by Coll, Steve;
“Now that we’re talking again, Sid, I think we should just have an oral agreement not to do anything, to have a truce,” Gordon suggested when they were alone.
Petersen said that he didn’t think that was a very realistic idea. He was thinking, but he did not say, I can’t trust you, Gordon, you schlemiel. You’ll change your mind tomorrow or forget what you said. We can’t make any oral agreement.
A few minutes later, Harold Williams joined their private caucus. It was the first time that all three principals had been alone together, with no advisors present. Gordon repeated his suggestion that the three of them make an oral agreement not to sell Getty Oil or attempt a takeover.
“That might be all right with me,” Williams said. Petersen was stunned. He couldn’t believe that Williams would accept an oral agreement with Gordon.
The Getty Oil chairman said that he would talk about Gordon’s idea with his company lawyers.
A short time later, Petersen, Winokur, Boisi, Galant, Lipton, and Williams met in the glass-walled conference room where Getty Oil management was stationed. Lipton summarized his discussions thus far with Gordon.
“Mr. Getty is unwilling to sign any piece of paper, but he is willing to have an informal agreement, where everyone would say orally that they wouldn’t do anything for some period of time, perhaps sixty days.”
“Gordon told me the same thing when I met with him a few minutes ago,” Petersen said.
“As far as I’m concerned, an oral agreement would be all right,” Williams reiterated. “I think it would be preferable to have a three-way standstill of some kind, even oral, rather than just a two-party agreement between the company and the museum.”
“I told Gordon that as far as I am concerned, it is not satisfactory to have an oral agreement,” Petersen said. “People have enough trouble figuring out what something means when they write it down, but at least then you have the words to refer to. If you don’t write them down, then nobody can even remember the words that were used, because everybody has a different recollection. I don’t want to do that. If there’s going to be an agreement, we have got to write it down.”
“Well, Harold is uncomfortable with some of the provisions in the two-way standstill that the company has proposed,” Lipton said, referring to the elaborate document drafted by Winokur the previous week. “It might tie the museum’s hands at a time when Gordon might be taking some action which would be detrimental to the museum. If that happened, the museum would want to protect itself. The point is, we would have to make some changes in that agreement if we’re going to sign it. My client feels very strongly that he wants to have a three-way truce.”
“Well, we’re not willing to accept an oral agreement,” Winokur said strongly. “So if there’s going to be any agreement at all, it’s going to have to be in writing.”
“All right. We’ll go talk with Gordon and his lawyers,” Lipton said.
For hours, Petersen and his Getty Oil lawyers and bankers were alone in their conference room; they neither heard from nor saw Lipton, Williams, Gordon or the Lasky attorneys. They had made their position clear. If there was to be a truce, it had to be in writing. There was nothing to do now but wait.
On the other side of the floor, Lipton was trying desperately to persuade Gordon Getty to sign the simple, handwritten standstill agreement that he and Marty Siegel had drafted during their flight to California. At Siegel’s insistence, the length of the proposed truce had been reduced from eighteen to twelve months. They had negotiated a number of important provisions. The company would rescind its action at the emergency board meeting in Philadelphia authorizing the issuance of 9 million treasury shares. Management would agree, additionally, to the election of Moses Lasky and Harold Williams as company directors, as well as to the appointment of three other directors selected by Gordon and approved by management—the board would be expanded from twelve to seventeen to accommodate the new members. In exchange, Gordon and the museum would agree not to act by consent or to attempt a joint takeover of Getty Oil. All three parties—Gordon’s trust, the museum, and the company—would be prohibited from joining with any “group” to attempt a takeover or to independently seek the sale of the company. No major corporate changes would be undertaken during the year covered by the truce. There could be no buy-backs or issuance of stock, no restructurings, reorganizations, liquidations, or recapitalizations. Getty Oil’s basic structure and operations would be frozen in place. Finally, all three sides would agree not to launch any stock proxy fights challenging management or the board of directors.
All of this was covered in only two pages, handwritten in Lipton’s distinctive block-capital printing style. They talked about it over and over, and still Gordon was reluctant to sign.
At dinnertime, someone ordered in Chinese food. It was, several of those present said later, the worst Chinese food they had ever eaten. Whether for that or other reasons, Gordon Getty began to grow pale. He said that he didn’t feel well. He was nauseous. But they continued to talk and negotiate, all of them urging Gordon to sign the truce. Finally, around eight-thirty, Gordon gave in. He and Harold Williams both signed and dated the three-way, handwritten truce.
Suddenly, Gordon Getty looked positively ashen. “I feel very sick and I have to go home,” he declared.
Tim Cohler said that he would drive Gordon to his Broadway mansion immediately. They left.
Lipton took the signed truce over to the company’s conference room across the floor. “We spent hours with Gordon trying to convince him to sign an agreement,” he announced. “In the course of that, we finally convinced him that he should sign a three-way agreement.”
Lipton handed the two-page standstill to Winokur and Boisi, and they looked it over.
“This is a substantial change from the discussions we had last week,” Winokur said.
“Look, this was the only way we could get Gordon to sign anything,” Lipton said. “Mr. Williams and I think it is not a bad idea to have additional board members, because hopefully, if they are responsible people—and Gordon has assured us that he will only name responsible people—they might have a positive influence on Mr. Getty and his relationship with the rest of the directors.”
“Well, this outline is obviously ambiguous in many respects,” Winokur said. “It is purely an outline, and there are a whole series of questions we addressed in our draft that we worked on together as lawyers. We worked out what the language meant.” Winokur went through some examples. He was concerned, among other things, that the company had now apparently lost its “out,” its ability to sell Getty Oil rather than let Gordon take control. Moreover, the brief paragraph in Lipton’s draft prohibiting “fundamental corporate changes” such as reorganizations or liquidations struck Winokur as highly ambiguous. What exactly is a fundamental corporate change?
“I recognize all that, but I think we have found a moment in time here, a brief moment in time, when the trustee was willing to sign something,” Lipton said. “I’m afraid that moment might never appear again if we attempt to clarify or redraft anything. We have to take whatever we can get tonight. You might not think it is perfect, or even satisfactory, but the fact is that it is better than nothing.
“Sign it as it is or don’t sign it at all,” Lipton concluded.
Feeling that he had no choice, that Lipton was right—even an imperfect truce was better than no truce at all—Sid Petersen finally agreed. He told Lipton, however, that he did not have the power to sign such a document in the company’s name. He would have to write “Subject to approval of the board of directors” beneath his own name. Lipton thought that was reasonable, and he talked about it with Gordon’s lawyers, who agreed.
Around nine o’clock, Sid Petersen finally signed the standstill truce on behalf of Getty Oil.
Marty Lipton, Moses Lasky, Tom Woodhouse, and Tim Cohler were nearly ecstatic after the summit meeting broke up that night in San Francisco. After stepping to the brink in London, they had manag
ed in just two weeks to pull back, to restore “rationality,” as Lipton liked to put it, to the affairs of Getty Oil. Now they had twelve long months to negotiate a sensible, long-term solution. Gordon was appeased; he could busy himself with the selection of his new directors. Williams, meanwhile, could return peacefully to his expansive art-acquisition program and his elaborately ambitious plans to build a large new museum facility on a barren bluff overlooking the San Diego Freeway, near Beverly Hills. There would be no danger of embarrassment or disruption to the J. Paul Getty Museum because of infighting at Getty Oil.
Sid Petersen, however, did not feel so sanguine as he flew south to Bakersfield late that night, preparing to attend the next day’s round of company budget meetings. Despite their acquiescence to Lipton’s handwritten truce, Petersen and his advisors still believed that Getty Oil Company could only be saved if Gordon’s control over his family trust was somehow undermined. By signing the standstill that night, Petersen thought, he had agreed not to sell the company or to implement any major restructurings. But he had not agreed to end his sponsorship of a family lawsuit challenging Gordon’s right to be sole trustee—the issue had not even been discussed at the Lasky offices, of course, because neither Gordon nor Williams knew anything about Petersen’s plans. The standstill agreement had bought Petersen some time, the Getty Oil chairman knew. But it would hardly preserve a lasting peace.
14
“Snookered”
Even before Gordon Getty signed the truce with management and the museum, there were signs that his own family was preparing to rebel against him.
It was a terribly frustrating time for Gordon. He had been betrayed, he felt, by Chauncey Medberry and the “snakes” on the company board who had said they would resign before they permitted Gordon to take control of Getty Oil. His proposal to Harold Williams and the museum had been flatly rejected. Marty Lipton had described Gordon’s thinking as “absurd.” Moreover, Gordon’s own attorneys had made it clear to him in London that they thought he was wrong, mistaken. In the face of all this disapproval and disappointment, there was a part of Gordon Getty that seemed to say, The hell with them. In the weeks after his return from London, he became increasingly churlish and stubborn. Shortly after the day-long truce negotiation in San Francisco, for example, Gordon received a bill for services from the Lasky law firm. It totaled more than $1 million. The bill pushed Gordon into a rage; it was excessive, outrageous, he declared. Everyone thinks they can get something from me, take advantage of me, was the message he delivered to the Lasky lawyers through Laurence Chazen, his friend and financial advisor in San Francisco. Cohler and Lasky were told by Chazen that Gordon was so upset that he was thinking about retaining new attorneys. Further, Gordon had decided that despite the provisions of the standstill document he signed, he was not going to permit Moses Lasky to become a company director. He instructed Tom Woodhouse to immediately inform Getty Oil that Lasky’s name should not be included in any press release announcing the nomination of new directors at the company.
“My relationship with Gordon is gone,” Lasky told Bart Winokur by telephone just a few days after the standstill negotiations in San Francisco. “Gordon isn’t confiding in me or looking to me anymore.”
It was amid this atmosphere of isolation, anger, and frustration that Gordon began to hear from members of his family about his activities at Getty Oil and about his status as sole trustee of the family fortune. The first contact came on Monday, October 10, when Paul Jr., in London, telephoned Gordon at the Broadway mansion. Paul spoke with both Ann and Gordon, and to both of them he expressed his deep concern that Gordon was fouling things up at Getty Oil Company, and that he would lead the family into a new round of internal dissension and lawsuits if he did not accept a corporate cotrustee to help manage the family stock. Gordon and his wife both tried to assure Paul that there was no need to worry, that everything was in hand. But Paul was unconsolable. At one point, he burst into tears over the prospect that Gordon’s refusal to accept a cotrustee would lead to family in-fighting.
Shortly thereafter, Paul wrote to Gordon in San Francisco. “It was Father’s clear intention that there should be a corporate cotrustee,” his letter said. “I don’t want to threaten you or even appear to, but I’m afraid that litigation will be inevitable if you don’t quickly agree to another trustee and I’m sad to think that I, too, would be sucked into it.”
At virtually the same time, Gordon began to hear from the Georgettes. “I have heard from several sources that you are attempting to make some major changes that concern Getty Oil, the museum, and the Sarah Getty Trust,” Caroline wrote on October 21. “I am concerned that you are continuing to act as sole trustee.… Since as trustee you act in a fiduciary capacity on my behalf, and since any changes at Getty Oil or the trust affect me directly, I am interested in knowing what your reasons are for trying to change the company and what your ultimate goals for the trust are.”
Gordon was uncertain what the impetus was for these ominous letters from his brother and nieces, but he did not suspect that Getty Oil management was behind them. There had been a few sketchy newspaper stories about Gordon’s takeover proposal to the museum in London, and news about fresh dissension at the company was circulating on Wall Street. After the standstill agreement was signed on the nineteenth, the company itself was forced to issue a press release describing the provisions of the truce. That a truce was necessary at all, and that it contained specific language prohibiting the sale of the company or alliances by the museum and the trust with outside “groups” made it plain that Getty Oil had been buffeted by serious internal hostilities. It was not terribly surprising, then, that Gordon’s relatives had contacted him to express their concern about his role in the company’s troubles.
Gordon moved quickly to assuage his nieces. Shortly after he received Caroline’s letter, he flew to Los Angeles for a meeting with the Georgettes and Mark Harris (who also used his given name, Mark Getty), Paul Jr.’s son by his first marriage. Caroline, particularly, pressed Gordon about his meddling at Getty Oil and asked why he felt it necessary to challenge Sid Petersen’s management decisions. From her stockbroker and her attorneys, she had heard about Gordon’s dealings with the Cullen family and Boone Pickens, and she had been told that Gordon had disclosed confidential information to the potential raiders.
“Since the trust has so much money already, why are we trying to get more?” Gordon was asked.
“A very interesting philosophical question,” Gordon answered with typical professorial enthusiasm. “But it is my fiduciary duty to maximize the wealth and income of the trust and to prevent it from falling into a weak minority position.”
A few days after that meeting, Gordon wrote to Caroline, Anne, and Mark, with carbon copies to Claire, Ronald, and Paul Jr. “It was good to talk with all of you recently,” Gordon told his family. “Your views and questions on the 1934 trust are welcome anytime.… The trust by itself doesn’t control the company since forty percent isn’t a majority. What the company does is up to its directors, of which I am only one. I think it should stick to the oil business and keep debt low. Getty Oil, like many other companies, has been called ‘worth more dead than alive.’ In other words, our appraised asset value is far larger than the current stock price.… I personally believe that if Getty Oil does not solve this problem it will sooner or later be taken over and on terms which the trust may not have the power to control.
“I am convinced that a solution is possible,” Gordon went on. “The tripartite [standstill] agreement will give us time to achieve it. (I’m afraid I can’t say much more without revealing private company information). A corporate co-trustee would probably mean a passive and neutralized trust just when it most needs to take the lead in working for a solution. Love, Gordon.”
It was vintage Gordon Getty—carefree, affectionate, sincere, and naïve. But on November 3, only two days after writing that appeasing missive, Gordon sat down in his basement study at the Broadway
mansion and signed a much tougher letter to his brother Paul Jr. in London.
“Your recent telephone call to me and your letter of October 28 lead me to write you now,” Gordon began. “There is no basis on which anyone has any legal standing to seek the addition of another trustee, and any attempt to do so would be opposed. There is, moreover, nothing to favor a corporate trustee. A corporate trustee, such as a bank, operates through underlings and their judgment about how the company should be operated has nothing to commend it.…
“You say that Father intended that there be a corporate trustee, but we know that in the 1948 designation of successor trustees, he stated that the corporate trustee should act only if individual trustees were dead. And in the 1971 designation, Father appointed George alone and designated a bank to act only if George should fail to act. The history shows that Father ‘covered the bases’ by making provisions for contingencies when he wished to do so. In the 1973 designation he did not designate a substitute corporate co-trustee if Security Pacific should fail to act.
“Your letter deplores another round of dissension in the family,” Gordon continued. “No one would deplore that more than I. But there can be no such dissension after Ronald’s current litigation comes to an end unless someone in the family takes it on himself to create dissension by instituting litigation. Ronald wants to be a trustee. He has already broached that idea to me and I turned him down. If anyone should institute litigation seeking an additional trustee, that would be an invitation for Ronald to come into the suit and seek appointment of himself.
“And speaking of Ronald, you might wish to consult your own attorneys about the risks you would be taking should you involve yourself in litigation in California about the appointment of a trustee. You might find yourself subject to the jurisdiction of California’s courts in Ronald’s litigation against the trust and the other beneficiaries.…