Paper chase

William Morgan says he's just an innocent document dealer snared in a campaign finance scandal. And if you believe that, he has some old railroad bonds he wants to sell you.

But Morgan wasn't looking for a pretty good living. He was after the Big Payoff, which has yet to come. Yet even after eight years, he does not doubt that these "programs" actually exist. "I know they're real, because I've talked to people who've been paid," Morgan says. (He can't give names, though, because "they're all sworn to secrecy. They all signed confidentiality agreements.")

Like many of those in the business, Morgan has been looking for the Big Payoff in one form or another for most of his adult life. Morgan was raised in Lawson, a small burg near Seagoville that no longer exists; his father died when he was 3. "My mother had to borrow money to bury my father," he says. "She didn't remarry till I was 26." Obviously bright, Morgan graduated from North Dallas High School in 1955, at age 16; when he turned 17, he joined the Navy and for three years was a radar operator in an anti-submarine squadron.

After the Navy, he attended college at North Texas State, graduating in 1962. He immediately went to work teaching history at W.W. Samuells High School. He left the DISD in '66 to work for a chemical company as a sales manager. By the early '70s, he set out to make his fortune as an entrepreneur. Beginning in '73, Morgan shows up as officer and director of a series of corporations, among them laundries, restaurants, chemicals, even a hot tub dealership at Dallas' Old Town shopping center.

By the mid-'80s, like a good chunk of Dallas, Morgan turned to real estate to generate his pot of gold. In 1987, someone introduced him to a fellow named Charlie Knapp, the former head of American Savings & Loan, the first of the high-flying S&Ls. Sure, the feds were grousing about the pile of bad loans Knapp had left behind at American when they forced him out in 1985. But when Knapp vowed that his newest venture, Trafalgar Capital Corp., would become one of the largest mortgage lenders in the country, Wall Street pretty much believed him. So who was Bill Morgan to question Knapp, whose boasts had landed him on the front page of The New York Times' business section?

"He was going to finance real estate out of his supposed reservoir of cash," Morgan says. Knapp was to be the "financial partner," the source of funds; Morgan was to be the "development partner," the one who found the property and did all the work in exchange for a 50 percent share in the deals.

In 1987, while working for Knapp, Morgan met a California attorney named Lawrence W. Taggart. At the time, Taggart, a controversial former California S&L commissioner, was head of Knapp's nascent mortgage lending business, Trafalgar Capital. Despite his grandiose plans, Knapp had some very real difficulties. For one thing, real estate lending had virtually dried up, leaving Knapp and his associates scrambling for a way to finance deals.

"Larry [Taggart] was the guy who introduced me to the bonds, when we were trying to find a way to finance real estate," says Morgan.

Like most of the people with whom Morgan wheels and deals, Taggart is an interesting character in his own right. He is best known as the man who approved Charles Keating's purchase of Lincoln Savings and green-lighted Lincoln's investment in the sorts of speculative deals that eventually led to the largest S&L bailout in history. Then, only weeks after resigning as commissioner, Taggart went to work for Lincoln as a consultant. In 1986, just before signing on with Knapp, Taggart also did a stint as a $10,000-a-month consultant and lobbyist for yet another S&L, Don Dixon's Vernon Savings & Loan. By the time regulators closed Vernon in 1987, more than 96 percent of its loans were in default.

By 1989, both Taggart, who could not be reached for comment, and Morgan were out of a job. Knapp's stash of real estate cash turned out to be illusory. But what really hastened Knapp's demise was a nasty racketeering suit filed by Morgan over one of the first deals Morgan and Knapp closed. The soured deal involved the purchase of a half-interest in an Austin development, the Circle C Ranch.

"We flew to California and closed the deal," Morgan recalls. "Fifteen minutes after the closing, when we'd all left, Knapp goes in to Trafalgar Securities [the escrow agent] and pulls the deed from escrow, then gets on a plane for Phoenix. He pledged that deed to an S&L, saying he owned it free and clear."

When Morgan found out, he sued Knapp--and laid out the fraud publicly in his pleadings. "It was my job as a citizen to report that crime," Morgan says, chuckling. The FBI, who'd been angling after Knapp for years, wasn't slow to snap up the bait. "When that agent called me," Morgan says, "I asked him, 'What's your favorite color?' When he asked me why, I said, 'Because I'm about to deliver you Charlie Knapp's ass, and I want to know what color ribbon to use.'"

Knapp went to jail in 1993, largely on the strength of Morgan's testimony.

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