CLEBURNE, Tex. — To say they were awe struck in this modest ranch country town south of Dallas when Thomas W. Reid came out of nowhere in 1982 is to put it lightly. Reid bought the biggest ranch in the area sight unseen for $1.6 million, hung a giant "TWR" on its front gates, and started inviting people he met in town on free junkets to Las Vegas casinos where he was treated like a foreign potentate and gambled like one, too.
The story was that Reid had made $70 million in the stock market, maybe more, on Southland Royalty Corp., a very successful Fort Worth oil company in which he was one of the biggest shareholders. No one really knew how much Reid had, though, and as a result, says Jimmy Campbell, president of the First State Bank of Cleburne, "Every time somebody talked to somebody else, Tom Reid got richer."
Called Massive Scheme
To reconstruct Tom Reid's remarkable time in Cleburne is to reproduce the environment that led to what the Securities and Exchange Commission later charged was a massive scheme to rig the market in the stock of a Los Angeles real estate company called First City Properties Corp.
FOR THE RECORD
Los Angeles Times Wednesday July 24, 1985 Home Edition Business Part 4 Page 2 Column 4 Financial Desk 2 inches; 53 words Type of Material: Correction
The Times incorrectly reported Sunday that securities fraud charges are pending against several co-defendants of Thomas Reid in a case brought by the Securities and Exchange Commission. Defendants Maurice Rind, Michael J. Rogers and two other defendants settled the case in February by agreeing to an injunction against fraud without admitting or denying the allegations.
The SEC did not implicate First City's majority owners, the wealthy Belzberg brothers of Canada, in the scheme.
Reid and one other defendant have consented to a permanent injunction against securities fraud. Without admitting or denying the charges, Reid also agreed to pay two brokerage firms nearly $160,000 secured by liens on his ranch and a $2.5-million yacht. Charges against other defendants are pending.
The SEC lawsuit seems to have barely scratched the surface of how the people of Cleburne, population 19,000, got entangled in the matter.
The SEC's court papers also do not communicate those aspects of Tom Reid's impact on the lives of people in Cleburne and elsewhere that give it the weight of a morality tale. Those who met him were somehow drawn out of their depths to experience, first, euphoric profits, and second, ruin.
To people like Jimmy Campbell, the president of the First State Bank of Cleburne who managed to stay out of Reid's stock-buying circle, the recent history of this affair is a story of "how one man came into a town like this and appealed to people's greed."
Perhaps the story should begin with the Energy Bank, a Dallas institution that now exists only as a file number in a local office of the Federal Deposit Insurance Corp., which shut it down in May. Hungry for deposits and loan customers to compete in the overheated financial-services industry of a furiously expanding Dallas, the Energy Bank welcomed Tom Reid as a star customer, to its eventual misfortune.
Got $1-Million Loan
In June, 1983, Reid strolled in to see Jon Webber, the bank president, with a letter of introduction from another customer. It was the briefcase he carried that everyone remembers, for it was filled with a quantity of marketable securities in "bearer" name--that is, belonging to whoever had them at the time--that left Webber thunderstruck. Reid riffled off a sheaf of Southland stock certificates worth $3.5 million and asked, "How much will you lend me on this?" The bank made him a loan of nearly $1 million.
The people of Cleburne would soon be playing an important role in the Energy Bank's history, and the glue that stuck them together was Tom Reid.
Chatting incessantly about his favorite stocks, Reid first got his friends in Cleburne interested in buying up shares of First City Properties. When some of those friends needed money, whether to buy more FCP or otherwise, Reid introduced them to his friends at the Energy Bank. Sometimes he would lend them stock to underwrite their loans.
In the end, loans were being made to Reid's friends, occasionally on his collateral, often to buy stock in which he had an interest, according to court records, interviews and an internal bank report. Now with the Energy Bank having failed, in part because it was too cozy with the "Cleburne connection," and now with some of Cleburne's biggest businessmen reeling from millions of dollars in losses they incurred from plunging too deeply into FCP, Tom Reid says he was just trying to help out a few friends and he doesn't appreciate all this finger-pointing.
People in Cleburne say Reid knew virtually nothing about cattle- and horse-breeding the first time he drove from Dallas/Fort Worth Airport to his new ranch in their town, past the cement plants and scrub ranches that occupy the intervening 55 miles of gently rolling geography.
He had bought the 400-acre ranch through a broker he contacted through Maurice Rind, a Sherman Oaks businessman who had been permanently barred from employment as a securities broker back in 1976 after having served time in federal prison for securities fraud. (Rind was later a co-defendant with Reid and Rogers in the SEC's manipulation complaint. Charges against Rind are pending.)