“Why not Minot”— teachers strike, flood, First Western bank scandal and the “zap-in”

February 2009
For years I’ve wanted to write something about the rise so-called Minot, North Dakota First Western bank scandal in 1969.

I started to look at what other stories were in the news during the spring of 1969 and I realized there were a number of other stories I should write about.

The employment contracts at the Minot high school between the teachers and the Minot school board were up for renegotiation in the spring of 1969.

At the time the high school teachers were members of the American Federation of Teachers (AFT), which was the only AFL-CIO teachers union in the state. The teachers union submitted its salary demand and other classroom benefits demands. The school board countered with a lower offer. It did not take long before it was apparent the union desired to strike and the Minot School Board wanted to “bust” the union.

One of the lawyers for the school board was Bruce Van Sickle, a Republican state legislator and partner in one of the city’s preeminent law firms who would later be appointed federal judge by United States Senator Milton Young, during his patronage control .

The school board lawyers sought and received an injunction from a local state district court judge declaring that any teachers strike was a “ breach of contract” and restraining any strike activity. The teachers went on strike anyway. At least 125 teachers were fired, more than 20 were jailed for picketing and the union was eventually “busted.”

Decades later I spoke to a number of teachers who had been involved in this strike. Most of them expressed their belief that the strike could have been successful had it not been for the flood coming. The teachers had begun with strong public support, however Spring run off brought a simultaneous crest of the De Lacs and Souris rivers and caused the worst flood in the history of Minot.

At the time, newspapers reported that more than 11,000 homes had to be evacuated because of the flood. The Army Corps of Engineers straightened the Souris River in the city and built several flood control structures to better cope with any future flooding.

The dominant view of the citizens of this city during the flood was that everyone should walk “lockstep” to fight the flood damage. Public support for the teachers strike washed away. This is borne out, when after firing all the striking teachers, the Minot School Board adopted a resolution saying “in this community’s hour of greatest need, this group of teachers saw fit to desert their contracted teaching positions, committing a willful breach of contract. They exhibited the most flagrant dereliction of duty ever witnessed in this stricken community. These teachers were discharged for cause.” The Board then denied all fired teachers requests for reinstatement.

A few months before the “summer of love” music festival at Woodstock, North Dakota hosted the now famous “zap-in.” There are a number of stories about the genesis of this event. The Wikipedia story on the “zap-in” says the event was the idea of the student body president of North Dakota State University (NDSU), Chuck Stroup. He said he could not afford to travel to the annual college spring vacation at Fort Lauderdale so he placed ads in his college newspaper, the Spectrum, inviting people to spend a weekend, in early May of 1969, camping and enjoying themselves in Zap, North Dakota. Zap is located in Western North Dakota. Stroup’s family are bankers in the region surrounding Zap. Another story is that a group of the college veterans club and a few journalists from the college newspaper decided to have an end of the school term picnic in Western North Dakota.

The college newspaper placed their story about the weekend on the Associated Press wire service. The weekend party invitation captured the imagination of a number of colleges across the upper Midwest. College kids were encouraged to “Zip to zap.” One NDSU college newspaper article promoting the weekend concluded with saying “in addition to these events, a full program of orgies, brawls, freak outs, and arrests is being planned.”

Main Street businesses and state government officials reacted predictably. On one hand they liked the national attention and, of course, the prospect of making money. On the other hand, the event would bring the student protest movement that opposed the Vietnam War and were “free love” hippies who wanted to tear down most of their own rigid morality and beliefs. The city powers opted to double the price of beer in the two bars at Zap and have the National Guard and Highway Patrol at the ready.

On the weekend of May 9, 1969 about 2000 kids in invaded Western North Dakota for the “zap-in.” The partygoers became Inebriated, then rowdy, then angry as they drank the town out of beer. They became cold as the nighttime temperature dropped and they tore down an abandoned building to start a bonfire. Governor Guy determined that the kids had become too unruly and he called out the National Guard to dispel everyone (in North Dakota National Guard history says it was actually the mayor of Dickinson that made the request). The events in Zap was the lead story on the next Walter Cronkite CBS news broadcast.

At the same time as the “zap-in” , Minot teachers strike, and Minot flood the state news was also dominated by a story most often called the Minot First Western bank scandal.

One of the earliest beliefs of the Nonpartisan League (NPL) was that there is no reason why all the banks in the state should be owned and controlled by Republicans. The League created a state owned bank during the first legislative term they were in power. After the League lost political control of state, the scope of the state bank activities was limited so that the state bank of North Dakota did not have branches in various communities to compete against the local banks, which in majority Republican controlled. Even after they were no longer in state control the NPL always maintained their belief they should own banks and compete with the banking power of Republicans and this view continued after the League merged into the state Democratic Party.

In 1964, Hayden Thompson received a state bank charter to open a bank in Minot, North Dakota which he named the First Western bank. Hayden was a young Democrat. He came from a banking family that owned a bank in Towner. Hayden placed a number of the prominent city Democrats on his board of directors. The bank became active in state politics and the election of Hubert Humphrey over Richard Nixon for president in 1968. The bank also made loans to Democrats under lucrative terms as well as financial campaign contributions.

In my youth I remember people bringing up the subject of the First Western bank and winking, nodding and smiling at each other as though they knew something that others didn’t.

Scott Anderson told me of receiving an unsecured loan of $150,000 from Hayden and the bank. Hayden took him to the futures commodity market in Minneapolis. Scott said he lost most of the money in a couple of hours. Jungroth was either state party chairman or national committeeman at the time. He told me, I was a big shot too but no one from the bank ever offered me a sweetheart loan.

Actually I don’t think the bank did much more in a partisan way than lots of Republican banks did over the years but I do admit to being impressed with some of the stories about bank financed debauchery.

In the spring of 1969, state bank examiners came to First Western bank to conduct a routine examination and were soon joined by federal FDIC examiners. There was never a question about the financial solvency of the bank but the combination state and federal examination found political activity supporting Democrats and a number of other questionable financial transactions by the then bank president Gary McDaniel. The FDIC ordered Hayden Thompson to create a new board of directors, new management, a recapitalization plan, and to divest himself of control of the bank. Hayden hired Jack Hoeven to replace Gary McDaniel as president of the bank. At the time Hoeven was president of Union National Bank in Minot. Hayden sold him 10,000 shares of stock with an option to purchase 51%. Years later I did some legal work for Hayden and he recalled that Jack’s mother-in-law had sufficient stock in JC Penney and this gave him the financial power to purchase majority control of First Western bank. Jack’s son John worked at the bank and later went on to become governor of North Dakota.

At this point the First Western bank scandal took on a “Keystone cops” aura. The federal and state prosecutors created a virtual joint and concurrent prosecution of the bank. North Dakota United States Attorney Harold Bullis convened a grand jury to prosecute a number of people who were or had been connected to the bank. Bullis had once worked for United States Senator Milton Young and later became an average lawyer in North Dakota. Under the accepted in traditional patronage rules, when Richard Nixon was elected president in 1968 Senator Young, being the senior senator in the party of the presidency was given the authority to choose a United States attorney and he selected Bullis.

Bullis subpoenaed First Western bank president Gary McDaniel. He declined to testify, asserting his Fifth Amendment right not to incriminate himself . He was immediately taken over to the U. S. Attorney Office and served with a subpoena to appear before a state grand jury. The North Dakota Attorney General prosecutors had convened a state grand jury several weeks after the federal grand jury was convened. The state grand jury was convened to investigate and bring prosecutions under the North Dakota Corrupt Practices Act. A federal grand jury is commonly used as a prosecutorial device. The state Attorney General office has almost never used a grand jury device since statehood.

The North Dakota Corrupt Practices Act says a person cannot refuse to testify because of their Fifth Amendment right against self-incrimination but anything a subpoenaed witness testifies to is immunized from use against them in a subsequent criminal prosecution. A later Federal Appeals Court decision would say neither the U. S. Attorney or state Attorney General prosecutors realized at the time that all of the state grand jury testimony was immunized under the Corrupt Practices Act. McDaniel’s attorney Bill Mills realized this however. Mills made sure McDaniel testified at length to every possible illegal act or transaction he had been part of at the bank including giving testimony beyond the scope of this state Attorney General prosecutor’s questions.

Attorney General prosecutors also subpoenaed the testimony of a number of prominent Minot Democrats thought to be connected to various activities of the bank that were being investigated.

The state grand jury, in December of 1969, returned an indictment against bank president Gary McDaniel for violating the North Dakota Corrupt Practices Act. At the same time a separate indictment was filed against the First Western bank, Hayden Thompson, Herbert Meschke, Larry Erickson, Richard Backes. Gary Williamson, and Mark Purdy for aiding and abetting, advising or consenting in making unlawful political contributions under the North Dakota Corrupt Practices Act.

The defendants brought a motion to dismiss the case. Three months after the indictments were issued, District Judge Eugene Coyne quashed all the indictments, saying all of the defendants were granted transactional immunity on their testimonies under the Corrupt Practices Act.

On February 4, 1970, two months after his state indictment, Gary McDaniel was served with a seven count federal indictment charging him with embezzlement and misapplication of bank funds and making false bank entries. After the District Judge Coyne quashed the state indictments, the United States attorney served McDaniel with a second indictment charging him with one count of embezzlement and misapplication of bank funds insured by the FDIC.

McDaniel brought a motion to dismiss the federal indictments using the same reasoning as had been submitted to the state court, saying that the prosecution was tainted by using the immunized testimony before the state grand jury. United States judge George Register denied the motion on the grounds that the state crimes bore no relationship to the federal crimes charged and therefore the grant of immunity contained in the State Corrupt Practices Act did not extend to the federal indictments. Judge Register then consolidated in the two indictments and scheduled a trial. A jury convicted McDaniel of all charges against him and judge Register sentenced him to five years imprisonment on one indictment and two years to run concurrently on the second indictment. McDaniel appealed his convictions, again arguing the government had unlawfully used his immunized state grand jury testimony. The Eighth Circuit Court of Appeals vacated his convictions and remanded his case back to North Dakota federal court for an evidentiary hearing as to whether McDaniel’s state grand jury testimony was used by the United States Attorney. An evidentiary hearing was held. Judge Paul Benson issued an opinion saying United States Supreme Court case law compelled him to rule that McDaniel’s immunized state grand jury testimony was used in the federal prosecution and therefore, he was compelled to dismiss the convictions. The ruling of judge Benson was sustained on appeal. In the end all state and federal charges against Gary McDaniel were dismissed.

As he had done with Gary McDaniel United States Attorney Bullis brought a new federal prosecution against the First Western bank and Hayden Thompson, Herbert Meschke, Larry Erickson, Richard Backes. Gary Williamson, and Mark Purdy a couple of months after the state court judge had dismissed the state prosecution. The bank was charged with five counts of knowingly and unlawfully making a contribution and expenditure in connection with an election for political office. Thompson, Meschke, Erickson, Backes. Williamson, and Purdy were each charged with one count of conspiracy to make financial contribution to political office.

These defendants filed a motion to dismiss based upon use of state immunized testimony judge Register denied this motion as he had done when the similar motion was filed by McDaniel. Later the defense lawyers resubmitted the motion and asked for an evidentiary hearing. Judge Register retired and took senior status and died unexpectedly. His replacement, Bruce Van Sickle disqualified himself from the case because his law firm represented one of the parties. Judge Benson also disqualified himself because he had been the judge in the McDaniel evidentiary hearing. Senior judge Ronald Davies was assigned to conduct the evidentiary hearing and to rule on the motion to dismiss. After conducting his hearing, judge Davies found that the number of telephone calls between the Ward County state attorney’s office and the U.S. Attorney and other evidence of joint investigation between the state and the United States led him to conclude that the government had failed to meet its burden of proof showing legitimate and independent sources for its evidence and suppressed the defendant’s testimony before the state grand jury and suppressed any evidence relating to the state grand jury testimonies.

The United States Attorney appealed judge Davies decision. The circuit court found that judge Davies opinion overreached and at one point ambiguous. The court also noted that the U.S. Attorney said he did not rely at all on any state grand jury testimony in organizing its prosecution. The Court of Appeals reversed judge Davies opinion and remanded the case back for an additional evaluation of the evidence the United States said it had used to bring its prosecution and was in no way tainted by the immunized state grand jury testimony.

After the remand, the parties reached a plea agreement. In 1975, the United States Attorney dismissed its indictment against two of the six men who had been charged, Gary Williamson and Mark Purdy, agreed to the First Western bank pleading guilty to one count of the five count indictment and paying a $1000 fine. Hayden Thompson, Herbert Meschke, Larry Erickson, and Richard Backes agreed to plead guilty to a misdemeanor and to pay a $1000 fine. Herbert Meschke, who had been the lawyer for the bank, was permitted to plead nolo contendere which is a legal technique permitting a charged person to accept the punishment without having to say the word “guilty” on the official record. Meschke would go on to a distinguished career as a North Dakota Supreme Court Justice.

Looking back, I realize the “First Western bank” case took nearly 6 years from gavel to gavel. An untold amount of hours were expended by federal and state law enforcement personnel and prosecutors, as well as court services. Also, there were innumerable hearings, trials, appeals, legal fees, legal time yada yada yada. All of this in return for the dismissal of all charges against bank president Gary McDaniel, charges being dismissed against two of the six indicted Democrats, the bank pleading guilty to one count of the indictment and paying a $1000 fine, and the remaining four men either pleading guilty or accept a guilty plea to a misdemeanor and paying a $1000 fine. It seems like it was a waste. Not the first or last obviously.

  1. Tracy Potter says:

    Just found your site, Ardell. Thanks for the lowdown on First Western. Politicos of our generation only saw the winks and nods … I appreciate the research.

    • Ardell says:

      Tracy,
      sorry this is taken so long to respond. I’m glad liked the First Western bank story. I left some things out about what they made Herb in order to get the nolo contendere plea-bargain. I also didn’t pass on that somehow Bob McCarney got a hold of the Gary McDaniel grand jury testimony. He tried to shop it to Kevin while Kevin was still a political reporter at the Fargo forum. The grand jury record was sealed so I’ve always wondered how he was able to get that.

      I understand from Clay that you gave a good interview regarding Bill Guy. I declined to give an interview. Don’t think he was worth it. I hope I didn’t irritate Clay. I’ll be anxious to see what the documentary says were the good things that he did. I can think of is that you didn’t call federal troops for the ABM demonstrations as was wanted by John Mitchell. Other than that he was a pretty irrelevant piece of shit if you ask me.

      I hope you’re not into much peril for the upcoming election.

  2. Kendall Gregory says:

    Did you ever come across in your research what happened to Gary Mcdaniel after the scandal?

    • Ardell says:

      My old law firm represented Garry a number of years after the events. At this time I remembered yet shoulderlength longhair and was living in Minneapolis but I don’t know what he was doing for a day job. But then I lost track.

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