Crime Pays

How the Feds let S&L swindler Clifford Sinclair get away with millions

Federal prosecutors are now almost sheepish when asked how Sinclair managed to walk away with so much money, especially since the plea agreement Sinclair signed with the government required him to pay it all back.

Former U.S. Attorney of Dallas Marvin Collins, who signed the plea agreement with Sinclair, says his office did not have the time, resources, or expertise to chase down Sinclair's assets. He says he considers Sinclair's 13-year sentence harsh punishment in and of itself.

Terry Hart, the former assistant U.S. Attorney who used Sinclair as a witness to convict Faulkner, Toler, and Blain, hedges on the subject, saying the plea agreement was signed before he took over the case. "As far as the financial stuff," he says, "that was something that for whatever reason to whoever was involved at that time, it just wasn't that important."

Almost three years ago, Sinclair was released from custody, after serving 52 months in federal prison. He and his wife, Kitty, moved into their custom home, to live out their retirement years in the tranquil shadows of the Sangre de Cristo mountain range.

Dusty, the couple's adopted son and former chauffeur, lives next door in another custom-built house, complete with a recording studio. It was built, and is owned, by the same corporation as Sinclair's home.

Sinclair, and two of his attorneys, would brook no questions about his financial wherewithal.

"I'm taping the phone call. There's no comment from Mr. Sinclair or anyone representing Mr. Sinclair," said Arlington attorney James Robertson.

At age 67, the lifelong hustler has retired off the biggest scam of his career.

A child of the Depres-sion born in 1926, Clifford Sinclair spent a lifetime selling. He sold houses. He sold insurance. He sold advertising. For 25 cents a pop, he sold form letters that companies used to browbeat delinquent customers.

Slight and owlish, Sinclair could be alternately sour-faced or friendly, given to eloquence or curtness depending on his purpose.

Most often, he seems to have operated as somewhat of a free-lance rainmaker, working as a contractor or forming his own companies with names like Professional Motivation Associates or Secured Investments Company.

Before he pleaded guilty in the I-30 scandal, Sinclair had never been convicted of fraud. But he had come close several times, perhaps because of a proclivity for involving himself with business ventures that ran afoul of the law.

Over the years, Sinclair has been charged with fraud in Texas, Alabama, and Arkansas. In all three states the charges were dropped, usually after Sinclair made some sort of arrangement to atone for his missteps.

His earliest known troubles began in Texas in the early 1960s, when Sinclair ran an insurance agency and sold policies for the Southern States Life Insurance Company. According to a report issued by Texas Commissioner of Insurance J.N. Nutt when he canceled Sinclair's license in 1965, Sinclair and some of his sub agents were using "false and fraudulent misrepresentations and promises" to sell insurance.

Specifically, the report found, Sinclair had paid a Southern States vice president $16,950 for a list of company customers with paid-up life insurance policies. Sinclair and the others would then visit the customers and try to sell them more insurance--with a catch.

According to insurance commission and court records, Sinclair and his helpers convinced customers to take out new policies, and pay for them by borrowing against the value of the policies they already had.

But some customers were apparently misled into believing they were receiving more insurance for free. What they were really doing was allowing Sinclair to place a lien against their paid-up policies. Some might have missed that distinction, records show, because they were asked to sign blank forms.

As many as 16 customers sued when they realized what had happened, and Southern States paid out $53,000 to assuage policyholders.

Sinclair and one of his partners were charged with fraud in two Texas counties in 1964. The insurance commission yanked his license the next year, and the charges against Sinclair were eventually dropped.

During the 1970s, Sinclair moved from insurance to loan brokering, and this time found himself facing fraud charges in two states.

The scheme this time, according to court and regulatory records from Arkansas and Alabama, was fairly straightforward. Sinclair or his agents--working under the name Diversified Financial and Management Services--represented themselves as loan brokers.

For an up-front processing fee, the company claimed it would take loan applications from people looking for money to buy a house or start a business, and submit the applications to lending institutions.

According to a 1978 Alabama Securities Commission investigation report, at least 25 people in that state paid Sinclair's company a total of $3,875 to find them lenders. Although Sinclair sent signed letters to the customers assuring them their applications had been submitted to lenders, none ever received loans. The Alabama investigation found that none of the lenders Sinclair claimed to have contact with had ever received the loan applications.

In 1977, the Arkansas Securities Commission filed charges against Sinclair and Diversified Financial, saying the company did not have a license to do business there. In September, the state's securities commissioner signed a cease and desist order, concluding that Sinclair and his company had defrauded customers and barring them from further business in that state.

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