Ken is a member of First Baptist Church in Richardson and is very proud to be a Rotary member in Corsicana. One of his biggest passions is being involved in selecting the high school senior to receive the Corsicana Rotary Scholarship each year. Ken is a big fan of the Dallas Mavericks, Dallas Cowboys, and Oklahoma Sooners. He enjoys hunting and fishing and being with family and friends.
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About the Book
Who do you think of when you think of a banker? Perhaps you think of the bankers trying to foreclose on Kevin Costner's farm in Field of Dreams? Bankers are usually portrayed as jerks who are trying to foreclose on widows and orphans. I have been a banker for nearly forty years and I want to show you some different sides to one banker - me.
I come from a family of storytellers, from my father's mother's family, the Gillhams. When a Gillham told a story at the campfire, you could feel the heat of the sun beating down and hear the calling of an owl just as if you were there.
The stories in this book are half from banking and half from my hunting, my dogs, and my childhood. Some of the stories are humorous, some are serious, and some are a little of both. As you read, you will hopefully share my puzzlement as I listen to a loan request, feel the pounding of a buck's hooves on the dirt as it gallops toward me, and hear my father's whistle. If you do, I have accomplished my goal in writing this book.
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Keep reading for an excerpt:
I discovered Roy’s con game when I reviewed a loan that the Garland bank had made three years earlier. The customer, Bill, had retired from a major corporation after working there for forty-five years. Bill had a nice retirement plan and he had managed to save quite a bit of cash over his lifetime. Bill had always wanted to own his own business and that is how he met Roy in 1985.
Roy had purchased a closed car wash a year earlier. He had replaced the equipment and put the eight bay, self-service, car wash for sale for $500,000.
Roy met with Bill and Bill agreed to purchase the car wash for $475,000. Bill came to the Garland bank and agreed to put 20% down ($95,000) so he could get the loan. He had a great credit score of 800 and a significant personal financial statement so he got the loan.
I got involved with Bill and this loan three years later. Bill came into the bank a few months after I became president of the bank. Bill sat down with me and explained that the car wash was not bringing in enough money to pay half of the payment on what was now a $345,000 loan. He had been withdrawing cash from his savings for three years in order to pay the bank. He said he did not want to default on the loan, but that he had exhausted his savings and that he did not see any other alternative. He was a good man and he was ashamed to be in the situation he was in.
We foreclosed on the car wash. It took me some time to piece together what had happened, but I did figure it out eventually.
Roy’s staff greatly inflated the income that the car wash would produce. Neither Bill nor the bank nor the appraiser had any expertise in car washes so no one questioned the income information. Later, I figured out that Roy had under $200,000 invested in the car wash when he sold it so he made a profit of $275,000 on the sale.
In Bill’s case, he purchased a car wash for $475,000 that should have sold for a price closer to $225,000 (based on the actual income figures we had after he owned it three years). Bill was a good man who was fleeced by an excellent con man.
If the cash flow projections had been based on real numbers, it would have been clear that the car wash could not provide the income to pay a loan of $380,000. The appraisal, based on real numbers, would have been closer to $225,000 rather than $475,000. Roy had figured out how to “game” the banking system.
Roy discovered that he could con the buyer and the bank if there were five key things in place when a buyer was purchasing a business from him. The keys were that (1) the purchaser had to have good credit, (2) the buyer had to have at least 20% cash to put down on the purchase, (3) the business had to have no current verifiable income figures, (4) the purchaser must have no experience in the particular business he is purchasing and most importantly, (5) Roy’s staff had to inflate the projected income to a number that would cover the payment at least 1.25 times.
The most amazing thing about this story is that Roy continued to con people in this manner for the next thirty years. In each case, it appears his company would use the same inflated projected income approach as well as the other keys mentioned above. He and his company would get sued on occasion when the businesses failed, but he continued to play his con game. You may wonder what finally stopped him after all those years? He died.
I would not wish death on anyone. Roy took people’s dreams of owning their own business and turned it into nightmares. He cheated many fine people and cost banks in North Texas millions of dollars in losses. He will not be missed by me.
