James M. Fail
Encyclopedia
James M. Fail is an American financial executive, the chairman of Stone Holdings, Inc. and Bluebonnet Savings Bank. A native of Mobile, Alabama
, he attended Murphy High School
and served for three years in the U.S. Navy.
After graduating from the University of Alabama
in 1949, he began his career as a securities salesman for Merrill Lynch
. In the following decades, Fail and his holding companies have owned and operated a variety of investment, mortgage, banking, savings and loan, and insurance businesses throughout the U.S.
Fail was thrust into public attention
in 1990, when the Senate Judiciary
Antitrust Subcommitee
held hearings scrutinizing his business activities, in particular his acquisition of a federally funded thrift despite a prior indictment
for fraud and the criminal conviction
of his company.
More recently, he has been noted for a variety of philanthropic and community leadership efforts.
Fail was indicted for securities fraud
in Alabama in 1976. As a result of a plea bargain
, the charges against him personally were dropped; he pled guilty on behalf of his already-bankrupt company, and he was barred from doing any further business in Alabama. This incident would later provide the basis for further fraud charges against Fail brought by the FDIC
.
In 1988, during the savings and loan crisis
, the Federal Home Loan Bank Board
approved the Southwest Plan, a program to provide government assistance to induce private capital investors to bail out failed savings and loans in the southwestern United States
. While owner of CFSB Corporation, now known as Stone Capital, Inc., Fail acquired one such package of 15 insolvent thrifts, the Pard/Rose package. These were merged into a single thrift and renamed Bluebonnet. As a result of regulatory changes in 1989
, Fail has been pursuing a Winstar suit
against the federal government for an amount on the order of $100 million, which was still running as of 2006.
In order to buy Bluebonnet, in September 1988 Fail borrowed $34 million from Mutual Security Life Insurance Co., a Fort Wayne, Indiana
company he had bought the previous year while it was struggling with debt. Mutual Security became insolvent in August 1990 and moved its headquarters to Lincoln, Nebraska
and Dallas, Texas
; its Indiana business was seized by state regulators, prompting BusinessWeek
to describe 130,000 policyholders as "in limbo". Also in 1990, another of Fail's insurance companies, Farm and Home Life Insurance, failed and was placed in receivership by the Arizona Department of Insurance. In March 1992, Arizona sued Fail and his deputies for civil racketeering fraud in an amount in excess of the company's $101 million insolvency, alleging that "Mr. Fail and others were engaged in an elaborate scheme to drain millions of dollars out of the company...", resulting in its failure. The case was settled for $78.8 million.
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights
investigated the Bluebonnet deal in 1990 to determine, among other questions, why Fail's bid succeeded despite the 1976 fraud conviction of his company, which should have been a "presumptive disqualifier" per FHLBB regulations. Initially most of the criticism came from chairman Howard Metzenbaum
, who described the deal as "an abomination, the worst case we have found" among the savings and loan bailouts.
When Fail admitted to incorrect disclosures of his legal history, Senators Arlen Specter
and Orrin Hatch
also voiced their concerns. Author Marin Lowy, in his 1991 analysis of the situation, describes the hearings as exaggerated and "political hay". At the same time, Lowy expresses doubt towards Fails' "business morals" and trustworthiness with federal aid, concluding that thanks to the public scrutiny, "there's little likelihood that Mr. Fail can or will loot Bluebonnet", and in this sense the public good had ultimately been served.
Bluebonnet maintained a profitable banking profile through 2003, when it opted to liquidate its assets.
and a founder of its Centennial Society, and a Director of the Phoenix Symphony
. In 1997 he established The Patsy and Jim Fail Scholarship at Birmingham-Southern College
for "any worthy and deserving student". In 2007 Fail donated $200,000 to the Mobile Symphony
, endowing its principal cello chair in memory of his wife.
Fail has repeatedly given to the Crimson Tide Foundation, the non-profit arm of the University of Alabama's athletic department. The department's media suite is named for Fail's father-in-law, Naylor Stone. In 2008, the visitor's locker room at Bryant-Denny Stadium
was officially named "The Fail Room". Fail commented, "Earlier this year, when I saw the visitors' locker room as a potential naming right, I figured it was the most appropriate opportunity I would ever have to use my name."
Other donation recipients include the UAB School of Medicine,
St. Paul's Academy,
the Metropolitan Museum of Art
,
the University of Alabama Collegiate Fund,
the Alabama Symphony
,
and Kappa Sigma
Beta.
Mobile, Alabama
Mobile is the third most populous city in the Southern US state of Alabama and is the county seat of Mobile County. It is located on the Mobile River and the central Gulf Coast of the United States. The population within the city limits was 195,111 during the 2010 census. It is the largest...
, he attended Murphy High School
and served for three years in the U.S. Navy.
After graduating from the University of Alabama
University of Alabama
The University of Alabama is a public coeducational university located in Tuscaloosa, Alabama, United States....
in 1949, he began his career as a securities salesman for Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
. In the following decades, Fail and his holding companies have owned and operated a variety of investment, mortgage, banking, savings and loan, and insurance businesses throughout the U.S.
Fail was thrust into public attention
in 1990, when the Senate Judiciary
United States Senate Committee on the Judiciary
The United States Senate Committee on the Judiciary is a standing committee of the United States Senate, of the United States Congress. The Judiciary Committee, with 18 members, is charged with conducting hearings prior to the Senate votes on confirmation of federal judges nominated by the...
Antitrust Subcommitee
United States Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights is one of seven subcommittees within the Senate Judiciary Committee.-Jurisdiction:...
held hearings scrutinizing his business activities, in particular his acquisition of a federally funded thrift despite a prior indictment
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
for fraud and the criminal conviction
Conviction
In law, a conviction is the verdict that results when a court of law finds a defendant guilty of a crime.The opposite of a conviction is an acquittal . In Scotland and in the Netherlands, there can also be a verdict of "not proven", which counts as an acquittal...
of his company.
More recently, he has been noted for a variety of philanthropic and community leadership efforts.
Business history
Fail became Vice President of Commercial Mortgage Company in 1961 and President of Gulf South Mortgage and Investment Company in 1964. He founded Lifeshares Group, an insurance holding company, in 1970. From 1987 to 1997 he was owner and chairman of The Oklahoma Bank.Fail was indicted for securities fraud
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
in Alabama in 1976. As a result of a plea bargain
Plea bargain
A plea bargain is an agreement in a criminal case whereby the prosecutor offers the defendant the opportunity to plead guilty, usually to a lesser charge or to the original criminal charge with a recommendation of a lighter than the maximum sentence.A plea bargain allows criminal defendants to...
, the charges against him personally were dropped; he pled guilty on behalf of his already-bankrupt company, and he was barred from doing any further business in Alabama. This incident would later provide the basis for further fraud charges against Fail brought by the FDIC
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...
.
In 1988, during the savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
, the Federal Home Loan Bank Board
Federal Home Loan Bank Board
The Federal Home Loan Bank Board was a board created by the Federal Home Loan Bank Act of 1932 that created and oversaw the Federal Home Loan Banks also created by the act. It was superseded by the Federal Housing Finance Board and the Office of Thrift Supervision in the Financial Institutions...
approved the Southwest Plan, a program to provide government assistance to induce private capital investors to bail out failed savings and loans in the southwestern United States
Southwestern United States
The Southwestern United States is a region defined in different ways by different sources. Broad definitions include nearly a quarter of the United States, including Arizona, California, Colorado, Nevada, New Mexico, Oklahoma, Texas and Utah...
. While owner of CFSB Corporation, now known as Stone Capital, Inc., Fail acquired one such package of 15 insolvent thrifts, the Pard/Rose package. These were merged into a single thrift and renamed Bluebonnet. As a result of regulatory changes in 1989
Financial Institutions Reform, Recovery and Enforcement Act of 1989
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 , , is a United States federal law enacted in the wake of the savings and loan crisis of the 1980s....
, Fail has been pursuing a Winstar suit
United States v. Winstar Corp.
United States v. Winstar Corp., 518 U.S. 839 , was a decision by the United States Supreme Court which held that the United States Government had breached its contractual obligations...
against the federal government for an amount on the order of $100 million, which was still running as of 2006.
In order to buy Bluebonnet, in September 1988 Fail borrowed $34 million from Mutual Security Life Insurance Co., a Fort Wayne, Indiana
Fort Wayne, Indiana
Fort Wayne is a city in the US state of Indiana and the county seat of Allen County. The population was 253,691 at the 2010 Census making it the 74th largest city in the United States and the second largest in Indiana...
company he had bought the previous year while it was struggling with debt. Mutual Security became insolvent in August 1990 and moved its headquarters to Lincoln, Nebraska
Lincoln, Nebraska
The City of Lincoln is the capital and the second-most populous city of the US state of Nebraska. Lincoln is also the county seat of Lancaster County and the home of the University of Nebraska. Lincoln's 2010 Census population was 258,379....
and Dallas, Texas
Dallas, Texas
Dallas is the third-largest city in Texas and the ninth-largest in the United States. The Dallas-Fort Worth Metroplex is the largest metropolitan area in the South and fourth-largest metropolitan area in the United States...
; its Indiana business was seized by state regulators, prompting BusinessWeek
BusinessWeek
Bloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...
to describe 130,000 policyholders as "in limbo". Also in 1990, another of Fail's insurance companies, Farm and Home Life Insurance, failed and was placed in receivership by the Arizona Department of Insurance. In March 1992, Arizona sued Fail and his deputies for civil racketeering fraud in an amount in excess of the company's $101 million insolvency, alleging that "Mr. Fail and others were engaged in an elaborate scheme to drain millions of dollars out of the company...", resulting in its failure. The case was settled for $78.8 million.
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights
United States Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights is one of seven subcommittees within the Senate Judiciary Committee.-Jurisdiction:...
investigated the Bluebonnet deal in 1990 to determine, among other questions, why Fail's bid succeeded despite the 1976 fraud conviction of his company, which should have been a "presumptive disqualifier" per FHLBB regulations. Initially most of the criticism came from chairman Howard Metzenbaum
Howard Metzenbaum
Howard Morton Metzenbaum was an American politician who served for almost 20 years as a Democratic member of the U.S. Senate from Ohio . He also served in the Ohio House of Representatives and Senate from 1943 to 1951.-Early life:Metzenbaum was born in Cleveland, to a poor Jewish family, the son...
, who described the deal as "an abomination, the worst case we have found" among the savings and loan bailouts.
When Fail admitted to incorrect disclosures of his legal history, Senators Arlen Specter
Arlen Specter
Arlen Specter is a former United States Senator from Pennsylvania. Specter is a Democrat, but was a Republican from 1965 until switching to the Democratic Party in 2009...
and Orrin Hatch
Orrin Hatch
Orrin Grant Hatch is the senior United States Senator for Utah and is a member of the Republican Party. Hatch served as the chairman or ranking member of the Senate Judiciary Committee from 1993 to 2005...
also voiced their concerns. Author Marin Lowy, in his 1991 analysis of the situation, describes the hearings as exaggerated and "political hay". At the same time, Lowy expresses doubt towards Fails' "business morals" and trustworthiness with federal aid, concluding that thanks to the public scrutiny, "there's little likelihood that Mr. Fail can or will loot Bluebonnet", and in this sense the public good had ultimately been served.
Bluebonnet maintained a profitable banking profile through 2003, when it opted to liquidate its assets.
Philanthropy and community involvement
Fail has served as a Director of the Beneficial Mortgage Company, a member of the Economic Club of New YorkEconomic Club of New York
The Economic Club of New York is an American nonprofit and nonpartisan membership organization dedicated to promoting the study and discussion of social, economic and political questions...
and a founder of its Centennial Society, and a Director of the Phoenix Symphony
Phoenix Symphony
The Phoenix Symphony is a major United States symphony orchestra based in Phoenix, Arizona.Founded in 1947 when Phoenix had a population of less than 100,000, the orchestra began as an occasional group of musicians performing a handful of concerts each year...
. In 1997 he established The Patsy and Jim Fail Scholarship at Birmingham-Southern College
Birmingham-Southern College
Birmingham–Southern College is a 4-year, private liberal arts college located three miles northwest of downtown Birmingham. Founded in 1856, it is affiliated with the United Methodist Church. Approximately 1400 students from 30 states and 23 foreign countries attend the college...
for "any worthy and deserving student". In 2007 Fail donated $200,000 to the Mobile Symphony
Mobile Symphony
The Mobile Symphony Orchestra is the symphonic orchestra of Mobile, Alabama. Scott Speck, co-author of Classical Music for Dummies and Opera for Dummies is its current music director. They perform at the Mobile Saenger Theatre.-See also:...
, endowing its principal cello chair in memory of his wife.
Fail has repeatedly given to the Crimson Tide Foundation, the non-profit arm of the University of Alabama's athletic department. The department's media suite is named for Fail's father-in-law, Naylor Stone. In 2008, the visitor's locker room at Bryant-Denny Stadium
Bryant-Denny Stadium
Bryant–Denny Stadium, located in Tuscaloosa, Alabama, is the home stadium for the University of Alabama football team. The stadium opened in 1929, and was originally named Denny Stadium, in honor of former Alabama president George Hutchenson Denny...
was officially named "The Fail Room". Fail commented, "Earlier this year, when I saw the visitors' locker room as a potential naming right, I figured it was the most appropriate opportunity I would ever have to use my name."
Other donation recipients include the UAB School of Medicine,
St. Paul's Academy,
the Metropolitan Museum of Art
Metropolitan Museum of Art
The Metropolitan Museum of Art is a renowned art museum in New York City. Its permanent collection contains more than two million works, divided into nineteen curatorial departments. The main building, located on the eastern edge of Central Park along Manhattan's Museum Mile, is one of the...
,
the University of Alabama Collegiate Fund,
the Alabama Symphony
Alabama Symphony Orchestra
- 1921-1955: Beginnings :The Alabama Symphony Orchestra can trace its beginnings to 1921, when on Friday, April 29, fifty-two volunteer musicians joined to perform at the Birmingham Music Festival at the Old Jefferson Theater...
,
and Kappa Sigma
Kappa Sigma
Kappa Sigma , commonly nicknamed Kappa Sig, is an international fraternity with currently 282 active chapters and colonies in North America. Kappa Sigma has initiated more than 240,000 men on college campuses throughout the United States and Canada. Today, the Fraternity has over 175,000 living...
Beta.