One firm's huge break

For a man who has secured a tax break from Congress worth about a half- billion dollars - one of the largest ever given to a single business - Cecil Ray Owens has compiled a curious set of credentials.

To finance his latest venture, Pacific & Texas Pipeline & Transportation Co., Owens and others raised $2.1 million by selling more than 200,000 shares of stock that were not registered with state or federal regulatory authorities - a violation of federal securities laws.

He used company funds to pay his personal living expenses, including his Nieman-Marcus charge account, a pool and garden service for one of his two homes, and food.

He has been involved in a series of failed business undertakings, among them a planned office tower in Phoenix that was aborted when his attorney was assassinated. And he has been sued by unhappy investors seeking to recover money they gave him for his projects and by businesses whose bills he neglected to pay.

So how did Owens get a custom-tailored tax provision that will allow his company, Pacific & Texas, and investors in it to avoid payment of a half- billion dollars in taxes?

"We went to Congress, a conference committee . . . to the people that were involved in writing the tax bill," Owens, 58, said in an interview with The Inquirer.

Asked to identify the individual congressmen, Owens said: "Oh, I don't know. Good night, I think there was a hundred and some people on the committee. " (The conference committee was composed of 22 senators and representatives. )

Did he go to each member?

"Well, not each of 'em," said Owens. "But the California delegation, some of them were very helpful, and some of the Arizona delegation was very helpful, and some of the people in New Mexico was very helpful, and Texas also - the four states that we're going through. "

Whoever is responsible, Owens knows a lot of politically influential people - both on the national and state levels.

"I have a lot of politicians as friends . . . personal friends," Owens said.

Indeed so. Take Pacific & Texas, which Owens created to build a pipeline to carry crude oil from Long Beach, Calif., to Midland, Texas.

One of the three incorporators and original directors of the pipeline company with Owens was Milton M. "Mike" Masson Jr., a campaign aide and fund-raiser for Ronald Reagan during his 1980 and 1984 presidential campaigns.

Masson also served on President Reagan's transition team in 1980 and last year was named the western regional adviser in the campaign of George Bush, who has a lock on the Republican Party's presidential nomination. Masson says he is not currently active in the Bush campaign.

Over the years, Owens has regaled investors with stories about his Washington connections. And he has, on occasion, displayed letters, from Republicans and Democrats alike, to document the relationships.

There was, for example, the October 1983 letter from Sen. Barry Goldwater (R., Ariz.), which says in part:

"I was pleased to learn of the progress you are making, and it is my understanding this is a very needed project. It is important that we move Alaska and California OCS (outer continental shelf) oil inland to places where it is needed. "

There was the "Dear Cecil" letter written the same month by Sen. Lloyd Bentsen (D., Texas), who now heads the Senate Finance Committee, that expressed appreciation for Owens' "friendship and support. "

And there was the "Dear Cecil" letter written in November 1983 about the pipeline that concluded:

"I've known all along that if anyone could do it, it would be Cecil Owens! "

That was from Rep. Jim Wright (D., Texas), now speaker of the House of Representatives.

Owens also talks about a time when he did "some campaign work" for Lyndon B. Johnson when Johnson was a senator, and "I did work for him when he was running for vice president. "

Then there was the "friendly meeting" at the White House when Jimmy Carter was president. According to Owens, his son was on the president's staff.

While Owens has had a lot of cheerleaders in Congress and the political world, he failed to stir the same kind of enthusiasm in his business undertakings in the years leading up to the formation of the pipeline company.

ITEM. In 1976, he sold an interest in a partnership to Dr. Maxwell L. Roston, a physician in Orange County, Calif. The partnership, according to Orange County Superior Court records, was going to buy a tract of land in Anaheim, Calif., where Owens planned to construct a hotel.

Then the venture collapsed and he never bought the land or built the hotel. Dr. Roston sued to recover his money, and a judgment for $15,000 was entered against Owens.

ITEM. In November 1977, Owens announced with great fanfare the planned acquisition of 7.7 acres of land in Phoenix and construction of a 12-story bank building and 22-story condominium complex. Then the deal unraveled and he never bought the land or erected the buildings.

As he later explained in an unrelated legal proceeding, the project collapsed when "my attorney got assassinated . . . I got scared as hell. We disbanded it after losing quite a bit of money. " He said he did not know why his attorney had been shot.

ITEM. In the early 1980s, Owens headed a group that tried to acquire Civic Savings & Loan Association, a beleaguered Dallas-area financial institution.

When the planned acquisition never came off, investors who had put up thousands of dollars sued Owens and one of his associates to recover their money.

Whatever the reason for the failed business endeavors of the late 1970s and early 1980s, Owens did not have Congress behind him in those days.

To help him with construction of the 1,032-mile, $1.7 billion crude oil pipeline from Long Beach to Midland - some friendly tax reformers wrote a private tax law for Owens and incorporated it in the Tax Reform Act of 1986.

It was just one of hundreds of special-interest exemptions that Congress granted that year in the largest giveaway in the history of the income tax. Now, as The Inquirer has been reporting this week, Congress is preparing to add scores of new private tax provisions to a technical-corrections bill, designed in theory to remedy defects in the Tax Reform Act of 1986.

In the case of Pacific & Texas, the exemption would benefit Owens as the company's largest shareholder, with 46 percent of the stock. Of the 545,060 shares of Pacific & Texas stock outstanding as of Dec. 24, 1987, Owens owned 253,000.

The granting of the exemption came against this background, court records, corporate documents and interviews with people familiar with the project show:

* From at least June 1981 through at least June 1985, according to a complaint filed by the Securities and Exchange Commission in federal court in Los Angeles, Owens and his company "obtained money and property by means of untrue statements" and "engaged in transactions, practices and courses of business which operated and would operate as a fraud and deceit upon purchasers."

* While Owens was selling stock to investors for $10 a share, he was buying stock for himself for $1 a share. After Arizona regulatory authorities began an inquiry, Owens paid $10 like everyone else. At least 160 people in nearly two dozen states and nine foreign countries purchased shares in the pipeline company at the $10 price.

* To help win over potential pipeline investors, Owens and his associates promised some people they would receive jobs with the company once construction started, and they promised others that they "would receive returns of at least 500 percent per annum beginning as early as March 1985," the SEC complaint said. To date, the return has been zero and construction has yet to start.

* While Owens told investors in December 1984 that he "had supported Pacific & Texas for four years with 'no salary,' " he neglected to mention that company funds had been, and were continuing to be, expended for various of his personal and living expenses.

* From the spring of 1981 to the fall of 1985, Pacific & Texas spent about $469,000 on Owens' behalf for, among other things, "travel, living expenses, lobbying and entertainment, political contributions, and various business expenses," the SEC said.

* At a November 1985 meeting of the Pacific & Texas board of directors, held one year after Owens told shareholders he had taken no salary, the board unanimously fixed Owens' salary at $500,000 a year - retroactive to 1982. The directors also decreed that "this salary, plus a reasonable expense account, may at any time be reconsidered for increases, but not decreases. " At the same meeting, Owens advised directors "that he was being audited by IRS."

* As chairman and chief executive officer of Pacific & Texas, Owens presided over a casual system for tracking corporate expenditures. A May 1984 audit by Arthur Andersen & Co. disclosed that "all the supporting documentation for cash receipts and disbursements for the period from inception of the company's business through May 1982 had been inadvertently destroyed. "

For the years subsequent to May 1982, Andersen reported, "we were unable to locate supporting documents for a significant number of cash receipts and disbursements. "

Andersen auditors said Pacific & Texas officials advised them "that there had been no cash receipts records maintained in support of substantial receipts in 1983 and 1984 except informal notations of such receipts, and that the company would not make this information available. . . . "

Accounting procedures were so haphazard that auditors were unable to determine whether $1.5 million that the company had taken in by mid-1984 came

from personal loans or the sale of stock. According to Andersen auditors, during the spring of 1984 Pacific & Texas officials said the "company had not sold stock, but rather that the cash receipts were generally personal loans. " By year's end, they had changed their story, telling the auditors that "the cash receipts had been for the sale of stock and that stock certificates were currently being prepared and issued. "

Owens spent $151,085 in Pacific & Texas funds for which the company had no records, according to yet another audit report, this one by Ernst & Whinney, dated May 1985. The report said the company also lacked records to explain $111,304 in "lobbying and entertainment expenses" or $107,240 in cash disbursements. Overall, Ernst & Whinney auditors said they were unable to obtain "supporting documentation" or "verify the propriety of the business purpose" of $511,734 in expenditures during 1983 and 1984.

In a telephone interview with an Inquirer reporter, Owens at first denied that any Pacific & Texas money had been used to pay personal "living expenses," as claimed both in the SEC complaint and by dissident shareholders.

At a December 1984 meeting of Pacific & Texas shareholders, critics of Owens distributed photocopies of canceled checks they said showed that company

funds had been used to pay doctor bills, garden and pool services, a real estate commission on his Long Beach house, and rent for an apartment.

Owens attributed the allegations - including some of those recited in the SEC complaint - to disgruntled shareholders who, he said, along with "a couple of crooks out of Canada," had unsuccessfully sought to take over the company.

"They lost hard," he said, "so that's the reason for all the b.s. And that's what it is. "

Does that mean no Pacific & Texas funds went for living expenses?

"Well, there was a check to a realtor in there," he said, "but in the beginning . . . the company didn't have the money to pay me any salary. They passed a resolution, the board passed a resolution that I was to take all my living expenses and everything, in California, from the company because I was working for no salary . . . .

"And that's the reason that there was some 'quote' apparently personal checks that showed up. . . . "

The board that authorized Owens to spend Pacific & Texas money for living expenses consisted of Owens, Moore and Mike Masson.

When Owens used company money to pay his personal bills, he often wrote checks drawn on Pacific & Texas bank accounts made out either to cash or in his name. Sometimes he used his own cash.

Once asked in a legal proceeding how he decided which funds to use, Owens replied:

"Well, when the company didn't have any money, I did it. "

Owens said during an interview with The Inquirer, "I did not get a salary voted (by the board) until 1985. "

Asked if the board had not made the salary retroactive, he replied:

"Oh, well, they made it retroactive to cover all those expenses and so forth. "

How was the $500,000-a-year figure arrived at?

During the SEC inquiry, Owens said that as president of the company he had appointed a committee to "investigate salary compensation for the officers. "

After the committee had completed its review, Owens related, "they said I was doing a hell of a job without a bit of money, without a lot of staff, and it was a way of compensating me for my 60- and 70-hour weeks. "

Whatever the shortcomings in his business affairs, Owens has excelled in one area, as attested to by his company's tax break: politics.

His political skills are also attested to by those who invested in his projects.

A Pacific & Texas shareholder recalled receiving a company mailing that underscored the importance of politics. In it, Owens related a story that he has told on other occasions about a meeting with George Deukmejian, the Republican governor of California.

Owens quoted the governor as telling him, "Cecil, the Pacific Texas project is 90 percent politics, 10 percent financing and technology. "

Arnold F. and D. Anne DeHart, a Tucson, Ariz., couple who said they had invested in the pipeline, maintain that Owens assured them he had the necessary "political connections" to get the pipeline built.

And Owens stepped in where others had failed.

During the mid-1970s, when the country was emerging from one energy crisis and heading toward another, the Standard Oil Co. of Ohio (Sohio) sought to build the same pipeline now planned by Pacific & Texas. In fact, those in the business sometimes refer to the Pacific & Texas project as the Son of Sohio.

Sohio had become the largest holder of domestic oil reserves by virtue of its discovery of the vast Prudhoe Bay field on the North Slope of Alaska. By 1979, the company was pumping nearly 600,000 barrels of crude oil a day out of Alaska, all of which had to be transported by tanker to the West Coast.

The company hoped to build a pipeline running from Long Beach to Midland, where the crude oil would flow into existing pipelines leading to refineries along the Gulf Coast and in the Midwest.

The alternative, and far more costly option, was to ship the oil by tanker south past Mexico, Guatemala, Honduras, Nicaragua and Costa Rica, through the Panama Canal and north again to the Texas and Louisiana refineries and connecting pipelines along the Gulf Coast.

But in 1979, after spending $57 million for engineering and planning studies and legal expenses to obtain the necessary state and federal construction permits, Sohio wrote off the pipeline because it was unable to overcome political and environmental opposition in California.

As the company explained in its annual report to shareholders: "After four years of unsuccessful efforts to obtain all of the required permits, and facing the prospect of prolonged litigation, the company reluctantly concluded that the project was no longer economically attractive. "

Where Sohio, a corporation that posted billion-dollar profits, failed, Cecil R. Owens has succeeded.

While Mike Masson says that he had nothing whatsoever to do with Pacific & Texas' tax break, he did open some doors for Owens in Washington.

"When he was getting some permits through the Department of Interior, and he wanted an introduction to some people in the Bureau of Land Management," Masson said in an interview with The Inquirer, "I brought him back (to Washington) and introduced him to some people. "

In addition to lining up required permits and allaying the fears of environmental groups, Owens also persuaded California officials to approve issuance of $618 million worth of tax-exempt bonds to help finance the $1.7 billion project, and he persuaded Congress to give him federal tax breaks worth a half-billion dollars.

That exceeds every dollar in income taxes that will be paid over the next several years by low-and middle-income individuals and families living in Reading, Pa.

Owens has pointed to the private tax law on several occasions to demonstrate Congress' support for his project.

In August 1986, just before Congress passed the Tax Reform Act with the Pacific & Texas concession, Owens told an SEC attorney who was questioning him about the company:

"We have gotten transitioned in the U.S. Congress and the U.S. Senate tax bill, which hopefully will be voted on in mid-September and sent to the President for signature, which means that our tax-exempt bonds of a half a billion dollars will be immediately marketable and we can put an awful lot of people to work in this country. "

More recently, Owens cited the private tax law in a public statement issued in March during the turmoil in Panama surrounding Gen. Manuel Antonio Noriega's refusal to surrender control of his military regime.

In a press release typical of those distributed to the news media and investors through the years in an effort to generate positive publicity about his pipeline, Owens said:

"In the event of a hostile situation in Panama, the flow of this nation's crude oil through the pipeline there, which is owned by the Panamanian government, could be interrupted.

"Construction and operation of the Pacific Texas pipeline would secure the distribution of our nation's domestic crude oil to refineries. . . . For the past several months, Pacific Texas has received increasing interest from various federal agencies concerning our construction timetable.

"In fact, Pacific Texas received congressional bipartisan support for its project in the form of transition relief in the 1986 Tax Reform Act, and several governmental agencies have assisted us in obtaining federal permits for our project. "

Harry R. Watkins, who lives in Lake St. Louis, Mo., and has been a TWA pilot for 23 years, as well as an investor in one of Owens' failed business endeavors, well remembers claims about Owens' political connections.

"He was always flying to Washington and taking people out to dinner . . . wining and dining big shots in Washington, supposedly to keep his contacts and to be able to get this thing approved and taken care of," Watkins said in an interview.

But mostly, Watkins remembers his very first meeting with Owens, who is described variously by business acquaintances as "a good old boy" from Texas, a man with a photographic memory and "a great personality - he'll tell you water is dry and you'll believe him when he gets done. "

It was back about 1981 at the Civic Savings & Loan Association in Irving, Texas, just outside of Dallas. Watkins and his father, a retired construction superintendent who also was named Harry, had flown there to discuss investing in Civic.

SEEKING INVESTORS

As Watkins recalls it, Owens said he was running the savings and loan and was looking for investors to help him buy it. Said Watkins:

"We went into an office that supposedly was his (Owens') office and met a guy . . . who was the president of the bank, and supposedly that was Owens' office.

"The bank was supposedly in trouble and he (Owens) was running it and trying to get it out of trouble and we (the investors) were going to buy it and take it over. "

It sounded like a worthwhile opportunity, and so Watkins said he, his father and his stepmother invested more than $30,000. As time dragged by, the younger Watkins began to worry.

"At a later date," he said, "I called the bank trying to check up on the situation, and the gal I talked to at the bank said . . . she didn't know anything about Owens, except that he had used their office one day. "

Owens has a different recollection.

"I will tell you this," he said, "Mr. Harry Watkins never invested any money with me. We have a signed receipt, witnessed by two people, where Mr. Harry Watkins and his son . . . decided that they wanted a third of the whole deal.

"And, you know, my East Texas grandfather used to say, 'pigs get fat and hogs get slaughtered. . . . ' Well, they went in and paid their money directly to the president of Civic Savings & Loan, which is in control of the control group. And they didn't go through me.

"It was true that there was several of us involved with the Watkinses. And the group asked me to lead looking into the whole thing (buying the savings and loan). We looked into it, and we saw that there was so many insider loans . . . that we backed off. . . . "

Does that mean he never received any money from either of the Watkinses?

"No, sir," said Owens, "I can swear to God that that money did not go to me. "

Asked whether he ever maintained an office at the savings and loan, Owens said:

"No, when I would go in there I would just use one of the vacant offices that they had. . . . I would generally be in there with the auditors or, you know, we spent quite a bit of time there with the auditors because it was - we were surprised at the enormity of the problem, because when we looked at it that was not the way it was presented to us. "

Well, then, did he ever see the Watkinses at the savings and loan?

"They came by," Owens said, "but I was there with the auditors. I was digging into all this other (business) that was going on. But the group kindly, I guess, appointed me, or annointed me, or something. . . . "

'IT WASN'T MY GROUP'

Who were the members of the group?

"Oh, they was just - it wasn't my group. They was just a group that I was a part of. And it was a small group. It wasn't a big group at all. "

At the same time that Owens was looking into buying the savings and loan, he also was seeking investors for the pipeline that he planned to build.

According to Harry Watkins and other investors and business acquaintances of Owens who were interviewed by The Inquirer, the two business deals were linked.

"The situation was," Watkins said, "that . . . if they had their own bank they could save a lot of cost and make some profit from the bank side of the organization, because of the moneys the federal government and everybody was going to loan them to build the pipeline. "

With their investment in the savings and loan, Watkins said, they were promised that they, in turn, would "be able to buy and control more shares of the pipeline. "

Owens acknowledged during questioning by an SEC attorney that he believed owning Civic Savings would benefit the pipeline.

"If you own a portion of a financial institution," he said, "it makes it a lot easier to borrow money from other financial institutions. "

Watkins said his father, who lived in Tucson, decided to invest in the savings and loan as a result of his friendship with one of Owens' business associates, Carleton W. "Mickey" Moore, another Tucson resident.

Moore at the time was lining up investors for Civic and later the pipeline company. During Pacific & Texas' early years, he served as its vice president, secretary and treasurer.

"Dad had met Mickey Moore and they had become friends," Watkins said. Moore and Owens, he said, "were supposedly . . . good close friends, and at the time Mickey was vouching for Cecil, and my dad was vouching for Mickey. "

The elder Watkins and his Vietnamese wife, Thu Thi, put more than $25,000 into Civic. His son invested an additional $5,000.

Over time, the elder Watkins also advanced $79,100 to the pipeline company, his son says, bringing the father's total investment in the two Owens ventures to more than $100,000.

That money, according to the younger Watkins, represented his father's life savings. The elder Watkins died of cancer last July at the age of 75.

Owens says there is no record of the Watkinses putting any money in Pacific & Texas.

As evidence of this, he pointed to audits of the company by "three of the largest Big Eight accounting firms. " Nothing in the audits, he said, "showed that the Watkinses ever gave Pacific Texas or me 15 cents. "

Two of those three audits had found that Pacific & Texas records relating to cash receipts and disbursements had been destroyed.

While Owens disclaimed knowledge of any investment by Watkins, Carleton Moore - who was the elder Watkins' friend and who spent several years raising money for the pipeline before falling out with Owens - tells another story.

"He (the elder Watkins) put in everything he had," said Moore, who also encountered financial difficulties and left the pipeline company after a bitter dispute with Owens.

Three months before his death, Watkins, his wife and son filed a lawsuit against Owens and Moore, seeking to recover the $30,000 they had put into the savings-and-loan deal. Moore now says that he, too, was taken in by Owens after raising $3.1 million from investors, many of whom "were my friends that trusted me for years. "

The Watkinses said in a lawsuit filed in Pima County Superior Court in Tucson that they were persuaded to fly to Texas and visit the Civic Savings & Loan where Owens maintained an office "and had the appearance of being the manager or controlling officer. "

They said they had been promised that savings-and-loan stock then selling for $3 a share was really worth $12, and "that the money provided to Moore or Owens was to be placed in an escrow account and that, if the transaction did not occur, the money would be refunded promptly to them. "

Some time later, in 1983, they were told that another group of investors had purchased the savings and loan and that Owens and Moore had filed a legal action against those investors.

Owens and Moore explained that "it would take at least two to three years to bring the legal matter to a conclusion," the Watkins lawsuit states, at which time the investors "would receive at least three times the amount of money invested. "

In 1985 and 1986, the Watkinses said, they learned "that there was no pending lawsuit . . . that no trust account or escrow account had been established and that they had been bilked of their funds. " Owens has denied the allegations in the lawsuit, which is still pending.

Of all the tangled Owens litigation, the one lawsuit that perhaps tells much about his business practices is the one filed by the DeHarts, the Tucson couple, who said that Owens had refused to deliver the stock in Pacific & Texas that they had been promised.

In 1979, the DeHarts alleged, Owens and Moore offered them an opportunity to invest in the newly formed pipeline company. But Owens needed some help.

More specifically, he needed the DeHarts' credit cards.

According to the DeHarts' lawsuit, they were told that "Owens had recently sustained a business loss as well as a life-threatening accident which led to the loss of his credit card privileges and that he needed funds or credit privileges to be able to travel to make the pipeline venture a success. "

The DeHarts handed over their American Express and CarteBlanche credit cards with the understanding, they said, that they would receive 5 percent of the stock in Pacific & Texas, options to buy additional stock at $1 a share and promises of a salaried position with the corporation in Long Beach.

A year or so and $39,150 in credit card charges later, the DeHarts said they had not received the 5 percent of the stock they were promised, nor the corporate post, although Owens had paid $4,400 on the credit card bills, leaving an outstanding balance of $34,750, plus interest.

Two years ago, the DeHarts filed for bankruptcy. The two largest outstanding debts that they reported: About $30,000 in delinquent federal income taxes owed to the Internal Revenue Service, and $27,700 owed to American Express for unpaid credit card bills.

In legal papers filed in connection with the lawsuit, Owens acknowledged that he had used the DeHarts' credit cards, but denied they were used for the pipeline project. The suit is still pending.

In his interview with The Inquirer, Owens contended that the charges he incurred were for yet another project.

"They (the DeHarts) were involved in a deal," Owens said, "an oil and land deal up in Wyoming, Montana, along the border up there. They asked me to check with some of my friends in the oil business and, about buying the situation . . . .

"I said I wouldn't do a damn thing . . . unless you pay for my expenses up front. "

With the credit cards in hand, Owens said he talked "to one of the major oil companies that I knew. They looked at it and said, 'Cecil, if it's like it is, it looks good. '

"Well, they (the DeHarts) got in with a group of folks from New York that was going to make 'em instant millionaires overnight, and they said, 'Cecil, we don't need you. ' "

Whatever the purpose, using other people's credit cards apparently was a popular way of underwriting costs.

Witness the experience of the elder Harry Watkins.

Watkins had worked on building projects around the world for both Morrison Knudsen Corp. and Brown & Root Inc., two U.S.-based global construction companies. He had spent nine years on construction jobs in South Vietnam, his son Harry said, and when Saigon fell he moved to Indonesia, where he built oil rigs in the ocean for five years.

Owens and Moore used his father's connections in the heavy construction business, Watkins said, to bring in other investors. "My dad and Mickey (Moore) made trips around the world," he said, "going to these construction camps and meeting friends of my dad. "

He estimated that perhaps as many as half of the 160 or more investors in the pipeline were in the construction business and that Owens "met quite a number of them also. "

How were the global journeys in search of investment capital financed?

"They used my dad's credit card," Watkins said, referring to his father and Moore. "For whatever reason, financial problems or whatever, they (Owens and Moore) did not have credit cards. For a couple or three years they were using my dad's American Express card to travel on because they didn't have one. "

Moore maintains that his credit cards were also used by Owens for trips within the United States and abroad. "He'd run my credit cards up $12,000, $15,000," Moore said, adding, "I kept that up for several months, a year, and then I couldn't handle it. "

Moore, like the DeHarts, eventually ran into financial difficulties and filed for bankruptcy. When he, too, failed to pay his federal income taxes, the IRS seized his Pacific & Texas stock options and offered them at public sale.

Pacific & Texas itself also has had tax troubles. Public records show that it has been slow in paying the federal income and Social Security taxes withheld from employee paychecks.

The IRS filed a lien in the Orange County Recorder's Office in Santa Ana in May 1987, stating that Pacific & Texas owed $105,443.85 in back employment taxes. Three months later, the IRS filed a release, indicating the tax bill had been paid.

Owens also has an eye for politically well-connected law firms, as attested to by records filed in state and federal courts in Arizona and California and in the House of Representatives in Washington.

When he wanted someone to plead his tax-exemption case before Congress, Owens hired Vinson & Elkins, a Houston law firm whose partners included former Sen. Howard H. Baker Jr. (R., Tenn.), now chief of staff for President Reagan, and John E. Chapoton, who was assistant secretary of the Treasury for tax policy from 1981 to 1984.

When the Securities and Exchange Commission began investigating Pacific & Texas stock sales, Owens hired Rogers & Wells, a New York firm whose members also possessed impressive political credentials. There was William P. Clark Jr., who was chief of staff to Reagan when he was governor of California and who later served in a variety of high-level federal positions after Reagan was elected president, among them assistant to the president for national security affairs. And there was Gerald E. Boltz, who held a series of high-level positions with the SEC from 1959 to 1972, including that of administrator of the SEC's regional office in Los Angeles.

It was Boltz who represented Owens when the SEC filed a civil complaint last September in U.S. District Court in Los Angeles, contending that Owens and his pipeline company had violated federal securities laws through the sale of unregistered securities.

The SEC asked the court to issue a permanent injunction barring Owens and Pacific & Texas from engaging in "unlawful transactions, acts, practices and course of business" and to require them to furnish detailed financial statements and other business reports to stockholders.

Without either admitting or denying the allegations, both Owens and Pacific & Texas signed agreements consenting to a permanent injunction order. The order barred them from selling additional stock until a registration statement was filed with the SEC, and required them to comply with other securities laws.

As for Cecil Owens, he has a clear vision of his pipeline.

He knows, as he once put it, "what is required for it to be a reality, not a pipe dream. "

He told stockholders at the December 1984 meeting:

"I feel like the little boy in first-grade art class. The teacher was having the class draw a picture of anything they wanted. After several minutes she called time and asked everybody to stop drawing. One little boy in the back of the room kept drawing.

"The teacher demanded, 'Cecil, quit drawing. '

"I kept drawing. So she walked back to my desk and said, 'What in the world are you doing? '

"I replied, 'I'm drawing a picture of God. '

"Looking puzzled, the teacher looked down and said, 'How can you do that? No one knows what God looks like. '

"I looked up and replied:

" 'When I get through with this picture they will.' "