Maroon

              loyola maroon January 26,1973  Vol. XLIX no. 13 Fr. Kennelly named in Texas banking suit By TARA LEBLANC Editor's note: in an article dated December 20, 1972, the Times-Picayune reported Loyola president, Very Rev. Michael Kennelly, S.J. as a defendant in a suit by the Federal Deposit Insurance Corporation for the sum of $4,028,006.07. Since most of the university community had already left for the Christmas holidays, the Maroon felt that a brief summary of the facts leading up to the case would prove helpful to those not yet informed of the situation. In 1971, the Securities and Exchange Commission (SEC) of the U. S. government began an investigation into the dealings and businesses of Frank W. Sharp of Houston. Under investigation at the same time were Fr. Kennelly and 16 others. I In February of 1971, Fr. Kennelly was named as a defendant in a suit by stockholders and debtors of the Sharpstown State Bank in Texas where he served as an honorary chairman of the board for a time. In that suit, Fr. Kennelly, along with others, was said to have "aided, abetted and assisted Sharp and others who directly misled the other shareholders (of the Sharpstown State Bank)," according to a Houston Post story dated Feb. 4, 1971. The suit in which Fr. Kennelly is presently involved seeks recovery of losses for a period from Jan. 1, 1968 to Jan. 12, 1971 during which time Fr. Kennelly was director of the bank. According to the Times-Picayune story, the suit claims that Fr. Kennelly, as a director of the Sharpstown State Bank, breached his oath by failing to heed warnings received from the Texas Banking Department and the Federal Deposit Insurance Corporation which approved 18 loans listed in the suit, allowed the bank to operate in an unsafe and unsound manner and allowed the Sharpstown bank to accept brokered certificates of deposit in violation of state and federal banking instructions. The losses named in the present suit, according to the Times-Picayune story, occurred subsequent to January, 1969. In January, 1969, Fr. Kennelly had been advised by the Texas Banking Department and the Federal Deposit Insurance Corporation that Frank Sharp had abused his privileges as owner of the Sharpstown State Bank and that further loans represented self-serving transactions, said the Houston Post. When the investigation by the SEC first began in 1971, an alleged stock fraud was revealed which could have eventually bled $50 million out of Loyola. In a, deposition filed with the SEC in 1971 and reported by the- Houston Post, Fr. Kennelly said that "had the SEC investigation not interfered, Sharp would have pursued a plan to get $50 million from Loyola University in New Orleans." Fr. Kennelly went on to say in the sworn testimony that "Sharp told (him) the $50 million would serve as seed money to obtain $200 million in securities from Europe." Further transactions between Fr. Kennelly and Frank Sharp were revealed during the probe. On Feb. 4, 1968, the Houston Post reported an unrestricted gift of $3 million to the Strake Jesuit College Preparatory school had been announced by then president of the institution Fr. Kennelly at a luncheon the day before. The story went on to say that the 85 acres on which the campus had developed had originally been received from the Sharp family in 1960. On Dec. 15, 1969, according to the Houston Post dated July 23, 1971, the Jesuit Fathers of Houston bought $6,000 of Neiman-Marcus gift certificates to provide free clothing for the wives of three astronauts. The $6,000 check was signed by Fr. Kennelly on the advice of Frank Sharp according to records filed with the U.S. District Court in Dallas on July 22, 1971, according to the Post story. Accountant Robert J. C'ruikshank of the Houston firm of Haskins and Sells which examined the Jesuit Fathers' financial records revealed the existence of the check in a deposition taken by the SEC. The audit as reported by C'ruikshank also revealed thar Fr. Ken nelly gave his secretary, a "Mrs. McCormick" a $1,000 bonus on the same day as the purchase of the certificates. As a result of all these transactions, when the SF.C probe began in 1971 the Jesuit Fathers of Houston were $6 million in debt. Fr. Michael Kennelly: responsible for $4 million? Maroon analysis: undergrad bulletin p. 3 '73 Spring Semester Calender p. 6-7 Ex-Loyolan 's account of sniper incident..p. 10 Reviews: soul music, country rock p. 11 WHP %ipS»m ; !Dj|lH[ Pr see features pages 8 and 9