Free Enterprise, Buckley Style

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Some of these companies have acquired rights to acreage in Canada, Australia and the Gulf of Mexico, which, after years of proving unprofitable, have begun to create significant revenue. Others are mere corporate shells, owning little of value and sometimes lacking even a headquarters staff. Catawba managed all six satellite companies, charging high fees for this service and reaping royalties on any fuels or minerals these firms were able to sell.

This arrangement has been profitable. Between 1974 and 1978, Catawba collected $6,106,283 in fees and $6.7 million in royalties from the six affiliates. The SEC said that Catawba could not always produce records that would justify the high fees it charged. Still, when the bills were presented to the controlled companies, they were readily paid. In many cases, the Catawba officials sending the bills also served as officers or directors of the companies receiving them and thus were authorizing payments for themselves.

The SEC contended that some $525,000 in fees collected by Catawba from 1972 to 1978 actually was paid for time that Catawba officers and staff had spent on Catawba's financial transactions rather than on managing the other companies. Moreover, said the SEC, another $570,000 in such fees was spent on the upkeep of Great Elm, the 46-acre estate in Sharon, Conn., where the Buckley children grew up. Another $500 a month in fees was spent to help support a family member living in Texas.

The SEC cited numerous examples of alleged deception of public shareholders. It noted that United Canso Oil & Gas Ltd., which was controlled by the Buckley family, in 1971 acquired a 20% interest in a license to explore for oil and gas in the British North Sea. The Canso board sold its share in 1975 for $50 million plus $7 million in previous expenses. Canso's board then appointed two of its directors to make an "independent" study of what Canso owed Catawba in royalties on the oil It would have produced if It had not sold its rights. The two directors reported that Catawba was entitled to $3,196,000, a tidy sum that ended up going to the Buckley family. Canso, claimed the SEC, failed to inform its own shareholders that one of the "independent" directors was William Buckley's brother-in-law and the other an administrator of Buckley trusts. A group of angry Canso shareholders in 1980 seized control of Canso in a proxy fight. Unmentioned in the SEC report was the fact that James Buckley had signed the Catawba-Canso fee and royalty agreement in the first place.

James Buckley tried to isolate himself from the family business by placing his holdings in a "blind trust" while a Senator from 1971 to 1976 and again when he joined the Reagan Administration. Yet until recently one trustee was Reasoner, a Catawba adviser. Buckley has since shifted the trust to independent managers. John Buckley, as well as Reasoner, is banned under the consent decree from continuing to hold any office in Catawba.

Lawsuits pose continuing financial problems for the family, but the Buckleys are far from broke. Great Elm, however, is no longer the same. Its gracious 18th century mansion is being cut into a complex of fine condominiums. Priced from $175,000 to $200,000 each, they will, if sold, help ease the burdens imposed by the SEC's crackdown on the family's businesses.

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