Date: Mon Jan  4 03:38:24 est 1993
From: "John Covici" <covici@ccs.covici.com>
Message-Id: <2b47f787.ccs@ccs.covici.com>
Reply-To: "John Covici" <covici@ccs.covici.com>
Organization: Covici Computer Systems
To: uunet!css.itd.umich.edu!pauls@uunet.UU.NET
Subject: Unauthorized Biography of George Bush: Part 8
Status: O


Chapter 8 

THE PERMIAN BASIN GANG, 1948-59 


Pecunia non olet.
[Money doesn't smell.]
           -- Vespasian
During the years following the
Second World War, the patrician
families of the Eastern Anglophile
Liberal Establishment sent numbers of
their offspring to colonize those
geographic regions of the United States
which, the families estimated, were
likely to prosper in the postwar
period. On the surface, this appears as
a simple reflex of greed: Cadet sons
were dispatched to those areas of the
provinces where their instinctive
methods of speculation and usury could
be employed to parasitize emerging
wealth. More fundamentally, this
migration of young patrician bankers
answered the necessity of political
control. 
   The Eastern Establishment,
understood as an agglomeration of
financier factions headquartered in
Wall Street, had been the dominant
force in American politics since J.P.
Morgan had bailed out the Grover
Cleveland regime in the 1890s. Since
the assassination of William McKinley
and the advent of Theodore Roosevelt,
the power of the Wall Street group had
grown continuously. The Eastern
Establishment may have had its earliest
roots north of Boston and in the Hudson
River Valley, but it was determined to
be, not a mere regional financier
faction, but the undisputed ruling
elite of the United States as a whole,
from Boston to Bohemian Grove and from
Palm Beach to the Pacific Northwest. It
was thus imperative that the constant
tendency toward the formation of
regional factions be preempted by the
pervasive presence of men bound by
blood loyalty to the dominant cliques
of Washington, New York, and the
``mother country,'' the City of London. 
   If the Eastern Liberal
Establishment were thought of as a
cancer, then after 1945 that cancer
went into a new phase of malignant
metastasis, infecting every part of the
American body politic. George Bush was
one of those motile, malignant cells.
He was not alone; Robert Mosbacher also
made the journey from New York to
Texas, in Mosbacher's case directly to
Houston. 
   The various sycophant
mythographers who have spun their yarns
about the life of George Bush have
always attempted to present this phase
of Bush's life as the case of a
fiercely independent young man who
could have gone straight to the top in
Wall Street by trading on father
Prescott's name and connections, but
who chose instead to strike out for the
new frontier among the wildcatters and
roughnecks of the west Texas oil fields
and become a self-made man. 
   As George Bush himself recounted
in a 1983 interview, ``If I were a
psychoanalyzer, I might conclude that I
was trying to, not compete with my
father, but do something on my own. My
stay in Texas was no Horatio Alger
thing, but moving from New Haven to
Odessa just about the day I graduated
was quite a shift in lifestyle.''@s1 
   These fairy tales from the ``red
Studebaker'' school seek to obscure the
facts: that Bush's transfer to Texas
was arranged from the top by Prescott's
Brown Brothers Harriman cronies, and
that every step forward made by Bush in
the oil business was assisted by the
capital resources of our hero's
maternal uncle, George Herbert Walker,
Jr., ``Uncle Herbie,'' the boss of G.H.
Walker & Co. investment firm of Wall
Street. Uncle Herbie had graduated from
Yale in 1927, where he had been a
member of Skull and Bones. This is the
Uncle Herbie who will show up as lead
investor and member of the board of
Bush-Overbey oil, of Zapata Petroleum,
and of Zapata Offshore after 1959...
   Father Prescott procured George
not one job, but two, in each case
contacting cronies who depended at
least partially on Brown Brothers
Harriman for business. 
   One crony contacted by father
Prescott was {Ray Kravis,} who
was in the oil business in Tulsa,
Oklahoma. Oklahoma had experienced a
colossal oil boom between the two world
wars, and Ray Kravis had cashed in,
building up a personal fortune of some
$25 million. Ray was the son of a
British tailor whose father had come to
America and set up a haberdashery in
Atlantic City, New Jersey. Young Ray
Kravis had arrived in Tulsa in 1925, in
the midst of the oil boom that was
making the colossal fortunes of men
like J. Paul Getty. Ray Kravis was
primarily a tax accountant, and he had
invented a very special tax shelter
which allowed oil properties to be
``packaged'' and sold in such a way as
to reduce the tax on profits earned
from the normal oil property rate of 81
percent to a mere 15 percent. This
meant that the national tax base was
eroded, and each individual taxpayer
bilked, in order to subsidize the
formation of immense private fortunes;
this will be found to be a constant
theme among George Bush's business
associates down to the present day. 
   Ray Kravis's dexterity in setting
up these tax shelters attracted the
attention of Joseph P. Kennedy, the
bucaneering bootlegger, entrepreneur,
political boss and patriarch of the
Massachusetts Kennedy clan. For many
years Ray Kravis functioned as the
manager of the Kennedy family fortune
(or fondo), the same job that later
devolved to Stephen Smith. Ray Kravis
and Joe Kennedy both wintered in Palm
Beach, where they were sometimes golf
partners.@s2 
   In 1948-49, father Prescott was
the managing partner of Brown Brothers
Harriman. Prescott knew Ray Kravis as a
local Tulsa finance mogul and
wheeler-dealer, who was often called
upon by Wall Street investment houses
as a consultant to evaluate the oil
reserves of various companies. The
estimates that Ray Kravis provided
often involved the amount of oil in the
ground that these firms possessed, and
these estimates went to the heart of
the oil business as a ground-rent
exploitation in which current oil
production was far less important than
the reserves still beneath the soil. 
   Such activity imparted the kind of
primitive-accumulation mentality that
was later seen to animate Ray Kravis's
son Henry. During the 1980s, as we will
see, Henry Kravis personally generated
some $58 billion in debt for the
purpose of acquiring 36 companies and
assembling the largest corporate
empire, in paper terms, of all time.
Henry Kravis would be one of the
leaders of the leveraged buyout gang
which became a mainstay of the
political machine of George Bush....
   So father Prescott asked Ray if he
had a job for young George. The answer
was, of course he did. 
   But in the meantime, Prescott Bush
had also been talking with another
crony beholden to him, {Henry Neil
Mallon,} who was the president and
chairman of the board of Dresser
Industries, a leading manufacturer of
drill bits and related oil well
drilling equipment. Dresser had been
incorporated in 1905 by Solomon R.
Dresser, but had been bought up and
reorganized by W.A. Harriman & Co. in
1928-29. 
   Henry Neil Mallon, for whom the
infamous Neil Mallon Bush of Hinckley
and Silverado fame is named, came from
a Cincinnati family who were
traditional retainers for the Taft
clan, in the same way that the
Bush-Walker family were retainers for
the Harrimans. As a child, Neil Mallon
had gone with his family to visit their
close friends, President William Howard
Taft and his family, at the White
House. Mallon had then attended the
Taft School in Watertown, Connecticut,
and had gone on to Yale University in
the fall of 1913, where he met Bunny
Harriman, Prescott Bush, Knight Wooley,
and the other Bonesmen. 
   As we recall from the previous
chapter: the society's internal history
boasted that in 1918, Mallon burned the
flesh and hair off the skull of
Geronimo, which Prescott Bush and his
friends stole from the despoiled grave
at Fort Sill, Oklahoma. 
   One day in December 1928, Bunny
Harriman, father Prescott and Knight
Wooley were sitting around the Harriman
counting house discussing their
reorganization of Dresser Industries.
Mallon, who was returning to Ohio after
six months spent mountaineering in the
Alps, came by to visit. At a certain
point in the conversation, Bunny
pointed to Mallon and exclaimed,
``Dresser! Dresser!'' Mallon was
subsequently interviewed by George
Herbert Walker, the president of W.A.
Harriman & Co. As a result of this
interview, Mallon was immediately made
president of Dresser, although he had
no experience in the oil business.
Mallon clearly owed the Walker-Bush
clan some favors.@s3 
   Prescott Bush had become a member
of the board of directors of Dresser
Industries in 1930, in the wake of the
reorganization of the company, which he
had personally helped to direct.
Prescott Bush was destined to remain on
the Dresser board for 22 years, until
1952, when he entered the United States
Senate. Father Prescott was thus
calling in a chit which procured George
a second job offer, this time with
Dresser Industries or one of its
subsidiaries. 
   George Bush knew that the oil boom
in Oklahoma had passed its peak, and
that Tulsa would no longer offer the
sterling opportunities for a fast buck
it had presented 20 years earlier.
Dresser, by contrast, was a vast
international corporation, ideally
suited to gaining a rapid overview of
the oil industry and its looting
practices. George Bush accordingly
called Ray Kravis and, in the
ingratiating tones he was wont to use
as he clawed his way toward the top,
said that he wished respectfully to
decline the job that Kravis had offered
him in Tulsa. His first preference was
to go to work for Dresser. Ray Kravis,
who looked to Prescott for business,
released him at once. ``I know George
Bush well,'' said Ray Kravis years
later. ``I've known him since he got
out of school. His father was a very
good friend of mine.''@s4 

   Bush in Odessa

   This is the magic moment in which
all the official Bush biographies show
our hero riding into Odessa, Texas in
the legendary red Studebaker, to take
up a post as an equipment clerk and
trainee for the Dresser subsidiary
IDECO (International Derrick and
Equipment Company). 
   But the red Studebaker myth, as
already noted, misrepresents the facts.
According to the semi-official history
of Dresser Industries, George Bush was
first employed by Dresser at their
corporate headquarters in Cleveland,
Ohio, where he worked for Dresser
executive R.E. Reimer, an ally of
Mallon.@s5 This stint in Cleveland is
hardly mentioned by the pro-Bush
biographers, making us wonder what is
being covered up. On the same page that
relates these interesting facts, there
is a picture that shows father
Prescott, Dorothy, Barbara Bush, and
George holding his infant son George
Walker Bush. Young George W. is wearing
cowboy boots. They are all standing in
front of a Dresser Industries executive
airplane, apparently a DC-3. Could this
be the way George really arrived in
Odessa? 
   The Dresser history also has
George Bush working for Pacific Pumps,
another Dresser subsidiary, before
finally joining IDECO. According to
Bush's campaign autobiography, he had
been with IDECO for a year in Odessa,
Texas before being transferred to work
for Pacific Pumps in Huntington Park
and Bakersfield, California. Bush says
he worked at Huntington Park as an
assemblyman, and it was here that he
claims to have joined the United
Steelworkers Union, obtaining a union
card that he will still pull out when
confronted for his long history of
union-busting, as for example when he
was heckled at a shipyard in Portland,
Oregon during the 1988 campaign. Other
accounts place Bush in Ventura, Compton
and ``Richard Nixon's home town of
Whittier'' during this same period.@s6 
   If Bush actually went to
California first and only later to
Odessa, he may be lying in order to
stress that he chose Texas as his first
choice, a distortion that may have been
concocted very early in his political
career to defend himself against the
constant charge that he was a
carpetbagger. 
   Odessa, Texas, and the nearby city
of Midland were both located in the
geological formation known as the
{Permian Basin,} the scene of
an oil boom that developed in the years
after the Second World War. Odessa at
this time was a complex of yards and
warehouses, where oil drilling
equipment was brought for distribution
to the oil rigs that were drilling all
over the landscape. 
   At IDECO, Bush worked for
supervisor Bill Nelson, and had one
Hugh Evans among his co-workers.
Concerning this period, we are regaled
with stories about how Bush and Barbara
moved into a shotgun house, an
apartment that had been divided by a
partition down the middle, with a
bathroom they shared with a mother and
daughter prostitute team. There was a
pervasive odor of gas, which came not
from a leak in the oven, but from
nearby oil wells where the gas was
flared off. George and Barbara were to
spend some time slumming in this
setting. But Bush was anxious to
ingratiate himself with the roughnecks
and roustabouts; he began eating the
standard Odessa diet of a bowl of chili
with crackers and beer for lunch, and
chicken-fried steak for dinner. Perhaps
his affected liking for country and
western music and pork rinds, and other
public relations ploys go back to this
time. Bush is also fond of recounting
the story of how, on Christmas Eve,
1948, he got drunk during various IDECO
customer receptions and passed out,
dead drunk, on his own front lawn,
where he was found by Barbara. George
Bush, we can see, is {truly a regular
guy.} 
   According to the official Bush
version of events, George and ``Bar''
peregrinated during 1949 far from their
beloved Texas to various towns in
California where Dresser had
subsidiaries. Bush claims that he drove
1,000 miles a week through the
Carrizo Plains and the Cuyama Valley.
Some months later they moved to
Midland, another tumbleweed town in
west Texas. Midland offered the
advantage of being the location of the
west Texas headquarters of many of the
oil companies that operated in Odessa
and the surrounding area....
   The Bush social circle in Odessa was
hardly composed of oil field
roughnecks. Rather, their peer group
was composed more of the sorts of
people they had known in New Haven: a
clique of well-heeled recent graduates
of prestigious eastern colleges who had
been attracted to the Permian Basin in
the same way that Stanford, Hopkins,
Crocker and their ilk were attracted to
San Francisco during the gold rush.
Here were Toby Hilliard, John Ashmun,
and Pomeroy Smith, all from Princeton.
Earle Craig had been at Yale. Midland
thus boasted a Yale Club and a Harvard
Club and a Princeton Club. The natives
referred to this clique as ``the
Yalies.'' Also present on the scene in
Midland were J. Hugh Liedtke and
William Liedtke, who had grown up in
Oklahoma, but who had attended college
at Amherst in Massachusetts. 
   Many of these individuals had
access to patrician fortunes back East
for the venture capital they mobilized
behind their various deals. Toby
Hilliard's full name was {Harry
Talbot Hilliard} of Fox Chapel near
Pittsburgh, where the Mellons had their
palatial residence. {Earle
Craig} was also hooked up to big
money in the same area. The
{Liedtke brothers,} as we will
see, had connections to the big oil
money that had emerged around Tulsa.
Many of these ``Yalies'' also lived in
the Easter Egg Row neighborhood. A few
houses away from George Bush there
lived a certain {John Overbey.}
According to Overbey, the ``people from
the East and the people from Texas or
Oklahoma all seemed to have two things
in common. They all had a chance to be
stockbrokers or investment bankers. And
they all wanted to learn the oil
business instead.''@s7 

   The Landman
 
   Overbey made his living as a
landman. Since George Bush would
shortly also become a landman, it is
worth investigating what this
occupation actually entails; in doing
so, we will gain a permanent insight
into Bush's character. The role of the
landman in the Texas oil industry was
to try to identify properties where oil
might be found, sometimes on the basis
of leaked geological information,
sometimes after observing that one of
the major oil companies was drilling in
the same locale. The landman would
scout the property, and then attempt to
get the owner of the land to sign away
the mineral rights to the property in
the form of a lease. If the property
owner were well informed about the
possibility that oil might in fact be
found on his land, the price of the
lease would obviously go up, because
signing away the mineral rights meant
that the income (or ``royalties'') from
any oil that might be found would never
go to the owner of the land. 
   A cunning landman would try to
gather as much insider information as
he could and keep the rancher as much
in the dark as possible. In rural Texas
in the 1940s, the role of the landman
could rather easily degenerate into
that of the ruthless, money-grubbing
con artist, who would try to convince
an ill-informed and possibly ignorant
Texas dirt farmer, who was just coming
up for air after the great depression,
that the chances of finding oil on his
land were just about zero, and that
even a token fee for a lease on the
mineral rights would be eminently worth
taking. 
   Once the farmer or rancher had
signed away his right to future oil
royalties, the landman would turn
around and attempt to ``broker'' the
lease by selling it at an inflated
price to a major oil company that might
be interested in drilling, or to some
other buyer. There was a lively market
in such leases in the restaurant of the
Scharbauer Hotel in Midland, where maps
of the oil fields hung on the walls and
oil leases could change hands
repeatedly in the course of a single
day. Sometimes, if a landman were
forced to sell a lease to the mineral
rights of land where he really thought
there might be oil, he would seek to
retain an override, perhaps amounting
to a sixteenth or a thirty-second of
the royalties from future production.
But that would mean less cash or even
no cash received now, and small-time
operators like Overbey, who had no
capital resources of their own, were
always strapped for cash. Overbey was
lucky if he could realize a profit of a
few hundred dollars on the sale of a
lease. 
   This form of activity clearly
appealed to the mean-spirited and the
greedy, to those who enjoyed rooking
their fellow man. It was one thing for
Overbey, who may have had no
alternative to support his family. It
was quite another thing for George
Herbert Walker Bush, a young plutocrat
out slumming. But Bush was drawn to the
landman and royalty game, so much so
that he offered to raise capital back
East if Overbey would join him in a
partnership.@s8 
   Overbey accepted Bush's
proposition that they capitalize a
company that would trade in the
vanished hopes of the ranchers and
farmers of northwest Texas. Bush and
Overbey flew back East to talk with
Uncle Herbie in the oak-paneled board
room of G.H. Walker & Co. in Wall
 Street. According to {Newsweek,}
``Bush's partner, John Overbey, still
remembers the dizzying whirl of a
money-raising trip to the East with
George and Uncle Herbie: lunch at New
York's 21 Club, weekends at
Kennebunkport where a bracing Sunday
dip in the Atlantic off Walker's Point
ended with a servant wrapping you in a
large terry towel and handing you a
martini.''@s9 
   The result of the odyssey back
East was a capital of $300,000, much of
it gathered from Uncle Herbie's clients
in the City of London, who were of
course delighted at the prospect of
parasitizing Texas ranchers. One of
those eager to cash in was {Jimmy
Gammell} of Edinburgh, Scotland,
whose Ivory and Sime counting house put
up $50,000 from its Atlantic Asset
Trust. Gammell's father had been head
of the British military mission in
Moscow in 1945, part of the
Anglo-American core group there with
U.S. Ambassador Averell Harriman. James
Gammell is today the eminence grise of
the Scottish investment community, and
he has retained a close personal
relation to Bush over the years. Mark
this Gammell well; he will return to
our narrative shortly. 
   {Eugene Meyer,} the owner
of the {Washington Post} and the father
of that paper's present owner,
Katharine Meyer Graham, anted up an
investment of $50,000 on the basis of
the tax-shelter capabilities promised
by Bush-Overbey. Meyer, a president of
the World Bank, also procured an
investment from his son-in-law Phil
Graham for the Bush venture. Father
Prescott Bush was also counted in, to
the tune of about $50,000. In the days
of real money, these were considerable
sums. The London investors got shares
of stock in the new company, called
Bush-Overbey, as well as Bush-Overbey
bonded debt. Bush and Overbey moved
into an office on the ground floor of
the Petroleum Building in Midland. 
   The business of the landman, it
has been pointed out, rested entirely
on personal relations and schmooze. One
had to be a dissembler and an
intelligencer. One had to learn to
cultivate friendships with the
geologists, the scouts, the petty
bureaucrats at the county court house
where the land records were kept, the
journalists at the local paper, and
with one's own rivals, the other
landmen, who might invite someone with
some risk capital to come in on a deal.
Community service was an excellent mode
of ingratiation, and George Bush
volunteered for the Community Chest,
the YMCA, and the Chamber of Commerce.
It meant small talk about wives and
kids, attending church--deception
postures that in a small town had to
pervade the smallest details of one's
life. 
   It was at this time in his life
that Bush seems to have acquired the
habit of writing ingratiating little
personal notes to people he had
recently met, a habit that he would use
over the years to cultivate and
maintain his personal network. Out of
all this ingratiating Babbitry and
boosterism would come acquaintances and
the bits of information that could lead
to windfall profits. 
   There had been a boom in Scurry
County, but that was subsiding. Bush
drove to Pyote, to Snyder, to Sterling
City, to Monahans, with Rattlesnake Air
Force Base just outside of town. How
many Texas ranchers can remember
selling their mineral rights for a
pittance to smiling George Bush, and
then having oil discovered on the land,
oil from which their family would never
earn a penny? 
   Across the street from
Bush-Overbey were the offices of
Liedtke & Liedtke, Attorneys-at-law.
{J. Hugh Liedtke} and
{William Liedtke} were from
Tulsa, Oklahoma, where they, like Bush,
had grown up rich, as the sons of a
local judge who had become one of the
top corporate lawyers for Gulf Oil. The
Liedtkes' grandfather had come from
Prussia, but had served in the
Confederate Army. J. Hugh Liedtke had
found time along the way to acquire the
notorious Harvard Master of Business
Administration degree in one year.
After service in the Navy during World
War II, the Liedtkes obtained law
degrees at the University of Texas law
school, where they rented the servants'
quarters of the home of U.S. Senator
Lyndon B. Johnson, who was away in
Washington most of the time...
   The Liedtkes combined the raw,
uncouth primitive accumulation
mentality of the oil boom town with the
refined arts of usury and speculation
as Harvard taught them. Their law
practice was such in name only; their
primary and almost exclusive activity
was buying up royalty leases on behalf
of a moneybags in Tulsa who was a
friend of their family...
   Hugh Liedtke was always on the
lookout for the Main Chance. Following
in the footsteps of his fellow Tulsan
Ray Kravis, Hugh Liedtke schemed and
schemed until he had found a way to go
beyond hustling for royalty leases: He
concocted a method of trading
oil-producing properties in such a way
as to permit the eventual owner to
defer all tax liabilities until the
field was depleted. Sometimes Hugh
Liedtke would commute between Midland
and Tulsa on an almost daily basis. He
would spend the daylight hours prowling
the Permian Basin for a land deal, make
the 13-hour drive to Tulsa overnight to
convince his backers to ante up the
cash, and then race back to Midland to
close the deal before the sucker got
away. It was during this phase that it
occurred to Liedtke that he could save
himself a lot of marathon commuter
driving if he could put together a
million dollars in venture capital and
``inventory'' the deals he was
otherwise forced to make on a
piecemeal, ad hoc basis.@s1@s0 

   Zapata Petroleum
 
   The Liedtke brothers now wanted
to go beyond royalty leases and land
sale tax dodges, and begin large-scale
drilling and production of oil. George
Bush, by now well versed in the alphas
and omegas of oil as ground rent, was
thinking along the same lines. In a
convergence that was full of ominous
portent for the U.S. economy of the
1980s, the Liedtke brothers and George
Bush decided to pool their capital and
their rapacious talents by going into
business together. Overbey was on board
initially, but would soon fall away. 
   The year was 1953, and Uncle
Herbie's G.H. Walker & Co. became the
principal underwriter of the stock and
convertible debentures that were to be
offered to the public. Uncle Herbie
would also purchase a large portion of
the stock himself. When the new company
required further infusions of capital,
Uncle Herbie would float the necessary
bonds. Jimmy Gammell remained a key
participant and would find a seat on
the board of directors of the new
company. Another of the key investors
was the Clark Family Estate, meaning
the trustees who managed the Singer
Sewing machine fortune.@s1@s1 Some
other money came from various pension
funds and endowments, sources that
would become very popular during the
leveraged buyout orgy Bush presided
over in the 1980s. Of the capital of
the new Bush-Liedtke concern, about
$500,000 would come from Tulsa cronies
of the Liedtke brothers, and the other
$500,000 from the circles of Uncle
Herbie. The latter were referred to by
Hugh Liedtke as ``the New York guys.'' 
   The name chosen for the new
concern was {Zapata Petroleum.}
According to Hugh Liedtke, the new
entrepreneurs were attracted to the
name when they saw it on a movie
marquee, where the new release {Viva
Zapata!,} starring Marlon Brando as the
Mexican revolutionary, was playing.
Liedtke characteristically explains
that part of the appeal of the name was
the confusion as to whether Zapata had
been a patriot or a bandit.@s1@s2 
   The Bush-Liedtke combination
concentrated its attention on an oil
property in Coke County called Jameson
Field, a barren expanse of prairie and
sagebrush where six widely separated
wells had been producing oil for some
years. Hugh Liedtke was convinced that
these six oil wells were tapping into a
single underground pool of oil, and
that dozens or even hundreds of new oil
wells drilled into the same field would
all prove to be gushers. In other
words, Liedtke wanted to gamble the
entire capital of the new firm on the
hypothesis that the wells were, in oil
parlance, ``connected.'' One of
Liedtke's Tulsa backers was supposedly
unconvinced, and argued that the wells
were too far apart; they could not
possibly connect. ``Goddamn, they do!''
was Hugh Liedtke's rejoinder. He
insisted on shooting the works in a
{va-banque} operation. Uncle Herbie's
circles were nervous: ``The New York
guys were just about to pee in their
pants,'' boasted Leidtke years later.
Bush and Hugh Liedtke obviously had the
better information: The wells were
connected, and 127 wells were drilled
without encountering a single dry hole.
As a result, the price of a share of
stock in Zapata went up from seven
cents a share to $23. 
   During this time, Hugh Liedtke
collaborated on several small deals in
the Midland area with a certain {T.
Boone Pickens,} later one of the
most notorious corporate raiders of the
1980s, one of the originators of the
``greenmail'' strategy of extortion, by
which a raider would accumulate part of
the shares of a company and threaten to
go all the way to a hostile takeover
unless the management of the company
agreed to buy back those shares at an
outrageous premium. Pickens is the
buccaneer who was self-righteously
indignant when the Japanese business
community attempted to prevent him from
introducing these shameless looting
practices into the Japanese economy. 
   Pickens, too, was a product of the
Bush-Liedtke social circle of Midland.
When he was just getting started in the
mid-fifties, Pickens wanted to buy the
Hugoton Production Company, which owned
the Hugoton field, one of the world's
great onshore deposits of natural gas.
Pickens engineered the hostile takeover
of Hugoton by turning to Hugh Liedtke
to be introduced to the trustees of the
Clark Family Estate, who, as we have
just seen, had put up part of the
capital for Zapata. Pickens promised
the Clark trustees a higher return than
was being provided by the current
management, and this support proved to
be decisive in permitting Pickens's
Mesa Petroleum to take over Hugoton,
launching this corsair on a career of
looting and pillage that still
continues. In 1988, George Bush would
give an interview to a magazine owned
by Pickens in which the Vice President
would defend hostile leveraged buyouts
as necessary to the interests of the
shareholders. 
   In the meantime, after two to
three years of operations, the oil flow
out of Zapata's key Jameson field had
begun to slow down. Although there was
still abundant oil in the ground, the
natural pressure had been rapidly
depleted, so Bush and the Liedtkes had
to begin resorting to stratagems in
order to bring the oil to the surface.
They began pumping water into the
underground formations in order to
force the oil to the surface. From then
on, ``enhanced recovery'' techniques
were necessary to keep the Jameson
field on line. 
   During 1955 and 1956, Zapata was
able to report a small profit. In 1957,
the year of the incipient Eisenhower
recession, this turned into a loss of
$155,183, as the oil from the Jameson
field began to slow down. In 1958, the
loss was $427,752, and in 1959, there
was $207,742 of red ink. 1960 (after
Bush had departed from the scene)
brought another loss, this time of
$372,258. It was not until 1961 that
Zapata was able to post a small profit
of $50,482.@s1@s3 Despite the fact that
Bush and the Liedtkes all became
millionaires through the increased
value of their shares, it was not
exactly an enviable record; without the
deep pockets of Bush's Uncle Herbie
Walker and his British backers, the
entire venture might have foundered at
an early date. 
   Bush and the Liedtkes had been
very lucky with the Jameson field, but
they could hardly expect such results
to be repeated indefinitely. In
addition, they were now posting losses,
and the value of Zapata stock had gone
into a decline. Bush and the Liedtke
brothers now concluded that the epoch
in which large oil fields could be
discovered within the continental
United States was over. Mammoth new oil
fields, they believed, could only be
found offshore, located under hundreds
of feet of water on the continental
shelves, or in shallow seas like the
Gulf of Mexico and the Caribbean. 
   By a happy coincidence, in 1954
the U.S. federal government was just
beginning to auction the mineral rights
for these offshore areas. With father
Prescott Bush directing his potent
Brown Brothers Harriman/Skull and Bones
network from the U.S. Senate while
regularly hob-nobbing with President
Eisenhower on the golf links, George
Bush could be confident of receiving
special privileged treatment when it
came to these mineral rights. Bush and
his partners therefore judged the
moment ripe for launching a for-hire
drilling company, Zapata Offshore, a
Delaware corporation that would offer
its services to the companies making up
the Seven Sisters international oil
cartel in drilling underwater wells.
Forty percent of the offshore company's
stock would be owned by the original
Zapata firm. The new company would also
be a buyer of offshore royalty leases.
Uncle Herbie helped arrange a new issue
of stock for this Zapata offshoot. The
shares were easy to unload because of
the 1954 boom in the New York stock
market. ``The stock market lent itself
to speculation,'' Bush would explain
years later, ``and you could get equity
capital for new ventures.''@s1@4 
   1954 was also the year that the
CIA overthrew the government of Jacobo
Arbenz in Guatemala. This was the
beginning of a dense flurry of U.S.
covert operations in Central America
and the Caribbean, featuring especially
Cuba. 
   The first asset of Zapata Offshore
was the SCORPION, a $3.5 million
deep-sea drilling rig that was financed
by $1.5 million from the initial stock
sale plus another $2 million from bonds
marketed with the help of Uncle Herbie.
The SCORPION was the first
three-legged, self-elevating mobile
drilling barge, and it was built by R.
G. LeTourneau, Inc. of Vicksburg,
Mississippi. The platform weighed some
9 million pounds and measured 180 by
150 feet, and the three legs were 140
feet long when fully extended. The rig
was floated into the desired drilling
position before the legs were extended,
and the main body was then pushed up
above the waves by electric motors. The
SCORPION was delivered early in 1956,
was commissioned at Galveston in March,
1956 and was put to work at exploratory
drilling in the Gulf of Mexico during
the rest of the year. 
   During 1956, the Zapata Petroleum
officers included J. Hugh Liedtke as
president, George H.W. Bush as vice
president, and William Brumley of
Midland, Texas, as treasurer. The board
of directors lined up as follows: 
   @sb|George H.W. Bush, Midland,
Texas; 
   @sb|J.G.S. Gammell, Edinburgh,
Scotland, manager of British Assets
Trust, Ltd.; 
   @sb|J. Hugh Liedtke, Midland,
Texas; 
   @sb|William C. Liedtke,
independent oil operator, Midland,
Texas; 
   @sb|Arthur E. Palmer, Jr., New
York, N.Y., a partner in Winthrop,
Stimson, Putnam, and Roberts; 
   @sb|G.H. Walker, Jr. (Uncle
Herbie), managing partner of G.H.
Walker and Co., New York, N.Y.; 
   @sb|Howard J. Whitehill,
independent oil producer, Tulsa,
Oklahoma; 
   @sb|Eugene F. Williams, Jr.,
secretary of the St. Louis Union Trust
Company of St. Louis, Missouri; fellow
member with ``Poppy'' Bush in the class
of 1942 AUV secret society at Andover
prep, later chairman of the Andover
board; 
   @sb|D.D. Bovaird, president of the
Bovaird Supply Co. of Tulsa, Oklahoma,
and chairman of the board of the
Oklahoma City branch of the Tenth
Federal District of the Federal Reserve
Board; and 
   @sb|George L. Coleman,
investments, Miami, Oklahoma. 
   An interim director that year
had been Richard E. Fleming of Robert
Fleming and Co., London, England.
Counsel were listed as Baker, Botts,
Andrews & Shepherd of Houston, Texas;
auditors were Arthur Andersen in
Houston, and transfer agents were J.P.
Morgan & Co., Inc., of New York City
and the First National Bank and Trust
Company of Tulsa.@s1@s5 
   George Bush personally was much
more involved with the financial
management of the company than with its
actual oil-field operations. His main
activity was not finding oil or
drilling wells but, as he himself put
it, ``stretching paper''--rolling over
debt and making new financial
arrangements with the creditors.@s1@s6 
   During 1956, despite continuing
losses and thanks again to Uncle
Herbie, Zapata was able to float yet
another offering, this time a
convertible debenture for $2.15
million, for the purchase of a second
Le Tourneau drilling platform, the
VINEGAROON, named after a west Texas
stinging insect. The VINEGAROON was
delivered during 1957, and soon scored
a ``lucky'' hit drilling in block 86
off Vermilion Parish, Louisiana. This
was a combination of gas and oil, and
one well was rated at 113 barrels of
distillate and 3.6 million cubic feet
of gas per day.@s1@s7 This was
especially remunerative, because Zapata
had acquired a half-interest in the
royalties from any oil or gas that
might be found. VINEGAROON then
continued to drill offshore from
Vermilion Parish, Louisiana, on a
farmout from Continental Oil. 
   As for the SCORPION, during part
of 1957 it was under contract to the
Bahama-California Oil Company, drilling
between Florida and Cuba. It was then
leased by Gulf Oil and Standard Oil of
California, on whose behalf it started
drilling during 1958 at a position on
the Cay Sal Bank, 131 miles south of
Miami, Florida, and just 54 miles north
of Isabela, Cuba. Cuba was an
interesting place just then; the
U.S.-backed insurgency of Fidel Castro
was rapidly undermining the older
U.S.-imposed regime of Fulgencio
Batista. That meant that SCORPION was
located at a hot corner. We note that
Allen Dulles, then director of the
Central Intelligence Agency, had
previously been legal counsel to Gulf
Oil for Latin American operations, and
counsel to George Bush's father at
Brown Brothers Harriman for eastern
Europe. 
   During 1957 a certain divergence
began to appear between Uncle Herbie
Walker, Bush, and the ``New York guys''
on the one hand, and the Liedtke
brothers and their Tulsa backers on the
other. As the annual report for that
year noted, ``There is no doubt that
the drilling business in the Gulf of
Mexico has become far more competitive
in the last six months than it has been
at any time in the past.'' Despite
that, Bush, Walker and the New York
investors wanted to push forward into
the offshore drilling and drilling
services business, while the Liedtkes
and the Tulsa group wanted to
concentrate on acquiring oil in the
ground and natural gas deposits. 
   The 1958 annual report notes that,
with no major discoveries made, 1958
had been ``a difficult year.'' It was,
of course, the year of the brutal
Eisenhower recession. SCORPION,
VINEGAROON, and NOLA I, the offshore
company's three drilling rigs, could
not be kept fully occupied in the Gulf
of Mexico during the whole year, and so
Zapata Offshore had lost $524,441, more
than Zapata Petroleum's own loss of
$427,752 for that year. The Liedtke
viewpoint was reflected in the notation
that ``disposing of the offshore
business had been considered.'' The
great tycoon Bush conceded in the
Zapata Offshore annual report for 1958:
``We erroneously predicted that most
major [oil] companies would have active
drilling programs for 1958. These
drilling programs simply did not
materialize....'' In 1990, Bush denied
for months that there was a recession,
and through 1991 claimed that the
recession had ended, when it had, in
fact, long since turned into a
depression. His current blindness about
economic conjunctures would appear to
be nothing new. 
   By 1959, there were reports of
increasing personal tensions between
the domineering and abrasive J. Hugh
Liedtke, on the one hand, and Bush's
Uncle Herbie Walker on the other.
Liedtke was obsessed with his plan for
creating a new major oil company, the
boundless ambition that would propel
him down a path littered with
asset-stripped corporations into the
devastating Pennzoil-Getty-Texaco wars
of a quarter-century later. During the
course of this year, the two groups of
investors arrived at a separation that
was billed as ``amicable,'' and which
in any case never interrupted the close
cooperation among Bush and the Liedtke
brothers. The solution was that the
ever-present Uncle Herbie would buy out
the Liedtke-Tulsa 40 percent stake in
Zapata Offshore, while the Liedtke
backers would buy out the Bush-Walker
interest in Zapata Petroleum. 
   For this to be accomplished,
George Bush would require yet another
large infusion of capital. Uncle Herbie
now raised yet another tranche for
George, this time over $800,000. The
money allegedly came from Bush-Walker
friends and relatives.@s1@s8 Even if
the faithful efforts of Uncle Herbie
are taken into account, it is still
puzzling to see a series of large
infusions of cash into a poorly managed
small company that had posted a series
of substantial losses and whose future
prospects were anything but rosy. At
this point it is therefore legitimate
to pose the question: Was Zapata
Offshore an intelligence community
front at its foundation in 1954, or did
it become one in 1959, or perhaps at
some later point? This question cannot
be answered with finality, but some
relevant evidence will be discussed in
the following chapter. 
   George Bush was now the president
of his own company, the undisputed boss
of Zapata Offshore. Although the
company was falling behind the rest of
the offshore drilling industry, Bush
made a desultory attempt at expansion
through diversification, investing in a
plastics machinery company in New
Jersey, a Texas pipe lining company,
and a gas transmission company; none of
these investments proved to be
remunerative. 
   Notes 

1.
 Harry Hurt III, ``George Bush,
Plucky Lad,'' {Texas Monthly,} June
1983.
 
2.
 See Sarah Bartlett, {The Money
Machine: How KKR Manufactured Power and
Profits} (New York, 1991),
pp. 9-12.
 
3.
 Darwin Payne, {Initiative in
Energy: Dresser Industries, Inc.,
1880-1978} (New York: Simon and
Schuster, ca. 1979), p. 232
{ff.}
 
4.
 Bartlett, {op. cit.,} p. 268.
 
5.
 Darwin Payne, {op. cit.,}
p. 232-33.
 
6.
 Hurt, {op. cit.}
 
7.
 {Ibid.}
 
8.
 ``Bush Battles the `Wimp Factor',''
{Newsweek,} Oct. 19, 1987.
 
9.
 See Richard Ben Kramer, ``How He Got
Here,'' {Esquire,} June 1991.
 
10.
 See Thomas Petzinger, Jr., {Oil and
Honor: The Texaco-Pennzoil Wars} (New
York, 1987), p. 37 {ff.}
 
11.
 {Ibid.,} p. 93.
 
12.
 {Ibid.,} p. 40.
 
13.
 See Zapata Petroleum annual
reports, Library of Congress Microform
Reading Room.
 
14.
 Petzinger, {op. cit.,}
p. 41.
 
15.
 See Zapata Petroleum Corporation
Annual Report for 1956, Library of
Congress, Microform Reading Room.
 
16.
 Hurt, {op. cit.,} p.
194.
 
17.
 ``Zapata Petroleum Corp.,''
{Fortune,} April 1958.
 
18.
 Walter Pincus and Bob Woodward,
``Doing Well With Help From Family,
Friends,'' {Washington Post,}
Aug. 11, 1988.
 
----         John Covici
          covici@ccs.covici.com