Poor Them

The Tycoons Who Lost It All

Nelson Bunker Hunt, who died this week, made and lost billions of dollars. He’s not alone among the mega-rich, brought low by a combination of avarice, bad timing, and bad luck.

Call it schadenfreude, but, like the poet Shelley surveying the vast and trunkless ruins of the icon of Ozymandias, king of kings, there is something remarkably reassuring—to those of us who live paycheck-to-paycheck lives of regular financial chaos—in the contemplation of how even the mightiest of financial tycoons can fall.

Take, for example, Nelson Bunker Hunt, the Texan oilman who ruthlessly attempted to “corner” the silver market and was once worth up to $16 billion, but ended his days (he died last week at the age of 88) in mightily reduced circumstances, living in a modest suburban house on the outskirts of Dallas.

Bunker, along with his brothers Herbert and Lamar, started buying silver in 1970, when it was $1.94 an ounce. By January 1980, along with 1,000 racehorses and they had the rights via options to 200 million ounces, and it was worth $50 an ounce (let us do the math for you—they controlled $10bn of the stuff).

Only one problem—their holding was so vast that they could not sell off any meaningful percentage of their horde without driving down the price.

This they found out over the following months.

By March 27 of 1980, which went down in financial history as Silver Thursday, Hunt’s holdings and bets on silver had plunged from having a hypothetical positive value of $7 billion to being a liability of $1.7 billion, which he had to sell other assets to cover. Eventually, the fire sale extended to his personal belongings—including a $20 enamel teapot.

Hunt—on whom the character of Dallas’s J. R. Ewing was based—was said to have remarked, “A billion dollars ain’t what it used to be.”

Of course, Hunt is far from alone in the destruction of his fortune. For every story of rags to riches, there is another of riches to rags. The history of commerce is littered with the husks of unimaginably wealthy tycoons brought low by a combination of avarice, bad timing and (as your stockbroker would be keen to point out) a boring old lack of diversification in their portfolio.

Take the Brazilian oil baron Paulo Mendonça, for example. Less than three years ago, the chief executive of OGX Petróleo, known as “Dr Oil,” was on his way to becoming one of the world’s richest men. But when OGX, of which he was both CEO and a major investor, was only able to deliver 15,000 barrels of oil a day rather than the 750,000 he had claimed, its share price plunged 90 percent. Mendonça’s own fortune declined commensurately; according to Forbes, he lost more than $25 billion in the course of a few months.

The commodities bust has hit many other billionaires hard. According to Forbes, Viktor Nusenkis, the Russian coal baron, for example, saw his fortune decline from $2.2Bto $350M while Robert Friedland, the US mining kingpin, had a 2013 net worth of $1.8B reduced to $950M in 2014.

I know. Poor them.

The internet has created many massive, overnight fortunes, but many of these have disappeared back into the thin air faster than you can say pop.

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Take, for example, the German internet millionaire Kim Dotcom, founder of Megaupload, an online file sharing service.

He was, briefly, worth many millions, but, having moved to New Zealand in 2010, he is now facing extradition to the US over alleged copyright infringement.

He shelled out around $400,000 to sponsor fireworks welcoming in 2011 in New Zealand’s biggest city, Auckland, and set up a political party, the Internet Mana alliance, spending over $3 million in a failed attempt to win a seat in New Zealand’s 120-seat parliament.

Kim is not thought to be broke just yet, but he will be soon, as movie studios seek to recoup $100m in copyright fees. Just last week, a New Zealand court ruled he could no longer continue hiding his assets.

Kim was known for a rock ‘n’ roll lifestyle, as was Jordan Belfort, familiar to film lovers as the Wolf of Wall Street. Yachts, planes, drugs, women and even midget throwing parties were just some of the delights the then-25 year-old spent his $250 million fortune on.

Belfort’s millions were stripped from him when the FBI nabbed him for securities fraud and money laundering.

Since publication of the book and movie, Belfort has taken to touring the world discussing how to achieve success without sacrificing integrity and ethics—while keeping a remarkably straight face.

In Ireland, the name of Sean Quinn will be forever linked in the public mind as the ultimate cautionary tale of riches to rags. In 2006, Quinn, who headed a cement-to-insurance empire, was worth $6 billion—making him Ireland’s richest man by a long chalk.

He and his family lived a lavish lifestyle. In 2007, he spent €100,000 on his daughter Ciara’s wedding cake alone.

The cake—a towering six-foot mass of tiered layers surrounded by cascading edible flowers—was baked in New York, packed it into 20 boxes and flown to Ireland for a lavish reception for 200 people in 2007.

Quinn lost his fortune after he amassed control of 25% of Anglo Irish Bank, which promptly went under in the 2007 financial crash.

His humiliation was complete when, in 2009, he was jailed for nine weeks for contempt of court after attempting to put his family’s €500m property empire beyond the reach of the former Anglo Irish Bank.

He is now relying on supporters to pay his legal bills.

Hardest hit of all in recent years, however, was the aforementioned Paulo Mendonça’s direct boss, Eike Batista. In early 2012, Batista had a net worth of some $30 billion, making him the seventh wealthiest person in the world and the richest in Brazil by some margin.

Batista, who always claimed he sold insurance door-to-door to help pay for school, had previously boasted to Forbes that he would one day become the “world’s wealthiest guy”.

He set about ticking the boxes required of any self-respecting plutocrat enthusiastically. He drove a $500,000 custom sports car. He married a Playboy centerfold and had two sons, the humbly-named Thor and Odin.

Journalists who visited Batista at his marble-heavy home high above Rio marveled at the Olympic-size swimming pool, the two home theatres and the sight of his 77-foot-long cruise ship converted to a private yacht moored in glittering Rio bay below.

He claimed a mystical streak, saying that a clairvoyant advised him to go to Machu Picchu in Peru, and gaze at the sky, and that it would bring him luck. His company names all ended in an X—EBX, OGX, MMX—because in numerology, X stands for the multiplication of wealth.

But, buffeted by the OGX debacle and the collapse of emerging-markets mania, he filed for bankruptcy protection in October 2013 and Bloomberg reported in January 2014 that Batista had a negative net worth.

Even worse, for a man of such hubris, is the joke doing the rounds in Brazil, that when the Pope comes to Brazil again he will be visiting Batista, as he has an obligation to call on the poor.

He might be able to take some solace, perhaps, in the words of Bunker Hunt, who told Senate representatives investigating his role in the Silver Thursday debacle: “A billion here, a billion there, and pretty soon you are talking about real money.”