LBJ

by Phillip F. Nelson

  Despite the energy he invested in his business and his continual creation of new ventures and new ways to defraud the government, the public, and other businesses, his schemes were eventually found to be like a house of cards built on quicksand: He wound up not only broke but hopelessly in the red, $12 million by his own figures, closer to $20 million by those of Texas Attorney General Wilson.31

  Enigmatic Affairs, Political Intrigue, and Murder …

  At the Department of Agriculture?

  Billie Sol’s legal troubles began in 1957 after Congress passed legislation to support artificial (nonmarket driven) price supports for cotton farmers. In exchange for the government’s price subsidy, the Department of Agriculture (USDA) was directed to establish rules to control the production of cotton through allotments that stipulated how much each farmer could plant. The existing land that had been used for cotton production was “grandfathered” into the program; however, strict controls were established to prohibit cotton from being grown on other acreage. In accordance with this legislation, the USDA promulgated strict rules to administer cotton production and empowered its field agents to enforce the rules. These simple rules would eventually catch up with Billie Sol Estes, but not before at least four men were murdered. As will be seen shortly, Estes would eventually finger his old friend Lyndon B. Johnson—the man whom he had gone to for assistance in perpetrating his swindles in 1957—as the man who ordered those murders.

  To understand the context and why Johnson was in the unique position to be the culprit behind the Estes allegations, it is necessary to review how the two of them got to be business associates in the first place, and how it came to be that Johnson’s political influence came to bear on Billie Sol Estes’s various business interests. This “partnership” started in 1957, when Johnson began acting as Estes’s business agent in Washington, getting favorable rulings through the men whom he had had the foresight to assist in getting placed within various federal agencies. In the process, Johnson invested in one of the vendors which supplied fertilizer to Estes, Commercial Solvents, which was suspected of having gangster connections.32 Johnson had also assisted Estes in establishing contacts within the Agricultural Department to facilitate his business transactions in a number of areas. As the Senate majority leader, his political influence was without peer, and he had perfected, by then, his use of the famed “Johnson treatment” in arranging for personal favors at many federal agencies, including the FCC, to facilitate favorable decisions in his own behalf for his radio and television stations. When he became vice president, he unleashed his famed “Johnson treatment” on the new secretary of agriculture, Orville Freeman, as a means of directly influencing the internal policies of the department at its very topmost hierarchal level; this ensured that his friend and collaborator Billie Sol Estes could continue his fraud against the government, which had been so profitable for both of them.

  The relationship between Johnson and Estes was not just an arm’s-length business arrangement between an official of the U.S. government and a “shady character.” Billie Sol’s involvement—and his reciprocal “campaign contributions”—was extended to a warm personal friendship with Johnson and a number of his aides, particularly Walter Jenkins and Cliff Carter.33 According to author Haley, “The Vice President’s letters reflected warm pleasure over Billie’s visit ‘with Lady Bird and me’ in their Washington mansion; his enjoyment of Billie’s favorite gift, the famed Pecos cantaloupes; holiday roses at the Christmas season and his interest in helping promote Billie Sol’s religious and denominational zeal through the Department of State, ‘in behalf of the churches’ in Tanganyika; and so on.”34 Estes had told an associate that he spent $100,000 a year on a “situation” in Washington but never explained what that was, being mindful of Johnson’s order to him to keep his name out of it. He did tell this associate—Coleman McSpadden, who later told a court of inquiry—that he was going to build a ten-thousand-bushel grain storage elevator at Hereford, Texas, and give an eighth interest to Vice President Johnson.35

  Estes had visited Johnson’s home in Washington at least twice: In January of 1961 he was there for the inaugural parties, and he visited again in January 1962.36 In those days, campaign funds collected by politicians were not closely monitored, as they were presumed to be handled in accordance with prudent fiduciary standards by completely honest men; obviously, there were weaknesses in that paradigm that inevitably resulted in massive abuses. It will never be known how much money was involved, because Johnson had placed himself as the central Democratic banker—the “decider” of how much money the Democratic Party would disburse to senatorial candidates, and to whom—the extent his personal fortune benefited from his role will likewise remain a mystery. One incident which reflects that situation was reported in the May 25, 1962, issue of Time: “Still not adequately explained are three checks totaling $145,015.14 that Estes drew on a bank account in Pecos last January and then cashed in Austin just before taking off on a trip to Washington, D.C.”37 It was apparently—based upon the contemporaneous Time magazine article—the Estes contribution to “Assistant Secretary of Labor Jerry Holleman, former president of the Texas A.F.L.-C.I.O., who got to know Estes well in the liberal faction of the Texas Democratic Party. Holleman—before his forced resignation due to his acceptance of gifts from Estes38—had asked Estes and other Texans to ante up for a big dinner party given by Labor Secretary Arthur Goldberg last January for Lyndon Johnson.”39 It should be no surprise that both Goldberg and Abe Fortas were nominated by Johnson eventually for the Supreme Court, but both were denied that privilege due to their tainted past.

  Johnson supported Kennedy’s choice of Orville Freeman as the secretary of agriculture and volunteered to help Freeman find top-level USDA officers (though the unsuspecting Freeman had no idea of the real motives of Johnson, at least initially). The highest level of the “Johnson men” in the USDA included Assistant Secretary of Agriculture James T. Ralph and his assistant William E. Morris, both of whom were ultimately fired for having accepted gifts from Estes, along with a dozen other employees of the USDA, who had also been recipients of Billie Sol’s generosity.40 Another “Johnson man,” Red Jacobs, was also later removed from his position. Still another man Johnson had placed in the USDA was Jack Puterbaugh (who was, months later, involved in assisting Johnson plan Kennedy’s Dallas trip, including many changes in the motorcade to drop standard protection measures).41 Puterbaugh, before being assigned to work with Johnson and Carter to liaise with the Dallas Police Department and the Secret Service on motorcade planning, had been employed by the Democratic National Committee.

  On January 17, 1961, two days before Johnson took his solemn oath of office, he had a small party at his home in Washington, which was attended by, among others, Cliff Carter, Mac Wallace, and Billie Sol Estes.42 Johnson moved this group to the back patio, despite the cold January weather, to assure absolute privacy in their discussion of what to do about Henry Marshall, knowing that unless he could be brought under control, Johnson’s entire career could end in disaster. Marshall had already refused a Johnson-arranged promotion to the USDA Washington headquarters, and it was feared that he was about to go public with his investigation. Vice President Johnson, according to Estes, finally said, “Get rid of him,” and Malcolm “Mac” Wallace was given the assignment. As reported by Barr McClellan, it was agreed that Wallace would be sent to meet with Marshall again to try once more to make him understand that he had to back off in his investigatory zeal, even if it meant a financial payoff to him, but if he still wouldn’t cooperate, then it was understood by all that to avoid the risk of Henry Marshall pursuing his case against the Estes fraud, he must be removed.43

  The decision on handling Henry Marshall was only one facet that Johnson was developing in his counterattack. During the ten-day period after the inauguration, he focused on other ways around the dilemma being experienced by his friend Billie Sol, looking for a way to subvert the regulations in a more routine busines
s manner that would not raise too many flags. He needed the Agriculture Department to adopt a method that put the decision-making authority in the hands of local officials—who might be more malleable and vulnerable than those in Washington—to allow them to make exceptions to the rules on their own. Pursuing this idea further, the newly sworn vice president wrote the newly sworn cabinet secretary Orville Freeman on January 31, 1961, in support of Estes and asked him to intervene in the matter. The secretary responded to Johnson (tardily, by Johnson’s reckoning) by pointing out that “there have been some abuses of the law in this regard … [which] had the effect of an outright sale of the pooled allotment by the displaced owner under subterfuge practices,” which were not consistent with the law.44 Johnson replied to Freeman, asking for a personal meeting, undoubtedly as a means for Lyndon to apply the Johnson treatment to his new colleague, who evidently did not previously have the benefit of the experience and had not been properly schooled on how Washington really worked.

  Johnson’s cajoling of the new cabinet secretary, Orville Freeman, was quite effective in bringing him into the loop very quickly. The best evidence of that were the results: Shortly after these contacts, changes were made in the rules to make them a little more flexible. Freeman was just learning how to move a bureaucracy, but when he did respond, the effect was tantamount to giving Estes a fast track through the USDA regulations. The new secretary Freeman—apparently wanting to show that he was a “team player” after being given a lesson in political expediency by the master himself—agreed to certain changes in the rules. The net effect of the revisions was to allow them to be liberally interpreted by local officials: The local county committee was given the authority to consider exceptions as long as the petitioner appeared before it with all applicable documents and answered all pertinent questions bearing on the transfer. However, the new rules were given even more flexibility through an exception that allowed the committee to “waive appearance” if it “unduly inconvenienced the applicant,” or “because of illness or other good cause.”45 On top of all that, Freeman’s letter to Johnson explaining this windfall stated that he felt “‘sure that the State Committee’ would ‘be reasonable in passing judgment,’ should the applicant fail to appear under the ‘conditions enumerated.’”46

  Estes regarded this as manna from heaven and expected it would eliminate any further need to observe the rules as long as he got dispensation from the local committees, which would not present the “king of Pecos” any problem.* Unfortunately, the Estes empire was basically a classic pyramid scheme that would soon begin crumbling anyway, despite the estimated annual income of $5,000,000 to $7,000,000 he was banking at the time.47 In addition to the normal kickbacks, campaign contributions, and other payments Johnson received from Estes, it was also reported that Mrs. Johnson was a “heavy investor” in Commercial Solvents, which furnished the fertilizer being sold by Estes in conjunction with his many other “services.”48 Even though Orville Freeman approved, in September 1961, a $42,000 fine against Estes for the illegal cotton allotments, in November he appointed Estes to the National Cotton Advisory Board.49,* “Freeman’s explanation: Estes had originally been appointed to the board in July 1961, and in November the department had merely ‘reconstituted’ the old board. Seven months after that, Freeman was still claiming there was ‘no evidence’ that Billie Sol Estes had received special favors from the Department of Agriculture.”50 Freeman explained that he considered all of this merely a “lawyer’s quarrel.” The USDA finally got around to fining Estes $554,162 for his numerous violations.51

  Freeman’s magnanimous attitude toward Billie Sol Estes extended to helping him keep his capital costs down by keeping his fidelity bond—set at $700,000 in 1960—at the same level, despite having reported losses with the Internal Revenue Service each year. In fact, he reported no income at all to the IRS despite his bragging to everyone else about being worth $12 million. An attempt was made to increase the bond on January 18, 1962, but Estes protested, and one week later, thanks to Johnson’s influence with Undersecretary Murphy, the increase was rescinded.52 “Freeman explained the department’s generosity to Estes by saying that he had filed a financial statement showing a net worth of $12 million to prove that he was a good risk. But that financial statement was grossly inflated, and could not have passed a reasonably careful scrutiny” (not to mention the contradictory tax filings he made).53

  The delays the Agriculture Department continued having in its investigation led Texas Attorney General Wilson to begin his own investigation; the first investigative reports soon produced the news stories on the front pages of local newspapers. One of the early items reported on involved employees of Dallas’s famed Neiman-Marcus luxury department store, who stated that Estes had bought expensive clothing for three officials of the U.S. Agriculture Department. On one occasion, Estes took Assistant Secretary James T. Ralph and Ralph’s assistant, William E. Morris, into the menswear department of the downtown store; the two USDA employees selected more than $1,000 worth of clothing, which Estes paid for. In October, he went back, this time with Emery E. Jacobs, deputy administrator of the USDA’s Commodity Stabilization Service. Jacobs selected $1,433.20 worth of clothing; Estes went into the fitting room with him; “when they came out, Jacobs proceeded to pay the entire bill himself—with cash.”54

  According to information presented by the author Larry Hancock, “Billie Sol Estes told Wilson C. Tucker, deputy director of the Agriculture Department’s cotton division, on 1st August, 1961, that he threatened to ‘embarrass the Kennedy administration if the investigation were not halted.’” Tucker went on to testify, “Estes stated that this pooled cotton allotment matter had caused the death of one person and then asked me if I knew Henry Marshall.” As Tucker pointed out, this was six months before questions about Marshall’s death had been raised publicly.55 There were many other reports of Estes using his connection with Lyndon Johnson as leverage against uncooperative people, two of which were reported in newspapers of the day:

  • Robert E. Manuel, minority (Republican) counsel to the House subcommittee investigating the Estes matter, grew impatient with the cover-up being done and “leaked” a USDA report detailing the fraud. He also revealed that Estes had pressured a department employee, Carl J. Miller, by “invoking the names and influence of Lyndon B. Johnson and the late Sam Rayburn. Manuel’s “whistle-blower” reward for advancing a measure of truth into the House deliberations was being fired immediately afterward.

  • One of Estes’s creditors, Frank Cain of Pacific Finance, swore under oath that when he told Estes that the FBI was investigating him, Estes retorted, ,“I can stop all that. I will get Lyndon Johnson on the phone,” and that night Estes added, “I’ve got that investigation stopped.”56

  In the early part of 1962, stories were beginning to appear in Texas newspapers about the vice president’s involvement with Estes, including a report that Johnson had lent Estes $5 million; CBS News had picked up on this story, so Johnson contacted Hoover for help from the FBI in squashing it by having his agents talk to the editor. “Hoover promised to ‘get started on it right away.’ Johnson and Hoover then discussed how best this could be done, the vice president inquiring ‘what to do on these things except to call DeLoach.’ (an Assistant Director of the FBI.) ‘That was the thing to do,’ Hoover replied, and DeLoach apparently defanged the editor. Johnson also agreed that in the future, ‘he would have his assistant, Walter Jenkins, get in touch with Mr. DeLoach in such instances.’”57 Hoover had known for a long time about his secrets, including “the ballot-rigging of 1948 that had brought him to the Senate, and he had an inside track (through his friend Clint Murchison) on the corruption that made Johnson rich. Two years earlier—responding to an appeal for help from Johnson—Edgar had used FBI clout to squash press interest in the Billie Sol Estes fraud scandal.”58

  Johnson had effectively, with Hoover’s acquiescence, set up a permanent procedure to efficiently shut down whatever future incid
ents that might crop up, without having to be bothered with them himself: His man, Jenkins, would contact Hoover’s man, DeLoach, and the entire resources of the FBI would be unleashed on anyone not toeing the line in behalf of Lyndon B. Johnson. When Republican Congressman Bill Cramer (FL) started to prepare impeachment proceedings against Johnson’s associations with Estes, Jenkins contacted DeLoach to send agents to interview/intimidate Cramer; soon, Hoover would report back that “we have already checked into the story told by Cramer and found it false; Cramer himself is a loud mouth.”59 There were many, many other instances of Johnson’s use of Hoover to block investigations that came dangerously close to involving himself. Another such case occurred in the spring of 1962, when the editors of Farm & Ranch magazine published allegations of Johnson’s connections with Billie Sol Estes; he had Hoover send FBI agents to interview the editors as a way to (successfully, it turned out) intimidate them from continuing to look into the scandal. Hoover’s cooperation in helping Johnson like this only encouraged him to take advantage of this tool, which he would continue doing from then on, throughout the remainder of the Kennedy administration and then throughout his own presidency.60 This outrageous and illegal misallocation of federal law enforcement practices would reach its zenith at the 1964 Democratic National Convention.