by The Big Rich: The Rise;Fall of the Greatest Texas Oil Fortunes
She stuck to her story throughout a cross-examination by Hunt attorneys, led by the man who had defended Bunker and Herbert in Lubbock, Phil Hirschkop. Asked why she had signed a settlement agreement that pointedly omitted any mention of their marriage, Frania said, “I signed that statement to protect Mr. Hunt from a bigamy charge. That was my contribution to his life.”
“You say you swore to facts that were not true?”
“Yes.”
“Doesn’t that bother you to do that?”
“At that time I did that for the man I loved. And women in love are not philosophers, nor do they know the law that well.”
“They know the truth, don’t they?”
“Yes,” Frania testified, “but they make a lot of sacrifices. I was thinking not only of him, but of all the children.”
It was an immensely sympathetic performance, and Frania’s attorneys followed it up with several sharp blows to the Hunt defense. They called in Hunt’s onetime aide, John Currington, who testified that H.L. had privately admitted marrying Frania. Then they revealed their secret weapon, a voided entry Frania and her son Hugh had discovered in a Tampa courthouse that clearly listed the marriage in 1925. The faded writing was the source of considerable intrigue. After its discovery—and certification by both sets of lawyers—someone had sliced the original entry from a courthouse ledger. Hunt attorneys brought forth a handwriting expert who argued that the entry was in a different hand from adjacent entries, suggesting it might be a forgery. The Hunts tried to date the ink but couldn’t. The damage had been done.
After two days of testimony, Bunker was ready to settle. He and his brothers and sisters lingered outside the courtroom during recesses, smiling and mingling with Ray’s side of the family just as they had in Lubbock. But no amount of public backslapping and cowboy boots could offset the impression Frania had made on the jurors. Phil Hirschkop took one of her lawyers aside and suggested the Hunts might consider a settlement. The lawyer, Roger Fritchie, said Frania might be willing to reduce her demands from one hundred million dollars to twenty-five million.
When Frania’s team concluded their courtroom presentations at noon on Friday, January 13, Hirschkop made the offer. The Hunts, he said, were willing to pay Frania $3.5 million but would not recognize her as Hunt’s wife. Hirschkop gave Frania’s attorneys until 5:30 that day to respond, at which point he would withdraw the offer. The appointed hour came and went. Frania’s lawyers never responded.
When the court recessed for the weekend, the first family scattered; Lamar took his wife, Norma, to Miami to watch Clint Murchison’s Cowboys beat the Denver Broncos in Super Bowl XI. Only Ray remained in Shreveport, studying the week’s testimony. The more he read, the worse he felt. Frania’s case appeared unbeatable. By Sunday night, when everyone reconvened, Ray was willing to increase the settlement offer to ten million dollars and recognize Frania as his father’s wife. The first family, however, would have none of it. They authorized Hirschkop to offer more money, but refused to recognize Frania.
On Monday both sides and their attorneys gathered in Judge Tom Stagg’s chambers to negotiate a deal. Frania was willing to settle on favorable terms, in large part because Judge Stagg had issued several rulings in the Hunts’ favor. Among other things, the judge ruled that the jury couldn’t consider Hunt’s supposed promise to include Frania and her children in his will because she could furnish no independent witness; her financial claims, as a result, would be limited to only the period when they lived as a man and wife, from 1925 to 1934.
It was over within hours. Frania agreed to accept $7.5 million, representing half of H. L. Hunt’s community property in 1942; the money would come from trusts left both Dallas branches of the family. In return Frania pledged to end both lawsuits. She would not be recognized as H. L. Hunt’s wife, even though it was now clear to everyone she had been. Afterward Frania approached Bunker in a hallway. “I just wanted you to know that I don’t have any hard feelings about this,” she said. “I’ve always liked you kids.”8 Bunker managed a weak smile.
A month later, Ray returned to Shreveport to deliver the $7.5 million check. When he reached Judge Stagg’s chambers, however, he received a rude surprise: Frania didn’t want it. Actually, it appeared her son Hugh was the problem. Frania and all the other Hunt children had signed the settlement, but for reasons no one seemed to understand, Hugh refused. It took another ten long months before he reappeared in Shreveport to explain himself. Everyone gathered in the judge’s chambers, Ray with a group of lawyers from both sides. Hugh seemed unable to explain his opposition, but in questioning in front of Judge Stagg, the Hunt attorneys insinuated that he wanted to reserve his right to challenge any of his half siblings’ wills. The Hunts argued that the judge should simply force Hugh to sign.
And there things lay for months, an inconclusive final act to a sad family drama, when suddenly, with practically no warning, the Hunts found themselves caught up in the financial equivalent of a thermonuclear explosion. In the panic it injected into world markets, in the unprecedented audacity of its scope and aims, in its sheer Texas weirdness, it was unlike anything the world had ever before seen.
It was Bunker and his silver.
SEVENTEEN
The Great Silver Caper
I.
By all rights, Bunker Hunt should have emerged from the 1970s the world’s richest man, a position he may have briefly held for a period in the late 1960s. Oil prices had risen to all-time highs. Inflation pushed interest rates to records. All across Texas, new millionaires were once again hatching like mayflies. In Fort Worth, Sid Bass and Richard Rainwater, products of Yale and Stanford, were demonstrating what a modern, diversified investment strategy could do for even the smallest oil fortune. But in the 1970s Bunker and his brother Herbert, who pooled their investment capital, charted a far different course.
Over the years they had slowly diversified, going into sugar and real estate. Bunker was the big-picture man, the one who devised their ideas and strategies; Herbert was the detail man, the one who put his brother’s ideas into action. Bunker’s ideas, however, were at best unconventional. At worst, they were stupid. By and large, Bunker ignored the advice of Wall Street’s best and brightest. The product of a single semester at the University of Texas, a man who fervently believed in Jewish, Communist, and Rockefeller plots to subvert the world, he devised his own unique investment strategy: silver.
Afterward, everyone involved would offer a different story of how it all began. A New York commodities broker named Alvin Brodsky claimed to have been the first to interest Bunker in silver, in 1970, as did one of Bunker’s prep-school friends and a pair of Dallas silver brokers. Probably all four made the recommendation; silver was a popular investment at the time and was trading at historic lows. To understand why Bunker listened, it helps to understand his worldview. Bunker, like his father, believed the world was slowly falling apart. The Communists, the Jews, the Rockefellers, the Russians, the Chinese, the hippies—everyone was out to destroy the world and Bunker’s position in it. “Bunker,” noted a Los Angeles rare-coin dealer named Bruce McNall, who befriended him during the 1970s, “was just obsessed with the idea that the Russians were coming over the Rockies.”1
It’s impossible to know whether Bunker’s philosophy was a product of extreme nouveau riche insecurity, his father’s harem-scarem politics, or something else altogether. Whatever its cause, it channeled his mind to a place familiar to all the world’s worried wealthy, from Middle Eastern Jews to South American dictators, who for centuries have invested their money in tangible, inflation-resistant items: diamonds, silver, and especially gold, anything that could retain its value if a family, a country, or a world economy suddenly collapsed. Bunker was perhaps the ultimate case of the worried wealthy. As the tumult of the 1960s built to a crescendo, he had begun funneling much of his fortune, including his Libyan profits, into tangible investments.
At first, silver was just one of many. Bunker started small in 1
970, when the price still hung near all-time lows, $1.50 per ounce. Working with Herbert, the two slowly increased their purchases over the next three years, buying five-thousand-ounce “penny packets” through a Wall Street brokerage, the Bache Group. Silver’s price rose steadily as they did, eventually doubling, to $3 per ounce, in 1973. It was then that Herbert read a book, Silver Profits in the Seventies, by Jerome A. Smith, an author of several financial newsletters who specialized in gloom-and-doom economics. Smith argued that the world faced an imminent economic and political collapse, and that the only safe hedge was gold and silver. He urged wealthy investors to buy both and store them in Switzerland—just in case Russia invaded the United States.
Bunker didn’t actually read the book—he was never much of a reader—but from what Herbert said, it sounded brilliant. In hindsight, in fact, the brothers appeared to follow Smith’s strategies to the letter. In mid-1973, working through a variety of brokers to mask their identities, they began buying silver contracts on the New York market. A silver contract entitles its owner to buy the metal at a specific price. No one actually buys the silver itself; a contract is a bet on the movement of prices. It’s simple: If you buy a December contract at ten dollars and the price of silver moves to twelve, you make a two-dollar profit. If it falls to eight, you post a two-dollar loss. What was unusual about the Hunts’ evolving strategy was the amazing number of contracts they bought—an initial twenty-million-ounce December 1973 contract, followed by several more large orders, until by early 1974 Bunker and Herbert sat atop contracts entitling them to buy fifty-five million ounces of silver—roughly 9 percent of all the silver on Earth. No one, not even governments, controlled more.
But what was truly jaw-dropping about the Hunts’ purchases—what stultified investigators when the truth eventually came out—was that Bunker and Herbert, unlike almost every other investor on Earth, actually took the silver. It came in ingots, and it cost around $175 million, in cash. Years later, one of Bunker’s top men told a congressional committee how the operation worked, a story both Bunker and Herbert denied. According to this story, the Hunts selected a dozen cowboys from Bunker’s Circle T ranch east of Dallas, handed them rifles, and divided the men among three chartered 707s. The three planes, flying at night, landed in Chicago and New York, where the cowboys stood, rifles at the ready, as lines of armored cars drove up with forty million ounces of silver ingots from the New York and Chicago exchanges. Once loaded, the planes took off, crossed the Atlantic, and landed the next morning in Zurich, where the silver was loaded into still more armored cars. With the Circle T cowboys riding shotgun, the cars ferried the silver to six separate Swiss banks.ag
There was another tale about these flights, one so improbable that most investigators later dismissed it altogether. According to this story, Lamar Hunt went along on one of the planes. The silver ingots were distributed evenly around the hold, leaving a large open space in the middle, which the plane’s owner decided to fill with, of all things, a cage containing a circus elephant. Over the mid-Atlantic, so the story goes, the plane began to lurch out of control, at which point it was discovered the elephant had looped its trunk around the wires that controlled the aircraft’s flaps. Lamar and an aide, it was said, saved the day by opening the elephant’s cage and tossing in a rubber tire, diverting the elephant to a new toy and saving everyone’s lives.
As was his habit, Bunker moved into the silver market with stealth and secrecy, but warehousing 9 percent of the world’s silver supply couldn’t stay secret for long. In the spring of 1974 the rumors finally began to fly. One question spun through the world’s silver exchanges: Who the hell was Nelson Bunker Hunt? And what was he doing with all that silver? No one knew, and everyone needed to. If that much silver were sold, prices could crash. For the moment, traders believed the Hunts would buy more. Silver’s price rose to six dollars per ounce.
It was then, in April 1974, that Bunker made his dramatic debut on the floor of the New York commodities exchange, known as the Comex. All around the vast room, busy traders stopped and stared—as a paunchy man in a blue suit and thick glasses waddled through the aisles, craning his head, studying this strange new world of commodities. Before Bunker left, a financial reporter from Barron’s cornered him and asked his intentions. “Just about anything you buy, rather than paper, is better,” Bunker said. “You’re bound to come out ahead in the long pull. If you don’t like gold, use silver. Or diamonds. Or copper. But something. Any damn fool can run a printing press.” Few Barron’s readers had the first clue what Bunker was talking about, and he didn’t linger to explain. In fact, it was the last anyone in the silver market would see Bunker for a long time.
In the months to come, the hubbub over the Hunt silver purchases fell away. As it did, silver’s price sagged, falling a dollar, then two, before finally settling below four dollars per ounce. In Dallas, Bunker was perplexed. How could they get the price to go back up? He began making quiet trips to Europe and the Middle East, taking leading silver dealers out to lunch and mumbling questions. One of the market’s most important suppliers was a sly Abu Dhabi bullion dealer named Haji Ashraf. Driving up silver’s price was simple, Ashraf told Bunker over lunch in London. All you needed was for wealthy Arabs to begin buying.
Bunker thought it an idea worth pursuing. Which was how he found himself in March 1975 aboard a commercial airliner descending across the mountains of Iran toward the capital city of Tehran. He had come to see the shah of Iran with a simple proposal: the shah should begin buying silver. If he and Bunker bought in tandem, they could drive silver’s price through the roof. The meeting had been arranged by a prince Bunker had met during his prep-school days. When the prince met Bunker at the airport, however, he had bad news: the shah was away. Bunker ended up meeting with the finance minister, a man named Hushang Ansari. Ansari hadn’t the faintest idea who Bunker Hunt was. He smiled during Bunker’s presentation, shook his hand, waved good-bye, and forgot all about it.
Irked, Bunker left Iran for Paris, where he spent several days inspecting his horses. At a stable, he spied an Arabian sheikh. It gave him an idea: Why not call the Saudis? He phoned a family friend with connections in the kingdom, who promised to arrange a meeting with King Faisal himself. He advised waiting two or three weeks, however, since word of Bunker’s Iranian visit was making the rounds. They wouldn’t want the Saudi king to feel he was Bunker’s second choice. The meeting, however, never came off. Faisal was assassinated several days later.
Batting 0-for-2 with Middle Eastern royalty, Bunker returned to the drawing board. He needed more people buying silver; that much was clear. He couldn’t simply do it himself. It was expensive, and that very year commodities markets, after years of unregulated growth, had finally gotten a federal regulator, the Commodity Futures Trading Commission, the CFTC. There were now limits on how much a single entity could buy and sell. Searching for a pliable partner, Bunker and Herbert turned to their newest company, Great Western Sugar, acquired in late 1974. At their direction, one of Great Western’s subsidiaries began buying commodities and metals across the board, sugar, copper, gold, and especially silver—lots and lots of silver. In June 1976 alone, Great Western purchased twenty-one million silver contracts. But to Bunker’s dismay, silver’s price simply wouldn’t stay up. It rose to $5.20 that August, but by the end of 1976 it had fallen back to barely $4.
It was then the fledgling CFTC stirred, lobbing a series of questions Bunker’s way about how much silver he actually controlled. Bunker explained, lamely, that it wasn’t an investment. He was only buying silver to use in a complex barter arrangement with the government of the Philippines; in essence, he claimed they had tried to trade silver for sugar, but the deal never came off. In the process of answering these inquiries, Bunker’s attorneys raised a more worrisome concern. Great Western was still a public company. Its shareholders, or even the Securities and Exchange Commission, might not look too kindly at one of its subsidiaries trafficking in massive amounts of
silver. Bunker and Herbert simply announced an offer to buy back Great Western’s publicly traded shares. Now they could do as they pleased.
Their next move, brought off in the spring of 1977, was to have Great Western launch a rare hostile tender offer for a company named Sunshine Mining, which controlled the nation’s largest silver mine, outside Kellogg, Idaho. The Hunts quickly bought up 28 percent of Sunshine’s stock for twenty million dollars, at which point its management surrendered, handing over permission for the brothers to acquire the rest of the company’s stock. The Sunshine deal not only gave the Hunts control over another thirty million ounces of silver, they now qualified as commercial users of silver, exempting them from most trading limits.
At this point, the Hunts’ commodities strategy took a detour. While the Hunts remained fixated on silver, they had continued dabbling in other tangible investments, and in January 1977 Bunker decided to get serious about one of them, soybeans. His angle was the weather; Bunker’s decision was heavily influenced by a New Mexico climatologist named Iben Browning, who predicted that climate changes in South America would soon lead to a worldwide soybean shortage. Using this and other predictors, the Hunt brothers began buying unprecedented amounts of soybean futures contracts. Federal regulations set the legal limit on one individual’s soybean-contract holdings at three million bushels. By that spring, Bunker and Herbert controlled six million bushels between them, plus an astonishing eighteen million bushels in the names of their children, giving them control over one-third of the total U.S. soybean supply. Their buying drove up prices, to ten dollars a bushel from six dollars, giving them a paper profit of nearly one hundred million dollars.
It was a flagrant flouting of the law, and in April 1977 the CFTC told the Hunts to reduce their holdings to three million bushels—or else. The Hunts sold off a mere two million, leaving them with twenty-two million. At that point the CFTC went public, suing the Hunts and showing the press what they had done. Bunker was outraged. This was government harassment, he told reporters, pure and simple. Plenty of commodities buyers worked together to get around legal limits, he said, yet the government only pursued the Hunts. “I think the reason, frankly, they jumped on us is that we’re sort of a favorite whipping boy,” Bunker said. “We’re conservatives, and the world is largely socialist and liberal. As long as they want to jump on somebody, they want a name and they want somebody that’s on the other side.”