Chilton, with a population of somewhere between 400 and 800, can boast only a handful of churches, some grain elevators, two gas stations and two small restaurants that serve home-style meals with real mashed potatoes.
"I wouldn't even call it a one-horse town," says a resident of Waco. ''It's more like a half-a-horse town."
But it appears that Galanis, the alleged mastermind behind a nationwide, multimillion-dollar investment scam that included Atlantic City's failed Boardwalk Marketplace project, has left his mark here as well.
Hundreds of local residents, who until two weeks ago had never heard the name Galanis, may lose thousands of dollars as a result of the sudden liquidation of the Chilton Private Bank, which was purchased a little more than a year ago by John F. Landon, a key Galanis associate.
The uninsured and unregulated financial institution, founded in 1914, was
closed May 15, three days after Galanis, 44, Landon, 39, and two other associates were arrested on federal tax-fraud and racketeering charges. Its failure - Landon voluntarily turned the bank over to the state for liquidation - is the latest chapter in a saga of alleged fraud and financial deception that has followed Galanis and his business dealings across the country.
While the Chilton Private Bank was not mentioned in the federal charges against Galanis and his associates, investigators and attorneys familiar with the Galanis investigation believe that the bank became a way station for some of the millions of dollars generated by the last of a series of Galanis-linked tax-shelter investment deals.
Those deals, now the focus of sweeping fraud investigations by the Internal Revenue Service, FBI, Securities and Exchange Commission and Manhattan District Attorney's Office, are believed to involve between $500 million and $800 million in investor funds, bank loans and tax write-offs.
Wealthy investors nationwide, ranging from doctors, lawyers and former congressmen to professional athletes and such celebrities as actor Eddie Murphy, invested in the tax shelters that Galanis set up to fund his investment schemes. The deals included oil- and gas-drilling ventures in Texas and Oklahoma; luxury condominium projects in Florida, California, Arizona and Utah, and a grandiose plan to restore fading hotels and shops near Atlantic City's Boardwalk.
Each of the projects has collapsed amid allegations of fraud and mismanagement and questions about the whereabouts of tens of millions of
Downtown Chilton is 1 1/2 stories tall, unless you count the slightly taller grain elevators. On summer afternoons, a half-dozen of the town's men normally sit on two weathered, wooden benches in front of the old Featherston Dry Goods store, next door to the Chilton Private Bank. They chew tobacco, drink Dr Pepper, nod at passing pickup-truck drivers and talk about the latest local news - such as it is.
But all that changed May 15 when notices were posted on the doors of the Chilton Private Bank, announcing that the Texas State Banking Commission was shutting it down.
Suddenly, Chilton found itself linked to a major national scandal. Articles in the Waco Tribune, detailing Landon's involvement with Galanis in a multimillion-dollar racketeering case, received wide circulation. So did one frequently passed-around copy of a Wall Street Journal article about the alleged scam.
"The town was in an uproar," recalled Johnny Faulk, who with his wife operates Jo Ann's Kitchen, one of the two restaurants along Chilton's main drag.
"This is just a little country town," said Faulk about a week after the scandal broke. "Many, many people are going to be hurt by this. . . . We lost everything we had. . . . When the bank closed, all we had was the money in our pockets."
Although local residents say the town's other bank, the FDIC-insured First State, was more popular, Chilton Private - one of only six private, unregulated banks that remained in Texas - attracted many depositors by offering free checking and 10.3 percent interest on savings accounts.
That appealed to people like retired farmer Herbert Jaster, about to turn 85, who had $1,000 in the bank.
"They didn't tell me to put it in there - I did it of my own free will," said Jaster, wearing overalls and a cowboy hat as he sipped soda pop under a grape arbor in his breezy back yard. Besides, Jaster said, "when you get as old as I am, you don't want to fight that highway."
Chilton Private was on Jaster's side of the street; he would have had to cross the community's small main street - braving a parade of cattle trucks and harvesting machines - to get to First State Bank on the other side.
The bank "had been here since 1914," added Joseph Champagne, a retired south Texas man who moved here recently. "By gosh, when it was run by the right people, there was nothing wrong."
Champagne said he lost just "hundreds" when the bank closed. He is bitter, though, because he feels that Landon - an absentee owner who occasionally appeared in town driving a red Mercedes-Benz - betrayed the people "who put their trust and confidence" in the bank.
If Landon shows up again in town, Champagne suggested, "I hope one of those cattle trucks doesn't miss him when he crosses the street."
Auditors for the Texas State Banking Commission completed a review of the bank's books last month, but have refused to comment publicly about their findings. Investigative sources say commission officials believe that the bank may have been used as a "conduit" through which Galanis and his associates funneled money while siphoning off the bank's assets.
Investigators say Galanis' wife, Chandra, had an account at the bank that at one point was overdrawn by about $1.4 million. Chilton also holds a $2 million mortgage from Chandra Galanis on a Del Mar, Calif., beach home, which she purchased late in 1985. That mortgage, however, is subordinate to two others on the property and may prove worthless.
The Galanises' beachfront home north of San Diego is to be auctioned off in a mortgage-foreclosure action this month.
Landon, a Salt Lake City businessman, did not return several phone calls to his home and office last week. He is free on $400,000 bail. Galanis is being held on Riker's Island, a New York City prison facility, after failing to post $10 million bail.
Landon purchased the Chilton bank from James P. Whepley, an Oakland, Calif., businessman, in January 1986 for about $750,000, according to sources close to the Galanis investigation. About the same time, Whepley sold ISI Corp., which managed three California mutual funds, to another Galanis associate, Douglas Adams, for $2.9 million.
Investigators are trying to determine whether the funds for both those purchases came from Nashua Trust Co. (NATCO), a bankrupt Galanis-linked firm that was set up to develop the Boardwalk Marketplace project in Atlantic City.
The ISI sale was voided after the SEC began an investigation into the circumstances surrounding the purchase. For the brief period that Galanis associates controlled the company, it invested close to $4 million of mutual- fund assets into a Connecticut bank and a Netherlands Antilles company linked to Galanis.
Those funds have not been recovered.
Stories of Galanis - and of his wife's million-dollar-plus overdraft in her Chilton Private checking account - are widely discussed here. But the talk soon turns to more immediate problems, like the one local pickup driver who won't fix his noisy muffler and the invasion of snails in Herbert Jaster's back yard.
Galanis and his lifestyle seem a million miles away.
The bank's closing was big news, and bad news, but the most common sentiment expressed was that the local people would get by.
"We all come from pretty sturdy stock," said Pat Cantrell, a retired nurse and grandmother to eight. When the bank closed, Cantrell and her family lost "everything we had over there," she said. "We didn't have a lot, but it was a lot to us."
Like many in this quiet, rural area, though, Cantrell has quickly put the loss in perspective.
"We had our home to burn down, lost everything we had, and we came back
from that," she said while sitting at Jo Ann's, where she was buying homemade ice cream for local children. "We lost a little girl when she was 1 year old - we survived that.
"This was just money."