Why George Bush Came to Texas, OR Enron - A Short History

Many years ago I became acquainted with Catherine Austin Fitts, while both of us were members of what was then called a listserv, which was managed by Kris Millegan. The three of us and many others were trying to learn how the American economy incorporated proceeds of narcotics sales into our financial system. Sometime after Catherine had visited me in Texas, the Texas corporation Enron collapsed in November 2000, the same month George W. Bush was first elected and less than a year before the September 11, 2001 destruction of the World Trade Center. (See James P. Galasyn's Bush/Enron Chronology).

The work below grew out of those debacles.

ENRON

From Hoover’s Handbook of American Business, 1993: 

Enron traces its history through two well-established natural gas companies — InterNorth and Houston Natural Gas (HNG).

InterNorth started out in 1930 as Northern Natural Gas, an Omaha, Nebraska, gas pipeline company.  By 1950 Northern has doubled its capacity and in 1960 started processing and transporting natural gas liquids.  The company changed its name to InterNorth in 1980.  In 1983 it spent $768 million to buy Belco Petroleum, adding 821 billion cubic feet of natural gas and 67 million barrels of oil to its reserves.  At the same time the company (with four partners) was building the Northern Border Pipeline to link Canadian producing fields with U.S. markets.

HNG, formed in 1925 as a South Texas natural gas distributor, served more than 55,000 customers by the early 1940s.  It started developing producing oil and gas properties in 1953 and bought Houston Pipe Line Company in 1956.  Other major acquisitions included Valley Gas Production, a South Texas natural gas company (1963), and Houston’s Bammel Gas Storage Field (1965).

In the 1970s the company started developing offshore fields in the Gulf of Mexico, and in 1976 it sold its original gas distribution properties to Entex.  In 1984 HNG, faced with a hostile takeover attempt by Coastal Corporation, brought in former Exxon executive Kenneth Lay as CEO.  Lay refocused Enron on natural gas, selling $632 million of unrelated assets.  He added Transwestern Pipeline (California) and Florida Gas Transmission, and by 1985 Enron operated the only transcontinental gas pipeline.

In 1985 InterNorth bought HNG for $2.4 billion, creating the U.S.’s largest natural gas pipeline system (38,000 miles).  Soon after, Kenneth Lay became chairman/CEO of newly named Enron (1986), and the company moved its headquarters from Omaha to Houston.

Laden with $3.3 billion of debt (most related to the HNG acquisition), Enron sold 50% of Citrus Corporation (operated Florida Gas Transmission, 1986), 50% of Enron Cogeneration (1988), and 16% of Enron Oil & Gas (1989).  In the meantime the company paid $31 million for Tesoro[1] Petroleum’s gathering and transportation businesses in 1988.

In 1990 the company bought CSX Energy’s Louisiana production facilities, which helped to increase Enron’s production of natural gas liquids by nearly 33%.  In late 1991 Enron closed a deal with Tenneco to buy that company’s natural gas liquids/petrochemical operations for $632 million.

Enron’s 1992 contract with Sithe Energies Group to supply $4 billion worth of natural gas over 20 years to a planned upstate New York cogeneration plant fits its vision of natural gas as a leading fuel for the future.

History of Enron, Originally Founded as 
Houston Natural Gas Company

In 1893 John Henry Kirby started construction of the Gulf, Beaumont and Kansas City railroad line, which he sold to the Atchison, Topeka and Santa Fe in 1900. He decided to invest the money he made on building the railroad into East Texas timber land, but after the big Spindletop oil discovery near Beaumont in East Texas in 1901, he took another turn into oil exploration. With dollar signs in their eyes, however, his creditors thought it more advantageous for themselves to take the corporate assets held as security than to give Kirby the necessary time to develop those assets into oil-producing property.

On July 6, 1901 the Houston Daily Post contained a huge front page headline and photo of Kirby announcing the chartering of Houston Oil Company of Texas with a capitalization of $30 million and of the Kirby Lumber Co. with $10 million in capital. The stock was issued, but Kirby still had to obtain buyers for the stock. That means he had to find stock brokers who had connections to huge pools of capital to invest. For his financing, Kirby had gone to Patrick Calhoun, a New York corporate attorney "with desirable connections in eastern banking circles." Calhoun was the grandson of John C. Calhoun, vice-president under John Quincy Adams.

Patrick Calhoun, a native of South Carolina, owned stock in the Southern Oil Co., which had 100 producing oil wells in the Corsicana Field in East Texas. The investors Calhoun brought into Kirby's companies included Brown Brothers of New York; Simon Borg & Co., originally founded in Tennessee; and Maryland Trust Co. of Baltimore, the latter being proposed as trustee to handle the company's securities and act as its subscription agent. Maryland Trust Co. was headed at that time by ex-Confederate officer, Colonel J. Wilcox Brown.

The Brown Brothers firm was founded in the United States by descendants of Alexander Brown, who also were involved in the English brokerage firm of Brown & Shipley, of Baltimore, Maryland, and, after 1825, in New York. Brown Brothers would operate out of New York City until its eventual merger in 1931 with W.A. Harriman & Co., the latter an investment bank set up five years earlier for E. H. Harriman's young sons by Prescott Bush's father-in-law, George Herbert "Bert" Walker of St. Louis, Missouri, who is the subject of a series of articles at this blog.

Foreclosure and Receivership

The financing scheme for the Kirby companies was an intricate system of cross-collateralization which Kirby alleged was designed to allow the creditors to steal the assets of his companies. Receivers were appointed on February 1, 1904, the same day interest was due on timber certificates that had originally been issued for $11 million, but devalued down to $7 million. Of that, $6 million work of the certificates had been sold by Brown Brothers, while being guaranteed by Houston Oil Co.[2] The semi-annual payment was made by Brown Brothers & Co. in the amount of $700,000, including $210,000 interest, but only the interest was tendered to Maryland Trust, which was rejected.

The receivers appointed for Houston Oil were F.A. Reichardt, cashier of Planter's and Mechanic's National Bank of Houston (of which John H. Kirby was president) and Thomas H. Franklin, a San Antonio attorney, who was president of the Houston Oil Company. N.W. McLeod, a "prominent St. Louis lumber man," and B.F. Bonner, Kirby Lumber Company's vice president, who lived in Houston, were appointed as receivers for Kirby Lumber.[3]

A receiver not mentioned in the New York Times article at that time was Col. J.S. Rice, who, according to his obituary in the Houston Chronicle on March 12, 1931, had been in the sawmill business in Tyler since 1881, after starting as a clerk at the Houston & Texas Central Railroad in 1879 — a railroad extending west and north from Houston to the cotton fields of central Texas. Jo Rice served as receiver of Kirby Lumber from 1904 to 1909 and was elected vice president after it was reorganized. He was also president for a time of Great Southern Life Insurance, vice president of Houston Land Corp., and a director of Missouri Pacific Railroad Co. A nephew of William Marsh Rice, through marriage he was also related to both W.S. Farish and Stephen P. Farish--two brothers who had married Libbie Randon Rice and Lottie Rice, respectively, Jo Rice's sister and cousin.

The New York Times quoted Mr. Kirby as saying that both companies were profitable, and "the only and sole cause of the present trouble lies in the fact that the securities issued the Houston Oil Company have not been marketable." The Times went on to say that

... interests identified with the Atchison and with the St. Louis and San Francisco [Frisco] Railroads have a large interest in the Kirby Lumber Company. Representatives of several banking houses more or less closely associated with the two companies which have just been placed in receivers' hands said yesterday that the assets of the companies were of undoubted value, and that the proceedings were really the outcome of internal discord.[4]

From the Galveston Daily News, February 4, 1904:

Houston, Tex., Feb. 3 --There was nothing new here today in connection with the affairs of the Kirby Lumber Company or the Houston Oil Company, both of which were given receivers by Judge McCormick of New Orleans. Affairs about the Planters and Mechanics National Bank moved along today as they do every day. There was no unusual deposit nor unusual withdrawal of money. In other words, they had their normal appearance all day. In connection with the affairs of the appointment of the receivers the following facts and figures show the status:

The Kirby Lumber Company was incorporated under Texas laws in July, 1901, capitalized at $10,000,000. Its object was to take over fifteen sawmills previously purchased by the Houston Oil Company of Texas. Financial aid was obtained from Eastern associates also interested in the Houston Oil Company of Texas, capitalized at $30,000.000. Stock of the Kirby Lumber Company is divided into $5,000,000 of common, and preferred shares of the same amount. The Kirby Lumber Company contracted with the Houston Oil Company for six and one-half billion feet of yellow pine timber of 12 inches diameter and upward, for the aggregate sum of $30,000,000, to be paid in semi-annual installments in sixteen years....The company owns 180,000 acres of land at Kountze easily worth $5,000,000. Other lands held by the company amount to 127,220 acres, readily marketable for at least $3,000,000.
The temporary receivers of the Kirby Lumber Company and the Houston Oil Company have ordered a continuance of operations in the usual manner, and announcement is made that plans are being considered to terminate the receiverships when the cases are called before Judge Burns of the Southern District of Texas on February 17.

On February 12, 1904 the New York Times contained a short item on page 14 stating that a committee of five had been chosen by the holders of the 6% timber certificates issued by Maryland Trust--George W. Young, Dumont Clarke (president of the American Exchange National Bank in New York and a director of U.S. Mortgage & Trust Co.), James Brown (chairman of Brown Brothers), Gerald L. Hoyt (who served as a director of the Wisconsin Central Railroad alongside Brown Brothers partner, John Crosby Brown), and F.S. Smithers. A week later, Kirby was again quoted in the Times, as follows:

"A distinguished Wall Street operator undertook to finance the Houston Oil Company; had and exercised undisputed authority in the conduct of its affairs. He also directed the financial affairs of the Kirby Lumber Company until about a year ago, and during this period of his control caused the latter company to invest heavily in the preferred shares of his oil company....The Board of Directors of the Houston Oil Company, over the protest of the Wall Street promoter, who is still a member of the board, voted to accept the money and to request the Maryland Trust Company not to proceed, but the money was declined and the demand for receivership persisted in."

By the end of March of that year a lawsuit had been filed by members of a stock syndicate managed by two officers of the Baltimore Trust and Guaranty Company alleging misrepresentations made about the condition of the lumber company in the prospectus. The petition further alleged that one month prior to the appointment of receivers, Kirby formed a holding company with Benjamin F. Yoakum, president of the St. Louis and San Francisco Road, to which they transferred the majority of the Kirby Lumber Company stock, and that they formed the Houston, Beaumont and Northern Railroad Company, to which Kirby Lumber's traction lines and other railroad properties were transferred. In addition, the HB&N RR Co. was capitalized at $500,000 with a bond issue of $1 million. Yoakum loaned the company $600,000 and in return received all the bonds, half the stock and $18,000 in commissions. The newly formed company used half the loan proceeds plus an additional $18,000 to repay a prior loan to Yoakum and his commission for this loan.[5]

Surprisingly, we learn that in 1904 Yoakum was a director and on the executive committee of the board of Seaboard Air Line railroad with people very close to the Alex. Brown bank, including Sol Davies Warfield, uncle of Wallis Simpson and others written about in another blog this author writes.

In 1906 Walter Monteith, brother of Edgar Monteith, Sr. (who many years later became attorney for Gibraltar Savings and Brown & Root), was appointed to act as receiver on behalf of the investors.[6] A settlement was reached in 1908. Houston Oil owned several shallow oil wells in Nacogdoches County, all of the stock of Southwestern Oil Co. and properties of Southern Oil Co., as well as stock in Higgins Fuel and Oil Co., but for revenue it primarily relied on the stumpage agreement with Kirby Lumber. Because of more efficient equipment and the demand for timber for the railroad industry, the lumber company was better able in the next few years to meet its contract requirements, and virtually the same investors organized Houston Natural Gas Co. (HNG) in 1926.

Houston Pipe Line Co. was a wholly owned subsidiary of Houston Oil Company of Texas, and its stockholders formed HNG as a separate corporation a year before the pipe line company completed constructing distribution gas lines. Their hope was to compete with Houston Gas and Fuel (HG&F), of which Captain James A. Baker was president. HG&F had signed a contract to buy only from Houston Gulf Gas, and HNG therefore turned to the outlying areas and other cities in Harris County for customers. Shortly before the stock market crash in 1929, Houston Gulf Gas bought out HG&F and then merged with United Gas Corporation, a holding company, 42% of which was bought by Pennzoil (Zapata’s successor) in 1965, then divested by the SEC in 1970, creating a separate investor-owned corporation, United Gas, Inc.--later Entex. The two gas companies merged in 1976 and were later merged into Enron.

[NOTE: The money can be followed directly from the Baker network into Enron.]

John H. Kirby had incorporated Houston Natural Gas in 1925 with eleven subscribers to the initial issue of capital stock issued on January 18, 1926:

• E.H. Buckner, president - 70 shares
• Louis Seymour Zimmerman, Baltimore (president of Maryland Trust Co.) - 70 shares 
• George Mackubin, Baltimore - 70 shares
• David Hannah, Houston - 40 shares
• Judge H.O. Head, Sherman, Texas - 40 shares
• McDonald Meachum, Houston - 40 shares
• C.B. McKinney, Houston - 40 shares
• H.M. Richter, Houston - 40 shares
• George A. Hill, Jr., Houston (father of Raymond M. Hill—discussed in Pete Brewton’s book, The Mafia, the CIA and George Bush) - 35 shares
• T.M. Kennerly, Houston - 35 shares
• A.S. Henley, Houston - 20 shares

The following May, 1926, 1,500 additional shares were issued, with 140 each bought by the largest three investors, with Hannah and McKinney each buying 80 more. New shareholders of note were Samuel C. Davis (80), Thomas S. Maffit (80), John Foster Shepley (80), Samuel W. Fordyce (80), and N.A. McMillan (70), all of St. Louis, Missouri--part of the syndicate for which Prescott Bush's father-in-law, George Herbert "Bert" Walker, was already handling investments through his investment bank, G.H. Walker & Co.[7]

After the 1926 sale of stock, the following geographical breakdown existed:

• Houston -- 1,100
• Baltimore -- 430
• St. Louis -- 390

Filings with the Securities and Exchange Commission in 1976, just prior to the merger with Entex, show that directors of Houston Natural Gas included the following:

1. John H. Duncan (also a member of the audit committee)--chairman of the board of Gulf Consolidated Services, Inc. in Houston and chairman of the executive committee of Gulf + Western Industries, Inc. in New York--since 1968, who owned 40,000 shares of HNG.
2. C. Thomas Clagett, Jr. (also a member of the audit committee), whose occupation was investments in Washington, D.C.--who owned 252,226 shares individually plus over 700,000 additional shares as trustee for family members.
3. J.A. Edwards, a board member since 1968, who was president of Liquid Carbonic Corp., an HNG subsidiary (42,596 shares).
4. W.S. Farish III, who was shown to be president of Fluorex Corp., an "international mineral and exploration company" in Houston (4,000 shares), grandson of Libbie Rice Farish.
5. Robert R. Herring, chairman and CEO of HNG, director since 1964 (60,000 shares), husband of Charlie Wilson's girlfriend, Joanne Herring.
6. M.D. Matthews, vice-chairman of board (32,482 shares).
7. Neil D. Naiden, partner of Morgan, Lewis & Bockius, a Washington, D.C. law firm.
8. Charles Rathgeb, chairman and CEO of Comstock International, Ltd. in Toronto, Ontario, Canada.

Interestingly enough, Robert Herring (at the time of his death married to a Houston "socialite," the former Joanne Johnson King) was also president of Rice University in 1980, shortly before his death, and John Duncan's brother, Charles Duncan, Jr., retired in 1996 as chairman of the Rice board, which had previously been headed by George Rufus Brown, brother of Herman Brown, co-founder of Brown & Root (later Halliburton).

The newspaper misspelled the name of Pakistan's President--Zia ul Haq.

HNG located its offices in 1927 in the Petroleum Building built by Irishman J.S. Cullinan, where it remained until 1967, when it became the core tenant of Kenneth Schnitzer's office building at 1200 Travis. The primary attorney for the company was shareholder George A. Hill--of Kennerly, Williams, Lee, Hill & Sears--the father of Raymond Hill of Mainland Savings fame, to whom Pete Brewton devoted an entire chapter of his book. The foremost Houstonian shareholder was David Hannah who had arrived in Houston from Scotland in 1908 and was head of the Houston Cotton Exchange for a time. David Hannah Jr. would later be named a trustee of the Hermann Hospital Estate and serve alongside Walter Mischer, Jr. He would also attract investment from Toddie Lee Wynne, Jr. into a company called Space Services, Inc., which would launch the first private satellite into space from Matagorda Island, Texas.

In 1956 Houston Oil Co. was sold to Atlantic Refining Co. for a quarter-billion dollars ($250 million). In 1966 Atlantic acquired Richfield Oil Corp., a company which had been placed in bankruptcy in 1928 when it had over $10 million in judgment claims resulting from canceled oil leases at the Elk Hills Naval Reserve, subject of the Teapot Dome scandal, to Pan American Petroleum, received by Richfield from Edward L. Doheny in 1928. The case was settled in 1933 for $5 million after broker Henry L. Doherty & Co. (60 Wall Street) made an exchange offer for 4 shares of Richfield for one share of Cities Service Co. stock. To protect its interest in the stock, Cities later purchased a large block of Richfield and Pan American bonds.

It appears that these various oil companies owed interest on bonds to holders comprised of numerous foreign, mostly British, investors. According to a book written in 1972 by Charles S. Jones,[8] the former chairman of Richfield, as his very first act, once the decision was made to merge with Atlantic, was:

... to go to London to visit my friend Sir Maurice R. Bridgeman, chairman of British Petroleum. While his company was very much interested in entering the United States market, British Petroleum needed government approval to use dollars, and Sir Maurice thought the market value of British Petroleum shares too low for an advantageous exchange of stock. The matter was left in abeyance until either party desired to explore it further.

Jones next offered to merge with K.S. "Boots" Adams--father of former Houston Oilers owner "Bud" Adams--who was chairman of Phillips Petroleum. Later, he set up talks with Standolind at Bunny Harriman's ranch in southeastern Idaho, "Railroad Ranch."[9] After news of this meeting was leaked by unknown sources, Richfield's stock increased, leading to an offer from Robert O. Anderson, chairman of Atlantic of Philadelphia, whom Jones met in August 1965, again at the Harrimans' ranch, leading one to believe that Brown Brothers had a big interest in a buyout of Richfield. After that meeting several other companies expressed an interest, but, according to Jones, "a curious event occurred."

One of our Washington lawyers called to tell me that a Mr. Cladouhos, an Antitrust Division lawyer assigned to the case, had suggested that Richfield settle the suit by merging with Atlantic Refining Company. The division had earlier suggested a merger, but this was the first time it had named a partner. The suggestion seemed most unusual, but I concluded that Bob Anderson's lawyers had probably been exploring the Justice Department's attitude toward a merger with Richfield and had thus given Cladouhos this particular inspiration.

As far back as 1959, when W. Alton Jones was still living, we had made a study of the possibility of merging Richfield, Sinclair, and Cities Service to form a national company strong enough to compete with the international majors. There was always the imponderable of the Justice Department's attitude, but we decided that we would never know the reaction until we tried....Cities Service already owned about 30 percent of Richfield.

When the merger was finally worked out, "Francis Kernan and others of the Boston-based investment bank, White, Weld & Company, represented Richfield."[10] The White, Weld investment bank, which in 1974 merged with G.H. Walker and Co., owned by then by G.H.W. Bush’s Uncle Herbie, his own financial patron. The White Weld-Walker amalgam also merged its London and Swiss operations with Crédit Suisse, the premier drug-money-laundering institution of the day, and the domicile for the Bush-North "Enterprise" offshore bank accounts.

The Zimmerman who was named as a HNG shareholder was president of Maryland Trust from 1910 until 1930, when the company merged with Drovers and Mechanics National Bank and the Continental Trust Company, but continued to operate under the name of Maryland Trust, with Zimmerman as senior vice president until his retirement in 1948. Shareholder Mackubin was a senior partner in the brokerage firm of Mackubin, Goodrich & Co. and became a director of Houston Oil Co. in 1925.

Continental Trust was operated by Solomon Warfield, the uncle of Wallis Simpson —Duchess of Windsor. Solomon Warfield acquired a number of shares of Alleghany preferred stock, "issued in a storm of controversy by the banker J.P. Morgan, who was a chief investor for King George VI and Queen Elizabeth at the time they were Duke and Duchess of York," for his niece, which she inherited upon his death in 1927. This stock had always been her "first investment favorite," according to her biographer Charles Higham.[11] When the Duke and Duchess became friends with Alleghany’s Robert Young, allegedly after being introduced by mutual friend Robert Foskett after the Windsors moved to the Bahamas, Young and his wife Anita became one of their few close friends. Both Foskett and Young were directors of Alleghany and lived in Palm Beach, Florida. When Warfield died, he left her only "the interest from $15,000 worth of shares in his railroad companies and in the related Alleghany Company and in the Texas Company [later Texaco]. She had expected a slice of his $5 million, and she furiously began a lawsuit against the trustees of the estate, in the form of a caveat."[12]

In 1937 Allan Kirby gained virtual control of Alleghany. Not long thereafter Texan, Clint Murchison, would be introduced to the Duke and Duchess of Windsor by mutual friend Allan Kirby, and another Houstonian, George R. Brown, would become an Alleghany director. In such cases, it seems very likely that the person holding title to the stock and acting as a director is a mere nominee for someone who does not wish to have his or her name disclosed.

This leads one to wonder whether George and Herman Brown really owned Brown & Root, or whether they were primarily nominees for someone else, or whether they were simply very dependent upon the other capital invested in their corporations--all of them handled by the investment bank of Dillon Read, specifically by August Belmont IV, thought to be working on behalf of his patron, Rothschild Bank, which handled American investments for royal British capital. George and Herman were nobody before 1942, but almost overnight George Brown became Lyndon Johnson's chief financier and a director of major multi-national corporations, and for many years served as chairman of Rice University. After the death of Herman Brown, Brown & Root would be sold to and become a subsidiary of the Halliburton Company, the company to which Vice-President Dick Cheney is so closely tied. The sale proceeds set up the Brown Foundation, managed by, among others, Edgar Monteith and Fayez Sarofim, the investor/husband of Herman Brown's adopted daughter, Louisa Stude.

Sarofim was born in Egypt, but obtained a bachelor’s degree in food technology from the University of California and an MBA from Harvard Business School. In 1958 he established Fayez Sarofim & Co. in Houston, though his first job in Texas was in the Abilene branch of Anderson Clayton cotton merchants, where he became close to Edward Randall III and his circle of friends. Herman Brown's adopted daughter Louisa Stude was in the same circle. After their marriage, Herman Brown's new son-in-law began managing the corporate retirement fund for Brown & Root and the endowment of William Marsh Rice University, then valued at $63 million. Herman himself died in 1962, and Sarofim thus stepped up in managing a big part of the Brown & Root wealth.

Names of Halliburton directors may give an idea about the corporation's other major shareholders. In 1976, for example, they included Alex E. Barron, president of Canadian General Investments, Robert J. Bradley, a director since 1952, owner of only 700 shares, whose occupation was "personal investments." F.A. Calvert, Jr., a director since 1965, was also an investor. Ford M. Graham was an oil and gas consultant, and the 10th Lord Polwarth (Henry Alexander Hepburne-Scott) was and outside director from the Bank of Scotland from 1974 to 1987. At the time this report was made, Joseph A. Thomas, a partner in Lehman Brothers, was retiring from the board. Thomas, a Texan, had been "lent" to Schenley Distillers as administrative assistant shortly after Lehmans brought out the original issue of Halliburton stock in 1933, just after repeal of the 18th Amendment. [13]

Entex was the successor corporation to Houston Gas & Fuel formed by Captain James A. Baker of Baker, Botts probably for his major client, the Rice family or Rice Institute itself. Baker was president and had signed a contract to buy only from Houston Gulf Gas, preventing any competition in its market from upstart company, Houston Natural Gas, which was forced to market its product outside the city of Houston. Eventually, HG&F merged into Houston Natural Gas in 1976, and later became Enron.

If all the original shareholders retained their shares in the initial companies, Enron would be controlled by the families of the Rices, Farishes and the stockholders of the Maryland Trust Co., which put John Henry Kirby in receivership in the early days of the 20th century. But of course people do sell their stock or die and pass it along to heirs and devisees. Nevertheless, it would be fascinating to see who the major stockholders in Enron were in 2001 when it cratered, and took so much with it, only a matter of days following the destruction of the World Trade Center Buildings in New York on September 11.

Originally published at this blog on May 3, 2011 as 

"Pakistan's old friend, Joanne Herring of Houston."

---

ENDNOTES: 

[1] Tesoro Petroleum Corporation, has an equally fascinating history as Enron, as seen from this excerpt from 1965: "There's some local confusion over the proposed stock interchange of Coronet Petroleum Corp. of Houston and the Texstar Corp. of San Antonio. Coronet is the former Gulf Coast Leaseholders, Inc. Texstar is the holding company organized a decade or so ago by the late Tom Slick of San Antonio, and purchased last year by Amon Carter Jr., of Fort Worth, and others. William T. Rhame of San Antonio is president of Texstar. Burford King, Fort Worth who became president of Gulf Coast Leaseholds before its name was changed to Coronet last year, was one, of those listed as the purchasers of the old Slick firm. Then, reportedly, the [Amon] Carter group sold its Texstar stock to Gulf Coast and this group became the controlling interest of the Texstar Corp. All this was last summer. In the fall, Bob West of San Antonio, who had been head of the Texstar Petroleum Corp., subsidiary of the corporation of the same name, set up his own company and purchased the petroleum subsidiary from the parent corporation. West's new company is Tesoro Petroleum Corp. Now, Coronet Petroleum stockholders will meet April 15 in Houston to vote on an agreement whereby Texstar Corp. would assume control of Coronet Petroleum stock. The ratio would be one share of Texstar stock for each 5.8 shares of Coronet stock. As of Jan. 1 Tex Star Oil & Gas Corp. of Dallas changed its name to Texas Oil & Gas to avoid confusion in the public's mind over it and the Texstar Corp. of San Antonio. Louis Becherl Jr., of Dallas heads this firm which has no connection with Texstar Corp." [Source: San Antonio, TX EXPRESS/NEWS - April 4, 1965] 

[2] New York Times, February 2, 1904, p. 11. 
[3] New York Times, February 3, 1904, p. 11. 
[4] New York Times, February 3, 1904, p. 11. 
[5] New York Times, March 30, 1904, p. 12. 
[6] It should be noted that both George and Herman Brown and the Monteiths previously hailed from Bell County, where several surveys of land were patented to a Monteith.  It might be interesting to learn whether the Browns may have been related to the family of brokers. 
[7] Samuel Davis, born in 1871, was a son of John Tilden Davis, and his brother was none other than Dwight Filley Davis for whom the Davis Cup was named. When he obtained a passport in 1918, Samuel Craft Davis called himself president of the John T. Davis Estate and stated he was traveling to France and England to work on behalf of the YMCA's War Work Council. More will be said about his family and about John Foster Shepley in future posts at this blog. 
[8] Charles S. Jones, From the Rio Grande to the Arctic:  The Story of the Richfield Oil Corporation (Norman, Okla: Univ. of Okla. Press, 1972), p. 308. 
[9] Remarkably it was in Sun Valley, the Harrimans' ski resort, where Warren Buffet and Disney's chairman bumped into each other accidentally and decided to merge. 
[10] Keep in mind that at that time, the Hannah family appeared to be major shareholders of Houston Natural Gas.  David Hannah was also chairman of a private company competing with NASA, with a land development company with a Scottish name, and with an amusement company started near the Dallas-Fort Worth International Airport in 1955 by Robert Bernerd Anderson, trustee of the Waggoner estate, lawyers Toddie Lee and Angus Wynne, who wanted Bill Zeckendorf to help develop as an industrial and distribution center.  Zeckendorf brought in the Rockefeller Brothers' investment company.  Angus Wynne was the father of Bedford Wynne, who was not only an employee of the Murchison family, but a minor partner with Clint W. Murchison, Jr. in the Dallas Cowboys football team.

  If this director was actually oilman, Robert O. Anderson (as distinguished from Eisenhower Treasury Secretary Robert B. Anderson), it is interesting to explore this link between him, David Hannah and the Wynnes, since he would also add into the mix a connection with John Dick and Walter Mischer. 

Mischer's connection to Robert O. Anderson involves a 250,000-acre ranch near Big Bend National Park that Mischer owned with Anderson. According to Pete Brewton, John Dick "had Anderson over to his house for dinner, while Anderson invited Dick to his annual Christmas dinner for the 'world's most powerful men' at the Claridge Hotel in London. The only woman in attendance . . . was then-British Prime Minister Margaret Thatcher." Brewton, p. 274. Both Mischer and John Dick also both borrowed money from Hill Financial Savings of Pennsylvania, one of the companies involved in the St. Joe Paper transaction. Anderson's father was Hugo A. Anderson, a leading oil and gas banker at First National Bank of Chicago. When Robert O. retired from AtlanticRichfield, he went into an oil and gas partnership with Tiny Rowland, considered by some to be a front for the British monarchy. In 1975 HNG directors included John H. Duncan and W.S. Farish III. In 1976 the company merged with Entex and later with Enron.

     [11] Charles Higham, The Duchess of Windsor:  The Secret Life (New York:  Charter Books, 1989), p. 387. 
     [12] Higham, p. 67. 
     [13] Wechsburg, p. 248.

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.