Hide and seek

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In the end, Reese wound up owning a piece of the Hawaii land, 634 acres that a decade ago were transferred to his wife. In Milan, as his hosts ordered up lunch in their perfect Italian, Reese bragged that the plantation deal netted him a total of $21 million.

In 1990, Reese had more to worry about than just civil disputes.

A federal task force investigating corruption in Texas banks and savings associations obtained an indictment in August against Reese and five S&L officers for engaging in a series of "sham transactions" to prop up the balance sheet of Austin-based Lamar Savings Association. Reese says he aided the thrift officers in the scheme in order to obtain a $37 million loan to finance the purchase of 225 acres near DeSoto.

A year later, federal prosecutors in Dallas charged him with violating federal fraud and conspiracy laws by seeking to conceal the profits from the sale of a 19-acre parcel near the intersection of LBJ Freeway and North Central Expressway.

He was accused of conspiring to defraud the IRS on taxes owed on $14.2 million he'd received from the sale, which was financed by Western Savings. The proceeds were wired to a bank in the Cayman Islands, then laundered through a Cayman Islands corporation to a wholly owned subsidiary in Kentucky, which in turn bought a 465-acre horse farm near Lexington, Kentucky. Reese and two other individuals owned the farm. As a result of the multiple transactions, no federal taxes were paid, according to court papers.

Reese's plea bargain, signed that same month, suggests he was also under investigation for banking transactions at thrifts in Louisiana, Colorado, and Oregon. If that weren't enough, as Reese explained on the sting tape, federal prosecutors had one more sword hanging over him.

In April 1989, he had directed his wife, Susan, to take $443,000 from a safe-deposit box, purchase cashier's checks for smaller amounts at 17 different financial institutions, and deposit them in a bank account and a securities account. Reese testified later that his motive was to hide money from his creditors. The government alleged the money-laundering scheme was arranged to avoid federal currency reporting requirements.

As Reese told Aviv in Milan on the sting tape, "I was vulnerable because it was very likely Susan would go to jail...The head of the task force said, 'Mr. Reese, we're tired of messing with you. Either we work out a plea agreement with you today or on Monday we indict your wife.'"

Reese agreed to plead guilty to bank and tax fraud charges, exposing him to a maximum prison sentence of 10 years. He agreed to testify for the government at several trials, including that of Western Savings president Jarrett Woods. Reese says he testified as a government witness at two other trials before his sentencing in February 1992.

"He was as high a flier as I dealt with," recalls Assistant U.S. Attorney Dan Mills, who brought dozens of thrift bandits to trial. "He borrowed money all over the damned place. He borrowed more than $500 million."

At his sentencing hearing, Reese wrote a letter to U.S. District Judge James Nowlin saying that he lost his "moral compass" in the spirit of the times and broke laws in an effort to keep his business afloat. "I should repay my debts, and I will do everything I can to repay as much money as possible," he wrote.

Mills, the prosecutor, says Nowlin was too lenient when he sentenced Reese to five years.

After his sentencing, Reese requested and was twice given extensions of time before being made to report to prison in October 1992. Reese says his father was in ill health, but Napp suspects something else was going on as well. On the sting tape, Reese told Aviv and friends that he did considerable research into offshore banking practices that year.

"He was going away for five years, and he was doing things to make sure the money would be safe and secure until he got back," says Napp. "He needed time to get all the pieces in place."

On the Milan hotel tape, Reese describes the way he has arrayed his assets as "a well-designed oyster." But even with his own words betraying him, it's been a difficult if not impossible shell for creditors to crack.

In a series of agreements filed in public deed records between late 1985, when the real estate crash was fairly evident, to 1990, when jail and criminal penalties loomed, Reese gave his wife separate ownership of much of the land around their house, properties along Greenville Avenue, stocks and bonds, and the rights to the 634 acres in Hawaii he made in the 1988 deal.

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Thomas Korosec
Contact: Thomas Korosec