Over the Hill

Handling money calls for honesty

How did this happen? Estate Financial Inc. of Paso Robles once managed hundreds of millions of dollars for 3,000 investors. Now it’s bankrupt. And on Monday, the company’s two chief officers were sentenced to state prison.

Did those two executives set out to defraud their investors or were they just incompetent? Maybe they couldn’t resist the temptation to borrow some of their investors’ money. But whatever the reason, it’s a warning that all investment firms need strict regulations and frequent audits.

In 1955, I was hired by a personal loan company. I started at a branch office on the San Francisco Peninsula. I’d been there six months when the manager lost our night-deposit bag.

The company had a limit on how much cash we could keep in the office overnight. Any excess was locked in a canvas bag and dropped into our bank’s night-depository chute. We retrieved it the next morning.

That evening, the manager put $300 in the night bag. (In those days $300 was significant money.) He laid the bag on the seat beside him in the truck, which we had used that day to repossess some furniture. He returned the truck to the junkyard where he’d borrowed it and drove home in his own car, completely forgetting the night-deposit bag.

The next morning he went the junkyard but nobody admitted seeing any bag. He didn’t know what to do. He couldn’t replace the $300. That was more than half his month’s pay, and he lived from payday to payday.

We’d all heard of a few managers who’d gotten in trouble making loans to themselves under fictitious names, usually because of slow horses or fast women. Once they started, they kept getting in deeper until a company auditor made an unannounced visit. The next stop was criminal court.

But my manager never faced that temptation because a certain borrower surprised us by walking in to make a payment. The man was wanted in Oregon for child stealing. A few weeks earlier we’d received a wanted poster offering $500 reward. We didn’t mention the poster to him. When he left, the manager followed him. I ran to the nearby police station.

We split the $500 50/50. I paid for the birth of my new son, and the manager was able to replace the $300.

Of course, he should have immediately told headquarters about the missing money. They would have worked something out. Whenever you handle other people’s money, complete openness isn’t just the best policy, it’s the only policy — especially when it’s reinforced by frequent audits.

Contact Phil Dirkx at phild2008@sbcglobal.net or 238-2372.

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