Friday, January 06, 2012

Scandal, 1950s Texas Style: Allan Shivers, Earl Rudder and the Veterans Land Swindle, Part II

A Texas farm boy, James Earl Rudder became internationally famous as a D-Day hero. A political outsider, he cleaned house as Commissioner of the Texas General Land Office after one of the messiest scandals in the state's often corrupt political history. A deeply conservative man who lacked the proper academic credentials, he nevertheless ruled as president of Texas A&M when the tradition-bound school underwent sweeping reforms. Under Rudder, A&M changed its name, desegregated, admitted women for the first time, and ended the requirement that students serve in its paramilitary "Corps of Cadets." This passage describes what Rudder discovered when he took over the Land Office following the suicide of a figure connected with the Veteran’s Land Scandal.

The only state with complete control over its public lands and over the revenues produced from its administration over and sale of these tracts, the First Congress of the Texas Republic created the General Land Office in December 1836, just nine months after the Battle of the Alamo. The new republic was eager to establish who held legal title to lands within its borders. The Republic’s constitution recognized all grants made by the Empire of Spain and the Republic of Mexico in Texas as valid, so the first land commissioner John P. Borden, collected from the Spanish and Mexican governments a record of valid land grants and translated them into English. The archives, originally stored in Houston but now housed in the state capitol of Austin, currently holds 4,200 such land grants pertaining to 26.2 million acres of land within the present-day Texas boundaries. Leases, trades and sales of public lands and mineral rights properties administered by the General Land Office have generated more than $6 billion for the state’s Permanent School Fund, netting Texas public schools about $700 million a year.

Upon the recommendation of Giles, land commissioner since 1939, the state established the Veterans' Land Board after voters’ approval of a state constitutional amendment in November 1946. Aid programs for veterans sprang up across the United States after the Japanese surrender in August 1945. Worries over the impact of "reconversion," the effect on the American economy as the country transitioned from a war to a peacetime footing, marked the months immediately following World War II. Before the war, the United States had suffered a decade of Depression, and it was uncertain whether peace signaled a return of economic hard times.

A deep recession, after all, had followed World War I. Defense industries faced a production slowdown. No one was sure about the influence of lifting wartime production quotas. Workers, meanwhile, impatient after nearly four years of wartime wage controls, launched strikes across the country in 1946 even as the government signaled concerns about inflation. Many economists made gloomy predictions regarding the fate of millions of now unemployed soldiers returning to uncertain prospects stateside.

To cushion the impact of reconversion, many states paid direct, one-time cash bonuses to returning veterans. At the start of 1946, however, Texas had no program in place to aid the thousands of veterans making the transition to civilian life. In November 1946, voters approved the constitutional amendment implementing the Veterans' Land Act. This law authorized the state to issue $25 million in bonds. Using proceeds from the bond sale, the state purchased land, intended to be re-sold to participating veterans who took out special 40-year loans at three percent interest. The law creating the program, written by Giles, specified that no loan be made for more than $7,500 and that loans could not be used to purchase less than 20 acres. Veterans had to provide a five percent down payment and hold the land for at least three years before selling it. Because it would be difficult for many veterans to buy land even under these terms, the Legislature allowed the property to be purchased in "block sales" to two or more veterans. In 1951, voters approved another constitutional amendment that set aside an extra $75 million for the program.

In seven Texas counties, land promoters induced veterans to sign paperwork for what the veterans believed would be wartime bonuses paid in the form of free land or cash payments. Instead, these veterans later discovered they had signed Veterans Land Board loan applications. Anglos
participating in the swindle bought tracts at prevailing market rates, divided them into smaller parcels and then, after getting the veterans’ signatures, completed the paper work. An artificially high demand for these tracts drove up land prices. Bribed officials at the General Land Office, including Giles, drove prices of these tracts even higher by assessing highly inflated values to the parcels. The conspirators then sold their land to the Veterans Land Board and cashed in, leaving the veterans with a debt for land they had usually never seen and some cases didn’t want. Giles and his co-conspirators would then expedite approval of the loan application paperwork submitted by these land syndicates.

"Certain 'promoters' acquired or assembled varying-sized tracts of land . . .," a 1955 Senate investigating committee report noted. "In many such instances, it appeared that the consideration to be paid by the 'promoters' . . . was not paid until the money was advanced by the Veterans Land Board. By this practice, the only money involved was that of the State . . . The plan . . . constituted a highly reprehensible practice, especially in view of the 'spread' between the original purchase price paid by the 'promoters' and the appraised price paid by the Veterans Land Board, resulting in unconscionable and shocking profits . . . without risk and with only token expense to them and the 'rooking' of the veteran-purchaser."

Veterans who had signed loan paperwork often received checks ranging in value from $10 to $300, perhaps in hope of buying their continued cooperation. In some cases, however, land office employees sent bills for the land to these veterans, who were surprised to find they were responsible for purchasing tracts they thought they had received as a war bonus. "[T]hese veterans started trickling in, complaining that they hadn't bought any land, wanting to know what the blue slips [they had been mailed by the land office] were, were there payments to be made," recalled Dewitt County prosecutor Wiley Cheatham. "Some of them had pink slips where delinquent payments had not been made, and delinquent notices." The complaints made by these veterans added to the mounting evidence against Bascom Giles and the other conspirators.

Public awareness of the scandal grew after publication of a series of articles by managing editor Ken Towery at the Cuero Record in 1954 and 1955 forced a complacent statewide press to pay attention. After investigations by Wiley Cheatham and the Texas Department of Public Safety, a state audit of the General Land Office, and an inquiry by the state Senate's General Investigating Committee, nine counties issued indictments against 21 people. Charges centered on improper use of state money and fraud committed against the veterans. A Travis County grand jury indicted Giles on March 5, 1955 for conspiracy to steal $83,500 in state money (nearly $590,000 in 2005 dollars). Upon conviction, Giles became the first elected official in Texas history convicted of a crime committed while he was in office. Having won election to a ninth term as General Land Office Commissioner, Giles declined to be sworn in and later was sentenced to six years at the state penitentiary in Huntsville. He served his sentence from January 1956 to December 1958 before release for good behavior. Giles also paid $80,000 to settle civil suits. Only one other defendant, B.R. Sheffield of Brady, spent substantial time in prison as a result of the scandal. Convicted of forgery, Sheffield, served five years in prison before winning parole in 1966. A state auditor's report issued in December 1955 concluded that land transactions totaling more than $3.5 million (about $25 million in today's dollars) involving 591 veterans buying land from 39 sellers should be "classified as fraudulent in whole or in part." Meanwhile, land promoters involved in the scheme were forced to buy land back from the swindled veterans and return money to the state.

Regardless of the causes of the land scandal, Shivers now faced an image problem. As dictated by the legislation creating the program, a board that consisted of Land Commissioner Giles, Governor Shivers and state Attorney General John Ben Shepperd supervised the veterans land program. The enabling legislation requiring the consent of board members before the state could buy land for the program. Shivers and Shepperd, however, rarely attended meetings of the board, at times leaving Giles alone to make decisions. Shivers often sent a representative, Maurice Acers, to attend in his stead, and Acers suspected problems with the program as early as March 1954, but Shivers never acted on Acers’ suspicions.

Both Shepperd and Shivers vigorously denied any role in illegal transactions, even though in March 1955 Giles implicated the two in the scandal. Although no evidence surfaced of Shivers and Shepperd's direct guilt, much of the voting public assumed they were responsible for the crisis, either as active participants in the corruption or due to neglect. “The news eventually came out and no one saved face . . .,” Shivers biographer Ricky Dobbs wrote. “Legislative investigators ruled that the scandal stopped with Giles, his staff, and the land developers involved. However [these investigators] also criticized Shivers and Shepperd for their lax attention to duty.” Shivers, entertaining thoughts of a fourth gubernatorial term, needed to salvage something positive from the land scandal. Specifically, he sought a replacement for Giles with impressive credentials and a heroic reputation. He turned to his old friend Earl Rudder.

Shivers appointed Rudder Commissioner of the Land Board on January 1, 1955 and he and Shepperd named him the chair of the Veteran's Land Board on January 5. The first paragraph of the press release announcing Rudder's appointment to the board described the aviation executive as an "outstanding hero of the Normandy invasion in World War II." The state press followed the governor's lead, emphasizing Rudder's war record. A typical newspaper story on Rudder's appointment, in the January 9, 1955 issue of the Dallas Morning News, details in several paragraphs his role on D-Day. The reporter, Dawson Duncan, describes Rudder as "blunt, jovial, unequivocal, the opposite of egotistical, whose innermost desire is to serve his fellow man without ostentation . . ." The story then covers Rudder's management of the Brady Aviation Company. Dawson notes that Rudder had not even been inside an industrial plant when he was hired to run Brady Aviation. In spite of this inexperience, Duncan notes approvingly that during Rudder's brief tenure, the company "has not lost a single day in labor stoppage or strike." Asked how he managed such congenial labor relations, Rudder replied, "I just saw to it that they (employees) were treated like they ought to be treated as people. It's just that simple."

After a string of public relations disasters, the appointment of Rudder represented a coup. The Texas media presented the new land commissioner as heroic, honest, and an excellent manager, in stark contrast to corrupt Giles. Rudder knew his mission as land commissioner, in part, depended on improving the tarnished image of the land program. In a lengthy feature story in the Houston Post by Marie Moore, Rudder related the story of a young former employee of the land office who applied for a job in another city and expected to be hired until he was asked about his duties at the General Land Office. The man's job had been to check the surveys of land bought under the veterans' program. "As the boy explained it to me, his interview was over as soon as the veterans' land question came up," Rudder said. "Of course, he didn't get the job. I think one of my greatest tasks in this job is overcoming suspicion as that. Whether this attitude was justified by what happened in this past is not a matter for me to consider."

The scandal caused many people to reconsider the value of the land program. “Well, a lot of people [thought], ‘Well, we don’t need a veterans program, we shouldn’t do that,’” recalled Jim Lindsey who served as speaker of the House at the time of the legislative investigations of the land office. Rudder, however, was adamant that the veterans' land program should continue and that it provided a valuable service to a deserving population. ". . . I've thought ever since I took over this job that a system of state loans for veterans to buy farms should be continued," Rudder told the Post. He pointed out that 15,682 veterans had used the program at that point. He added that, in spite of well-publicized problems, only 1,291 loans were delinquent in the veterans' program. " . . .[S]how me a bank that has a better average," he said.

Rudder acted aggressively to restore the credibility of the Land Office and to distance himself and his subordinates from the Giles era. At a January 13, 1955 meeting, Rudder recommended and won approval of the resignation of three Giles-era land program employees: Executive Secretary Laurence C. Jackson; Assistant Executive Secretary U.S. McCutcheon; and Appraiser Lee Richey. The board halted consideration of any loans in which there were any suspicions. The board asked for more information from the principals before such loans could be further considered. Finally, Rudder appointed Dennis Wallace, the chief clerk for the General Land Office, as the Acting Executive of the Land Program.

In addition to purging the office of employees with clouded reputations, Rudder grappled with missing Land Office documents and with a chaotic filing system. On the job just over a month, Rudder was called before the Senate's General Investigating Committee, which had subpoenaed records from Giles administration that had not yet been turned over. "I know that there have been accusations that the files have been stripped in the past, and I certainly don't want that to happen while I'm here," Rudder testified on February 15, 1955. " . . I do want you to know that the opportunity for people to strip our records and get information out of them is kept to a minimum."

Many gaps existed in the Land Office records, including correspondence concerning questionable land deals previously published by the Cuero Record. It was not just the possibility that potential criminal defendants had destroyed important evidence that concerned members of the Senate committee. Such records provided key information that might be important in future state land transactions or private business deals. Sloppy records management, however, still plagued the office six weeks after Giles' sudden departure. Senator Jimmy Phillips of Angleton fumed over a visit he paid to the Land Office the previous day, February 14, when he requested a set of records that were still in the possession of the agency. The file, Phillips complained, "wasn't misplaced, it was somewhere in the department. Went to the mimeograph machine and it was going 90 miles an hour. We went to the desks, went to the lawyers' desks, on top of files, in and out, around and around for an hour and a half and the general conversation was to this effect, anything could have happed to that file, it might be in the lawyer's title opinion office; it might be here; it might be in the photostat machine, it might be anywhere."

Rudder seemed chastened by this description of his office's record keeping. Apologizing to Senator Phillips Rudder, even though he had just started as commissioner, refused to take the easy way out and blame Giles. The failure of his staff to find the file, he said, "is a matter of internal management on my part." Regarding the office's record keeping, Rudder said, " . . . I'm not happy with it because [we're] . . . not giving you the kind of service we want . . . and I repeat that our files are not in good shape over there." Rudder then made a vow. "But we are working to get them that way and you give me a little time and I think we'll have the files where you can walk in and in a matter of two or three minutes should be able to get any file over there."

Not only were records missing from the General Land Office, Rudder and his two fellow board members, Shivers and Shepperd, discovered that the records that remained could not be trusted. Reading through minutes of meetings in which controversial land deals had been approved, Shivers and Shepperd insisted that several transactions had been inserted into the record that had not been discussed while they or their designees had been in attendance. The board delved into "correcting" the altered minutes while a House investigating committee concluded that Shivers and Shepperd could not have known what was going on in the Land Office due to the widespread forgery of records.

Just a month later, Rudder announced to the press that he had sent a letter requesting the Legislature, the governor, and the state attorney general to conduct a "thorough investigation" of all General Land Office actions. He noted to the press that he opposed ending the land program, "which was not all bad despite reports of fraud and excess profits from some fast-dealing land promoters." Rather than cancel the program, Rudder called on the Legislature to place before the voters constitutional amendment that would double the program’s size. Rudder then cited letters from veterans who had participated in the program. "It has been good for some," he said. ". . . [It] can be made good for all by proper supervision and management."

Rudder also acted to improve working conditions in the Land office, which he found to be impossibly crowded. The state had neglected this agency, underpaying employees and providing inadequate resources for a “$50,000,000 a year business” to do its job. Even Giles had previously complained in a report that due “to the necessity of satisfying public demand in the operation of the Veteran’s Land Program, it has become necessary to assign several of the Land office employees to perform work of the Veteran’s Land Board. This, of course has curtailed many of the operations of the General land Office.”

Rudder not only agreed that the Land Office was inadequately staffed and that employees were underpaid and stretched too thin, but he expressed his astonishment at the cramped quarters staff occupied. “Within 30 minutes after I assumed the duties of Land Commissioner a meeting of the Veterans Land Board was held in my office,” he later wrote. “I was amazed to find such inadequate facilities for holding a meeting. A large contingent from the press was present and the available space was so crowded and confused that it was extremely difficult to conduct the meeting properly. I also became aware of the deplorable working conditions of the employees. They were badly handicapped in the performance of their duties by the heat and the crowded working conditions.” Rudder spent his tenure lobbying for better funding and facilities and more personnel for the agency.

Rudder didn't leave the rehabilitation of the Land Office's reputation to the Legislature, but sold the value of the program to civic groups, promising a new era of responsible management. In such public appearances, Rudder pursued several overlapping goals. He placed the veterans' land scandal in a larger historical context in order to reduce the threat to the program's survival. He strengthened the public's sense of kinship with veterans who might be harmed if the program were to be scrapped. He cast the program as not representing a handout, but a conservative investment in the state's future. Finally, he assured all that the program had entered a new era of openness and honesty.

Rudder pursued all four objectives in a speech to the Austin Lion's Club on August 11, 1955. " . . . [W]e find in the records of the land office, even in the early days of our Republic, that fraudulent land schemes were widespread," Rudder told the gathering. In short, if Texas luminaries like Sam Houston or Mirabeau B. Lamar couldn't completely prevent fraud, modern Texans should not be surprised by its occasional outbreak today. Rudder, however, walked a rhetorical tightrope, knowing that he could not dismiss the crimes of the Giles era as business as usual.

After providing details on a pair of corrupt land deals from the 1830s, he shifted tone and declared that, "Fraud in government is a detestable thing and, with your help and the help of all Texans, I hope to keep the Land Office operations free of it, so that the Veterans Land Program will be administered for the benefit of the veteran . . ." In contrast to Giles, who had provided only evasive answers as various investigations of the land office proceeded, Rudder invited the public to scrutinize his every move. "I invite you to keep a close surveillance on my conduct as Land Commissioner, and I strongly urge you to do the same toward the conduct of all other public officials," he said. " . . . I do not wish to operate in an official vacuum — separated from the desires and the will of the people who it is my duty to serve."

In the racist climate of 1950s Texas, Rudder urged his Lion's Club audience to see African American veterans and Mexican American veterans as the unwilling dupes of a criminal plot hatched by powerful, scheming white men.

The veteran . . . has been victimized . . . Some of our veterans, not wise in the ways of the world, and I might say underworld, were an easy prey to those shady-dealing promoters who would capitalize upon veterans' benefits to the prejudice of the veterans themselves . . . Veterans as a whole cannot, by a long shot, be classified as a shiftless lot . . . Why, you and I are veterans . . . I do not mean to convey the idea that the veterans deserve a reward simply because they were serviceman. Quite the contrary — It is my belief that it is a man's duty to serve his country even to the point of giving up his life in that service . . .[but] our people decided to restore to the veteran some of the things lost by [his time in service] . . . to enable him to more easily readjust and more quickly become integrated into a peace-time civilian society. The Veterans' Land Program was an excellent way to accomplish this purpose.

Rudder's public relations campaign proved enough to save the program from the budget axe and his improvements in accounting practices helped the Veterans' Land Board resume operations in October 1955. He aggressively pursued collection of money from those involved in the scandal. In addition to the nearly $80,000 returned to the Veterans Land Program from Giles, Rudder secured the return of nearly $400,000 from B.R. Sheffield. Three-men committees were established in each county to review each veteran's land loan application. All veteran applicants were required to meet with appraisers on the tract to be acquired and the appraiser was required to inform the applicants of the loan terms and the features of the property. Under Rudder, the General Land Office more professionally collected oil royalties from leased state lands. He persuaded the Legislature to hire additional field inspectors to confirm that oil and gas producers strictly obeyed the state's drilling laws. He also increased the seismic exploration staff, enabling the land office to locate more oil wells on state land and thus increase royalty payments to state universities.

Rudder also discovered to his chagrin that the Land Office's archives, filled with documents more than a century old, were in daily use, a result of increasing litigation concerning land titles in a rapidly growing state. Constant handling caused deterioration of the fragile papers, but no single policy had been settled upon to prevent the destruction of these historical treasures. "There is nothing so exasperating and frustrating as to open a book of old letters where you expect to find a vital piece of correspondence dated some 50 to 60 years ago, and to discover, to your great dismay, that the letters and the writing have been reduced to nothing more than a mass of crumbled confetti and dust," Rudder noted in his 1956 report, "or to open up a set of original field notes and to find two or three calls eaten away by the acid from the ink." He commissioned a study on records preservation, settling on lamination of documents, and thereby slowed the decay.

Michael Phillips has authored the following:

White Metropolis: Race, Ethnicity and Religion in Dallas, Texas, 1841-2001 (Austin:  University of Texas Press, 2006)

(with Patrick L. Cox) The House Will Come to Order: How the Texas Speaker Became a Power in State and National Politics. (Austin: University of Texas Press, 2010)

“Why Is Big Tex Still a White Cowboy? Race, Gender, and the ‘Other Texans’” in Walter Buenger and Arnoldo de León, eds., Beyond Texas Through Time: Breaking Away From Past Interpretations (College Station: Texas A&M Press, 2011)

“The Current is Stronger’: Images of Racial Oppression and Resistance in North Texas Black Art During the 1920s and 1930s ”  in Bruce A. Glasrud and Cary D. Wintz, eds., The Harlem Renaissance in the West: The New Negroes’ Western Experience (New York: Routledge, Taylor and Francis Group, 2011)

“Dallas, 1989-2011,” in Richardson Dilworth, ed. Cities in American Political History (Washington, D.C.: CQ Press, 2011)

(With John Anthony Moretta, Keith J. Volonto, Austin Allen, Doug Cantrell and Norwood Andrews), Keith J. Volonto and Michael Phillips. eds., The American Challenge: A New History of the United States, Volume I.   (Wheaton, Il.: Abigail Press, 2012).

(With John Anthony Moretta and Keith J. Volanto), Keith J. Volonto and Michael Phillips, eds., The American Challenge: A New History of the United States, Volume II. (Wheaton, Il.: Abigail Press, 2012).

(With John Anthony Moretta and Carl J. Luna), Imperial Presidents: The Rise of Executive Power from Roosevelt to Obama  (Wheaton, Il.: Abigail Press, 2013). 

“Texan by Color: The Racialization of the Lone Star State,” in David Cullen and Kyle Wilkison, eds., The Radical Origins of the Texas Right (College Station: University of Texas Press, 2013).

He is currently collaborating, with longtime journalist Betsy Friauf, on a history of African American culture, politics and black intellectuals in the Lone Star State called God Carved in Night: Black Intellectuals in Texas and the World They Made.

1 comment:

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