The Dutchman

 

 

When the money was pouring in, it seemed that nothing was going to go wrong.  In the fall of 1988, when Investment Partners was getting organized, he and Irving Labovitz and their wives took a walk on a parcel of land they hoped to develop in Greenfield.

“We talked about down the road, both owning property there and living next to each other, and him being a judge and myself being a bank president.”

                                     September 2, l997

Mike Smith,   

                on the stand

Traveling north and east into New Hampshire, driving alongside wild spring rivers.  About an inch of snow on the ground and the wind is blowing it . There’s something sparse and culturally deprived and discouraged about this part of New Hampshire. Old buildings just boarded up and left to rot, too many old rusted-out Torinos, too many trailers.

The Franklin County Courthouse in Newport N.H. is in the center of town, a big old church-like structure.  The registry of deeds is small and friendly and still uncomputerized.    Whole walls of great bulky cobwebby books straight out of the Dickens era. A scriveners delight. The data in the average registry is the only reliable pathway into the shadowy world of the men and women who wheel and deal in real estate.  It’s where you have to file your intentions.   You can see who the players are, who is financing what, the joys and troubles, the acquisitions, the attachments and liens as trouble hits, the ignominious endings when the bank or the FDIC moves in and forecloses on you. 

When the banks lawyers came up here in l989 trying to check out these persistent rumors at the bank that Mike owned a condo in the Lake Sunapee area, they found nothing.   There was no Mike Smith in the index at the courthouse but he had a condo. The title was held by The Dutchman, Inc.  a New York Corporation having a usual place of business at  8910 Third Avenue, Brooklyn New York.

This is the address of one of Mike Smith’s major lenders, Jeffrey Anderson, and his corporation, G & H Leasing.  The relationship of Mike Smith and Jeffrey Anderson started in September 1986, when he gave Jeffrey and his wife Mary Anderson a $150,000 mortgage to buy their home in Northampton.  They had come to live in Northampton because of the Clarke School’s programs.  The borrowing that Anderson and his corporation, G & H Leasing, did from Heritage over the next two years was massive.  Sixteen loans , totaling over six million dollars.  The heaviest traffic was in June, l988, when Mike loaned him 2.7 million dollars.

Just three months later Mike and his wife purchased the condominium.   His down payment came from  a $50,000 cashiers check dated October 19, l988 from G&H Leasing payable to the Dutchman. Thereafter G&H issued monthly checks to the Dutchman from July 9, l989 to July 2, l990. 

The FDIC noted dryly, “It appears that Anderson and G&H Leasing, in addition to providing the down payment, were also making monthly mortgage payments (about $3,000) for Smith on the condo. Anderson was not a shareholder of the Dutchman, nor did he have a second mortgage on the property."  In l987 Anderson gave Smith an envelope containing $8,000 in cash during a meeting at Wiggins tavern, and for eight months, between l987 and early l988, Anderson paid Smith $2,000 monthly for a mysterious “Texas Project”.

“The Dutchman” is a nickname for Mike Smith’s college team at Union College.    Mike was both president and secretary of  Dutchman Inc.  At first the corporation was sited in Brooklyn, then it was in Florence, and finally it was in Milford New Hampshire, where he moved after he lost his job at Heritage.  

Just above the Dutchman listings, in the grantee index,  I see “Duseau”.   Armand Duseau, alias Buddy Duseau. And of course there is a big Mike Smith Heritage mortgage on his summer home.  And then I look up Buddy Duseau’s partner in Calduwood Enterprises, which owned an old Northampton dump site off Glendale Road and I see that he has a house here too. Sunapee was a clubhouse for some of the big Heritage borrowers, who came up here in the summer.

Buddy is a charismatic guy, always bubbling over with ideas.   He loves to talk, loves to charm people.  He was a supporter of mine many years ago in the micro-world of Northampton politics.  He drives around town in his nice old Mercedes.  I got a $100 cash contribution from him once on the street.   He thought I was doing a hell of a job.  I came home and showed my wife all my ill-gotten riches that I picked up out in front of Dunkin Donuts, and she asked if I should keep it?  I sent it back, with thanks. Buddy owns the fleet of compactor trucks that prowl the alleys of Northampton in the early mornings looking for their matching containers.  The last of our independents.

Buddy Duseau was a major figure in the Hoare report and the FDIC audit too. Duseau Trucking and Duseau Waste Industries, Inc. was a big borrower from Smith. Between October, l987 and May of l988 he gave him ten loans totaling more than $5 million. The FDIC classified his loan package as substandard because of a lack of appraisals on properties taken as collateral and the "poor financial condition of the company"

By about one in the afternoon, I’m done with the paper trail at the Registry of Deeds. Outside it is even colder than it was this morning.  The wind is just blasting in from the North Pole.  Another fifteen minutes I am in the town of Sunapee, checking out assessments at city hall.

It's a skeleton crew that mans Sunapee in the winter.  All the parking lots along the beaches and all through the cottage communities are empty. I go out at take a look at Buddy's summer cottage.  It's the biggest building in White Shutters, a

“private community” collection of cottages overlooking Dewey Beach.   A  cozy-looking little ice-fishing house sits out in the bay, with the fisherman’s car sitting next to it.  Clouds of snow boil up out of nowhere and race across the frozen lake toward the mountains.

On the south side of Lake Sunapee is Lake Avenue.  A private road leads up a forested bluff to a  luxury development,  Indian Cave Condominiums.   Mike had 4A, which is right by the entrance.  All the units are pretty much the same, big modern-California style duplexes with shake roofing and cedar siding stained brown. Two carports, two doors, two decks.  The road splits and the two forks spiral up the bluff, cutting through two outbreaks of ledge. There’s a model unit that is “planned to open”, and so I pose as a possible home buyer.  The price now for about the same unit is cheaper than what Mike paid. Back in the teeth of the condo boom they were going for $350,000, now they are going for about $250,000.

Three floors, three bathrooms, a big Jacuzzi.   Soaring ceilings over the kitchen/living room area. Kitchen  cabinets with a cheap feel to them. Plenty of glass, a heated swimming pool and tennis courts for everyone.  It’s billed as exclusive and inclusive, a boat slip is extra. 

The development went belly up in 1990, said the  builder, who showed me around his model home. He bought it from the FDIC.  I leave him, go out on the deck and look across the lake. I see Buddy Duseau' s summer home out there in the distance and I remember what a friend of mine said about Buddy and I suddenly think I see into Mike Smith’s sad misbegotten dream of the halcyon days, when the money flowed and the future seemed glorious. It’s the summer of l986 and there’s a party on the lawn.  The ice and snow are gone, the lake is  flecked with sailboats and crisscrossed with the wakes of power boats, going nowhere in a hurry.   On the fourth of July Buddy and his wife Nancy, like they usually do,  hire a guy to put on a fireworks show for their friends, and the beach and lawn are thronged with people from all over. Sky rockets fill the sky, fired off from an unseen barge.     Mike Smith is there, maybe as guest of honor. The fireworks drench the skies with color and stun the onlookers.  There is applause. 

Young Mike Smith feels, perhaps, that he has finally arrived, finally made his American dream come true. In the crowd are scores of people whose projects depend on his financing. On the point across the way ,the Indian Cave condos are going up, not too far from Bill Wood’s summer house.

He and his wife go over to take a look at the model unit.  He sees what could be, he and his family living the good life with their summer home on the bluff, boating with his Heritage friends on the lake. They get the videotape.  And then Mike wondered who could help him with this dream. He would think of Jeffrey Anderson; he would give him the videotape.

Challenged on the stand on his approaching Anderson, Smith said   “Jeff had said that if I came across any real estate, basically that we should look around, if it looks to be something that was promising to come talk to him about it. "

  

This whole business with Jeffrey Anderson is puzzling. Here the evidence of impropriety was clear and overwhelming, and the FBI spent some time investigating it.  Why was Anderson never indicted or put on the witness list?   Perhaps because Anderson was a prominent Northampton businessman whose buildings house ServiceNet, the mental health agency that coordinates many city programs, including its shelter.   Perhaps because the Anderson/Smith relationship did not fit the prosecution’s picture of what killed the bank.  Irving Labovitz appears only once in this case, in a very minor supportive role when his address shows up as to where to send the Vanguard mortgage back to. 

Smith  engineered this shakedown by himself.   He got two notes to finance the Dutchman, the first from Vanguard, the second from Bank of New England . He and his wife bought the condo in l987.   By  October of l989, the Bank of New England was in the hands of the FDIC and by l992 the condominium association and the town was putting  liens on his property for unpaid condominium fees and taxes. I wonder whether Mike Smith and his family ever had a chance to move into the condominium.   He took possession of it in October of l988, and the Feds took over the Bank of New England a year later and seized the condominium shortly thereafter. Maybe he got one summer of swimming out of it.