August 14, 2000
The Bush Family "Oiligarchy"
Part One: The Early Years
Business Networks Pay Off
The Liedtke brothers and Bush steered Zapata through leaner years in the late 1950s while continuing to grow the company’s two businesses. By 1963, Hugh Liedtke was ready to expand Zapata Petroleum by merging it with the Penn Oil Company. The combined company took the name Pennzoil, with Hugh Liedtke at the helm as president and chief executive officer.
Liedtke’s instincts, his business know-how, and his aggressiveness would combine to help build Pennzoil into one of the world’s largest oil companies. In 1999, Pennzoil-Quaker State’s revenue was almost $3 billion and its market capitalization was almost $1 billion. [See Pennzoil-Quaker State’s Annual Report.] Not bad for a company that started with less than $1 million from Bush’s Uncle Walker.
The Bush-Liedtke relationship also was destined to become a financial cornerstone for George H.W. Bush’s political career. The relationship attracted the well-connected and wealthy by the dozens. It was partly through this connection that Bush first came into contact with James Baker III.
Baker’s family had established itself in the Texas legal profession going back almost to the Civil War. Beginning in 1870, Baker’s grandfather helped build Baker & Botts, established four years earlier by two Confederate partisans, Judge Peter Gray and Walter Browne Botts. By the late 1800s, a major client was the railroad empire of E.H. Harriman, Union Pacific Railroad.
Because of a strict anti-nepotism rule within Baker & Botts, James Baker III was not permitted to join the firm out of college. Instead, he became a boss of Houston's Andrews, Kurth, Campbell, & Jones law firm, a satellite of Baker & Botts located in Houston. [See George Bush: The Unauthorized Biography by Webster G. Tarpley & Anton Chaitkin.]
After the 1963 merger of Zapata and Penn Oil, Baker & Botts became the chief legal firm to the growing oil conglomerate. Baker & Botts enjoyed a remarkably close relationship with this client. Wall Street Journal business journalist Thomas Petzinger described the close connections between Baker & Botts and Pennzoil this way: “For 25 years, the internal legal department at Pennzoil had been almost indistinguishable from Baker & Botts.” [See Parmet’s George Bush.]
By this time, Bush, Baker, and Hugh Liedtke were all headquartered in their respective businesses in Houston, a much larger city than Midland. In Houston, Bush’s connections expanded beyond the oil industry to include a variety of country club social circles. Still, for Bush, oil remained the blood of the Houston network.