10 Years Later, Case of M. David Howell's Ponzi Scheme Nears End

by Gwen Moritz  on Monday, Oct. 29, 2012 12:00 am  

M. David Howell Jr.

(Editor's Note: This is the latest in a series of business history feature stories. Suggestions for future "Fifth Monday" articles are welcome. Please contact Gwen Moritz at (501) 372-1443 or by email at GMoritz@ABPG.com.)

Last Tuesday was the 10th anniversary of the death of M. David Howell Jr., whose Ponzi scheme was the largest ever perpetrated in Arkansas, generating claims of more than $84 million - including one for $11 million by Dallas Cowboys owner Jerry Jones.

The date was noted at yet another hearing in Pulaski County Probate Court, where the case file opened with the submission of Howell's last will and testament will also mark its 10th year on Tuesday, Oct. 30.
Last week's hearing was a minor one: Probate Judge Mary Spencer McGowan disallowed a claim against Howell's estate by American Express for failure to respond to communications from the estate's administrator, retired Circuit Judge Robin Mays. But the parties had scheduled it on Howell's death date specifically hoping that it would be the final action in a convoluted case that schooled even experienced attorneys.

Nothing about the Howell case could be that pat. There is still one more piece to be dispensed with before 59 claimants who have already divided up $2 million get their shares of the $507,000 remaining in the estate.

"We've got to get squared away with the Internal Revenue Service as far as any tax liability that the estate might have," Stuart Hankins, the Little Rock attorney representing Mays and the estate, said last week.

The estate does not expect to owe any taxes but needs the IRS to put it in writing.

"To my knowledge, that is the last step that needs to be made to close the probate case," Hankins said. "We'd love for it to come before the end of the year, but we think it will be the first of next year."

When the final distribution is made, the estate will have paid about 6 cents for every dollar of the $38.3 million in approved claims from friends and friends-of-friends who believed Howell was an investing genius.

"There would have been a whole lot more money in the estate if we had not had to fight so many things," Mays said last week.

Another $34.8 million in claims were disallowed. Jerry Jones, who had previously invested $5 million, got his $11 million secured investment back within months after Howell's death because he had been savvy enough to insist on a letter of credit from Howell's bank. Bank of America, in turn, had required Howell to buy a certificate of deposit to cover the letter of credit.

Mays believes it was that CD, purchased in August 2002, that sent Howell's scheme into a nosedive.

"Jerry Jones is what brought it down," Mays said. "He, to his credit, required a letter of credit to guarantee his last investment. Howell had to take Jones' money and buy the CD, and then he didn't have the money to keep making payments."



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