Big Bill for a Bullion Binge

By Barbara Rudolph

"People who know how much they're worth generally aren't worth too much."

-- Nelson Bunker Hunt, 1980

At the rate they are going, the Hunt brothers of Texas may lose so much of their fortune that they will be able to count what remains at the kitchen table. Just eight years ago, Nelson Bunker, 62, William Herbert, 59, and Lamar, 56 -- heirs of the legendary Oilman H.L. Hunt -- commanded a combined net worth of more than $5 billion. Since then their fortune has plummeted to $1 billion or less, and it could keep right on shrinking until they are no longer "big rich," as Texans refer to the truly wealthy. The brothers are fighting a complex and heated battle with creditors to retain control of the two pillars of their crumbling empire, Placid Oil and Penrod Drilling.

What may deal the Hunt fortune a fatal blow is the fallout from the brothers' role in the great silver-price boom and bust of 1980. Thousands of investors who lost money in the debacle are suing the Hunts. On Saturday the brothers lost a civil case that could set an ominous precedent. A six-member federal jury in New York City found that the Hunts conspired to corner the silver market, and held them liable to pay $63 million in damages to Minpeco, a Peruvian mineral-marketing company that suffered heavy losses in the silver crash. Under federal antitrust law, the penalty is automatically tripled to $189 million, but after subtractions for previous settlements with Minpeco, the total value of the judgment against the Hunts is $134 million.

The verdict in the six-month trial may darken the Hunts' prospects in a slew of other silver-crash lawsuits, which had been put on hold pending the outcome of the Minpeco case. Two class actions filed by some 17,000 investors now await hearings before the U.S. district judge who presided over last week's verdict, Morris Lasker. The Hunt family's advisers believe that no domino effect will occur, since the other lawsuits differ in some respects from the Minpeco case. But that may be wishful thinking. Says a Government official: "The Hunts may appeal and fight for a while, but the total loss of their fortune is inevitable." Warns Herbert Deutsch, an attorney for the plaintiffs in one of the class actions: "My case alone will kill them. If they have assets anywhere, I will ferret them out and satisfy my clients' claims."

During the New York trial, Bunker Hunt testified that he began accumulating silver in 1973 as a hedge against inflation, "to invest in something I could get my hands on." By late 1979, the brothers had acquired more than 180 million oz. of bullion and coin. Prices rocketed to euphoric heights, hitting a peak of $50.35 per oz. in January 1980.

The Hunts attributed the price rise to such events as the hostage crisis in Iran and the Soviet invasion of Afghanistan. But plaintiffs in the trial accused them of conspiring with several Middle Eastern investors to create a monopoly. The bubble burst in January 1980, dropping silver's price to $10.80 in about two months. The Hunts lost approximately $1.3 billion, and many investors lost millions.

When the Hunts were forced to borrow $1.1 billion to cover losses in the silver debacle, they pledged their corporate holdings as collateral. But because their wealth was concentrated in oil, sugar and real estate businesses -- all of which have foundered in the 1980s -- the Hunts' personal trusts and the companies they own have been driven to bankruptcy court. The sparring for control has been contentious: in 1986 the Hunts filed a $14 billion lawsuit against 23 banks that once extended credit to the clan, accusing the institutions of conspiracy to defraud them by shutting off credit. The banks answered with a countersuit.

Both sides have tentatively agreed to drop their suits as part of reorganization plans for Placid and Penrod. Under the Hunts' proposed terms, Placid Oil would repay its creditors with $800 million in cash and notes. To finance the payback, the Hunts would slash the company's size by selling off assets that include Louisiana's Black Lake oil and gas fields and a minority interest in Dallas' gleaming 60-story Thanksgiving Tower. To keep a hand in Penrod, one of the world's largest offshore drilling companies, the Hunts would give the banks a 50% stake in the firm.

The Hunts still hope that their luck will change in one swift stroke. They are counting on the Green Canyon oil and natural-gas fields, situated 1,500 ft. beneath the ocean floor in the Gulf of Mexico. The Hunts hold leases on the property, and are spending some $300 million to get production started. Though some experts view Green Canyon as a dangerous gamble, the Hunts believe the field could prove fabulously profitable.

So far, the Hunts have made only a few personal concessions. Bunker, a collector of Thoroughbred horses, sold 580 of the animals earlier this year for a reported $47 million. He and Herbert unloaded 1,400 acres of land near San Diego for $72 million. Lamar still owns the Kansas City Chiefs football team, and all the brothers retain substantial personal assets -- in cash, bonds, real estate and coin and art collections.

But the silver-crash lawsuits could start to pinch the Hunts' style, because the judgments are levied against the brothers as individuals, rather than their trusts or companies. Already the Hunts have shown some surprising frugality. When they left the federal courthouse in Manhattan last Thursday afternoon, no limousine was waiting. Like hundreds of New Yorkers around them, they went underground, paid $1 apiece and got on the subway.

With reporting by Roger Franklin/New York and Richard Woodbury/Houston