An Arkansas banker who died mysteriously in October is accused of defrauding a group of wealthy Mem-phians of several million dollars since 2000.
Mace David Howell Jr. of Little Rock was found dead in October in a room at the Peninsula Hotel in Beverly Hills, California. The week before his death, the Arkansas Securities Department had issued a cease-and-desist order against Howell for selling unregistered securities and for not being registered as a broker-dealer.
Last week, a group of investors filed a complaint in Marion, Arkansas, in Crittenden County Circuit Court against Howell's estate and three trading firms: Merrill Lynch, Goldman Sachs, and Refco.
The Memphis and Shelby County investors include Alabama football booster Logan Young, Shelby County Commissioner Bruce Thompson, former car dealer Tommy Keesee, cotton man Frank Barton Jr., Walter Edge, James H. Barton, Erskin and Jane Hubbard, Rex Jones, David Pearson, Sherry Pearson, Gary Prosterman, Harry L. Smith, and Herbert Thomas. According to documents filed in probate court in Little Rock, their investments ranged from $50,000 to $5 million apiece. Seven more claims totaling $1.8 million were filed this week, and more are expected.
Other investors not named in the lawsuit reportedly included Arkansas native and Dallas Cowboys team owner Jerry Jones, according to the Arkansas Democrat-Gazette.
Howell, who was 54 when he died, claimed he had devised a system of investing in bond and commodity futures that yielded returns of 90 percent, the Crittenden County complaint says. Howell gave investors promissory notes with annual interest payments of 10 to 40 percent and also told them they could get all their money back any time they wanted it on 30 days' notice. Such returns would beat the single-digit returns of legitimate bond funds over the last two years and the losses of the stock market since 2000. The best commodity traders have gotten 20 percent returns over time.
"If you are going to claim you are infinitely smarter than the average manager out there, then you are taking speculative risks," said Charles McVean of McVean Trading and Investments. "You can marginally beat the averages over time by being smarter."
With the notes now worthless, investors have their sights on Howell's family trust, insurance proceeds, and the trading firms. Court filings say Howell was actually broke and unable to meet demands from the trading firms to put up cash when the leveraged bets he made on the futures markets -- essentially a gamble on the direction of interest rates or commodity prices -- began going against him. (Hillary Clinton's successful foray into commodity futures trading in Arkansas was a Whitewater subchapter.) The heaviest losses were sustained by Frank Barton, who invested $5 million, and Young, who put up $4.74 million individually and through various trusts, according to probate court filings.
Howell traded on his Arkansas and Memphis connections with the country club set as well as his background as a banker. His sister, Linda Bailey, named a defendant in the complaint as trustee of the family trust, is head of the civic group Goals for Memphis.
Howell told investors, according to the complaint, that he could not "pull the trigger" on their investment but would "borrow" their funds and pay them a share of the returns providing they understood "that he, Howell, was earning far more in investment profits than he was paying them."
The lead plaintiff, William B. Benton of Horseshoe, Arkansas, could not be reached for comment. The attorney who filed the lawsuit, Kent Rubens of West Memphis, declined comment. Other investors declined to comment or referred questions to Rubens. Linda Bailey could not be reached for comment.
Investors were still giving Howell millions of dollars as recently as last August. Shortly after that, Howell disappeared. Lawsuits indicate that Howell wrote checks to some of his investors in early October, but the checks bounced. The Arkansas Securities Department announced its investigation on October 15th. The next day, Bank of America sued Howell in Pulaski County Circuit Court over approximately $2 million in bad checks.
Howell's body was found by paramedics in the hotel room in Beverly Hills on October 23rd. David Campbell, spokesman for the Los Angeles County Coroner's Office, said the cause of death still has not been officially determined, pending receipt of medical records and toxicological tests. Campbell said it was reported to the coroner's office that Howell had a history of alcohol and prescription drug use and had been treated at the Betty Ford Clinic.
Howell was the former president or part-owner of several banks in Arkansas, according to Arkansas Business, a weekly newspaper in Little Rock. Some of his biggest Arkansas investors were bankers and fellow members of Pleasant Valley Country Club in Little Rock.
Flyer sources say there were Memphis investors not named in the Crittenden County lawsuit. Word of Howell's "system" apparently got around, with big investors getting notes with the highest interest rates of 25 to 50 percent, while the small fry settled for 10 percent. The lawsuit says Howell kept the money coming by falsely overstating his net worth, assuring investors he had millions of his own funds invested, and paying out "profits" that were in fact funds that belonged to other investors.
"He had a track record of paying 32 percent a year," said a source familiar with the case. "No one had any reason to believe it wasn't working."