Arkansas Loan and Thrift
Arkansas Loan and Thrift Corporation (AL&T) was a hybrid bank that operated for three years outside state banking laws with the help of political connections in the 1960s before coming to a scandalous end. A U.S. district judge halted the operations and placed the company in receivership in March 1968, and a federal grand jury indicted three officers of the company, as well as a former Arkansas attorney general. AL&T became a symbol of the corruption and lethargy that were the products of Governor Orval Faubus’s twelve-year control of the statehouse and, in the opinion of Governor Winthrop Rockefeller, the Democratic Party’s unfettered reign in government since Reconstruction. It was jokingly called “Arkansas Loan and Theft.”
The grand jury indictment said the four men ran the finance company illegally and dissipated depositors’ money by making loans to themselves and their companies, friends, and confederates—loans that were never repaid—and by giving themselves and friends large stock dividends even though the company was broke. The chief operating officer and two other executives were convicted and sentenced to prison for wire, mail, and securities fraud, as well as conspiracy and bribery. Bruce Bennett, who helped organize AL&T while he was attorney general and profited from it, was indicted on twenty-eight counts, but a longtime friend from El Dorado (Union County), U.S. District Judge Oren Harris, delayed the trial when Bennett revealed that he had throat cancer. Bennett died ten years later, in 1979, without going to trial.
More than 2,000 people and churches lost money when AL&T collapsed. The receiver eventually recovered about a fourth of the $4.2 million placed in the company. Securities, bank, and savings-and-loan officials for Gov. Faubus backed off regulating the strange institution, heeding the official but secret advice of the attorney general and the intervention of powerful state legislators, two of whom, Representative Paul Van Dalsem of Perryville (Perry County) and Senator Joe Lee Anderson of Helena (Phillips County), would be listed in the indictment as co-conspirators, along with other state officials and politicians. Cartoons by George Fisher in the Arkansas Gazette, which featured the political figures involved with AL&T, popularized the scandal for a number of years.
The bank seemed to be the brainchild of Ernest A. Bartlett Jr., a twenty-five-year-old used-car dealer, and Bennett, a politician from El Dorado who was elected attorney general in 1956 by inveighing against racial integration. Bennett ran an unsuccessful race for governor against Faubus in 1960, accusing him of being soft on integration, and regained the attorney general’s office in 1962. He would make a final race for governor in 1968 while a grand jury was investigating his role in AL&T.
Bartlett, Bennett, and others set up Arkansas Loan and Thrift in December 1964; the incorporation papers were prepared in the attorney general’s office by an assistant attorney general, who received AL&T shares for his trouble. Bartlett and Bennett found a defunct finance company, United Loan and Investment, which had a charter from 1937 as an industrial loan company. It was incorporated into AL&T and became the finance company’s authority for taking deposits. Van Dalsem, a longtime leader of the House of Representatives and Faubus’s floor leader, arranged for Bennett to buy an inactive insurance company from the House speaker, J. H. Cottrell Jr. of Little Rock (Pulaski County). Bennett then sold it at a profit to AL&T, which renamed it Savings Guaranty Corporation, a shell company that would “insure” people’s deposits in AL&T. Savings Guaranty was given more than 1,000 shares of stock in AL&T, the only assets it would ever own. AL&T wrote Savings Guaranty a check for $580,000, which allowed the state insurance examiner, who received AL&T stock, to certify that the insurance company had the necessary capital to insure bank deposits. Then Savings Guaranty sent the money back to AL&T and took an IOU.
AL&T advertised that it would pay an interest rate of 5.75 percent for deposits, more than banks and savings-and-loan associations were allowed to offer, and that deposits were safer than if the Federal Deposit Insurance Corporation (FDIC) insured them. Actually, Savings Guaranty had no assets but the worthless AL&T stock, but in advertisements it used a seal that looked like the great seal of the United States.
The company opened a headquarters at Van Buren (Crawford County) and offices in Paris (Logan County), Waldron (Scott County), Ozark (Franklin County), Fort Smith (Sebastian County), Helena, Little Rock, and Booneville (Logan County). It spent $150,000 advertising that people would make more money with AL&T than with banks and thrift institutions. It quickly accumulated more than $4 million in deposits.
Bennett issued five official opinions to Van Dalsem and state regulators explaining that AL&T’s operations were perfectly legal and that, because it operated under the auspices of an old industrial loan charter rather than a bank or savings-and-loan charter, the state securities commissioner, bank commissioner, and savings-and-loan commissioner could not regulate its activities. Bennett never released the opinions publicly; they were found in the files at AL&T when it went into receivership.
The state securities commissioner testified in Bartlett’s criminal trial that when he moved to regulate AL&T and suspended Bartlett’s broker’s license, Bennett threatened to go to Faubus about his interference. Faubus insisted that he never did anything to help the company and knew little about its operations. Bartlett maintained that Bennett’s opinion giving legal sanction to AL&T was written by William J. Smith, Faubus’s legal counsel, and that Smith advised Faubus on the formation of the company. Smith denied this.
When Joe Purcell, a Benton (Saline County) city judge, defeated Bennett for the office of attorney general in 1966, he quickly moved to shutter AL&T. He filed a lawsuit in Pulaski County Chancery Court on January 23, 1967, ten days after taking office, contending that AL&T was selling securities illegally. The case was assigned to Chancellor Kay L. Matthews, a former Faubus aide. The next day, Bartlett visited Matthews’s law and business partner, Claude Carpenter Jr., also a former Faubus aide, and paid him a substantial retainer for AL&T. Carpenter would be named a co-conspirator in the subsequent indictment. He testified at Bartlett’s trial in 1969 that he never did anything for the fees except discuss Arkansas Razorbacks football with Bartlett and accompany him on a private plane trip to Las Vegas, Nevada, to gamble.
Judge Matthews never brought Purcell’s suit to trial. One of Carpenter’s connections to AL&T was mentioned in a procedural hearing more than two years later, and Matthews disqualified himself from the case. The next week, on March 13, 1968, acting on a motion by lawyers of the federal Securities and Exchange Commission, U.S. District Judge John E. Miller of Fort Smith closed AL&T and put it into receivership. At a hearing on the claims against the company, a minister said churches that had invested their building funds in AL&T should have first call on any assets that were recovered because such assets were “God’s money.” Judge Miller famously countered that God should have been wise enough not to put his money in AL&T.
A federal grand jury indicted Bennett, Bartlett, and two officers from Booneville—Afton Borum and Hoyt Borum—on twenty-eight counts. Judge Harris, who presided, severed Bennett’s case from the others and gave him a continuance when Bennett said he was ill. The government eventually quit trying to bring Bennett to trial. Bartlett was convicted and sentenced to five years in prison and fined $5,000. The Borum brothers were convicted and received even shorter sentences.
Bennett, Bartlett, and Van Dalsem helped establish a similar company in Louisiana, called Louisiana Loan and Thrift, which operated with the help of Attorney General Jack P. F. Gremillion, aides to Governor John McKeithen, and U.S. Attorney Jim Garrison of New Orleans, who became famous for his investigation of the assassination of President John F. Kennedy in 1963. Bennett profited there also by borrowing $160,000 from Louisiana Loan and Thrift and then having the debt canceled by transferring his stock in the company to another man. Bartlett, Gremillion, and others were indicted in Louisiana, but a jury acquitted them of all charges in 1971.
For additional information:
Dumas, Ernest. “Arkansas Loan: How It Grew with Bruce Bennett’s Help.” Arkansas Gazette, September 14, 1968, pp. 1A, 3A.
———. “Bartlett Convicted of 26 Federal Counts in AL&T Operation.” Arkansas Gazette, September 27, 1969, 1A, 3A.
———. “Bennett, 3 Others Indicted in Probe of Defunct AL&T.” Arkansas Gazette, January 31, 1969, pp. 1A, 5A.
———. “Political Contacts Helped in Birth of Arkansas Loan.” Arkansas Gazette, September 15, 1968, pp. 1A, 2A.
Little Rock, Arkansas
No comments on this entry yet.
"*" indicates required fields