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Bankers and Judges THE FIRST CITIES stock dealing that ended in February five years ago, ultimately found its way into the Johnson County courthouse where it involves one of the state district judges, C.C. “Kitt” Cooke. Part of the story is revealed in the bankruptcy filing of Cleburne attorney Michael Rogers. And part of the story is revealed in the records of the Johnson County clerk, located on the same floor in the 70-year-old courthouse where Cooke presides over a district court. Claims made by Cooke against Rogers appear three times in Rogers’s bankruptcy statement: once as a contingent/contested claim of unknown amount and twice in joint-venture agreements contracted with Rogers and his current law partner, Ben Hill Ttirner. The ‘original amount of the transactions, which involved several partners, was $763,600. Cooke is Rogers’s former law partner and served as county judge until last year when he was elected to the position of district judge. Four months after the FCP stock took its fall, Cooke sold his Cleburne residence for $200,000 to his next-door neighbor, District Judge John MacLean. MacLean borrowed the $200,000 from First State Bank of Cleburne. Eight months later, on March 3 of 1986, Cooke purchased the same house from MacLean for.$300,000, borrowing the money from First State Bank of Grandview. The two sales generated $150,000 to $200,000 in new money that is money loaned by banks. Questioned about the quick sales of the house, Cooke said that it did not represent any impropriety, even though no improvements sufficient to justify such a large increase in price were made during the eight months that MacLean owned the LOUIS DUBOSE property. The sale did not, Cooke said, represent a circumvention of the homestead prOvision of the Texas Constitution that precludes homeowners from borrowing money by using their homestead as collateral. Cooke said that he moved out of the house ,and that his neighbor, Judge MacLean, took ‘possession of the property. The increase of price, from $200,000 to $300,000, Cooke attributed to fluctuations in the real estate market. On January 6, 1989 First State Bank of Grandview took title to the house that Cooke had sold then bought back again. The bank, by warranty deed, took the house “in lieu of foreclosure” and cancelled the promissory note. Asked if. the entire transaction might be considered a bank’s currying influence with a judge, Cooke said no. “A judge has a right to borrow money,” Cooke said, adding that as a judge, all of his loans are a matter of public record. Cooke further defended the series of transactions by stating that they were not even made by the same bank. The first transaction was a loan from First State Bank of Cleburne. The second loan, and ultimately the agreement not to foreclose, was done by First State Bank of Grandview. Yet both banks, while Cooke and MacLean were buying and selling the house, were owned by the same individual, Charles Baker. What occurred, in essence, was a transfer of a large sum of money -in the form of home mortgage loans from Mr. Baker’s banking interests to Judge Cooke and t’ perhaps Judge MacLean. Cooke said that he sees no need to recuse himself from any case in which one of the banks, or someone with a vested interest in the banks, is a party And recusal, it should be observed, would present a problem since it is not clear how the proceeds from the bank loans were distributed between the two judges. There are only two district judges in Johnson County. An attorney who is an authority on judicial conduct said that Cannon I of the Judicial Code requires that judges avoid even the appearance of impropriety. The attorney suggested that this seems more than an appearance of impropriety. \(The, incident was presented A veteran Austin trial lawyer, also asked to comment on the series of transactions as a hypothetical case, said that banks conduct much of their litigation in state district courts. As a lawyer, he said, he would not want to try a case against one of the involved banks under such circumstances. Judge John MacLean did not return calls by press time. L.D. investor in FCP stocks. And a Civil suit filed in Dallas includes allegations about questionable lending practices at First National during the same .time that FCP stock was The borrowing craze associated with FCP seemed to pervade Cleburne’s small banks. One source, a Cleburne businessman, said that three of Cleburne’s four banks were making loans on FCP stock: “Eddie Saylors, Jimmy Campbell and John Kelly [of Interfirst bank, now NCNB, First State Bank, and First National, respectively]” were all making stock loans, the source said. Indeed, among creditors whose names appear on Roger’s bankruptcy declaration, are three of the town’s four banks and at least two former members of the board of directors of First National Bank of Cleburne. While their claims do not constitute proof of their involvement in FCP dealing, they establish that they were lending to Rogers who, according to court documents, was very involved in the trading of the stock. Stock dealing in Cleburne became so intense that at times, it seemed the banks could hardly keep. track of who was borrowing for what stock. Court records allege that in one incident, a Cleburne bank, after inadvertently accepting and guaranteeing payment for stock certificates that Reid’s account could not cover, accommodated him with a quick loan for several hundred thousand dollars to cover the mistake. But easy credit and big borrowing were not limited to Cleburne’s banking commu nity. For the Energy Bank of Dallas, which in lending money seemed determined to emulate the go-go S&Ls that made “1-30” synonymous with fraudulent lending, involvement with the “Cleburne Group” proved to be fatal. Between June, 1983, and March, 1984, Energy Bank loaned $10 million to Thomas Reid and other investors that he directed to the bank. Thirty-five percent of the bank’s loans, according to an internal report, ended up in the ‘hands of Cleburne investors. The FDIC, acting as a receiver for the defunct Energy Bank, has filed a $1.2 million claim against the estate of Rogers. Part of the $1.2 million was secured by First Cities stock. Reid, who now will stand trial with Rogers and former Energy Bank President 16 MAY 5, 1989 144600.1114….0.1.0:.;”, mr.r.W94’4,4+,4,014,0