Crime Pays

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

But Sinclair's next move was even bolder. As he awaited sentencing before U.S. District Judge Barefoot Sanders, Sinclair's accountants submitted a financial statement to the court setting Sinclair's net worth--not including his wife's assets--at just $2.4 million.

There was no mention of the $6 million the couple had siphoned off to the Virgin Islands, which defense attorneys for Faulkner and Toler would discover later.

On October 8, 1985, Sinclair stood before Judge Sanders to receive his sentence. He was appropriately humble.

"I deserve whatever punishment you wish to give me and I will take it without whimpering whatsoever," Sinclair told Sanders.

"I am extremely sorry for what happened on I-30 and my involvement," Sinclair continued. "I regret the problems that I have caused my family, my relatives, my friends, and my government, and when this ordeal is over with, whatever time I have left I want to spend it with my family making amends and attempting to become a useful citizen again."

Sanders handed down the maximum 13 years Sinclair faced under the plea agreement, and then turned to the matter of money.

But when setting the amount of restitution, a transcript of the hearing shows, Sanders apparently misread Sinclair's financial statement and thought that the $2.4 million was community property, not Sinclair's alone.

Believing that, Sanders halved the total to $1.2 million. Then he knocked off $600,000--the amount Sinclair had falsely claimed to be worth before I-30. That boiled down to $600,000 in restitution, which Sanders ordered along with a $40,000 fine.

Sinclair, standing before the bench, said nothing about the judge's mistake. Nor did attorney Bill Boyd, who stood at Sinclair's side. (Sanders dod mpt respond to phone calls seeking comment on Sinclair's sentencing.)

On the day he walked out of that courtroom, documents and tax returns would later show, Sinclair and his wife actually had somewhere in the neighborhood of $10 million at their disposal.

But Sanders did not know that, and no one from the U.S. Attorney's office pointed it out. Later, as evidence emerged that Sinclair violated the terms of his plea agreement by hiding assets, the government would do nothing to revisit the issue.

Because even before he was sentenced, Sinclair had become the man who was going to put Faulkner, Toler, Blain, and the other I-30 heavyweights in jail.

By the time Faulkner and six other defendants perceived by the government as the key players of I-30 went to trial, more than 100 smaller fish had already been snagged by the task force assembled to pick over the remains of Empire.

"It was handled on the tried and true pyramid theory where you start at the bottom with the smaller fish and then work up to the medium size and then finally all the way up to the top," says former U.S. Attorney Marvin Collins.

To get the "sharks," as Collins calls them, prosecutors needed an insider, someone intimately involved in the fraud who could explain how the deals went down and who was giving the orders.

Sinclair did that, testifying at length during two separate trials.
The first I-30 kingpin trial opened in Lubbock in the spring of 1989, and ended about seven months later with a jury split 11 to 1 for conviction.

Two years later, the government tried the case again in Midland. The second time, it took about five weeks, and ended in convictions.

At both trials, Sinclair was the government's most potent weapon, paging through reams of documents and explaining how they proved the complicity of Faulkner, Toler, Blain, and the other defendants.

"The documents were the bones of the case, but to put the meat on the bones we had to get one of the co-conspirators," says lead prosecutor Terry Hart.

Although there were literally truckloads of documents in the case--including thousands of pages of Sinclair's own handwritten notes--few of them actually connected Faulkner and the other defendants directly to crimes.

Rather, it was Sinclair's interpretation of the documents, and his insistence that Faulkner or Toler had ordered certain things to be done, that implicated the men on many of the criminal counts.

"As far as his memory, the guy was phenomenal," Hart says. "I mean, he was extremely intelligent. I believed absolutely his rendition of the facts, because I spoke with him numerous times and we'd go over the thing deal by deal. I'd have my notes from the last time I spoke with him, and just from memory he would always tell it exactly the same."

Defense attorneys, of course, did their best to paint Sinclair as a self-interested liar. They resurrected Sinclair's previous fraud problems in Texas, Alabama, and Arkansas.

They also pointed out, in great detail, how Sinclair had lied about his hidden wealth during his own sentencing.

Sinclair, whose testimony for the prosecution showed nearly total recall of years-old conversations with the defendants--sometimes to the point of remembering who sat where in the helicopter during a flight--evinced almost total ignorance of his own financial situation. He testified that he had no knowledge of his wife's companies, or how much money they had.

Even when shown the large amounts of interest income the couple was reporting on its federal tax returns--including more than $700,000 of interest earned in 1989--Sinclair could not recall how much money he had tucked away.

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