Do You Sincerely Want To Be Rich? (45 page)

e company,' recalled Cowett, 'and he talked to them about the mystique of ten dollars. And goddam it, he convinced them. Of course, within half an hour, they were unconvinced again - but they had done the deal.' It was the conceptual salesman's greatest achievement, and so he closed the deal for a single sale with a face volume of $110 million.

    Of that money, roughly half went to the selling shareholders, and the influx to the IOS corporate treasury through sales of new shares was $52,400,826 after deductions. If ever a company needed to raise new capital, it was IOS, for in the day that the proceeds came in, the effective cash position of the IOS parent company was $1 million.

    The respite for the treasury was short-lived. Ed Cowett disposed of the new cash with remarkable rapidity, in a series of intricate schemes. In order to understand the inner beauty of most of them, it is necessary to be acquainted with John M. King.

    

    

    

    

    
In which we introduce Ambassador John M.
King, and describe an industry built upon tax avoidance. Together with their new chum, our heroes get mixed up in the Middle East crisis, hunting oil in Arab waters. Ed Cowett discovers the Arctic:
nopis
and other strange animals appear. Handley Page Aircraft becomes a casualty.

    

    

    The
hits oil in commercial quantities. The chances of a wildcat striking are one in thirty, but King's first wildcat, drilled on a friend's farm in Oklahoma, did strike oil. 'I've always been lucky,' he said. ‘I get into difficult situations, but I always manage to come up smelling like a rose.'

    The success of that Oklahoma wildcat decided the direction of John King's career. In 1955, King went into partnership with a man called Ben Stevenson in Chicago and formed the King-Stevenson Oil & Gas Co.

    But John King did not become an oil man in the same sense as, say, Paul Getty. Nor did the companies he organized do the same kind of things as Standard Oil or Shell. In that sense, John King was not really an oil man at all. He was in the fund business, only his funds were drilling funds, not mutual funds. While Cornf eld owed his power and prosperity to the outflow of dollars beyond the United States, King owed his to features of the taxation system inside the United States. King's business consisted primarily not of exploiting oilfields, but of exploiting the taxation advantages available to those who look for oilfields.

    Despite Congressional attacks which have progressively whittled away at those advantages ('inept laws and historic emotionalism,' said John King) it remains official policy to allow people to claim tax relief upon money invested in the search for oil, and upon any income arising from oil discovered. The potential of this system as a tax 'shelter' was widely exploited for the first time in the Fifties. Highly paid film stars, sportsmen and other folk in need of tax relief could not go out and drill their own wells. But there was nothing to stop them getting together in partnerships, pooling their money into a fund, and then hiring a manager to handle the drilling. It was then natural for the managers to turn into promoters, actively selling pieces of such partnerships. Fees increased, and since the manager tended to have little or none of his own money at stake, it often became questionable whether he cared whether his wells struck oil or not. Some wells were thought to exist only on tax returns. Others had to do service for more than one partnership, so that it would have been an embarrassment to strike oil, because accounts would have to be produced. There is said to have been some trade in 'dry holes' to meet such difficulties.

    Abuses of this sort came to a head in the late Fifties, when a couple of drilling funds collapsed and a cloud settled over the whole business. It suffered a further blow in 1964, when the maximum tax rate was cut, eliminating some of the demand.

    At the end of the Fifties, John King moved from Chicago to Denver. The King-Stevenson partnership broke up, and in January 1961 he started up a new concern, King Resources, which took over the oil and gas properties of the old firm. For the first six years of its life King Resources made little mark on the business scene. Then in 1966 John King started up with a new kind of drilling fund, and within three years,
Forbes
magazine reckoned that $300 million would be 'a low guess' for King's personal wealth. As to the amount of money his companies controlled, 'nobody other than King would dare put a figure on the total