The Taking of Getty Oil

by Coll, Steve;

  “Well, can we talk about what the problems were that you had with Mr. Getty? Why did he turn it down?”

  “I’m not free to tell you that. Mr. Getty flatly rejected the proposal.”

  “Does Mr. Getty understand that if he goes and makes the proposal to the museum, that the company will be forced to act in a way that will ensure the sale of Getty Oil?” Winokur asked.

  “I understand from our discussions last night that that’s the company’s position. I transmitted that to my client,” Cohler answered. It seemed to Winokur that Cohler’s voice was tight, choked.

  “Is that what your client wants?” Winokur demanded. “Does he want to sell the company? Because if he wants to sell the company, we’ve told you repeatedly in the past that there are better ways to sell Getty Oil than in a war. In a war, you’re not going to get the best price. We’ll have a much better chance if we do it in a friendly manner. If he’s going to take a step which is going to lead inevitably to the sale of the company, then we should all agree to just sell the company.”

  “I understand your position on that and I have transmitted it to my client,” Cohler answered. “I can’t discuss my client’s reasons, just as you refused to discuss the nine million treasury shares and what you plan to do with them.”

  “Well, what we’ve done with those shares is not irrevocable.”

  Winokur hung up the phone and returned to the dining room to finish what was left of his breakfast. He reported his conversation with Cohler to Petersen, Boisi, and the others. They discussed what they should do next. They had to prepare immediately to issue the 9 million treasury shares, in case Gordon and Williams tried to sign a consent firing the board of directors that very afternoon. They decided to return to the Dechert Price & Rhoads offices to establish a base of operations.

  It was shortly after they arrived at Bedford Square that Marty Lipton telephoned and asked to speak to his friend Geoff Boisi.

  Boisi stepped into an unoccupied office to take the call. Winokur and Galant followed him in. During the conversation, Boisi repeated what Lipton was saying to the other Getty Oil lawyers.

  “There has been a meeting between Gordon and Williams,” Boisi reported. “Gordon has proposed a joint consent takeover. Marty thinks that we are in an absurd situation. He wants all of us, including Sid, to come over to Claridge’s and meet with Harold Williams.”

  “Tell him that we don’t think it’s a good idea for Sid to come over,” Winokur instructed. “Tell him that the advisors will come over and meet with him.”

  Boisi repeated Winokur’s instructions, and Lipton agreed. A few minutes later, Lipton, Winokur, Boisi, Galant, and Patricia Vlahakis, a Wachtell, Lipton associate, gathered in Lipton’s hotel room.

  “I have just undergone one of the most exceptional and curious experiences of my career,” Lipton began. “I had a meeting with Gordon and his lawyers that was patently absurd. They made an absolutely absurd proposal. It was truly outrageous, it involved firing the entire board of directors, and obviously it is totally unacceptable to the museum.

  “In the course of that discussion,” Lipton continued, “I was also told that Getty Oil held a board meeting over the weekend and that some action has been taken to issue treasury shares and threaten the status quo. I am quite upset about that, too. I can’t understand how we can be in a situation like this. I cannot understand how the company could have done something like that.”

  “We did it because we received a telephone call from Moses Lasky indicating that Mr. Getty was going to make a proposal to the museum, and that in Lasky’s view, it was a proposal which was so attractive that the museum could not possibly refuse it,” Geoff Boisi said. “Not knowing what the proposal would be, we were unable to make an independent judgment on whether or not the museum would or would not refuse it. So we had to take action to protect against the possibility that the museum would accept it.”

  “That’s absolutely ridiculous,” Lipton responded. “How anyone with a sense of responsibility could think that a responsible man like Harold Williams or a lawyer like Marty Lipton would ever enter into an agreement with Gordon Getty like this is just inconceivable. Mr. Williams is a responsible businessman. He is respected in the business community and he obviously would always act responsibly. It’s just inconceivable that he would ever enter into an agreement like this.”

  “Well, that may or may not be true,” one of the Getty Oil advisors said. “And we’re certainly happy to hear that you don’t find the proposal acceptable, but we don’t even know what the proposal was. We don’t know why you found it unacceptable, and we have no way to know whether, if that proposal was modified in some way, you might find it acceptable in some different form.”

  “The proposal is totally absurd and there is no redeeming feature about it,” Lipton declared.

  “I understand that you’ve said that,” Geoff Boisi answered, pressing Lipton. “But that might well have been because it was ill conceived in terms of structure. And knowing your genius and brilliance, we’re afraid that perhaps you will be brilliant enough to figure out a proposal yourself which the museum might not be able to refuse. Maybe you haven’t had the time to do that yet. Maybe you ultimately will be able to do that, and maybe then you’ll reach an agreement with Gordon to take over the company.”

  “Geoff, it’s just outrageous to think that a man of Harold Williams’ stature would ever endanger his reputation by entering into an agreement conceived like this with Mr. Getty, someone like Mr. Getty. I had never met Gordon Getty before this morning, and frankly, I’ve heard a lot of stories about him. But I was unprepared for what I actually met with a few moments ago.

  “I really think the solution here is just to tone everybody down,” Lipton went on. “There ought to be a standstill agreement, a truce, a three-way standstill between the company, the museum, and Gordon. The standstill ought to give everybody enough time—eighteen months or so—so that everyone can calm down and try to approach these problems in a more rational, businesslike way.”

  “Without having talked with our client, I would think the idea of a standstill would have some appeal,” Winokur answered. “But at the same time, that has some dangers to it because at this moment, the company is in a position to defend itself by forcing an auction sale in the event there is action by the museum and Mr. Getty.”

  “I think the company ought to take down its defenses, including whatever you did with the nine million shares—which was probably illegal anyway,” Lipton said.

  “What does the company have to gain by an eighteen-month standstill?” Boisi asked. “Our concern is that during the truce the company will have no defense, but Gordon will have time to ally himself with an outsider, maybe the museum, maybe somebody else.”

  “Well, I think the company could use the standstill period to attempt to neutralize Gordon Getty as trustee of the Sarah Getty Trust,” Lipton answered. Unbeknownst to Lipton, of course, that was precisely what the company was attempting to do through the family lawsuit yet to be executed, challenging Gordon’s right to be sole trustee.

  They talked about it some more and finally agreed that a standstill truce would be sensible. But before the meeting ended, Winokur raised another issue.

  “There has been a failure of communication, at the very minimum, between Williams and Petersen,” he told Lipton. “We still have a concern that Mr. Williams has other objectives here, including involving himself more fully and heavily, in some direct way, in the day-to-day affairs of Getty Oil or its board of directors.”

  “Harold Williams has no such intent of involving himself,” Lipton said. “He is interested only in being a shareholder. In fact, what he is interested in is cooling things down and not causing embarrassment for the museum. He is not looking to sell his shares at this point. He’s happy with his investment.” Williams might eventually sell his shares for tax reasons but he was in no hurry.

  “Perhaps Mr. Williams ought to speak directly to Mr. Petersen a
nd tell him directly his views about the company and his role in the company, so that they can have a very frank discussion and get out on the table all these issues that have so far been boiling below the surface,” Winokur suggested.

  “That would be a good idea,” Lipton agreed.

  Winokur then telephoned Sid Petersen at Bedford Square and asked him to come over to Claridge’s.

  “I’ll go down the hall and see if Mr. Getty’s lawyers, or Mr. Getty himself, would be willing to enter into a standstill,” Lipton said.

  He found Tim Cohler and Tom Woodhouse with their client in Gordon’s two-room suite. Lasky had not bothered to attend the earlier meeting where Gordon presented his proposal to Harold Williams. Lipton explained to Gordon and his two lawyers that he had met with Getty Oil’s advisors and that the company had agreed to enter into a standstill.

  “You have one hour to agree to a standstill,” Lipton said. He had decided to play hardball with Gordon. The “or else” attached to his deadline was the implication that Getty Oil would immediately issue its 9 million treasury shares, diluting Gordon’s position. It was an empty threat, since the company’s lawyers were still suspicious of Lipton, but it was effective nonetheless.

  Cohler telephoned Lasky at the John Howard Hotel. He explained that Williams and Lipton had flatly rejected Gordon’s proposal, that Lipton had subsequently met with Winokur and Boisi, and that now he was proposing a standstill agreement. Gordon had one hour to accept, or the company would likely issue its 9 million treasury shares, Cohler said. He urged Lasky to hasten over to Gordon’s suite at Claridge’s.

  Fifteen minutes later, Lasky arrived. Gordon, Cohler, Woodhouse, Lipton, and Vlahakis were there. Lipton repeated to Lasky the ultimatum he had previously delivered to Cohler.

  “Would you like to hear my views as to whether you should enter into this standstill agreement?” Lasky asked Gordon.

  “I would,” his client answered.

  Lipton and Vlahakis stepped into the adjoining room so that Gordon could talk privately with his lawyers.

  Lasky did everything in his power to persuade Gordon to accept the standstill. “In my opinion, Gordon, you’ve done what you were required to do as a fiduciary after you became sole trustee of the family trust more than a year ago. You explored all possible avenues of improving and protecting the value of your shares in Getty Oil Company.

  “Now that you’ve done that, it is apparent that if you don’t enter into the standstill agreement, the company will be put on the block and sold,” Lasky went on. “This morning, you said that you wanted to maintain the status quo. If the museum proposal is not going to work, the standstill comes as close as anything to maintaining the status quo.”

  “I am not going to make a decision about the standstill before Lipton’s deadline,” Gordon announced when Lasky was finished with his speech. “One thing I learned from my father is that whenever somebody gives an ultimatum that something has to be done immediately, the thing to do is to refuse to act immediately.”

  “But it’s not a matter of being able to avoid a decision,” Lasky insisted. “By refusing to make a decision to enter into a standstill, you would in fact be making a decision to sell the company.”

  “I will not meet Lipton’s deadline,” Gordon repeated stubbornly.

  Exasperated, Lasky called Lipton back into the room. “Perhaps you could go back to the company’s representatives and see if the deadline can be postponed twenty-four or forty-eight hours or even until we all get back to the United States,” Lasky suggested. “It seems absurd that a matter concerning a company in Los Angeles should be determined by rush proceedings in London.”

  “I will try,” Lipton said.

  Lipton and Vlahakis walked back to the suite where Winokur, Boisi, and the others were waiting. Sid Petersen had arrived from Bedford Square and was meeting in the adjoining room with Harold Williams. They were talking about their mutual suspicions.

  “I tried to give Gordon a time deadline and I got no response to that,” Lipton reported. “The answer was not ‘Yes,’ and it was not ‘No.’ It was ‘I don’t know.’ He doesn’t know what he is going to do, and he doesn’t know when he is going to know what he is going to do.

  “Since we don’t know when or what Mr. Getty is going to do,” Lipton continued, “we ought to consider signing a two-party standstill between the company and the museum, in case they decide not to join us.”

  They talked for a while about whether a two-way standstill was even worth signing, with Winokur questioning its value and Lipton insisting it was a sound idea. Lipton even drafted a few sentences on a Claridge’s notepad.

  “Maybe we should draft a standstill document right here and sign it,” Winokur suggested at one point during the discussion.

  “That really isn’t necessary,” Lipton said. “What we ought to do is all go back to the United States and draft a document in an atmosphere where we’re capable of doing it properly.”

  “That’s all fine to say,” Winokur responded. “But the fact is that World War III has just about broken out here. And even though you’ve assured us that there is no way that you’re going to set off the bomb, there is no way that we can know that for sure. What is there to prevent a signing tomorrow, where you and the trust act to take over the company?”

  “It’s absurd to think we would do that,” Lipton said. “Look, I am in this business, this merger and acquisition business. This is my life. My word is what I live and survive on. If I break my word, I will be out of the business.”

  Herb Galant, the Wall Street lawyer recently retained by Getty Oil, accepted Lipton’s protestations. “That’s right,” he said. “If he breaks his word, he will be out of the business.”

  “I’ve known Marty for a lot of years and I agree with that,” Geoff Boisi added. “He could never afford to break his word.”

  “I give you my word on behalf of me and the museum that under no circumstances will the museum sign a consent with Gordon and the trust to take over the company,” Lipton declared.

  “Marty’s word is good enough for me,” Galant said.

  And with that, Martin Lipton and the Getty Oil advisors agreed that their adventure in London was concluded. The next day, they would fly back to the United States to begin work on a formal, eighteen-month standstill agreement.

  Down the hall, in Gordon Getty’s suite, Moses Lasky was once again meeting with his client. Gordon had summoned his lawyers back to his room because, he said, he had now made a decision.

  “I suppose you think I’m out of my mind for rejecting your recommendation this morning and again for refusing to enter into the standstill,” Gordon told Lasky, Cohler, and Woodhouse. “But I will not enter into the standstill agreement. I have decided that I must sell the shares of Getty Oil owned by the family trust. I would like the three of you to accompany me to New York tomorrow morning so that we can consult an investment banker on this subject.”

  “I’m scheduled to go to Los Angeles tomorrow,” Lasky said quietly.

  “Well, it’s really not necessary for you to be in New York. Tom and Tim can take care of it.”

  “Yes, they can,” Lasky answered. He was laconic, withdrawn.

  “What do you think of Gordon’s decision to sell the trust’s shares, Moses?” Tim Cohler asked his partner.

  “I have nothing to say,” Lasky answered. “The decision is his to make, and he has made it.”

  13

  A Negotiated Peace

  Vanni Treves, J. Paul Getty, Jr.’s solicitor, had been trying to reach Dave Copley while he was in London, but it was not until late Tuesday that the two attorneys finally spoke by telephone. Treves asked for a meeting with Copley and Sid Petersen. He wanted to know if there was any new information about Gordon’s activities at Getty Oil. Copley assured him that there was. They tried to find a time for a meeting, but by now it was getting late in the evening, and Petersen and Copley had reservations on a flight back to Los Angeles the next morning.
Copley suggested that if Treves could come to Claridge’s early Wednesday, then perhaps he could join them for a cab ride out to Heathrow Airport. They could talk about Gordon in the car.

  Treves was agreeable, and so the next morning they all piled into one of London’s distinctive black taxicabs: Treves, Petersen, Copley, and Winokur. As they rolled through central London and then west on the highway toward Heathrow, they talked about Gordon Getty’s latest escapades. In earlier discussions with the solicitor, Treves had emphasized that Paul Jr. would almost certainly take action against his brother if Gordon did anything to jeopardize management’s control of Getty Oil. Copley had tried earlier to make the case that Gordon was doing just that by visiting with Wall Street analysts and insisting on restructuring studies by Goldman, Sachs. As recently as September 14, Copley had met with Treves in Los Angeles over dinner at the Biltmore Hotel; Treves had been in California on a brief stopover on his way to Hong Kong on unrelated business. After dinner, while walking back to Treves’ hotel, Copley had handed the solicitor a draft petition for a lawsuit against Gordon. Treves agreed to examine the document, but it was still not clear to Copley whether the solicitor felt a family lawsuit against Gordon was really necessary. Now, at least, the company’s case against Gordon was compelling. In London, Gordon had crossed the line. He had made a direct, hostile proposal for control of the company in combination with the museum.

  “We understand from Martin Lipton, the museum’s attorney, that Gordon’s proposal involved immediately throwing out the entire board of directors and replacing them with Gordon’s designees,” Bart Winokur told Treves in the taxi. “According to Lipton, the museum rejected the proposal because they considered it absurd and outrageous.”

  Winokur, Petersen, and Copley each described their hurried, harried two days in London. They said that Gordon seemed now to be rejecting even the advice of his own lawyers. And while they were pleased that they had seemingly averted disaster on Tuesday afternoon, they remained concerned that anything could happen when they returned to the United States. After all, Gordon had refused to sign a standstill truce.