Jones Makes Texas-sized Estate Claims

Jerry Jones, the colorful North Little Rock native who owns the Dallas Cowboys football franchise, will presumably be made whole for $11 million he invested with M. David Howell Jr. in August, thanks to an irrevocable standby letter of credit issued by Bank of America in Los Angeles.

But a $5 million promissory note Jones received from Howell last April came with no such guarantee and will face the same fate as the other $65 million in claims that were filed against Howell’s estate by the Valentine’s Day deadline.

Howell, 54, who was born in Fayetteville and reared in Springdale, killed himself with an overdose of the painkiller hydrocodone in a Beverly Hills hotel room on Oct. 23. An investment scheme he masterminded had come crashing down the previous week, when investors holding worthless checks began complaining to the Arkansas Securities Department.

Other than an $11.99 million certificate of deposit that was pledged as security for Bank of America’s letter of credit, the estate’s assets seem meager compared with its unending stream of obligations.

Jones — properly Jerral W. — received a $5 million promissory note on April 1 that was cosigned by Little Rock investor M. David Howell and his sometime business associate, Hot Springs banker Richard T. Smith.

The note, executed in Little Rock and referencing Arkansas finance laws, carried an 8 percent annual interest rate, and the principal and interest were payable on Jan. 15.

As was frequently part of Howell’s M.O., Jones at some point received a check written on Howell’s account at Bank of America and postdated to the promissory note’s maturity date. But the amount of the check, $6.125 million, far exceeded the amount promised in the note and instead represented an annualized return of 30 percent on a nine-month investment.

The check, a photocopy of which was filed with Jones’ claim in Pulaski County Probate Court, shows that it was written on an individual account, not the Howell Family Revocable Trust Account that was the subject of the first lawsuit to emerge from the Howell investment scheme. During the first week of October, Bank of America honored almost $2.15 million worth of Howell’s checks, overdrawing the Howell family trust account by $1.9 million before refusing to honor additional checks that were presented for payment.

Jones has made no claim against Smith.

As Howell’s business plan spun out of control in the summer of 2002, he apparently returned to Jones for another infusion of cash. The second promissory note, executed in New York on Aug. 19, was for $11 million.

This second promissory note given to Jones was unique among the scores filed against Howell’s estate in that it was backed by “an unconditional, irrevocable letter of credit” from Bank of America in Los Angeles in the amount of $11.99 million — the principal plus a half-year’s worth of simple interest at the stated rate of 18 percent.

Howell’s second note to Jones was one of the few that referred to Howell as “borrower” rather than “maker.” More significantly, it specified exactly what Howell was to do with the money: “Borrower represents and warrants that the entire principal sum of $11,000,000 is being used by Borrower to fund investment transactions through Goldman Sachs and Company in New York City.”

The promissory note came due on Feb. 15, and Jones had until Feb. 21 to demand payment from Bank of America under the terms of the letter.

Bank of America is being represented in the Howell case by Judy Henry of the Wright Lindsey & Jennings firm in Little Rock. She declined any comment on the letter of credit, but a claim she filed against the Howell estate revealed that David Howell had purchased an $11.99 million certificate of deposit and pledged it as security for the letter of credit — an obligation Bank of America expects the probate court to honor.

The existence of a Howell asset worth nearly $12 million cleared up the mystery of how a man so deeply in debt was able to get the letter of credit — something banks don’t issue lightly.

“You and I couldn’t buy dinner on the amount of money banks have lost on letters of credit,” said an attorney who asked that his name not be used.