The scheme worked for a time—just a little quid pro quo. It was the late 1960s, and famed Houston developer Frank Sharp, who’d made a pile of money in real estate, banking, and insurance, wanted to see some favorable banking bills pushed through the Texas legislative session of 1969.
To ensure things worked out in his favor, he offered Texas state officials, including Gov. Preston Smith and House Speaker Gus Mutscher, $600,000 in loans from his own Sharpstown State Bank, named after him, just like the neighborhood. The officials used that money to buy stock in National Life Insurance, another Sharp company, inflating the stock value before selling their shares for a nice profit. In return for this service, the lawmakers convened a special legislative session and pushed the bills through. Brilliant—until they got caught.
The next year, someone at the Securities and Exchange Commission noticed the number of large loans that had been made against insufficient collateral from the Sharpstown State Bank and started investigating. In 1971 the feds sued Sharp, triggering a run on the bank and forcing it to close. Smith then vetoed the banking bills, avoiding indictment, but his political career was over.
In fact, the scandal ruined the political careers of everyone it touched, and in 1972 voters replaced every single incumbent statewide elected official and half the state legislature. The new body passed a number of laws on open records, public meetings standards, and swapping kickbacks for political support.
Sharp himself got only three years of probation and a $5,000 fine. Meanwhile, the Jesuit order that he had long supported here in Houston—even receiving a commendation from the Pope for doing so—didn’t fare as well. On Sharp’s recommendation, the order had bought National Life Insurance stock and, post-scandal, had to declare bankruptcy after losing more than $6 million.