Jaffes in Old San Antonio

Wolfe Jaffe

 John Delane Williams' statement, citing Madeleine Brown, that Sam R. Bloom was the father-in-law of Morris D. Jaffe of San Antonio, was erroneous. The proof is in a study of the Jaffe genealogy.

Jaffe's grandfather was a Russian Jew named Wolfe Jaffe who arrived in Galveston from Hamburg in 1883 and initially settled into a Mexican-Catholic neighborhood in downtown San Antonio one  block west of the river. He sold dry goods, and his store was listed in San Antonio's directory at 613 W. Commerce Street. In 1915 Wolfe's plan to construct an apartment building in San Antonio at 423 Oakland Street was announced with fanfare. A large fourplex on what was then called Oakland Street (now within the right of way of IH-35) near the intersection with McCullough Avenue would be built for himself and three tenants.

Only a few doors away from these apartments lived the wealthy Irish-born  attorney, Henry Patrick Drought, with a family of four sons and five servants. Mrs. Drought took pride in the heritage of her family, the Tunstalls, who claimed their first Tunstall forebears arrived in Virginia shortly after the death of Charles I. The old half-century old Tunstall homestead at 418 Oakland was sold in  1907 to be demolished and graves in its adjoining family burial ground moved to the city cemetery. When Mrs. Drought's mother died in 1911, the obituary reflected about her life that:

Mrs. Tunstall was born in Lexington, Ky., and was the daughter of Rev. Nathan Hall, pastor of the Presbyterian church there. She remembered with great distinctness the great men of that day, knowing Andrew Jackson, who was a friend of her father's and who attended his church in Lexington when he made his periodical visits to Kentucky looking after his democratic fences in the whig stronghold of Henry Clay. She early married Warrick Tunstall, a distinguished lawyer of St. Louis, one of the founders of the St. Louis Law society and library, who died some years ago. Mrs. Tunstall taught probably the first Presbyterian Sunday school in San Antonio, having among her pupils then many who have since become the leading men and women of San Antonio. She took a great interest in politics and, in fact, in all current issues. She was extremely charitable and her heart and hand were always open to the afflicted or needy. In the early days in San Antonio her house was a center of gayety where hospitality was generously dispensed.

Despite her mother's pride in her Presbyterianism, Mrs. Drought converted to Catholicism upon her marriage to the Irishman, and she took her role as a socialite very seriously, as revealed by her own obituary in 1943:

Apparently the rent from the other units was profitable, and by 1917 Wolfe Jaffe began construction of another apartment complex at 223 4th Street for $35,000, a tidy sum in those days. He sold it in 1920, only a year before his death. His widow, however, continued managing other rental properties until her own death in 1949.

Wolfe and his Polish wife, Anna Jaffe, had two sons, Louis and Morris, and four daughters. When their son Morris died in 1958, his funeral was held in St. Mary's Catholic Church. He had married  a Catholic woman named Irene, and their son, Morris D. Jaffe, was not born until 1922, several months after Wolfe Jaffe's death. He attended St. Mary's, a Catholic university in San Antonio, at about the same time as Mrs. Roger Zeller's brother, Edwin F. Dietzel, Jr., and entered the Army air corps at about the same time as well. A notice in the local paper in 1918 indicates Morris and Irene lived at 525 E. Elmira, one street west of Oakland, that year and that he ran a loan company that helped finance his father's real estate business, further confirmed by WWI draft registration papers.

1918 notice in San Antonio newspaper

The real estate market in San Antonio had begun to take off, and the Jaffe family benefited by being involved in both the construction and loan industries. Northerners had discovered the climate in the south to be favorable and were relocating to the warmer state. One of those transplanted northerners was Clara Augusta "Gussie" Ayres, born in Ohio shortly after the end of the civil war.

Miss Ayres married James Mills Young, son of a medical doctor, Dr. Charles Glidden Young, in San Antonio in 1890, the same year his brother, Vinkler Howard Young, had died in Palestine, Texas. Dr. Young, originally from New Hampshire, had come south prior to the war that erupted between the states to build short line railroads connecting cities in Mississippi, Louisiana and Texas.

One family researcher has shown that James was born in 1864 in Chappell Hill, just outside of Brenham, Texas, shortly after his father (who had married Henrietta Maria Louisa Chamberlain in Cincinnati, Ohio, in 1842) finished his railroad work in Louisiana and moved on to eastern Texas.

In 1910 James M. and Gussie Ayres Young lived in San Antonio (within the present bounds of Fort Sam Houston) with their three daughters and Gussie's father, Nathan Tandy Ayres. More will be said about these families later. Suffice to say that it was this area on the outskirts of the military reservation where the Jaffe land development projects were focused.


Morris D. Jaffe
When Morris married Jeanette Elaine Herrmann, a former student at the Catholic Incarnate Word college, in April 1947, he was described as having been "a captain in the air corps." He had trained at Blackland Field in Waco and was assigned to duty posts in Utah, El Paso and Kansas. His best man was Paul Herder, son of trucking line owner, Charlie J. Herder, from Weimar, Texas, located in San Antonio at 1311 S. Flores.

His new wife's family were established in San Antonio, and their names appeared often in trivial society blips such as this one in 1932:

Mrs. Albert Hermann entertained with a party Sunday afternoon in her home in West Mulberry Avenue, complimenting her small daughter, Jeanette Elaine, on her fifth birthday anniversary.

On the occasion of the fifth birthday of Jeanette's brother, Don Albert Herrmann II two years later, the guests at his birthday party included young Ann and Travis McCrory "Mac" Moursund (frequently spelled Moursand), son of Travis and Marion Moursund, who lived on E. Mistletoe a block or two from the Herrmanns. Ann McCrory Moursund would be crowned queen of the Victory Black and White ball in 1945, long after her parents' divorce, and in 1944 Mac began his studies in New York at West Point.

Their father, Travis B. Moursund, was the son of Anton N. Moursund, an attorney who practiced for a time in Mason County, not far from Blanco and Johnson City, Texas, where his brother Albert Wadel Moursund practiced law. Their father was known as "Judge Moursund," an attorney from Norway who had settled in the Texas Hill Country near Lyndon Johnson's birthplace. Travis entertained a brief fling with politics--elected in 1926 as a state representative from San Antonio--where he served only one term. He lost his primary bid for the Texas state senate race in 1928 and was thereafter content to spend his spare time acting in local "little theater" productions and serving as local bar association president. In August 1932 he married Norma Basse of San Antonio in Nueva Laredo, Mexico. The Moursund children's mother was the former Marion McCrory, daughter of criminal judge W.W. McCrory, who later married Charles Murphy, city license and dues collector, who then ran for tax commissioner.

Morris D. Jaffe and his role in Fed-Mart

Why is Morris Jaffe Interesting?

Madeleine Brown told John Delane Williams, in his 2001 interview with her that in none of her previous interviews had she been asked about Morris Jaffe.Williams found Jaffe interesting, he says in an article appearing in the Dealey Plaza Echo, for the following reasons:

Morris Douglas Jaffe, to begin with, backed Johnson for the Democratic nomination for President in 1960. Jaffe was in Los Angeles "... to lay his money on the line. An old time San Antonio newspaperman came home admitting that Jaffe not only seemed to be the "money" man but the brains and trouble-shooter and smart beyond imagination, the most effective man behind Lyndon B. Johnson." (2). Jaffe was the person who bought all of the holdings of Billie Sol Estes when Estes declared bankruptcy, although Jaffe did not get Estes' holdings immediately. J.C. Williamson moved at once after Estes' bankruptcy to regain Estes' property, which was blocked by the bankruptcy judge, Ewing Thomason, who incidentally, was a good friend of Lyndon Johnson. (3) In June, 1963, Jaffe paid Williamson only the outstanding amount on Williamson's loan, $418,000, to acquire Williamson's holdings, who by that time had been converted to the political conservative cause. (4). Jaffe was said to have offered $7 million for Estes's vast holdings. Actually, Jaffe, who preferred not to risk a single red cent, agreed to pay perhaps as little as $100,000. (5). "The conclusion is inescapable that the Johnson-controlled political machine in Texas designedly set the stage for Jaffe's takeover, as the cleanup was without financial risk and potentially very good." (6).

Notes:

2.  J. Evetts Haley, A Texan Looks at Lyndon.: A Study in Illegitimate Power (Canyon, TX: Palo Duro Press, 1964), p. 156.
3. Ibid, p. 148.
4. Madeleine Duncan Brown, Texas in the Morning: The Love Story of Madeleine Brown and Lyndon Baines Johnson. (Baltimore, MD: The Conservatory Press, 1997), pp. 149-150.
5. Haley, p. 148.
6. Ibid, p. 150.

~~~~~~~~~~~~~

Williams speculates a great deal in his article, using the words "seems," "may," "likely," "presumably," and similar such phrases that indicate mere guesswork on his part. In addition, citing Madeleine Brown as a source, without corroboration, is a dangerous habit because much of what Brown said is inaccurate. For example, Williams quotes Brown's statement that Morris Jaffe was the son-in-law of Sam Bloom of Dallas, when in fact, Jaffe was married to Jeanette Herrmann, daughter of a German family in San Antonio. Perhaps Madeleine was speaking of a different Morris Jaffe, an attorney in Dallas. It's an easy mistake to make, but one which needs to be corrected.

With that caveat in hand, we can pick our way through Williams' work (posted at his blog) to see what more we can learn about Jaffe. The following was derived mostly from J. Evetts Haley:

Jaffe was born in San Antonio of Jewish-Hispanic heritage and became an aircraft engineering officer during World War II. Jaffe and a friend, David P. Martin, began a construction company (Jaffe and Martin Builders). They built barracks at Lackland Air Force Base in San Antonio. It was determined that Jaffe had wined and dined the civil engineer named McLain, who was hired by the government to insure the job was done to specifications. An inquiry was begun to investigate shoddy workmanship, but the investigation ended when McLain was transferred.

A friend of Jaffe's, Lieutenant Colonel Roger Zeller, was allowed to jump over several hundred full colonels to the rank of Brigadier General, and get a plum transfer to the Pentagon. With influence in the Pentagon and with Senate Majority Leader Lyndon Johnson, "...Jaffe really hit his stride." (13) Continuing on at Lackland, Jaffe built a skating rink, which he could not own, because it was on government ground, costing $260,000, but he was given a ten year period to "recoup" his costs. Jaffe used his influence to require that each airman in basic training skate at least one hour a week. The director of basic training, Colonel James A. Smyrl, was brought under fire because he refused to go along. It took some time for Smyrl to save his military career; other Lackland officials would eventually suffer either resignation or reassignment. And Jaffe? He would sell his interest to a Sam Katz in January, 1959 and walk away unscathed, at a good profit.

Brig Gen. Roger Zeller
That Army colonel was Roger L. Zeller, who died in San Antonio in 1997 at the age of 80. According to his obituary, Zeller in 1952 "founded Columbia 300 Industries in San Antonio....Columbia began sponsoring PBA events in 1972. PBA Commissioner Mark Gerberich called Zeller a bowling industry giant....Zeller, who was a college basketball player, was a member of the first investors group that brought the Spurs to San Antonio." (Galveston Daily News, August 11, 1997)

In March 1963 Brunswick Corp. sued Columbia Industries in federal court at Spokane, Washington, for patent violation on its manufacture of its "300" plastic bowling balls, then produced at Ephrata, Washington, near the Columbia River. After acquiring that company, Zeller moved it to San Antonio, and on December 3, 1963 announced an expansion, indicating that "the San Antonio firm is the originator of the high-impact plastic bowling ball which has revolutionized bowling ball sales throughout the nation." It added to its existing 2011 Sable Lane plant, southeast of the current airport, by purchasing 40,000 square feet at 5005  West Avenue in San Antonio, southwest of the airport. In the fall of 1965 Zeller announced the promotion of Mitchell Webb to be a vice-president--a man who was "company commander in Europe during World War II and earned the Bronze Star in action at the Remagen Bridge on the Rhine."  Zeller thus maintained the military connection.

In 1943 Zeller, said to be a San Antonio First Lieutenant, was listed as missing in action in North Africa. A World War II pilot, he had married the former Miss Laura Dietzel, daughter of Mr. and Mrs. Edwin Frank Dietzel, of 1606 W. Woodlawn ave. in San Antonio while stationed in that city. Laura was called "Cherry" and had a brother who was killed in the war. He was announced missing in action a year or two after Zeller was missing:

 Cherry's paternal grandfather was Alfred Dietzel, proprietor of a bakery and retail grocery at San Pedro and Woodlawn, and her mother was the former Stella Favella:

Mrs. Dietzel was a descendant of one of the original 14 families from the Canary Islands who founded San Antonio. She was a native of San Antonio and had lived here all her life. Her son, Lt. Edwin F. Dietzel, was killed in action over Japan in World War II. Survivors are her  husband, Edwin F. Dietzel; daughter, Mrs. Roger L. Zeller, San Antonio; and six sisters, Mrs.Mary Favella and Mrs. J. W. Cook Coker, both of San Antonio; Mrs. Adele Peschke, Mrs. Hortense McLean, Mrs. Annie Montel and Mrs. Josephine Whitt, all of San Diego, Calif. (San Antonio Express, March 5, 1951)

The old Dietzel home at 714 West Laurel was located within the historic community of Five Points, just north of downtown San Antonio, one of the oldest communities in the city, and it was Fermin Favella's address as early as 1895 when his name was listed in the news as having become an American citizen. Fermin died in 1919, and his widow conveyed the residence to Edwin Dietzel in 1926, whose family operated the market at 1902 San Pedro not far away. Fort Sam Houston was situated a short distance to the east. Stella Favella Dietzel's mother, Zulema (Emma) Rodriguez de Favella died in San Antonio in 1930, survived by one son, Joe Favella, who was affiliated with the San Antonio Express publishing company, and seven daughters.

On January 23, 1944, the following notice appeared in the San Antonio Express:

This has been a regular home week for several members of the armed force just back from overseas duty. CAPT. AND MRS. ROGER ZELLER have returned from Miami and are awaiting orders for a new station. She is the former LAURA "CHERRY" DIETZEL. Roger has many decorations, and should have been awarded one to show that he escaped from a GERMAN PRISON CAMP. Cherry's brother, ED, is back after serving with the Army Air Corps in Trinidad. Making it a "flying threesome" is CAPT. JULIUS "RED" TAYLOR, formerly of NORTH AFRICA, now of BROOKS FIELD.

Zeller's heroics during the war were told in an article that appeared in Del Rio, Texas in April 1944:

Captain Zeller was on a mission over enemy territory when his ship was badly shot up. When fire broke cut in the cockpit at 10,000 feet he ordered the men to bail out and stayed with the ship until it reached an altitude of only 1,000 feet. He bailed out and was taken captive by a sheep herder and was taken to a concentration camp in Rome. After three months in Italy,
he escaped and in 24 days found his way back to the British lines.

In May 1950 Cherry's husband, Lt. Col. Roger Zeller, was named commanding officer of the 9817th Volunteer Air Reserve Training Unit at Brooks Air Force Base, replacing the retiring Lt.Col. Ernest F. Kusener, and in 1953 he was involved in Reserve Officers Association--accompanying 1948 Dixiecrat presidential candidate, Col. Strom Thurmond, on speeches to military bases. He was installed as president of the group on June 23, 1956 at New Orleans.

Roger and his wife Cherry had built a bowling alley in San Antonio called Woodlawn Alleys and were avid bowlers with their scores listed often in the local news. They also played tennis in mixed doubles tournaments during the 1950's.

Their names also appeared in a local column called "Bexar Facts," written by Morris Willson, who reported local society news gleaned from such groups as the St. Anthony Club, which the Zellers and Jaffes frequented. He announced the following news in December 1960:

Names of note: Atty. Park Street revealed as ardent dancer (he danced almost every set during a recent outing in the St. Anthony club) * * * Things to come: Look for insuranceman Roger Zeller to be promoted to brigadier general next month in the air force reserve.

An excerpt of the column from July 1961 stated:

Verdant vernacular: Cherry Zeller's description of a dog fish * *  ...  * *  Didja hear about
Morris Jaffe's size-7 feet in Roger Zeller's size-13 shoes?

A month later the following tidbit appeared in that column:

The city at night: Cherry Zeller, the general's wife, has a little joke with her husband about his forgetting dance step countdowns. * * * ... Pattern for parents: The Morris Jaffes refuse to ride on the same airplane.

In November was this one:

Some of the great facial contortionists of movie and television fame could take lessons from Cherry Zeller, wife of the brigadier general; Cherry's cleverest new routine is a realistic, if somewhat exaggerated, demonstration of tuning a color TV set . . . 

The columnist gave another clue to how he kept up with the Zellers in a February 1962 item:

At the St. Anthony Club Saturday night prime topics of conversation included ... an original tune called "Coconut Island," its words and music written by Cherry Zeller . . .

In January 1958 Roger Zeller was spokesman for the Loma Corp. in El Paso, Texas at a town hall meeting of protesters to a zoning change in the community who wanted information about the company which would be operating a commercial business there. Zeller told the group:

"Loma Corp. is a retail department store. We sell everything, all nationally advertised merchandise." A wave of surprise passed through the audience when Zeller added, "All that our operations will include is the department store and a gas station."

A Fed-Mart was eventually built in El Paso in 1959, located at 6600 Montana Avenue, owned by the North Loop Plaza, Inc., a corporation filed in Texas in August 19, 1957.

In 1961 there were Fed-Mart stores located in Long Beach, Anaheim, San Diego, Phoenix, Houston, San Antonio (at 2514 S.W. Military Drive), El Paso and Dallas. At that time shoppers had to be members, paying $2 to join and $1 per year to renew their membership. A 9th Circuit court opinion involving a dispute over income tax stated:

Fed-Mart is a California corporation engaged in the business of discount retailing. On March 3, 1967, Fed-Mart made an exchange offer to the holders of its common stock... The primary purpose for the exchange offer was to effect the withdrawal of Morris Jaffe from corporate ownership and management in a manner agreeable to him. At the time of the offer, Jaffe was the holder of the largest single block of Fed-Mart's common stock. Disagreements between Jaffe and Sol Price, Chairman of the Board and President of Fed-Mart, had created problems in the operation and management of the taxpayer and had contributed to a decline in earnings in the three years preceding March, 1967.

Jaffe's connection to Sol Price leads one to wonder whether there may have been a CIA connection. In Price's obituary in the Washington Post, it was stated:

"Sol Price -- his family said it was never Solomon -- was born Jan. 23, 1916, in New York City, the son of Samuel and Bella Price, who came to the United States from Russia during the wave of Jewish immigration in the first years of the 20th century. Mr. Price said his father had worked with organizer David Dubinsky in the creation of the International Ladies Garment Workers Union and later founded his own clothing factory in Lower Manhattan. His father, who became ill with tuberculosis, relocated the family to San Diego in the late 1920s."

Long-time Central Intelligence Agency operative Jay Lovestone, a former Communist,

...worked [his] way into the good graces of ILGWU President David Dubinsky, who had been [his] fiercest enemy before [his] expulsion....In 1944, Dubinsky arranged to place Lovestone in the AFL's Free Trade Union Committee, where he worked out of the ILGWU's headquarters. Along with Irving Brown he led the activities of the American Institute for Free Labor Development, an organization sponsored by the AFL which worked internationally, organizing free labor unions in Europe and Latin America which were not Communist-controlled.

In connection with that work he cooperated closely with the CIA, feeding information about Communist labor-union activities to James Jesus Angleton, the CIA's counterintelligence chief, in order to undermine Communist influence in the international union movement and provide intelligence to the US government. He remained there until 1963 when he became director of the AFL-CIO's International Affairs Department (IAD), which quietly sent millions of dollars from the CIA to aid anti-communist activities internationally, particularly in Latin America.

In 1973, AFL-CIO president George Meany discovered that Lovestone was still in contact with James Angelton of the CIA, who was conducting illegal domestic spying activities, despite being told seven years earlier to terminate this relationship.

Samuel Price, Sol's father, moved to San Diego in 1929, the same year Dubinsky was undergoing upheavals within the union and the same time Lovestone began to gain influence. San Diego was the location of military intelligence giant General Ralph Van Deman, who retired there in September 1929 and died in mid-1950's.

By 1959, Sol Price had become influential enough in California politics to be appointed to Governor Pat G. Brown's Business Advisory Council with the state's leading businessmen who supported the Democrat. It was during his tenure on that council that the first Fed Mart stores were built in California. The ground-breaking ceremony was announced in Long Beach on April 2, 1961 by the company that developed the site for the stores. It was the same corporation Roger Zeller had represented in the El Paso meeting a few years earlier, Loma Corp. The spokesman in California told the Independent Press-Telegram the building to be built would be:

a one-story building to house a giant market for the Fed-Mart Corp., a membership discount firm for federal and civil service employes. Loma Properties, the development corporation, with offices in San Diego, said William Schmidt of theleases are being negotiated on some other stores to be erected in the center.

 That confirms the link between Zeller, who was working in 1959 to get Fed-Mart into El Paso on behalf of Loma Corp. and Jaffe who by the time he sold his stock in Fed-Mart was its largest shareholder.

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