McCloy and the Rockefellers

Rockefeller Land, Bill Zeckendorf and John J. McCloy

William Zeckendorf was acting in 1946 as real estate adviser for John D. Rockefeller, Jr. and a few years later by his sons--Nelson, David, Winthrop and Aldrich.  Behind all these transactions was the attorney John J. McCloy, High Commissioner for Germany following World War II, followed by presidency and chairmanship of the Chase Manhattan Bank of New York.

 

FLUSHING, N. Y., (UP). — The United Nations general assembly plans to put its final stamp of approval today on the choice of New York City for permanent U. N. headquarters. The assembly had before it an
overwhelming recommendation of the U. N. headquarters committee in favor of building a skyscraper world capital in midtown Manhattan. Thirty-three nations voted to accept the offer of John D. Rockefeller, Jr., of land worth $8,500,000 along the East river. Seven nations — all of them Moslem nations except Australia — opposed the site.

 

Leonard Lyons column - DECEMBER 22, 1949

The Rockefeller family has retained William Zeckendorf, head of Webb & Knapp, as their real estate advisor for Radio City, the largest single privately-held parcel in the world. Nelson Rockefeller, consummated the deal with Zeckendorf, who was also responsible for selling to the Rockefellers the site on which the new U.N. buildings are being erected.

January 14, 1955

Biggest Bank Merger
Okayed By Directors

NEW YORK (AP)—The biggest bank merger in history has been approved by directors of Chase National Bank and the Bank of the Manhattan Co. If the plan is approved by stockholders and the New York superintendent of banking , Chase would be merged into Bank of the Manhattan Co. to produce the nation's second largest bank.

Bank of America in California is the largest bank with total resources of around 94 billion dollars. The Chase Manhattan Bank, as it would be called, would have resources of about 7 billion. Chase Manhattan would become the largest bank in New York—a position now held by National City Bank of New York.
On Dec. 31, Chase had deposits of $5,379,000,000 and Bank of the Manhattan Co. deposits totaled $1,479,000,000. The two thus would have deposits of $6,858,000,000 compared with Bank of America's $8,270,000,000 and National City's $5,639,000,000.
 
John J. McCloy, Chase chairman, would be chairman of the new bank and J. Stewart Baker, Manhattan's chairman, would become president and chairman of the executive committee. Percy J, Ebbott, president of
Chase, would have the post of vice chairman, the two banks announced.

 We can't leave here without connecting one more dot: how Zeckendorf became involved in Texas with the Wynne family in Dallas. That, too, began with our friend Jack McCloy. Author/historian Kai Bird tells us at p. 409 in The Chairman: John J. McCloy, The Making of the American Establishment (1992):

"Only three days after Eisenhower issued his 'clarification,' McCloy came to the White House for one of the president's intimate stag dinners. He was one  in The Chairof fourteen tuxedoed guests that evening. Others included such old friends as Bernard Baruch, Milton Eisenhower, Arthur Hays Sulzberger, and Dr. Henry Wriston, the president of Brown University. Seated across from him at dinner was Sid Richardson, a Texas oil man who was then one of America's wealthiest individuals. Richardson had met Ike aboard a train traveling from Texas to Washington, D.C., in December 1941. The two men had kept in close touch since the end of the war, and Ike now counted the oil magnate as one of his closest friends. For years, Richardson had kept the Eisenhowers' freezer stocked with hundred of pounds of Texas beef, sausage, and hams. As president, Eisenhower consulted Richardson on oil and economic matters and used the Texan to influence the newly elected Senate minority leader, Senator Lyndon B. Johnson.

"That evening, Richardson took an instant liking to McCloy and invited him to visit his farm in Texas. In a very short time, their friendship would also include some business dealings. But on this occasion, the dinner talk was all politics."

The Texans, Sid Richardson and Clint W. Murchison, have been shown many times to have been parts of an intricate network of businessmen in Texas tied up with all sorts of "deep political" intrigue. The first researcher to make the connection was Peter Dale Scott, whose work led this writer to engage in many other research projects following up on this fascinating connection. Those links can be seen in this blog at various tags and also in another website called Minor Musings. Search key words here.

Saudi Owners of American Bank Stock

Barnes family stock in Bank of the Commonwealth, Detroit, Michigan:

United Press International, April 3, 1972

DETROIT (UPI) - James T. Barnes & Co., a Detroit-based mortgage investment firm, announced today it had options to purchase controlling interest in the financially-troubled Bank of the Commonwealth from the Chase Manhattan Bank of New York. James T. Barnes Jr., president of the mortgage firm, said the Barnes family had agreed to purchase 1,780,435 shares of the common stock of Commonwealth from Chase Manhattan. The New York bank acquired the stock more than a year ago in public auction after it had foreclosed on two notes totaling $20 million owed the bank by the prior controlling group interest, Donald H. Parsons [former chairman of the Bank of the Commonwealth of Detroit and owner of a Pittsburgh hockey team, the Penguins, and the Ford and Dime Buildings in Detroit] and his associates. [Parsons and his group, mostly University of Michigan alumni in their mid-thirties, took over Bank of the Commonwealth in a proxy fight in 1964.] The Barnes family also said it had arranged to purchase the 65,000 shares of preferred stock held by Chase Manhattan, as well as an additional 100,000 shares of preferred stock held by two California real estate men, Donald Kaufman and Eli Broad.

The combined total gives the Barnes family 53 per cent of the preferred stock and 39 per cent of the common stock, effective control of Commonwealth, Detroit's fourth largest bank. However, ultimate control remains with the Federal Deposit Insurance Corp. (FDIC) which was given broad powers in agreeing to loan Commonwealth $60 million to strengthen the bank's capital. The FDIC loans, the largest of its type ever extended, was approved by the stockholders last month.

The purchase price was not disclosed, but Commonwealth stock, traded over-the-counter, closed at 7% on the last trading day, Thursday. The acquisition of the Commonwealth stock by the Barnes family, which last fall bought 85 per cent of the Peoples Bank of Port Huron, another ill-fated Parson's venture, was praised by Robert P. Briggs, commission of the Michigan Financial Institutions Bureau. He called it "good news to all who have worked to bring about the reorganization of the bank."

John E. Thompson, president of Commonwealth, praised Chase Manhattan for its role in strengthening the bank but said it was "in the best interest of everyone" that a local family now has control. Barnes told a news conference that John A. Hopper, a Chase Manhattan vice president sent in as chairman of the Commonwealth, would remain as chairman "for as long a period as possible consistent with his intention at a later date" to return to New York.

United Press International, April 3, 1972

DETROIT (UPI) - James T. Barnes & Co., a Detroit-based mortgage investment firm, announced today it had options to purchase controlling interest in the financially-troubled Bank of the Commonwealth from the Chase Manhattan Bank of New York. James T. Barnes Jr., president of the mortgage firm, said the Barnes family had agreed to purchase 1,780,435 shares of the common stock of Commonwealth from Chase Manhattan. The New York bank acquired the stock more than a year ago in public auction after it had foreclosed on two notes totaling $20 million owed the bank by the prior controlling group interest, Donald H. Parsons [former chairman of the Bank of the Commonwealth of Detroit and owner of a Pittsburgh hockey team, the Penguins, and the Ford and Dime Buildings in Detroit] and his associates. [Parsons and his group, mostly University of Michigan alumni in their mid-thirties, took over Bank of the Commonwealth in a proxy fight in 1964.] The Barnes family also said it had arranged to purchase the 65,000 shares of preferred stock held by Chase Manhattan, as well as an additional 100,000 shares of preferred stock held by two California real estate men, Donald Kaufman and Eli Broad.

The combined total gives the Barnes family 53 per cent of the preferred stock and 39 per cent of the common stock, effective control of Commonwealth, Detroit's fourth largest bank. However, ultimate control remains with the Federal Deposit Insurance Corp. (FDIC) which was given broad powers in agreeing to loan Commonwealth $60 million to strengthen the bank's capital. The FDIC loans, the largest of its type ever extended, was approved by the stockholders last month.

The purchase price was not disclosed, but Commonwealth stock, traded over-the-counter, closed at 7% on the last trading day, Thursday. The acquisition of the Commonwealth stock by the Barnes family, which last fall bought 85 per cent of the Peoples Bank of Port Huron, another ill-fated Parson's venture, was praised by Robert P. Briggs, commission of the Michigan Financial Institutions Bureau. He called it "good news to all who have worked to bring about the reorganization of the bank."

John E. Thompson, president of Commonwealth, praised Chase Manhattan for its role in strengthening the bank but said it was "in the best interest of everyone" that a local family now has control. Barnes told a news conference that John A. Hopper, a Chase Manhattan vice president sent in as chairman of the Commonwealth, would remain as chairman "for as long a period as possible consistent with his intention at a later date" to return to New York.

WISCONSIN STATE JOURNAL, 
SATURDAY, FEBRUARY 1, 1975

DETROIT (AP) - A Saudi Arabian financier has reached agreement with the Bank of the Commonwealth, Michigan's sixth largest bank, to buy 40 per cent of its stock. The agreement, announced Friday, must be endorsed by the Federal Deposit Insurance Corp., which holds a $35-million note on the bank.

Ghaith Pharaon said he agreed to purchase most of the Commonwealth stock now held by the James T. Barnes family. Arab sources said Pharaon, 34, has close ties, to the Saudi Arabian ruling family. He attended the Harvard Business School and is a director of the Jezirah Bank of Jedda.

One segment of the Barnes family stock in Michigan's Commonwealth Bank had previously been owned by Chase Manhattan Bank, a member of the New York Federal Reserve, whose interest had been derived through foreclosure of loans made to Donald H. Parsons.

The other segment was purchased by the Barnes family from Detroit real estate men, Kaufman and Broad, creators of the first publicly traded (NYSE) home-building corporation. Thus, we can surmise the Federal Reserve was well aware in 1975 that a Saudi citizen was approved to controlling shares of the Commonwealth Bank in Detroit.

He was also happy, along with Khaled bin Mahfouz and John Connally, in 1976 to invest in the Main Bank of Houston, conveniently located in the historic Humble Oil Building on Main Street, which had become vacant after Humble Oil revealed its ownership by Exxon and moved into its new building a few blocks away. 

It was not until a year later the Saudis' investments in American banks became an appalling crime when they began to consider buying bank stock from Jimmy Carter official Bert Lance.

Associated Press - December 1977

CRS Design - John T. Jones, Jr. - and JESSE JONES

This is a fascinating account by John T. Jones, Jr. of how the Saudis got involved with the group of businessmen descended from parts of the "Suite 8F Crowd." Like his Uncle Jesse (who built and owned the Lamar Hotel where the crowd met), John Jones hailed from Houston, Texas. His father was Jesse Jones' brother, and he inherited what power he had from the foundation his uncle set up before his death--Houston Endowment--devised as a tax-free means of financing engineering work through "charitable" projects, such as museums, concert halls, and the like.

John T. Jones, Jr.'s favorite expression is "I don't know much," and he proves it in this oral interview. Was it that he didn't know, or that he just preferred not to tell us? One glaring example of what he didn't know is the omission of the name of Saudi investor Ghaith Pharaon, who entered the Houston scene at about the time CRS was intent on finding work abroad in areas where the oil money was abundant in the mid and late 1970s.

From Dec. 27, 1974 People of the Times column published in the Corpus Christi Times: 

"Earlier this month ARMAND HAMMER (above), chairman of Occidental Petroleum Co., told a Senate subcommittee on integrated oil operations that a Saudi Arabian businessman had purchased about one million shares of Occidental stock. He did not identify the businessman at that time. A company spokesman yesterday confirmed that the purchaser was GHAITH PHARAON, who represents Occidental's interests in Saudi Arabia. The confirmation followed identification of Pharaon by a Beirut financial magazine as the purchaser of shares. The company spokesman could not say precisely how many shares were bought. It has about 55 million common shares outstanding.

Another example concerns his involvement with the electrical contracting firm of Fischbach & Moore, Inc., which had not only been convicted and fined by a court in a lawsuit described below, but which had sold considerable shares of its stock to Ivan Boesky, who then conspired with Michael Milken, convicted in a later prosecution for violations of federal law. Yet John T. Jones, Jr. apparently saw himself as incidental to all this criminal activity going on all around him. What else was he in the middle of? More on that later. In the meantime, wrap your head around these blatant omissions:

Title :	JOHN T. JONES, JR.
Date  :	1991		Original File :	doc
Transcripts :	CRSS CENTER ORAL HISTORY PROJECT INTERVIEW WITH JOHN T. JONES, JR.. Kevin Noon interviewed John Jones at his home in Hempstead on December 10, 1991. It was transcribed by Barbara Anderson. KFN: This is real informal. . .what we are trying to get at is. . .if you could start with the beginning of how you got involved with CRS. JTJ: Okay. I think probably the best thing for me to do first is identify myself. I am John T. Jones, Jr. My relationship with CRS was as a corporate director. I have no training, no experience of any kind in the field of architecture or engineering. I was selected as a director, I think, because of my general business background, because I knew some of the active senior members of CRS, because I had employed CRS earlier for a major job. . .and we both spoke to each other after it was over. I wasn't very loud but I was a member of that Board from sometime in the early 70's to about the mid-eighties. The exact dates, I'm sure, are in the company records. There would be no problem about that. I resigned from the CRS Board at the same time directorship in the Fishbach Corp. of New York put me in danger of a conflict of interest with one or the other. This was at a time when both CRS and Fishbach Corp. were very interested in going into the general contracting business. Prior to that time, Fishbach had been a general electrical and plumbing contractor, national and international in scope. KFN: And your relationship with Fishbach was. . . ? JTJ: As a Director. My relationship with Fishbach was about ten years longer than with CRS. So when I had to give up one, I gave up the one with whom I had the shortest relationship. Without reference to personalities or anything like that, because at the time, I had a great many very good friends in both organizations, but sooner or later I would have been in conflict and I wanted to avoid that before it came to a head. My business background is primarily in communications. From 1950 to 1965, I was President of the Houston Chronicle Publishing Co.; President of the Houston Consolidated Television Co. from its inception in 1954 to its sale to Capital Cities Broadcasting Corp. in 1967. That is a Texas Corporation, which owns Ch.13 in Houston; and was and still am Chairman of the Board of the Rusk Corp., a radio broadcasting company, which has KTRH-AM and K101-FM in Houston, an FM stations in San Antonio, Austin, and the Permian Basin, generally in Midland. Now, CRS. . .what would you like to know? KFN: First of all. The initial project that got you involved. JTJ: The initial project that got me involved with CRS was the construction of Jesse.H. Jones Hall for the Performing Arts, which in this year, 1991, celebrated its 25th anniversary. At the time I was Chairman of Houston Endowment Inc., which financed the construction of the Hall as a gift to the City of Houston from Houston Endowment. Houston Endowment, incidentally, was the foundation formed by Jesse H. and Mary Gibbs Jones in 1938, principally funded at Jesse Jones' death in 1956. When we decided to do this, I had talked to several architectural firms but not very many. At the time, through the Jones interests, which had been commercial builders in Houston for a long time, I was in touch with a great many architectural firms. I was particularly impressed with background of CRS, Caudill Rowlett Scott. They had done a great many major school or college projects and other public type projects. I was rather naive about architecture then, but I thought if they could design a college campus, they surely ought to know how to handle people. I was also impressed with the representatives from CRS who called on me. The ones who called on me were Wallie Scott, Tom Bullock and Willie Peña. The selection process was really not scientific at all. We were just impressed with these people, and they left me brochures and that kind of stuff, which were pretty. Every good architectural firm has brochures and they are certainly not going to showcase their bad jobs. I asked them what they thought about it. KFN: So that was your impression of them, essentially, and how they performed when you interviewed them. How many other firms do you think you might have talked to? JTJ: I don't know. . .two or three. Besides that, they sure wanted the job. KFN: Oh, I'll bet. JTJ: They sure wanted the job. It was a good job for them because it was a chance for them to showcase themselves in Houston. They had only recently come into Houston. Before then, they were headquartered around College Station, doing work nationally. . .scattered around. When they moved into Houston, they really needed a real good job there. I thought because of that they might work just a little bit harder to make it a good job, a real showcase job. All the principals of the company I talked to were intrigued with the idea of this gift to the people of Houston on the same site as the old City Auditorium. The old City Auditorium, I'm sure, was a great building in its day but its day was long gone. That's basically the reason I picked them. KFN: How did things evolve after that? JTJ: Naturally, during the construction of Jones Hall, I was with them quite often. They were easy to get along with. They were the designers, supervisor of construction. I had never dealt with them before. I trusted them completely. . .but another architect was Clerk of the Works. He was there. . . KFN: To give a second opinion and keep an eye on things. JTJ: To see that it was being built as drawn and if not, that it was explained why. . .and to watch the architects and watch the contractor. He was our only direct employee; he worked for the owner. He has since then become quite a successful architect on his own. That is probably the basis and background. I got to know Tom Bullock very well and Herb Paseur. We used to have regular meetings of the Building Committee, and I was chairman. That didn't mean I knew a damn thing about building but it meant I was at all the meetings. We always had two or three people from Houston Endowment and most of the principals of CRS. . .always Bullock, Paseur. . . . KFN: Was Bill Caudill ever involved? JTJ: Bill Caudill was there from time to time. When he was there, he was very active, constantly offering suggestions, and just as frequently, offered questions. I was very impressed with the man. He had a mind that was . . .unfettered, let's say that. He liked to question and experiment, but never dangerous in his experimentation. Anyway I got to know the principals quite well. Jim Gatton was the Project Architect and I got to know him best of all. Jim, I will say, turned in a good job. No job is perfect. There are always glitches that show up now and then. But Jim did a good job on smoothing them out. If he couldn't smooth them out, he worked them out. Now what else do you want to know? KFN: I have a communication background myself, a degree, no work in the field at all. I'm interested in that topic and we're going to hit that topic pretty hard. Given all the possible definitions of communication, feel free to hit on any of those. What kind of communication structure did you see in the company when you tried to deal with them in the early years? Did you see any problems there, any advantages, examples of how they communicated with each other? JTJ: Not particularly. I was pleased. . .I won't say surprised. . .with the internal communications of the organization. I expected that because the principals I met were, to say the least, were garrulous. They were intent on everyone's knowing. . .Bullock, in particular, had this business of everybody working together. I don't know whether Tom Bullock can draw a straight line or not, but he's a hell of a mover. I got to know him and like him a great deal and my opinion hasn't changed at all. KFN: He had some great things to say before I came down here. I could tell he wanted to do this interview but he can't. JTJ: He'd have done a good job but he'd have done most of the talking. Anyway, I was pleased with the internal communication and I expected that. Certainly Bill Caudill. . .he was the Daddy Rabbit of the organization, the thing everybody coalesced around. . .was the fountainhead of a constant "stream of consciousness" memos, going at it all the time. Must have been a full time job for one person to keep him supplied with those damn little cards he used to send them out on. KFN: Yeah, he was a thinker. JTJ: Yes he was. . .thought all the time. He used to fly an old float plane. . .looked like a float plane, a cumbersome old thing. He'd fly it from College Station to Houston and come by this place, our ranch here in Hempstead, Texas; and there is old Oxbow Lake down there. He would fly over that thing and wiggle his wings and I knew next I was going to get one of those little cards with what he was thinking about when he flew over. KFN: That's wonderful! JTJ: What's next? KFN: Okay, you marked off "Mergers and Acquisitions." You were involved with some of those as they came along, possibly Sirrine and others. JTJ: Yeah, well. That was a long time after I got on the Board. I was interested in the Sirrine merger. I thought it was very much to the benefit of the company. When I first got on the Board, whatever that elusive date is. . .I can't think of it right now. . .CRS was just starting to grow out of being a pure architectural design company. They were going into Construction Management in a pretty big way, and they put in a pretty sophisticated. . .computerized, that's what sophisticated means these days, I guess. . .computerized construction management system. And they were doing very well. It was quite good and by that I mean they were getting work. KFN: So you think it was the right thing to do, switch over and start. . . . . JTJ: As you know from talking with others, at this time they were doing quite a bit of overseas work. When I joined the board, they were in the process of one big deal and going into another one, the HOK+4 consortium in the Saudi Kingdom. They were pretty well wrapped up with that. Incidentally, that went well and wound up that the companies' top echelon were more concerned with how to get the money out of Europe and back to the U.S. than they were with any glitches in their actual process in Saudi Arabia. KFN: I see, how to get the receivables back to the country. JTJ: I was kind of familiar with that because the Fishbach board. . .this other company I was with, an international electrical contractor, had just done a tremendous electrification job for the new nation of Zaire, and they were in the midst of electrifying. . .I don't know the name of the river. . .there's one great huge river that runs almost the full length of Afghanistan. . .and they were electrifying a lot of Afghanistan, hydroelectric dams, hydroelectric (?) and they had the same problem of how to get their money out. Seems all these countries want you to come in and do the work but make it difficult to get it out and the U.S. makes it difficult to get it in. KFN: So that was the big problem. . . JTJ: Not a big problem but was a problem, one that occupied some board time. Bought an awful lot of airplane tickets to Africa. . . KFN: Were you involved with the Sirrine acquisition? JTJ: No, not directly, just as a board member KFN: How did you feel about that? JTJ: I was for it. I thought a long time about it but I was for it. Architecture hadn't gone into a slump or anything like that, but architecture was a little flat. Sirrine was pure engineering company and had a real specialty. . .they were the leading paper-making engineers in the U. S. Having been closely associated with the newspaper industry for a number of years, I knew that was an industry that had not topped out. Canadian paper was becoming more and more expensive. European paper was certainly more expensive and very limited. . .all the companies were in Sweden and Finland. At that time we could not get any importation from Russia. I don't know whether there is any now or not. Russia's got the greatest potential in the world. The Canadians have got the raw material but the Canadian plants were all old, old, old. The new plants were all in the southern pine belt. Southern pine is a very rapidly renewing resource. You can grow pulp logs in 14-15 years. It takes 20-30 years to grow a tree the same size in Canada because the growing season is so short. Takes even longer than that in Finland. They've got to get their growth in 2-1/2 to 3 months. I was very much for the Sirrine and did everything I could to foster it . KFN: On the downside, what were some of the opposition comments? Do you remember any? JTJ: There was lots of questioning. There was only one real "con." Chuck was very reluctant to go into it. He had been for it for a long time. . .first he was indecisive and then was actually against it. That's the reason he left the company. He thought it was the wrong move, they were going too fast into uncharted areas. He was kind of a. . .I won't say cautious. . .but in this case, was careful to a fault. I think the good points were obvious. He didn't see it that way and wanted to keep the status quo a little longer. He was a little more apprehensive about going into uncharted waters. . . KFN: What other mergers and types of things did you look at. Do you remember? JTJ: There were lots of flirtations. One that went through was the Geren firm in Fort Worth. That was a relatively small firm, very, very strong in its market. That went through and I have no idea what came out of it. KFN: What was their specialty? JTJ: They were general architects in Fort Worth, did a little of everything. I'm sure they'd have been delighted to build you a church, office building, factory, whatever. It was a fair-size firm. . .my memory is bad. You can check with Bullock, although I know his memory isn't a damn bit better than mine, but he might add to it. I think they had close to 40 associates, but owned by an individual. . .at least that's my recollection. What else do you want to know about CRS? They had great board meetings, I'll tell you. You ate, you drank. . .anything you wanted. Extremely eclectic board, too. KFN: Yeah, I noticed there were some really interesting people on the board. JTJ: Characters, characters. KFN: Now did that help to broaden perspectives on where the company should go? Did that cause problems? JTJ: I don't think it caused any problems. This board was . . . .I don't remember any real arguments. . .lots of discussions, very open and free. It was a very good board in that respect. The character I referred to principally, I guess, was John Naisbitt, the author of Megatrends and all that stuff. He had a bunch of correspondents who clipped newspapers and sent them to him. From this wealth of clippings, etc. he would project things. I guess it turned out all right. . .I don't know whether he was an economist or just a good collator. He turned out to be a hell of an author, probably made a lot of money out of it. KFN: Do you think he sparked a lot of visionary ideas being there? JTJ: He sparked more discussions than interest. He may have headed off a few things. He pointed areas where you could concentrate (?). He was pretty firm in his projection that the future states, as far as economic growth was concerned, were California and Florida. Then the other sunbelt states with Texas in thelead as a sort of secondary role. That's my recollection. . .he kind of ruled out a lot of the rust belt states. He hasn't been completely accurate in that because some have done fairly well. KFN: Basically, then, he stirred up a lot of conversation. JTJ: Oh yeah. We had a board member who was a particular friend of mine, named Aaron Farfel. Who resigned before I got off the board. Aaron was, I guess you would call him, a general businessman and extremely successful. . .very quiet, softspoken and sharp as a tack. When he spoke, he never raised his voice but everybody stopped and listened. He didn't interject many comments, but when he thought he saw something, he would bring it up. KFN: What was that name again? JTJ: Aaron Farfel. He was. .. . KFN: Was he on the board for a long time? JTJ: He was on it for several years. He was particularly good with finances. He was also one of my board members on the old Ch. 13 board. KFN: Based on your work in the communication industry, coming into an advisory capacity for an architectural firm, did you think these folks were a little out in left field. . .were they progressive. . .aggressive. . .moderately so. . .visionary? JTJ: They were everything you said. They were kind of wide-ranging. They also. . .at least a number of them. . .had their eye on the bottom line too. . .knew what the company was there to do. It was there to be a great architectural firm but they didn't have a Medici family back of them to support them, so they knew they had to make money. They were good at that. KFN: Do you remember any of the other folks who served on the board with you? JTJ: Sure. At first, there were Bill Caudill, Wallie Scott. . . Side 2 JTJ: We always had the financial side of the company represented. The outside directors, Naisbitt, myself, Farfel. KFN: What did you say Farfel's contribution was, mostly? JTJ: Financial. He was an excellent financial man. KFN: Do you remember where he came from? JTJ: I know exactly. He was an accountant and lawyer by training; came to Houston following WWII as an IRS officer. He spent five-six years as an IRS officer auditing some of the major organizations in Houston, including our own. Then he opened A.J.Farfel & Co., a CPA firm. He did that for, I guess, 15-20 years and then gave that firm to his employees. It was a successful firm and is now Peat Marwick Mitchell in Houston. He was President of Pyramid Rubber Co. , which during WWII made an absolute mint of money because they had stockpiled most of the natural rubber available for baby bottle nipples. That's the only thing the federal government released natural rubber for and they owned the company. He was Board Chairman of Spaulding Sporting Goods Co., a big company. Their principal product was golf balls. . .which are, here again, wrapped in rubber. He was in a lot of things. . .real estate. . .a real entrepreneur. If it had possibilities, he would take it on, quite a venture capitalist. He gave me long lectures on the investment of money and gold. . .he said it was the worst investment of all. He said its dead, inert. . .money invested in gold does nothing. Money should be invested in production, something that's created. KFN: Well, he proved that. JTJ: Oh yeah, he proved that. He wasn't wrong very often. KFN: How did you guys get along as a team on the board? JTJ: Pretty good. I think everything was pretty copasetic most of the time. There were disagreements, sure. There are bound to be lots of disagreements in any company. Those were either settled, worked out or laid to rest before they ever got to board level. We didn't have to worry around with much of that. When Chuck left the company, that did get to the board level who accepted his resignation. KFN: If you could start over again, back when you first joined the board in the early years. What would you have done differently from what they had going? Brought on different people, tried different strategies, different economic directions. . ./ JTJ: No, I think they did pretty well like they did. On the board, I didn't talk very much, unless I thought something was going the wrong way. (This part unintelligible. . .the parrot drowns out Mr. Jones). But I didn't do that very much. I don't know that I'd have done anything very differently. I think CRS. . .although with many name changes. . .has been quite successful and done a damn good job. . .they've left very happy tracks behind them all through Texas. KFN: That's the point of our effort here, to find out why that happened. JTJ: I think this, in very large measure, is the pattern set by old Bill Caudill. He was kind oaf bear of a guy, but a great fellow. KFN: And of course, Tom, keeping up with the production end of it. JTJ: Oh yes. Tom had a little hand on the sales effort, too. Quite a bit. . .he was damn good at it. KFN: I'm sure he'll be glad to hear that. Did you follow the company at all when you left in the mid-eighties or so? JTJ: It was 84-85, something like that. Yes, I kept up with it. Certainly I kept up with Tom, Herb Paseur. . .I see quite a few of them. KFN: Let me go back and ask you one other thing. Did you get involved with any of the management of the company at all, anything internally, management-wise, how they were running things? JTJ: Not particularly. Tom might have been worried about something and talked to me. He likes to have somebody to bounce things off of. So I got involved in very small ways. But to be available to have things bounced off you is pretty good service sometimes. KFN: Oh yeah, especially with your background in your other interests. At the same time you were serving on the CRS Board, what other positions did you hold? JTJ: At one time or another during that period of service, I was involved with television. I was no longer involved with the Houston Chronicle. I resigned from the Chronicle because I had bought its radio station and didn't want to be in conflict with that. I was a director of what's now Texas Commerce Bank. It was then the National Bank of Commerce; I was director of the Houston local Chemical Bank, Chemical Bank & Trust, which was later absorbed by National Bank of Commerce. I was a director, just retired a couple of years ago, of American General [later AIG] for thirty years, and a director of Fishbach Corp. Fishbach Corp. is a New York contracting company. With a conflict of interest, I left the CRS Board. [The corporation's name is misspelled throughout this oral transcript. Correct spelling was "Fischbach".] KFN: So with the banking, communication and Fishbach, can you make any comparisons as to how they conducted business in those other industries vs. this one. Is there anything you . . . . JTJ: The difference between the boards? KFN: The boards, exactly. JTJ: There was a lot difference. KFN: Okay. Can you describe some of the more unique things that set them apart? JTJ: The Fishbach Corp. was essentially a family company, founded by Harry Fishbach and Bob Moore, two men. Moore sold out a few years after the war. Harry Fishbach and his sons stayed on and they pretty much dominated the company, a New York organization. The people on the board had all been there a long time and it was a very close board. The ones who lived in New York, especially, used to see each other socially. . .very willful, argumentative. It was necessary to have a lawyer on that board and they did. Fischbach & Moore, Inc. of Dallas (F&M) was sued for rigging contract bids on nuclear power plants ~~~~~~~~~ Result of the trial convicting the defendants was appealed and opinion announced in 1984 at 750 F.2d 1183 in The United States v. Fischbach and Moore, Inc. For approximately seven years, from 1974 to 1981, representatives of several electrical contracting companies met at the Duquesne Club in Pittsburgh. The purpose of these meetings was to allocate electrical construction projects, by bid rigging, at the Western Pennsylvania Works (Works) of United States Steel (USS). Whenever one of the companies desired to rig a bid, that company's representative would telephone the other contractors and arrange a meeting. After deciding among themselves which firm would receive the contract, that firm's representative would contact the other contractors and would tell them what bid to submit, ensuring that his firm's bid would be the lowest. Some of the firms kept track of the allocations to ensure that each contracting company received its fair share of work.... F & M brazenly committed a grave crime. The jury found the company guilty of conspiring to commit per se violations of the Sherman Act in a series of meetings that obviously were illegal. Moreover, F & M was one of the ringleaders of that conspiracy. As to the sentences imposed in the same jurisdiction, the penalties levied on the other defendants in this case provide a good example. Every individual defendant received a fine and a prison sentence; all the corporate defendants received one million dollar fines.  ~~~~~~~~~~~~ APRIL 25,1990 from AP-- "We believe that this prosecution and the fact that Mr. Milken has admitted to guilt will send the right message to the financial community," Assistant U.S. Attorney John K. Carroll told the court. Mr. Carroll said that after sentencing is completed, the public "should conclude that justice has been done."  Milken was composed as he described the work of Drexel's Beverly Hills, Calif.-based junk bond department and his unlawful actions. He broke down in discussing his personal struggle during the four-year investigation. In addition to conspiracy, Milken admitted to violations including:   —Violating federal disclosure requirements by failing to record a deal compensating Boesky for trading losses in Fischbach Corp. in 1984. Boesky had acquired more than 10 percent of the takeover target on Milken's recommendation and Milken promised to to cover any trading losses. —Securities fraud involving the sale of MCA Inc. stock by Drexel client Golden Nugget Inc. in the fallof 1384. Milken said he arranged illegal trades to cover losses by Boesky, who agreed to buy blocks of MCA stock to mask sales of large positions and create the appearance of market demand. Milken said his plea was an admission of personal responsibility "and not a reflection of the underlying soundness and integrity of the capital markets in which we specialized." "Our business was in no way dependent on these practices," he said. "Nor did they comprise a fundamental part of our business and I regret them very much." Junk bonds grew from an obscure form of debt to a $200 billion market almost entirely because of Milken, who controlled a wide network of buyers and sellers and wielded enormous power. The market virtually dried up last fall because of problems involving several large defaults and Milken's departure from the scene. ~~~~~~~~~~~ KFN: As a moderator. JTJ: But they all liked each other very much but were mostly individuals, men who had been CEO's of various contracting organizations, which had been taken over by Fishbach [sic]. They were all successful, all had very strong opinions. Sometimes it seemed to me that the one who could holler the loudest was the one who. . . . It wasn't quite that bad but it was a very open board. American General was more like a bank board. You had a very set agenda, stuck to it. As you come to everything on the agenda, the Chairman is more like a school teacher. He recites everything, explains the items, including all ramifications, and there is not as much feedback from the various board members because, everything is talked about and the only feedback you get is if somebody really does object. In those days, banking was a pretty well regulated industry, so there was not as much reason for much feedback, as long as you stayed within the law. American General [founded by Gus Wortham] was very much the same, possibly a little more discretion than the bank but not much. The one time when you had a whole lot of board feedback was if the bank ("hook 'em horns". . .you know where I went to school) was going through a change of direction or policy, something like that. . .if they were planning on a merger, a purchase, a major acquisition. That's when things really got out, but the routine, day-to-day things were not discussed, as say, they were on the CRS Board. They were on the Fishbach [sic] board. KFN: They were discussed on the Fishbach [sic] board? JTJ: Everything was. KFN: Everything was? JTJ: Just about. If it wasn't discussed, they'd bring it up and ask. . . ."where do you buy your pencils?" KFN: Is that right? And CRS had a kind of mix of that, some details but not much. And in the banking and insurance. . . . JTJ: Much more structured. KFN: They didn't bring out the details as much. . .they were pretty much set anyway. JTJ: Toward the end of my tenure on the CRS board, it was becoming more structured because it was getting so damn much bigger. So many different things to discuss, there had to be more structure to the board. KFN: Was the attention to detail in Fishbach beneficial to them? Could they have done better without so much attention to detail? JTJ: I don't think it would have made much difference, either way. The strength of Fishbach is that they had a core of employee built up over 25-30-40 years, who were extremely loyal. . .never underestimate people like that. . .god, they're important in the contracting industry. . .their various branch supervisors, people like that. You could have wiped out the Board of Directors and they wouldn't have known it for a year. The company would have just gone on. Sooner or later, they would have needed a board but actually the main things we discussed were major trends we saw coming up, things like that. There was a lot of petty discussion. We didn't actually quarrel of where they bought pencils, but it was. . . . KFN: A level of detail there. JTJ: And in the contracting business, you have a tremendous loophole for theft in purchasing, and the internal audit report was always a big part of the meeting. Outside auditors don't audit anything like that, so we had fairly substantial internal auditing system because there were literally buying millions of dollars worth of supplies every week or so. This is the biggest electrical contracting firm in the U.S. and about third in the world. A lot of that stuff can fall thru the cracks, one of the big problems. . .like the restaurant business. If you close the back door, you make money; if the back door's open, you don't. Something else I've been in too. KFN: Really? Holy cow. You've certainly seen a lot of action. Then the CRS Board had a sort of happy balance between detail, vision and planning. JTJ: I think so. It was a very happy and, I think, an effective board. KFN: Did they socialize with each other as much as the other boards? JTJ: Once or twice a year we would have a get-together. KFN: Okay, but not real tight. . .no outside relationships or anything. JTJ: A couple times a year there would be a get-together when wives would be invited. KFN: Would it have helped if you had been a little closer with these board members on the outside, socially. JTJ: No. KFN: You don't think so. . .wouldn't have had any effect? Okay. Some folks mentioned that as being a.. . . . JTJ: I think it was all right like it was.. If you wanted to see each other outside, you could. There were some business-related functions when they would invite the directors, sometimes all of them, sometimes just the ones in Houston they could get together in a hurry. They would get together, maybe for some potential major client who was in town. . .buy him a drink, give him a nice little snow-job. KFN: Did you notice during your tenure an evolution of the board to a broader perspective. . .from design to. . . .? JTJ: A little bit. We took in more outside members, and that broadens it some. KFN: Were you really the first outside board member? JTJ: No. John Naisbitt and Aaron Farfel were both there when I got there. I don't know which of them was the first outside member. I kind of think it was Aaron but am not sure. KFN: Was this before Naisbitt wrote Megatrends? JTJ: It was before. . .he wrote Megatrends while he was on the Board and after I got on it. He sent me an autographed copy and didn't even ask me for any money. KFN: That was an incredible book and he struck a cord with folks all around the country. Don't know if it's true or not but it created a lot of interest and is still selling right now. You've been going for an hour now. This is a long interview. JTJ: It's long enough as far as I'm concerned. I've told you everything I know. End of taping session

A Spooky Houston Syndicate

In a previous blog, I discussed Joanne Johnson King Herring, the former doyen of the Houston social scene. Joanne one the one-time girlfriend of Charlie Wilson in Charlie Wilson's War and was played on the screen by Julia Roberts. After her romance with Wilson, she later married a rich businessman named Davis.

I began my research on her long before George Crile wrote Charlie Wilson's War. More accurately, I was researching her husband, because he was ran a natural gas corporation for years before it became Enron. Already teetering on the bring in August 2001, Enron used as its excuse for its global collapse the destruction of the World Trade Center on September 11.

You can call me a cynical skeptic if you like.

When I first heard of Joanne Herring, I was doing research into an informally organized political group that met in Houston, Texas and was often given credit for providing the funds that elected Lyndon Johnson to Congress and, later, to the U.S. Senate and the Presidency.

Herring 's husband was ancillary to that group, not an actual member, and he came to my attention once he moved the corporate headquarters of Houston Natural Gas, out of the Petroleum Building--where it had been located since 1927--and into 1200 Travis Street, an office building across the street a few blocks to the north from Houston's largest department store, then called Foley's.

 

Petroleum Building, 1314 Texas Ave.

Robert Ray Herring began working for Houston Natural Gas (HNG) Company in 1963, when a corporation he had set up in 1958 to build natural gas pipelines (Valley Gas Corp.) was bought out by HNG, and he became president in 1967. Herring's previous employer had been Fish Engineering owned by Ray C. Fish, the largest stockholder in El Paso Natural Gas. Fish also founded Pacific Northwest Pipeline Co. which built a pipeline from the San Juan Basin of Colorado and Artesia, New Mexico to Puget Sound. Fish died in 1962, at about the time Valley Gas Company was purchased by HNG.

For many years Houston Gas & Fuel (the securities of which were held by Houston Gas Securities corporation) had produced the natural gas bought and distributed by the HNG Co. to Houston consumers. Consolidation began in 1928 when the stock of Houston Gas Securities, then owned by Empire Power of New York, was bought by a local company composed of William L. Moody, III and Odie R. Seagraves.

Houston Gas Securities and Empire Power Corp

Completed by the end of March 1930, the consolidation was summarized by Time Magazine as follows:

Last week was announced a major gas consolidation in the southwest. Companies affected are Louisiana Gas & Fuel Co., a subsidiary of Electric Power & Light (which in turn is controlled by Sidney Zollicoffer Mitchell's Electric Bond & Share Co.) and United Gas Co., which Odie Richard Seagraves organized in 1928. Mr. Seagraves, together with William Lewis Moody III, constitute what is commonly known as the Moody-Seagraves interests.

Able promoters, Mr. Moody and Mr. Seagraves have developed many a Texan and Southwestern industry, including hotels, cosmetics, railroads. Mr. Seagraves has a large ranch at Kerrville, Tex. Although the new gas company will be organized as a subsidiary of Electric Power and Light, Messrs. Seagraves and Moody retain a large stock interest and will in all probability be represented on the directorate.

Electric Bond & Share will have a controlling interest in the as yet unchristened new company, which will also purchase from Standard Oil of New York the natural gas properties in Texas and Louisiana owned by Magnolia Gas Co., a Standard subsidiary....Significance of this consolidation lies:

1. in the extended influence of Electric Bond & Share;
2. in the drift of the natural gas business away from its petroleum and toward its public utility affiliations;
3. in the probable status of the newly formed company as the first of many far-reaching consolidations which should ultimately create a super-gas situation comparable to the already existing super-power systems in the electric field.

According to Griffin Smith, Jr. in an article, "Empires of Paper," in Texas Monthly (November 1973), in the 1930s:

Vinson Elkins...was a 'four-client firm'-- those clients being:

• Great Southern Life Insurance Company,
• Moody-Seagraves,
• the production end of United Gas Corporation, and
• Pure Oil Corporation.

All but the last one were headquartered in Houston. Judge Elkins saw another resource, however, and exploited it brilliantly. The local independent oil men had never catered to Baker & Botts, thinking the Baker firm was too close to the big oil companies and Eastern finance. The Judge, wearing his banker's hat as president of First [City] National, gave them loans; VE in turn did their legal work...This neat little arrangement catapulted VE into the big time.

In December 1965 42% of United Gas Corporation stock was sold to Pennzoil Corporation. Only four years earlier a subsidiary, Shreveport-based United Gas Pipe Line, among other companies, had negotiated long-term contracts with Texas Eastern Transmission Co. allowing the latter company, formed at the end of WWII by George and Herman Brown and other Houston associates, to expand. 

Pennzoil was formed in July 1963 when South Penn Oil shareholders approved a merger with Zapata Petroleum and Stetco Petroleum, allowing Zapata stockholders to exchange four shares of Zapata common stock for one share of Pennzoil stock and Stetco shareholders to exchange seven for one. In 1959 Zapata Petroleum had split off part of the company into Zapata Offshore, with the new stock going to George Bush, who previously had been a shareholder of the former company; he therefore obtained no interest in either Pennzoil or United Gas by virtue of the mergers that occurred subsequent to the Zapata split.

HNG had bid on long-term contracts to supply gas to other major cities in Texas, but it was being bombarded at that time by competition waged by a Texan named Oscar Wyatt through his corporation, Coastal States Gas, particularly in Corpus Christi, San Antonio, and Austin, who claimed he could save the cities money.

In 1955 the firm became the Coastal States Gas Producing Company, engaged in collecting and distributing natural gas from the South Texas oilfields. In the early 1960s Coastal purchased the Sinclair Oil Corpus Christi refinery and pipeline network and established a subsidiary called Lo-Vaca Gathering to supply natural gas to Texas cities and utilities. When Lo-Vaca curtailed its gas supplies and raised prices during the energy crisis of the early 1970s, customers sued Coastal. Regulators ordered the subsidiary to refund $1.6 billion in 1977, and Coastal spun off Lo-Vaca as Valero Energy to finance the settlement.

Newspaper articles from that early era tell us that Hy Byrd, who grew up in Port Arthur, Texas, had become wealthy from building the pipelines to carry gas from the south to northern areas and that in 1962 he decided to "branch out into the aerospace industry"--a decision that came at the same time Senator Lyndon Johnson was using his influence in locating an arm of the NASA program in Houston.

Byrd also went into banking by acquiring the stock of the Montrose National Bank (located at 3400 Montrose Street), changing the name to Central National Bank.

The majority ownership of the bank was controlled at the time by Hy Byrd's corporation, Gulf Interstate Corp.[2] During this time, Houston Natural Gas was under the management and control of a variety of businessmen. Hy Bird would be succeeded as president in 1967 by Robert R. Herring.

A noted architectural firm was hired to design an office building for the bank at 2100 Travis at Gray Street, and other businessmen who had bought stock in the bank located their own businesses in the building. Hy Byrd was president of the bank, and another person involved in Central National's banking syndicate was L.E. Cowling, (responsible for the founding and initial capitalization of Alabama National Life Insurance Company, Capital National Life Insurance Company of Houston, Texas, and Southern States Life Insurance ) later a defendant named in an intricate scheme of corporate insider loans in the Shell v. Hensley case, 430 F.2nd 819 (1970).

2100 Travis - Central Square

William Wayne Caudill had been acclaimed for his school building design before he moved from College Station to Houston in 1959--senior partner of the Caudill Rowlett Scott (CRS) firm of architects, which would eventually become CRS Sirrine. Caudill was also a professor from 1961 to 1969 at Rice University where he also served as chairman of the department of architecture. The Rice professor was chosen to design the bank's office building. 

During both the Johnson and Nixon administrations, Caudill was appointed to federal government advisory commissions, most notably tapped to be "architectural consultant to the Department of State on foreign buildings" from 1974-79 for President Gerald Ford's administration. The CRS firm's history is recounted below:

In the late 1960s, as the boom in school construction started to wane, CRS branched out into the health care market and broadened its planning and design capabilities. To adapt to its new focus on design, the firm renamed itself again in 1970, incorporating in Delaware and becoming CRS Design Associates. The following year CRS made its initial public offering of 350,000 shares at $12 a share on the American Exchange. With the resultant infusion of cash, CRS began a strategy of expansion, and it immediately began acquiring other businesses, especially in construction management and design. Under the leadership of Chairman Thomas A. Bullock, one of the original partners, CRS would acquire ten companies over the next eleven years; these companies were businesses as diverse as interior design, water resource engineering, and pulp and paper, and their acquisition transformed the nature, size, and role of the company.

Stock Issued in 1971 by Underwood, Neuhaus & Co. of Houston, TX

 In 1971, the first year it publicly reported revenues and profits, CRS had revenues of $8.79 million and net income of $955,000, up from $6.465 million and $500,000 the year before. In 1972, CRS made its first major post-public offering acquisition, buying A.A. Mathews, a construction engineering firm specializing in tunnel design with offices in Los Angeles, New York, Washington, D.C., and Rome. With this stroke CRS moved into the civil engineering market. 

The same year, CRS also bought a water resources engineering company, Stevens, Thompson & Runyan, Inc., which had offices in Oregon, Washington, and Idaho, for 232,000 common shares and $1.65 million in cash. With these acquisitions, CRS's businesses boomed. By 1973, revenues totalled $17.1 million and brought the firm a net income of $1.464 million.

In 1973, CRS and a joint venture partner, McGaughy, Marshall & McMillan, were awarded one of the largest Middle Eastern projects ever, to provide full architectural and engineering services for the King Abdulaziz Military Academy near Riyadh. By 1976, the firm had 761 employees, and revenues of $33 million, with a net income of $2.3 million. As the firm brought in more construction and engineering contracts, the numbers continued to rise. In 1979, the firm had $50 million in revenues and $2.85 million in net income.

In 1978, CRS acquired Clark, Dietz & Associates-Engineers, an Illinois-based civil engineering firm that specialized in environmental engineering, for $5.25 million. That year CRS melded the four engineering firms it had purchased in the last five years into one, STRAAM Engineers. CRS continued to develop its international business, completing massive works at King Fahad University in Saudi Arabia. Indeed, in the 1970s, about 70 percent of CRS's revenue derived from international orders, most of which came from building schools, hospitals, and other institutions in the Middle East.

Also in 1978, Saudi businessman Ghaith Pharaon bought a large stake in CRS, buying about 20 percent of the firm's shares at about $20 per share. Although he became the firm's biggest shareholder, the eight original partners still owned a larger share between them, and were basically left in control. But changing conditions in the world economy and marketplace forced CRS to transform itself in the 1980s. It went into the decade heavily reliant on foreign construction business. But by the end of the decade, it would focus more on domestic design and power generation.

Military orders would continue to play an important role in the company's growth in the 1980s, just as they had in the 1970s. In 1980 CRS received a contract of about $56 million from the U.S. Air Force to provide furnishings and equipment for the Saudi Arabian F-15 aircraft program. And the following year CRS received a subcontract to formulate the master plan and construction logistics planning for an MX missile base in the western United States, which contributed significantly to the firm's revenues of $76 million and income of $5.25 million in 1981.

That same year CRS acquired Geren Associates, an architectural and engineering firm based in Fort Worth, Texas. To develop its domestic construction business, CRS bought four general contracting firms the following year: Metro Southwest Construction, based in Dallas, and Western Empire Construction, Colo-Macco, and Summit Constructors, all of which were based in Denver. This move greatly expanded CRS's regional coverage.

By 1981 orders from the Middle East had slipped while other areas of business had grown, and only one quarter of CRS's revenues came from projects in the Middle East.

Still, the 1980s brought lucrative Middle Eastern contracts to CRS. Between 1982 and 1987, CRS managed a five-member international consortium of firms that planned, designed, and did construction management for a $2.1 billion project for Saudi Arabia's Ministry of the Interior to provide 12,000 housing units.

In 1982, CRS began acquisition talks with J.E. Sirrine, a privately-held mill architect and engineering company based in South Carolina that had been in existence since 1902. But CRS canceled the talks in March 1982. In 1983, though, the talks were revived and the sale went through. Sirrine has been CRS's most important acquisition, and it has helped change the direction of the company. At the time, Sirrine's main appeal was that it had a large domestic business, and that it represented new geographic and business areas. Sirrine provided engineering services to the growing pulp and paper, tobacco and chemicals business in the southeastern United States. More importantly, though, Sirrine was a major power plant designer. After the acquisition, in October 1983, CRS Group formally changed its name to CRS Sirrine, Inc.

While Hy Byrd chaired Gulf Interstate, the company also purchased a 40% interest in Kenneth Schnitzer's office building at 1200 Travis Street (between Polk and Dallas Streets)--called "the Houston Natural Gas Building" for its core tenant. Across the street from 1200 Travis, Gulf Interstate also acquired a leasehold interest in the Americana Building which had several floors for parking, leased to Foley's Department Stores (now Macy's) on the other side of Travis Street.

According to an April 24, 1977 Houston Chronicle:

Over the past several years, the firm [Gulf Interstate] has been going through the motions involved in establishing a business relationship with developing Arab petronations. At present an Arab representative "maintains a presence" for the company by officing at a residential villa Gulf Interstate has acquired in Al Khobar, Saudi Arabia. * * * * In the early 1950s . . . "a pipeline from Louisiana to Ohio was, in essence, promoted by Hy Byrd (a private investor currently on the Gulf Interstate board) and others to deliver gas to Columbia Gas in Ohio.The obvious thing happened: Columbia merged with Gulf Interstate Pipeline and took it over," says Wells.

The engineering company Gulf Interstate Pipeline had formed, however, turned out to be an unwanted stepchild for Columbia's purposes.

In June, 1958, therefore, Gulf Interstate Co. was spun off with Gulf Interstate Engineering as its subsidiary.

"Part of the spinoff included the rights to process all the gas on the pipeline," Wells said. This right was sold at the turn of the decade [1960] to what is now Allied Chemical.

"This gave Gulf Interstate two principal assets," said Wells: "$4 million and an engineering company." * * * The $4 million . . . went mostly into Houston real estate.

According to the Funding Universe website, its history is further detailed as follows:

Gulf Interstate was involved in the construction of the $200 million Transwestern Pipeline, which extended from west Texas to California and was completed in 1960. The company continued to flourish in engineering, gaining a reputation as an innovator in this field. Gulf Interstate engineers designed and oversaw the construction of the world's first long-distance ammonia pipeline, the Gulf Central Pipeline, which was completed in 1970. Now a $7 million company, Gulf Interstate looked to diversify. Operating pipelines was a natural offshoot of its expertise, but as early as 1960 the company's management had begun investing in real estate, becoming especially interested in high-rise Houston office buildings.

It owned the Americana Building, a ten-story building that also housed its headquarters, located in the heart of Houston's business center. Across the street was the Houston Natural Gas Building, a 28-story structure in which Gulf Interstate held a 40 percent interest. The company also owned the Gulf Credit Card Center, which it leased to the Gulf Oil Company for its credit card operations. Moreover, Gulf Interstate acquired a 10 percent stake in some 3,300 undeveloped acres near Houston International [Now George H.W. Bush] Airport, as well as some property in Buffalo, New York. Gulf Interstate became involved in the marine terminal business, operating a "tank farm" in South Shield, England. The facility included 26 tanks to store gas and oil, as well as docking facilities.

It was also in the early 1970s during Gulf Interstate's diversification efforts that it became involved in the support vessel business that would one day evolve into GulfMark. The company acquired a 49 percent interest in a Louisiana company called Gulf Overseas Marine Corporation. The remaining stock was owned by a single individual. Gulf Overseas provided utility boats that supplied the 100 drilling rigs that operated in the Gulf of Mexico. In addition it supplied crews for anchor handling duties. With each rig in the Gulf requiring at least two support boats, the company recognized a growing opportunity. Gulf Interstate also took a 50 percent ownership position in a subsidiary formed in 1973, Gulf Overseas Shipbuilding Corporation, to build two deep sea tug boats, with the possibility of additional future construction.

Gulf Overseas would be in need of these new vessels because in 1974 it accepted an attractive offer from a foreign company and sold its three-vessel fleet, generating an after-tax profit of nearly $1 million. Also in that year, Gulf Interstate sold the Americana Building and its Buffalo [NY] properties. Although still primarily an engineering company, it continued to cast about for business opportunities. Gulf Interstate bought a stake in Northwest Pipeline Corporation. It undertook oil and gas exploration in Texas and Oklahoma through a subsidiary, Gulf Interstate Exploration, Inc....

Key Dates:
1953: Gulf Interstate Co. is formed as a pipeline engineering firm.
1959: Gulf Interstate goes public.
1983: The company changes its name to Gulf Applied Technologies.
1989: Shearson Lehman Hutton acquires a 30.5 percent stake.
1990: The marine division of Offshore Logistics is acquired.
1991: The company is renamed GulfMark International.
1997: The marine services division is spun off as GulfMark Offshore, Inc. 

In 1960 Union Texas Natural Gas was formed and merged a year later with this same Allied Chemical. Renamed Union Texas Petroleum Division of Allied, its president, J. Howard Marshall II, went on the board of Allied Chemical. Born in Maryland in 1905, he became a Yale law professor while in his twenties and was soon chosen to work in FDR's Interior Department as oil coordinator. From that important position he moved back and forth between oil and gas corporations exploring in Saudi Arabia involving both California and Texas independent oil men and the federal government.

Marshall's name is most commonly known with what occurred in the last two years of his life; in 1994 at the age of 89 he married 26-year-old topless dancer and former Playboy "Playmate," Anna Nicole Smith.
One of the original tenants of the Central Square buildings was James Talcott Western, Inc., subsidiary of James Talcott, Inc., the country's largest independent industrial finance company, whose president since 1961 had been Henry R. Silverman. In 1973 the old factoring corporation was sold to Michele Sindona, an Italian banker.

Most of the other tenants were insurance companies, most no doubt connected to companies controlled by Cowling.

The tenants in the Americana Building which Gulf Interstate owned were somewhat different. Those tenants, among others, included

• the Consulate General of France andConsulate of Ecuador,
• Gulf Central Pipeline,
• Hunt Oil Co.,El Paso Natural Gas Building Co. (a Murchison company), and
• the Johnston Division of Schlumberger.

According to a deed dated January 6, 1963, the original leasehold had been created by First City Bank when it leased the building to Melvin Silverman and Bennett Rose in July 1956 with a simultaneous sublease to Foley's Department Stores (the company where Leopold Meyer spent his career) for parking in the basement and on the first five floors. The 1963 deed conveyed a 1/3 interest in the lease to Metropolitan Industries (a corporation owned by Ken & Ralph Schnitzer) pursuant to a partnership existing in 1961 when the leasehold was acquired by Gulf National. Fee title was held by First City National Bank, which was then controlled by "Suite 8-F" member, attorney James A. Elkins.

It was noted in newspaper articles in September 1973 that Gulf Interstate had sold its leasehold in the Americana Building. The actual transaction was structured with Gulf Interstate receiving a loan of $4.2 million from New York State Teachers Retirement System, then assigning the ground lease to Black Coral Investments, N.V., a Netherlands Antilles corporation, for a $1.2 million profit. This could very well have been either a money-laundering transaction or an attempt to avoid payment of taxes. In the exhibit to its Assignment of Leases, Gulf National Properties set out all the tenants of the building, including those listed above.

Gulf Interstate was also a partner with Schnitzer's Century Properties in the construction and management of the Houston Natural Gas Building. In a newspaper article in 1985, however, the Houston Natural Gas Building was said to be owned by Prudential Insurance and BP Pension Fund, although the core tenant which gave it the name by which it was known, was the Houston Natural Gas Co. (later to be known as Enron). 

Houston Natural Gas also leased 23,600 square feet of space in the Americana Building and 80,000 square feet in the Continental Resources Building at 3040 Post Oak Blvd. The 1985 criss-cross directory showed the 5th floor of the Continental Resources building occupied by Florida Gas Transmission, a subsidiary of Enron, and the 8th floor by ANR Pipeline. Continental Resources was also an investor in the development of the Galleria.

Gulf Interstate also acquired a 20-acre industrial site near the Houston Ship Channel and a large block of undeveloped land in downtown Houston (for Houston Center, a commercial retail center developed by a joint venture between Texas Eastern and the Canadian group called Cadillac Fairview). This would connect it again to Brown & Root (located near the ship channel) and to the company called Texas Eastern, which developed the Houston Center in downtown Houston.

Texas Eastern was a corporation set up primarily by George and Herman Brown and other members of the Suite 8F Crowd with financing put together by Dillon Read’s August Belmont IV. The development also included a new Gulf Building. The original office building occupied by Gulf Oil in Houston had been constructed by Jesse Jones, and the ground floor was occupied by Jones’ Texas Commerce Bank, which incidentally had merged with the bank set up by James A. Baker.

The major occupant of the Houston Center development was First City National Bank. In 1976 the Congressional Banking Committee which investigated foreign ownership of American banks discovered that First City Bank was largely owned by N.M. Rothschild of London. This bank had been founded by James A.Elkins, partner in the Vinson & Elkins law firm in which John Connally was later a partner. It should be remembered that Connally also owned a large block of stock in the Main Bank in Houston (housed in the vacated Humble Oil Building after that company built a new Exxon headquarters building). Connally (and CIA operative Jim Bath) sold Main Bank stock to Saudi investors who would later turn up in BCCI. It would later be learned that Jim Bath was fronting for a brother of Osama bin Ladin in other investments. Rumors were that he was doing so at the behest of CIA Director under President Gerald Ford, none other than Houston oil man George H. W. Bush.


Gulf Interstate’s president was Hy Byrd, who was also president of Central National Bank during 1963. In 1966 Hy Byrd and his wife, Gertrude, conveyed a tract of land which in 1928 had been owned by Houston Gas & Fuel--later called Entex before merging with Houston Natural Gas and Enron. Byrd had an office in the Houston Natural Gas Building. Also in 1966 Byrd sold his home in West Houston’s Tanglewood Sec. 8 to the Republic of France, possibly as a residence for the French Consulate which had an office in the Americana Building. Interestingly, Entex held the old University Savings as a wholly owned subsidiary. This S&L was chaired for a time by Bob Lanier, who would become Houston’s mayor in the 1990s. Lanier had also been president of the Main Bank and was also connected to Texas Gulf, a company which selected George H.W. Bush for its board after he was fired as CIA director by Jimmy Carter.

Another interesting connection to the Houston companies is Ann Bronfman, daughter of John L. Loeb, ex-wife of Edgar Bronfman, Sr., who controlled the Cadillac Fairview Company mentioned earlier. She (along with a number of investors named Loeb, Kempner, Levin, Cohen and Gimbel with Park Avenue, New York addresses) was a partner in a joint venture called GIX Associates with Gulf Interstate Exploration Co. of Houston and Norco Investments Co. of Washington, D.C. in 1983. Norco (perhaps coincidentally) is the name of a refinery in New Orleans owned at one time by Shell Oil. In Stephen Birmingham's book, Our Crowd, he states:

Just as the Lehmans had secured their position [on the New York Stock Exchange] by marrying Goodharts and Lewisohns, so John L. Loeb secured his by marrying a Lehman--the youngest daughter of the Arthur Lehmans, Frances. . . . One sister was married to Richard Bernhard, a partner at Wertheim & Company. Another married Benjamin Buttenwieser, still one of the most important partners at Kuhn, Loeb.

John Loeb's new firm opened its doors in January, 1931. Six years later, through a merger with Rhoades & Company, an old gentile firm that needed money, the Loebs' firm, which needed a prestige name, became Carl M. Loeb, Rhoades & Company. Like his banking predecessors, John Loeb has kept his house tightly "in the family," employing among others, his son, John Loeb, Jr., a nephew, Thomas Kempner, and until his recent death, a son-in-law, Richard Beaty, as Loeb, Rhoades partners. . . .

Thanks to antennae around the world that amount to something very like a private CIA, he completed the sale of the firm's major Cuban sugar holdings the day before Fidel Castro took over. In 1945 the Loeb and Lehman millions received a new infusion of wealth when Clifford W. Michel joined Loeb, Rhodes. Michel was married to the former Barbara Richards, one of the granddaughters of Jules Bache, and therefore related to the Cahns and the Sheftels and, by marriage at least, to the Lewisohns (to whom the Lehmans, of course, were already related). Another Bache granddaughter was Mrs. F. Warren Pershing, wife of the son of the World War I general, and head of J. Pershing & Company, a rich brokerage house.

United Fruit - Empire Trust

Then in 1953 John Loeb's daughter, Ann, married Edgar Bronfman, elder son of Samuel Bronfman, the founder and chief executive of Distillers Corporation--Seagrams, Ltd., undoubtedly the richest man in Canada and among the wealthiest in the world. Bronfman money is not formally a part of Loeb, Rhoades capital, but one of the firm's partners has said, "He's a kind of partner who is awfully important." . . . The Bronfman millions, however, have joined Loeb-Lehman and Bache holdings to make up the largest single holding of stock in New York's Empire Trust Company, which has assets of some $300 million. Edgar Bronfman, now [1967] in his middle thirties, and head of his father's American subsidiary, Joseph E. Seagram & Sons, joined the board of directors of the Empire Trust Company in 1963. . . .[3]

ENDNOTES:

[1] According to a trustee's deed resulting from a foreclosure conducted by William Ladin pertaining to a loan to Anthony Luciano [B498509].

[2] Houston: A Profile of Its Business, Industry and Port, 1982. An article appeared in the Houston Chronicle on September 13, 1973, announcing that Gulf Interstate had signed a 25-year contract to design, build and operate a fuel oil terminal on the Delaware River near Wilmington, marking the company's "entry into the commercial terminaling business." The Delaware terminal was to have a deepwater dock capable of handling tankers up to 50,000 tons. This is interesting because of Kenneth Schnitzer's connection to Gulf Interstate and his involvement in the Port of Houston.

[3] Stephen Birmingham, "Our Crowd": The Great Jewish Families of New York (New York: Dell 1967), pp. 444-45.