The Man in the Black Hat
By mastering the mysterious ways of South Texas, Clinton Manges has built an empire, amassed political influence, declared war on the state establishment—and left bitter enemies in his wake.
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Meanwhile Manges imposed restrictions that increased the cost of operating on the ranch for producers not targeted in the pollution suit. In late 1972 he closed a number of highway gates leading to the oil wells, forcing many operators to drive miles out of their way to go through designated entrances. In 1973 he assessed a $2500 fee for each new well drilled, to cover damages to the surface. In theory, both actions could have been overturned in court – but the court was O. P. Carrillo’s. Again, some small operators acceded to Manges’ demands.
But the big boys could afford to fight. When Manges locked the gates, they broke the locks with bolt cutters. When he demanded his royalty in oil rather than money, they found language in the lease that allowed them to refuse. And when, despite the previous settlement with Mobil, he asked for another $1 million for sick cattle he said the company had harmed by pollution, Mobil bypassed O. P. Carrillo and went to federal court. After a lengthy legal struggle, Mobil got an injunction against further interference with its lease. Texaco did the same after Manges’ ranch company refused to allow drilling unless Texaco resurfaced a ranch road or built a new one.
By the mid-seventies Manges had reached a stalemate. In time he would renew the war on the oil companies, and once again his first target would be Mobil. For the moment, however, he began to exploit his gains from the first round of combat. Clinton Manges, the scourge of the oil companies, mobilized all of his resources and invaded the oil business.
A DEAL WITH OSCAR WYATT
A ranch hand who later worked for Manges tells a story, vintage 1964, of the time Manges was visiting a ranch near Valentine in the Trans-Pecos. Some other guests had arranged to take a pickup out to hunt deer, and Manges, an ardent hunter, begged to go along, even though there was no room in the cab. The group agreed to let Manges ride in the bed of the pickup, but only after extracting a promise from him that he wouldn’t shoot until everybody was out of the truck and on the ground with an equal chance. Events unfolded predictably. Driver spots deer. Driver stops truck. Driver jumps out – and ducks for his life as Manges blazes away over his head. Afterward, no one was really angry. “That’s ol’ Clinton,” everybody agreed.
It still is Clinton. Manges has never been one to let anything stand in the way of something he wants. It was true when he was playing for small stakes, like deer, and it was true when he was playing for big stakes, like oil.
The obstacles keeping Manges from getting into the oil business in a big way in the summer of 1974 were property and money. He had the 107 marginal wells he’d won from Mobil, and he had mineral interests in thirteen counties, but the biggest of his properties were the Guerra lands – which, since he was merely a co-owner of the minerals, were his only to lease out rather than to develop for himself. Even if he’d had a hot property, he didn’t have the money to underwrite an extensive drilling program. By the end of the summer Manges had found the solution. It was supplied by his third mentor, the master of oil and gas wheeling and dealing, Oscar Wyatt.
As with Lloyd Bentsen and George Parr, Manges’ connection with Wyatt went back a long way. Wyatt had had a hunting lease on a portion of La Coma ranch when Manges was the owner. In the intervening twenty years, Wyatt’s career was a model for Manges. Wyatt gained a foothold in the gas business by attacking the big companies (in his case, pipelines) that imposed their will on landowners. One of his first leases was on the Duval County Ranch, under its old ownership. His big break came through the strength of his political connections, which he used to land lucrative gas supply contracts for San Antonio, Austin, and Corpus Christi. Most of all, he let nothing stand between him and a good deal. Even though four million Texans depended on gas supplied by his utility company, he sold off precious reserves to improve Coastal’s bottom line. He was betting on the come, betting that he could always make a better deal if he had to. Time proved him right, though he had almost lost everything along the way. All of these footsteps Manges would follow. The lesson of Wyatt’s career was make the deal now and take care of the consequences with another deal. And that is exactly what Clinton Manges did in September 1974. He made a deal with Oscar Wyatt.
A Coastal subsidiary called Gas Producing Enterprises loaned Manges $2.8 million and later increased the amount to $5 million. Manges pledged to spend at least $100,000 a month exploring for oil and gas until his return reached $500,000 a month. Wyatt’s company had a seven-year option to buy the oil and gas produced from all the Manges lands in the thirteen counties.
It was up to Manges where to drill; if GPE wasn’t satisfied with the way Manges was developing the property, however, Wyatt’s company had the right to take over. The deal was akin to a bet, with Manges wagering his minerals against Wyatt’s money that he could strike it rich before the money or Wyatt’s patience ran out. (The deal that began with a bet ended with a bet. Some years later Coastal decided that Manges could pay off his $5 million debt with the future delivery of 115,000 barrels of oil – an agreement that in effect had both parties speculating on the price of oil. It went down and Manges won.)
On the surface the Manges-Wyatt deal seemed harmless enough, but the Guerras thought otherwise. If GPE had the right to take over Manges’ minerals, what other oilman would risk taking a lease from him? It seemed to them that the GPE deal allowed Manges to lock up the Guerra lands for seven years without paying them the bonus that goes along with a traditional lease. The transaction was a work of genius, the genius of the consummate land trader, for it was impossible to say for certain whether the Guerras had been cheated. But they decided to find out. Besides, there had to be some reason why no one wanted to lease the property. A year after the GPE deal, Joe Guerra filed suit against Clinton Manges, his former ally.
The Wyatt loan temporarily eased Manges’ money problems, and he soon solved his property problems as well. In 1975 he got a promising farmout (similar to a sublease) from ARCO on 10,000 acres in Zapata County. But Wyatt’s money soon proved to be insufficient. Manges was drilling a dozen wells and more, running up bills beyond his ability to pay. Another ARCO farmout on the Duval County Ranch was eating up even more of the Wyatt loan. Manges had to get more money, and he knew just where to get it. He turned to his own banks.
MINDING THE CANDY STORE
To adopt a description used by one of Manges’ lawyers, Manges was unable to resist treating his banks as though they were candy stores and he had a sweet tooth. In addition to the Rio Grande City bank he had acquired from the Guerras, Manges also owned the Groos National Bank in San Antonio. He bought it in 1971 by applying a proven method – exploiting a split among stockholders brought on by the firing of a bank officer – but not until 1973 did he gain full control, after beating federal banking officials who were fighting his takeover because of his old felony conviction. Manges was not an officer or a director of either bank, just the major shareholder (92 per cent in Rio Grande City, 100 per cent at the Groos), but in subsequent civil suits and congressional investigations, federal officials had no doubt that the bankers were acting on his orders. And the essence of those orders was to make the deal now – support Manges’ drilling activities in every way possible – and take care of the consequences, including violations of federal banking rules, with another deal.
The Rio Grande City bank first came to the attention of federal bank officials in 1974 because of the concentration of loans to Manges’ associates. The Federal Deposit Insurance Corporation told the bank to clean up the loans; the bank’s response was to make even more. The big splurge came in the first half of 1976, when Manges’ Zapata County exploration activity neared its zenith. The bank made seven Manges-related loans, each of which exceeded the bank’s legal lending limits to individuals, including one for $350,000 to Manges himself. Those and other insider loans, the FDIC later charged, went to finance Manges’ oil and gas exploration; they were really pass-through loans to Manges himself. There were also unsecured loans, loans with inadequate collateral, loans to cover overdrafts, new loans to borrowers whose earlier loans had been charged off as uncollectible, loans to Manges’ wife, loans to Manges’ brother, loans to Manges’ son-in-law, loans to Manges’ accountant, loans to Manges’ friends, loans to a new Manges partner – so many loans that they represented 22 per cent of all the dollars loaned by the bank.
The Groos National Bank was no different. Shortly after taking control of the bank in the spring of 1973, Manges contacted an officer at a bank the Groos did business with, reminded the officer that the Groos was a big customer, and asked him to place the bank’s insurance with the agency Manges suggested. The answer was no, but in a few days Manges was back with another proposition. He wanted a loan, secured by stock owned by Mrs. Manges. This time the answer was yes, but before the paperwork was finished, the officer got a tip from someone at the Groos that Mrs. Manges didn’t own the stock; Manges wanted the money to buy the stock. Manges vehemently denied the story, but the officer called off the deal. Before long, the Groos took its business elsewhere.
Federal officals were constantly on Manges’ trail, but he always managed to stay one step ahead of them. After failing to thwart his takeover of the Groos, they got him to sign an agreement in November 1973 limiting his self-dealing. When the bank violated that, they got a cease-and-desist order. The Groos went right on wheeling and dealing. Finally the government obtained an injunction against any extension of credit to Manges, his relatives, and a long list of associates. But Manges’ oil ventures were devouring his cash. He found one last way to get money out of Groos National.
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