The New Athenians
(See Cover) Like much of East Texas. Henderson County is a rolling expanse of pastureland, woods and worked-out cotton fields. Its county seat and cultural capital is a sleepy town with the splendid name of Athens (pop. 5,300). Henderson County and Athens have a distinction that makes them notable even in Texas. They have spawned about 50 of Texas' millionaires and multimillionaires.The biggest of these big rich are a select few known throughout Texas as"the new Athenians."
Sid Richardson, the richest of the new Athenians because of his ocean of oil reserves, jokingly takes credit for starting the boys from Athens on their way years ago. After making his first killing in oil, Richardson drove into town in a block-long Cadillac. "When I left," he says, "all those guys sitting on those benches around the square jumped up and followed me right out of town." Leader of the new Athenians, by general agreement, is Richardson's old crony, Clinton Williams Murchison, 59, a financial genius who, according to affectionate legend, can add $1 and $1 and get $11 million. A solid little bundle of energy (5 ft. 6 in., 175 Ibs.) with horn-rimmed glasses, twinkling blue eyes and a putty blob of a nose, Murchison (pronounced Murkison) is the first of a brand-new breed of Texas oilmen. Having made his millions in oil, he is now using them to further the popular Texas ambition of buying up the rest of the U.S.
Pirate's Treasure. Murchison has built up an empire of 48 companies, with 50,000 employees and an estimated $350 million in assets--not to mention scores of lesser investments. The companies stretch from Canada to Mexico, from coast to coast, and are as varied as a pirate's treasure (see map). No sooner has he bought a ship line than he wants a railroad, no sooner a candy company than he gets a grocery. Murchison juggles multimillion-dollar deals with the unconcern of a racetrack teller counting $2 bills. In Texas, where such a man is admiringly known as a "wheeler-dealer," Clint Murchison is the biggest wheeler-dealer of them all. Says Sid Richardson: "Murchison is the kind of man that tells you, 'Here, hold this horse while I run and catch another one.' First thing you know, you've got your hands full of Murchison horses."
In the past few months Murchison and Richardson have hit the nation's front pages by trying to help their fellow Texan, Robert R. Young, catch an iron horse--the $2.7 billion New York Central Railroad. The Central deal started with a long-distance phone call last March. Young, an ambitious dreamer who has exchanged Texas roughness for Newport's semi-suavity, had run into trouble in his campaign to win the Central. From Palm Beach, he called Murchison and said, "I need some help." Murchison called Richardson in California and said, "I need some help." Richardson took the call just as he was starting out for a round of golf. In his haste, he agreed to go along on the deal without hearing the full details. Next day, when he spoke to Murchison again, Richardson was startled to find that it was not a $10 million deal as he had thought; but a $20 million one. Cried he: "What the hell did you say was the name of this railroad?"
Well-Hedged. Murchison and Richardson jumped at the deal, because they know that Bob Young is an expert at parlaying shoestrings into golden chains. Early this year Young sold Murchison a 24% interest in his huge Investors Diversified Services, Inc., whose three subsidiaries sell savings certificates and other securities (TIME, Sept. 15, 1952). Murchison's $5,000,000 investment is already worth more than $7,000,000.
The New York Central proposition was just the kind Murchison likes. He and Richardson did not have to put up a cent of their own money, but borrowed the entire $20 million needed to buy 800,000 shares of Central stock from the Chesapeake & Ohio Railway, which until February was controlled by Young. They got more than half the money from Young's own Alleghany Corp. and his business associate, Allan Kirby. With it, they got an option to sell 50% of the stock back to Alleghany at the $25 price they paid (current market value: about $22).
The real reason for the purchase, of course, was to vote the 800,000 shares in favor of Bob Young at the Central's annual meeting May 26. Last week New York Supreme Court Justice James B. McNally turned down the Central's plea for an injunction to block the Texans from voting the stock on the ground that the sale violated an ICC order. Unless the Central can find new legal objections, it looks as if the Texans will be able to vote the shares, which constitute about 12% of the total, and bring Young & Co.'s holdings to 1,300,000 shares.
But the vote on the other 5,318,530 Central shares did not seem to be going in Young's favor. About 40% is held by brokers for their customers. The largest such holdings are in the hands of Merrill Lynch, Pierce, Fenner & Beane, the biggest brokerage house in the world. It holds 415,000 shares owned by 1,752 of its customers. About three-quarters of that vote is in, and the Central management has 60%, though individual stockholders have voted 3-1 for Young.
A month ago, Murchison predicted: "We'll get 90% of the proxies." Richardson, who loves to josh his wheeling-dealing friend, picked him up: "Bet you $10 million we don't." Said Murchison: "Well, if we don't get 90%, we'll get 55%, and that's enough."
No matter what happens in the Central deal, Murchison is busy on a bigger transaction. Last week, in Canada, the Alberta government, by okaying a gas-export permit, in effect gave the go-ahead to Trans-Canada Pipe Lines, Ltd. to build a 2,240-mile pipeline from Eastern Alberta to Toronto and Montreal, with a planned spur to Minneapolis-St. Paul. The $3 million Trans-Canada pipeline, which will be half owned by Murchison's Canadian Delhi Oil, Ltd., will be nearly half again as long as the Big Inch. Murchison and his Canadian partners still have to raise the money. But with all the natural gas in Alberta, including close to a trillion cubic feet owned by his Canadian Delhi, and the waiting markets of Eastern Canada and the U.S., Murchison expects no trouble, plans to have it built by 1955.
The Big Rich. One big reason Murchison is able to swing such varied deals is the tax bonanza enjoyed by all oilmen. This is the depletion allowance which permits them to pocket 27 1/2% of their gross income (up to 50% of their net) before paying a cent of taxes. Such old-time Texas millionaires as Jesse Jones, who owns dozens of Houston's choicest buildings, and Publisher Amon Carter, whose Fort Worth Star-Telegram is Texas' biggest paper (circ. 241,582), were able to amass their first riches in other fields. So was Dallas' Leo Corrigan, who has pyramided his real-estate holdings to an estimated $500 million (latest project: a $5,000,000 resort hotel in Nassau). But by & large, the big Texas fortunes are now founded on oil and the liberal tax provisions that go with it. Samples: P:Haroldson Lafayette Hunt, 65, of Dallas, who got his start running one of the tables in an Arkansas gambling house, is probably rivaled only by Sid Richardson for the title of richest man in the U.S. Richardson figures that Hunt's production is higher, but that his own oil reserves are bigger (estimated at as high as 750 million bbls.). Hunt, a lone wolf who hardly knows the new Athenians, uses his oil wealth to spread his far-right views through such media as radio & TV's Facts Forum. He lives in a Texas version of Mount Vernon, i.e., bigger. P: Hugh Roy Cullen, 72, of Houston, is another far-right winger, but no friend of H. L. Hunt. He is Senator McCarthy's patron saint in Texas, has contributed to McCarthy's campaigns and right-wing Republican causes. Cullen has also contributed much to Houston, has put aside an estimated $160 million for colleges, hospitals and charitable organizations. P:Sam Wilson, 49, of Corpus Christi, is a wildcatter described as a "Glenn McCarthy who managed to hold onto it." With part of his oil wealth, Horse Lover Wilson built a huge office building in his home town, topped it with a giant revolving neon W in his racing colors. P: R. E. (Bob) Smith, 59, of Houston, a great, friendly bull of a man who is one of a new group of civic-minded oilmen. While not in the same financial class as Cullen or Hunt, he has quietly amassed millions in an office labeled simply with his name and the words "Oil Operator." Smith headed Houston's swank Petroleum Club, spends much of his time and money on such civic functions as civil defense and hospitals, is No. 1 layman of Houston's First Methodist Church, the nation's largest.
The K.K.K. The new Athenians, especially Murchison and Richardson, differ from their brother millionaires in that they do not dabble noisily in politics, propaganda, or welfare institutions. While they stick to business, they have their little luxuries but shun ostentation. Bachelor Richardson lives in the Fort Worth Club, has one of the finest U.S. collections of frontier paintings by Russell and Remington. Murchison shuttles between New York, Washington and a collection of city and country homes in a private DC-3, the Flying Ginny (named for his pretty second wife, Virginia, who accompanies him on many of his trips). He has a 25-room house just outside Dallas and a 3,300-acre ranch 65 miles away. When he wants to get farther away from the world, he flies to his 75,000-acre Acuna Ranch in Mexico's Sierra Madre Mountains. It is comfortably furnished but it has no phone, is on no road, and can be reached only by plane. Murchison likes to hunt on his 1,000-acre island in the Gulf of Mexico. He and his wife are now putting the finishing touches on a $100,000 farm near his old home town of Athens. To landscape the 2,000-acre site, he has planted 10,000 pine seedlings and 10,000 strawberry plants. Says a friend: "Murchison does almost everything by ten thousands." But when the new Athenians really want to enjoy themselves, they make for the Koon Kreek Klub, an exclusive (i.e., mostly millionaires) tract of wilderness near Athens. There, Murchison, Richardson and such other Athenians as Oilman Ike La Rue and Lease Broker George Greer loaf around simple cabins in sports shirts or old clothes, play gin rummy for 1-c- a point, kid each other about their waistlines, and fish for bream (pronounced "brim" in Texas, and a member of the sunfish family). With guides to bait the hooks and take off the fish, it is perhaps the most relaxing form of fishing in the world; Murchison likes it because it gives him time to think.
Funny Question. Murchison extends the same open-shirted informality to his business. One sure laugh at stockholder meetings of his key Delhi Oil Co. is provided by a stockholder, a mailman who has made a small fortune. He plaintively asks the same question year after year: "Clint, when you goin' to pay a dividend?" Delhi stockholders, who get few dividends, can afford to guffaw at this. They all know that Murchison is interested not in dividends but in piling up the lower-taxed capital gains. He achieves them for himself and his stockholders by "spinning" new companies out of old ones.
The prime example of this is Murchison's Southern Union Gas Co., the foundation stone of his empire. Started as a gas producer and distributor, Southern Union's earnings were strictly limited by state utility commissions. Murchison "spun off" its gas-and-oil holdings into separate corporations, including Delhi Oil, Barker Dome, Aztec Oil & Gas, Arkansas Western Gas and Texas Southeastern Gas, whose earnings as producers were not regulated. Delhi Oil, the biggest of the children, has since wildcatted its way into 215 producing oil and gas wells in six states and oil reserves of more than 11 million bbls. It started hunting oil and gas in Canada through a subsidiary, but the subsidiary was spun off (with Murchison retaining control) when the Trans-Canada pipeline deal shaped up. The pipeline's future seemed so solid to Murchison that he thought it had no place in wildcatting Delhi. Said he: "Canadian Delhi is so conservative we kicked it out of Delhi." Such corporate spin-offs have well profited Murchison and his stockholders. A man who paid $1,000 for 1,000 shares of Southern Union in 1943, and exercised all rights and options since then, would have spent a total of $31,688 (easily borrowed against his holdings). By now, his dividends would have amounted to more than $10,000, and his stock (including the offspring companies) would be worth close to $150,000. (Murchison himself sold out of Southern Union in 1950 with a $5,500,000 net profit.)
Daring & Reason. Wheeler-Dealer Murchison deals in such big figures that, like many other oilmen, he automatically drops off the zeros when talking about his business. Recently, when asked how he made out on a certain deal, he smiled and held up seven fingers, meaning that he had made $7,000,000.
Murchison, in all likelihood, would have been a success--and probably a millionaire--no matter where he lived. The proximity to Texas oil, plus the depletion allowance, gave him a chance to pyramid his millions. He has a trader's shrewd knowledge of human beings and a gambler's quiet ability to calculate the odds. He also has a banker's cold logic and an optimist's faith in U.S. business enterprise. A little bit of all these qualities is apparent in most of his deals.
He bought 49% of the stock of Manhattan's Henry Holt publishing house for $760,000 between 1945 and 1951, in the correct belief that the World War II baby crop and the G.I. Bill of Rights meant a big boom in textbooks. With another eye on the moppet market, he bought 4% of Lionel Corp. for $630,000. Field & Stream Magazine ($1,300,000) and the James Heddon's fishing-tackle company in Michigan ($2,400,000) were naturals for Murchison, and not merely because of his abiding interest in rod and reel. Among other things, he was figuring on a basic change in the U.S. economy: "Shorter hours mean more fishing." Following the same line of thought, he leased Colorado's Royal Gorge Bridge, a tourist attraction complete with an amusement ride for children, bought a string of outdoor movie theaters, and a resort hotel in La Jolla, Calif. With Robert R. Young in 1951, he bought control of Seattle's American Mail Line, because government subsidies made it look good. Says he: "I'm always a little bit bullish." "
Nothing Complicated." Once Murchison has made up his mind on a deal, he turns the details over to someone else--often to the aide's consternation. When he sent a friend to Jackson, Miss, to buy the Lamar Life Insurance Co. not long ago, the friend decided after he got there that Murchison had underestimated the complications and the size of the deal. But when he phoned back, Murchison snapped: "There's nothing complicated about it--100,000 shares at $105, that's $10.5 million. Just a simple business deal." To Murchison, a deal is right when both sides profit from it; that way, "they can do business together again." When he figures a deal is right, he will not quibble about terms. One time when Murchison was trading some life-insurance and oil properties with a partner named Toddie Lee Wynne, they were $498,000 apart on price. They flipped a coin for the difference. Wynne won. But Clint made a fat capital gain anyway.
Murchison has built his empire on credit. He now owes millions and is considered vulnerable by some Texans, who think that he is already spread too thin. Murchison thinks not, as long as he is able to borrow more against his oil reserves and other holdings. Says he: "Cash makes a man careless." Both he and Richardson pride themselves on the fortunes they owe. "Murchison," Richardson once said, "I'm a bigger success than you are. Some of my paper is held in London." When Murchison once decided to get out of debt, Richardson talked him out of it: "Don't do it. The day you do you'll be dead, and I haven't got time for a funeral."
Melon & Coke. Murchison has built such a wheeling-dealing reputation that propositions pour into his downtown Dallas office at the rate of more than 600 a year. Only a handful are acted on. Murchison does most of his thinking about these while others sleep. He gets up as early as 3:30 a.m., brews himself a pot of coffee and sits for hours, thinking and listening to the Rev. W. E. Hawkins, a fundamentalist preacher on Dallas' Station KRLD. After breakfast (a slice of melon or a bottle of Coke) he drives himself to work in a 1953 Ford. He works in shirtsleeves with no tie, throws papers that he wants filed on the carpeted floor.
Unlike many a financial operator, Murchison is not interested in managing a company, will not take on a property unless it is already doing well. He personally heads only two of his many companies (Canadian Delhi and Delhi), has not even set foot in many of their offices. (His only advice to Henry Holt was that it should publish a book on gin rummy.) He leaves all the details to a crack team of young financial brains headed by his sons John Dabney, 32, and Clint Jr., 30, along with James H. Clark, 45, a former executive in a Chicago firm of management consultants. Around Dallas, they are known as "Clint's Whiz Kids."
Skunks for Sears. Murchison got his start in business as a boy in Athens. His parents were of Scotch Presbyterian pioneer stock and, for Athenians, fairly well off; his father was head of the First National Bank. Nevertheless, young Clint, the second of nine children, used to get up at 3 a.m. to run a trap line for coons and skunks, sold the pelts to Sears, Roebuck.
At school he was a laggard in mathematics and was put in a special class, where he was made to do sums in his head. The lessons stuck, and he now astounds people with his memory for figures and lightning-like calculations. Schoolmate Sid Richardson, who is five years older, spent his spare time trading cattle. Sid taught Clint so much about cattle trading that Murchison was able to run a crippled heifer into $1,500 by the time he entered Texas' Trinity University.
After only two months in college, Gambler Murchison was caught in a crap game. He was told he could stay if he signed a no-craps pledge. But Murchison would not make such a promise; he returned to Athens as a teller in his father's bank. Instead of staying in his cage, Clint spent most of his time drinking coffee and drumming up business at the corner drugstore. He could not be bothered counting small change that was not included in the bank's legal reserves. But a bank inspector reasoned differently, ordered Murchison to count every dime in his cage. Murchison spent a full day doing so. then quit.
He entered the Army in 1917 and got a commission, but even the Army could not stop his trading. When the brass on his post ordered some salvage lumber burned, Clint sold it instead for kindling, netted more than $15,000 for the mess fund. (Sid Richardson, meanwhile, had joined a National Guard company where he was allowed to do some oil-lease trading to bolster the outfit's funds.)
Gamblers & Promoters. When Richardson got out of the Army, he set himself up as a lease trader in Fort Worth. Murchison was only one day home himself when he got a call from his old friend asking him to join him. When Murchison showed up in uniform, Richardson ordered him into civvies. Said he: "If you wear that uniform when we go around to talk to people, they'll want to talk about the war. We aren't talking about anything but oil." Murchison set off for Wichita Falls, where the big play was in an extension of the Burkburnett Field. He found it full of gamblers, promoters, oilmen and rumors. It was his job to separate the oil from the rumors, then snap up leases.
Once, Richardson hauled Murchison out of an evening poker game to investigate a wildcat well he had heard about. They raced to the closely guarded site and, by bluffing guards, got near enough to smell oil. Next day they spent $50,000 buying leases in the area. Twenty-four hours later, they sold the leases for $200,000.
There were crises. In the commodity collapse of 1921, the price of oil dropped in nine days from $3.50 a barrel to $1. Murchison and Richardson had all their money tied up in leases nobody wanted. Says Murchison: "We almost lost our taw." They split up, held creditors off as best they could. One even hounded them on a hunting trip; they left him stranded on an island in the Gulf while they fled to the mainland. Ultimately, the price of oil went up; they paid their debts. Says Murchison:"If you are honest and if you are trying, most creditors will play ball."
Then Murchison made the decision that made him rich: he started drilling. Through a system of "financin' by finaglin'," i-e-, getting money in exchange for a share of one lease, a rig in exchange for a share of another, he formed a new partnership, started drilling wildcat wells at the rate of 50 or 60 a year. Murchison always put aside a few shares for himself. He struck it lucky and his income soared to $30,000 a month. In 1925 he sold his oil interests for some $5.000,000, retired to San Antonio, but not for long."What else is a fellow going to do but work? I can't play the piano," says Murchison.
Murchison's first wife died in 1927, and one of his sons died not long after. To take his mind off his troubles, he moved to Dallas, started buying leases and drilling again in West Texas. When his first well in the Pecos Field brought in gas not oil, he arranged to pipe the gas into nearby towns, later expanded his gas lines into Oklahoma, New Mexico, Colorado and Arkansas. That was the start of his Southern Union Gas Co.
During the Depression Murchison and his partners kept right on expanding. He formed the American Liberty Oil Co., so named in protest at the Government cuts in oil production (prorating) to reduce the surplus caused by the big East Texas oil strike of 1930. Murchison himself was hard hit by that strike, had to shut down some of his wells for four years. Nevertheless, he battled proration in the courts and lost. Murchison now grudgingly admits that proration makes oil-producing cheaper, but still opposes it.
Money in the Ground. As the Depression wore on and war approached, Murchison saw inflation coming, sank every cent he had or could borrow into the ground. He worked out a variation of the reversionary interest, applied it to the oil business and made more millions. His trick: to lure buyers, he would sell oil property cheap, with the agreement that after the property had paid off the purchase price plus interest, a half-share in all production would revert to Murchison.
He never stopped gambling. In 1940 he took over a 14,000-acre lease from the Texas Co. and agreed to drill 200 wells on it (at an average cost of $50,000 a well). Texaco's geologists doubted that he could even make interest on his $10 million investment. Instead, he netted $15 million. Following his gambler's instinct, he wanted to spread the risk of the oil business by going into other fields. He chose insurance companies first, since they are not taxed on part of their income. He bought Reserve Loan Life in Indiana, Atlantic Life in Richmond, and Tennessee's Lamar Life. They led to companies that manufactured everything from elevators to tires.
Among the spokes in Murchison's golden wheel today are 23 wholly-owned companies, including three chemical companies, four taxi and bus companies in Texas, and Chicago's Martha Washington candy company. He controls, in addition to American Mail Line, Delhi and Holt, Ohio's Diebold office-equipment company (60%), Chicago's Consumers construction-materials company (85%), a water company in Indianapolis and six Texas banks (including 100% control of Athens First National). Through Delhi, he has a big interest in Taylor Oil & Gas, and with Sid Richardson, he controls Kirby Petroleum in Houston. Other interests: a restaurant in California, a club building in Denver, a small newspaper in Texas, a Tennessee motel, Easy Washing Machine of Syracuse, a curb-service grocery chain in Dallas, a Mexican silver factory, and a big chunk of Missouri Pacific bonds.
Like other Texas oilmen, Clint Murchison has also wet his feet in politics. An early Eisenhower supporter, he financed a pro-Ike campaign paper in Texas with Richardson. He has also been a vocal and financial supporter (for about $40,000) of Senator McCarthy, and has entertained him at his Mexican ranch. Murchison once said: "I like Joe McCarthy. He's done the greatest possible service to his country." Recently, he has cooled somewhat: "I was for him and still am, but with more reservations."
Starting Again. One reason why Texas oil millionaires have taken to politics is that they want to protect their oil interests, e.g., tidelands oil and the depletion allowance. Last, week in Washington, as a congressional committee started hearings on tax-free foundations, there were rumblings against H. L. Hunt's depletion-fed foundation, Facts Forum. Republican Senators, Delaware's John Williams and Vermont's George Aiken, are out to cut the allowance to 15%.
Oilmen argue that without the depletion allowance nobody would take the risks needed to find new oil reserves. In the last three years Sid Richardson claims to have spent $15 million looking for oil without bringing in a well. And Murchison's Delhi Oil ran up a $690,000 deficit last year because almost half the 56 wells it drilled were dry. Only the depletion allowance, they say, keeps them hunting and keeps oil prices from soaring.
If the depletion allowance were cut to 15%, consumers might have to pay a little more for their oil and gas, but the Government would pick up an estimated $300 million in additional revenue each year. Says Senator Williams: "As long as there is oil, people will be looking for it, depletion allowance or no."
Clint Murchison is the kind of wheeler-dealer who tends to prove that statement. Though he is now turning over many of his properties to his sons, that does not mean he is retiring from combat: "I guess you could say that I am starting all over again." Could it be uranium? Murchison's face lights up at the word; he has already equipped some of his oilfield crews with detecting devices, just in case. Murchison has no doubts about which of his many deals gives him the most pleasure. Says he: "The next one."
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