-Caveat Lector- Most people don't seem to be aware of how Enron originated. Here's the research I did to trace those roots. Linda ----- THE RISE OF ENRON FROM J.H. KIRBY’S CORPORATIONS On July 6, 1901 the Houston Daily Post contained a huge front page headline and photo of Kirby announcing the chartering of Houston Oil Company of Texas with a capitalization of $30 million and of the Kirby Lumber Co. with $10 million in capital. Despite the impressive allegations, Kirby still had to obtain financing. He went to Patrick Calhoun, a New York corporation attorney “with desirable connections in eastern banking circles.” Calhoun was the grandson of John C. Calhoun, who subsequently became vice-president under John Quincy Adams. Calhoun, a native of South Carolina, owned stock in the Southern Oil Co., which had 100 producing oil wells in the Corsicana Field. The investors Calhoun brought in to Kirby’s companies included Brown Brothers brokerage company; Simon Borg & Co., originally founded in Tennessee; and Maryland Trust Co. of Baltimore, the latter being proposed as trustee to handle the company’s securities and act as its subscription agent. Maryland Trust Co. was headed at that time by ex-Confederate officer, Colonel J. Wilcox Brown. The Brown Brothers firm was originally called W. & J. Brown of Baltimore and changed to Brown, Shipley when it opened an associate office in Liverpool. The London office opened in 1863 and Liverpool office was closed in 1889. Incidentally, the J.P. Morgan investment bank, with its links to London, was also based in Baltimore before it moved to New York. The Alexander Brown Investment Bank is still located in Baltimore directly across the street from the former location of Sol. Warfield’s bank. Receivers were first appointed on February 1, 1904, the same day interest was due on timber certificates, originally issued at $11 million, but reduced to $7 million, $6 million of which were sold by Brown Brothers. The certificates were guaranteed by Houston Oil Co. The semi-annual payment was by Brown Brothers & Co. in the amount of $700,000, including $210,000 interest, but only the interest was tendered to Maryland Trust, which was rejected. The receivers appointed for Houston Oil were F.A. Reichardt, cashier of the Planter’s and Mechanic’s National Bank of Houston (of which John H. Kirby was president) and Thomas H. Franklin, a San Antonio attorney, Houston Oil’s president. N.W. McLeod, a “prominent St. Louis lumber man,” and B.F. Bonner, Kirby’s vice president, of Houston, were appointed as receivers for Kirby Lumber. A receiver not mentioned in the New York Times was Col. J.S. Rice, who, according to his obituary in the Houston Chronicle on March 12, 1931, had been in the sawmill business in Tyler since 1881, after starting as a clerk at the Houston & Texas Central Railroad in 1879. He served as receiver of Kirby Lumber from 1904 to 1909 and was elected vice president after it was reorganized. J.S. Rice was also president for a time of Great Southern Life Insurance, vice president of Houston Land Corporation (in which Kirby and J.W. Link were also involved), and a director of Missouri Pacific Railroad Co. The New York Times quoted Mr. Kirby as saying that both companies were profitable, and “the only and sole cause of the present trouble lies in the fact that the securities issued the Houston Oil Company have not been marketable.” The Times went on to say that ... interests identified with the Atchison and with the St. Louis and San Francisco Railroads have a large interest in the Kirby Lumber Company. Representatives of several banking houses more or less closely associated with the two companies which have just been placed in receivers’ hands said yesterday that the assets of the companies were of undoubted value, and that the proceedings were really the outcome of internal discord. On February 12, 1904 the Times contained a short story on page 14 stating that a committee of five had been chosen by the holders of the 6% timber certificates issued by Maryland Trust—George W. Young, Dumont Clarke, James Brown, Gerald L. Hoyt, and F.S. Smithers. A week later, Kirby was again quoted in the Times, as follows: “A distinguished Wall Street operator undertook to finance the Houston Oil Company; had and exercised undisputed authority in the conduct of its affairs. He also directed the financial affairs of the Kirby Lumber Company until about a year ago, and during this period of his control caused the latter company to invest heavily in the preferred shares of his oil company....The Board of Directors of the Houston Oil Company, over the protest of the Wall Street promoter, who is still a member of the board, voted to accept the money and to request the Maryland Trust Company not to proceed, but the money was declined and the demand for receivership persisted in.” By the end of March of that year a lawsuit had been filed by members of a stock syndicate managed by two officers of the Baltimore Trust and Guaranty Company alleging misrepresentations made about the condition of the lumber company in the prospectus. The petition further alleged that one month prior to the appointment of receivers, Kirby formed a holding company with B.F. Yoakum, president of the St. Louis and San Francisco Road, to which they transferred the majority of the Kirby Lumber Company stock, and that they formed the Houston, Beaumont and Northern Railroad Company, to which Kirby Lumber’s traction lines and other railroad properties were transferred. In addition, the HB&N RR Co. was capitalized at $500,000 with a bond issue of $1 million. Yoakum loaned the company $600,000 and in return received all the bonds, half the stock and $18,000 in commissions. The newly formed company used half the loan proceeds plus an additional $18,000 to repay a prior loan to Yoakum and his commission for this loan. In 1906 Walter Monteith, brother of Edgar Monteith, Sr., later the attorney for Gibraltar Savings and Brown and Root, was appointed to act as receiver on behalf of the investors. A settlement was reached in 1908. Houston Oil owned several shallow oil wells in Nacogdoches County, all of the stock of Southwestern Oil Co and properties of Southern Oil Co, as well as stock in Higgins Fuel and Oil Co., but for revenue it primarily relied on the stumpage agreement with Kirby Lumber. Because of more efficient equipment and the demand for timber for the railroad industry, the lumber company was better able in the next few years to meet its contract requirements and virtually the same investors organized Houston Natural Gas Co. (HNG) in 1926. Houston Pipe Line Co. was a wholly owned subsidary of Houston Oil Company of Texas, and its stockholders formed HNG as a separate corporation a year before the pipe line company completed constructing distribution gas lines, hoping to compete with Houston Gas and Fuel (HG&F), of which Captain James A. Baker was president. HG&F had signed a contract to buy only from Houston Gulf Gas, and HNG therefore turned to the outlying areas and other cities in Harris County for customers. Shortly before the stockmarket crash in 1929 Houston Gulf Gas bought out HG&F and then merged with United Gas Corporation, a holding company, 42% of which was bought by Pennzoil (Liedtke’s successor to Zapata) in 1965, then divested by the SEC in 1970, creating a separate investor-owned corporation, United Gas, Inc.—later Entex. The two gas companies merged in 1976 and were later merged into Enron. John H. Kirby incorporated Houston Natural Gas in 1925 with eleven subscribers to the initial issue of capital stock issued January 18, 1926: E.H. Buckner, president, 70 shares Louis Seymour Zimmerman, Baltimore, 70 shares (president of Maryland Trust Co.) George Mackubin, Baltimore, 70 shares David Hannah, Houston, 40 shares Judge H.O. Head, Sherman, Texas, 40 shares McDonald Meachum, Houston, 40 shares C.B. McKinney, Houston, 40 shares H.M. Richter, Houston, 40 shares George A. Hill, Jr., Houston, 35 shares (pres. in 1930s) T.M. Kennerly, Houston, 35 shares A.S. Henley, Houston, 20 shares The following May 1,500 additional shares were issued, with 140 each bought by the largest three investors and Hannah and McKinney buying 80 more each. New shareholders of note were Samuel C. Davis (80), Thomas S. Maffit (80), John F. Shepley (80), Samuel W. Fordyce (80), and N.A. McMillan (70), all of St. Louis, Mo. After that sale, the following geographical breakdown existed: Houston -- 1,100 Baltimore -- 430 St. Louis -- 390 SEC filings for 1976, prior to the merger with Entex, show that directors of Houston Natural Gas (“HNG”) included: 1. John H. Duncan (also a member of the audit committee)--chairman of the board of Gulf Consolidated Services, Inc. in Houston and chairman of the executive committee of Gulf + Western Industries, Inc. in New York—since 1968, who owned 40,000 shares of HNG. 2. C. Thomas Clagett, Jr. (also a member of the audit committee), whose occupation was investments in Washington, D.C.—who owned 252,226 shares individually plus over 700,000 additional shares as trustee for family members. 3. J.A. Edwards, a board member since 1968, who was president of Liquid Carbonic Corp., an HNG subsidiary (42,596 shares). 4. W.S. Farish III, who was shown to be president of Fluorex Corp., an “international mineral and exploration company” in Houston (4,000 shares). 5. Robert R. Herring, chairman and CEO of HNG, director since 1964 (60,000 shares). 6. M.D. Matthews, vice-chairman of board (32,482 shares). 7. Neil D. Naiden, partner of Morgan, Lewis & Bockius, a Washington, D.C. law firm. 8. Charles Rathgeb, chairman and CEO of Comstock International, Ltd. in Toronto, Ontario, Canada. Interestingly enough, Robert Herring was also president of Rice University in 1980 [G498639], and John Duncan’s brother, Charles, Jr. retired in 1996 as chairman of the Rice board. In 1926 HNG, a Texas corporation, borrowed funds from Maryland Trust, secured by a trust indenture. In September 1940 this loan was released when the Texas corporation’s stock and all assets were acquired by a new Delaware corporation of the same name, along with three other subsidiary companies. HNG located its offices in 1927 in the Petroleum Building built by Irishman J.S. Cullinan, where it remained until 1967, when it became the core tenant of Kenneth Schnitzer’s office building at 1200 Travis. The primary attorney for the company was shareholder George Hill—of Kennerly, Williams, Lee, Hill & Sears—the father of Raymond Hill of Mainland Savings fame, to whom Pete Brewton devoted an entire chapter of his book. The foremost Houstonian shareholder was David Hannah who had arrived in Houston from Scotland in 1908. A descendant Hannah was also president of Ayrshire Corp. in 1972 [E150920] and one of Jon Lindsay’s biggest contributors, along with his associate Billy Burge. In 1956 Houston Oil Co. was sold to Atlantic Refining Co. for a quarter-billion dollars. In 1966 Atlantic acquired Richfield Oil Corp., a company put in bankruptcy in 1928 when it had over $10 million in judgment claims resulting from canceled oil leases at the Elk Hills Naval Reserve to Pan American Petroleum, received by Richfield from Edward L. Doheny in 1928. The case was settled in 1933 for $5 million. 1930-31 after broker Henry L. Doherty & Co. (60 Wall Street) made an exchange offer for 4 shares of Richfield for one share of Cities Service Co. stock. To protect its interest in the stock, Cities later purchased a large block of Richfield and Pan American bonds. It appears that the bondholders of these various oil companies were comprised of a number of foreign, probably British, investors. According to a book written in 1972 by Charles S. Jones, the former chairman of Richfield, at the time the decision was made to merge, his very first act was: ... to go to London to visit my friend Sir Maurice R. Bridgeman, chairman of British Petroleum. While his company was very much interested in entering ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. 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