r 1981, its union employees frantically .tried to buy the airline as the only certain way to block him. But they lost and he won, and exactly two years after becoming Continental’s majority stockholder he went into Chapter 11 and (with the bankruptcy court’s approval) canceled all union contracts. Was this a life or death matter? Did he really need to get rid of the unions? Not at all. The airline was not broke; although its income was skimpy enough to make the use of union labor somewhat risky, Continental’s workers were cooperating with management in trimming the budget. In 1982, the first year of his ownership, the pilots’ union had given back $100 million in salary concessions, and just before he declared bankruptcy the pilots and mechanics and flight attendants had agreed to a total of $150 million in give-backs. It was plain that Continental's workers would make any reasonable sacrifice to keep the line going. But that was not enough for Lorenzo, who was determined to rid himself of the need to negotiate with unions under any Chapter 11 allows anybody, any partnership, any corporation to seek the shield of bankruptcy. They can be in fact—s many of our recent bankrupt” corporations have been—highly profitable. u condition, and so in 1983 he dove into Chapter 11, pleading the desperate need for “reorganization.” De-union- izing was apparently the only reorganization he had in mind; in 1984 he climbed out of Chapter 11, thus ending what William F. Buckley hailed as “arguably the most important symbolic economic struggle of the decade.” And within three years, having grown rich from scab labor, Lorenzo was ready to buy Eastern Airlines (again with the frantic opposition of the unions). Devout capitalists may hail Lorenzo’s victory as solid proof of the need of Chaptej 11 to give hardworking managers a breathing space so they “can keep their c6tnpanies alive. There is, however, one significant quibble that must be made to their argument. If Lorenzo went into bankruptcy just to bust the union (as all circumstantial evidence seems to indicate), then he was breaking the law, and the bankruptcy court was a co-felon in allowing him to do so, for there is that quaint piece of writing called the National Labor Relations Act that requires companies to bargain in good faith. The Bankruptcy Reform Act of 1978 is not supposed to be used to obliterate the NLRA. ne feels a bit naive talking about “good faith” in this context. In fact the Code, written by Congressmen who apparently were embarrassed by ethical considerations, makes no explicit requirement that those who take bankruptcy do so in good faith- meaning that they not misuse the Bankruptcy Reform Act to achieve an unfair advantage over competing business, or over labor unions, or over workers who are suing them for damages, or to cover past crimes or to escape penalties for having broken nonbankruptcy laws. The Code is not supposed to be used like an ace up the sleeve or a knife in the boot. If a bankruptcy judge catches a business (or person) using it in that way, he is supposed to throw them out of court. Written into the Code or not, good faith has always been an implicit requirement since the first permanent federal bankruptcy law wap passed in 1898. Nevertheless, in practice it means virtually nothing. Rarely does a bankruptcy judge question the faith of big business. Nowhere is bad faith more pungent than in the Chapter 11 now protecting several sons of the late H.L. Hunt of Texap, once one of the wealthiest men in America and one of the most domesticated, so to speak, for he contrived through a fascinating shell game of matrimony and bigamy to produce three families (fourteen children). Of these offspring, the two who seem to have been stocked with most of H.L.’s predatory genes are Bunker Hunt and Herbert Hunt, close allies in several shady, if not downright crooked, enterprises that we will briefly sketch here as a talisman of their business character. T en years ago Bunker and Herbert first became known for their rapaciousness when they tried to corner the soybean market by buying futures contracts for 24 million bushels —about one-third the total U.S. supply. Federal law decrees that no person, or group acting in collusion, can hold futures contracts for more than 3 million bushels. When the Commodity Futures Trading Commission caught Bunker and Herbert, the boys put on a farcical act of innocence. Collusion? Nonsense! Bunker said he was absolutely bowled over to learn that brother Herbert was also interested in soybeans. And both swore they had no idea their teenage children were buying soybean futures. The CFTC, made up of easygoing rascals, let them get by with it. So a few years later the Hunts set out qn a much more socially devastating adventure—to corner the silver market. When they started buying, silver sold for $3 an ounce. By 1980 their gigantic purchases—at one point they controlled two thirds of the silver in circulation in the world —had driven the price to $50.35 an ounce, giving the Hunt brothers a greater paper fortune than their father had earned in real money in his entire life of hunting oil. Their speculative success caused real pain to the buying public. Film, flatware, the price of anything with a silver ingredient went sky-high. Billionaire.s though they were, the Hunts were not so foolish as to use only their own money for the gamble. They borrowed millions from banks and brokerage houses, which, caught up in the Hunts’ delirium, also bought silver heavily on their own. hen came the fall. Pressures exerted by equally ruthless pirates on the New York Commodity Exchange, the largest silver market in the world, drove the price down to $15.80, and at that point the Hunts told their big creditors that the silver they had cornered would no longer cover their debts and they would not put up any more collateral for their loans. In other words, they were welshing. The financial world went into a tizzy. When rumors spread that several banks and some of the biggest brokerage houses were in deep trouble from playing the Hunts’ game, stock prices dropped to the lowest level in five years. Here was a wonderful possibility. Let’them go under! Business Week appraised the situation correctly: “They played a dangerous game for high stakes. They guessed wrong, and they lost. They should be forced to liquidate other assets and cover their losses—just as any speculators would have to do.” Exactly. If the Hunts had been forced to dismantle 10 Clinton St. Quarterly—Summer, 1988
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