Major stories and events
Political fallout from Frank W. Sharp’s bribery scheme was epic.
Onthe opening day of the 1971 legislative session, former state Sen. Don Adams got an unexpected grilling by a capitol reporter.
Why had Adams voted against legislation that favored a Houston banker and real estate developer, the reporter demanded.
“I told him I didn’t remember anything about the bills, and that I probably voted against them because they didn’t give me enough time to read them,” Adams said.
The obscure bank bills were central to what would come to be called the Sharpstown scandal, a stock fraud embroglio that eventually would depose the reigning Texas political establishment. The full extent of the fraud was exposed by federal prosecutors, who traced bribery and corruption from the governor’s mansion to the Democratic Party leadership and into the upper echelons of the Texas Legislature.
“Like Watergate, Sharpstown is a byword for public corruption. It ended political careers, launched others, and changed the face of Texas government. Not everyone recalls it fondly,” noted a Houston Post story on the 20th anniversary of the scandal’s eruption.
The fallout from the bribery scheme was both immediate and long-lasting, as voters first conducted a housecleaning of both chambers of the Legislature. Soon after, outrage over the scandal inspired a newly installed slate of politicians, along with a few survivors, to pass wide-ranging reforms that still affect Texas government.
“There were several reform bills that passed in the 1973 session” that would not have otherwise become law, Adams said. “Normally, politicians are not interested in open government.”
Adams helped author the first Texas Open Records Act and worked on strengthening ethics laws and open meetings legislation, efforts that won him the prestigious 2015 James Madison Award from the Freedom of Information Foundation of Texas.
Bill Hobby Jr., an heir to a politically powerful Houstonbased media empire, was elected after the scandal, in November 1972, to preside over the Texas Senate as lieutenant governor. He would hold the post for 18 years.
“The political impact of the Sharpstown scandal was immense,” Hobby recalled in an interview at the Hobby Family Foundation. “All the state-wides (office holders) running for reelection were defeated, and even more important than that, more than half of the new House and Senate were freshmen. That’s a pretty strong impact.”
The Sharpstown revelations stemmed from an intricate stock fraud scheme orchestrated by Houston banker and real estate developer Frank Sharp. He had secretly loaned $600,000 to a number of Texas leaders, who in turn passed bills that gave Sharp’s National Bankers Life Insurance Corp. an advantage in insuring bank deposits. The politicians later cashed in on large profits when they sold their shares in his company, thanks to Sharp fraudulently inflating its worth.
Amongthose ensnared in the fraud was then-House of Representative Speaker Gus Mutcher, two aides and Texas Democratic Chair Elmer Baum. The investigation also named Sharp’s business associates, including former state Insurance Commissioner John Osario, who was convicted of embezzlement, and ex- Attorney General Waggoner Car, who was charged but acquitted.
Gov. Preston Smith was listed lisa sa un-indicted conspirator for accepting accept in a loan from Sharp, anda the governor later turned a $62,500 profit after selling the insurance stock. Smith had convened a special legislative session that passed the bills favoring Sharp, but he later vetoed that leg is lat legislation. He was never charged with a crime.
Smith called the Sharpstown scandal “a complete travesty” when asked for comment by the Post in 1991.
“Being governor, it’s natural I’d be drug into it,” he said. “There’s not one good thing that’s come out of it.”
Sharpstown resulted in both Smith and Lt. Gov. Ben Barnes losing their campaigns to be the 1972 Democratic candidate for governor, effectively ending their political careers.
Barnes was said to have accepted cash to help Sharp, an allegation that was never proved. Hobby and others say the rising politician was guilty only of being “in the wrong place at the wrong time.”
Adams, the former state representative from East Texas and now a municipal judge in the Hill Country, remembers how difficult it was for an incumbent like him to campaign for a senate seat in the face of pervasive public anger.
During a 1972 campaign stop at the town square in Athens, he shook hands with an older man and asked for his support.
“He said, ‘Are you in office?’ and I said, ‘Yes sir, I’m in the House of Representatives.’ Andhe said, ‘I ain’t voting for anybody who’s in office.’ It was ugly,” Adams said.
State Sen. John Whitmire, D-Houston, was a 22-year-old senior at the University of Houston when disillusionment over the Sharpstown scandal provided an opportunity for a political newcomer. At the same time, Texas had agreed to elect representatives drawn from single-member districts due to a Supreme Court decision that found county-wide races limited minority participation.
“When I knocked on peoples’ door, they would say, ‘I’m going to vote for you because you are too young to be crooked,’” said Whitmire, recalling his successful 1972 door-to-door campaign for a seat in the House of Representatives.
Sharpstown provided an opening in the 1973 session for reformers to elect a moderate, Price Daniel Jr., to the powerful post of speaker of the House of Representatives, Whitmire said.
“We passed a tough ethics bill in my first term. Andwe passed a bill to make it illegal to give a public official a benefit, and made it part of the penal code. Before that, it was wide open,” Whitmire said.
“Under Daniel’s speakership, the state Legislature passed new ethics and financial disclosure requirements for public officials, more stringently regulated lobbyists, and strengthened open meetings and open records laws, ” according to his political biography by the Briscoe Center for American History, at the University of Texas.
Today, Whitmire still marvels at the ferocity of public reaction to Sharpstown.
“I mean, the people just swept out everybody,” said the now-veteran senator.