Shortfall
Page 14
Sharer did not have the $3,000, but that wasn’t the only reason he opted to make himself scarce. He knew the Dollar Building and Loan Association was insolvent. From Raton, Sharer mailed his letter of resignation as president of the association to the state building and loan commissioner, Eli Gross. It was not until May 8, three weeks after Ed and Myrtle Sharer had left the Springs, that the local dailies reported on the association’s insolvency. Whereas the Gazette’s article, entitled “Plan Liquidation Loan Association,” was discreetly tucked away inside the newspaper, the Denver Post went into great and alarming detail about the looming financial scandal, which it said “threatens to shake Colorado Springs to the core.” The Post, which ran the story (and an accompanying picture of Sharer) on its front page, noted that the accountant examining the association’s books estimated that the Dollar’s shortfall would likely come to $140,000. Even determining that wasn’t easy, the Post revealed, because proper credits and debits had not been entered into the company’s books. Furthermore, it looked as if the Dollar had no legal officers or directors. Neither its president, Ed Sharer, Ruth Smith, its secretary, or its board members, Smith and Mr. and Mrs. Sharer, seemed to own any association stock, which most people assumed (wrongly, it turned out) was a requirement for all directors.31
The state B&L commissioner could not yet determine if criminal liability was involved in the Dollar’s collapse, but he traced its current problems back to 1927, when the association had suffered that $32,000 shortfall and $40,000 impairment of its assets. Local authorities were divided on the question of Sharer’s guilt. However, he certainly aroused suspicion by traveling with his wife from Raton to Los Angeles rather than returning to the Springs and helping the auditor sort out the association’s books. On May 9, Colorado attorney general Clarence Ireland announced his intention to move forward. “Sharer might be able to tell us who owns the association stock,” he said, “but we don’t know where he is. So apparently there’s nothing left to do but apply for a receiver.” Depositors—or some of them—preferred to see the company liquidated rather than put into receivership. However, two weeks later the press reported that such a move required the cooperation of the Sharers, who initially had refused it. All this time, Sharer was on the lam somewhere in Los Angeles. According to the El Paso County sheriff whose task it was to find him, the fugitive banker went to considerable lengths to thwart efforts to locate him.
While Sharer was at large several lawsuits against him went forward.32 On June 1 a coal mining engineer, John A. Shields, appeared in court as the plaintiff in a $2,500 lawsuit against the former B&L president. In 1924 Shields had loaned $3,000 to the Dollar association. He had received in writing the assurance that what he had negotiated with the association was a 7 percent certificate, and that repayment (with interest) was his with thirty days’ advance notice. Shields signed that agreement, but he told the court that Sharer had verbally assured him that he could get his money any time he needed it, that the usual requirement was the giving of thirty or sixty days’ notice but that the association did not go by that. Sharer emphasized that he would give Shields 7 percent and would make the loan payable on demand. Shields had received regular interest payments and had succeeded in withdrawing $500 as recently as November 1931. Yet on December 5, 1931, when Shields served notice that he intended to withdraw the remaining $2,500 due him, the association refused him on the grounds that he was actually a stockholder. Shields maintained that he knew nothing about this thing called “stock.” What was a stockholder? he demanded. His lawyers argued that Shields was, in fact, a creditor of the association, and the association his debtor. Sharer later maintained that whatever he told Shields in that conversation, it wasn’t legally binding.33
Five days later, seventy-three-year-old George Oswald filed suit, claiming that in July 1931 the Sharers (and their employee Mrs. R.M. Smith) had induced him to loan the Dollar $5,000 at 7 percent interest. Oswald, a retired rail conductor, said he had agreed to the loan largely because the Dollar’s officers had persuaded him that the association was solvent and secure. But when he went to pull out his money on January 2, 1932, just four days after Sims’s suicide, he had been turned away, as had Shields a month earlier, on the same grounds—that he was a stockholder in the association and would have to abide by its rules.
A little more than two months after Oswald won his case, Sharer was slapped with another lawsuit, this one for an alleged 1927 forgery involving local house painter, Fred Forbes, who had been involved with Sharer in a complicated Black Forest land deal.34 When asked at the September trial if he thought that Sharer had tried to forge his signature, Forbes replied, “He did the best he could, I’ll say that.” Forbes’s response elicited such an outburst of laughter from the spectators in the crowded courtroom that the bailiff had to loudly rap his gavel to establish order. Just as damaging was the testimony of Pueblo auditor George W. Purcell, to whom Sharer had admitted his dishonesty. By the time the forgery cases went to trial in September, Sharer was incarcerated in the county jail, where he had been since the El Paso County sheriff had nabbed him in Los Angeles in late June. In addition to the multiple lawsuits against him, the district attorney charged Sharer with falsifying reports about the condition of the Dollar. Throughout, Sharer maintained his innocence and blamed all of his problems on Walter Davis, whom he claimed controlled the Dollar.35 Sharer’s wife and two daughters must have boarded with friends because in the couple’s absence both their house on North Tejon and the furniture inside it had been seized to satisfy the mortgage.
Life for the Sharers changed dramatically during the weeks the couple were gone. Since the couple’s departure in April, conditions in the state and in the town had also worsened. The sugar processing company, Great Western Sugar Company, suffered a $1 million deficit in 1932. The Colorado Fuel & Iron Company, which produced 30 percent of the state’s coal and 2 percent of all American steel, saw its earnings drop, and it responded by slashing the pay of some of its workers. By 1933 the corporation would declare bankruptcy. Farmers in the state who had earned $213 million in 1929 were earning only $82 million three years later.
Ed Sharer, once on the fringes of the Springs capitalist class, stood accused of fraud and forgery. (Gazette)
By mid-1932 Little London could not claim immunity from the Depression even if the Golden Cycle Company boasted that conditions for gold mining had never been better. Even Spencer Penrose’s luxury hotel, the Broadmoor, was in trouble. By August 1932 it would be in bankruptcy, although it did reorganize and survive. While high-end traffic to the Broadmoor hotel slowed, the number of transients passing through Colorado Springs tripled from the previous year. Twenty thousand men passed through Colorado Springs during the month of April alone. In the first half of 1932, 10,974 transients sought a “flop” at its municipal shelter. During only one week of April the Salvation Army served 2,780 meals to the destitute.36 There was an “implied code between the city and the drifters,” according to the local papers: “‘Colorado Springs will give you a warm and comfortable place to sleep and a solid, wholesome meal, and then you must go your way.’” Transients were housed for the night in a heated building the city had remodeled for drifters. The facility resembled an army barracks and featured two rows of double-deck bunks covered with soft mattresses. Before bed and once again in the morning drifters received a hot meal. The shelter had many names, including Hoboes’ Rest, Hotel Del Gink, and Hotel de Harper, after the police chief.37
The Great Depression soon altered Colorado Springs in other ways as well. Indeed, the very sounds of the city were changing as the familiar rumble and grind of its little trolley cars, once the pride of the Springs, forever ended on May 1, the day modern buses were introduced. The junking of its streetcar system, which covered forty-one miles and, much like the system in Los Angeles, had taken passengers virtually everywhere, reflected residents’ greater reliance on the automobile. It was also a part of the city’s belt-tightening regime.
By
mid-1932 it seemed to some that even the weather was turning strange. On June 10 a tornado appeared east of the city. After jumping over the city’s business district, it sheared a path a block wide and a half mile long through the west side of town. For residents of the west side the tornado literalized the pain of the escalating building and loan crisis, which grew scarier and scarier that summer. Middle-class people were hurt by the crisis, and much more than the news coverage ever suggested, but nowhere was the dread of loss more profound than on the west side of town in the former Colorado City.38
A crowd gathers at the local Salvation Army in 1932. During one week of April that year, the organization served 2,780 meals to the destitute. (Courtesy of the Margaretta M. Boas Photograph Collection, the Pikes Peak Library District, 001-720)
That fear played itself out in the offices of the town’s remaining building and loan associations. Sometime that spring Fred Bentall called the police after an angry depositor entered his Home Building and Loan Association, pulled out a gun, and demanded his money. On June 21 the fifty-one-year-old Bentall disclosed that he would be conferring with Commissioner Gross about voluntarily liquidating the Home. Association members, who numbered only between sixty and seventy, had no reason to be concerned, he said. “Our little association was going along nicely,” he said soothingly, and there was “absolutely no reason for any of our depositors to become worried.” Worried! Bentall’s depositors, like those at the other building and loans, were consumed with fear and anger and worry as the bills piled up and the one source for paying them lay out of reach, perhaps forever.
They grew more despairing after one of the Home’s more affluent depositors, a forty-nine-year-old man who ran a plumbing business, filed an $8,000 suit against Bentall.39 Within a week Bentall phoned B&L commissioner Eli Gross to request a receivership. Bentall met with reporters and explained that throwing the Home into receivership meant losing everything that he had accumulated over a lifetime of work. He also admitted that the shortage in his association was far larger than he had let on and that it would be almost impossible to liquidate securities now for anything close to their onetime value. The upshot was that his association would be unable to make its July 1 interest payments. Whatever his current circumstances, however, Bentall cheerfully promised to make good on his debts. “I’m going to see to it that none of the depositors who have trusted me loses money,” he claimed. “If, when the whole thing is over, they are not repaid in full, I’ll give them my personal notes and I’ll devote myself to paying them back, no matter how long it takes.”
Within days the district attorney took decisive action and arrested Bentall on embezzlement charges. Bentall came clean, confessing to authorities that he had juggled funds for years, with the result that his association now faced a $65,000 shortfall. He admitted that he had used the stolen money to purchase property in the Springs and equity in an Oklahoma property. He also purchased cattle and $2,000 worth of machinery, which were on his ranch. He claimed that the property was worth no more than $12,000, although the paper noted that it was unclear if that pertained to all the property he had purchased with association funds. From the county jail a contrite Bentall declared, “I’m ready to take my medicine,” as Los Angeles B&L man Gilbert Beesemyer had said eighteen months earlier. He also promised to pay back his defrauded depositors.
In the June 30, 1932, issue of the Gazette, the B&L scandal dominated the paper with news of Bentall’s jailing and a thwarted kidnapping of Dorothy Davis. (Gazette)
However, a week later G.W. Barron, the court-appointed receiver of the Home, declared that the association was in far worse shape than Bentall had admitted. “Every day the shortfall increases by between $6,000 and $7,000, and we have no idea when the end will come.” Barron was horrified to discover thirty-five accounts totaling $66,198.90 that were nowhere listed on the association’s books. And then there was the “appalling condition” of the books. Moreover, the president of the Home had lied about having $1,600 of his own money invested in the association. It turned out he actually owed it between $5,000 and $6,000. Receiver Barron estimated the shortfall would reach $100,000. Bentall took offense at this, and insisted that the receiver must have miscalculated: “It is difficult to understand how that much could slip through your fingers without your receiving something for it.” All he really had taken was “a few hundred here and a few thousand there to meet demands for money similarly disposed of,” he said. His own life had been simple, he contended. Making off with the association’s funds was about “staving off financial disaster,” not about “luxurious living.”40
During the summer of 1932 Ed Sharer and Fred Bentall both occupied space in the county jail, but they were not treated equally there. In contrast to Sharer, who had been part of the town’s establishment, Bentall was an outsider whose time in the KKK had not endeared him to the authorities. Was this why the police took mug shots of Bentall, which were then distributed to the press, while Sharer escaped this indignity? That was the view of Common Sense, and it seems plausible. The press treated Bentall’s mug shot, in which he appeared “haggard and old,” as visual evidence of his guilt. Why else would he have aged so if he weren’t guilty? The dailies made much of the fact that Bentall swayed side to side in his cell, his heads in his hands, moaning to himself, while Sharer kept a “bold, almost defiant front” in his cell, where he played cards by himself.41
Bentall pleaded guilty to embezzlement at his August 25 sentencing. As best as could be determined, he had caused a deficit of $92,000. As he stood before the court, sobbing, he repeatedly clenched and unclenched his fists. Conspicuously absent were his wife and his thirteen-year-old son. Clyde Starrett, a former district court judge and, like Bentall, a Democrat, argued for leniency, but the district attorney, John Meikle, was having none of it. He pointed out that Bentall had used other people’s money to buy houses in Colorado Springs, a ranch on the fringes of town, and a 160-acre farm in Oklahoma. And he emphasized that Bentall had embezzled from poor people concerned about their old age and about having enough money to tide them over in times of financial adversity. Meikle also noted that Bentall had actually asked him if he needed to charge him on so many counts, especially after he had cooperated and pled guilty. “It was unintentional even if it may not look that way” were his final words of defense. Judge Cornforth sentenced him to between sixteen and thirty-five years in the state penitentiary. On his way to the state pen he confided in the sheriff that he thought his sentence was fair, but harsher than what he had expected. According to the local press, Bentall’s wife was “nearly prostrated” after he was hauled off to prison. A year into her husband’s prison sentence fifty-three-year-old Selma Bentall died.42
Excess—playboy mayors, channel swimmers, yachting parties, Wall Street brokers and holding companies—went a long way toward defining America in the twenties.43 Now Americans were faced with something else entirely. With thousands of banks and B&Ls shuttered, payrolls slashed, and rents, mortgages, and taxes unpaid, you could say the whole country was coming up short. There was a money drought in the United States so severe that by spring 1933 there were 150 barter or script systems operating in thirty states.44
“Shortfall” usually refers to a financial deficit, but there were other kinds of deficits during the Depression. There was the weather, which threw the Plains into a drought for nearly a decade. And there was something else just as disorienting as the bizarre weather. It was the deficit of character that was now so manifest. Most Americans before the crash were not so cynical as to believe the world consisted of suckers and racketeers. In Colorado Springs Bentall, Sharer, and Sims had been respected leaders within their own communities. And while Walter Davis had never been a pillar of the community, he was considered financially shrewd. Indeed, when his business crashed, one of Walter’s employees admitted to a reporter that the news had flattened him. It was not only that his own money was invested in the City, it was also, he said, just “an awful smash . . . to see a
man he trusted in such a position.” For depositors these failures reverberated emotionally as they confronted the shortcomings of men they had once trusted. If you are searching for a metaphor for these Depression years, try “shortfall.”
5
Sowing Grief
It would be easy enough to mistake Walter Davis for the sort of careless person who turns up so frequently in F. Scott Fitzgerald’s writing about the period he dubbed the Jazz Age. Still, even when you factor in his womanizing, he was not cut from the same cloth as Tom and Daisy Buchanan, the couple whose recklessness proves to be the final undoing of Jay Gatsby in Fitzgerald’s famous novel. My grandfather certainly knew something about being rich—where to shop, what to drive, and where to stay—but the feeling of immunity that undergirds the carelessness of the Buchanans was not a feeling with which he would have been familiar. Like Gatsby, what Walter knew was the fear of being exposed as a fraud—the cabin boy strutting about in a captain’s uniform. Think about the man’s meticulousness—his preoccupation with the daily ledger of deposits and withdrawals at his association. Consider the steady flow of flowers and candy to his wife and his daughter—and all those telegrams. He was a man who gambled, but not without doing his best to hedge his bets.