by The Big Rich: The Rise;Fall of the Greatest Texas Oil Fortunes
What drove the second-generation Hunts apart—emotionally as well as financially—was the massive $1.1 billion loan Bunker and Herbert had taken to escape the silver debacle. The collateral was Placid Oil, still owned by the six siblings’ various trusts. That arrangement was fine so long as oil prices continued to rise; in the early 1980s, Placid was valued at $2.2 billion, twice the size of the loan. But even before oil prices began to drop in 1983, Margaret and the other siblings realized that if the worst happened—if Bunker and Herbert defaulted on the loan—the banks would go after Placid, which could cost the “uninvolved” siblings millions of dollars.
Margaret moved to sever all her financial ties to Placid, and to Bunker and Herbert. All through 1982 and 1983 family attorneys worked to disentangle Margaret, Caroline, and Hassie’s holdings from those of Bunker and Herbert’s. In the end, the three walked away with some of Placid’s most promising oil fields. Bunker and Herbert, shrugging off several years of awful publicity—both were obliged to testify about their silver dealings before Congress in 1980—struggled to break free from the confines of their $1.1 billion debt. The oil fields Margaret and Caroline took from Placid left it a smaller company, with less cash to pay the banks each month. At first the two brothers had some success reducing their debt load, raising $410 million by selling off oil properties to the Petro-Lewis Corp. in 1982; they later raised another $161 million by selling stock in a number of other companies, including Louisiana Land & Exploration and Gulf Resources. Bunker wanted to sell even more assets, but the bank consortium’s managing partner, Morgan Guaranty of New York, resisted, insisting it would need new collateral to replace anything that was sold. Bunker lobbied the other banks to remove Morgan and succeeded, replacing it with two banks, Bankers Trust and Republic of Dallas, who seemed more reasonable.
No sooner had Bunker achieved some elbow room, however, than oil prices began to drop. It was Penrod that first felt the shock waves. Penrod leased drilling rigs, but the drop in prices meant every major oil company froze or scaled back its hunt for new reserves until prices stabilized. As the months wore on, more and more Penrod rigs fell idle. The company had four hundred million dollars in debt, and in late 1983 Bunker asked its banks for better terms, along with fifty-seven million dollars in new loans. The banks agreed, but asked for more collateral. Bunker and Herbert reluctantly went along, handing over 476 acres of land along the North Central Expressway in suburban Richardson. The first payments on the new debt were delayed until May 1985. For the moment, Penrod seemed secure.
The bad news, however, just kept coming. While the Hunts’ oil companies at least still functioned, Bunker and Herbert’s sugar empire was falling apart. A venture that began with the takeover of Great Western Sugar in 1974 had expanded over the years, with the acquisitions of several other sugar companies, eventually rolled into a single holding company named Hunt International Resources, known as HIRCO. The company had been piling up annual losses for years when it was blindsided by the soft-drink industry’s decision to begin flavoring Coca-Cola, Pepsi, and other drinks with corn and artificial sweeteners instead of sugar. All through the early 1980s, sugar prices fell. When HIRCO’s suppliers demanded new contracts to reflect the lower prices, the Hunts refused, then sued. Their business evaporated. Bunker tried to sell the sugar factories, but no one wanted them anymore.
In March 1985 HIRCO’s sugar subsidiaries filed for bankruptcy protection, citing $200 million in liabilities on barely $175 million in assets. A month later, HIRCO itself followed. Six months after that, a federal judge wrenched all the business from Hunt control, placing it under the supervision of a Dallas trustee. By a conservative estimate, the sugar business had cost Bunker and Herbert more than $1 billion.
Through it all, the Hunts managed to keep up appearances. Placid and Penrod were still large and functioning; even at their darkest moments, Bunker and Herbert never faced anything like what had happened to Clint Murchison. In 1983 they moved all their various offices into the gleaming new Thanksgiving Tower in downtown Dallas. Bunker was still able to fly the world to watch his horses run races in California and Europe; in 1985 Forbes magazine estimated he remained the nineteenth-wealthiest man in the world, though his net worth, nine hundred million dollars, was a fraction of what it had been a decade before. He still made headlines from time to time, as when he donated money to the Nicaraguan Contra guerrillas secretly funded by a White House aide named Oliver North. By and large, the Hunts remained the Hunts. If not for their massive debts, much of it dating to the silver bailout, they might have weathered the storm. But at every turn, silver continued to haunt them. In late 1984 the IRS sued Bunker and Herbert, seeking two hundred million dollars in back taxes related to silver. In March 1985, following a five-year federal investigation, the CFTC finally filed a complaint against the brothers, formally charging them with unlawfully conspiring to corner the silver market. It took years to sell all their silver. When the last of it was finally gone, Bunker and Herbert had lost billions.
All through 1984 and 1985, meanwhile, oil prices continued to fall. By mid-1985 both Placid and Penrod, the twin pillars supporting the Hunt empire, were on the verge of defaulting on their bank debts. Barely half of Penrod’s rigs were working; those that were fetched rates less than half what they demanded at the height of the drilling boom a decade earlier. Its loss in 1984 alone topped one hundred million dollars. Bunker and Herbert continued selling off pieces of Placid, but half its cash flow was still going to pay off the remaining silver debt. It no longer had sufficient cash to replace the reserves it was selling; at this rate, Placid would wither and die. Its last chance was a risky play Bunker and Herbert were eyeing in the Green Canyon area of the Gulf of Mexico, which analysts believed could contain billions of barrels of new oil. If Placid could find an elephant in the deep waters of the Gulf, Bunker believed, it might yet find a way to survive.
By mid-1985, however, both Placid and Penrod had told the banks they might be forced to miss debt payments. Bunker and Herbert pleaded for time. The banks refused. They had seen how the brothers stiffed their sugar lenders, and were in no mood for assurances. They demanded to be repaid, and didn’t especially care where the money came from. “They made no bones about it,” Herbert recalled. “They said, ‘If Placid can’t pay, get it from some other member of the Hunt family.’ ”
Negotations between the brothers and their banks were already tense when oil prices suddenly went into free fall in late 1985. All through 1986 they continued to drop like a stone, eventually hitting $12.88 a barrel that summer. In a panic, the bank consortium demanded more and more collateral. By and large, Bunker and Herbert refused. What they needed was more cash, not less, they insisted, if they were to have any hopes of hitting marketable amounts of oil in Green Canyon.
With oil prices plummeting, Placid missed its first debt payment on March 27; two months later, Penrod missed a payment as well. Five days later the banks called the loans. Bunker and Herbert had run out of time. Three weeks later, pushed to the brink of bankruptcy, they filed a massive $3.6 billion lawsuit against twenty-three different banks, charging them with fraudulent scheming to “dismantle and destroy” Placid and Penrod. A month later, the banks countersued Bunker, Herbert, and Lamar, demanding immediate repayment on total debts of more than $1.3 billion.
In late August 1986 the whole mess was thrown into a federal court when Placid filed for Chapter 11 bankruptcy. Hordes of attorneys from across the country descended on Dallas for the fireworks. In legal arguments that stretched for more than a year, the banks demanded immediate repayment of their loans. Hunt attorneys argued for the payments to be delayed, to give Placid a chance of finding oil in Green Canyon. The banks won many of the motions; the Hunts, after replacing their Boston attorneys in December 1986, hired a Dallas attorney named Stephen Susman, who began winning some motions of his own.
By mid-1987 Susman had entered into talks aimed at settling all the litigation and constructing a schedule to repay the ba
nks. But for the Hunt brothers themselves, it was too late. Oil had fallen too far; there was simply too much debt. Herbert was the first to fall, filing for bankrupcy protection on July 22, 1987. Bunker held out as long as he could, but with the banks demanding shares of his remaining fortune to satisfy Placid’s debts, he had no choice. Finally, on December 1, 1987, like hundreds of derelict oilmen across the state, Bunker followed Herbert into Chapter 11 bankruptcy protection. Lamar filed at the same time; he sold his North Dallas mansion and moved his family into a smaller home in Highland Park, not far from Bunker’s. All the brothers’ main assets—the sugar companies, Penrod, Placid, now the three brothers themselves—were operating in bankrupcy.
Fighting between the Hunts and the banks would stretch on for years longer, but it would all be anticlimactic. The story was over, at least for Bunker and Herbert. Soon Herbert would begin selling his beloved antique coins. Bunker would be forced to begin selling his horses. In barely ten years, thanks to one of the most harebrained financial schemes of the twentieth century, the two brothers had gone from being among the world’s wealthiest men to laughingstocks.
VI.
Like the end of Texas Oil’s golden age in the late 1950s, there was no formal announcement that the era of the Big Rich had reached its end. Texas would go on, of course, but something, no one was quite sure what, had died. When did it happen? Some pointed to the Hunt bankruptcy, some Clint Murchison’s, some to the awful auction John Connally underwent after his own bankruptcy. In truth the end came not with a single event but scores of small deaths, of the people and the places and the mood that made Texas what it had been. If forced to pick a date, many would point to the steamy afternoon of June 1, 1987, when the first wrecking balls slammed into the walls of the Shamrock Hotel.
It had been coming for years. In its day the hotel had hosted six American presidents, from Eisenhower to Reagan. By the early 1980s it was rarely full, and the grand soirees that once showcased Frank Sinatra and Milton Berle and Liberace had long since given way to pimply bands playing the proms of teenagers from Pearland and Cypress and Houston’s gritty south side. The pool was still there, just as Glenn McCarthy had left it, but the Cork Club was long gone, the tuxedoed “oilionaires” and starlets replaced by winsome retirees. In December 1985 Hilton Hotels announced it was selling the hotel to the expanding Texas Medical Center, whose half-dozen facilities clustered around the hotel, all but begging for space. The Shamrock was to be closed, they said, then torn down, replaced by, of all things, a parking lot.
A neighborhood group sprang up to rescue it. They called themselves “Save the Shamrock.” On Sunday, March 16, 1986, the day before St. Patrick’s Day, some nine hundred of them paraded down South Main, turned onto Holcombe, and spread out to form a human ring around the old hotel. One man wore a T-shirt that read TEARING DOWN THE SHAMROCK WOULD BE LIKE TEARING DOWN THE ALAMO. Television cameras whirred; local reporters scurried through the crowd, scribbling in their notebooks. At one point there was a stir. A reporter was talking to an elderly man in a dark suit. Word trilled through the throng:
It was Glenn McCarthy.
He was almost eighty years old that day, unrecognizable as the dashing figure of yore, stooped and worn, his face sunken, ravaged by decades of Wild Turkey. He and his wife, Faustine, had been living in suburban La Porte for years by then, if not forgotten by Houston, discarded. “It’s a silly thing to tear it down,” McCarthy rasped as the reporters wrote down his words. “The people talking about knocking it down have lost their brains. It’s a landmark known all over the world. Houston was a small city when it was built.”5
McCarthy didn’t come to the big Irish wake they threw that June the night the Shamrock closed. It was a sad evening. An older woman cried in the lobby. Middle-aged men led their children past the pool, pointing out where they swam as boys. Up in the penthouse a bagpiper serenaded the last visitors as they took the elevators down after midnight. Nor was McCarthy there the day they auctioned off thirty-five thousand bits of his memories, hundreds of Shamrock towels and robes, and thousands of pieces of Shamrock dinnerware. One man bought the entire breakfast room and opened it as The Shamrock Café in a Houston strip mall.
The building remained empty after that, padlocked and musty, until the wrecking crews arrived at the end of May 1987. They didn’t rig explosive charges and take it down in one deafening bang, deciding instead to use the wrecking balls to knock it down piece by piece, blow by blow, like the fists of a frustrated Atlas pummeling its great granite facade. It took months for it all to crumble away, until the crews left in December, leaving behind nothing but heaps of rubble.
Glenn McCarthy’s kidneys gave out a month later. Doctors wheeled him out of surgery at St. Luke’s Hospital, and Faustine placed him in a nursing home. He lingered for nearly a year, finally dying, a day after his eighty-first birthday, on December 26, 1988. The newspapers hailed him as a “Texas giant” even as they tried to explain to younger readers who he had been. A thousand people attended his memorial service, where a bar singer from the Shamrock’s glory days led renditions of “You’ll Never Walk Alone” and “Londonderry Air.” They buried him in Houston’s Glenwood Cemetery, steps from the grave of Howard Hughes. “He was a tough man, and the drinking and fight stories are true enough, but he wasn’t anything like that character in Giant,” one old friend told a reporter. “He was a man, and he took a good deal of pride in that. I don’t think there’s ever been anyone like him, before or since.”
EPILOGUE
Twenty years—twenty years now since the worst of it was over, Clint Murchison Jr.’s death, the Hunt bankruptcies, those awful days when another Texas banking chain seemed to fail every Monday, when the office towers around Houston and Dallas were so empty they were called “see-through” buildings—the days when the era of the Big Rich finally came to its crashing end. Texas lives on, of course, as do many of the Hunts and Basses and Cullens and Murchisons, but it’s not the same today, not really. None of the Big Four families remain true players on the nation’s business or political stage. When one of their own, George W. Bush, entered the White House in 2001, some of the old names began popping up at presidential dinners. Ray Hunt, still thriving, was one; in 2007 Hunt Oil received a lucrative concession to drill in northern Iraq. Sid Bass, whose family, along with the Hunts, ranked among Bush’s largest financial backers, was photographed alongside the president, Laura Bush, and the queen of England.
Today, though, the Hunts and the Basses and all the rest are mere rich people, and Texas, despite its colorful cultural history, is—dare I say it—just another state. Was it ever anything else? Were they? To a Texan, the answer is yes. To many native Texans, it must feel as if something has been lost in the transition from family to corporate empires. A bit of bravado, maybe, a bit of pride. It’s as if the knighted nobles have been replaced by a faceless plutocracy, all very clean and efficient, yet somehow lacking some of that boisterous Texas joie de vivre. Call it the state’s maturation, as many have; call it the days when Texas finally entered the modern age. Maybe this is just an adopted son’s nostalgia, but I call it just a little sad.
This book is an epitaph for a Texas era I was too young to experience myself, except for its tumultuous end. But for those who lived through it, the age of the Big Rich, especially the golden years of the 1950s, was a time when Texas seemed poised to rival New York or California as a center of economic, political, and cultural influence. It’s certainly had an impact, especially in political circles, where Texas politicians and even a few oilmen still make their voices heard, often loudly; witness the group of Lone Star businessmen led by oilman T. Boone Pickens who created the Swift Boat campaign against John Kerry in 2004. George W. Bush rode into the White House on a river of oil money, much of it from Texas; by one count, he received fifteen times as much money from energy companies and their executives as Al Gore. “Oil and gas money,” the New York Times noted in 2000, “has been the essential lubricant of George Bush’
s political career.”
But as a cultural or intellectual bellwether, Texas never quite fulfilled the promise of those first honeymoon years after 1948 when, whether you loved them or hated them, the Big Four oilmen seemed poised to trigger real change in America. Had they risen to prominence fifteen or twenty years earlier, when they first became rich, maybe they would have. But by the 1950s America was changing, and the most prominent oilmen, many born during the nineteenth century, weren’t. In time, as conservative politics moved into the mainstream, so did most Texas oilmen, quietly becoming just one more reliable source of campaign money for politicians from Barry Goldwater to John McCain.
Oil still matters in Texas, but it no longer dominates the zeitgeist. Working rigs, those actually looking for oil and gas, fell from a high of 1,318 in 1981 to 311 a decade later; even today, with world oil prices rising to record highs, the Texas rig count has only rebounded into the 900 range. By the mid-1990s taxes on the oil and gas industry provided barely 7 percent of Texas governmental revenues, less than a quarter the level in the late 1970s. Where the state still dominates is in oil refining; those massive plants lining the Gulf Coast still produce more gasoline and oil by-products than any place outside the Arabian Peninsula. It’s not so much oil income as oil savvy that fuels much of the state’s growth today. Just as Spindletop-era gushers educated the first Texas oilmen, the years since have produced an entire class of modern international oilmen, many of whom can be found today in fields from Nigeria to Indonesia to the deserts of Iraq. Despite a looming national recession, Houston and much of Texas is booming today not because of the oil beneath its dirt but the expertise its engineers and executives have built over the years.