By Editorial Staff
Published May 2, 2008
- or –
How to make $2 million developing a worthless tract of land without selling one square foot of it
By Nicholas A. Guarino
When the media folk told you about Whitewater, they left out a few amusing details. So in a spirit of altruistic service and public education, I’m going to let you in on the secrets. Pay attention, because you’ve never heard this before.
A. Real estate developing is more fun when you can borrow all your capital without having to pay it back … or even sell any land. So to get started, you need two friends: one an appraiser, one a banker.
B. Next, you find some dirt-cheap dirt. Anywhere in the boondocks will do. In the Whitewater case, it was 230 acres of land along the White River for about $90,000. (Some housing tract! It was fifty miles to the nearest grocery store.)
C. Then you get your appraiser friend to do a bloated appraisal. Hey, what are friends for? Let’s say he pegs it at $150,000.
D. You go to the bank and get the usual 80% loan (e.g., 80% of $150,000 with the land as collateral). You now have $120,000, so you pay off the land ($90,000), and you still have $30,000 in your pocket. You’re on a roll.
E. You pay $5,000 to subdivide it and bulldoze in a few roads. (Or if you know the ropes, you get the state to do it, as Bill did to get a $150,000, two-mile access road.)
F. Voila! You now are the proud owner of a partly-developed luxury estate community. So you call up your appraiser friend again, and he re-evaluates it at a cool $400,000.
G. You hustle back to the bank (run by your friend McDougal) and get a new 80% loan based on the new value. (Nothing out of line so far. An 80% loan is standard, right?)
H. You draw up plans for some fine houses (which will never be built.)
I. You get a new appraisal.
J. You get a new loan.
K. You make two or three phony homesite sales to friends. You shuffle the funds around among your shell corporations and bounce it back to your friends – plus a little extra for their help.
L. You get a new appraisal.
M. You get a new loan.
N. You do a “land flip,” selling the whole thing to Company X for $800,000, which sells it to Company Y for a million, which sells it back to you for $1.25 million. (All these companies are your friends.) And yes, this kind of thing did happen in Whitewater and Madison. In fact, Whitewater figures David Hale and Dean Paul once flipped Castle Grande back and forth from $200,000 to $825,000 in one day!
O. You get a new appraisal.
P. You get a new loan.
Q. Finally, your development corporation declares bankruptcy, and the bank has to eat your loans because the money is all gone, and since the record-keeping is so poor, nobody knows where it went.
But weep not for the bankers. You pay them nicely – perhaps a third of the $2 to $3 million you skim off. Weep for the taxpayer who bails out their banks. Which is to say, in the case of Whitewater, weep for yourself.
Does This Actually Work?
Whitewater was just the first of a series, like a pilot for a sitcom. Using Whitewater as a prop, Bill and his partner Jim McDougal milked – by my rough estimate – several million dollars from the SBA (Small Business Administration) and at least five or six banks and S&Ls, starting with the Bank of Kingston.
But their later ventures, bringing in Steve Smith and now-Gov. Jim Guy Tucker, did even better. Campobello started with about $150,000 in property and squeezed over $4 million in loans from banks in about two years. Castle Grande began with $75,000 worth of swamp land and cleared over $3 million. It never built anything. The only human artifacts on it today are a few old refrigerators and mattresses.
Why do I have information you haven’t seen before? Because my firm had $10 million in Madison Guaranty S&L, and I was thinking of buying the Bank of Kingston. (I was already worth millions by that time.) When I saw Kingston’s financial statement, however, I ran like a scalded cat.
And Madison was worse. You didn’t have to be a Philadelphia CPA to spot their money laundering, dead real estate liabilities proudly listed as assets, huge amounts of 24-hour deposits from brokers, and $17 million in insider loans. It was a nightmare.
Whitewater Development Corp. had at least an appearance of sincerity. It even had TV commercials, starring Jim McDougal’s striking young wife, Susan, in hot pants, riding a horse. Another one showed her behind the wheel of Bill’s restored ’67 Mustang.
But after Whitewater, the deals began dropping their frills. The RTC criminal referral that Bill suppressed during his presidential campaign cites such later corporations as Tucker-Smith-McDougal, Smith-Tucker-McDougal, and Smith-McDougal. Catchy, eh? If it were me, I would have called them Son of Whitewater, Whitewatergate, and Whitewater & Ponzi, L.P.
On their 1979 income tax, Hillary valued Bill’s used undershorts – donated to charity at the end of their action-studded tour of duty – at two dollars a pair. Plainly, we are dealing here with a couple that gives loving attention to detail in matters of deductions.
As you may recall, however, Clinton has proclaimed over and over that he simply “forgot” to deduct the $68,900 he claims he lost on Whitewater. Commentators have been mystified by the paradox. But it’s no mystery to me. The reason is obvious: Bill didn’t deduct the $68,900 because he didn’t lose a dime on Whitewater, and he didn’t want to do time for tax fraud. Period.
Jim McDougal put up all the money except for $500 – and Bill borrowed even that. But weep not for Jim. Not only was he Bill’s partner in Whitewater, but he owned Madison Guaranty S&L, which was the designated milk cow that provided most of the inflated loans. Weep instead for the taxpayers – like you and me -who picked up the $66 million tab when Madison folded.
Forerunner - Home » Pass The Word » Pass The Word - March/April 1996
Your comments are welcome!
With “preaching to the lost” being such a basic foundation of Christianity, why do many in the church seem to be apathetic on this issue of preaching in highways and byways of towns and cities?
Is it biblical to stand in the public places of the world and proclaim the gospel, regardless if people want to hear it or not?
Does the Bible really call church pastors, leaders and evangelists to proclaim the gospel in the public square as part of obedience to the Great Commission, or is public preaching something that is outdated and not applicable for our day and age?
These any many other questions are answered in this documentary.
$19.95 — ORDER NOW!(We accept all major credit cards and PayPal.)
Special Two-Disc Set!
After 40 years of intense study and world-wide ministry, Dr. Francis Schaeffer completed his crowning work of scholarship – to present profound truths in simple film language. Dr. Schaeffer’s brilliant analysis of the past and predictions for current trends have proven so uncannily accurate that this amazing series still feels contemporary almost three decades after its initial release. Ultimately, Schaeffer concludes that man’s only hope is a return to God’s Biblical absolute, the truth revealed in Christ through the Scriptures.
Available for the first time on DVD, this documentary spectacular also includes intimate in-depth conversations with Francis and Edith Schaeffer. With the on-disc study guide, this presentation forms a unique course of comprehensive study. While this series forms an innovative analysis of the past, this outstanding work is more than history. Each episode focuses on a significant era, yet speaks clearly to 21st-century man with answers for modern problems.
$49.95 — ORDER NOW!(We accept all major credit cards and PayPal.)
Foundations in Biblical Eschatology
By Jay Rogers, Larry Waugh, Rodney Stortz, Joseph Meiring. High quality paperback, 167 pages.
All Christians believe that their great God and Savior, Jesus Christ, will one day return. Although we cannot know the exact time of His return, what exactly did Jesus mean when he spoke of the signs of His coming (Mat. 24)? How are we to interpret the prophecies in Isaiah regarding the time when “the earth will be full of the knowledge of the LORD as the waters cover the sea” (Isa. 11:19)? Should we expect a time of great tribulation and apostasy or revival and reformation before the Lord returns? Is the devil bound now, and are the saints reigning with Christ? Did you know that there are four hermeneutical approaches to the book of Daniel and Revelation?
These and many more questions are dealt with by four authors as they present the four views on the millennium. Each view is then critiqued by the other three authors.
$12.95 — ORDER NOW!(We accept all major credit cards and PayPal.)
Download the free Study Guide!
Is there a connection between pagan religion and the abortion industry?
This powerful presentation traces the biblical roots of child sacrifice and then delves into the social, political and cultural fall-out that this sin against God and crime against humanity has produced in our beleaguered society.
Conceived as a sequel and update to the 1988 classic, The Massacre of Innocence, the new title, The Abortion Matrix, is entirely fitting. It not only references abortion’s specific target – the sacred matrix where human beings are formed in the womb in the very image of God, but it also implies the existence of a conspiracy, a matrix of seemingly disparate forces that are driving this holocaust.
The occult activity surrounding the abortion industry is exposed with numerous examples. But are these just aberrations, bizarre yet anomalous examples of abortionists who just happen to have ties to modern day witchcraft? Or is this representative of something deeper, more sinister and even endemic to the entire abortion movement?
As the allusion to the film of over a decade ago suggests, the viewer may learn that things are not always as they appear to be. The Abortion Matrix reveals the reality of child-killing and strikes the proper moral chord to move hearts to fulfill the biblical responsibility to rescue those unjustly sentenced to death and to speak for those who cannot speak for themselves (Proverbs 24:11,12; 31:8,9).
Speakers include: George Grant, Peter Hammond, RC Sproul Jr., Paul Jehle, Lou Engle, Rusty Thomas, Flip Benham, Janet Porter and many more.
Ten parts, over three hours of instruction!
Running Time: 195 minutes
$19.95 — ORDER NOW!(We accept all major credit cards and PayPal.)
“Here I stand … I can do no other!”
With these immortal words, an unknown German monk sparked a spiritual revolution that changed the world.
The dramatic classic film of Martin Luther’s life was released in theaters worldwide in the 1950s and was nominated for two Oscars. A magnificent depiction of Luther and the forces at work in the surrounding society that resulted in his historic reform efforts, this film traces Luther’s life from a guilt-burdened monk to his eventual break with the Roman Catholic Church.
Running time: 105 minutes
Special offer: Order 5 or more for $5 each.
Watch a clip from Martin Luther.
$9.95 — ORDER NOW!(We accept all major credit cards and PayPal.)