A thin, balding man, whose stiff right leg gave him a pronounced limp, entered the East Dallas bank. He shuffled across the lobby to a receptionist.
“Hello, my name is Erwin Brown. I’d like to speak to Harry Mason.” Smiling down at the woman, he added, “He’s my loan officer.”
With that introduction, Erwin Brown set in motion one of the slickest bank swindles in Dallas history. When it was over, 14 months later – in the first winter months of 1975 – Erwin Brown and his associates had bilked at least three Dallas lending institutions and several credit card companies of a quarter of a million dollars. The swindle was a classic “sting” – with some unusual twists not depicted in the recent motion picture.
That day in February, 1974, when Brown first appeared at the bank, was not the first occasion on which Harry Mason had dealt with him. The banker had received a call in November, 1973, from a car dealer who wanted the bank to finance an automobile purchase for Brown. The Chevrolet dealer told Mason he “ought to get to know this fellow.”
“He’s retired from the Justice Department. He has some money down at First National, and he’s looking for a place to invest it,” the dealer reported confidentially.
That was fine with Mason, a young vice-president of a prominent East Dallas bank. Mason, in his late thirties, was rising fast in the banking business and had won the confidence and trust of all who had met him.
The dealer gave Mason some information about the car, a Chevrolet Monte Carlo, and said Brown would make a down payment of more than $1,000, provided the bank would lend him $3,200.
The credit application listed a $1,200 per month income from the Justice Department and credit references from Virginia. A check of those references showed that Brown had two major transactions – a house payment and an American Express card balance. A call to the Justice Department confirmed that Brown was “on the payroll.” The loan was standard, with standard rates, and Mason routinely approved it. That simple car loan was to become the basis of the swindle.
Now, a few months later, the secretary ushered Brown into Mason’s glass-fronted office, and the two men introduced themselves.
They sat down, sipped coffee, and talked in generalities. Brown’s accent gave away his BrooRlyn background. He told Mason he was looking for an investment, possibly in the automobile business. Since the energy crisis was in full swing, Mason tried to dissuade him. “No, that’s not a good business to get into right now,” Mason argued. “Let me look around and see if I can find something.” Mason thought very little about the interview until a month later when Brown returned to the bank and said he wanted to buy his wife a present – an Oldsmobile Cutlass. Mason checked the loan records and found Brown was paying on time. He told Brown to go ahead and buy the car.
Brown also talked about an investment – a used car business. He wanted to “floor plan” some cars, a highly risky method by which high-volume retailers finance their inventory. A dealer purchases cars wholesale and has the wholesaler send a draft to his bank for the price of the car. The bank, in turn, lends the car dealer the money, which is paid directly to the automobile wholesaler. The bank takes possession of the auto titles and when the cars are sold retail, the dealer comes to the bank, exchanges the money for the title, and clears his account on the loan.
Mason did not care for the “floor plan” idea. But he told Brown he might do it if he were provided with a financial statement and assigned the Certificates of Deposit which the earlier report had listed as being at First National Bank. Brown agreed, and returned several weeks later with the financial statement. It showed his net worth to be $110,000, including an airplane, a boat, cars, property and some cash. It did not, however, list the CDs. In the meantime, Brown had set up a savings account with a balance of $7,000 at the East Dallas bank and a checking account with several thousand more in it.
After these deposits were made Brown asked again about setting up a car business. He also let Mason know that, while he had not “retired” from the Justice Department, he was on disability from a gunshot wound he had received while working undercover on a criminal case. His wound was causing him to have back pains and forcing him to walk in the rather odd, shuffling manner.
Though Mason felt Brown would be a good customer and their relationship was comfortable, it was not comfortable enough to approve the auto business.
“What do you know about the car business?” Mason asked. “You’ve worked all your life for the Justice Department, you know nothing about the industry. Besides, it’s not a good deal. Your financial statement doesn’t justify a ’floor plan’ operation.”
Brown replied that he was also an accountant and that he would find someone to run the car side of the business while he handled the books.
Mason said he couldn’t justify the risk and involve the bank’s money.
In June, Brown was back. He had used his own money to get into the car business, doing body work. Mason thought that made sense. The body shop business didn’t require a lot of capital, but it did require good records. With the energy crisis, people would be fixing up old cars instead of buying new ones.
“Congratulations. That’s a good deal,” Mason commented.
“Yeah, thanks. By the way, I want to get out of that Chevrolet and buy a Cadillac.”
“Okay, buy a Cadillac,” Mason told him.
At this point, the young banker felt he knew Brown well. He had met his wife and children, set up savings accounts for them, and counseled Brown on outside investments. Brown paid off the loan on the Monte Carlo; Mason never knew whether Brown traded it in or sold it. When the draft for the Cadillac – $7,000 -came in, Mason financed it.
In July, Brown returned, accompanied by a short, stout man whom he introduced as Sam Giommo, a former neighbor from Virginia. He was swarthy, with coal black hair and piercing black eyes. Giommo, Brown explained, had operated a body shop in Phoenix. He would be Brown’s partner in the Dallas body shop and in a wholesale car business. They asked Mason to finance a Cadillac for Giommo. Mason remembers that he thought the two men would do well together, and probably make a ton of money. “Keep an eye on these guys,” he thought to himself.
At the same time, however, it was here that the first shade of doubt crept into Mason’s mind. Why should the owners of a body shop both need Cadillacs? But, thought Mason, each to his own. He agreed to finance the Cadillac if Giommo would provide financial statements. When the statements arrived from Arizona they were in good shape. Giommo had an even longer list of transactions than Brown, and he paid on time. Mason didn’t ask for profit-and-loss reports on Giommo’s Phoenix body shop, because it was supposedly closed down.
The two men were now wholesaling cars, using the draft method of payment. (A draft is similar to a check. When a draft comes into a bank, the bank contacts the assignee and he comes in and verifies the draft. The draft is then credited to his account, and the signer’s account – usually at another bank – is debited for the amount.)
At this point, a second bank, located in North Dallas,started sending drafts to Mason’s bank for deposit in Brown’s account. They were drawn on a car leasing company, E & D Auto Leasing. Brown asked Mason to designate the drafts as cash, but Mason refused. Many of the drafts coming in from the second bank were bouncing. Mason told Brown he could not honor the drafts until the actual cash was delivered to cover them. Unknowingly, Mason had sidestepped Brown’s first attempt at swindle, for had he allowed the unsupported drafts to stand as cash, Brown could have piled them on and then withdrawn a good chunk of money from his various accounts.
While the initial attempt had misfired, Brown was apparently content to wait it out, building up his status with Mason and using Mason as his “good guy.”
Meanwhile, the second bank continued to designate the drafts as cash and to pay them to Brown’s account. By the time the scam was over, the second bank would be the big loser, suffering as much as $101,000 in losses. Mason, though, was growing tired of the bookkeeping required to keep track of the various bouncing drafts. Both Brown and Giommo continued to push, gently but steadily, to have Mason set up a “floor plan” so they could draft.
“It’s simply because we’re undercapitalized. I put all my money into the business, and Sam is having trouble selling his Phoenix property because the real estate market is depressed,” Brown told Mason. That made sense.
“Okay, I’ll do it, but not in the manner you want,” Mason told them. “It looks to me, based on cash flows” – Mason had financial statements on the body shop – “like your company needs about $10,000.”
“Well, we’d like to borrow,” Brown said.
“Okay, but I’m going to have to have some security. One hundred per cent.”
“Well, how about our tools? We’ve got $22,000 worth.”
“How can you have $22,000 worth of tools?” Mason asked.
“Naw, we don’t have that much, Ed,” Giommo interjected. “We got about $13,000 worth.”
“All right, give me a complete list, description and serial numbers on those tools. I’d also like a bill of sale from the company where you bought them,” Mason said.
He agreed to lend them 70 per cent of the value of the tools, put the money into Certificates of Deposit, and have them sign a security agreement pledging the CDs into the checking account for the purposes of drafting and loan-paying. They could draft up to the amount of the CDs.
The men furnished Mason with the data he requested, and the arrangement went through. Within days the drafts came in and pushed right against the $9,000 limit. Both men were acting testy about Mason’s hesitancy to lend them money.
“You don’t trust us,” Brown whined at one point.
“Trust doesn’t have anything to do with it. This is a business arrangement. It has to be handled this way,” Mason said.
Mason thought he had the situation in firm control. After all, Brown was employed by the Justice Department, and the business he had established was legitimate.
Shortly after the loan went through, Mason visited the body shop in an industrial area on the west side of Garland. He verified that the tools were on the premises. “It was a busy place,” he recalls. “People banging on fenders. Cars being worked on. With all that activity, I knew they could turn the corner.” Both Brown and Giommo kept up the payments on their cars and the loan, and everything went well.
In the fall, the partners asked Mason to finance an auto carrier. Mason approved the application after checking with friends in the car business as to the vehicle’s worth, about $5,000. Brown asked for a loan of the full amount, but Mason demurred. Brown then suggested that the partners pay $1,500 cash; Mason agreed to cover the remaining $3,500. The truck sale went through a Phoenix bank, which sent in a draft for the balance. The seller of the truck was Margie’s Auto Sales in Phoenix. Later Mason was to learn it was Giommo’s old Phoenix business – still operating.
By December, 1974, Mason began noticing that all the cars Brown and Giommo sold were going to E & D Auto Leasing. And, more disturbing, several checks and drafts from this firm were bouncing when Brown deposited them in his accounts.
“I began to talk to him about these overdrafts,” Mason recalled. “It was right around Christmas that I began to feel a little uneasy with these guys. I could see that somewhere along the line something had gone wrong. Just as I started to pull back, they began to push. They wanted more loans that I wouldn’t give them. They wanted another car and I wouldn’t finance it. The relationship began to strain. In January of ’75 I told them that if they didn’t straighten out their business, I was going to cash out the CDs and close their accounts.”
Mason also began getting calls from another bank in Richardson where Brown wanted to open an account. Mason told the bank that it wouldn’t be a good idea. He also got calls from a jewelry company where Brown and Giommo had applied for credit.
“They were using me for a credit reference. They would just say ’Call Harry Mason at the bank’ when they applied. The calls were always about some kind of credit,” Mason said.
Brown and Giommo were ready to make the “sting.” They had played the game out as far as it could go.
In late January, one of the accountants in the loan service department of the bank came into Mason’s office. “This truck on Brown’s auto sales is past due by weeks,” he reported. The banker was stunned. “What the hell do you mean it’s past due?” Mason buzzed his secretary and told her to get Brown on the phone. At Brown’s plush Richardson apartment his wife said he was in Washington, testifying in a case for the Justice Department. “Tell him I’d like to see him here in my office when he returns,” Mason told her.
On the following Monday, Brown limped in. He and Mason had a row.
“I don’t like the way you’re handling this business of the truck loan,” Mason said.
“Well, that truck’s up to date now,” Brown replied. “I made a payment on it today. I’m an honorable man. I’m going to make every payment I owe to you. Even though this business is not doing too well, I’m going to pay you every dime I owe you.”
“That’s fine. But it doesn’t solve your problem,” Mason retorted. “I want current financial statements and profit-and-loss statements on your business.”
Mason knew that Brown had three or four savings accounts at the bank; all the transactions had been in cash. He notified Brown that he intended to freeze the accounts. Brown replied that he was overreacting to a business situation that was still salvageable. Mason relented.
That was a mistake Mason would regret. Had he not released the accounts, then Brown could not have done what he did next. When he walked out of Mason’s office, he went straight to his car in the parking lot and drove through the outdoor teller’s cage. He withdrew every penny from his savings accounts.
On Tuesday, Mason discovered that Brown had lied to him. He hadn’t made the payment on the truck. Fuming, Mason drove to the Garland body shop. The place was empty. A small sign on the door said “Gone on vacation,” and all that remained were two badly-wrecked late-model cars. “It didn’t take a genius to see I was in trouble. That place was cleaner than a whistle,” Mason said He drove back to the bank and wen1 to the loan collection department Sitting in a conference room, he looked across at the bank’s officers and opened, “I’ve got a bad problem.”
The collectors left the room a few minutes later. They called the house. No answer. They went out to the Richardson apartments of Brown and Giommo. Both were vacant. Neighbors said trucks had come the night before and the people had left. The children of both families had been pulled out of school; someone said they had gone to Arizona.
The landlord let the collectors into the apartments, which were in a shambles. About $5,000 worth of damage had been done. Trash and junk littered the rooms. The collectors began picking up loose paper with anything that looked like a telephone number. For the next 10 days they searched for Brown and Giommo. They discovered that the references Brown and Giommo had listed on their credit applications were either relatives or employees of the body shop or the car leasing company. All had moved to Dallas from Phoenix or Virginia at about the same time as Brown and Giommo. One exception was a Justice Department employee listed as a friend. The Justice Department, however, offered no useful information.
Mason checked with the Chevrolet dealer who had first introduced him to Brown. The dealer said Brown had recently purchased a new Caprice, financing it through a major finance company. Brown had told him how he had arrested Giommo years ago and that they had become good friends.
It soon became apparent that Brown and Giommo and their families were in Phoenix. Calls came from banks there, telling Mason the men wanted to open accounts and purchase homes. Mason also learned that two credit card companies had been stiffed for thousands of dollars worth of items in Phoenix and Miami.
Mason was now holding the bag for $41,000 worth of loans on the cars, the truck and the tools. The bank immediately notified the Federal Bureau of Investigation and local authorities. An official investigation was started.
Among the phone numbers found in Brown’s apartment was a number with a 212 area code, which is New York City. One of the loan collectors dialed the number direct; a secretary answered “Mr. McGuire’s office.” The collector, not knowing who McGuire was, hung up without speaking. After a discussion with Mason, the collector called back and asked directly for McGuire. When he came on the line, the collector identified himself and asked for the address and phone number of Erwin Brown.
“He almost threw up on the phone. We could hear him coughing and choking. He demanded to know how we had his number. The collector explained; McGuire was audibly upset but said he was not able to give out Brown’s number. He told the collector to get in touch with Clint Peep-les, the U.S. Federal Marshal in Dallas. The collector told him that we would,” Mason said.
The bankers never had the chance. Within a few minutes, Peeples called them. He said he wanted to discuss an urgent matter.
The next day the three men were gathered in Peeples’ office. Peeples told the officers that he was aware of the FBI report on the bank’s losses, but he wanted to know the details of how the bank had discovered the New York telephone number. Mason related the story concisely, while the marshal nodded. With a sigh, he informed the startled bankers that they had reached a U.S. Attorney on special assignment to the Justice Department’s organized crime strike force. The telephone number was top secret: it was used by a handful of top informers to let the Justice Department know they were still alive.
Mason, flushed and angry, began to call friends in law enforcement agencies. Within a few hours his worst suspicions were confirmed: Brown and Giommo were underworld figures with criminal records who had become informers for the Justice Department. In return for their testimony, they had been given new identities – right down to their impressive credit ratings. With these invented backgrounds, they had easily established the bank loans which enabled them to commit fraud.The incredible picture unfolded for Mason. He had been swindled with the help of the United States Government.
The sting was nothing more than a variation on the old pea-and-shell game. Brown and Giommo stayed just legitimate enough to retain confidence – making loans, paying on time, purchasing new cars for family use. Once the banking relationship was established, they were able to finance the purchase of several new cars by supplying the banker with the titles. The swindle was this: the new cars were wrecks purchased for considerably less than the amount the bank was financing.
Mason was able to regain a portion of his losses. Once Brown and Giom-mo were located in Phoenix the Cadillacs and a Corvette were repossessed and returned to Dallas. The auto carrier was found in Abilene with a burnt-out engine. The tools were never recovered. As it turned out, the bill of sale was phony as a $3 bill. The company in Phoenix had gone out of business three years before Brown used the bill of sale to establish the tools as collateral for his loan. The signature of the former owner was forged, and when the bank contacted him, he was “scared out of his wits” about what had occurred.
If the whole swindle was based on a carefully-built relationship with the bank, that relationship was based on the authority of the Justice Department. Brown had provided Mason with the name of his Justice Department supervisor, and the supervisor had verified that Brown was “on the payroll.” Only later would the bank learn that the phrase used by the government agent had no reference to employment. It was that careful, and conveniently evasive, choice of language that led the bankers into the trap which they otherwise would have easily avoided.
The three Dallas banks involved in the scandal are still counting their losses, which will no doubt be passed on to stockholders and customers in the form of decreased earnings and increased interest. Neither Brown nor Giommo have been arrested, although they have been questioned, which suggests that officials in Washington are continuing their sponsorship of the pair.
Mason has a reminder of Erwin Brown, a copy of the Nixon transcripts which Brown brought him from Washington after one of his many trips there to testify. He keeps it on his desk.
“It reminds me of the lesson I’velearned. Any time I begin to play it alittle loose, to help a guy out by givingin a little, I look at that book. If thePresident can lie, the government canlie. If the government can lie, anybody can lie.”