# In re Podcast: Pennzoil V Texaco - pt 1 (audio only)

## Метаданные

- **Канал:** AttorneyTom
- **YouTube:** https://www.youtube.com/watch?v=nkjagsN_pdw

## Содержание

### [0:00](https://www.youtube.com/watch?v=nkjagsN_pdw) Segment 1 (00:00 - 05:00)

Josh, are you ready? I'm ready right now. Roll the music. Welcome everybody to the very first episode of the InRay podcast. My name is Tom Kirker and I'm joined with my co-host and law partner Josh Sford. I will introduce myself. I'm Josh Samford. The purpose of the Enray podcast is to do deep dives into legal matters. It could be a wide variety of legal matters from past cases to pending cases and everything in between. For today's very first episode, we are doing a deep dive into the notorious Penso v. Texico. At the time, the largest prayer for relief in an American lawsuit, the largest judgment when innered, the largest bankruptcy when injured, and maybe the largest settlement, — the largest settlement maybe. Hey, you don't we can't give it away. We want people to stick to the end. Phrase that as a question. The largest settlement. Maybe. I mean, I don't know. Stick around. Uh I My angle on this is that this podcast is not for people. It's for lawyers or at least people who think that lawyers are not people. Wait, hold on. — Yeah, that's right. We hope to do such indepth analysis that it is really entertaining for people who care and for people who don't care you might say you maybe did too much analysis. No, people will care if they listen because um so I know we had a lot of primary sources but I really leaned heavily on a book called uh oil and honor by Thomas uh tell me his last name. — Thomas Pinger. — Dude, three separate nights. I went to sleep thinking, how could someone turn his book into a uh a movie for Hollywood because this story is so insane. — Yeah, the drama and the side plots that are surrounding this case are incredible and Pensiger's book is by far the best source that I found as well. So, we should just credit him in advance. Also, I want to point out that I drove to the Brisco Center at the University of Texas where Pens Oil had donated their complete case file to the library. So, I sat down with hundreds of boxes with personally scribbled annotations, attorney work product, with trial transcripts. It is riveting. This case is so interesting and I cannot wait to get into it. But first, a quick shout out to our presenting sponsor, Supio. Supio is the number one artificial intelligence tool in the legal industry. More on them later. With that said, we should get started. I'm ready. I told you that already. And I'm going to start this story in 1903 with perhaps the most important lawyer in this entire saga, George Getty. George Getty is a lawyer from Minnesota sent to Oklahoma to collect a $2500 insurance payment. He's pretty well established and also he does have some experience in the oil industry. Now, when he gets to Oklahoma, what he sees is a booming oil industry. And spiritually, he never leaves. He might physically leave to go back home and take care of some matters. But on the spot during that trip, he changes careers. He stops being a lawyer and becomes an oilman. As I said previously, he's not some firstear associate. He has a little bit of money. So he invests, starts his oil business. He drills 43 wells on his initial venture. He hits on 42 of them. 42 out of 43 wells are oil producing, which is incredible. This sets the stage for what would become the Getty Oil Empire. Yeah. His timing actually could not be better because at that point the US was using less than 500,000 barrels of oil a day, which is really not very much. By the time he died in 1930, that number was up 16x. And but in the next 20 years after that

### [5:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=300s) Segment 2 (05:00 - 10:00)

it was up again another 2x. He was at the very beginning of oil just being on a rocket ship trajectory to becoming something that was absolutely critical to the American economy at the time. Sure, you could make money on it, but it wasn't like the economy was turning on oil, but as I mean what we learned in the 20th century is that oil was at the center of everything. — Yeah. I mean, we're not even at the mass production of cars yet, are we? 1903. No, you don't even have uh Henry Ford not really accelerating that until another 15 years. So, George Getty catches a great economic tailwind. He's in early. And also just the fact that he's able to hit on 42 out of 43 wells. I'm going to go out on a limb and maybe some people who are experts in oil would get mad at this statement, but effectively drilling for oil back then is guessing. I mean, you just kind of go to a site and say, "This looks like it has oil. Let's drill a really deep hole. " — Dude, they were using like um like witching sticks and all this craziness. They really did not know how to find oil. But also, he didn't need to hit on 42 or 43 to make a lot of money. Uh I think if he's hitting on 25% of his wells, as long as a couple of them are producing big, he's going to make a good amount of money. — Yeah. So, so this is the foundation of what would become the Getty Oil Empire. And the reason why it's important that we're talking about George Getty is because he has one son. And that son's name is J. Paul Getty. — Okay. During the rest of this episode, are you going to call him Paul Getty or J. Paul Getty? — I think J Paul Getty. — He goes around introducing himself as J. Paul. He's just Paul Getty. — Are you sure? — I didn't mean him. I'm pretty sure it's just Paul Getty. Okay, we can — I beg you call him Paul Getty. — Okay, I will You've given me in indemnification here. So if I'm wrong in Indification. If I'm wrong, let's have him just throw a J in post. — Okay. Paul Getty, the only son of George Getty. Paul Getty would die the richest private citizen in the world. But there's a lot that has to happen until we get there. He's 11 years old when his dad goes down to Oklahoma and hits a big in oil. — Yes. His dad hits it big. Spiritually, never leaves Oklahoma. His dad is an oil man. So Paul Getty jumps into the oil business with his father. From the age of 12, he starts working on the oil field. Here's a quote from his autobiography. My father was explicit about the terms under which I would be employed on the oil field. I would receive the rousedabouts going wage, which was about $3 a day for a 12-hour shift. I could expect no preferential treatment because I was the boss's son. I would have to learn to hold my own with the other men. I had long enjoy the advantages and comforts that might be expected to go with being a wealthy man's only son. To my astonishment, I adapted readily to this abrupt transition, and I took to bunk house living and grubshack eating in stride. and I enjoyed both. — He can say that, but he was only doing that during the summertime because he was also going to LA and going to a Harvard Westlake school and then he ended up going to college and so like yes, he was working hard in the summer but like he wasn't there year round. But what it shows is he's a hard worker. He's learning the craft. His father is very supportive. He's tough but supportive. He's not giving his f son differential treatment when he's working. Paul Getty is getting his hands dirty and that's really important because he learns everything you need to know about the oil business. He has a great foundation which he would then parlay in the future to have a thriving oil business. So after his college, Jaul Getty is a typical 21-year-old kid doesn't know what to do with his life. his father actually has to beg him to come back to Oklahoma and work in the oil field. And how does he do that? He does it by enticing his son. By saying, "Hey son, I will personally put up all of the capital you need to start your own oil venture. I will receive 70% of the profits. You will receive 30% of the profits. and you have to do all of the work, but I will fund it. So, under that business arrangement, Paul Getty goes and starts his own oil venture, which actually fails. The first oil venture fails. It's a big bust. They drill a duster, as they call it. It's only the second well after Paul Getty's father, George, agrees to finance it again, that they hit oil. And

### [10:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=600s) Segment 3 (10:00 - 15:00)

it's a huge success. We're currently in the year 1916. Paul Getty is 23 years old and he personally pockets over a million dollars from his oil well now. — And that's that but he's only getting 30% of the profit. So he obviously just he nailed it on the second time around. — Yeah, he nailed it. His father obviously does well. So, he wants naturally to double down and put all that money back into the ground and not reap the benefits or earthly rewards of his financial success as a 20 a good-looking 24y old, right? — No. Oh, did I miss it? For the o I appreciate the setup, but for the only time in Paul Getty's career, he retires as a 23year-old with a million dollars. He goes to California, sets up shop in Malibu, and by his own admissions shop. — Yes. admissions, — it's about 2 years of women chasing and partying and not a whole lot of economic production, if at all. It's actually kind of like the prodigal son story. Like he gets his inheritance early and then he just goes and blows it and then he's worn out and he wants to come back. Yeah, that that's exactly right. U J Paul Getty J I say J pill Paul — we had a deal. Paul Getty would say in his autobiography that he became depressed. Too much fun. Not no purpose in life. So what does he do? Well, he comes crawling back to dad. And I just want to emphasize this over and over again. George Getty appears to be a fantastic father. Is he upset that his son has abandoned him for two years? No. You always see these quotes from Paul Getty talking about the reverence of his father. He says, "My seat was set for me. Without the love and training of my father, I would not be the man I became. Vice President Nelson Rockefeller once did me the honor of saying, "My entrepreneurial success in the oil business put me on par with his grandfather, John D. Rockefeller, Senior. " My response was that comparing me to John D. Senior was like comparing a sparrow to an eagle. My words were not inspired by modesty, but by facts. John D. Rockefeller began his life poor. He began work as a lowly paid bookkeeper and worked and fought his way up the ladder. I enjoyed the advantage of being born into an already wealthy family. And when I began my business career, I was subsidized by my father. While I did make money and quite a bit of it on my own, I doubt if there would be a Getty Empire today if I had not taken over my father's thriving oil business after his death. I'm going to say this is uh not humility. This is an understatement because when his dad died in 1930, he left him with like 15 or $16 million. I'm sure you'll get into the exact specifics of it. And he says that his dad was like the number one shaping influence in his life and that when he looked back on his life, he was basically a terrible dad to all five of his kids. And I wonder if that's going to play into this story at all by the time we get done. Okay, that might be an understatement, but can you give me a minute to lay the foundation of what you just said? Yeah, yeah. Hit me. Okay, so J. Paul Getty moves back from California to Oklahoma to work with his father. This is 1925. The next 5 years go great. You've already spoiled the fact that George Getty dies in 1930. But from 1925 to 1930, father and son are working together. They are growing the Getty Oil Empire. During those five years, it becomes very apparent to George that his son Paul has a major defect, error. What's the right way to flaw? He a limitation, a flaw, a flaw. And that flaw is his personal relationships. What do you mean? He's really great at getting married like over and he's like one of the best fans of weddings out there. Yes. His first marriage lasts two months. During that marriage on the honeymoon, his son George Jr. was conceived. George II. The second marriage, there's no children. It's just a summer fling in Mexico. The third marriage is a woman in Germany. He has a son named Ronald Getty. The wife would get such a large settlement from Paul Getty that he disinherits Ronald completely, which we'll talk about

### [15:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=900s) Segment 4 (15:00 - 20:00)

Ronald later, but it's uh the settlement wasn't very big compared to what would what Getty would become. — George Getty was a 10 out of 10 as a dad. I think Paul is maybe closer to like a negative 10 out of 10. — Yeah. And his fourth marriage is to a woman named Anne. — Anne Roor. — Annne Ror. — Well, this one has to work. I've read that the fourth marriage is always the charmed one. It's always the one that goes right. — Four. Fourth times the charm. Clearly. — That's what they say. — In this marriage, there are two kids, Eugene and Gordon. Now, I have to tell you the side story about this marriage. I want to hear it. Okay. So, they get married in a private hotel room. It's not a real ceremony because when they try to go abroad, the passport office says, "Hey, there's no proof that you're actually married. " So, they go and get married in a Spanish-speaking ceremony and doesn't understand Spanish. There is certainly some circumstantial evidence that this was all planned because while getting married in Spanish, which again Ann doesn't speak, she also has to sign papers in Spanish, which she doesn't read or understand. And those papers specifically disclaim any interest that she may have to Paul Getty's estate. Oh, come on. Does he have an estate left after his previous marriages? — Yes. As one can guess, this marriage ends in divorce and an is left with alimony of $40,000 a year, which is a lot of money back then, but it is nothing compared to what it could have been. Oh, and by the way, she was probably only paid this because the divorce was really scandalous. They filed this in the newspapers. the press was picking this up because, you know, Paul Getty may or may not have totally taken advantage of her by making her sign uh documents in another language. But hey, who am I to judge? Paul Getty is clearly struggling in his personal life. He's doing great in his professional life, but he's working under his father. Now, we get to the year 1930. The Getty Oil Empire is worth 15. 5 million dollars. George Getty dies. He leaves his son $500,000 in Getty Oil stock and the remaining 15 million to his wife Sarah Getty. I would say that Paul's serial marriages and serial relationing and his running off to Mexico and everything else that he did really jammed him up for ownership of the Getty Oil Empire for the rest of his life. Yes. Josh, is there anything interesting happening in 1930? — Uh we are at the very beginning of the Great Depression. You have the stock market collapse in October of 29 and not for nothing but there are some natural disasters happening in the western part of the US called the dust bowl and things are really bad economically for the next 11 years. So, so just to paint the picture, we have Paul Getty who has shown himself to be a prudent operator inside the oil business, but he does not have control of his company. He has to go through his mother. His mother has employed lawyers. Those lawyers are very hesitant to take any sort of aggressive risk because it appears that the world is falling apart. Now, Paul Getty wants to do the complete opposite. He wants to go on the offensive. And Paul Getty is credited with this tactic of essentially drilling for oil on Wall Street. Here's a quote. I considered that it was foolish to buy properties with $100 when you could buy them indirectly on Wall Street with $50. My research was that he actually succeeded in getting oil for even cheaper than that. And here there's two reasons why this strategy is so good. Number one, if you are drilling for oil, you don't know if you're going to get it. Even the Gettys get dry well sometimes. But if you are buying it for less than market rates, then you're killing the game. Yeah, it's a fantastic strategy that ends up working for Getty and working tremendously. But in order to get his mother on board, she's very hesitant. She the last thing she wants to be doing is investing in a stock market that appears to be failing. And her lawyers feel the same way. But after years, I

### [20:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=1200s) Segment 5 (20:00 - 25:00)

mean, we we get to 1934 at this point. So George Getty dies in 1930. For four years, there's this struggle of — I like to imagine she's also saying, "Remind me again, what's the name of your new wife? " — Very condescending. Sarah Getti is very condescending. very clearly. So, two things are happening simultaneously in 1934. Sarah Getty has finally been worn down. She has agreed to let Paul Getty do his thing. Also, Paul Getty has said, "Hey, look, I'm just going to buy you out. I'm going to buy your shares out. you don't have to worry about anything because you're going to get paid and if I gamble everything away or it gets lost in a divorce, it's none of your problem. The problem with this is Paul Getty is making a margin bet of his oil empire of their oil empire on Tidewater Oil. He has overextended himself and when it comes time to make a debt payment to Sarah Getty to buy her out of her shares, he cannot afford it. Sarah Getty, as a creditor, but also a mother, strikes a deal on Christmas Day 1934. She says, "Okay, Paul, you don't have to pay me back, but all of my shares and your shares that you currently have need to be put into a trust. That trust cannot sell unless to avoid severe economic harm and it cannot be dissolved until not only you're dead, but also your children are dead. " Okay, so this is one of the things that you have to get into the wayback machine. something that we learned in law school so many years ago. — Dude, I'm going to say it. It is the rule against perpetuities. This concept that you can like tie up assets or property for longer than your life and longer than your children's life, but not forever, was one that Sarah Getty was absolutely willing to test. She wanted to tie up all the shares of Getty Oil for as long as the laws of the United States of America would allow her to do it 21 years after the last living grandchildren died. Yes. So the Sarah C. Getty Trust is formed. Paul Getty is the sole trustee of it. So he has complete control but he cannot sell. This is a foundation to what would transpire 45 years later. — Did you ever have a Christmas morning where you struck a deal with your mom about a trust and like millions of dollars of shares of oil or anything? — I can't say I have. — Okay. That was a typical Christmas morning at my house. Just declaring trusts and exercising, you know, options and all that stuff. That's what we did every Christmas. And now it's time to thank our friends and presenting sponsors of the show, Supio. Supio is an AI company geared towards plaintiff lawyers. You know, I travel a lot. I go to a lot of conferences. I know lawyers all around the country and everyone understands that now is the time to get into the AI game and to figure out how to make your law firm more efficient. Supo is specifically designed for plaintiffs lawyers to help us navigate our case from the very beginning from intake all the way to settlement or judgment. The number one benefit that Supio provides law firms who use it is that it makes you more efficient and allows you to get more done in a day with more confidence that you are getting the best results for your clients. I know firms around the country who are using Supio and everyone is very pleased with the progress that their firms are making adapting to this new phase of what it means to practice law. — That's right. I think the reality is whether we like to admit it or not, those of us who don't use AI will be left behind. It's not a cure all. I think Supio would be okay with me saying that. And part of the reason why I'm so enthusiastic about their sponsorship is because they've given us our creative deference. This is not a magic button that you press and all of your problems are cured. This is a tool that you can use to optimize the efficiency in your practice. A task that takes 2 hours can now take 20 minutes or less. You can get summaries. You can generate cases. This is a tool in your arsenal that can help you be a better lawyer. And they don't make you do it on your own. They train you. They train your team. They're there for you. It is a actual relationship with a company who wants to see your

### [25:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=1500s) Segment 6 (25:00 - 30:00)

firm succeed. And that's the way that they've been with us at EKSM. Yeah. — They didn't just say, "Oh, sign this contract. " And then we never hear from them again. They're fantastic to work with. — Yes. For whatever it's worth, our law firm uses Supio and we are happy and we implore you to do the same. Tell them Tom and Josh sent you and book a demo. No commitment. Just see what they got. I think this is a good opportunity to pivot the conversation to Paul Getty's sons. And actually, I don't think we mentioned it, but there was a fifth son named Tim Getty, but he dies when he's 12 years old of a brain tumor. So, for all intents and purposes, we're going to be focusing on George Jr., Ronald, Eugene, and Gordon. And I just need to add parathetically that Eugene was born John, but spelled Jean, and then was sometimes called like John Paul Jr., sometimes Jean Paul, sometimes Eugene. That dude changed his name like three times. Yeah, he's a disaster, which we can I mean, we'll cover in about two minutes, I think. So, George Jr., the firstborn son of Paul Getty, has potentially the most promising career in the Getty Oil Empire. He works hard. He becomes his own accomplished young executive. I believe he's on the board of Bank of America for a time. He becomes president of Tidewater, which is the second largest oil property under the Getty Empire. He does very well. But there are constant stories of no matter how good he could do, his father is always going to treat his son arguably worse than he would any other executive. There is just relenting pressure, constant beratement. George can do 10 things great and one thing wrong. And the one thing wrong, Paul Getty's gonna get on the phone and chew him out over Intercontinental Voice for 10 hours, right? There are a lot of firsthand accounts of this. It's really, really sad. Effectively, what ends up happening is George ends up dying likely by suicide induced by all of the pressure put on him by probably his father. — Yeah. And now that's not immediate. He actually works in the business for a really long time. — Correct. That absolutely correct. George has a long career. I'm trying to put an incap on George and the other kids so we can focus on the star of the show. That's fine. But we're also underlining the fact that Paul Getty was not a great dad. I mean, essentially, if you read between the lines, he kind of drove his oldest into abuse of alcohol and barbituates to the point that he killed himself. So, not great. Not winning father of the year that year. George Jr. does have three daughters which will become beneficiaries of the Sari Getty Trust. Now, let's talk about Ronald. Ronald in some ways has the least tragic story because nothing really bad happens to him. But at the same time, he is disinherited from the start. Despite his father becoming immensely more successful than he could have ever dreamed during his lifespan after the divorce, he still does not reinclude Ronald. Yeah. Like let's not underplay this. During the 1950s, Paul Getty, the man you like to call J. Paul Getty, was declared the wealthiest man on the planet who wasn't a monarch. Like this dude, he was incredibly wealthy. He wasn't as wealthy at the time that he disinherited Ronald U, but he got super wealthy in the 50s, — but effectively Ronald is disinherited from the divorce that his mom got. He becomes way more successful after that. And when Jaul Getty ends up dying in 1976, he actually does leave Ronald an additional $300,000, which isn't nothing, but for the richest guy in the world, it is not a whole lot. — I think that's like 2 million in today's money. — And also, it's important to note that Ronald is technically in the trust, but he can never receive more than $3,000 a year. So he's not meaningfully in the trust. So Ronald works in Getty Oil. He is h has an average career. He leaves that at some point, but he's not a meaningful part of the story because he's not a meaning he doesn't have a meaningful part in the inheritance in the fight that would ensue.

### [30:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=1800s) Segment 7 (30:00 - 35:00)

Next, let's talk about Eugene. Was he born Eugene or was he born Paul Jr.? — I don't know. He changed his name so many times. At first, I thought it was interesting and then I just kind of got tired of it. He changed his name like his dad changed his wives. So Eugene and Gordon are the two sons from the fourth marriage with an they're pretty close growing up. They start in the Getty Oil Empire together. They actually start at a service station. So, very similar to Paul Getty starting as a rouseabout, he sticks Eugene and Gordon at a gas station in San Francisco when they're 25 years old and they run the gas station. That that's their first foray into the Getty Oil Empire. — Wow. — Yeah. You Eugene actually shows some promise like a pumping gas or other things. He's sent to Rome to be a I mean I think just general ambition, you know, just a he's what appears to be a good young man. — He's 25 years old, 26 years old. He gets into Rome, Italy to be a middle management director at Getty Oil Italy. There the the wheels fall off. What happens is he becomes a hippie. Just to put it in vernacular terms, he becomes a hippie. He develops a drug dependence. He stops shaving. He grows out his hair. — I love your version of what a hippie is. I love you. L you really did a lot of research about what are hippies into? You're like, — I don't know. — Hair. Uh — well, you were around. Tell me. — Oh my goodness. Okay. So he becomes a hippie in Italy. Hey, but just to be clear, the Getty Empire, the Getty Oil Empire, actually Italy wasn't so far from there because Paul spent most of his adult life not in the US, but actually in England. In fact, he died in, I think, a place called Suri. But he was trying to be closer to all of these um Saudi Arabia oil interests that he uh gathered over the years. Right. That's right. Getty's big break, well, you know, that's relative. He was already fairly large at this time, but Getty's big break was he negotiates a deal with Saudi Arabia to have the exclusive exploratory rights to explore and drill for the Saudi Arabia neutral zone. All other major players and there were bigger oil companies at the time all passed on this because it was an extremely expensive proposition. For instance, they had to pay the Saudi Arabian government a 55% royalty. They had to hire a certain amount of Saudi Arabian workers and monitors. They'd had to pay not only their salary but for their pension. They had to deliver a million oil barrels of gasoline every year to Saudi Arabia for free. It was an incredibly expensive deal that most people passed on. Paul Getty did not. And he made a fortune. I hear there's lots of oil in Saudi Arabia. Yeah, it was not known at the time how much there was, but I think it's important to note out to note that during the 1930s, he had the opportunity to get into the Saudi Arabian oil game. He did not have the control and Sarah wouldn't let him. And this was like the I think the late30s. 17 years pass and this opportunity comes to him again. And he says, "This time even though the price is too rich for everybody else, I want in. " And he ended up proving this maxim that I have heard on the acquired podcast, which is if you're acquiring a great a truly great business, probably no price is too high. And that's what he decided uh when he had a second goround at this Saudi Arabian oil and he got into it and it paid off handsomely. Paul Getty spends a lot of his life based in the UK. He just wants to be closer to the action. Speaking of the UK, after burning out in Rome, Eugene Getty, who at this point I think is renamed himself Jean Getty or Paul Getty Jr., whatever. He leaves Rome for London. He gets married. He has a son who will become a critical player in this story later named Terra Gabriel Galaxy Gramophone Getty. Can you say that name without reading it? — Terra Gabriel Galaxy Gramophone Yeti. Triple G as we call him. — Triple G. It's a great nickname. — Yeah. And his parents were not high when they named him. — Oh, to totally to — totally not high.

### [35:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=2100s) Segment 8 (35:00 - 40:00)

— That's the story of Eugene for now. He sticks around and becomes a player later. But now, let's turn our attention to the most important son in this saga, Gordon Getty. Gordon is the fourth son. He's the youngest son who survives. He is a space cadet. There's no other way to describe Gordon. He, by all indications, he's very smart. He's very bright, but he is more interested in philosophy, in academia. Academia. — Academia. No. — Did you go to school? — Yeah. — Academia. — He's into academia. He's into philosophy. He's not so much into working. He is absent-minded. He is notorious for losing cars. — Oh, I actually came across some of this also. So, one of the stories was he drove to a restaurant to pick up some food. He got the food. He goes outside and waits on a car to pick him up, not remembering that he had driven himself there and there was no car coming for him. And I guess he wasn't in a hurry to get home, so he just waited. — Right. And or he would just pull up to the airport and park his car up front and just leave it. — They don't actually allow that anymore. — Yeah. And Okay. But what what's particularly interesting and what I want to impress upon the listeners is by all accounts he lives a very modest life. Again, Anne Getty only gets $40,000 a year. She remarries three more times. Gordon doesn't have a father figure growing up. His father, Paul Getty, is off running his oil company. He actually could care less about spending meaningful time with Gordon or the other sons. just they communicate in passing every now and then, but it's nothing meaningful. There's no amount of money that Paul Getty is sending Gordon to live a lavish life. He he's living normal. And despite living like a normal guy or as much as you can be being the son of Paul Getty, he is still a space cadet. I'm not convinced that he wasn't using drugs. I don't know. I think he's a little out there. It's just important to me that the listeners understand that Gordon Getty is an odd duck. He's an odd duck. I don't think the money is what made him an odd duck. I think he was an odd duck to start and when he would eventually come to control billions of dollars, it really just makes the problems 10 times worse. So, let's talk about Gordon's career in Getty Oil. As stated, he starts in the gas station in San Francisco. While his brother Eugene is sent to Rome, Gordon is sent to the neutral zone in Saudi Arabia. Here he becomes a focal point to a international controversy. This is the late 1950s. Gordon is in the neutral zone. An employee of Getty Oil drives their pickup truck into a pipeline causing a huge explosion. The direct supervisor of that employee then runs to Gordon Getty asking for him to immediately sign his paper so he can get out of the country. Gordon is the supervisor to the supervisor permits this. When the authorities come knocking, they find out that Gordon let this guy leave. So they arrest him. Gordon spends a week in Saudi Arabian jail. His father has to negotiate his release. I have a letter written by Paul Getty to Gordon after he is released from Saudi Arabian prison. Are you going to read the letter from the world's greatest dad? Yes. It reads, "Gordon, your failure to be duly respectful to the king's representatives was immature, undiplomatic, and bad business for Getty Oil Co. Face and prestige are very important to the Orient, and to have a Getty arrested and confined by Saudi authorities was harmful to the morale of the company's employees. I was anxious for your safety and about the company's relations with the Saudi government. It was very distressing. Thanks largely to my intervention with the governor of the neutral zone, we obtained your release on the promise that you would immediately leave the zone in Saudi Arabia and not return. This episode naturally affected my opinion as to your business judgment when in an executive position. Dude, that letter is savage. He says, "Yeah, I was a little bit worried about your safety, but also really you brought shame on our family and our business, and I am the hero cuz I got you out. " And the way I did it was

### [40:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=2400s) Segment 9 (40:00 - 45:00)

that I sacrificed you. Get out of the Middle East, which I'm randomly calling the Orient because I don't really understand the planet in the mid 1950s or whatever, and never come back. So Gordon is sent to Tulsa, Oklahoma to run Spartan aircraft, which he fails at. — So you're telling me he gets banished from a Saudi Arabian prison to Tulsa? — That's right. — Is that an upgrade or what? Like I don't know. — So there's this company, Spartan Aircraft. They made planes during World War II. Their goal is to convert Spartan Aircraft into an RV manufacturer, a mobile home manufacturer. Gordon gets put in there. He doesn't last very long. He shows that he's a space cadet and the prior management there throws a fit and effectively gives an ultimatum that says either Gordon leaves or the management leaves. And Paul Getty very clearly picked the management over his son, probably rightfully so. We're in the year 1960 now. Gordon is 27 years old. Spartan Aircraft was the last time he was meaningfully employed in the Getty Empire. After Spartan Aircraft, Gordon becomes a consultant for Getty. What does that mean? — It doesn't mean a lot. — Yeah, not to rag on consultants. That doesn't mean anything. — Oh, no. There's plenty of quality consultants out there. I'm saying for G for Gordon, it doesn't mean a lot. So, I just made a dig at my consulting friends. I'm I apologize. Effectively, — wait, can I have a list of the names of your consultant friends that you were intentionally insulting on our podcast episode? — I plead the fifth. Okay. — Although they are probably listening because they have nothing to do, but — they better be listening. — Okay. So over the next couple of years, Gordon Getty is engaged on a number of projects to consult on. By all accounts, his analysis is fine. He's smart. He's educated. He's intellectual. But his recommendations for implementing any sort of serious business strategy are just complete garbage. I mean, they've totally sidelined him. He was supposed to be in Saudi Arabia where a lot of value was being created for the Getty Oil Empire. He flames out there, but pun intended because of the explosion. But anyways, then he they put him in Tulsa at like a secondary business that doesn't matter. He flames out there. So, they've just completely sidelined. — Yeah. They've signed him and they don't take his recommendations seriously. This consulting work is just so he can have a couple thousand bucks here or there. And what's important to note is he is unaware of the family trust at this time. He is not getting paid the $28 million a year that he would get just a decade or so later from his family trust. He he's very much earning a normal wage, living under normal means. He is just the son of Paul Getty, which affords him some opportunities, but even that can only get you so far. He he's he is effectively sidelined. He's just a consultant that implementations are never actually taken seriously. So this is the year 1960. While Gordon is being a consultant, he approaches his father and asks about his inheritance. Says, "Father, what's the deal? What's happening here? " His father's response was, "Your grandmother created a trust. The trust documents are in the public record in Los Angeles County. Go find them. I'm not going to tell you. If you want to look them up, go look them up yourself. — Dude, the disrespect is real. Yeah. I mean, Paul Getty thinks this is disgusting behavior. Not because he is trying to stonewall Gordon and keep the money because at the end of the day, the money's never being dispersed anyways. It's more of just the fact that Gordon doesn't want to work. He's not working hard. He doesn't want to work hard. He just wants to get by. — Yeah. And it's truly a family business, right? I mean, this was Paul's dad's business. Now it's Paul's business. He wants his sons to be involved in it, and they're not good at it. And it's not like he has a laser printer and could give him a copy of the trust, but I think they have mimograph machines by then. He doesn't have to burn him by telling him to go to Los Angeles and read it himself. — Right. So, flash forward to 1963. Gordon receives about $125,000 of stock of Getty Oil from a different trust, a smaller trust. He immediately sells it because he wants the cash. Within the next 12 months, the Getty stock quadruples. I mean, he just he can't

### [45:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=2700s) Segment 10 (45:00 - 50:00)

help himself. He just — He's snake bit. He's just snake bit. It doesn't work for him. — He's snake bit again. By this time, it's 1963. Gordon is aware of the trust. His father effectively owns 80% of the trust or is entitled to 80% of the trust. Gordon and his three brothers who are alive get the other remaining 20%. Let's call it 6 and 12% 7% whatever 7% for round numbers even though that's not technically true. — Yeah. I don't think anyone would ever agree with you that 6 and a half is a round number. — Yeah. Okay. So Gordon is aware of the trust at this point. He's entitled to plus or minus 7% of the dividends earned by the trust. There's only one problem. Getty Oil doesn't produce dividends. — Yeah, it does. They're not legally required to. They can reinvest their money and grow the business. — Correct. Paul Getty to this point has just kept his chips on the table. Why issue a dividend when they could just put more money into finding more oil, which would then increase the stock price? And at this point, he's no longer the world's wealthiest citizen. He's been eclipsed by Howard Hughes. And so maybe he just wants to see if he can go reclaim the title before he dies. — Gordon writes his father. He hires a lawyer and says, "I believe Getty Oil is extremely well able to pay a dividend. The income to me should not under any circumstance be less than $50,000 a year. " Oh, and by the way, if you don't do this, I'm going to sue you for breach of fidiciary duty to the trust. So, public image is very important to Paul Getty. He has a quote. He says, "So far as I know, the Kennedy family has never had a suit, nor has the Rockefeller family. " So, he capitulates. He issues a very small dividend. I think it's 10 cents a share to Getty Oil, which would mean Gordon's dividend payment from the trust is about $48,000 a year. So, pretty close, — but perhaps intentionally less than his son demanded, — maybe. I don't know. 10 cents seems like a pretty round number. I mean, I don't know why you would give a dividend for 11 cents. But regardless, this ties Gordon over for a little bit. But at this point in time, he's married and he starts to have kids. He's just living a semi-normal life, I guess. But again, you know, your father's the richest person in the world or one of them. And of course, it goes without saying this creates a huge riff in the family. This goes against their father. George Jr. says, "Congratulations, Gordon. You have gained $50,000 but lost a father. " It's real hard feelings. It's just a nasty affair. You would imagine at that point though that Ronald probably um starts following uh Gordon on LinkedIn. — Yeah, that's you're on the outs with dad. Come on, man. — And what's funny is I don't think Ronald is really on the outs with Paul Getty other than the inheritance thing. I mean, by all accounts, he's just a — other than this small issue of billions and billions of dollars. Okay, so this goes on for a little bit. We're now in 1966. Gordon hires a lawyer to examine the trust documents. Once again, what they realize is that the trust is not only entitled to a money dividend, but also stock dividends, which Getty Oil has been doing for years. They do some calculations that the stock dividends, which have not been distributed to any of the beneficiaries, is worth over $und00 million. Meaning Gordon's portion is worth seven million. — Okay, this is 60 years ago. $7 million is gonna be somewhere around $40 million in today's money. — Yeah, we're talking about 1966 Gordon Suz. This goes as bad as you would expect. It's a huge embarrassing saga for the Getty Oil family. It's mostly bad for Gordon. Gordon is painted as a spoiled child in the media and he just gets demolished. There's no way to describe it. Gordon gets crushed. He gets embarrassed. His father has an army of lawyers led by a gentleman named Lancing Hayes. Lancing Hayes is ruthless at some point in time and not to be confused with Gordon's mother an Getty Gordon's wife picks up the phone, calls Paul Getty and says, "Your lawyers are killing my son. Please stop. " Paul Getty's response is, "Keep killing my son. " — Yikes. — Yes. I think I think it's he's wishing

### [50:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=3000s) Segment 11 (50:00 - 55:00)

at this point that he just left him in the jail in Saudi Arabia, — right? And Paul Getty does end up winning this case. He ends Gordon Getty does not get this stock dividends or an immediate payout to the stock dividends. — I read that he won the case because uh because Gordon Getty drove to the wrong courthouse. — Would wouldn't be surprised. So all of that is the prelude to an event that would happen a decade later. We could jump from 1966 to 1976 and Paul Getty dies. He bites it. He croaks. It's the end of an era. — Yes. He's 83 years old when he dies. Who's going to take over Getty Oil? This is the first time in 46 years that there's anything resembling a power vacuum at the top of the Getty oil industry cuz his dad died in 1930. His mother was still alive. But even when his mother was alive, at least once the shares were put into the trust, Paul Getty was the sole trustee. So he could do what he saw fit. And — he was the CEO for I think 46 years. — Yeah. And additionally on top of the shares that he put into the trust, Paul Getty would buy more shares of his company throughout the preceding decades that were not subject to the trust. And when he ended up dying, Paul Getty between the trust and his own personal shares had a majority interest in Getty Oil close to 52 53% I believe. — Yeah, it was 52%. — Gotcha. But just to be clear, the 52% is made up of separate categories of ownership. The Saras Getty Trust owned roughly 40% of Getty Oil and Paul Getty individually owned about 12%. But remember, he has complete control of the SEC Getty Trust. So he effectively has control of 52%. So Paul Getty ran Getty Oil with an iron fist. We're in 1976 J. Paul Getty dies. Harold Berg, who's Paul Getty's longtime second in command, takes over. He runs the show from 1976 to 1978. It was always planned that he was going to be in a transitory CEO. He was always going to transition out of power. He was old. He wanted to retire as well. Okay. So, we get to 1978. Harold Berg has to make a decision on who is going to be his successor in Getty Oil. There are two options. On one hand, we have Robert Miller, who is arguably the Harold Berg of Harold Berg. Robert Miller is an oil man's oil man. He knows oil inside and out. He can work on the field. He can work in the executive suite. He is probably the favorite person to be the successor if you were asking Berg or any of the true oil magnets. So, there was no secret document from Paul Getty that says, "After my death, put Gordon back in charge. We're gonna give him another shot at it. " — Quite the opposite. So, we have Robert Miller and then we have Sydney Peterson. Now, Sydney Peterson is the opposite of Robert Miller. Sydney Peterson is someone who has never left the executive suite. He's never been on an actual oil field. He's a New York guy. — Yeah. I mean, he he's a financeier. — He's a financeier. He likes to make strategic decisions from his huge office. He gets the nickname the imperial chairman. Spoiler. He is the one who ends up getting the role. He becomes the imperial chairman of Getty Oil. And his main strategy is actually to diversify away from just oil. So what you see over the next couple years is Getty Oil making a bunch of strategic investments into nono industries. Josh, what news network? — I already know. I 'm so excited about this. I'm so excited. Did Getty Oil invest $60 million into to found a completely insane idea, which is a 24-hour a day sports channel from Connecticut called ESPN. That's right. Getty Oil invests $60 million to fund ESPN. Paul Getty, had he been alive, no chance on earth he says yes to this. It's completely crazy, actually. Did you see the story about the lawsuit involving ESPN, the divorce lawsuit? — No, no. Tell me, tell me. — Okay. So, so a couple years after ESPN is launched, Getty Oil is sued, named as a party, as a defendant in a

### [55:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=3300s) Segment 12 (55:00 - 60:00)

divorce petition because the woman who is suing blames ESPN for their divorce. Oh my word. Yeah. Uh and okay, and the ESPN investment isn't the only investment. They actually in invest in a movie studio called Premiere, which actually gets shut down due to antitrust issues. I think they ended up recouping their money or they sold it off, carved it up. They ended up doing okay on it. — Did ESPN end up all right? Did that take off or how that — Yeah, they did okay on there. They also invest into other minerals other than oil which do well. But Sid Peterson's crowning diversification investment is in the ERC Corporation which sells reinsurance. They buy it for $570 million. And flash forward a decade, not even a decade, seven or eight years later, it's worth double that, close to $1. 4 billion. Just to highlight that a little bit, uh, reinsurance is a product that insurance companies buy that insures them in case of outsized losses. So, it's basically insurance for insurance. It's not a consumer product. It's something that's operating totally in the background and only comes into play when there's basically like natural disasters like hurricanes and things like that. Yes. So, this is by all accounts a huge success. And we have to tell you about this because it becomes very important to the story later, the ERC. Side note, when Sid Peterson brings the ERC deal to the board, everybody votes in favor of it except for one person. Josh, who is that person? Has this person ever been in jail in Saudi Arabia? — Yes. — It's Gordon Freaking Getty. — Yes. — Who does not approve? which is a great time to discuss why Gordon Getty is on the board. — Yeah. Why is he on the board? J. Paul Getty dies. — Oh no. Is he related to Paul Getty? — Yeah. — Josh, don't do this to me. — Okay. So Paul Getty dies. Upon Paul Getty's death, the Sarah Getty Trust will now have three co-rustees. One is a family member. Two is Lancing Hayes, who is the lawyer who was sent to quote unquote kill Gordon in the dividend wars. By all accounts, a very mean and nasty man. And three is a bank, specifically Security Pacific National Bank, the longtime bank of Getty Oil. This is the most castrating setup for Gordon Getty possible. Cor — correct. Well, first of all, I think by all accounts, there's no way Gordon Getty would have even won his interf family strife for the family member board seat, but you have to remember George Jr. is dead. Ronald has no meaningful interest in the trust, so he can't be a trustee. Eugene is a drug addict hippie living in London. Gordon's the only one left, so he is a co-rustee of the trust with Lancing Hayes. Now, — I know this is an interruption of an interruption, but you surely came across the story of one of Paul Getty's grandkids getting kidnapped in Italy, right? — Yes. — Okay. And do you remember that Paul Getty did not want to pay to save the life of his grandchild? — I know. He Well, he was worried about setting the price. Yeah, — he was worried. He was worried that it would create a market for kidnapping a Getty. — Supposedly, that's what he was worried about. I think that he just loved tossing shade at his family members. — Yeah. Paul Getty, for how great of a business person he was, he clearly was not a great individual outside of work. While we are talking about the trustee situation, it's important to talk about the third trustee, the bank. Okay, it's designated that Security Pacific National Bank will be the third trustee of the Saras Getty Trust. — Right. However, before accepting the appointment, there becomes a very interesting tax issue, potential tax issue with the UK. Effectively, it's come out that uh Paul Getty in his infinite gamesmanship may not have reported $3 billion dollar of or so in stock to the UK. And in the UK, a trustee could be held liable for the tax deficits of the trust. It's just a tiny bit of under reporting there. Wait, did you say billion or thousand? — Yeah, billion. So, uh that this issue actually becomes a nothing burger. It gets

### [1:00:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=3600s) Segment 13 (60:00 - 65:00)

resolved, — right? But it's hanging out there at the — time. It gets resolved. But even after it gets resolved, this might have been relevant during the early years, but it gets resolved. And after it's resolved, they try to get Security Pacific Bank on a co-rustee of the SEC Getty Trust for reasons we'll continue to discuss, but the bank just won't do it. Here I have a letter from the bank to Sid Peterson. Sid Peterson being the financeier who's uh who's on the board at Getty I'm sorry who's the CEO of Getty Oil, right? It says the size of the trust is just too big for the bank. Should there be a one in a million serious development, the trust document that Paul Getty and Sarah C. Getty wrestled over on Christmas Day 45 years earlier prevented any sale of Getty oil except to avoid a major loss. If it ever came to that, of course, it almost surely never would. But for selling the trust shares was unthinkable, but if it did, litigations resulting from such a question would be difficult to defend and the results unpredictable with the potential judgments of unprecedented proportions. — No, the potential magnitude of any loss resulting from and acting as co-rustee of the $3. 2 2 billion trust could jeopardize the very existence of the bank. — That's nonsense. There's no shot that there's going to be litigation about the sale of these assets later in time. Can we give a round of applause for the general counsel of the Security Pacific National Bank? That is Dude, that's incredible. Well, that's an incredible letter. — Even though you had a hard time reading through that letter, it's actually pretty interesting. We should post that on our LinkedIn channel so that people can see some of these resources. If you are listening to this podcast somewhere other than LinkedIn or if you're watching the video somewhere other than LinkedIn, get on over to LinkedIn, follow our channel. It's in check out this fascinating letter that Tommy's posted. And here's why it's so it's actually so crazy is because while he says the size of the trust is just too big. You have to keep in mind that the way that banks get paid to serve as professional trustees on these trusts is based on a percentage of the assets. So they would have been making tens of millions of dollars a year if I'm not mistaken. — Well certainly over the course of the trust. I think I came across something and it's not in my notes, but I think they said it was a $3 million a year salary for being a trustee of this trust. — Okay, that that's uh a lot of trusts are pegged at 4/10en of a percent of the value of the trust corpus per year, but so $3 million a year is a discount to that. And perhaps um that's the reason they didn't take the plunge because maybe if it was, you know, 15 or$20 million a year, they'd say, "Yeah, we'll go ahead and take that. " Yeah. Okay. So, going back to the boardroom, we have Gordon who is on the trust is a co-rustee — and basically a genius. We have Lancing Hayes who's a co-rustee and that's it. — And basically they're BFFs. — Correct. They are BFFs. There's so much BFFs that Gordon's opinion doesn't even matter. They're so in sync because Lancing Hayes is such a bully and so in control and has known the old man forever that no matter what Gordon expresses, Lancing will just do whatever he wants and imposes his will on the trust and Gordon just takes it by all accounts. He just takes it. It this is not a big deal. — There's a pattern of abuse, — right? Well Well, I think Gordon is no dummy. He knows that he's not really qualified to run Getty Oil, but this is his own words. While Lansancy was alive, my views as a trustee weren't worth a hoot unless he joined in them. So, I have very little doubt that our editors are going to cut out a lot of your misreadings of the letters, but I just want to say that I should start writing you letters cuz I think you'll spend all day trying to figure out how to read them. — That's right. I think that would be great. — I don't even know what this says. I think Gordon Getty's writing lancing uh like little notes that say you complete me stuff like that. — So Gordon is on the board. He can vote no. Nobody's going to stop him from voting no. But his votes are not material cuz they don't make any sway. He's really just voting no just so he can be the guy who votes no. — Yeah. He's just flexing or flipping him the bird or whatever, right? He just wants to be he wants to make sure not everybody's a yes man and assert his dominance. But I mean

### [1:05:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=3900s) Segment 14 (65:00 - 70:00)

certainly being the only person to vote no on a $560 million deal that ends up almost tripling in money is uh I mean it's not a great look especially when he's voting no just to vote no. I'm not going to describe him as petulant. The dude is he's just not treated well by his dad or by his dad's lawyer henchmen. So, we're in the early we're in the late 70s, early 80s, and I want to take some time to put ourselves in the interesting conflictrridden situation that Gordon is in. Gordon, as a co-rustee, by this point, his dividend is worth some odd $28 million a year. He is living a great life. He is not working hard other than his participation as a trustee and board member of Getty Oil. He is attending all of the socialite events. He is composing music. He is living the life that you would expect of somebody who doesn't have to worry about money. He's still weird. He still does weird things that maybe aren't money driven, but he's now money is not an issue for him as it was in the late60s when he sued his father. And I want to say also on top of that, uh, just to be perfectly clear, the consumption of oil in the US went up 8 and a half times while Paul Getty was the CEO of the business. And from 72 to 80, the price of gasoline basically tripled in the US. So the amount of money that's at stake is just climbing and climbing. So nothing could go wrong. We are now in the early 1980s and Paul Getty's practice of drilling for oil on Wall Street is rampant. — Oh, is it really? — Oh, yeah. — Who's doing it? — Everybody. — That's right. There's massive consolidation and there has to be I mean the oil market is maturing. We kind of talked about this earlier, but you have to remember that um oil is a finite resource. It's getting harder and harder to find, which means it's going to get more and more valuable. It's being used more and more. And so there's all of these financial pressures for these companies to grow and scale and maximize cost savings by becoming as big as they can possibly be. — And I think there's a prevailing fear that oil is running out. — Yeah, it's always running out. That's all we ever hear. — Right. So Josh, I think this would be a great opportunity to introduce the other players in this saga. Do you want to start with Pinso or Texico? — No, no. We need to talk about Pinso. — All right. — Because the con the social connections to between Penso and the Getty family go all the way back to the 1960s and they touch on a little person that you like to call President Bush. — That's right. So all right, let's do Penso. In order to understand Penso, we first need to know a Mr. Hugh Litki. Hugh Litki is born on February 10th, 1922 in Oklahoma. His father was an original founder of Oklahoma. I think he signed the Oklahoma Constitution. His father becomes a judge. He's very well respected. He then becomes one of the top lawyers for Gulf oil and gas. So Huittki grows up very much in the oil business, although he's not really working in the field, although I think he has a couple of summers in the field. He's not as hands-on as Paul Getty would be, but he knows what he's talking about. — Yeah, he has a very different approach. Uh, right before World War II, Hugh Litkkey went to Harvard Business School and got an MBA, — right? — No, he's no dummy. — He's no dummy. So after the war, he comes back. He goes to Texas law school. He actually rents the back house from a freshman senator named Lynden Johnson. Oh, I think I've heard of that guy. He rents Lyndon Johnson's back house when he's in law school. That's crazy. — It's a small It is a small world. — Yes. So the year is 1949. Litki and his brother set up a law firm in Midland, Texas, where the Texas oil boom is starting. In the building where they set up, there's another enterprising young man named George Bush. Okay. So he in law school he rents an apartment from Lynden Johnson and then he moves to Midland to start a business and in the same business in the same building where he and his brother start a business there's George HW Bush has al is also working. — That's right — dude lift up a rock find a president.

### [1:10:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=4200s) Segment 15 (70:00 - 75:00)

This is like Pokemon Go for presidents in the 1940s. This is crazy. After some years in Midland, Litki, his brother, and George Bush become great friends. They're all doing well independently. The Litkis have this business model where they would identify tracks of land, take that deal, drive back home to Tulsa, Oklahoma, where they had a contingent of investors, get the money to close the deal, and then drive back, and hopefully the deal was still there. They did this for a few years relatively successfully. In 1953, the Litki Litkis and Bush decide to create a company together. They go out and raise a million dollar. $500,000 from the Litkis investors in Tulsa and $500,000 from the Bush's investors in the Northeast. Can I please tell everyone what the name of the business is and why? — Sure. Okay. The business that Hugh Litkkey starts with uh the future President George Bush is called Zapata Petroleum Corporation and Zapata comes from a Maron Brando movie called Viva Zapata. Dude, this is not the height of maturity or sophistication. — I Yeah, I thought that they just picked that name because they wanted to be in the last page of the phone book. — I don't believe that's correct. — Maybe. I don't know. But so anyway, they raise this million dollars. They effectively gamble it, although they would say that it's not gambling. They invest all $1 million into a single field. What their thesis was this oil field was extremely untapped and the reserves connected underground. I'm sorry, I'm not an oil person. Maybe somebody knows what that means. They end up getting this oil field and it becomes a huge success. Wait, huge. Do you know how many wells they drilled and how many of them uh were not dry? — No. — Oh, dude. It's so crazy. Like, we thought 42 out of 43 was impressive, which it was. They hit on 127 consecutive wells. George Getty has nothing. — That's right. — Nothing on Hugh Litkkey and George Bush. — So, this is in uh Ko County, Texas. I'm suspicious that like history is written by the victors and maybe this isn't completely true. But like they got so much oil that it became believable. But the story that people believe is that they drilled 127 consecutive productive oil wells. So, so this goes great. We're now in the year 1959. Bush and Litki actually decide to start an offshore venture. They want to drill in the Gulf of Mexico or I mean Josh, can we even say the Gulf of Mexico? Is it the Gulf of America? — At the time it was called the Gulf of Mexico in the same way that Saudi Arabia was called the Orient. We now know it has temporarily has a different name. — Yeah. Now, you say joint venture, but really they kind of broke up on very friendly terms and said, "I'll take the wet stuff and you take the land. " — So, what's important about that is the company's doing very well. There's a consensus at the time that America is running out of oil that is landbased. So, there's a huge push to start drilling offshore. So what effectively happens is they spin off a Zapata offshore drilling entity. — Yeah. And um and the future President Bush takes Zapata offshore. That's is this is an amicable split. They made a lot of money. They said we're going to go our own ways, — right? that and there seems to be some tension between the investors that Litki pulled from Tulsa and the investors that Bush pulls from the East. So, they end up splitting on favorable terms. They're still friends forever. In fact, there are so much friends that do you know, Josh, did you know that Hugh Litki was forced to testify during the Watergate scandal? — Yes. I mean, so the way that the Gettys and Litkkey and the Bushes are all kind of interrelated and in the Nixon era politics and I know we're a long way from getting to the trial and this is a Penso v Texico podcast and we're talking about Watergate.

### [1:15:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=4500s) Segment 16 (75:00 - 80:00)

— So here's what happens. Bush and Litkkey remain friends. Liti is a longtime contributor to Bush and his political goals, which would actually be important later because Litkkey may or may not threaten Texico with some impending antitrust action while George Bush is in office. But Watergate Litki and his cronies donate $700,000 in cash. Some of that money is cleared through anonymous bank accounts before going to its intended recipients. That $700,000 is found on the persons involved in Watergate. — And by involved in Watergate, you mean the actual criminals who broke into the Watergate hotel? — Yes. — They had that cash. — Yes. Okay. So Litkkey is forced to testify in front of Congress about his involvement. And actually, there was a law already in place making the anonymized campaign contributions illegal, but the law didn't take effect till a week after they did this. So they didn't do anything technically illegal, but they were certainly exploiting a known gray zone when they were involved. But nonetheless, it's an amicle split amicable split. They go their separate ways. We're now in the year 1960. — And Hugh is very different than these oil field guys because much like Paul Getty, he believes that you can grow your business through acquisitions. — Yes. — And he's not out there saying, "Hey, let's keep getting lucky and let's keep drilling wet holes over and over. " And instead, he goes out buying companies. And one of the companies that he buys is crucial to the rest of the story. What is it called? Can I lay the foundation? — Do it. Do it. — Okay. We're in the year 1960. Hitki is already successful. He has moved back home to Tulsa, Oklahoma. His next door neighbor is a gentleman by the name of Bill Skellyy. Bill Skellyy is the owner of Skellyy Oil and Spartan Aircraft. Never heard that name before. That's right. So Skellyy owns Spartan Aircraft with Paul Getty. Now, Litkkey is recently engaged and Skellyy throws him a party. Who comes to that party is one Mr. Paul Getty. I can't believe it's Paul Getty. I thought it was going to be like Nixon, Ford, and Carter. all the other presidents. — He'll have to settle for Paul Getty. — Yeah. Yeah. — So, Licky has been looking for his opportunities to find oil on Wall Street. He's identified a company called South Pin. He is aware that Paul Getty owns 10% of South Pin. So during this party, Litki goes to Paul Getty and says, "Hey, you own 10% of South Pin. I want to make a move on South Pin. I think that they have a ton of oil in the ground that I'm an expert in extracting and it's extremely undervalued and I can make us all a lot of money. " Paul Getty says, "Okay. " — Yeah. Okay. Did your research indicate that this was a um like a very friendly merger or that Litki he was looking for an opportunity and basically kind of declared war and took over South Pin that way? — Well, yeah. He declares war. — Yeah. — With Paul Getty. — Yeah. — As in together as in allies. So what happens is Hitki buys 10% of Southpin to match Paul Getty's 10% of Southpin. They own 20% together, but Paul Getty, even though he might only own 10% of a company, he has a lot of sway because he's Paul Getty and people are just going to defer to what he wants. The result of this is Huittzki and Paul Getty perform a coup on the board of Southpin, installing Huittki as the CEO, even though despite promises that they weren't going to do that earlier. Long story short, Huittzki becomes the CEO of South Penn, which owns the brand Penso. Huitki would then rebrand South Pin to the Penso Corporation. And that's So this is 1963 when this happens. — 1960. — Yeah, that's 1963 when that happens, right? — My note says 1960, but it doesn't matter. Early 1960. — Well, he spends then Litki spends the 60s and 70s just trying to grow Pinso as best he can. Um, he becomes kind of a takeover guy. And from my research, I found that one of his kind of most staggering accomplishments was that in 1966, Penso takes over United Gas Pipeline

### [1:20:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=4800s) Segment 17 (80:00 - 85:00)

Company. Uh United Gas Pipeline Company was eight times bigger than Penso. At the time that Penso took them over, — the dude he knew how to do business. So Litki becomes a businessman doing business things, and it's not a great idea to get in his way. Yeah. And he's also a great marketer. Penso is famous for hiring Arnold Palmer as one of the first corporate ambassadorships ever. And the little yellow can of Penso does really really well. Dude, I have so much I want to say about Litki and his kind of business style and management style and his honesty and all that, but I don't think that we can tell those stories at this point in our story because um let's just say there's a couple different versions of Hugh of how Hugh Litkkey conducts himself in business, — right? But let's put a pin in Pinso and now transition to our third actor, Texico. Oh. Oh, I'm sorry. Quick sidebar. Hugh Litky's nickname throughout this entire saga, he's called two things. He's called Chairman Mau. Oh, yeah. Yeah, yeah. And the fat man. He's a dictator. Okay. He's a dictator. I'm sorry. Back to Texico. That's just a quick sidebar. Back to Texico. If Penso is run by a dictator, a charismatic individual at the top who can make quick decisions, Texico is the exact opposite. Texico is founded in Bumont, Texas after Spindle Top by a gentleman named Buckskin Joe. Buckskin Joe is not a real important figure in this story. He founds Texico. He actually moves the headquarters to Houston. There are a lot of New York backers in Texico and they kick Buckskin Joe out within 10 years of Texico's founding. Now, Texico has a reputation of being hated in the oil industry. They don't play nice with others. small individual operators. They're a big behemoth that doesn't have to play nice because they have so much oil. They don't care. They just don't care. at least for a few decades. Josh, did you find out why Texco has so much oil? — So, when I was growing up, I was always told that Louisiana politics was dirty and crooked. All right. — Hey, as a licensed Louisiana lawyer, I'm going to have to stop you right there. Don't you dare disrespect my state. — That's right. Uh, I didn't mean anything by it. However, Texico was successful under um a little known Louisiana senator turned governor Huie Long in securing some access to oil in the great state of Louisiana that really was obtained on what I would call brother-in-law terms and really set them up for decades. — Yeah. So in 1935, Huey Long sets up a venture called the Win or Lose Corporation. Well, they really only won. Effectively, what the Win or Lose Corporation does is obtain the mineral rights to nearly all of Louisiana. In Louisiana, anything under the water is stateowned. And there's a lot of marsh in Louisiana. So there's a lot that is under the water that is stateowned. So the win-lose corporation gets the rights to Louisiana, what the state owns. They then turn around and subleasase that land to Texico. — Okay. But I don't want to gloss over this. Long was already an elected official at the time that he started this corporation. Correct. — Yeah. He I mean he bounces between senator and governor, right? Or is it governor and then senator? — He's 100% using his political power to start up really profitable businesses and then do sweet deals with Texico, — right? — But other than that, it was all above board. — Yeah. — Other than that, sure. So Texco gets this really sweet arrangement that empowers them to become a behemoth over the next decades. They become, I think, the second largest oil company in the United States. Texico can basically print money despite themselves. — Well, they have so much oil in the ground. They're just not they don't really have hardly much competition. — They don't have any competition. And the culture that develops from this is one of bureaucracy. Texico bea becomes a behemoth. It's executives upon executives. They can't move quickly.

### [1:25:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=5100s) Segment 18 (85:00 - 90:00)

They don't really have any sort of urgency because they don't need to. It is just a bloated large company that still makes a ton of money. So what do they care? — Yeah. And even though they're on paper they're from Texas, uh they're publicly traded. All of their brass is in New York. And I think it's might be important later in the story to understand them as being outsiders. Even though they have texts in the name, they in when the time comes, they're from New York. — Yeah. Oh, Texico is not from Texas. Well, you would know that as a Louisiana lawyer or whatever you declared yourself as. — I'm okay. Born and raised in Houston, also licensed in Texas. Yeah. You know, I'm diverse. Okay. So, the Texco oil empire is for all intents and purposes established in 1935 with this Louisiana deal. They come to the forefront of American oil companies. They absolutely crush it over the next decades. Flash forward to the late 70s. Texico has some really big problems. First of all, it comes out that Texico may have bribed government officials to obtain licenses to drill in Louisiana. — What does that even mean? Like paid them money. — On top of that, they haven't had meaningful new oil discoveries in years. They actually have to settle with the state of Louisiana for $1. 7 billion dollars for some natural gas deal that they entered into that didn't end up panning out. They miss the opportunity to engage in the early days of the oil and gas consolidations. They have an opportunity to buy KICO. They pass on it. DuPont ends up buying it for the same price that Texico was pitched at. They have an opportunity to buy Marathon. They lose that to US steel. That on top of the issues in Louisiana and not finding new oil, Texico only has 8. 2 years of oil left in the ground in 1982. That's not enough. — No, that is scary. — Yeah, that's 82. It's 84 when Chevron acquires Gulf Oil for $13. 3 billion. And you said Texico missed out on that. I think that's what you said. — Bringing this full circle with Texico. They are missing out because their corporate structure has so much bloat in it. Nobody can move fast. Nobody's energized. So it's up to the chairman of Texico, John McKinley, to write the wrongs of his predecessors. meaning that they need to get more nimble and more aggressive and figure out how to compete in a world where there are fewer and fewer potential acquisition targets. Meanwhile, you got Boon Pickkins in Oklahoma City and Carl Icon in New York basically picking over undervalued assets and running acquisition plays on people in their market and making it even harder and harder to find good deals. — Right? If only there were a mismanaged oil company that had tons and tons of oil in the ground. If only, you know what I mean? Like, — oh man, that would be amazing. — That would be crazy. Like, if it had a CEO for 46 years who died and then there was kind of a power vacuum a weird ownership structure because the only son of the founder was like a serial marrier and divorcer. If only, right? We now need to transition back to Getty Oil. What we didn't discuss in our prior segment after Paul Getty's death is Paul Getty outside of the trust had acrewed some $600 million worth of Getty Oil shares in his life. When Paul Getty dies, he leaves bequavements to 11 women, $330,000 in stock to Ronald, and $600 million of Getty Oil stock to the Getty Museum. — Los Angeles, California. Right. — Correct. It's beautiful. I've been there. It's a It's an truly incredible building. Actually, what's funny about this is by the time the $600 million of the Getty Oil stock is probated, it's worth double. It's worth $1. 2 billion. Wow. His sons don't inherit anything from Paul Getty because they're taken care of in the trust except for Ronald, who gets $330,000.

### [1:30:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=5400s) Segment 19 (90:00 - 95:00)

This $600 million of stock or 1. 2 2 billion as it would become pro probated in Getty Oil gets put into the trust of the Getty Museum. This accounts for roughly 12% of Getty Oil. — So you got 40% in the Getty trust and 12% with the museum for a total of the Getty shares basically 52%. Right. — Yes. Let's go to 1982. Lancing Hayes puts the kibos on Sid Peterson buying some anti-takeover products from an investment banker named Marty Seagull of Kder Peabody. Lancing Hayes is adamant that Getty Oil cannot be taken over because of the structure of the trust owning 40%, the museum owning 12% and he can impose his will on Gordon and stalemate him at the very least. So there's nothing to worry about. Well, Lancing Hayes dies at 66 years old May 10th. On May 14th, we are now in Beverly Hills, California on the eve of the Getty Oil annual shareholder meeting. So, it's been it's basically been 4 days since Lancing dies. — Correct. — And he's supposed to come to the to this shareholder meeting with the power to vote all of these shares. He's either supposed to come to the meeting or send a proxy vote by mail — when he'd probably just be giving his proxy to Sid or someone else on the executive team. — That's right. — Okay. All right. — But nobody at Getty can locate the proxy votes. They don't know if Lancing had done them before he died. — Well, I mean, there are He probably wasn't planning on dying, — right? Yeah. I mean, — got this important meeting he's going to the trust. 32 million outstanding shares are unaccounted for. This could be very embarrassing for Getty Oil. — Way worse than embarrassing. Way worse — Yes. Yeah. Because if they don't get these shares to show up to the meeting, they might not have quorum. If they don't have quorum, they can't conduct their shareholder vote, which authorizes the directors to continue their employment for another year. And then there is blood in the water. — Right. At that point, — in a panic, Sid Peterson and his team call Gordon. Gordon says, "Hey, don't worry about it. I'll just show up to the meeting. I'll vote my shares on behalf of the trust. It will all be good. " Well, Gordon, we don't know if he got lost or left his car somewhere or acted with malice, does not show up to the meeting until the last possible minute. Josh, I tend to believe that was intentional on Gordon's part. He made them sweat. He makes them realize that there's a new sheriff in town who's unchecked by Lancing Hayes who has a significant control of 40% of Getty Oil. That is an absurd interpretation, Tom. That's absurd. However, I am holding up the look at me, I'm the captain now meme. That's right. Because — Gordon Getty is ready to flex on these people. He I don't think he wants to actually like run the meeting. He just wants to remind them he's the only one who wears the pants now. — Yes, Gordon is the captain now. The death of Lancing Hayes is the first domino to fall in what would become one of the saddest corporate power struggles in maybe ever. — I mean, it's the stakes are so high and it's all so pathetic. Yeah, — I think this is a great time to talk about our sponsor on the show, Smart Advocate, which is a fully customizable, award-winning legal case management software with built-in artificial intelligence tools, and it's made to handle the challenges of today's highly competitive and technologically demanding legal landscape. Smart Advocates robust built-in features enable firms to manage, store, track, and communicate like never before, ensuring the highest level of success. This revolutionary software will increase a firm's efficiency and profitability and we are honored to have them as a partner here on the show. There is a link in the description. Check out Smart Advocate if you're looking for a new case management platform for your law firm. Put yourself in Gordon Getty's shoes. And what I have in my notes is a bullet point that says conflicts, conflicts. Gordon Getty as the sole trustee is in a very interesting situation with respect to potential conflicts of interest at this point in time. There are 24 beneficiaries of the trust — and these are all like basically relatives of — Right. These are all the Gettys, — right? Gettys. — Yeah. Minus Ronald. — Yeah. Minus Ronald, of course. — Poor guy. About half of the beneficiaries are

### [1:35:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=5700s) Segment 20 (95:00 - 100:00)

income beneficiaries, meaning they actively receive a dividend payment every single quarter or every single year whenever the trust receives its dividends. The other half are remaindermen, meaning they're not actually receiving the income right now, but whenever who's ahead of them in the pecking order dies, they will then inherit the income. So Gordon is in an interesting situation because if he advocates for higher dividends that potentially takes money out of Getty Oil and handcuffs their ability to drill for future oil or pursue future ventures which could then increase the stock in the future and vice versa if they refuse to take any money out that's hurting the income beneficiaries. So he is in a really awkward situation. He is the sole trustee. He has complete power. He acknowledges this. He has a team of internal lawyers. He wrestles with this. He He's not malicious against his family. Actually, it's the opposite. You know, time and time again, you see Gordon Getty taking care of his family. He always has distant relatives or even the son of Eugene Getty getting into issues and Eugene's off being a drug addict. So, he um you know, he ends up taking care of expenses for his nieces or I guess his nephew. — Yeah. You know, this is a good time to point out that it's not like Gordon. He's not a bad guy. He's just not like a shark like his dad is. He's just not — right or so it seems. — Right. Putting a cap on Gordon Getty's situation. He cannot sell his shares either. That is prohibited by the trust. He can only sell his shares to avoid great economic loss. So, he's stuck managing the trust. de facto managing Getty Oil or at least making sure that the trust interests are working with Getty Oil and there's really nothing that anybody else can do about it or himself. He he's stuck. What Gordon decides his key performance indicator of how he's going to manage the trust is the stock price. As long as the stock price is high, he doesn't need to get into the weeds on the dividends or reinvestment because the stock's doing well, everybody's making money, nobody's going to complain. From 1980 to 1982, the Getty stock begins falling from $110 a share to $50 a share. And this is um inconsistent with what's happening with the price of oil because is actually still climbing during this time period, — right? And also if you just look at the oil that Getty has in the ground minus everything else, the share is worth $100 a share. So it's severely depressed. This worries Gordon. He's starting to feel the heat. Now I'm going to introduce us to a new character. We're in October 1982 and Wall Street has one pundit who is the most respected person in the oil and gas takeover game. That is a gentleman by the name of Kurt Wolf. — He's a little bit of a Nostradamus, right? — That's right. — He's predicted some takeovers. — Correct. He effectively writes a newsletter and he's correctly predicted the takeovers of KICO Marathon and City Services. In October 1982, Kurt Wolf sets his sights on Getty Oil. No. Yes. It It's just a brief report, but something very interesting happens after the report is issued. Gordon Getty, who is in this very particular situation with his conflicts of interest. He's worried about the share price being low, reaches out to Kurt Wolf. Dude, it's in the last name. You ought not talk to him. He's a wolf, but he's actually an analyst on Wall Street, which means you really, really shouldn't talk to him, and it might be unethical. That aside, I actually don't know the involvement and what would transpire, but essentially this starts Gordon Getty going on a search for options. He goes to Tboon Pickins, who by the way, T-boon Pickins, actually got his first big break from Hugh Litkkey. Okay, but you're not explaining how completely crazy it is that he is going he's basically going to these sharks and saying, "Hey, I've got this itchy spot on my back. Let me just show it to you and would you scratch it for me? I mean, it's actually insane to go expose this problem that he has to this group of people. It's so nuts. — Yes. — I can't tell if it's all a big thing where he's saying, "I really do want to invite this problem. " Or if he lacks the sophistication to know

### [1:40:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=6000s) Segment 21 (100:00 - 105:00)

— that that's right. I mean, some might say that him going to all these analysts and oil men is effectively walking down Wall Street with a for sale sign, but nonetheless, he goes to Tboom Pickins. Tibon Pickkins has this idea for something called a royalty trust which basically means you split the company's stock into the producing assets and you carve off some royalty interest to a trust that is taxexempt and the shareholders get a prorouted portion of the trust and it's a great way to make money tax-free and carve off this money. The problem is companies don't really like it because it pre prevents you from reinvesting money into the actual company. But at this point, that might sound very appealing to Gordon Tun Pickin's whole thesis is oil is running out. We need to extract the money while you can. Who cares about reinvesting the money because there's no more oil left to find. — What a quaint thing for someone to think 43 42 years ago. He also goes to the Bass brothers. They end up green mailing or they discuss green mailing, which is buying a minority interest in a company that you don't have enough to make a hostile takeover position, but they're going to pay you a premium just to get you to go away. He also talks about the idea of taking Getty Oil private. He's talking to a bunch of people at this point. We're in the fall of 1982. This is a big problem. It's a big problem. And in January 1983, after a quarter of Gordon pounding the pavement on Wall Street, Kurt Wolf writes a longer brief. Quote unquote, Getty Oil is the best statistical choice for major restructuring. Only six months ago, Gordon Getty became the sole trustee of the Getty Trust and as such must now become more active and might well question why investors hold Getty Oil in such low esteem. Investors are acting as though they have a very low level of confidence in the management of Getty Oil. By any measure, Getty Oil is a cheap stock. Now, let's hope something favorable happens to it. In the aftermath of this second report, Sid Peterson and the rest of Getty Oil are upset to say the very least. — Well, I can't imagine why. — Yeah. So, they call a meeting. Again, we're in January 1983. And they find out that Gordon has been sharing confidential studies performed by Getty Oil on Royalty Trust to the potential buyers, to the potential raiders. This is a huge securities violation. This is insider trading. This is a breach of the fiduciary duty owed by directors of companies to their shareholders by tipping other people off. It's just not good. So, it's illegal in two or three ways. What really kills me is that on top of that, it's not strategically advantageous. And that's what makes me think he just stumbled into it. wasn't part of a larger plan to be some sort of evil genius there all of the sudden. — Right? So things get really heated. Peterson's pissed. Gordon gets upset that he is being accused of doing anything wrong. Quote unquote. I feel I have a higher sense of ethics than anyone in this room. But even Gordon's lawyers turn on him. In January 17th, four days later, Moses Laskkey, who is now Gordon's lawyer, formerly Paul Getty's lawyer, who was on the team with Lancing Hayes, to destroy Gordon, writes a letter and handdelivers it to Gordon's house, not office, because he doesn't want anybody to see it. That letter says, "Oh no, you're going to read a letter. One of the most sensitive and trickiest aspects of the law, has to do with inside information and insider trading. The business world, particularly the world of investors, is full of people seeking tips or even bits of information. I think it is imprudent to have any communication with securities analysts at all. This is a C YA letter. Full stop. — Yes. — Yeah. Let me go on record as saying that your securities violations are a terrible idea. — Yes. We're now two weeks later, late January, 1983. What does Gordon Getty do? He meets with Wolf again. He meets with Kurt Wolf. Oh no, no. And on March 23rd, 1983, Wolf writes another report. It says any portion of Getty Oil converted to a royalty trust or limited partnership would be worth about twice as much in

### [1:45:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=6300s) Segment 22 (105:00 - 110:00)

the stock market. There is no Paul Getty today who combines a blood relationship to the beneficiaries of the trust with the intense personal involvement in the Getty Oil Company. Management should see the voluntary changes are better than an involuntary takeover. And this is crazy because this is Gordon doing exactly what the lawyer told him not to do. He's clearly like feeding this concept to Wolf because he wants out of the business. Yeah. Well, I don't know. Okay. I don't know if Gordon actually wants out of the business. I think there's a very real argument that you could make that Gordon really just wants the power. He wants to be the person in charge. Oh, he's got the power now. Even though he does, he doesn't want to work. I'll agree with you that he doesn't want to work, but I don't know if he wants to sell. And actually, he can't sell. Remember his trust. The tr you cannot sell under the trust. He wants a situation in which he has power and he's still in control. I think after the March 23rd Wolf report, the third report, Peterson and Gordon have a sitdown, they agree to hire Goldman Sachs to conduct a valuation analysis on how they can improve the stock price. And just so everyone's on the same page, before you would hire an investment bank to do that kind of work for you, you have them sign an agreement that ensures confidentiality. you can't just go up and down Wall Street asking people for ideas about what to do. You have to in-house it. And so this relationship they're starting with Goldman Sachs is going to be very different than what Gordon was doing kind of out on the town. — Yes. They nickname it Project Plutus. Plutus is the god of wealth but is blind. Sounds uh sounds like a character in this novel. So they engage Goldman Sachs. Project Plutus is launched. Simultaneously, Sydney Peterson, who is very upset about what Gordon has done over the past year, launches what I and I don't know if this was the official name, but Thomas Pensinker puts a I mean, I can't call it anything else. So, credit to him. Project Brutus. Sid Peterson launches Project Brutus. What is Project Brutus, Josh? Um, I actually don't remember what Brutus was. I just remember that the name was obviously a dig, but tell us what project Brutus is. Project Brutus is a plant to instill a co-rustee on the Saras Getty Trust to stalemate Gordon under the Sari Getty Trust. In the event there was a sold trustee, that sold trustee can do whatever they want. If there were two or more trustees, you would need two or more trustees to get anything done. Meaning, if another trustee was installed and those trustees had different of opinions, the trust would be stalemated and nothing could get done. Yeah. They'd be locked up. — So, Peterson embarked on this plan to get a trustee appointed to the board. — They need bank trustee, right? Correct. There's only one problem with that is he does not have standing to bring a case on behalf of the other beneficiaries to appoint a co-rustee. They basically need to reopen some of the trust litigation that's existed over the years and get a court to compel the creation or appointment of an additional trustee on the trust. — Correct. But you can only do that if you are either an income beneficiary or a remaindermanman. You've got to have some interest in the outcome or operation of the trust. And Peterson doesn't have that. All he has is management of Getty Oil. Correct. But he's a devious dude. — Correct. And in 1949, California passed a law that allowed the appointments of guardian ad lightums for originally it was unborn generations, but then they expanded it to include minor children. So their idea is if we can find a bank who's willing to serve as a trustee, we can get a beneficiary to sue to appoint a guardian adidum, which would be a successful lawyer, to then instill the bank as a co-rustee. So Sid Peterson works backwards. In February 1983, Peterson goes to Bank of America and gets them to agree to be a co-rustee in the event that they were appointed. So, next they need the lawyer who's going to be the guardian at Leidam. So, they first go to Gibson

### [1:50:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=6600s) Segment 23 (110:00 - 115:00)

Dunn, they get turned down. Then they go to O Melvin, a LA based lawyer named Seth Hoffetter. Seth is a very wellrespected member of the bar. He is a great lawyer by all accounts. He says that he would be willing to do it, but he's not going to solicit a client because that just seems dirty. And if a client were to come to him, he would serve as guardian adm. So now they just need the family member. — Just got to go find one of those 24 heirs, right? — Yes. — Basically Getty But Ronald. — Yes. Now, let's put a pin in that. Let's go to the July 1983 board meeting. The main agenda is to review the analysis of project plutus. Goldman Sachs shows up. Goldman Sachs banker is a guy by the name of Jeff Boise. Jeff Boise, as Joe Jal would call the is the $18 million man. He becomes a very important figure in the litigation. Jeff Boise gets up there and he says, "We've done our analysis. Goldman has done our analysis. The creation of a royalty trust is a very bad idea. It's And of course, this is a great news to Peterson. He doesn't want a royalty trust that keeps all of his cards in play, gives him more power. It's fantastic. — But it's terrible for Gordon. — It's Yeah, it's bad — because Gordon is clearly convinced that he would end up with more money if there was a — Yes. But he doesn't stop there. If that's where the analysis ended for Jeff Boise, maybe this would have all been avoided. Boise then goes on to say that if Getty Oil's chief concern is to increase their stock price, what they should do is go on an aggressive stock buyback. This is a great idea for Gordon. It's a great idea because if the company were to engage in a buyback, there would be less shares on the open market and his 40% of Getty Oil would creep up towards a majority. Gordon loves this idea. He's all over it. But in his infinite wisdom, Sid Peterson sees the threat immediately and calls for the board to study the study. He stalls. He says, "We can't consider this. We can't do this right now. We need to study the study. There's no way we can initiate a big buyback at this time. " Gordon wants to jump all over this buyback. He says, "There's no point in waiting. In fact, there is an single entity that owns 12% of the Getty shares that they could buy in one fell swoop. " He of course is referencing the Getty Museum. That's so savage. — A gentleman by the name of Harold Williams who's running the Getty Museum was President Jimmy Carter's head of the SECC. Williams is an incredibly wellrespected guy who's got a fantastic resume in academia. I think he was the dean of UCLA law school, the chair of the SEC, and also was a partner at a big fancy law firm. So, he's very wellqualified. He's he knows what he's doing. He's now the head of the Getty Museum, which is the largest charitable foundation in the world. — Not only was it the largest, I don't think there was one that was really close at the time. It was very, very monumental. — And what's most important is unlike Gordon Getty and the Sar Getty Trust, the Getty Museum Trust has no such restrictions on selling Getty shares. In fact, you could make the very colorable argument that it was a mistake to not be diversified in the market. You have your entire net worth wrapped up into a single company stock who's been failing for the past couple of years. Yeah. Not only have they been failing, there's published analysis that the company is undervalued. Meaning like it might be fine to hold a bunch of different stocks and you get some sort of total market value that's fair, but they are owning a depressed asset, — right? So nothing happens at this board meeting. Peterson stalls. He says, "We need to study the study. " Gordon is pushing for a move of Getty to purchase the museum shares. Williams, who wants nothing to do with this, kind of takes a step back and says, "What the hell did I get myself into? " He goes and he hires Marty Lipton from Watchel Lipton Rosen and Cats. Marty Lipton is a notorious Wall Street wheeler and dealer. He There's a great quote. Oh, I clipped this I clipped this quote because I thought it was so interesting. embattled managements on the defensive were so eager for Liptin's services that they gladly paid $350 per hour per lawyer, sometimes three times that amount when the action really got hot and heavy. That is Marty Lipton

### [1:55:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=6900s) Segment 24 (115:00 - 120:00)

the first $350 an hour lawyer on Wall Street. — Yeah, this is 42 years ago. There were not lawyers charging that much by the hour in the rest of the world. — Well, I just think it's funny. I mean, what hourly billable rate is approaching $2,000 for some lawyers now? — Yeah, that's right. — Yeah. But Lipton is incredibly qualified. He has a great resume. He's credited with popularizing the poison pill management defense, which basically allows shareholders to buy shares for a really cheap price in the event of a hostile takeover, making a hostile takeover just unnecessarily expensive. So, he uh we'll describe him in the trial, but he is the definition of New York. He is dressed to the nines, a wheeler dealer, just uh I don't know. He's a New Yorker. That's all I can say. We are now in September of 1983 at the Getty Board meeting in Pebble — Oh, I want to go to Pebble Beach. — Yeah, we should really do an onsite podcast filming. — We should do 18 holes of research there. — That's right. — Is that crazy? I don't think that's crazy. — No, of course not. So, the agenda of this meeting is to plate Gordon Getty. That is the main purpose. Peterson tells the board this. They said, "Look, Gordon's on the war path. He's making our lives incredibly difficult. He is essentially inviting all of these corporate raiders into our office. We have to stop this, dude. This company has a death sentence if they're having a board meeting, the purpose of which is to plate some misguided shareholder who's in control of 40 to 52% of the company. " — Yeah. Peterson's idea is to name Gordon the chairman of the board. This is effectively a title in name only. It doesn't come with any real power. Gordon still does not want to work 9 to5. He just wants to be consulted on major decisions. They think that if they give him the title, he'll go away. That's what he really wants. He's not money driven. He's got enough money to do whatever he wants already. Well, the members of the board hate this. Yeah. Especially the ones who were loyal to the old man. They threatened to resign. The day Gordon Getty becomes chairman is the day I leave this company. Let's just sell the whole thing while we still have control. Lots of quotes like that. Gordon is excused from the meeting in Pebble Beach. He's at the meeting, but he steps out of the boardroom so they could all talk about him. Things don't go well. There's a lot of bad things said about Gordon. He of course doesn't know this at the time. Flash forward. I got to stop saying flash forward. I say it too much. This is my first time podcasting, folks. Give me a break. Fast forward as much as you want, but flash forward. Yo, am I saying fall? At first, I thought you were saying flash forward and you were me to like — flash forward. Fast forward. What is happening? — This country, man, it's going down. I blame the school system. A couple weeks after the meeting, Gordon finds out the sentiment of the board. He is shocked that the board would have such negative opinion of him. It doesn't really go over well. He talks to somebody on the board, one of the old man's longtime confidants. Gordon just gets told like it is. The story goes that they were at lunch at the Beverly Hills Hotel. Gordon gets told directly what the directors think of him and he just leaves and sticks the old man's director with the bill. He's not very happy. What does Gordon do? Gordon comes up with a plan in which he is going to fire all of the corporate directors of Getty Oil. — Yeah. Now, how can he do this? Well, under Delaware law, if a majority of the common shareholders agree, they could just pass new bylaws. So, Gordon's plan is to file a consent of the major shareholders with the Delaware Secretary of State. That will say simply the undersigned holders of 41,25,428 shares constituting a 51. 9705% of the outstanding common stock of Getty Oil take the following actions. One, each member of the board of directors of the company other than Gordon Getty is hereby removed. Two, the following new directors are hereby elected, Harold Williams and Moses Laskkey. That of course is conditioned on the museum playing ball because Gordon only has 40% of the shares. — That's right. But there's reason to believe that if the company's for sale, the stock price could go way up and Harold has a fiduciary obligation to the foundation to go maximize value. It's very, very sneaky what he's done for an idiot. — Gordon's on the war path. He has this idea. He just needs to get the museum on

### [2:00:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=7200s) Segment 25 (120:00 - 125:00)

board. He effectively comes up with this plan where he's going to go to Harold Williams and say, "Look, Getty Oil will agree to buy the museum shares for whatever price you choose, but in order to keep him in check, Gordon then has the option to sell shares to the museum at the same price that Williams chooses. " — Yeah. — So, he can't pick too high of a price cuz then Gordon could in theory just unload the shares on the museum and blah blah. — Yeah. But Harold knows that Gordon does want to be a buyer at that price and so he has a motivation to price it fairly but for a profit and get a good outcome for his foundation. — Right. But once Gordon has majority control, I mean this voting block, it's game over. He can just impose he can impose his will. So Gordon goes to London for the Getty Museum board's annual meeting. His plan is to go there to pitch this idea. Word gets out that Gordon is going to London. So while he is on the flight to London, the Getty Oil Board convenes for an emergency session. Given one-day notice, and Gordon Getty is not present because he's in London. — No, cuz he's in route. Right. — Right. They convene the board with one day's notice. — Yeah. So, I think yeah, — by all accounts, Gordon's pitch to the museum goes terribly. You have to remember her Williams is the former secretary of the SEC. He does not want to get his hands dirty. He has a quote that says, "If you had dreamed up a law school exam question on how much trouble you could have in a corporate transaction, this is it. " I'm telling you, it's very clever. It's very clever and that's why it's so stupid. I mean, you also have to remember that Gordon on top of his fiduciary duty within the trust, he's also a director of the company. So, he is a buyer of the shares and it's his interest to get the share prices as low as possible, but he's also a director of the company which wants to sell the price for as high as possible if there is any sale. But other than that, it's super normal, — right? During the emergency Getty Oil board meeting, the board comes up with two plans. Plan A is to make Gordon the chairman, but put handcuffs on him, so he can't really do anything, but those handcuffs come off after 5 years. Plan B is the nuclear option. Getty Oil is to issue new shares of the company, diluting everybody, which of course has its own fiduciary problems as well because the directors are effectively doing this not out of the benefit of their shareholders, but just to prevent Gordon from taking control and presumably a dilution would hurt the price of Getty Oil. The pershare price. There is an argument to be made that it is in the best interest of the company if Gordon obtaining a degree of control or a lethal degree of control is somehow antithetical to the best interests of the shareholders at large, right? They're not crazy, but man, everyone is just dancing on the edge of a cliff right now. — Totally. So, Williams rejects Gordon's proposal. Getty sends people to London to negotiate with Gordon. While in London, Gordon sumearily rejects plan A. He says, "There's no way I'm becoming chairman with handcuffs. That's not a real position. You're just trying to plate me. I'm not going to buy it. " So, what do they do? Well, somebody else lives in London. And after the negotiations with Gordon follow through, Sid Peterson's people end up going to find Eugene Getty. It is on this trip that they end up convincing Eugene that he will file a lawsuit not on behalf of himself, but on behalf of his aranged son, who he very rarely sees. Triple G. — Triple G. Terra Gabriel Galaxy Gramophone Getty. — Is it quadruple G though? Is it quadruple G? Gabriel Galaxy. It is quadruple G. — Oh, we sold him short. Oh, is there any way in post we can go back and add a G? — T quadruple G. Yeah. So T quadruple G is on board even though he doesn't he's not actually on board. He's a 15year-old kid at this point in boarding school having the time of his life. He actually doesn't care. — Or counterpoint, he's getting the crap kicked out of him every day because everyone's making fun of him for the name that he has. — Yeah, but he's also a billionaire. So I would trade my name. I you could call me Triple G. Could throw me a few B's. Okay. So, — I hope your dad and your mom don't hear

### [2:05:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=7500s) Segment 26 (125:00 - 130:00)

you saying that you you'd change your name for just a few billion dollars. — Right. — So, they basically this trip to London is a two for one for the guys from Getty. — That's right. — Right. They they've switched their focus. They've switched their focus and Gordon switches his focus as well. Immediately after getting home, Gordon retains Marty Seagull from Kder Peabody. Now, if you remember, Marty Seagull is the one who brought the ERC Corporation deal to Getty Oil Company that Gordon voted no for. Yeah, everybody's seeing the writing on the wall. Stuff is about to happen. Gordon hires Seagull. October 19th, 1983, a peace agreement is reached. Herod Williams, the Getty Board, and Gordon all have come to the realization that things are out of control. Everybody is spiraling trying to do side deals or jockey for control, although Gordon doesn't know about Project Brutus yet. So, they agree that everything will be frozen for one year. Gordon gets four additional board members, but nothing can be done. Nobody can be removed for a year. Frozen in time. It's a standstill agreement. This is the ultimate sign to vultures. The raiders on Wall Street. Getty oil is ready. — Yeah. The front door, the side door, and the back door are all unlocked. — Yes. Simultaneously, Gordon starts receiving letters from fellow Gettys. He gets a letter from Eugene says, "Dear Gordon, your refusal to agree to the appointment of an additional and of course neutral trustee of the 1934 trust is unfortunate, provocative, and in my view wrong. I hope you will change your mind very soon because I'm saddened by the prospect of another round of public dissension within the family. There should be no misunderstanding. I don't want to threaten you or even appear to, but I'm afraid that litigation will be inevitable if you don't quickly agree to another trustee. And I'm sad to think that I too would be sucked into it. That's from Eugene. Do you think Eugene wrote that letter? I guarantee you that was number one written by a lawyer and number two that same lawyer had already written the lawsuit that he was saying might somehow someday become a possibility. Gordon gets another letter from Claire Getty. — Oh, no. You're not going to have to read this one, are you? — Claire Getty is the daughter of George Getty, who's dead. Dear Uncle Gordon, I'm writing to discuss some concerns I have regarding my interest in the Sarah Getty trust. In this connection, I've consulted with my lawyer regarding my rights and expectations. It seems clear that grandfather intended for there to be three trustees, only one family member, one of a business person, and one of a financial institution. I do not mean to be critical of you, but I think you would admit that your business management background is limited. There are a number of provisions of the trust that are important to me. For example, the trust clearly prohibits the sale of Getty stock. I have heard suggestions that you are trying to acquire control over the board over the business of the company. If this is true, it would seem to me that there is a conflict of interest problem. That one also written by a lawyer. Dear Uncle Gordon. Yes, Gordon is starting to feel the heat. We are now in November of 1983 in Houston, Texas, home of Tommy Kirker. Home of Tommy Kirker for the board meeting. The most notorious. The board meeting that would take center stage of the trial. Why is there a trial? I thought we were just going to sell this company and everyone makes a lot of money and everything is happily ever after. — Oh, we're not even there yet. We got Oh, we told y'all that there was a lot to this story. So, the formal agenda of this board meeting is to ratify the standstill agreement that Marty Lipton, the Getty Museum's lawyer, came to with both Getty Oil and Gordon Getty saying, "Hey, Gordon can put four more people on the board, but nobody's going to do anything for a year. It will give us time to figure everything out. — They're going to ratify the agreement that you've already said is a public declaration to the world that it's time to get raided. — That's right. The museum and Gordon excuse themselves from the board meeting so the other board members can talk freely about the matter at hand. When they are out of the room, they don't really talk about the standstill agreement, at least not meaningfully. This is where Sid Peterson announces to the rest of the board that Project Brutus exists and is in effect. This is like in uh episode 9 of Star Wars where they're they build the entire fleet of

### [2:10:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=7800s) Segment 27 (130:00 - 135:00)

star destroyers off camera. That That's right. So, in this meeting, Peterson announces that they've gotten Paul Jr. to agree to a lawsuit of Triple G quadruple G to add a co-rustee to neutralize Gordon. Seth Hoffetter will file the suit and the goal is to have Bank of America appointed. Most directors approve, although there is some disscent. They also announce or decide that Getty Oil would also file its own lawsuit against Gordon to allow this to happen. I'm not really sure they're standing, but Getty Oil files its own lawsuit against Gordon as well. — Seems like they just want to file an amikas brief in the guardianship case or something. — That's basically right. Additionally, while Gordon is out, Jeff Boise of Goldman Sachs comes in, Bart Wker, one of the lawyers, and Herb Galant, another lawyer, end up coming in. Joe Jal would later take, and I know we haven't introduced Joe Jal yet. We're talking about Joe Jal. — Are we talking about Joe Jale? — We're just I'm only going to give a little treat. — The king of tors. Just for reference, Joe Jamal calls this meeting the backdoor meeting. He calls Jeff Boes the $18 million man, which we'll explain in a little bit. He calls Bart Waker backdoor Bart. And Herb Galant, I don't know. So he I don't think he gets a cool nickname, but this is a pivotal moment in proving the malice behind the Getty board. — Pinsil comes back later to say this was wickedness. This was not right. — Right. All Gordon want Gordon's a humble man who's just trying to do what his father wanted him to do. And you know what I think is so funny about this? After the directors have this meeting where this plan is unveiled, they have to call Gordon back in. They just call him back in and pretend like nothing's happened. It's business as usual. — Don't let him see any of the notes that anyone wrote. Don't let him sit down by a person with their notebook open, — right? They agree to the standstill agreement, but they, you know, they all know that this is just it's the point of no return at this point. Shots are getting fired. So, we're now in mid November. Marty Seagull finds out about what transpired in the board meeting at a party. I guess somebody had loose lips and ended up telling Marty what had happened when the museum and Gordon were out of the room. No, actually, actually during this time it was pretty popular at parties like this to uh play a game where you talk about the kind of uh corporate shenanigans and backstabbing that you've engaged in. — That's right. — Yeah. immediately picks up the phone and calls Gordon. They also call the museum Marty Lipton and Harold Williams who are extremely upset over this. The court case gets very nasty. Essentially Gordon's response to the lawsuit by T quadruple G is that Getty Oil had deprived Eugene Getty of narcotics until he agreed to file this suit. Oh my goodness. But I, you know, Josh, I don't think that's the thing that made Gordon the most upset cuz on December 3rd, he goes on the war path. But something happens on December 2nd that I think is much more destructive to Gordon's psyche. — Yeah. On December 2nd, 1983, Gordon Getty, a long time composer, space cadet, lover of music, has his music performed in New York. and to he gets nothing but positive reviews from everyone. Right. Bernard Holland of the New York Times writes a bad review. No. Mr. Getty's settings are tense to the point of emptiness. There is, in other words, great difference to the text, but hardly any music at all. What there is expressed in popular 19th century American harmonies colored by the occasional Schubertian devices and interrupted with the occasional dissonant chord or two. Just heartbreaking. — Dude, I never saw this coming. Didn't see it coming. — Yeah. Okay, maybe he doesn't care about it that much, but December 3rd, he wakes up. Remember, only a couple of months ago, Harold Williams totally rejected the idea of running to Delaware and changing the bylaws with majority control because it's irresponsible and crazy and there's no circumstances under which you would ever do that. But after the board's actions in the November boardroom, the treachery Harold Williams is so upset that he gets on board with the idea. Now, he does have some

### [2:15:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=8100s) Segment 28 (135:00 - 140:00)

changes. They don't file the bylaws propo proposed by Gordon. They're softer. The new bylaws do three things. First, they allow Gordon the extra board seats that they agreed to under the standstill agreement. Four extra board seats. — Sure. — Second, the board now requires 14 of 16 votes for approval. Third, the bylaws require the withdrawal of the lawsuit against Gordon Getty. So, that takes care of one lawsuit. Yeah. But the board is stonewalled because nothing can get done when only two directors can block you because Gordon is one of those and he gets four more people that he's added to it. So, they're completely stuck. I think there's something even more significant than that, which is that the board now sees that Gordon and Harold can and will go to Delaware to change the bylaws whenever they want. So, it's almost like uh a warning shot in some ways. — It's December. People are on holidays. Investment bankers are in the Bahamas or the Caribbean or in Italy or whatever. Well, not this year. Hugh Litki decides that he's going to make his move on Getty Oil. The holidays are the perfect time to do so because there are a lot of people who just will be out of town. It's actually fairly common practice in the takeover game because they just want as little opposition as possible. They don't want people paying attention. But it's hard when the deal is so big people are going to pay attention regardless of the time. On December 13th, Pens Oil begins buying shares of Getty Oil under a company they create called Holdings Incorporated. They're just trying to fly under the radar. snap up what they can on the public market. Shortly after Pinso is done buying the shares on the open market that they can, they perform a tender offer. Their goal is to buy 20% of the company. Josh, can you explain what a tender offer is? — A tender offer is a conditional proposal. It says I will buy X shares at Y price provided that all of the shares that need to be consolidated from different B different sellers add up to the number X. So, it's like if you want to take over a business and you need 51% of the shares to do that, you would make a conditional offer that says, "I'll pay $30 for shares up to 51%, but I'm not obliged to purchase any shares unless I get all 51%. " And so, you put that offer out there, there's a time frame on it, there's it's a pretty organized system for people to decide whether they're going to participate in it. And it's always at a premium to the price on the exchange where the stock is available. — That's right. — Yeah. Which means it also acts as an upward pressure on the price even for people who are not participating in the tender offer. — That's right. — It's great for the share price. — Penso offers a 20% tender, meaning they will they want to buy up to 20% of Getty Oil shares at a $100 a share. Prior to the tender offer, Getty Oil is trading at about $80. — It does not require Hugh Litkkey to have had any dealings with Gordon or anyone else to start this process. Like he — he is just sensing that the animal is wounded and he is starting to chase it. And you have to remember that Getty Oil is such an interesting company because there are three entities that have a major stake. There are there's the public shareholders, there's the trust, and there's the museum. If you acquire 20% that is a meaningful amount to be a real threat because you can just form a coalition with another entity, i. e. the trust, and suddenly you have a majority share. Right? So Litkkey knows that if he's able to buy 20% and he coordinates with Gordon, they have 60%, they can do whatever they want. But this is not planned. And actually, Litkkey and Gordon Getty meet for the very first time on December 28th. Yeah. But keep in mind, Litkkey knows Gordon's dad from way back in the day, from the late 50s on the South Pin investment. — Oh, and he plays it up. Gordon is actually unaware of this. — Yeah, — he's unaware of this. So, Litkkey goes in. — We are aware. — Yes. Lit Litkkey goes into this meeting and says, "Hey, I love your dad so much. He gave me my first big break. He's the guy who put me on the board of Penso, which was then called South Pin. I made your dad a bunch of money because I doubled his investment in South Pin. He eventually would sell out of it, but he and Gordon had no idea. Gordon had no idea that his dad was an investor in Pins Oil at one point. He

### [2:20:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=8400s) Segment 29 (140:00 - 145:00)

had no idea that his dad had helped Hugh Litzky. Oh, and on top of that, Hugh knows how to play Gordon. He's coming in and saying it's absolutely terrible what they did in Houston. They backdoor stabbed you. Oh, I would you need to assert yourself and take control. Doesn't it sound a little bit like Satan whispering into Eve's ear, just telling her whatever she wants to hear? Oh, no. You can eat whatever you want. Everything will be great. — Absolutely. — And the irony is, which we can't talk about yet, things turned out great for Gordon. They really, really did. They Yeah. Well, but okay, it's important to note that Gordon is not a seller here. Let me make this very clear. Huletgeki is going to Gordon and saying, "Look, I'm going to get my tender offer. 20% of this company. You have 40%. We now have a majority block. We can then take this company private based on a pro rata shares that we have, which would be 47 to the Sarah Cetty trust and 37th to Penso. So for Gordon, this is a huge win because he gets rid of Sid Peterson and his friends. He goes private. He is in control. He owns 47 of Getty Oil and he's found out it's with one of his dad's old buddies, — right? It's potentially a home run deal. I think it gets I I read a lot of articles and analysis on this case and I think this gets this is the most misunderstood point. Gordon Getty is not a seller to Pins Oil. He is not a seller. He has no intention of selling his shares. He's coordinating with Hugh Litki. They are concocting a plan to get a majority control of Getty. Yeah, they're raiding Getty from the inside. — Right. So, now we need to talk about the museum because the museum, who has no obligation to never sell Getty oil, is terrified of a voting block of Gordon and Pins oil in which they could just be completely isolated. In the current situation, the museum is important in the fact that both waring factions need to sway the museum one way or the other. If Helitki gets involved, the museum is not so important anymore. So, they just went out. They need they are going to be a seller here. It is time. — Let's do it. — All of this preface to lead up to the most critical days, the days that would be the basis for the largest lawsuit in American history. But why? Everything's going so swimmingly. They get to do an insider raider move to take Getty private and nobody gets hurt. That's actually what it could have been. That's Yeah. Let's talk about what it was. Yeah. New Year's Day 1984. 400 p. m. in Gordon Suite at the Waldorf. It's New Year's Day 1983, man. Lionel Richie is at the top of the charts. Wham hasn't broken up. Everything's great. — Too bad it's 1984, Josh. — Oh, shoot. Wait. No, it's just it's New Year's Eve 1983, right? Oh, is it New Year's Day 1984? — Yes. — All right. It's now it's New Year's Day 1984. Wham is still together. The Olympics are coming to Los Angeles in a few months. Everything is great. Nothing can go wrong. — That's right. Litkkey and Gordon meet in Gordon Suite at the Waldorf. Here's the plan. There's 79 million outstanding shares in Getty Oil. The trust owns 32 million. Pins oil is to acquire 24 million shares. Once they get that, they have a majority. They then take private, buy all the other shares at the same ratio. As discussed, it's 47s to 37s. Yep. — There's a divorce clause that says after a year, if Gordon Getty and Pins Oil don't like each other, they can split the company assets along those pro rata lines. So, Hugh Litki can always just bail with 37 of Getty Oil and not have to deal with Gordon. — Seems like a good deal. — Yes. On top of that, Gordon is going to be in control. He's going to be named chairman and Hugh Litkkey is going to be the CEO. I don't think Litkkey cares so

### [2:25:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=8700s) Segment 30 (145:00 - 150:00)

much that Gordon is the chairman cuz he has this divorce clause. It's great. It's kind of like a win-win. You get to play Kate Gordon. You get a he gets to be the big fancy chairman he's always wanted to be. And Hugh Litkkey can just go and do his thing. Now, they approach Marty Lipton to try to acquire the shares of the museum. As discussed earlier, Pins Oil has a $100 share tender offer out in the open public. The museum very quickly turns this down. They say there's no way that will fly. $100 is way too low. We're going to need at least $120. Liti ends up countering at $110 a share. What I would say here is in my notes, I have conflicts, conflicts in big bold letters. Remember Gordon is a director of Getty Oil and a board member and he's the co-rustee of the Cersei Getty Trust. — He's the sole trustee right now, — right? Yeah. So Gordon is a buyer in a sense in this transaction. Pinso is also a buyer. So, it is inappropriate for them to be setting the price on what they think is fair, which was initially the $100 a share tender offer to the public. — Well, yes, but they're merely matching what Lit Key put out there. So, it's not like they pulled it out of thin air, — right? So Marty Seagull, who again is Gordon's banker, operating on behalf of Gordon, but also a director of Getty Oil, says the minimum price the board will find acceptable is $110 a share. Liti agrees. So Litkkey makes an offer for $110 a share. Now Peterson's people hear that Pins Oil is getting in the mix. It's hot and heavy. They are serious. They're putting $110 on the table. Peterson thinks $110 is too low for Getty Oil. So, they come up with an idea. The idea is an alliance. It's another standstill agreement. If Gordon, the museum, and Getty would agree to a tender offer of their own, meaning they would put an offer for $110 a share on the open market to attract investors to them instead of Pins Oil. Well, yeah, to attract sellers. Correct. Sorry, I apologize. to correct sellers to Getty Oil rather than Pens Oil. So, Getty Oil could buy up all of the outstanding shares for people who want to sell, thus preventing Pens Oil from gaining a significant portion of the stock and preventing them from gaining power. And this is only a temporary fix. Meanwhile, they would agree that in 90 days they the company would be sold. So effectively, it's a buyback, a temporary buyback in order to go sell the company for a higher price than the hundred $10 a share offered by Litkkey. — Yeah, that's right. And also, just to be clear, now it's starting to be the share price is around 80. This is starting to be very attractive to just people on the stock exchange who own the stock because now it's a 37% premium where it's at, which is not anything to sneer at, right? 600 p. m. January 1st, Marty Lipton is at a party with some lawyers at Pinso. A lot of deals get done at parties, I guess, if you're Marty Lipton, — apparently. And other deals get exposed. They approach Lipton and they say, "Hey, would you be a seller at $110 a share? " Lipton plays it off, plays it cool. Within two hours, he phones them and says, "At $110 a share, the museum are sellers. " 10 p. m. Now that it seems the museum's on board, the trust and Penso are worried about how the Getty board is going to react. So, they pick up the phone, they call the museum, they say, "Hey, listen. We're on board with the price. We are worried about how the Getty board will receive this. We want you to commit to a new majority shareholder agreement that gives Gordon control effectively meaning no takes these back seies because if things hit the fan, Gordon can just wave a magic wand and fix everything. — Yeah. And also it's good to keep in mind that they have this ability to go to Delaware and file new bylaws and affect whatever they want. I mean, they really have them over a barrel. — But the museum flat out refuses this. It doesn't get put on the table. Lipton refuses. He says he doesn't have authority to that. That that Litki would testify that he got real suspicious out of this because somehow Lipton has the authority to bind the museum to $110 a share, but doesn't have the authority to consent to a new shareholder agreement. That's fine. January 2nd, the board meeting is at 6:00 p. m. 9:00 a. m. Penso proposes a memorandum of understanding at the Paul Weiss office in the morning. Thatou is sent to Gordon Getty and Marty Lipton who represents the museum. — It's not yet shared with the board.

### [2:30:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=9000s) Segment 31 (150:00 - 155:00)

— Correct. — Okay. 9:30 a. m. Lipton demands favored nation status for the museum. Effectively arguing that if any shareholder gets purchased at a higher price, that is what the museum gets. Simultaneously, Gordon's team begins reviewing theou. 2 p. m. Gordon announces to the board that he has his own agenda for the meeting. This is the first time the board gets word of a formal Gordon Penso alliance. Remember, the board is aware of Penso's tender offer that is out there, but this is the first time they're hearing that there's a formal alliance that Penso and Gordon could be working together. They have to be shaking in their boots at that point given that they know that for the past few months Gordon's been out there having conversations that, you know, they wish he weren't having. — That's right. The board is not happy with the $110 share price. Bart Whitaker, who's a lawyer for Peterson, confronts Gordon on this. He says, "Look, Penso's a buyer. You're a buyer in this situation. How can you negotiate on behalf of Getty and the Getty shareholders? You're clearly conflicted in this situation. You Somebody else needs to talk. 300 p. m. Jeff Boise again from Goldman Sachs meets with Litky's team and says that the $110 is too low. 3:30 p. m. Litky's team drafts the Dear Hugh letter and asks Gordon to sign it. Now, let me read you the Dear Hugh letter. Keep in mind there are a lot of open questions at this point. They're still negotiating the price, but nonetheless, here's the dear Hugh letter. There's a lot of pressure on you to read this correctly. — Yes. Dear Hugh, I agree that I will support the plan before the board and will oppose any alternative proposals. If the board does not approve the plan today, I will execute a consent to remove the board and replace the directors with directors who will support the best interest of the shareholders as reflected in the plan. I will also use my best efforts to urge the J. Paul Getty Museum to execute a consent to the same effect. — That is a very carefully worded letter that was written by a lawyer, — right? And specifically, it was written by Hugh Litki. Penso's law lawyers sent to Gordon Getty for Gordon Getty to sign. Yeah. 4:30 p. m. Harold Williams arrives to see Penso's with Lipton's edits. Lipton adds, quote, "Upon the condition that if not approved at the January 2nd board meeting, m the museum will not be bound in any way by this plan and will have no liability or obligation to anyone hereafter. " 5:30 p. m. The directors gather at the Intercontinental Hotel. Before walking into the meeting, Gordon signs the Dear Hugh letter after making some minor edits. Specifically, he adds, quote, "Subject only to my fiduciary obligations. " Which, to be fair to Gordon, that might give him a big out because as a fiduciary, he's got a lot of fiduciary duties here. Fiduciary to the board, to the shareholders, also fiduciary to the trustees. subject to my fiduciary obligations. Now, before we start the board meeting, I want to talk about another potential conflict that exists, and that's with Goldman Sachs. Under the current proposal, the Penso Gordon plan, Goldman is going to make roughly a $9 million fee in this situation because they're getting paid on the number of shares that end up being transacted. And if Gordon Getty never sells his shares, that's obviously not the whole pot of shares that are available to potentially transact. Let's put a pen in that. Peterson starts the board meeting with Boise going over the Penso $100 tender, $100 share tender. Gordon interrupts and announces that he's working with Penso, says quote unquote, there is a better proposal available. The museum announces that it has a deal in principle to sell its shares to Pins Oil subject to approval. The directors hear this for the first time and they are in shock. I think in their mind they were anticipating Gordon working with Penso, but to hear that the museum had a deal in principle really put the screws to them. Yeah. Cuz now they're outnumbered. They've got 52% on one side of the transaction. — Yeah. Absolutely. So Gordon announces his proposal. His proposal is Penso is willing to offer $110 a share, but the deal is only good for as long as the board meeting was in session. It's a take it or leave it. And that is a really hard situation to be in when you're talking about billions of dollars.

### [2:35:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=9300s) Segment 32 (155:00 - 160:00)

and the board has a fiduciary obligation to the shareholders to maximize value. It's Yeah, they're really He's really putting it on them. Yeah. So, the directors are not happy to say the least. Another complication to this is Goldman Sachs will not issue a fairness opinion at $110 a share. What a fairness opinion is effectively a CYA vehicle for board members and directors. If Getty Oil ends up selling without a fairness opinion, it potentially exposes the board members and directors to a plethora of derivative lawsuits. But it's important to note that the museum has received a fairness opinion from the Solomon brothers for their sale at or sale in principle or agreement in principle for $110 a share. So why is Goldman holding out? I can't say for sure, but let me plant this seed. Goldman Sachs potentially has a conflict. This situation is a partial sale of Getty Oil. Jeff Boise at Goldman Sachs is very well aware that if the situation is right and enough pressure is put on the right parties, there's potentially a white knight company that will come in and buy all of the shares of Getty Oil. And if all the shares are transacted, Goldman Sachs fee is drastically more. Well, it's almost double. Right. We're now at 1:45 a. m. Boise and Goldman Sachs are not issuing a fairness opinion. We have quotes from Harold Williams here. It says, "We are in a very difficult position. There's no way we can do nothing. The trust will be in control with Pinso. At the same time, we've got a problem because Goldman won't give a fairness opinion. The board wants Gordon to go get more money out of Pinso, but Gordon is not having it. " Yeah. and ultimately he has the leverage, — right? I mean, but keep in mind this is 2:00 in the morning. Gordon's a weird guy, but by all accounts, Gordon is acting weird, even for Gordon. At this point in time, Harold Stewart stops the meeting. Harold Stewart is the most senior member of the board. He is longtime friends with the old man. Quote, "There's something going on here that Gordon isn't telling us about. Do you or any of your bankers, lawyers, or agents have any secret agreement with Penso? Gordon stops, declares he needs to see his lawyers, and they have a brief recess. Board meeting starts up again, and Gordon's lawyers read the Dear Hugh letter to the board. Can you imagine, Josh? That letter is I mean, what it says? I'm going to execute the plan. There's going to be no alternative. If I can't get the board to agree to my plan, then I'm going to oust them. — I mean, their backs against the wall. — It's not It's — Well, you know, I'm saying that, but the reality is that they're they would be absolved of any wrongdoing because Gordon would be executing a plan on them that they could not resist. — Yep. — So, it's not like they would be negligent or, you know, neglectful of their duties in any way. — Yes. It's not them winning. They'd be losing to Gordon in the in their, you know, multiverse. So, it's now 2:30 in the morning. Tensions are high. They end the night by saying, "Okay, look. We got to get over our emotions. Let's just try to get a deal done. We need a sweetener. 110 is too low. We need 120. " Go back to Pins Oil. The 120 does not even need to be all cash. It could be 110 a share price and then maybe it's a bond or maybe it's a stub or maybe it's something. but go and get us more money. So, they end the night at 2:30 with a counter offer for $120 a share. January 3rd, Litki is upset at the $120 counter offer. You have to remember that Litki came in with a $100 tinder. — He got worked up to 110, — right? Then he he moved up to 110 without even a former counter from the board. He only went up to 110 because Lipton and the other lawyers before the meeting said, "Hey, you've got no chance at 100. You got to increase your price. " And now the board's coming back for more money. — Yeah. — At the same time, you have Jeff Boise of Goldman Sachs not willing to issue a fairness opinion. And what is he doing in the morning of January 3rd? He's on the phone calling potential white knights. He calls Exxon, Mobile, Chevron, Shell, General Electric, the government of Saudi Arabia, and Texico. So again, Josh, I mean, you just have to wonder what's behind him blockading the fairness opinion. Does he really think

### [2:40:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=9600s) Segment 33 (160:00 - 165:00)

that the $110 share price is unfair, or is he trying to find a better deal for himself? — Well, I think he's just trying to get a better deal. Look, he's friendly with the management of Getty. He's friendly with Peterson. He stands to double his money if he can get the whole thing uh sold. And he also has this coverage that Solomon's already issued a letter at 110. So, I think he's just in it for himself and his friends at this point. — Yeah. Liti counters Pens Oils ask for $120 a share with this. It appears the big issue is the value of ERC. Remember, this is the reinsurance company that Peterson bought for $560 million. It's probably worth $1. 4 billion. They think that the price of Getty does not accurately reflect the value of ERC. So, this is Litki's counter. He says, "Okay, we're going to give the shareholders a choice. I'm willing to pay $100, $110 a share or $90 a share and will completely spin off ERC and if you own stock in Getty Oil, you will transition that stock to ERC as well. Well, the museum very quickly shuts that down. Lipton says, "No, that's too cute. We need another counter. " So, this is counter number two. He says, "Okay, we're going to offer $110 a share, but ERC would be sold, and all proceeds over $1 billion will go straight to the shareholders with a guaranteed minimum to the shareholders of $3 within 5 years. " Now, in response to this, Marty Lipton, who is just seems in the middle of everything, he represents the museum, but he's talking for everybody. I guess — at this point he represents the deal, right? — Like — he just wants to see a transaction. — Yeah. He's just he's a Wheeler dealer. He's Mr. New York. In response to this, Lipton says, "Okay, all right, guys. We're close. Get them to make it a guarantee of $5. " So, a stub of $5. Now, at this point, Hugh Litkkey is already very, very upset. He feels like he's being taken advantage of, which I doubt, by the way. I've, you know, the Hitkys of the world like to put on this performative act. He feels like he's getting ripped off and hemming and hawing. He knows by his own due diligence that he's buying oil in the ground, buying oil in Wall Street for $3 a barrel effectively by buying Getty Oil. — Yeah. — He thinks it's a great deal. But nonetheless, he puts on this show. His subordinates are afraid to talk to him. And so they actually come back and they say, "Okay, I am not going back to Hugh Liftky for more money. Here's what we're going to do. The board needs to approve the $110 a share with the $5 stub paid in 5 years. If you approve that, we will then go to Hu Litki and we will get a deal done. So that idea is pitched to the board. Boise, who works for Goldman Sachs, who is currently working for a looking for a white knight, still will not give them a fairness opinion. Solomon Brothers have has given the museum a fairness opinion. Again, in my notes, I just have conflict, conflict. I mean, this is potentially a big deal. I mean, not having a fairness opinion leaves the directors and board members up to personal liability. Yes. But also, if they refuse to play, they just get fired, right? They get bylawed out, — right? It could be a catastrophe. — catastroph. — But I don't view that as a catastrophe. They lose. They're no longer in charge. — Yeah. But the fear is if Gordon and Pins Oil form their alliance and own 60% they can then effectively set the market of what their take private buyback is going to be. — That's fair. — That is what their worry is. So they're caught between a rock and a hard place. So at 6:15, — right? — Except from a liability standpoint, it's no longer their problem. They need to let Gordon make good on his threat to bylaw them out of their positions so that then they're no longer on the hook. Well, nonetheless, at 6:15 p. m., the Getty board votes 15 to1 to approve the offer. Now, why is it $112. 50? That's because it's the $110 offer with the $5 pasta. But if you take the $5 due in 5 years and convert it to dollars to 1984, it's $112. 50. Nobody from the Getty board or the museum signs theou that Penso sent to into the meeting. Yeah, that shouldn't be a problem, — right? Gordon informs Penso of the 112. 50 price. They then go to Hu Litki who accepts. at least according to him. He accepts and he agrees to Peterson's golden parachute, which was talked about

### [2:45:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=9900s) Segment 34 (165:00 - 170:00)

during the board meeting. He says, "Okay, I'll eat the golden parachute. Just let's get this deal done. " Now, next is a disputed fact, but according to Mr. Leman, who is Penso's lawyer, who is in the Intercontinental waiting outside the boardroom, after the deal gets done, he says he goes in the boardroom and he walks in and he shakes a lot of people's hands. He's the only person who can recall shaking hands that this deal is done. That's fair. And Getty, but there is a another type of commemoration, right? The uh you know, little pop the — That's right. And Getty invites Hugh Litki, his her husband Gordon's new business partner to come over and have a champagne toast. Kiliki actually doesn't end up going to this because he goes for a night on the town partying with the Pins Oil executive team, but I think it's circumstantial evidence of uh they thought a deal might have gotten done. So, we're now at 700 p. m. — Have you ever drunk a congratulatory beverage on a deal getting done? — Yeah. I mean, well, settling a case, you — are you with your opponent, though? — Can't say that I have. — Okay. All right. Okay. Just curious. — So, it's now 7 PM. The PR teams start working on making an announcement. The lawyers for Getty Oil reject the first PR draft. Why did they reject the draft? Well, the first draft said Getty board had quote voted to accept a plan, but in reality, there had been no plan worked out, so they struck it. It also said that shareholders would receive a $5 stub within 5 years, but that was inaccurate. shareholders would receive a minimum of $5. If ERC sold for more, they would get more money. Also, it said the museum would be voting to sell shares after the sale, which doesn't really make sense. Which brings me to a new character, a new lawyer. The only female lawyer in the entire boardroom is Pat Hakis. Patakus is an associate of Marty Lipton. Her and Marty are the two lawyers who represent the museum. All the other entities have armies of lawyers. The museum has Marty Lipton and Pat Flahis. Marty Lipton goes home. Pat Lahus goes to the offices of Paul Weiss to monitor the situation of the deal drafts getting done. Something becomes very clear to Getty Oil that scares them. Under the terms, the museum was to be taken out immediately. Getty Oil was to buy the museum shares out while the other transactions are pending. But by buying the museum shares out, they're effectively giving Gordon more control because they're taking these the museum's 12% shares off the table. Gordon's 40% becomes a meaningfully more amount of that and he is getting very close to having majority control. — Yeah. So Getty's lawyers are scared of a situation in which there's a short time frame where Gordon Getty has a majority share interest in Getty Oil and then can reig on the deal or change the deal. So they start pressuring Bahus to change the deal to make sure the museum is not taken out first. This is unacceptable to Lipton and the museum and Vakus. So on the floor, Lakus yells in expletives, but we won't say those. She says, "There is no deal. There's no deal as far as the museum is concerned. " She then scratches out the museum's role in the press release. And uh according to the other accounts, they're able to talk her down and say, "Look, this isn't a deal killer. We'll figure this out later. We can just punt on the issue. We understand your concerns. We'll work it out. But you know, hey, let's not shut everything down. She agrees. I know that we are waiting to get all the facts in and of course we got to have the trial and everything else, but it seems significant to me that the parties to this deal or no deal are able to criticize the particulars of the press releases so that each can conform to their understanding of the terms of the deal. Right? I it's very suspicious if you can criticize what someone is saying that you must have an idea of whether or not they are reporting on the specifics of something that happened. — That's right. We're at January 4th, 1984. The very first thing in the morning that happens, there's a press release. — Yeah. There's mutual press releases by both sides. Right. — Josh, do you want to read it? — Oh. Um, — do you have it? I don't have it pulled up, but it's not a letter, so I think it should be pretty easy for you to read. Okay, I can read it. Here's the press release. Los Angeles Getty Oil Company.

### [2:50:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=10200s) Segment 35 (170:00 - 175:00)

The J Paul Getty Museum and Gordon P. Getty as trustee of the Sarah C. Getty Trust announced today that they have agreed in principle with Pins Oil Company to a merger of Getty Oil in a newly formed entity owned by Pins Oil and the trustee. The agreement in principle also provides that Getty Oil will grant to Pins Oil an option to purchase 8 million Treasury shares for $110 per share. The transaction is subject to the execution of a definitive merger agreement, approval by the stockholders of Getty Oil, and completion of various government filings and waiting period requirements. Following the consummation of the merger, the trust will own 47th of the outstanding common stock of Getty Oil and Penso will own 37s. The trust and Penso have also agreed in principle that following consummation of the merger, they will endeavor in good faith to agree upon a plan for restructuring Getty Oil on or before December 31st, 1984. And if they are unable to reach such an agreement, then they will cause a division of the company. Now, we have another character entering the fold, Bruce Waserstein of the first Boston Corporation. He's a Harvard Law former Cvath guy. To him, deals in principle mean nothing. He is a New York dealmaker through and through. It ain't over till it's over. He reads this report and he has lots of questions. Who's buying the museum shares? Who's buying the public shares? Is this a merger or a tender offer? When is the deal supposed to close? He picks up the phone and calls Marty Lipton. He says, "Marty, would the museum consider a higher offer for its shares? " Marty Lipton's response, "I'd answer the phone. So, it's not a yes or a no, but that I mean that's a New York yes. Can we all agree? — Marty, how much time do we have before we can do something? I don't know. We are working with Pins Oil. Boise, the Goldman Sachs banker, then calls Al Draine. He says, "Hey, Dra. " And by the way, Draine, we haven't talked about Drain yet. — No, we have not introduced Drain. — Drain is the number two at Texico. John McKinley is the number one. Alder Crane is the is number two. Boise says, "Listen, there's a handshake on price, but there are a lot of other issues and they're working out a definitive agreement. " The same day, Boise presents the Getty board with his invoice for $9 million. — That's not a bad fee. fee for a couple days of having late night meetings. — No, it's not. But this would be a critical piece of evidence that would be used by Pinso to say there was a deal because it's customary in the investment banking world that you only send your invoice after the deal is closed. Nonetheless, Boise is on the phone with Texico trying to get a white knight and he's sending invoices to Getty for a deal that they may or may not have closed. — Is it customary or is it an ironclad rule? — Depends on who you ask. — Yeah, I guess so. Waserstein. At first, Boston Corporation is making phone calls to potential players. Texico is one of them. Boise ends up calling Texico, letting them know that they're still very much in play. It's a facto. Texico and Waserstein end up linking up. They are decided that they're going to try to make a run at Penso. — No, they're going Getty. — Oh, sorry, Getty. — Okay, but I want to give a little context here. uh 1982 based on revenues, Texico is the third largest oil company doing 48 billion a year in revenue. Getty's the 14th largest oil company at exactly a quarter of that size. So that would take them from 48 billion to60 billion. So that's really substantial growth. They're finding out that their competitor to this deal is Penso. They have no regard for Penso. Penso is a company with uh 1982 revenue$2. 3 billion dollars. So functionally 4% 5% the size of Texico. So basically a child — right — to in the mind of Texico and they've been told through their first Boston connection that people would answer the phone if a higher price was offered. — Yes. So remember this isn't a simple merger with two parties. This is a merger with four parties because you have Pins Oil, you have Getty, you have the Cersei Getty Trust, and you have the museum. It's not a straightforward deal. Nonetheless, Getty was expecting a draft of the Penso documents on the morning of the 4th. Well, 8:00 a. m. comes, nothing. 10:00 a. m., nothing. Noon, nothing. 2:00 p. m. 400 p. m. 8:00 p. m. 8:30 p. m. is when Getty gets the very first draft of the agreement. And in the world of

### [2:55:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=10500s) Segment 36 (175:00 - 180:00)

dealm, that is an eternity. It's an eternity because a lot can happen. And oh, and something did happen because that day, while Getty Oil was waiting for its first round of docks, Claire Getty, daughter of George Getty, files an injunction in California, blocking Gordon from signing any documents about the sale to Pins Oil. Getty Oil stops working on the Pins Oil draft, which remember came in late. Because of this, they say, "Hey, look, there's too much going on. We can't touch this. You took too long. We're on ice right now. " Gordon and Litkkey start meeting. They actually plan a trip to the California headquarters, which uh they're going to leave that night or the next morning, which Litkkey would then later recount as his biggest mistake because it would get Gordon Getty out of New York. And also it would basically just demonstrate that there was in fact an agreement, but Litkkey thought it was poor form to walk through the office of Getty Oil while Sid Peterson was still there and he didn't really want to rub salt in the wound. We're still January 4th. Jeff Boise and John McKinley, who is the CEO of Texco, they speak. Boise indicates that Getty is receptive to hear other offers. Texco ends up hiring Scatteren Arps only minutes before Chevron calls to retain Scatteren for the same case for Getty. So, there are other people out there. There are other sharks swimming. January 5th, 1984. Penso is waiting on Getty. 10:00 a. m. They ask for an update. Getty says they're still reviewing. — Yes. But also, Getty is subject to a court order in California right now. — Correct. that says they can't move on it. — Not necessarily Getty. Gordon the trust. — Oh, yeah. That's fair. Yeah, — but of course they're using that as a ploy. 10:00 a. m. Getty informs Penso that they're not done reviewing the documents. 2 p. m. They're done reviewing, but they have edits. 4 p. m. They are still drafting edits. 6 p. m. The Texico board meets. They all agree that they're going to make a run at Pinso. They authorize a price of $125 a share. John McKinley calls Marty Lipton. Marty, are you free to deal? Yes. John McKinley then calls Sid Peterson. He says, "Sid, Texico has a rule in which we only engage in friendly acquisitions. They don't do any hostile takeovers, which had cost them in the past. Remember, Texico had lost the opportunity to hostilely take over Kaneko. They were running out of oil, but yet they they wanted to play quote unquote nice. They wanted to do things the right way, or so they thought. — Yeah. Like have a politician make them an inside deal, right? Or Yeah. — McKinley calls Peterson, says, "Hey, Sid, we only engage in friendly acquisitions. Please advise if you're willing to hear an offer. " Peterson says yes. Okay. So, Texico devises a plan. What they need to do, cuz remember Gordon Getty cannot sell. He cannot sell his shares except to avoid great economic loss. So what Texco needs to do is to create a situation in which Gordon could suffer great economic loss. So their plan is to buy the shares of Getty and the museum, giving them majority control and potentially icing Gordon out. Because if Gordon's a minority shareholder and Texico owns the rest, Texico can do whatever it's whatever it wants. then Gordon could be left holding the bag, right? So Texico goes to Lipton. At the same time, John McKinley of Texico goes to Gordon's suite in New York. So there's multiple teams of Texico execs going all over the town. The CEO goes to meet with Gordon. The rest of the higherups go to meet with Lipton. Liptin tells Bahus to stall who is working remember Bahus is working on the pins oil deal. So she does. Simultaneously, while this has happened on the 5th, 40 lawyers show up to the Claire Getty injunction hearing. I it must have been a bad connection. Um it sounded like you said 40 lawyers. — 40 lawyers. Tim Coller, who's Gordon's lawyer in open court, says the following. There is presently a transaction agreed upon among Getty Oil Company, J. a Paul Getty Museum, the trustee and pins Oil. This is the first time there has been an agreement among the four parties. Indeed, museum and the trustee of the company. This is an agreement which has been entered into after extremely careful consideration. He says that in support of his client to get the injunction lifted to get Gordon's ability to sign documents. — Yeah. And he is speaking on behalf of

### [3:00:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=10800s) Segment 37 (180:00 - 185:00)

Gordon, — right? — Not speaking on behalf of Getty Oil. — Correct. — But he's speaking on behalf of Gordon. And he is binding his client, Gordon Getty. And really the trust because Gordon's acting in his capacity as trustee of the Sarah Getty Trust. Binding the trust in open court from taking a position contrary to the concept that there is a deal. Right now, there still are open points that Penso and Getty are working through. Namely, who's going to be getting the final quarter dividend? Is it going to be Penso or Getty? Who's going to be in control of the spin-off or sale of ERC? And what's going to happen to Getty's loyal employees? There's over 20,000 of them. These are terms that in Pinto's mind are not material. They're just deal. They're just terms that will get worked out eventually. But I think you could very much make a reasonable argument that these are material terms that, you know, some people may or may not have an issue with. Moving on, 900 p. m. John McKinley and Gordon meet. Gordon at this point is afraid the museum is going to sell. He's afraid he's going to sell and he's going to be iced out. McKinley asked Gordon, "Are you free to sell? " — Well, let's dig into what you mean when you say iced out. What you mean is he'll no longer have a partner with whom he can link arms and go to Delaware and chop the head off the board, — right? — Yeah. I think that's really important to understand. Not that he really like loses out. Well, what happens is he becomes this giant minority shareholder who has essentially no ability to run, manage or affect change inside this large investment. — Right? But remember, Gordon is prohibited from selling except to save the trust estate from a substantial loss. So Gordon's response to this is, I feel like I would like an offer from you and I know I see no reason why I shouldn't. So now Lipkin and Mckenley are meeting. Lipkin is just inserting himself everywhere. He knows that if Gordon if he's able to get a higher price for Gordon, that's the museum. So he he's just inserting himself in everybody's business. Lipton says to McKinley, "What are you going to offer Gordon? " The answer is $122. 50. Lipton's response is that just won't do it. He won't accept. Lipkin is Lipton is just a gamer. He — dude, they already accepted 110. Now he's saying he just won't accept 100 12250. So — Oh man. — Yeah. So M McKinley takes this in stride and Lipton tells him to offer 125 and um sure enough McKinley goes up to Gordon's suite and then and there's a funny story with this. The story is that Lipton goes up to Gordon's suite. He walks in. He smiles. He says, "Hey Gordon, I was going to offer you $122 a share, but I got some indications that you won't accept it. I am prepared to offer. " And right then and there before he says a number, Gordon Getty says, "I — I accept. " — And they all laugh. And Gordon says, "Well, I guess you're supposed to give the price first. " So, it's a deal at $125 a share. Just for some context, that 112 to 125, so that extra $13 a share, that is so much cash in the pocket of Gordon Getty. It's so much money because remember the trust has what? 31 million shares. Yeah, that's not chump change. Now, Lipton writes Texico's equivalent of the Dear Hugh letter for Gordon to sign, which I'm I mean, Lipton works for the museum. It's just it's crazy. Nonetheless, here's the letter. I regret that an order of the Supreme Court in California prevents the trustee of the Saras Getty Trust from entering into a legally binding agreement in any way concerning the stocks or assets of Getty Oil Company. Therefore, I as the trustee cannot commit to sell the Getty Oil Company shares held by me as the trustee to Texico pursuant to the offer of $120 $25 per share being made by Texico to all shareholders of Getty Oil Company. I believe that I have a fiduciary duty to seek and accept the offer by Texico. It's my intention to the request the court should lift the order as soon as I am able to do so. I intend to sell or tender the shares to Texico. I will request Getty Oil Company to approve the Texico offer. So, he's a buyer in the Pins Oil deal. He's a seller in the Texico at $125. We

### [3:05:00](https://www.youtube.com/watch?v=nkjagsN_pdw&t=11100s) Segment 38 (185:00 - 187:00)

are now on January 6th, 1984. They wake up, they realize that the very first thing that Lipton, Gordon, and Getty Oil need are indemnities. But why would they possibly need indentities? — Well, I thought everyone was free to deal. — Everyone is free to deal according to Lipton and Getty and Gordon, — but not Gordon's lawyer in court in California the previous day. — Right. So, also there's a representation and warranty section and they slip in this little sentence. They say that no representation is made with respect to the standstill agreement, the consent, the stockholders agreement or the Penso agreement. Remind me what's an agreement again, right? So there there's indemnities and representations and warranties specifically enumerating the Penso deal. And you have to remember when you're dealing with a trial lawyer like Joe Jal and members of a jury who aren't real sophisticated, it's pretty easy to point to a document that says, "Hey, we make no representations about this particular agreement. And why would they identify? Why would they indemnify? " Right? That same day, Claire Getty gives the okay to Gordon to sign the Texico deal. 7 a. m. the museum signs the agreement with Texico. There's a press release. Lit response is unexpectedly calm. They were really afraid of how he might respond. He simply responds by sending a TX. That TX says, "Gentlemen, I hope you honor your agreement, and if you don't, I'm going to sue you. " Also, there's huge antitrust implications. Please consider that. Is effectively the TE summed up. Now, Goldman Sachs fee has gone from 9 million to $18 million under the Texco deal. So, at 6:00 p. m. on January 6th, 1984, the first lawsuit is filed. Unbelievable. In the Penso, Texico saga, it's actually filed by Getty. Getty runs to Delaware to file a declaratory judgment, a deck action, asking the court to determine as a matter of law that Penso never had a contract. And I think that is a good place to end it because the stage is set. What a tangled web. Yeah. I'm so excited. I'm so excited for the second episode because this lawsuit was in some ways completely unhinged. If we think the underlying facts are crazy, — the lawsuit is crazy. — And after Yeah.

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*Источник: https://ekstraktznaniy.ru/video/43649*