Huffington Plan to Remake Houston Skyline Fell Flat : Business: He secretly bought up 11 downtown blocks for project. But collapse of oil market took dream with it.

This was Mike Huffington’s “baby,” the chance to leave his own mark on a city that had long revered his oil-rich father as an entrepreneurial genius.

Huffington’s vision for his hometown: To create an urban community of swank high-rise condominiums, theaters and restaurants out of a tired downtown neighborhood. Working in secret, he bought up properties piece by piece through the 1980s and amassed 11 city blocks, utilizing the family oil money that is now financing his campaign for the U.S. Senate.

Like his headlong rush into politics, it was a move so aggressive for the conservative businessman that even close associates were left shaking their heads.

But then the Texas oil market collapsed, taking with it any hopes for Huffington’s dream development. And the property--now dotted with boarded-up shops, overgrown fields, and lots crammed with rusted-out trucks--sits instead as a remnant of his lucrative yet erratic two decades in business.

Jim Boyd, vice president of the company that bought out Huffington’s family-owned operation in 1990 for a reported $600 million, laughs when asked what his firm hopes to do with the once-promising land acquired in the deal. “We’d like to sell it,” he said.

The stalled development, representing one of the biggest land deals in Houston history, underscores central questions in the Republican congressman’s bid to defeat Sen. Dianne Feinstein on Nov. 8: Just how good was Mike Huffington as a businessman? And what does his record as an oil company executive and entrepreneur say about his ability to help lead California through tough economic times?

For the 47-year-old Huffington, the link between profit margins and prudent public policy is inextricable. His main achievement as an oil executive and his primary mission as a U.S. senator, he said in an interview, are essentially one: “Trying to cut back the fat in the budget.”

With a brief political record to run on, Huffington has made his business career a cornerstone of his Senate campaign, holding himself up as a man who built a fortune from modest beginnings before moving to Santa Barbara less than four years ago. “I am the American Dream,” he declared as he unseated a longtime incumbent congressman in 1992.

In the powerful oil and banking cliques of Texas, Huffington still carries a reputation as a tough, in-your-face negotiator who brought his Harvard Business School organizational savvy to a family company that was rich in gas reserves but raw in modern business know-how.

But he is also remembered as a businessman who served largely as a high-ranking “caretaker” for his father’s corporate empire and was often absent when trouble hit.

“It’s very difficult to find specific things that Mike achieved. He didn’t have any real track record,” said John T. Brown III, a former vice president at Huffco, the oil conglomerate that Huffington’s wildcatter father founded. “Mike’s idea of managing the company was to preserve the family wealth. He did not take risks.”

Many other associates describe Huffington as an industrious, hands-on executive. He even involved himself in corporate minutia, insisting that his 140 employees keep their desks clean and avoid smoking and caffeine in the office.

“It was his company,” said Boyd, who worked as Huffco’s controller.

Even his supporters, however, are slow to point to business successes that presaged Huffington’s political career. Although he oversaw Huffco finances as chief financial officer, problems arose on several fronts:

Environmental: The company paid about $1 million in the mid-1980s to clean up coastal wetlands on the Gulf Coast that were damaged by its oil rigs, according to former general counsel John Patton. Huffington and other officials voluntarily paid even more to clean up decades-old oil contamination discovered at a 400-acre site that Huffco owned just outside Houston, former executives said. Federal records show the firm also is listed as a “potentially responsible party” at a polluted Superfund site in Louisiana.

In California, a Huffco subsidiary owned a 20% stake in a bankrupted Paramount refinery that left a trail of environmental damage, The Times reported earlier this month. Testing has found that hazardous pollutants have spread into ground water and soil surrounding the 60-acre site, and water quality officials say it may cost tens of millions of dollars to clean up. Officials said that the pollution probably started decades before the Huffington company held an interest for several years in the 1980s.

Legal: The U.S. Commerce Department fined Huffco $250,000 in 1986 because it had improperly made dozens of shipments of computers and police equipment--including shock batons, billy clubs and handcuffs--to Indonesia. The company ran one of the world’s largest liquefied gas operations there, and former executives say the items were shipped, without required U.S. authorization, for use by Huffco’s overseas employees.

Huffington said he took immediate steps to avoid a recurrence, but the export violations already had proved costly to his political aspirations. He said the investigation had prompted him to ask the Ronald Reagan Administration to quietly withdraw his nomination as an assistant Commerce secretary before the Senate could consider it.

“You know how Washington is--if you have something (potentially damaging) like that,” he said, “it’s just not worth going through it.”

Financial: The company suffered major losses during his tenure on two oil projects in California and Oklahoma. The $135-million California project, designed to process crude oil in Bakersfield and pipe it to Los Angeles, led to tens of millions of dollars in losses and prompted run-ins with Texas bankers and Sacramento tax officials over millions more in alleged unpaid debts.

In an interview, Huffington dismissed many of these difficulties as insignificant compared to his biggest achievement--persuading his family to sell Huffco in 1990 at what he considers its peak value.

Most of the problems, he said, were someone else’s doing.

The baton and computer shipments, Huffington said, were authorized by lower-level executives without his knowledge and he was furious when he found out.

The Paramount refinery was run with little involvement from him, and he knew nothing about its environmental problems, said Huffington, whose account was supported by others.

The first he heard of Huffco’s $1-million oil cleanup on the Gulf Coast or the firm’s connection to the Superfund site in Louisiana came when a Times reporter asked about those issues in a recent interview, he said.

And he and other former Huffco officials said the Bakersfield refinery was approved by his father despite Huffington’s warnings that it could be a big money-loser.

“You’re asking the wrong guy,” he added. “That was done by other people. It was not one that I played an active role in at all. . . . It was not my favorite project.”

After Huffco was unable to repay part of a $15-million loan from First City National Bank of Houston, bank executive Bob Wagner negotiated with Huffington to settle the matter.

“The positive side to him was that he had a much more organized management style than his father, and he had good people around him,” he said.

“The negative was that he got (Huffco) into some lousy investments . . . and he was a tough guy to get along with,” he said. “His attitude was, ‘This is our offer, guys. If you don’t like it, take a hike.’ ”

The bank, which later failed, wrote off more than $5 million in losses on the loan, federal records show.

Huffington’s supporters say the congressman, only now managing to escape his father’s shadow, is rarely given credit for helping build Huffco and for using conservative fiscal policies to protect it from the oil bust of the mid-1980s.

“The way (Huffington) approached the business could very well have saved the company from going off a cliff,” said Michael Decker, Huffo’s former chief financial officer. “Huffco was the best-run, best-financed, best-performing independent oil company. The (profit) margins were great. This was a home-run business.”

Huffington refused to provide records to corroborate such claims. “You have to take people’s word for it,” he said.

Huffington’s business dealings did make him a rich man. He and his wife, author Arianna Huffington, own multimillion-dollar homes on each coast, and he is thought to be worth more than $70 million, his share of Huffco’s 1990 buyout by a nationalized Taiwanese oil company.

The congressman is so well-off that he has been donating his federal salary to children’s causes in Santa Barbara--and he has spent more than $25 million of his own money on the campaign.

Yet less is known about his finances than those of many other major candidates because Huffington has refused repeated calls from rivals and the media to release annual tax returns and other financial documents. He says voters are most interested in state and national issues, not his wealth.

Some who have worked closely with Huffington find it incongruous that such a zealously private person has thrust himself into what has become one of the nation’s most publicized races.

“I never saw Mike as a politician,” said Patton, the Huffco general counsel. “He was a very private person, and politics just isn’t a game for private people, in my view.”

As a candidate, he has carefully chosen what to disclose about his career. His campaign provided a reporter with a list of 29 professional associates who could speak about his accomplishments.

All who were interviewed spoke well of Huffington but most said they had rarely, if ever, dealt directly with him. They said they knew him primarily through his father, Roy, a geologist who forged into oil exploration in the 1950s.

The response of San Antonio oilman Robert V. West Jr. was typical:

“I’m a good friend really of Roy, and I know Mike through Roy,” said West, a retired petroleum company founder. “I think and hope that he’s like his father, really a great American. If he turns out half as good as Roy, he’ll be doing pretty well.”

Huffington has clung to his privacy, even when it comes to investments that he has had to publicly disclose.

For example, he reported in a congressional conflict-of-interest statement that his ownership in a Southern California production company called Crest Films Ltd. was worth $500,000 to $1 million. But Crest President Pierre de Lespinois said Huffington paid “definitely . . . more than $1 million” for his half-interest.

Huffington declined to discuss the discrepancy, saying: “That’s private, it’s a private company.”

Born of middle-class roots in Dallas in 1947, Huffington says he has restlessly considered a wide range of professions over the years--from real estate and filmmaking to religion, teaching and, in what he now considers his true spiritual calling, politics.

Amid all the possibilities, however, oil has dominated his professional life.

After graduating from Harvard Business School in 1972, Huffington went out on his own for four years in banking and oil investment. But after a messy legal run-in with his partners in a Texas investment firm, he joined the family company in 1976 to work in finance.

He stayed there for virtually all of the next 14 years in high-ranking positions under his father. He took only a year’s break to work as a deputy assistant secretary of defense in arms control, a position secured in part through his family’s contributions to the Republican Party.

Fiscal prudence has been Huffington’s professional credo, and even his personal portfolio today is built around low-risk holdings, with millions held in U.S. Treasury bills, state bonds, IRAs and money market accounts, records show.

His conservative philosophies became well-entrenched in Houston:

Although it put him at odds with his Huffco associates, Huffington opposed the ill-fated Bakersfield refinery because he thought it was too risky.

His penchant for husbanding the company’s resources became the stuff of legend in the office. On the eve of Huffco’s sale to the Taiwanese, several colleagues recalled, he gathered up desk supplies before the buyers moved in.

And his corporate billings sparked recurring tensions with Huffco’s overseas partners.

In 1971, Huffington’s father tapped into a major natural gas reserve in the jungles of Indonesia, and the family struck it rich over the next two decades as a partner with the Indonesian government and other international players in a gas liquefaction operation that generated tens of millions of dollars a year in sales to Japan.

From their Houston office, Huffco executives oversaw the Indonesia project and agreed to bill the partners for their administrative work. It was a profitable but contentious arrangement.

“Mike wasn’t bashful about spending money on his own personal (business) travel--first class and all that. As a general rule, that was all billed to the (Indonesia) partnership,” said Paul T. Scott, former executive vice president at Huffco.

“Mike liked corporate jets and he had a corporate jet, so he used it (and billed some of the expenses). Those were the perks of the job, and there was some resentment from the partners.”

One former Huffco official who spoke on condition of anonymity remembered an upset Huffington demanding to know why more of the official’s time that month had (not) been billed to the Indonesia project.

Huffington declined to discuss the billings.

Although Huffco’s Indonesian venture occupied much of his time, Huffington said, oil never generated the passion for him that it did for his father. His greater interest was in real estate, he said, and his Houston land acquisition was seen as his brainchild.

Over a period that spanned a decade, beginning in 1979, Huffington directed a handful of associates to gradually buy up what amounted to 11 blocks of a run-down area now dominated by the George R. Brown Convention Center.

Huffington hoped the city’s runaway growth would spill into the area, and Huffco would supply land for prime development. But even many of those closest to Huffington knew nothing about his plans.

Houston real estate broker David L. Cook, who helped buy the land piece by piece, remembers the intense secrecy among intermediaries handling the deal--including code names for parcels, pseudonyms for agents, even disguised voices for phone conversations.

“Certainly we didn’t want all the landowners to know who the purchasers were, or even that there was one purchaser out there,” he said. “It would raise the price.”

Former Huffco executive Decker, who would serve as best man at Huffington’s wedding, says he never heard anything about the project until several years after it began. Huffington sat him down one day on a bench downtown and instructed him to take a look at the neighborhood of parking lots, small shops and vacant land.

“Most of this,” Huffington told him, “is ours.”

In launching the land deal, Decker recalled, “his vision was to really have an impact on the skyline of the city and to do something that would be a lasting achievement in its history, a visible achievement.”

These are the types of images that Huffington often summons in speaking of his political ambitions as well. But in the Houston deal, the achievement never came.

The bottom dropped out of the oil market, and with it went much of Houston’s growth. So by the time the family began shopping its vast oil-and-gas operations to bidders in the late 1980s, it was also willing to sell off the land Huffington had worked so long to acquire.

“The only mistake they made,” said Houston realty agent Jenard Gross, a close friend and political backer of Huffington, “was that they were a little late in the game. And of course, the oil collapse occurred so they just ended up with a lot of land they didn’t develop.”

The mistake may have proved costly.

Although Huffington would not discuss the land’s finances, associates say they believe Huffco took a substantial loss, and financial and court records appear to bear them out. The family company paid a reported $38 million for the land, but the Taiwanese buyers valued it at only $15 million in a purchase agreement with Huffco.

Even today, Huffington considers the land “a fantastic investment” that may yet attract a developer. He speaks in terms of sacrifice when discussing the decision to package the property with Huffco’s oil assets in the 1990 sale.

“My father, if he was willing to sell the oil business, which he loved, then I had to be willing to sell the real estate business,” he said. The downtown property “was my baby, but so it was for my father when he sold his company.

“I thought it was the right thing to do.”

Huffington’s Business Career

Here are some key events in the professional life of Republican Senate candidate Mike Huffington:

* 1974: Two years out of Harvard Business School, Huffington starts oil investment firm in Houston with two partners.

* 1976: After messy run-in with partners, Huffington leaves investment firm with $700,000 buyout and joins Huffco, the Houston oil company his father founded. Serves in high-level finance positions over 14 years, becoming vice chairman under his father.

* 1979: Huffington begins decade-long task of quietly buying up 11 blocks of downtown Houston land for the family firm. Oil bust later stalls hopes for development.

* 1980: Huffington arranges financing for $135-million refinery project in Bakersfield. Company suffers tens of millions of dollars in losses, and refinery is later folded into partnership with a Paramount refinery that has experienced widespread environmental problems.

* 1984: President Ronald Reagan nominates Huffington as an assistant commerce secretary but quietly drops nomination several months later. It is later disclosed that a Commerce Department investigation, leading to a $250,000 fine against Huffco in 1986 for unauthorized shipments of computer and police equipment to Indonesia, caused Huffington to withdraw.

* 1986: Huffington lands lower-level job as deputy assistant secretary of defense, working in arms control. Unlike commerce position, it does not require Senate confirmation. Huffington stays about a year before returning to Huffco.

* 1990: At Huffington’s urging, family completes sale of Huffco to nationalized Taiwanese oil company for reported $600 million. Huffington gets $70-million share.

* 1992: After moving to the Santa Barbara area with his wife and two daughters, Huffington spends $5.2 million to upset incumbent Robert J. Lagomarsino for a seat in Congress.

* 1993: Eight months after taking office in Congress, Huffington announces run for Senate. Later wins Republican primary against former Orange County Rep. William E. Dannemeyer for chance to face Sen. Dianne Feinstein on Nov. 8.

SOURCE: Times staff and wire reports