Galveston: A History of the Island

Chapter 26

26 BOBBY MOODY was coming out first again. In the early 1970s, as Bobby's National Western Life Insurance Company was expanding, Shearn's Empire Life was in serious trouble, and so was his private bank, W. L. Moody & Son, Bankers, Unincorporated. Shearn was convinced that his troubles derived from a massive conspiracy cooked up by former Texas Governor John Connally, and including the Houston power structure, the Trilateral Commission, the Council on Foreign Relations, and 1972 presidential candidate (and former governor of Alabama) George Wallace. Incredibly, Shearn even believed his problems were somehow connected to the Watergate scandal. In his own mind Shearn Moody had more political enemies than Richard Nixon, including Richard Nixon. The motive for this conspiracy, Shearn maintained, was revenge for the lawsuit he had filed in 1970, which had the effect of blocking Connally's appointment to the board of the Moody Foundation. The truth appeared to be far less complicated. The conspiracy, if that's what it was, started in March 1972, when Texas Attorney General Crawford Martin, a Connally protege, happened to run into the attorney general of Alabama at a convention in San Antonio. Martin pulled his counterpart aside and told him; "You have an insurance company over there in Alabama that's about to collapse, and it's run by some pretty unsavory people." The company was Shearn Moody's Empire Life. In April, Alabama insurance officials reexamined Empire Life's 294 Gary Cartwright financial statement and downgraded the value of Shearn's interest in his grandmother's trust from $14.4 million to $4.4 million. With $10 million wiped off the ledger in a single stroke, Empire collapsed and was placed in receivership. The receiver, along with the shareholders , sued Shearn, charging him with fraud. In Texas the insurance commissioner filed a similiar lawsuit. But things were going to get worse for Shearn Moody, a lot worse. Three months after his insurance company collapsed, representatives of the Securities and Exchange Commission entered Moody's private bank in Galveston with a subpoena for all his records. Investigators believed that Shearn was selling securities that were not fully covered. Because the private Moody bank was unincorporated, it wasn't backed by the FDIC, only by Shearn's personal wealth, which was recorded in the bank's statement of condition at $20 million. Even before his insurance company went belly-up, Shearn Moody wasn't worth anywhere near that much. In September 1972 the SEC regional office ordered the bank closed and placed in receivership . Shearn had used the bank the same way the Old Man had used it, for pocket money. To his credit, Shearn made sure that when his bank failed nobody else lost money. Few people saw it, but Shearn had a generous side. He remembered with some embarrassment Old Man Moody's appalling cheapness, and told of a crosscountry train trip with his grandfather when the Old Man flipped a paltry fifty-cent tip to a harried porter. Though only a teenager at the time, Shearn dug into his own allowance and gave the man twenty dollars. Later, when he became his own financier, his generosity took the form of allowing certain loyal associates to carry overdrafts at his private bank and to borrow large sums without collateral. State Senator A. R. "Babe" Schwartz, one of the many attorneys who served Shearn Moody, remembered that when the bank failed Shearn personally assumed the loans and overdrafts. "He charged them against future fees and salaries," said Schwartz, who had borrowed more than $200,000 from the bank. His world falling apart, Shearn retreated behind the walls of his bayside compound. "He hardly ever left the Island," recalled Jim Wohlenhaus, Shearn's administrative aide in 1972. "He said he preferred to be a big fish in a little pond." Wohlenhaus and his family lived at the compound, along with a houseboy, a gardener, a chauffeur , and a former Las Vegas dancer and choreographer named GALVESTON 295 James Stoker. In court documents Stoker was always referred to as Shearn's "personal companion." An article in Newsweek reported that Stoker and Shearn lived together as "husband and wife," but Shearn denied that he was a homosexual, and told the magazine that Stoker was just a longtime employee and friend. In the autumn of 1976 the suit filed against Shearn by the Texas Insurance Commission went to trial in federal district court...