Riding for a Fall

By Richard Stengel

When the final gavel thumped down at the auction up at John Connally's 7,300- acre spread near Floresville, Texas, last Saturday, 126 of his prized Thoroughbreds and quarter horses had been sold off for nearly $400,000. Two of the latter were the progeny of a proud champion, Dash for Cash. The . stallion's name was apt, for the auction came at a time when Connally himself is making a run for money. Numerous creditors are pursuing the former Texas Governor and U.S. Treasury Secretary for millions in unpaid loans on a host of flailing ventures. Connally, a man as outsize as Texas itself, is in the same predicament as the state where he has always stood tall: he needs the cash or his overextended business will be dashed.

After Connally, 69, failed to get out of the starting gate for the 1980 G.O.P. presidential nomination, he returned home with the idea of becoming what Texans call "big rich." He was already worth about $6 million -- cattle feed by local standards. But Big John saw no end to the twin booms in oil and real estate, and aimed to parlay his connections and powerful salesmanship into serious money.

He formed a partnership with his protege, Ben Barnes, 48, a former Lieutenant Governor. With an initial investment of about $5 million apiece, the two men borrowed millions more to finance the construction of office buildings, shopping centers and luxury condos. Bankers practically threw money at them, and the two supremely confident former politicians readily signed personal guarantees for a variety of construction loans. "He was so persuasive and charming he could make you believe day was night," says Roger Chapman, a former business partner. In just three years Connally and Barnes built up their assets to a high of $300 million.

But as oil dropped from $32 a barrel to $9, the Texas economy went dry -- and just about everything that Connally and Barnes touched turned bad. Their $14 million, 14-story office building in Houston, 80% vacant, was foreclosed on and sold at auction. A swanky housing development, Triple Crown condominiums in Ruidoso Downs, N. Mex., is the target of a foreclosure suit. More than a quarter of the 212 lots in Austin's plush estates of Barton Creek sit unsold. A creditor has sued to foreclose on four shopping centers; a fifth has already been lost.

Altogether, Connally and Barnes owe at least $60 million and have been hammered with a score of lawsuits charging nonpayment of loans. "Connally has gone through the same predicament that a lot of Texans are going through," says a fellow Texan and friend, former Democratic Party Chairman Robert Strauss. They "bet too much. They believed the trees were going to grow to the sky."

Connally, who grew up poor on a hardscrabble farm in Floresville, is said to be worried, but determined to tough it out. That is no surprise coming from the man who was wounded during the assassination of John F. Kennedy in Dallas in 1963 and then went on to become a power in the Republican Party. "As bad as all this seems to you," Connally told aides recently, "it's not as bad as being shot through the chest." He and Barnes have been jetting around the world to drum up cash, because Texas, says Barnes, "is capital-poor now."

Connally never incorporated his main business, and is now vulnerable to creditors' claims on his personal assets. A high roller, Connally has begun to retrench. While he still maintains his Floresville ranch and his $960,000 home in Austin (with his and hers Jacuzzis), he sold his house in Santa Fe and put a FOR SALE sign on a penthouse condominium on South Padre Island in the Gulf of Mexico. His treasured racehorses were the latest to go. A man who never seemed to doubt himself, Connally still believes he can ride out his troubles. But this time he may well have tripped over his own self-confidence.

With reporting by Lianne Hart/Houston and Richard Woodbury/Austin