by Gwen Moritz
Posted 9/27/2010 12:00 am
Updated 2 years ago
Since I had a good idea of his household income and knew that he was also sending his kids to an expensive private school, I brazenly asked him how he could afford the house and tuition and everything else he needed to do, like saving for college and retirement. That's the point, he said: The house would be his kids' college fund and a retirement fund for him and his wife.
This was a whole new concept for me. I had never before considered that homeownership could be a way to accumulate wealth to be used for some other purpose. To me, a house was a place to live and a mortgage, like any other debt, was something to be got shed of as quickly as possible. My old boss told me that I was hopelessly entrenched in "middle-class values," a jab that often echoes in my mind as I read, write and edit stories about people in the upper-income brackets.
Last week, for instance, as I was editing Senior Editor Mark Friedman's cover story on the Murphy family fortune, I was struck by the contrast between the late Charles Murphy Jr.'s philosophy on business and that of Steve Clary, the Little Rock businessman who was in bankruptcy court last week and is scheduled for criminal court next May.
Murphy's daughter, Martha, testified in a tax dispute that her father's approach was "to put all of your eggs in one basket and then very carefully tend your basket. He felt enormous responsibility to the assets he'd been given. He felt an obligation to make those assets grow and be absolutely as productive as possible."
Charles Murphy, who had been left to tend his father's sizable business interests at age 21, "had very few hobbies and when he took on ... an endeavor, he just did it wholeheartedly," Martha Murphy said. "It wasn't in his nature to be passive."
Murphy concentrated on Murphy Oil Corp., Deltic Timber Corp. and First United Bancshares (now part of BancorpSouth Inc. of Tupelo, Miss.), and his heirs and his extended family have a combined fortune that undoubtedly exceeds $1 billion in value, despite some bumps along the way.
Clary, on the other hand, had an interest in at least 50 different businesses. He made some money as a real estate developer, and many of his individual business entities are related to that industry. But he was also dabbling in oil and gas, Web conferencing and the business that led to the federal criminal charges against him, custom bus leasing.
The Arkansas Democrat-Gazette sent a reporter to Clary's bankruptcy hearing last Tuesday. According to the report in the next morning's paper, bankruptcy trustee Randy Rice asked Clary under oath how he kept up with his business dealings.
Clary replied: "Once you breathe life into a business they take care of themselves."
Says the man who owes $168.6 million and has assets of only $1.4 million with which to pay those debts. As Senior Editor George Waldon reported last month, one of Clary's businesses, Petron Resources LLC of Frisco, Texas, took care of itself so well that six of his employees finally sued him for five months of work they did without pay.
I'm sure there's a lesson in here somewhere.
Like my former boss, Clary also has a nice house. In fact, it represents $1.2 million of Clary's assets, and there are nine creditors who have security interests far in excess of its value.
In testimony almost as revealing as his autopilot approach to business, Clary told the bankruptcy trustee that he and his wife have been paying their $5,600 monthly mortgage, buying groceries and paying other expenses with donations from friends, family and members of their church. And when asked if he hoped to keep the house, as bankruptcy law allows, Clary said, "That would be our desire."
Now, I know I'm hopelessly middle-class, but it seems like someone who is living off the kindness of others could make it a bit easier on his benefactors by moving someplace cheaper.
I often wonder how my old boss' plan worked out. Maybe he got in and out at the right time.
(Gwen Moritz is editor of Arkansas Business. E-mail her at GMoritz@ABPG.com.)