Hunt Bankruptcy Emerges as Biggest Show in Dallas

This city has settled back to watch one of those epic Texas-sized struggles in which the characters are bigger than life and the stakes beyond comprehension.

But all Leon Adams knows is that the Hunt brothers owe him $75.

“And,” he grumbles, “I suppose I can kiss that goodby. I’m just lucky it isn’t $750.”

That’s the way it is in bankruptcy proceedings, and bankruptcy is where the oil barons plopped themselves last month--along with 900 of their creditors, including Adams’ Acme Rubber Stamp Co.

There doesn’t seem to be much sympathy around here for the Hunts’ predicament. Collectively at least, the three brothers--Nelson Bunker, William Herbert and Lamar--are still worth more than $1 billion. And the way small businessman Adams figures it, “They’ve got more money than sense.”

But their legal wrangling--including bankruptcy petitions filed on behalf of three Hunt companies and lawsuits seeking $15 billion in damages from 23 of the nation’s biggest banks--is quickly becoming the biggest show in town.

To an expectant world, the collapse of a private fortune once estimated at $14 billion is a riveting event, all the more so because of the Hunts’ colorful legacy. To the Hunts’ legion of critics, the turn of events seems like sweet retribution. And to economists, it’s a seminal event that may signal a shift in the nation’s wealth.

There are unlikely political alliances and clashes: The ultraconservative Hunts and their Boston lawyers are seeking to avoid a local Democratic judge named Barefoot Sanders, while the 23 banks--only four of which are based in Texas--like Barefoot just fine.

And for the army of lawyers who have entered the case, it promises to generate years of fees from some of the nation’s deepest pockets.

Legacy of H.L. Hunt

“I don’t even watch ‘Dallas’,” a local securities dealer says of the prime-time television soap opera. “In fact, when I’m traveling I tell people I’m from Shreveport. But I watch the Hunt saga because it’s so entertaining.”

At stake is what’s left of the legacy that the late H. L. Hunt, oil wildcatter, bigamist, superpatriot and gambler extraordinaire, left to the three youngest sons of his “first family” after his death in 1974.

There are six children by the first of Hunt’s three wives: Nelson Bunker, 60, and William Herbert, 57, the principal operators of the Hunt empire; Lamar, 54, who has sizable sports holdings; Margaret Hunt Hill, 71, and Caroline Hunt Schoellkopf, 63, older sisters who apparently are billionaires in their own right as a result of separate trusts from their father; and H. L. Hunt III, known as Hassie, now 69, who was given a lobotomy in the late 1940s in an attempt to cure his presumed insanity.

The Hunt “first family” legacy increased to $14 billion in just half a dozen years after H. L. Hunt’s death, according to estimates by Hunt biographer Harry Hurt III of Houston.

A High-Stakes Gamble

What family money or property the courts can ultimately seize to settle with the banks will be hotly debated for months or years. But the crisis that precipitated the bankruptcy petition had its roots in the disastrous scheme by Nelson Bunker and William Herbert in 1980 to buy up most of the silver in the world.

“Just trying to make some money,” Bunker reportedly explained later to his irate sister Margaret.

It was a high-stakes gamble in the style of their father, and it proved to be a spectacular failure. Silver prices collapsed and the brothers needed an immediate $1.1 billion in cash to meet their trading commitments. But rather than sell off a few of their bountiful holdings to raise money, the Hunts borrowed the $1.1 billion from a consortium of banks basically by mortgaging their Placid Oil Co.

(According to Hurt’s biography, “Texas Rich,” the Hunts also put up as collateral thousands of ancient coins from the 3rd Century BC; 16th-Century antiques; Greek and Roman bronze and silver statuettes; 500 racehorses; 4 million acres of oil, gas and coal leases and real estate; lawn mowers, CB radios and more than 70,000 head of cattle. Much of that collateral was lifted in a later restructuring.)

Cornerstone of Fortune

With $2 billion or so in oil and gas reserves, Placid Oil is the cornerstone of the family fortune and the biggest customer of the second main Hunt enterprise, Penrod Drilling. The two companies are owned by the trusts for Bunker, Herbert and Lamar.

That loan is the main source of the Hunts’ crisis today, and Placid Oil--its value slashed in half by the collapse in world oil prices this year--is the major Hunt entity that was placed under the protection of the bankruptcy courts last week.

Pleading the same poverty as countless other oilmen this year, the Hunts missed nearly $80 million in loan payments and then sued 23 banks for $15 billion, accusing them of causing a lot of the trouble.

Two weeks ago, the banks moved to seize hundreds of millions of dollars in Hunt property in Texas and Mississippi, triggering the bankruptcy filings just hours before foreclosure auctions were to begin last week.

(The loan balance now stands at $773 million, of which $54 million apiece is held by Security Pacific National Bank and First Interstate Bank of California, and $33 million by Wells Fargo.)

A Bitter Altercation

It is a bitter altercation that is, in part, a sign of the times. Texas millionaires whose fortunes were made on oil or real estate have been going bankrupt at a dizzying pace in the last few years, notably such one-time movers as Clint Murchison Jr., former owner of the Dallas Cowboys, and T. Cullen Davis, the industrialist.

“The Hunts are the biggest, but they’re not an isolated example,” said Hurt, a native Texan and a contributing editor of Texas Monthly magazine. “It’s not entirely their fault. The oil business has gone to hell.”

In fact, Nelson Bunker and William Herbert today might be called Texas poor: They aren’t even the richest people in Dallas anymore. That title, going away, is held by H. Ross Perot, the computer tycoon with an estimated net worth of $2.4 billion--a sign of the transition in the Texas and national economies toward service- and technology-based money.

A local business publication says 10 of the 20 richest folks in town are Hunts, with a combined worth of $7.5 billion. But by that ranking, there are three Hunt women with net worths greater than Bunker’s and Herbert’s, whose holdings have shrunk to an estimated $900 million apiece.

A Separate Inheritance

Farther down that list in the $500-million range are Lamar and the offspring of H. L. Hunt’s so-called “second family,” which has long been estranged from the “first family.” They are Ray L. Hunt, 43, and younger sisters Ruth, Helen and Swanee, all children of Hunt and Mrs. Ruth Ray Wright, whom he married in 1957. They received a separate inheritance consisting mainly of Hunt Oil Co., which Ray runs and jointly owns with his sisters.

(There is yet another family consisting of the two surviving children of H. L. Hunt’s secret and bigamous marriage to Frania Tye Lee while still legally married to his first wife, Lyda Bunker. He left them a minor piece of his fortune.)

While it seems clear that the Hunt brothers have suffered greatly because of the oil-price collapse, others have survived it. Their critics call the bankruptcy a comeuppance for shoddy business practices.

Critics say Placid Oil and Penrod Drilling are mediocre companies unable to keep talented people because, it is said, the Hunts do not pay enough, and run the whole show themselves.

“You can’t run a company with a bunch of clerks,” a former ranking Hunt executive said. “They would hire talented people and then wouldn’t let them manage. They hire you at a marginal salary, and then three or four years later they can’t understand why you don’t want to work for $40,000 a year like you used to.”

Riding Prices Down

As for the dramatic growth of the Hunt empire in the late 1970s, a well-connected Dallas broker who knows the Hunts says they rode along as oil surged from $2 to $40 a barrel--just as they are riding prices down now.

“You didn’t have to be a rocket scientist to make money in oil back then,” the broker said. “The banana kept growing, but the brain behind the banana stayed the same size. If the Hunts had quality people, they’d never have gotten involved in that silver debacle.”

Meanwhile, a Dallas oil lawyer and speculator says, the Hunts--perhaps preoccupied with their silver woes--were late to respond to the slide in oil prices that began in 1981.

“Penrod was the last one to realize it,” this lawyer said. Long after other contract drillers had cut their rates as demand fell off, he said, “Penrod still wanted $40,000 a day” to drill for oil on a contract basis.

Parceling Out Blame

However the blame is parceled out for the Hunts’ latest financial crisis, the more urgent question is how the money will be parceled out--a decision that awaits the outcome of their grudge match with the banks.

Deeply suspicious of each other because of past run-ins, the Hunts and the lenders cannot even agree on what town the case belongs in or which judge should hear it.

The Hunts raised eyebrows all over town by hiring Boston lawyers to plead their case. Then, unhappy with the early rulings it was getting from U.S. District Judge Sanders, they rushed off to New Orleans to file for bankruptcy.

When Sanders last week ordered them back to Dallas, the Hunts demanded that Sanders--a long-time Texas Democrat who was named to the federal bench in 1979 by President Jimmy Carter--quit the case because of his political persuasions and investments in the banking industry. On Friday, the judge refused the request, and the Hunts have vowed to appeal.

Muddy Legal Waters

The Hunts, like their father well-known supporters of conservative causes, described themselves as major backers of Sanders’ opponents in his unsuccessful campaigns for Congress and the U.S. Senate. They also said one of the banks’ lawyers was the treasurer of Sanders’ 1972 Senate campaign.

Even before politics entered the picture, the banks were accusing the Hunts of practicing “the dark side of bankruptcy law,” and the Hunts suggested that lawyers’ fees, not legal issues, were the reason that the banks’ Dallas-based lawyers fought the New Orleans site.

Into these muddy legal waters last week walked Philip J. Hirschkop of Alexandria, Va., as special counsel to the Hunts.

It was Hirschkop, one-time lawyer for such 1960s radicals as H. Rap Brown and a specialist in civil rights and wiretap cases, who won acquittal by a jury in Bunker and Herbert’s 1975 wiretapping trial.

‘Symbiotic Relationship’

The brothers had tapped the phone lines of some Hunt employees who were suspected, and later convicted, of embezzlement. Hirschkop’s successful defense strategy was to cut through the Hunts’ image as remote and wealthy, portraying the family instead as “plain folks” who “laugh and cry” just like the jurors.

Hirschkop and the Hunts have “a very symbiotic relationship,” author Hurt said. “Bunker and Herbert trust him. He obviously disagrees with them about a lot of things, but at the same time he likes the Hunts and he’s amused and bemused by some of the curious scrapes they get into.”

While perhaps not as eccentric as their late father, who once confided to a secretary that he feared he was slightly crazy, Bunker and Herbert have their own fiercely independent styles.

Bunker, at one time a big contributor to the John Birch Society and given to such pointed remarks as “a billion dollars isn’t what it used to be,” is said to be a teetotaler who enjoys gambling and his huge stable of thoroughbred horses. A college dropout, he cultivates an image as an uneducated country boy--but he managed to discover a $7-million oil field at age 22.

He and the more conventional Herbert, who disdains many of the trappings of wealth and is active in the Presbyterian Church, scored some exploration successes--notably in Alaska in 1969--and were credited with rescuing the family oil empire during an earlier crisis in 1970.

Brother Lamar, although an equal partner in Placid and Penrod, has been less active in the family business and has devoted his time to professional sports franchises. He was a founder of the old American Football League and owns the Kansas City Chiefs football team.

In spite of their critics, the Hunts have their defenders. Ginger Canfield, who was preparing for the biggest foreclosure case in the 23-year history of her Dallas foreclosure posting service until the Hunts forestalled it by filing for bankruptcy, says:

“I think the banks are giving them a raw deal. Those loans were fully collateralized. They’ve done a lot for Dallas; we tend to forget that. People like to jump on them when they’re in trouble.”

Adds Edwin A. McCabe, the Boston attorney who heads the Hunts’ legal team:

“I don’t know how they’re perceived here. We’ll find out. A lot of what they do, they seek no aggrandizement for. On June 24, when I was filing the first lawsuit, I was unable to reach Herbert because he was off making a speech to the Boy Scouts. In fact, he frequently comes into our office wearing a Boy Scout tie.”