By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
By Jeff Balke
By Angelica Leicht
Every time Kinder Morgan loads a barge in the Houston Ship Channel with petroleum products, sends gas through a pipeline or stores a few tons of coal or salt, it gets paid. Kinder Morgan operates more than 35,000 miles of pipeline that reach from Mexico to Canada and nearly coast to coast.
It relies on a business structure as uncomplicated as the company's strategies. Kinder Morgan uses master limited partnerships that are Big Oil's equivalent to a real estate investment trust, or REIT. That gives Kinder Morgan a significant tax advantage over corporations because the limited partnerships are exempt from corporate income taxes as long as almost all profits are distributed to investors. Two of Kinder Morgan's three companies pay hefty cash dividends, giving them an effective annual yield of about 7 percent.
The company's top executives are limited to annual base salaries of $200,000, and their bonuses are tied to the company's ability to achieve its published growth targets. Kinder's salary is precisely $1. He gets no bonuses or stock options. But he's no pauper. This year, his holdings will pay him about $15.2 million in cash dividends. If President George Bush succeeds in eliminating the tax on dividends, Kinder could have an extra $5.8 million in his pocket this year.
He's already the third-richest man in Houston. His fortune is exceeded only by those of savvy money manager Fayez Sarofim, who Forbes estimates is worth $1.6 billion (Sarofim is also a big investor in Kinder Morgan), and oilman George Mitchell, who is worth about $1.4 billion.
Yet for all of Kinder's wealth, his companies are known for more than their ability to generate money -- they're also remarkably cheap.
In the six years since leaving the Enron building at 1400 Smith Street, Kinder's headquarters have moved only two blocks. But the corporate philosophy has moved light-years away from the days of Lay.
None of the trappings of the ultrarich can be found in Kinder's nice but hardly spectacular corner office on the tenth floor of One Allen Center. There's no private bathroom or attached conference room. His personal effects consist of a few photos of his wife and family. Rather than a chunky gold Rolex, he wears a plain Swiss Army watch that might have cost $200, tops.
Indeed, when it comes to billionaires, Kinder is a trifle disappointing. As one of his former Enron co-workers put it, "He's basically a boring guy."
The same exec says that Kinder is notoriously punctilious. Wherever Kinder went at Enron, he took a legal pad, which had his to-do list for the day. "It always had a one-page list -- one page only -- and he wouldn't go anywhere until he got that list done. He'd carry that yellow pad everywhere."
Kinder hasn't put any baubles on his yellow pad. Despite his astonishing wealth, he hasn't bought any Caribbean islands, taken up yacht racing or acquired a professional sports franchise. He delights in reminding people that he's tighter than bark on a tree, and nothing shows that penchant more than his attitude toward corporate airplanes.
"Airplanes were Ken Lay's weakness," says Mary Wyatt, who worked at Enron for 14 years and managed the company's aviation department. "Rich always managed to talk Ken out of getting bigger airplanes." Under Kinder, Enron relied heavily on a pair of small relatively inexpensive Cessna Citations. When Kinder left, Lay went on an aircraft buying binge, grabbing up a pair of $10 million planes.
"His seat wasn't cold before we sold the Citations [for $4 million] and bought two Hawker 800s." By the time of Enron's bankruptcy, the fleet was up to six jets, crowned by an ultraluxury Gulfstream V, with a list price of $41.6 million.
Wyatt says that shortly after Kinder left Enron, she jokingly asked if he and Morgan had bought a company plane yet. "I will never have a corporate aircraft," Kinder told her. So far, he's stuck to his pledge.
Even Kinder Morgan executives fly coach unless they want to use frequent flyer miles for first class. During an interview, Kinder told about his commercial flight back from Denver with five other Kinder Morgan executives. Half got upgrades to first class.
"I was one of the three that didn't," said Kinder. "You think that doesn't send a positive signal when you walk through first class and you see three of the people who work for you upgraded and you go and sit your butt down in the back of the plane? You think that wasn't all over the company by Monday morning? 'Hey, Kinder was sitting in the back.' "
Although Kinder abhors the kind of free spending that occurred under Ken Lay at Enron, he has emulated his college pal's approach to political donations. Few businessmen -- in Texas or elsewhere -- have better political connections than Kinder. He's personal friends with George W. Bush's political Einstein, Karl Rove. The two share an interest in history and have been pals since W.'s first race for governor in 1994.
"I was dubious as to whether he could win," Kinder says of Bush's gubernatorial bid. "But I thought, 'What the heck.' " He and other Enron executives donated $146,500 to Bush in that race.