The family-owned merchant banking firm of Stephens Inc. has become synonymous with wealth, success, power and philanthropy in Arkansas.
Over the years, the corporation has become recognized as a player to be reckoned with on both the national and international business scene.
Stephens grew from a humble bond trading operation in Little Rock to a sophisticated organization with enormous clout and the talent and resources to run with the big dogs on Wall Street. The landscape of Arkansas public companies — Wal-Mart Stores Inc. of Bentonville, J.B. Hunt Transport Services Inc. of Lowell, Alltel Corp. of Little Rock, etc. — has been shaped by its hand.
The company established a reputation for finding ways to get deals done when others couldn’t or wouldn’t. When no one else would underwrite the bond issue for the Louisiana Superdome in New Orleans, Stephens Inc. took the ball and ran with it.
Stephen Inc. began as a one-man show and now encompasses a staff of hundreds. The corporate story is interwoven with the personal endeavors and achievements of its namesake family.
The financial cornerstone of Stephens Inc. was laid in 1933 by its shrewd and colorful founder, W.R. “Witt” Stephens (1907-1991).
He was born Wilton Aubert Stephens, later changed to Wilton Robert Stephens. He was known simply as Witt to his contemporaries and Mr. Witt to many others.
In his later years, Mr. Witt commented that he took the company to the state while his younger brother Jack, who joined the business in 1946 and succeeded him as chief executive officer 10 years later, had taken the firm to the nation. And he predicted that his nephew Warren, who was named CEO on his 29th birthday in 1986, would take it to the world.
By all accounts, Warren Stephens is continuing to advance the corporate legacy established by his family. Some describe him as the hardest-working second-generation billionaire around.
In the Family
A special nod of recognition for Jack Stephens’ standing among his peers came in 1991 when he was named chairman of the prestigious Augusta National Golf Club and The Masters golf tournament.
Even in the earliest days, the Stephens family and the Stephens business were inseparable. Mr. Witt credited the wise counsel of his papa with helping guide him.
Possessing a sharp, insightful mind, Albert Jackson Stephens was a source of inspiration for the entire family. He was a Grant County farmer by trade who also served in the state House of Representatives in the late 1930s.
One legendary homily attributed to A.J. Stephens became a credo for Mr. Witt: “Poverty is not a thing to be proud of or ashamed of, but to be gotten shed of as quickly as conveniently possible.”
Witt Stephens’ vehicle for distancing himself from poverty was his talent as a hard-working salesman. The measuring stick of progress: dollars and cents.
After a teacher posted a 25-cent reward for the pupil with the best history lesson, young Witt suddenly exhibited an award-winning interest in the subject. He collected the reward more often than not, but his career as a historian waned when the reward system ended.
When he wasn’t working on the family farm, Witt was hustling to make a buck. His youthful entrepreneurial ventures included operating a shoe-shine stand and selling roasted peanuts.
On his father’s advice he answered an ad and became a novelty jewelry salesman for the National Craft Co. of Providence, R.I. Mr. Witt was so successful that he earned $2,100 in commissions in one month.
Belt buckles were the hot sellers. It seems Mr. Witt orchestrated the setting so that many young men at a Citizens Military Training Camp in Fort Leavenworth, Kan., thought the goods he sold were a required purchase.
His stellar performance landed him a promotion to regional sales manager in the Southwest, working out of Colorado Springs, Colo. Bibles had joined the line of wares, but the onset of the Great Depression brought an end to his days as a traveling salesman.
It was 1933, and he returned home to Arkansas for a fateful encounter with opportunity.
Bet on Bonds
The catalyst for starting the wheels of commerce turning in a big way for the Stephens family was bonds — state bonds.
Seventy years ago, there was a real and growing concern that more than $100 million worth of state-issued highway bonds weren’t worth the paper they were printed on.
Arkansas was on the brink of bankruptcy, but A.J. Stephens was convinced the state eventually would honor its bond obligations.
Again trusting his papa’s instincts, Mr. Witt borrowed $15,000 from family friends and went to work buying defaulted bonds from skittish investors for cents on the dollar and reselling them.
It was a risky market with thin margins, but he made a profitable go of it. Helping refinance bond issues at lower interest rates helped generate fee income for his W.R. Stephens Investment Co., too.
When the state got its fiscal house in order, the bonds paid off at full value. Investors reaped windfall profits from discounted bonds, and the Stephens’ reputation for making money was launched.
Mr. Witt also shared in the financial rewards, amassing a tidy sum of $150,000. He flirted with the notion of returning to Prattsville with his earnings and taking early retirement during the late 1930s.
His father convinced him otherwise, and Mr. Witt cranked up the money machine enroute to creating an Arkansas icon.
During World War II, Stephens began buying stock in state banks, an out-of-favor investment at the time. Bank stocks have been a source of interest with the family and the firm ever since.
In 1945, Mr. Witt made a foray into what is considered to be the goose that laid the golden egg and truly established the family fortune: oil and gas.
The $1.2 million acquisition of a small financially troubled utility, Fort Smith Gas Corp., led to his now legendary appearance before the Securities and Exchange Commission.
“You need $150,000 up front to complete this deal,” an examiner told him. “Do you have access to that much?”
Reaching into his pocket, Mr. Witt fished out a cashier’s check and laid the backwoods banter on thick: “I figgered you would ask that, so I just brung it with me.”
He enjoyed adopting the mantle of “I’m just a dumb old country boy” and disarming the big-city folk with his aw-shucks mannerisms and barnyard similes. Mr. Witt was something of a showman, and some of his antics were perpetrated for personal amusement as much as anything else.
He didn’t finish high school, but his down-home street savvy was a perfect complement to the book-polished smarts of his chosen partner, Jackson T. Stephens.
Bankrolled by his successful bond sales, Mr. Witt was able to send his younger brother to Columbia Military Academy, where he graduated in 1941. From there it was a year at the University of Arkansas and an appointment to the U.S. Naval Academy in Annapolis, Md., where Jack Stephens graduated in 1946 as a classmate of future President Jimmy Carter.
Last August, Jack Stephens donated $10 million to renovate to the academy’s Navy Marine Corps Memorial Stadium, renamed “Jack Stephens Field” in honor of the donation. A month earlier he gave twice that much to the University of Arkansas at Little Rock.
Poor eyesight prevented Jack Stephens from landing an officer’s commission and brought him back to Arkansas. A literal handshake deal turned the brothers into partners, and they busied themselves building a financial empire.
Arkla
The fortunes of Stephens Inc. paralleled the ever-climbing personal fortunes of the brothers. The values of deals were now commonly tallied in millions of dollars, headed for the realm of billions.
Tandem deals in 1953-54 resulted in the acquisition of Arkansas-Oklahoma Gas Co. and controlling interest of Arkansas Louisiana Gas Co.
The value of Arkla stock nearly doubled shortly after Stephens entered the ownership picture. It was a testament to their golden touch reputation of targeting lucrative deals.
Such votes of confidence were a nod to their growing power to make things happen that often had highly profitable consequences. Political influence was a valuable asset that wasn’t reflected on the balance sheet.
A.J. Stephens’ interest in politics and money-making was a family legacy that helped shape the personality of Stephens Inc. Beginning in the 1940s, Mr. Witt took political interests to a whole ’nother level.
There was a widespread perception that his clout could influence the choices for road improvement projects around the state. It was that sort of edge — real or imagined — that helped send a lot of bond business from Arkansas schools and municipalities to Stephens. Seeing the Stephens political machine in action didn’t hurt that image either.
After buying control of Arkla, Mr. Witt was able to enact a new pricing formula that fattened the company’s bottom line. When the Arkansas Supreme Court overturned the Public Service Commission’s decision, the Legislature was moved to change the law to accommodate it.
Even detractors had to shake their head in awe at the workings of Stephens-inspired government. Mr. Witt’s aura as a political kingmaker in Arkansas grew and grew.
He shrugged off all the money he contributed to political campaigns as merely his way of promoting good government.
“Why, I’m just a poor, ignert, humble old country boy,” he once told an Associated Press writer who questioned how much political power he wielded.
“Whatever scruples he may entertain about using agencies of government to support his personal objectives is something no man can answer except Witt Stephens,” one former Public Service Commission member said in 1959.
The windowless confines of oak-paneled meeting space at Stephens Inc. became the veritable manifestation of the smoke-filled room where important decisions were made.
Witt Stephens served two terms as state representative in his father’s old seat starting in 1961. In the era of limitless terms in office, who else with such a short tenure would be asked to be Speaker of the House?
After retiring from Arkla in 1973, he toyed with the idea of running for governor in the 1974 race. Asked why he opted not to, Mr. Witt offered a self-deprecating assessment that there were three strikes against his candidacy. “I’m old. I’m ugly. I’m country.”
Behind the scenes, his papa advised against it. Why? A run for office could have negative consequences for business whatever the outcome, not to mention the chance of a heart-breaking loss against a well-financed incumbent, Dale Bumpers.
In 1986, Brother Jack chewed on the idea of seeking the Republican nomination for the U.S. Senate and a race against Bumpers, who was seeking his third term at the time.
He also backed away, choosing to remain a politically active businessman instead of a politician with business interests.
Arkansans
Jack Stephens took over leadership at Stephens in 1957 when his brother devoted his full time to leading Arkla.
Mr. Witt gave Arkla the image of the caring utility who fought for the interests of residential customers. “Biscuit cookers” was the term he originated to describe the common man.
He enjoyed mixing it up with the mean, greedy electric company, Arkansas Power & Light Co., Arkla’s leading rival as well as largest customer. In a 1959 interview with Fortune magazine, Mr. Witt served up some of his famed ballyhoo at his competitor’s expense.
“You take people with ulcerated stomachs,” he said, grinning roguishly around his cigar. “I ran my own survey on this, and I personally believe in nine out of 10 cases it’s from cooking with electricity.”
Mr. Witt loved Arkansas, and the state benefited from that affection. Dozens of business enterprises and thousands of jobs can be traced back to him and his family.
The Stephens brothers played with the idea of taking over Missouri Pacific Railroad more than 40 years ago. In the 1960s, they tinkered with buying the London Bridge and moving it Arkansas.
Fun and fanciful was mixed in with cold and practical as Jack Stephens built up the corporate side of the business. Selling Arkansas was always important.
If Mr. Witt had any doubts about his considerable salesmanship, they were laid to rest half a century ago. He picked up a hitchhiker who turned out to be an armed robber who put a gun to Mr. Witt’s head and threatened to kill him.
“I really knew I could sell when I talked him out of killing me,” he told his namesake son years later.
Mr. Witt tried to help Perry Lee Williams straighten out his life with mixed success, but he didn’t regret making the effort.
Just like drilling dry holes in the gas fields left him unfazed despite the cost, Mr. Witt remained confident that even seemingly unfruitful attempts would pay off in the end.
Sign up for Daily E-news
