by Coll, Steve;
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The Taking of Getty Oil
Pennzoil, Texaco, and the Takeover Battle That Made History
Steve Coll
For the Colls from Coll Island—
Shirley, Robert, Geoff, Dan, and Dorothy
CONTENTS
PART ONE: AN EMBARRASSMENT OF RICHES
1. The Burglar’s Dilemma
2. A Letter from Ronald
3. Company Man
4. The Innocent on Wall Street
5. At the Bonaventure
6. Friends of the Family
7. The Puppy and the Sledgehammer
8. For the Old Man’s Sake
PART TWO: IN PLAY
9. On the Fence
10. Golden Handcuffs
11. Blood on the Floor
12. London
13. A Negotiated Peace
14. “Snookered”
PART THREE: WHEN THE FAT LADY SINGS
15. The Bulldog
16. Buyers and Sellers
17. At the Pierre
18. After Midnight
19. Deal-makers
20. An Agreement in Principle
21. A “Manly” Place
22. Bruce the Moose
23. Denouement
24. Big Boys
PART FOUR: A JURY OF THEIR PEERS
25. Sore Back Lawyer
26. The Loner
27. Promises
28. Of Sharks and Bear Hugs
29. The Aliens
30. “You Will Decide the Ethics”
31. Citizens
32. The Fall of the Merger Maniacs
Epilogue
Bibliographical Note
Notes
Index
About the Author
OWNERSHIP OF GETTY OIL COMPANY—MAY, 1982
CAST OF CHARACTERS
Sarah C. Getty Trust
Gordon P. Getty, Trustee
Ann Getty, Gordon’s wife
Moses Lasky, Gordon’s attorney
Charles “Tim” Cohler, Gordon’s attorney
Thomas Woodhouse, Gordon’s attorney
Marty Siegel, Investment Banker, Kidder, Peabody & Co.
J. Paul Getty Jr., Gordon’s brother and a beneficiary
Vanni Treves, J. Paul Jr.’s Counsel
J. Ronald Getty, Gordon’s half-brother and a beneficiary
Anne Catherine Getty, Gordon’s niece and a beneficiary
Claire Eugenia Getty, Gordon’s niece and a beneficiary
Caroline Marie Getty, Gordon’s niece and a beneficiary
Tara Gabriel Galaxy Gramaphone Getty, Gordon’s nephew and a remainderman
Seth Hufstedler, Guardian for Tara
J. Paul Getty Museum
Harold Williams, President
Harold Berg, Chairman of the Board of Trustees
Martin Lipton, Outside Counsel
Patricia Vlahakis, Outside Counsel
Jay Higgins, Investment Banker, Salomon Brothers
Getty Oil Company
Sidney R. Petersen, Chairman and Chief Executive
Dave Copley, General Counsel
Barton J. Winokur, Outside Counsel
Robert Miller, President
Geoff Boisi, Investment Banker, Goldman, Sachs & Co.
Henry Wendt, Director
John Teets, Director
Laurence Tisch, Director
Harold Stuart, Director
Chauncey Medberry III, Director
Herbert Galant, Outside Counsel
Pennzoil Company
J. Hugh Liedtke, Chairman and Chief Executive
Baine Kerr, President
James Glanville, Investment Banker, Lazard Freres & Co.
Arthur Liman, Outside Counsel
Perry Barber, General Counsel
Moulton Goodrum, Outside Counsel
Joe Jamail, Trial Counsel
John Jeffers, Trial Counsel
Irv Terrell, Trial Counsel
Texaco Inc.
John McKinley, Chairman and Chief Executive
Al DeCrane, President
James Kinnear, Vice Chairman
William Weitzel, General Counsel
Bruce Wasserstein, Investment Banker, First Boston Corp.
Joseph Perella, Investment Banker, First Boston Corp.
Morris Kramer, Outside Counsel
Richard Miller, Trial Counsel
Richard Keeton, Trial Counsel
Others
Corbin J. Robertson, Jr., Quintana Petroleum
T. Boone Pickens, Mesa Petroleum
Kurt Wulff, Oil Industry Analyst
William Tavoulereas, President, Mobil Oil
Richard Lawler, Jury Foreman
James Shannon, Juror
Theresa Ladig, Juror
Shirley Wall, Juror
Laura Johnson, Juror
Anthony Farris, Judge
Solomon Casseb, Judge
PART ONE
AN EMBARRASSMENT OF RICHES
1
The Burglar’s Dilemma
For months, C. Lansing Hays had known that he was dying, but he refused to discuss the fact openly with anyone, as if by sheer obstinancy he might defy mortality. His stubbornness did not surprise his family, even during those last, difficult days in the hospital in Monterey. They knew Lansing well enough. They knew that he could not tolerate frailty or weakness in himself or in others, this despite his own obvious, human fallibility. For his wife and children, who knew him best and loved him most, there was in Lansing’s final, often cantankerous last stand an important, ambivalent truth. Lansing died the way he had lived, with audacity and contempt and drama, and that was as it should be. But by pretending that he would survive during those final days, he had also cheated them a little, deprived them of a chance finally to touch him.
In late April 1982, knowing that he could not last much longer, the children had all flown out to Carmel, California, where their parents owned a winter home. Spencer, the middle son and the one who had so closely imitated his father’s life, attending the same college and law school and now practicing in New York City as Lansing had done, spent a full week hanging about the hospital, convinced that his father would die at any time. He wanted to be there for his passing. But the old man refused to let go, refused even to admit his time was near, so Spencer returned to New York and to pressing business at his office. Just a few days later, on May 10, 1982, his father was gone.
It took a week or so to arrange for a memorial service. The body was cremated, an appropriate act since Lansing Hays paid scant attention to his physical self while he was alive. He had been an imposing man, of average height but with extremely broad shoulders and a solid barrel chest. His head was large, and its most distinctive feature was a jutting chin that Lansing cocked and tilted aggressively if he found himself in an argument. Until 1979, when his lungs finally rebelled, he smoked three or four packs of cigarettes a day, and there always seemed to be one hanging from his lips or burning steadily in his ashtray. When, following a silent heart attack, the doctors finally ordered him to quit, he grew a silver mustache, which nicely complemented his thinning white hair and made him look distinguished, if also somewhat like a rascal. He said he would not shave the mustache off for fear the act might somehow cause him to take up smoking again. He held his whiskey well, but did not drink to excess because to do so would interfere with work.
And work, particularly work for Getty Oil Company, his principal client, was without question the most important thing i
n the world to Lansing Hays. It was not just that he worked hard. There was a ferocity about him, as if he believed that success in the practice of law depended not mainly on wit or judgment, but on stamina and unbridled animal aggression. He was a bellower, a ranter, an intimidator, a bully. He had a flash-powder temper, and once provoked, he would scream until his face reddened and the veins protruded from his neck. He was demanding and domineering, and he justified his abuse of others through the example of self-abuse. No one could work harder than he did. No one could care more about the client than he did.
Some of his partners, and even some of his clients, lived in fear of his outbursts. There were those, including his family and several of the younger partners at his firm, who loved Lansing despite his tyrannies, who regarded his bellowing as mere noise, and who accepted his abusive screaming and accusations as the price of his exceptional devotion. These few even found amusement in Lansing’s wild, angry tirades. There was a hilarious story his son Spencer told, for example, about the time the family vacationed on a dude ranch in Montana and his father tried with terrible sound and fury to master a reluctant horse. But by the end of Lansing’s life, there were many others, law partners and clients alike, who felt weary and bitter and even spiteful toward him. They had taken enough. Too many times they had been loudly, profanely accused of incompetence or imbecility. Too often they had been embarrassed in front of their colleagues. These people were frankly relieved when Lansing Hays was gone.
A powerful man who is disliked will nonetheless receive a proper tribute, and so they came from all across the country to the memorial service. It was held on a clear, warm day in Riverside, Connecticut, at St. Paul’s Episcopal Church, a large and modern building. The church was not far from the Hays house, which was hidden in the Riverside woods on a private lane and commanded a breathtaking view across Long Island Sound. For the family, who of course were aware that Lansing had risen to the top of his profession, the turnout at the service was nonetheless touching and impressive.
Sidney Petersen, the chairman and chief executive of Getty Oil Company, for years Lansing’s principal client, had flown the corporate jet in from California to attend. Other top company executives had come along with him. From Philadelphia, a contingent of partners from Dechert Price & Rhoads, the big law firm Lansing had merged with in 1979, came to pay their last respects. Other lawyers who had worked with Lansing for decades in the small firm of Hays & Landsman, and who were now partners in Dechert Price’s New York branch, consoled Lansing’s wife and children, whom they had known in the days before Lansing achieved his great success. And from San Francisco arrived the most impressive mourners of all, Gordon Getty and his beautiful wife Ann. The fourth son of J. Paul Getty, the renowned president of Getty Oil who died in 1976, Gordon was now one of the richest men in America, heir to approximately $25 million a year in income from his father’s fortune.
It was that fortune which had bound Gordon Getty to Lansing Hays. Since J. Paul’s death six years before, the two had been cotrustees of the Sarah C. Getty Trust, which owned 31.8 million shares of Getty Oil stock, or 40 percent of the company. The Sarah Getty Trust constituted the largest portion of J. Paul Getty’s financial legacy. Gordon, his brother J. Paul Jr., and several of his nieces shared the dividend income from the trust’s stock, but Gordon and Lansing, as trustees, controlled the rights of ownership. Both sat on the Getty Oil board of directors, and both earned more than a million dollars a year as a special fee for their trusteeship. When an issue was put to a shareholder vote, the two consulted together and decided which way to vote the trust’s stock. In theory, they were equal partners in management of the trust, although in practice Lansing dominated Gordon, as he did almost everyone. Still, Gordon respected Lansing, and he had felt compelled to travel to Connecticut for the memorial service.
For all of those gathered in St. Paul’s Episcopal Church that day, there was no escaping Lansing’s potent and aggressive personality, even on the occasion of its expiration. Bluster had been the essence of him, and his intensity provoked deep and often conflicting reactions in those who knew him. Some at the memorial service wept uncontrollably. Some sat stiffly, feeling no mournfulness, thinking to themselves that this was one man whose passing would not draw their tears. Lansing’s youngest son began the service by talking about his father and mother, and he described how theirs was a relationship that succeeded. Then an old friend and classmate of Lansing’s at Williams College, who was himself not in very good health, stood and said a few kind words. And lastly, Spencer Hays came to the front of the sanctuary, unfolded a sheet of yellow legal paper on which he had made some notes, and delivered a remarkable eulogy.
“First, a brief story,” he began. “A few years ago, my father and mother were spending the night alone in our summer house on Fire Island. It was during the off-season, so there were not many people about and the house was dark. My father woke up thinking he had heard someone in the house. He got out of bed and stood by the closed bedroom door and listened. He heard footsteps coming up the creaking wooden stairs, then coming down the hall to the bedroom. As he watched in the moonlight, he could see the bedroom doorknob beginning to turn. So he grabbed the doorknob, yanked open the door, and emitted what must have been a thunderous uproar of bellowing—without, I am sure, any expletives deleted.
“The hapless intruder must have had a stout heart indeed, for he did not drop dead on the spot. Instead, he turned tail, leaped down the stairs, probably without touching them, and burst out right through the closed screen door. He went screeching off into the night.
“I like to think that encounter with my father was enough to deter the intruder from a further life of crime.”
A wave of laughter rolled through the church. Even those who had attended the service more from obligation than sentiment laughed easily and warmly. That was Lansing Hays exactly, the man they had known and dreaded.
Spencer went on. “My father was not much of one for speeches, eulogies, public statements, and the like. Respecting that thought, but wanting to say some words about my father, I decided to avoid a speech and simply list some words, single adjectives, that I think describe him. Having composed the list, I was struck by two things.
“First, the adjectives cover a very wide range of characteristics, some seemingly contradictory. One would think they could not all apply to the same man. Hence, his ability to keep one constantly on one’s toes. My second thought on reviewing the list was that every single adjective applies to my father tenfold. Each word could, without overstatement, be modified by an ‘extremely’ or at least a ‘very’ and in certain cases an ‘incredibly.’ Here is the list:
“My father was shy. He was circumspect. He was noisy. He was private. He was complicated. He was honest—he was fond of recalling that a respected business associate once said to him, ‘Lansing, you’re so honest it’s painful.’ He was lawyerly—I’m sure he hated that word. He was hardworking—we have witnesses here. He was strong-minded. He was respected. He was loyal—to his clients, to his school, to his friends, and to his family. He was short-fused—to everyone. He was fair. He was independent. He was feisty—he loved the word. He was steadfast. He was courageous. He was sensitive. He had heart. He had great humor.
“And he could,” Spencer Hays concluded, “send you right through a closed screen door. He shall be missed.”
After the service, a small group from Lansing’s immediate family drove to a nearby grave site for a brief private ceremony. Then the family returned to the house on Leeward Lane where the other mourners were gathering for a reception. By late afternoon, there was a throng of guests, and a drone of conversation possessed the house. The visitors paid their condolences to Nancy, Lansing’s widow, and they talked among themselves about how their own lives might change now that Lansing was gone.
Ever since J. Paul Getty died, Lansing Hays had functioned as a kind of surrogate for the old man, as J. Paul was called, controlling both the direction of Getty Oi
l Company and the power of the Sarah Getty Trust’s stock. Lansing’s bombastic personality had, in effect, postponed the impact on the company and the trust of J. Paul Getty’s death. From the early sixties on, J. Paul had lived at his mansion, Sutton Place, outside of London, England, and in fact did not set foot on American soil during the last fifteen years of his life. He had managed to retain firm control of Getty Oil, which was headquartered in Los Angeles, through the tenacious force of his own personality and also through Lansing, his eyes and ears in America. Lansing was, J. Paul once remarked, “my great friend and attorney par excellence,” and that endorsement endowed Lansing with extraordinary power for a man who had never been an officer or employee of the company.
For many years, Lansing’s only official connection to Getty Oil was his role as chief outside counsel, based in New York. Later he joined the board of directors and became cotrustee of the Sarah Getty Trust. But Lansing’s power at Getty Oil had never been exercised through official channels. It depended not on title but on intimidation. If Lansing Hays wanted something done at Getty Oil, or if he did not like something that had been done by the company’s executives, he would scream and bully and ridicule until he had his way. And since the old man, ornery but secluded in England, had made clear his trust in Lansing, there was no recourse except resignation for company executives who could not tolerate Lansing’s tyranny. When J. Paul died, some expected Lansing’s power to diminish because the old man would no longer be quietly behind him, but in fact his power only grew, mainly because he ascended to control of the Sarah Getty Trust. Now if the Getty Oil executives dared challenge his authority, they would not merely be battling J. Paul’s lawyer and mouthpiece, but a man in charge of 40 percent of the company—although nominally he served as cotrustee with Gordon. And so Lansing had his way. He often treated Sid Petersen, the chairman of the board, with open contempt. He publicly humiliated Ralph David Copley, the company’s vice-president and the man ostensibly in charge of Getty Oil’s legal strategy. Copley, who had endured perhaps more abuse than anyone from Lansing, did not travel to Connecticut for the memorial service.
