by Gwen Moritz on Monday, Mar. 31, 2014 12:00 am
A version of this article originally appeared in Arkansas Business on Oct. 28, 2002. It is being republished as part of Arkansas Business' 30th anniversary issue. You can access the digital edition for free here.
M. David Howell, the former bank CEO in Little Rock and Fayetteville who died in a Beverly Hills hotel on Oct. 23, may have received $60 million or more from investors to whom he promised exorbitant returns, sources have told Arkansas Business.
Many of Howell’s investors — who might prefer to think of themselves as creditors — were friends and fellow members at Pleasant Valley Country Club. They include brothers Sam and Robert Vogel of Little Rock; Richard T. Smith, chairman of Smith Associated Bank Corp. (SABCO) of Hot Springs; Carol Reaves, president of SABCO-owned Stephens Security Bank in Ouachita County); former Razorbacks football player and banker Mickey Cissell; Dallas Cowboys owner Jerry Jones; and Jones’ brother-in-law, Danville banker John Chambers.
Another victim was Bank of America, which honored almost $2.15 million worth of Howell’s checks during the first week of this month because he assured his bankers that he would be receiving wire transfers to cover the amounts.
Howell’s whereabouts were unknown until Thursday morning, when the Los Angeles County Coroner’s Office confirmed that he had been found dead in a hotel room in Beverly Hills the previous day.
There were no obvious signs of foul play, according to coroner’s spokesman Craig Harvey, but no autopsy had been performed as of Thursday.
Howell had checked into the posh Peninsula Hotel on Monday, Oct. 21. Unidentified “family members” asked the staff to check on Howell’s welfare about 9 p.m. CDT on Wednesday after they were unable to reach him.
Hotel staff found Howell unresponsive and called for paramedics, who pronounced him dead and attempted no medical intervention.
He was identified by his Arkansas driver’s license.
According to the coroner’s report, Howell had a history of alcohol, cocaine and prescription drug abuse, and he had been released from the Betty Ford Center, a substance abuse rehabilitation center at Rancho Mirage, Calif., on Oct. 14. When he had checked into the rehab center and where he was between Oct. 14 and 21 could not be determined.
Bank of America sued Howell in Pulaski County Circuit Court on Oct. 16, the day after the Arkansas Securities Department announced that it had started an investigation into Howell’s business dealings. On Oct. 17, the ASD issued a cease-and-desist order against Howell that gave the first hints as to his business plan. It said that Howell had sold at least $15 million worth of unsecured promissory notes to at least 16 investors in Arkansas, Texas and Tennessee by promising them annual returns of 10-50 percent on pooled investments in the public securities and commodities markets.
None of the notes was registered with the Securities Department, nor is Howell a licensed securities broker. Sources indicate that Howell was investing the money through margin accounts at one or more Memphis brokerages.
Howell was also said to be working with Little Rock financial adviser Brett Holiman of Investment Advisory Group, which is located in Pavilion Center at 8315 Cantrell Road. Holiman declined to comment on his business relationship with Howell.
Russ Kelley, resident manager of the Merrill Lynch brokerage office at Fayetteville, said it was “absolutely not” possible that Howell had intentionally defrauded his investors.
“I just know my friend David Howell, and I can’t imagine him having the mindset to do anything besides exactly what he said he would do,” said Kelley, who had been friends with Howell since they worked together at First National Bank of Fayetteville in the 1980s.
Although the promissory notes dated back as far as March 1999, ASD Chief Counsel Bruce Bokony said the department received its first complaint about Howell on Oct. 14. Less than a week earlier, on Oct. 8, Bank of America had stopped honoring checks written on the account of M. David Howell and the Howell Family Revocable Trust, which suggests that investors then turned to the Securities Department for help.
By that time, Howell’s account at Bank of America was overdrawn by nearly $1.9 million, the bank said in its lawsuit. John Monroe, a local vice president, swore to the allegations in the complaint.
Bank of America’s complaint lists 25 handwritten checks signed by Howell and made out to 21 different payees; four carried dates in September and 21 were dated Oct. 1, but all were cashed on or after Oct. 2. They ranged from $284 for health insurance to a $702,500 check made out to Johnny Chambers.
The check for health insurance and a $419.40 check to Prudential Insurance Co. do not seem to be related to the promissory notes. Nor does a $939 check written on Sept. 25 to the Southern & Allen law firm in Little Rock — that amount matches the cash bond that attorney Gus Allen, also a member of the PVCC, posted in August after Howell was convicted in Maumelle Municipal Court of driving while intoxicated.
But the other 21 checks were likely interest payments to investors, several of whom received more than one check. Six of the checks bear memos indicating that they were replacements for earlier checks, and some of the earlier checks bear higher check numbers than later checks.
Robert Vogel confirmed that he was holding a number of bounced checks from Howell, in addition to four checks made out to him or his businesses that were honored by Bank of America. Vogel would not say what the checks were for.
Bank of America referred all questions about the suit to Diane Wagner, a public information officer in the bank’s Charlotte, N.C., headquarters. She said the bank would not comment on any matter in litigation, but she also said that the bank’s policy on overdraft protection might depend on the particular account.
Photocopies of the checks that Bank of America honored were included in the lawsuit. While the signatures all appear to have been written by the same hand, some of the checks were otherwise made out in a very different handwriting. And while Bank of America named the payee of one check as “Greg Smith” — the name of a member of PVCC — the handwritten name on the check looks more like “Guy Smith,” the name of Richard T. Smith’s brother and co-owner of SABCO.
Neither Greg Smith nor Richard Smith returned phone calls seeking clarification, and Guy Smith could not be located. Calls to Chambers, Jones and Cissell were not returned. Gus Allen did not return a call seeking to determine whether he was still representing Howell. Carol Reaves, the Stephens Security Bank president, declined to comment, as did Dr. John McCracken, a retired Little Rock physician who received one of the checks that Bank of America honored.
Mace David Howell Jr. was born in Fayetteville on June 21, 1948. His father was a banker at First State Bank of Springdale, where Howell Jr. went to work after receiving a degree in banking from the University of Arkansas in 1971.
By the time he was 28, he was its president. In June 1978, he joined Jim Lindsey and Dick Calhoun in developing Springdale’s first upscale residential subdivision, Woodcliff.
The young banker also became friendly with Springdale trucking mogul J.B. Hunt, whose corporate business he lured to his bank. In 1985, Howell and Hunt paid $22 million for the First National Bank of Fayetteville, which financially distressed Worthen Banking Corp. sold to raise cash. Howell became its president and CEO.
The next year, he and Hunt made a deal to buy First American Bancshares in North Little Rock, the holding company of One National Bank, from the Matthews family at a price of approximately $30 million. They created a holding company called Howell & Hunt Bancshares and, at 39, Howell moved his family to Cammack Village.
In 1987, Howell & Hunt Bancshares was renamed One National Bancshares. But One Bank’s fortunes were rocky. In April 1989, Howell resigned as CEO for “personal reasons,” and the bank later reported a net loss for the year. By then, however, Howell had led a group of investors to buy Farmers & Merchants Bank of Rogers and First National Bank of Bentonville.
In 1990, One Bank again erased any earnings by writing down $2.3 million in bad loans. In 1991, Hunt sold First National Bank of Fayetteville back to the resurgent Worthen operation for $32 million and also sold Worthen eight One Bank branches in North Little Rock. Ross Whipple of Arkadelphia bought the One Bank branch in Hot Springs, leaving One Bank with only four branches in Little Rock. Hunt subsequently sold One Bank to its CEO, Layton “Scooter” Stuart.
Howell and his wife, the former Kay Carter, divorced in 1996 after almost 19 years of marriage. They had two sons, Mace David Howell III and Dane Howell.
Not much has been written about Howell or his business activities in recent years. He was, however, a benefactor of Steven W. Jones, the bankrupt convenience store owner who is the subject of a fraud and conspiracy suit filed by Regions Bank.
Regions, which already has a $443,000 judgment against Jones, filed the suit in April, claiming that Jones had cooked up a plan to hide his assets. In a deposition for the first case, Jones explained part of the $760,000 that passed through his checking account between August 2000 and September 2001 by saying he borrowed $50,000 from Howell, Robert Vogel and professional golfer Glen Day.
Howell was driving a 2003 Mercedes SL500 — an $85,000 car — at about 2 a.m. on April 24 when a Maumelle Police officer pulled him over for driving erratically, although not very fast, on Highway 100 at Crystal Hill. Howell, who had no previous alcohol-related violations, was “very cooperative,” according to the officer’s report. Howell described himself as a self-employed investor.
Howell failed a field sobriety test and blew 0.12 on a breathalyzer, so he was arrested and charged with DWI and careless driving. The friend he called to come and take him home, according to the Maumelle Police Department’s release sheet, was Sam Vogel.
Since Then ...
2014: As audacious as it seemed when this story was published, the $60 million estimate on M. David Howell’s Ponzi scheme turned out to be conservative. Total claims would top $84 million.
One claim, for $11 million, was made by Dallas Cowboys owner Jerry Jones, who had insisted that Howell provide a letter of credit before adding to his earlier investment of $5 million. Bank of America, in turn, had required Howell to buy a certificate of deposit to cover the letter of credit.
Retired Pulaski County Circuit Judge Robin Mays would spend a decade administering Howell’s estate.
“Jerry Jones is what brought it down,” Mays said in 2012. “Howell had to take Jones’ money and buy the CD, and then he didn’t have the money to keep making payments.”
When the probate case was finally closed in December 2013, after more than 11 years of litigation, 58 parties whose claims for $38.3 million were approved by the court had received about 6.5 cents for each dollar they were due.
In 2009, Richard Smith, who co-signed some of Howell’s promissory notes, was sentenced to two years of probation and 200 hours of community service after pleading guilty to filing a false tax return during the time he was associated with Howell.
- Mobile-Payment Battle Brews Between Apple, Wal-Mart
- WSJ Looks at Crystal Bridges' 'State of the Art' Exhibit
- Report: Acxiom to Open Austin Office, Hire 150
- Natural Gas in Fayetteville Shale Takes Arkansas from Zero to Billions in 10 Years 1 day ago
- Wal-Mart Used Technology to Become Supply Chain Leader 2 years ago
- Dustin McDaniel Hospitalized 16 hours ago
- John Rogers Asks for Dismissal of Brace Suit 1 day ago
- Royalty Owners Haul Exxon Subsidiary XTO to Court Over Royalties 1 day ago