Bryan Burrough

by The Big Rich: The Rise;Fall of the Greatest Texas Oil Fortunes

  The turmoil in his private life did nothing to concentrate Clint’s focus on business at Murchison Brothers. As the 1970s wore on, he could get interested in little beyond the most complex—and often riskiest—real estate deals. After a half century of successful family investments, he had no real sense that anything could go seriously wrong. Where his brother John remained the careful, studied keel of the Murchison Brothers ship, Clint sank millions into deals on handshakes, on napkins, at urinals, risking vast amounts on investments he seldom took time to study. Worse, just as he had peopled his private life with hard-living cronies, his business life was increasingly crowded with fast-talking sycophants who promised him the moon, which was all Clint wanted to hear. A solid 8 or 10 percent return bored him. By the mid-1970s, he simply couldn’t be bothered with any investment that didn’t promise tripling his return or more.

  There was the ten million dollars he threw away on an Oklahoma plant that was to convert cattle manure into natural gas. Clint named it the Calorific Reclamation Anaerobic Process, CRAP for short. It never worked. He poured more than fifty million dollars into a computer company called Optimum Systems that had expanded into health care software after beginning its life as a program to rank and analyze college football players for the Cowboys. Murchison thought he could build it into an integrated software-management company to rival Ross Perot’s crosstown colossus, EDS. He never would. When Tex Schramm bought a marina in Key West, Clint agreed to invest twenty-one million dollars to turn it into a five-star resort, six hundred condominiums around a lush golf course. After Clint, who like his father was chronically short on cash, missed an interest payment, construction stalled, and lenders eventually foreclosed.

  What real estate developments did get finished were marred by shoddy workmanship, the kind of detail Clint had long since fobbed off on subordinates. A case in point was the Hillandale project in the Georgetown section of Washington, D.C., the brainchild of a new pal named Lou Farris Jr., whose résumé included a pair of personal bankruptcies. Barely thirty of the planned two hundred homes were built; the first residents warned everyone within earshot that the roofs leaked and the doors jammed. Still, Farris and other cronies kept plying Murchison Brothers with vouchers for more and ever larger expenditures; when accountants questioned what they were for, Clint just scrawled out the word “Pay.” “Clint Junior,” the family’s longtime attorney, Henry Gilchrist, once observed, “just threw money at people he perceived to be his friends. He was doing this out of sight of the family and family advisers and there was no way of stopping him.”

  John Murchison was not amused. John had become everything his brother was not, mature, worldly, personable. He and Lupe were now respected members of Dallas society, hosts of the city’s most elegant parties; John’s thoughtful insights, so unlike Clint’s, were sought by anyone weighing major new projects, especially those in the world of arts, museums, and civic boards. Uppercrust Dallas had been frankly dismayed in the early 1960s when John began uncrating the Miros and Rauchenbergs he and Lupe bought in New York and hung throughout the Big House. But as Dallas matured, John’s taste in art came to be seen not as bizarre but cutting edge, and he emerged as a driving force behind the Dallas Museum of Art, serving as chairman and then president from 1972 to 1978. “Everyone deferred to him because he had superb judgment,” one Dallas civic leader recalled. “He would say something at a park board meeting and suddenly everyone would say, ‘Yes, that’s the answer. Why didn’t I think of that? It was so simple.’ ” 2

  By the early 1970s John’s judgment was telling him to steer clear of his brother’s investments. For the first time John began venturing out on his own. North Dallas and its surrounding suburbs were booming, and in 1972 he and another developer set aside two hundred acres of pasturelands Big Clint had used for grazing cattle and began work on a $250 million residential, office, and retail project they called Bent Tree; it was the first major project John had attempted without Clint, and it was a resounding success. Yet in his own way John was no more enamored of day-to-day work at Murchison Brothers than his brother. Their companies ran themselves, and as the years wore on he and Lupe began traveling more and more. Summers they spent in La Jolla, autumns at a new plantation they bought in Georgia, while winter always found them in Vail. In between they spent long periods at a sparkling new home they had built on the harbor in Sydney, Australia, jetting off to Paris, fishing in Iceland, and photographing elephants in Kenya. Their four children were usually left behind, in the care of governesses.

  Whether in Texas, Vail, or Sydney, they entertained lavishly, parties that drew the crème of not just Texas but the nation. President Ford skied with John and Lupe in Vail, while Texas senator Lloyd Bentsen and other politicians were regulars at Big House affairs. Their gatherings, like a Gladoaks pigeon hunt they hosted in the mid-1970s, fused East Coast sophistication with Texas country life. Private jets disgorged hundreds of guests for the Gladoaks shoot, men with antique English shotguns, wives in rustic fashionables, all assembling beneath a dozen giant tents for a catered luncheon of fried bass, string beans, corn bread, and peach cobbler. Afterward the men struck off into the brush to blast pigeons released for their aim, returning to the tents at dusk for an outdoor banquet that lasted to the wee hours.

  John might have overlooked Clint’s string of bad investments were it not for the debt Clint was piling onto the Murchison Brothers balance sheet. His brother, raised on their father’s ability to get rich using other people’s money, never met a loan he wouldn’t take. In fact, Clint chased new loans with much the same fervor he chased women, always believing he could engineer a return higher than the interest rate. “Borrowing money was a game and a challenge to Clint,” one of his attorneys recalled. “He was always trying to see how much he could borrow. Most businessmen would get an idea for a deal and then go out and get the financing for it. Clint did the opposite. He’d pledge a Murchison Brothers asset, get a twenty-million-dollar loan for it, and then he’d look for a place to put the twenty million. Most people thought it was ludicrous, but it worked for him for years.”3

  When the lending game changed during the 1970s, Clint didn’t. Where Big Clint had built his fortune on interest rates of 2 or 3 percent, soaring oil prices in the ’70s brought soaring inflation, and with it soaring interest rates—by 1977 as high as 18 or sometimes 20 percent a year. Higher rates threatened Murchison Brothers from every angle. Not only did loans cost more to pay off, higher interest rates meant higher mortgage rates, so high many Americans couldn’t afford a new home. The resulting slowdown in the housing market struck Murchison Brothers a hard blow; several of Clint’s biggest projects, including the ones in Washington and Key West, stalled. His cash flow slowed. Yet the banks still had to be paid. Neither John nor Clint, schooled on Big Clint’s lectures to spread money like manure, kept much cash on hand. By 1977 their aides were scrambling almost every month to scare up enough to pay the banks.

  John’s lawyers repeatedly warned that in a nightmare scenario, Clint could drag them both under; all Clint’s deals involved both brothers’ money. John was away from the office so much that his brother had long ago given up seeking his approval for new investments, often the deals that were now facing trouble. John warned Clint to stop it. Clint promised he would, then didn’t, then like a child caught in a lie would promise that his next deal would make them whole. As a Murchison Brothers executive recalled, “Clint would say, ‘John, just give me a little more time. We’re going to have a Hail Mary pass. If this next deal works, it will clean up all the bad deals of the whole year.’ ”4

  By 1977 Clint’s assurances were ringing increasingly hollow. Too many Murchison Brothers investments were going south. Wall Street was stuck in the fourth year of a dreadful bear market, and the handful of public companies John and Clint controlled had been eviscerated. They had taken one of Tecon’s subsidiaries, Centex Construction, public in 1969, and the stock had soared. Amid the wreckage on Wall Street its value had plum
meted from $146 million to $22 million. The stress, as it had during Alleghany, wore on John; he took up smoking again. At night in the Big House, Lupe watched him stare out the window, lost in thought. Nothing he could say or do would change his brother, John knew that. It was too late anyway. The damage had been done. His chief counsel begged John to give him a single reason he wouldn’t dissolve the partnership with Clint. “Well,” John said, “he is my brother.”

  More than once John warned Clint he would break up Murchison Brothers. Clint begged him not to. But their investment styles had diverged so thoroughly, they were no longer able to agree on much of anything. The final straw appears to have been John’s refusal to plow another cent into Clint’s computer company, Optimum Systems. Not long after Clint refused to abandon it, John demanded out. The lawyers began drafting what they called a dissolution agreement. Completed in mid-1978, it called for Clint to take sole control of their riskiest investments, removing their debt from John’s balance sheet. It began the extraordinarily complex unraveling of Murchison Brothers, hundreds of investments that each had to go to either John or Clint. The lawyers guessed the process might take three years. In the final agreement both brothers promised to have the partnership dissolved by October 1981.

  Afterward they shook hands and promised nothing would change between them. Yet John was wracked with guilt. Big Clint had formed Murchison Brothers for his sons all the way back in 1942, and John and Clint Jr. had operated it as equal partners their entire business lives. John felt he had destroyed his father’s greatest creation, his legacy, and he worried that Clint, left to his own devices, would implode. Clint looked forward to the freedom of making his own decisions, but one look at his financial statements told him they wouldn’t be much fun. His capital pool had been halved. Of the assets he would take—Optimum Systems, Tony Roma, Tecon—much of it was spiderwebbed with entangling bank liens. He could still wheel and deal, but the game was no longer about fun. It was about survival.

  The breakup of Murchison Brothers should have eased the family crisis. Instead it provoked another. It arose from, of all places, the third generation, John’s and Clint’s children, who had grown tired of waiting for their inheritances. Their money was held in trusts. Beginning in 1949, Big Clint had created three funds for seven of his eight grandchildren. John and Clint, as the executors, had stuffed the trusts with stock, 80 percent of it in their Centex construction company, worth $150 million before the stock’s collapse and still valued in the tens of millions. The trusts were to begin throwing off cash to each of the grandchildren as they turned twenty-five. But Clint’s oldest son, Clint III, hadn’t gotten anything when he turned twenty-five in 1971, and neither had John’s oldest, John Dabney Jr. Six of the seven grandchildren were now twenty-five or older, and not one had seen a cent from their trusts.

  The problem, it turned out, was that Murchison Brothers had been using the trusts as a piggy bank. Any time John or Clint needed a loan, he dipped into the trusts for Centex stock to use as collateral—an ethically questionable practice, and perhaps illegal. When the firm’s attorneys had realized what was happening—a review was performed when Clint III reached twenty-five—they sought to cover the Murchison brothers by drafting a legal paper all the grandchildren were obliged to sign. Broadly speaking, the document said what John and Clint had done was okay with them. With the matter cleared up, at least in their own minds, John and Clint kept using stock in the trusts as collateral for loans all through the 1970s.

  If John and Lupe had been more attentive parents, the question of the trusts might have worked itself out. But they weren’t. For twenty years they had spent far more time traveling the world than raising their four children. The children resented it—deeply. “John had a very Victorian view of his children,” a friend recalled. “He thought of them as the absolute and complete responsibility of governesses and he did not want his life disturbed in any way by them.”5 No one resented John more than his eldest son, John Jr., a tightly strung young man. Like his siblings, John wasn’t even sure his father loved him; he never said so. “When my parents were home, which was seldom, they never wanted to be alone with us,” he recalled. “They always had to have a lot of friends and famous people around, people who would entertain them constantly.”

  John Jr.’s simmering anger grew when, after graduating from the University of Colorado, he returned to work at Murchison Brothers in 1975. If he thought this would draw him closer to his father, he was mistaken. “Basically John put his son in a room and said, ‘Here, look over these files and see what businesses we’re involved in,’ ” recalled a Murchison Brothers executive. “That was about all the business instruction John Junior got.” While his father lived at the Big House and toured the world, John Jr. was forced to make do on a salary of only eighteen thousand dollars. He talked it over with his cousin, Clint III, and in 1977 the two simultaneously sat their fathers down, politely pointed out that they were misusing the trusts, and asked for their inheritances. When John Jr. finished his presentation, John simply rose from his chair and walked out of the room. He abhorred family conflict, and couldn’t understand why his children couldn’t do as he and Clint had done, and follow their parents’ wishes. Clint had a more visceral reaction; he thought the boys were ingrates and said so, loudly. For the moment, John Jr. and Clint III were powerless to change things.

  All this—the faltering businesses, the mushrooming debt, the breakup of Murchison Brothers, the challenge from the children—was still unresolved on the evening of June 14, 1979, when John, who had returned to Dallas just that day from a week with Lupe at the Paris Air Show, suffered an asthma attack while delivering a speech during a Boy Scouts fund-raiser at the home of Texas governor William Clements. Coughing and choking, he stepped away from the podium. As he began gasping for air, the governor guided him into a state patrolman’s car and asked the officer to take him to the emergency room. When the attack worsened en route, John climbed into the backseat to lie down—just as the officer ran a red light and was struck broadside by an onrushing car. John suffered a heart attack and lost consciousness. An ambulance rushed him to a nearby hospital. An hour later he was dead.

  He was fifty-seven. In his last months John had been studying to convert to Catholicism, and after being baptized on his deathbed, he was buried in a Catholic ceremony beside his father in Athens. Every single obituary referred to him as the brother of the man who owned the Dallas Cowboys; not one mentioned what few in Dallas knew, that John owned exactly as much of the team as Clint. No one wrote, because no one really understood, that John had been the cement holding together the family empire, and that without him the Murchisons were doomed.

  III.

  If the Murchisons were Exhibit A in any discussion of how not to diversify, a Texas businessman didn’t have to look far to find a shining example of diversification done correctly. It loomed just to the west, in Fort Worth, where Sid Richardson’s nephew Perry Bass and his sons had begun transforming their smallish fortune into something special. The 1960s had been grim for the Basses. Perry, who lived quietly with his wife, Nancy Lee, in the suburb of Westover Hills, had left the reading of his uncle’s will with a 25 percent share of all the oil fields they had found since 1939, including the massive Cox Bay and Pointe a la Hache fields south of New Orleans. An internal financial statement Perry generated in 1968 put his net worth at twenty-five million dollars, less than 5 percent that of the Murchison brothers. Perry’s four sons had shares of the fields as well, valued in total around twenty-five million dollars, making the Basses worth maybe fifty million dollars—barely half “a unit,” as wealthy Texans termed a hundred million dollars. They were certainly wealthy, but by Texas standards they were no longer Big Rich.

  By the 1960s, while Perry Bass had lost interest in oil, he had found something of himself. Coming of age in Sid Richardson’s shadow, he had grown up a quiet, serious, inarticulate man, but after Richardson’s death he began to relax and open up. His sons, returning
from Andover and Yale, found him a new man, one who was now pleasant, comfortable with small talk, and had even begun giving speeches to local charity groups. “I had no idea how important it was to be glib,” Perry remarked over dinner one night on St. Joe’s, which had become the Bass family’s private retreat. Perry and Nancy Lee enjoyed riding out every major storm in the seaside home Perry had built so many years before, including Hurricane Carla in 1961; the only serious damage Uncle Sid’s house ever sustained, he was proud to say, was the time high winds blew a seagull through one of the windows.

  Perry discovered no significant oil reserves during the 1960s, but according to family associates, he laid the groundwork for what came later with a single deal. All of Sid Richardson’s oil reserves—the Keystone Field, sundry West Texas wells, plus the big Louisiana fields—now rested in the control of the Sid Richardson Foundation, which doled out an occasional scholarship but little else. Perry, who had never been pleased with his inheritance, badly wanted his Uncle Sid’s oil fields back. In the mid-1960s the family’s bank, Chase Manhattan, proposed loaning him the money he needed to buy them, in the range of fifty million dollars; the reserves themselves would be the collateral. Perry sat on the foundation’s board—in fact, he was its dominant figure—and any transaction between the family and the foundation, especially one so large, risked being viewed as blatant self-dealing. Perry put the proposal to his fellow board members, found them amenable, then sought a fairness opinion from the Texas attorney general. Once the attorney general approved the deal, Perry, backed by Chase’s cash, purchased all of Sid Richardson’s oil fields. And not a minute too soon. Several years later, in 1970, Congress passed a law outlawing just this kind of insider dealing.