Shortfall

by Alice Echols

  There were problem B&Ls throughout the country, including in Pittsburgh, where in June 1932 two building and loan men were sentenced to long prison terms for having embezzled $96,000 from the city’s Modern Building and Loan Company. A month later in Philadelphia forty building and loan and bank officials were charged with embezzlement, fraudulent conversion, and misappropriation of more than $1 million from four separate associations. Plenty of small-fry operators also stood accused of malfeasance as well. The secretary of a Newark, New Jersey, B&L killed himself in November 1929 shortly after being accused of embezzlement.14

  Closer to home, Coloradans learned in early December 1931 that the president of a building and loan association in Golden, Colorado, had tendered his resignation. Over the years, John Vivian, a prominent Republican Party operative, held many political appointments in the state. That fall he was fired from one of them—the post of regional administrator for Prohibition—when investigators uncovered numerous irregularities in his administration. Now, as the head of the Golden association, he stood accused of mishandling two estates, one of which was his very own aunt’s.15 And just before the New Year the Denver Post carried an article about a banker in eastern Colorado whose $86,000 embezzlement earned him a sentence of eight to fifteen years in the state penitentiary. However, none of these stories prepared the residents of Colorado Springs for the saga that began to unfold there in the closing days of 1931.

  Three nights after Christmas, on December 28, 1931, O.S. Sutherland was making his rounds on Pikes Peak Avenue, right by the Mining Exchange in downtown Colorado Springs. Sutherland worked as a night watchman for a business that provided local shop owners with what were called merchant police. His boss had only recently bought this route, and Sutherland had been working it for just a few months. Still, he knew whom he could count on seeing, and Willis Sims was not among them. However, that night the president of the State Savings Bank was at his desk. At about 1:30 a.m. Sutherland stopped by his office and chatted with him. An hour later the night watchman returned. The State Bank building, as it was known, contained several businesses besides the bank, including Sims’s Assurance Savings & Loan Association and the State Realty Company, all of which were loosely connected through their directors. As he entered the building Sutherland noticed someone sitting on a bench that was located about halfway down the long corridor. He was slumped over. As the watchman approached, he realized it was Sims. With a .22 caliber revolver in his hand and a bullet in his head, Sims was unconscious, with only a faint pulse perceptible. Efforts to revive him proved futile.

  The local dailies treated Willis Sims’s suicide as the most baffling of mysteries. In this respect, they appeared to be taking their cue from the tight-lipped way that New York papers just weeks earlier had handled the suicide of the prominent banker and Democratic Party operative J.J. Riordan.16 According to the “Daily Twins,” everyone who knew Willis Sims was at a loss to explain what might have led him to end his life. Bank customers reported that he had seemed especially jolly that day. And Sims’s widow reported that he had seemed in good spirits that evening. After supper with her and their two teenage sons, he had retired to the living room where he read a magazine leisurely for an hour or two. At about nine he had asked her to drive him to the bank. He told her he had paperwork to tackle in preparation for the New Year. Whatever he did over the next five hours did not include penning a suicide note.

  According to the Gazette and the Evening Telegraph, Sims’s suicide left his friends and business associates feeling as blindsided and dismayed as his widow. Sims had been a tireless booster of the country, the town, his businesses, and the building and loan industry. Just four years earlier at a meeting of the state’s thrift trade group he had declared that a building and loan association, if properly managed, was failproof.17 Reporters and editors at the local dailies furnished readers with nothing by way of a motive, but they were confident that Sims’s suicide was unrelated to his business affairs. They made much of the fact that on the very day of Sims’s death Colorado’s state banking commissioner, Grant McFerson, declared that he had examined the bank’s books and had discovered no shortages. As for the Assurance Saving and Loan association, readers were advised that the affairs of that concern were not believed to be in any way involved in Sims’s suicide. When it came to banking failures in their own backyards, local newspapers tended to be sanguine. When Missouri-based Farm and Home, a $50 million institution and the nation’s third-largest building and loan, applied for receivership in June 1932, the local press reported that the organization’s board of directors promised that it was a “friendly receivership” in which depositors “would not lose a dollar.”18

  Willis Sims, B&L Man. Springs’ District Attorney Clyde Starrett said of the state’s B&L commissioner Eli Gross, “When Willis Sims fired the shot that ended his life, a man exercising due caution would have walked into every building and loan office in Colorado Springs and ascertained just what cash and bonds it had.” (Gazette)

  In Colorado Springs some residents doubted whether Sims’s suicide could be completely unrelated to his business. The Denver Post, which had its share of subscribers in nearby El Paso County, noted in its coverage that Sims’s friends believed that his personal finances were a factor in his decision to take his life. A little more than a month after Sims’s death, the state building and loan commissioner, Eli Gross, revealed that he had read the report on the Assurance but had decided against commenting on it. “I do not believe the situation would be helped,” he told the press, “by an announcement at this time.” Gross’s non-explanation, which the Gazette buried on page ten of the paper, proved what all the skeptics had feared—that the institution was seriously in the red.19 Three weeks later, at a meeting of association stockholders, it was announced that the Assurance was insolvent, with liabilities of $179,000. It took the local press another week to make the association’s insolvency public. The directors of Sims’s savings and loan were able to reorganize and liquidate the business rather than have the courts mandate that it go into receivership.20

  It took six months before the town’s newspapers revealed that the original pronouncement about the State Savings Bank was too sanguine. In mid-June 1932 it was disclosed that Sims had caused the bank a loss of $23,158, and that the former credit watchdog had died with his own personal account withdrawn by $34. This was the one truly unflattering article about Sims to appear in the local dallies, but it was damaging. It was also reported that Colorado’s banking commissioner had slapped a $15,000 lawsuit against Sims’s estate and the bond company insuring his bank. The local representative of the bond company was court reporter Merton Stubbs, who was also on the board of directors of the Assurance, in which he was heavily invested. Depositors of the State Savings Bank would receive their final dividend payment seven years later, at the beginning of 1939. They were paid a total of 87 percent of their claims. As for the depositors in the Assurance, a little more than a year after Sims’s suicide they learned that the shortfall there totaled nearly $180,000 and that they would receive only 20 percent of the money they had on deposit there. As late as September 1936 depositors had yet to receive a penny.21

  In the months that followed Sims’s suicide the local papers dutifully covered the latest developments as they affected his depositors. However, the story of how Sims had gotten himself in such a fix was not one that any Colorado newspaper pursued. When depositors of the Assurance got the bad news about their money, the association’s sorry condition was tied to heavy losses in assets, a sharp depreciation in its remaining assets, and what were discreetly called unexpected liabilities.

  As with the Hollywood embezzler Gilbert Beesemyer, Willis Sims’s troubles began with real estate. His biggest problem was the Lennon Park development, which never took off. Sims embezzled and he took out loans. Unable to pay back anything but a fraction of this money, he proceeded to take out more loans. In the months before his suicide he was frantically moving money between his bank
and his building and loan association. Banking commissioner McFerson later claimed that in 1931 Sims took $6,000 that a retired schoolteacher had deposited at his bank and applied it to his own personal account. I cannot prove that the $6,000 loss forced the woman to come out of retirement to take a job as a librarian, but it seems plausible. He allegedly tampered with the funds of other depositors, including those of his mother. According to court records, Sims also audaciously removed $100 from the account of his own brother’s brokerage firm in order to make good on the $100 that his brother had loaned him. As late as December 28, 1931—the day before his suicide—Sims was juggling money, “borrowing” $543 of State Savings funds in order to pay his building and loan customers the money that would be owed them on their certificates of deposit come the New Year.

  One imagines that Sims believed that his auto lodge would eventually prove profitable and that he would be able to begin paying back his debts. But 1931 was hardly a banner year for tourism, even in the Springs. What these court records reveal is that by December Sims had to know that all his artful juggling was for naught and that within months he and his family would be out of their home.22

  While the collapse of the local tourist industry in 1930 and tumbling real estate values contributed to Sims’s money woes, there’s no getting around the fact that his bad personal investments were made using other people’s money. And yet aside from that one mid-June article, the press gave Sims a pass. His character went unquestioned, even as the lawsuits revealed his ethical shortcomings. His connections to the Republican establishment, his position as an esteemed Master Mason, and his patriotic activities help to explain the press’s reluctance to probe his character. Also working in his favor was that he had not personally benefited in any obvious way from his embezzlement. At the time of his death, his sole material possessions were reportedly a $40 radio and a three-and-a-half-year-old Chrysler Model 65 with more than forty thousand miles on its odometer. After making the needed repairs and outfitting it with new tires, the automobile dealership estimated that it could pay his widow $75 for it. Anna Belle Sims resorted to petitioning the court for a widow’s allowance. Over a year later, and after waiting a year for some payment, she asked the court if she might be permitted to keep the Chrysler in lieu of the allowance.

  The modesty of Sims’s estate and the unwillingness of the press to pillory him kept his family from being shunned. Three months after Sims’s suicide, the Evening Telegraph, perhaps in an effort to ensure that the Sims family did not feel like social outcasts, published a brief mention of a party that one of the Sims boys had attended. But people must have gossiped, perhaps particularly about why it was that Willis and Robert Sims had dissolved their partnership in 1924. Did people whisper about what Robert might have known about his brother Willis’s finances? Available records suggest that Robert Sims emerged from his brother’s tragedy with his own reputation intact. His brokerage firm was successful enough that even through the worst years of the Depression the family was able to continue living in their $13,000 Broadmoor home. The family remained part of the congregation at Grace Church, whose minister trusted Robert enough to have him serve as its treasurer. His wife, Margaret, continued to play golf at the Broadmoor with other members of the town’s “social contingent” such as Mrs. Miriam Shoup and Mrs. Francis Drexel Smith.23

  Robert was a successful businessman who enjoyed the trust of his community. Yet in February 1940, a shocking turn of events revealed that all was not well in his life. One Friday afternoon Robert arranged for his wife to meet him at work. However, as Margaret waited patiently for him downtown, Robert made his way back to Broadmoor. After leaving a note for her in their home, he headed out for a hike. It was a mild day and he walked some distance until he reached a wooded area. Quite possibly he knew these woods from the days before the Broadmoor was developed. He stopped there directly behind the house owned by longtime Springs lawyer P.M. Kistler. Perhaps he took in the beauty of the place, but sometime that afternoon he also removed a gun from his pocket, put it to his head, and pulled the trigger.

  Willis Sims’s ill-fated Buffalo Lodge, which featured a handsome central lodge of four thousand square feet, was an expensive undertaking. It has recently been made over into a bicycle-themed hotel. (Courtesy the Postcard Collection, the Pikes Peak Library District, 208-9295)

  Robert Sims’s body was found Saturday morning by one of the Boy Scouts who had been dispatched to search for the missing broker. The local press emphasized that the fifty-six-year-old was ill, and he may have been.24 Then again, this could have been a case of journalistic spin. Whether his decision to end his life was in some way related to his brother’s suicide cannot be known. Not long after his brother’s death in 1931, the liquidating committee for the Assurance had sold the lodge to a local man, who further developed it. About the same time, the State Savings Bank Building was also sold and converted into a movie theater. In the intervening period the Buffalo Lodge must have begun to do a pretty fair business, because in late November 1939, nearly a decade after Willis Sims’s suicide, the operators of a Denver hotel bought it for $99,000.25

  What did Robert Sims feel when he learned that the business whose insolvency had so figured in his brother’s suicide was now worth almost $100,000? Did the article, which appeared ten weeks before he ended his life, start him brooding about his brother? Did the lodge’s stunning sale price vindicate Willis’s conviction that the lodge would, in the longer term, prove to be a winning proposition? And had Willis felt that his younger, wealthier brother should have loaned him more money to help him keep his businesses afloat? The evidence here is slender but telling. Willis’s decision to defraud his brother’s company in order to give the appearance of repaying him suggests more than desperation. After all, why hadn’t he defrauded someone else? Stealing from his brother and not really repaying him, which he had to have known Robert would discover, may signal that Willis felt his brother should have done more for him. And did all of this come back to haunt Robert Sims ten years later?

  When Willis Sims killed himself in December 1931 he set in motion a process that no one could stop. To many people in the Springs, Sims’s suicide told them all they thought they needed to know about the condition of the region’s B&L industry. Association members’ fears were confirmed when they waited in long lines outside their B&L and discovered that no amount of haggling or pleading or threatening would produce their money. Time and again, depositors were sent away empty-handed, no matter how desperate their circumstances. Evidence suggests that the City Savings Building and Loan did its best to honor some depositors’ requests through the spring by allowing partial withdrawals.26 My grandfather’s willingness to bend the rules probably wasn’t George Bailey–like generosity on his part. Rather, I imagine he figured that outright refusal, while an association’s legal right, would only provoke a bigger panic.

  B&Ls were attacked for refusing depositors’ withdrawal requests, but again, the bottom line was that they were within their right to deny on-demand withdrawals. Associations required either thirty or sixty days’ notice for all withdrawals, and they could deny any request that would result in the association paying out more than one-half (and in some cases more than one-third) of its stock in any one month. These stipulations—along with others about the fees and penalties associated with withdrawals—were in the bylaws of every association. But when they faced a tsunami of withdrawal requests from their members, many of whom could not pay back their own loans, my grandfather and his staff were eventually forced to say no, just as the town’s remaining B&L operators, Ed Sharer and Fred Bentall, were doing. To members who had believed their associations’ advertising and directors’ smooth talk and assumed that money was available on demand, the enforcement of these basic B&L rules proved that the entire industry was a racket.

  Fueling customers’ aggrieved feelings was a small-circulation newspaper called Common Sense Weekly. The Denver Post covered the B&L scandals in the Springs and Pueblo
, but in the months following Willis Sims’s death, this small westside weekly was the one local paper that did not ignore the people crowding anxiously into the town’s building and loan associations as they tried to pull their money. Newspaper readers in much of the country were more apt to find boosterish articles about the B&L industry, planted by the industry trade group, rather than honest accounts of failing and frozen B&Ls.27 Common Sense was published by the husband-and-wife-team of J. Herbert Pratt and Clara Pratt, recent arrivals to the Springs. Herbert Pratt presented himself as a pragmatist committed to what he called “hard-headed business, men of good judgment, foresight and common sense.”28 He tried to use the paper to launch his career as a tax-slashing politician. One of the few businesses in the Springs where unions enjoyed any semblance of power was the print trade, and almost immediately the Pratts, who ran their own print shop, butted heads with the local Allied Printing Trade Council. The Pratts railed against labor unions in the pages of their paper, and they helped to pioneer one particular line of attack that in the future would prove very effective on the national stage. They accused union officials of being “racketeers,” linking them in the process with headline-grabbing mobsters. Several years later this argument eventually eroded public support for the New Deal, which in many ways was supportive of labor unions.29 The Pratts’ coverage of the B&L scandal was sensationalistic, which won the paper many readers, but it ratcheted up the panic and the anger.30

  Ed Sharer got the lion’s share of negative publicity as the scandal unfolded that spring. Readers of the local dailies learned something of Sharer’s legal troubles as early as March 1932, when hoisting engineer Joseph Borah sued him and Sharer’s Texas business partner on grounds of fraud and unlawful deceit. Borah, who had several thousand dollars in Sharer’s association, claimed that the B&L head had induced him to purchase an oil lease in Texas with $1,000 of this money, and later lured him into making a $2,000 loan to his Texas partner. Borah, asking for exemplary damages, sued for $8,000. On April 11, 1932, a month after a jury found the B&L head guilty of willful deceit, Sharer’s request for a new trial was denied. The judge in the case told Sharer he had five days to come up with the $3,000 bond or arrange a further stay of execution. On April 15, the day before he was meant to post bond, Ed Sharer, with his wife, Myrtle, by his side, fled Colorado for a town just across the state’s southern border—Raton, New Mexico. Sharer reportedly skipped town on borrowed funds and left behind a slew of bad checks and several lawsuits in the making.