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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Borrowing was out. The longer his list of creditors grew, the shorter were his chances of getting a conventional loan. His own banks could no longer help him either. Federal officials had finally shut down the candy stores. In November 1976 the FDIC invoked a remedy it had not attempted since 1940: it canceled its insurance coverage on deposits at the Rio Grande City bank. Manges was – and still is – furious. “They seized that bank,” he says. To him the issue was not self-dealing but solvency, and indeed, the bank was still solvent when the FDIC pulled the plug. At the time Manges said the FDIC’s interest in the bank had been triggered by none other than John Connally, who as former Secretary of the Treasury had once been the nominal boss of the FDIC and who, Manges averred, was eager to embarrass a Democratic potentate in South Texas. (Conspiray buffs, please note: the new owner of the bank was a partner of Connally’s in another bank.) In any case, once the insurance was gone, the state banking department had no choice but to close the bank and arrange for its sale. A year later, after deposits at the Groos had dwindled from a high of $69 million to less than $30 million, the FDIC told Manges that if he didn’t sell the bank, it too would be closed. He sold – to Oscar Wyatt.
Only one course was left open to Manges. He had to stall. He had to use the legal system the way a man sentenced to die uses it, not to achieve justice but to impede justice in every way possible. His normal method, a former Manges lawyer charged, became “not to repay his obligations until the creditor brings suit.”
In pursuing his delaying tactics, Manges did have one thing working for him: his total dedication to keeping his empire intact. It took a particular breed of man to withstand the pressure – to remain unyielding when several of his creditors themselves were forced into bankruptcy; when one died of a heart attack, forcing him to continue the fight against the widow; when it seemed as if all of South Texas was against him – but Manges was up to it. He is a man who cannot abide being forced; he insists on doing things in his time and in his way. In his office hangs a picture of an Indian chief, accompanied by a sign that says, “Around here there’s only one chief. Everybody else is an Indian.” The more his creditors tried to be chiefs, the more he was able to focus on the fight itself rather than on the merits of what he owed. In the end his bills became just another deal to be worked out. His instinct for trading exposed the weaknesses of his opponents. Most of them were less determined than he. They had no stomach for an all-out war with no end in sight. He could push them to the limit, and still they would settle for les than the full amount he owed, just to be rid of him.
All the while Manges was writing the book on how to frustrate creditors. It lies, uncollated and undistributed, inside scores of file folders scattered around the courthouses of the brush country. Everything is there except the chapter headings:
-Avoid service. One of the first steps in a lawsuit is to notify the defendant by serving him with papers – not a simple matter when he lives on a 100,000-acre ranch behind a high fence and a guarded gate and keeps an airplane handy. The Manges cases were filled with motions from lawyers to serve Manges by leaving the papers at the ranch headquarters rather than by handing them to him personally – but only after the traditional method had failed.
-Countersue. Unless Manges could shift the battle away from the invoices his foes had assembled to substantiate their claims, he had little chance to slow down the process of collection. So he sued his creditors right back, claiming overcharges or shoddy work. With a handful of exceptions, Manges’ countersuits offered no proof other than vague allegations, but it didn’t matter. They kept the ball in the air. The other side had to answer his contentions, then he got to answer theirs, and on it went. More time gained.
-Don’t cooperate. The rules of procedure include various methods designed to speed up lawsuits and narrow their focus. Each side can question the other’s crucial witnesses in advance. Each can ask the other to admit or deny certain basic facts so that the process doesn’t have to be repeated at a trial. But Manges frequently didn’t show up for depositions and failed to answer requests for admissions. That tactic touched off a new round of motions to compel a response. When he did answer, his inability to recall and his lack of knowledge of his own affairs were worthy of Watergate.
-Change attorneys. Manges went through as many as four lawyers on a single case – whether by design or whim it is impossible to say, but the effect was the same. Each change enabled him to win delays while his new lawyer familiarized himself with the file.
-Intimidate the opposition. If a creditor (or his lawyer) got tough with Manges, Manges got even tougher. Mustang Oil Tool Company filed a criminal complaint against Manges when a check for $57,000 bounced; he responded with a $1 million countersuit for false imprisonment and malicious use of process. (He lost.) Three creditors tried to force him into bankruptcy; Manges filed countersuits against them. Don McManus, a San Antonio attorney who represented one of the Guerras pressing a $419,000 claim against Manges, says a Manges operative made a take-it-or-else settlement offer in Manges’ presence – the “or else” being that Manges would file a grievance against McManus with the local bar association. McManus rejected the offer, and the bar did indeed get a complaint from Manges. It was dated four days before the meeting but postmarked four days after.
-If you can’t intimidate them, neutralize them. Manges has offered future employment to opposing lawyers, a tactic that worked for him during the first Guerra case. Among the lawyers he approached was Tony Canales of Corpus Christi (formerly the U.S. attorney in Houston), who was handling Duval County’s suit for delinquent taxes. “I can make more money suing you than I can defending you,” Canales told Manges.
-Juggle creditors. Remember the loan shark advertisements that used to be on the radio? Consolidate all those unmanageable little loans into one manageable debt, they advised. That’s what Manges did. While he still owed the Groos Bank, he ran up a $349,000 debt to an Oklahoma drilling contractor. The contractor went to the Groos, borrowed the money with the usual stipulation that Manges would pay off the loan, and used the money to pay Manges’ creditors. In return Manges gave him an option to do some drilling for himself on Manges’ land. Eventually the Oklahoman declined the option, though, and Manges had to come up with the money, which, of course, he couldn’t do. That led to a new lawsuit, but ultimately Manges solved the new problems in the old way. He hooked up with a wealthy fried-chicken entrepreneur named Joe Schero, who paid off the drilling contractor and a number of other Manges creditors in exchange for farmouts. Manges had brought in three wells on the land, but Schero was less fortunate. He drilled at least sixteen wells, all of them dry holes. Manges ended up with Schero’s oil refinery, and Schero ended up with a lawsuit against Manges, thereby joining the growing group of Manges’ associates who had fallen out with their former compatriot.
-Fight to the finish. If a creditor managed to outlast all this and get a judgment, he still faced the problem of collecting his money. Several reached the point of getting a court to order the sale of Manges’ land, but none actually saw it sold. Each time Manges found a judge to stop the sale – on several occasions, the order came not from the judge who had actually presided over the case but from a judge who presided in another territory. That happened twice in the Duval County tax case before a frustrated Canales got his own court order forbidding Manges or his ranch company from interfering with the sale. Then and only then did Manges pay up. When the state watchdog agency for judges, the Commission on Judicial Conduct, lectured the various judges who had helped Manges out, Manges filed a suit against the members of the commission. He lost.
It wasn’t only Manges’ creditors who got the full treatment; it was all sorts of people who had dealings with him, some in the most innocuous ways. In the spring of 1976 a fence separating the Duval County Ranch and a neighboring spread was in disrepair. The neighbor offered to supply the materials if Manges would provide the labor. The story may sound like something out of Robert Frost, but on this occasion a good fence did not make for good neighbors. While the fence was being repaired, some of the neighbor’s cattle wandered onto Manges’ ranch. Manges refused to return them and the neighbor sued. Manges sued right back. The neighbor, he said, had overstocked and overgrazed his pasture. The fence was strong enough to withstand cattle of “ordinary disposition,” but this hungry herd, casting covetous eyes on Manges’ sorghum-rich pasture, couldn’t control themselves and they broke through the fence. Manges offered to return the cattle – for $226,000. Eventually the neighbor wrote off his cattle rather than continuing the fight.
He had his plan. He had to hold his empire together at all costs until some miracle came along that would enable him to pay off his creditors and resume his pursuit of power and influence. Now what he needed was money – money to get out of debt, money to save his land, money to give him the staying power to fight against the oil companies and their hundreds of lawyers. He needed something totally unexpected, like Lloyd Bentsen’s driving up that day and saying he wanted to buy some property. And he got it.
In the late seventies, when the frenzy over the Southwest oil and gas play began to build, the Seattle-First National Bank wanted to be dealt in. Seafirst, as it was known, had been involved in some financing of Oscar Wyatt’s far-flung operations, and it approached a Wyatt contact in Houston to ask if he knew any oilmen who might be interested in borrowing money. Well, that was easy. Clinton Manges was always interested in borrowing money. It was repaying money that he wasn’t so good at, as Seafirst would learn to its sorrow. Starting in 1980, Manges borrowed more than $40 million from Seafirst – the first $2 million without security. He used some of it to pay off his remaining creditors and some to build a pipeline system known as Man-Gas to haul gas across his land for a fee. He did use some of it to explore for oil, but his most lucrative exploration took place not in the oil patch but in old land records and well reports, and the riches he took were not from the earth but from Mobil Oil.
Next Month: Clinton Manges' wheeling and dealing was the prelude for his rise to political power and his assault on the Texas establishment, culminating in state-wide notoriety from his campaign contributions and his victory over Mobil Oil.
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