Do You Sincerely Want To Be Rich? (24 page)

    In the meantime, the fall-out from Deonna's question continued. The Federal Council in due course handed down its formal reply, confirming Deonna's charges. It summarized the steps that had been taken to stop IOS posing as a Swiss corporation in its publicity when it suited it to do so, and to control door-to-door selling in Switzerland itself. Thirdly, it confirmed that IOS had indeed been breaking the rules by hiring foreigners without permission, and added ominously that 'The authorities in Geneva have taken the necessary measures to bring the situation back into conformity with the law.'

    The situation was that IOS had some 1,200 employees in Geneva, exactly 87 of whom had work permits. For many reasons, the Swiss in general and the canton and republic of Geneva in particular do their best to restrict immigration. They would have to restrict it anyway: Geneva is a small and very attractive place. There is also a growing amount of quiet and sometimes not-so-quiet xenophobia. And the authorities are seriously worried about the economic dangers of an unlimited influx of foreign workers.

    Like other people elsewhere, the Swiss are particularly irritated by the spectacle of foreigners breaking their rules. And here was a large and particularly conspicuous group of foreigners apparently going out of its way to break the rules, IOS people didn't bother to get work permits. They didn't bother to get residence permits. Some didn't pay taxes. And in order to get round the rules imposed by the
'controle de l’habitant',
the department of the cantonal government responsible, they adopted a number of cheerfully unsubtle ruses, IOS office workers were registered as students at the university. Dummy companies were bought, and a dozen IOS accountants or secretaries would apply for work permits as employees of some mythical import-export business.

    The civic bureaucracy and the police began to get cross. They began to raid the Bude apartments, behind the Intercontinental Hotel, which, being the most expensive in town, were naturally highly favoured by losers. They found dozens of people there without valid papers.

    What made things worse was the insouciant arrogance with which the IOS chiefs treated the Swiss bureaucrats. On one occasion Cornfeld himself called an official of the
controle de l'habitant
a 'son-of-a-bitch' and threw a handful of pens and pencils in his face. 'They behaved exactly as if they were in a conquered country,' one IOS lawyer told us. ‘I repeatedly made the point that if a Swiss company behaved that way in New York, the cops would come down and clear the building with their nightsticks in two minutes flat.'

    In the end the Geneva police came within a whisker of doing just that. Early in 1967, Bernie Cornfeld hired Raymond Nicolet, perhaps the ablest criminal lawyer in Switzerland. Nicolet was called in a panic. Two inspectors had arrived at the front door of 119 Rue de Lausanne and were getting ready to lock it and physically shut IOS down.

    The first words Nicolet spoke on behalf of his new clients were
'Ou sont vos mandats?'
- 'Where are your warrants?' The two inspectors, as it happened, hadn't got them, and things were smoothed over just short of the brink of catastrophe. For to be thrown out of Switzerland would have been a serious blow to IOS in several ways. The sales force found it an inestimable advantage to wrap themselves in the mantle of Swiss financial respectability. A law suit in Germany suggests just how powerful a talisman this was. On July 19, 1968, a Dusseldorf court found for a plaintiff, Adelgisa Rentsch, and against 'IOS Ltd (sa), Panama City', expressly because 'the accused concealed the fact that it is a Panama company and knowingly gave the impression that she was taking out the IOS programme with a Swiss company.'

    The judge upheld the plaintiff's contention that she would not have signed her investment contract if she had realized it was with a Panamanian company. 'In Europe,' he said, 'and especially in Germany, there is no very great confidence in the stability of South American republics.' In due course IOS modified its sales literature so that it could no longer be accused of misleading clients in this way. But it remained true that an address in Switzerland was deeply reassuring to clients everywhere: an address in, say, Nassau, would have had very different overtones.

    In any case, the world-wide sales force depended on communications with headquarters. Salesmen who didn't get their advances against commission on the dot would soon drift away to work for other funds. Clients who didn't get their certificates promptly would redeem. And all these communications depended on the IOS computer. The staff who ran the computer, were equally in danger of being expelled.

    The fact of the matter was, however, that however outraged the Genevese authorities might be, they were very reluctant to throw IOS out. There was the prosperity IOS brought to the town - those Patek Philippe watches, and those dinners at the Richemond and the Chat Botte, the oceans of whisky and gasoline and perfume that IOS and its employees consumed.

    And so the city fathers negotiated. But they did not do so in any lenient or kindly spirit. And they had all the high cards. The settlement they imposed was appropriately tough.

    First they insisted that IOS set up a Swiss company with assets within the jurisdiction. They did not want to find themselves dealing with a Panamanian will o' the wisp that might steal away across the frontier one dark night leaving them clutching an empty jacket.

    Then they confirmed the original quota of 87 work permits -but only 87.

    And they agreed to waive fines and back taxes, or rather to commute them for a sum in the region of one million Swiss francs, or say $250,000.

    IOS could stay in Switzerland. But the greater part of the IOS administrative machinery would have to go somewhere else, and go quickly.

    Where could they go? Many places were suggested: London, Munich, Luxembourg. Then Monaco was chosen. An option was taken on a palace there to be turned into office space. But Bernie had had a brighter idea.

    The Geneva international airport at Cointrin is only a bare two miles from the main IOS offices in the Rue de Lausanne. But the high wire fence which guards the frontier between Switzerland and France runs directly along the far side of the airfield. The main highway from Geneva to Paris passes under the main runway in a short tunnel and then immediately runs up the main street of what was still in the spring of 1967 an unreconstructed French village, complete with cafe, water-pump, farm tractors and mud on the road.

    This is Ferney-Voltaire, which owes half its name and the whole of its fame to the fact that the greatest of French writers, wits, and cynics spent the last twenty years of his life there, obeying his own advice to cultivate one's garden, and at the same time standing poised to slip over the border to safety in Geneva whenever one of his more waspish sallies got him into trouble with the French authorities.

    Ferney is only three miles from the centre of Geneva; but in every other possible way it is in another country. All road traffic between Geneva and Ferney must stop at a border equipped with customs posts and armed guards. Two telephone lines, in 1967, had to accommodate all the traffic, not just between Geneva and Ferney-Voltaire, but between Geneva and the French system as a whole. Ferney was totally unprepared in every way to absorb three quarters of the head office staff of an international financial organization whose brain and nerve centre were going to stay across the border in Geneva.

    Yet this is just what Bernie Cornfeld decided to bring about. And he succeeded.

    Voltaire's successor as the leading citizen of Ferney is an enterprising young businessman called Roland Ruet. Ruet is a close friend of the mayor of the neighbouring town of Divonne, Marcel Anthonioz, the major shareholder in a nearby casino and the junior minister for tourism in the French government. In March 1970 Bernie Cornfeld and Ed Cowett proposed at an IOS board meeting the IOS should buy the whole Divonne hotel and casino complex, in which Anthonioz is a shareholder, and develop it in conjunction with Hugh Hefner of
Playboy.
The board turned the idea down.

    ‘I was very helpful in getting the IOS people their
'permis de sejour'
(residents' permits)', Mayor Ruet confided to us. 'IOS was grateful, and made a grant of two million francs to help build a new school for the commune. They also made an interest-free loan of three million francs for a swimming-pool, which is still under way. We haven't had all the money yet.'

    'Were there any other conditions?' the Mayor was asked.

    'No. And please note that these were not conditions. This was all a spontaneous gesture, IOS was very happy at the way they had been received here, and this offer was only made six months after the move. That shows there were no conditions.'

    'During the move,' we asked M. Ruet, 'did you act as a consultant for IOS?'

    'Yes,' he said. ‘I helped them. They had to get building permits and all sorts of authorizations had to be obtained.'

    'Did you do this in an honorary capacity, or were you paid for it?'

    'Purely honorary.'

    Even when IOS had been guided with an expert hand by the Mayor through the thickets of bureaucracy there were still other problems to be overcome. Land had to be bought.

    Compelled to negotiate with landowners, builders and other shrewd fellows in a hurry, IOS found the move extremely expensive. Everything had to be provided: not just office space, but a restaurant, a club, bus service, housing, and a large loan to the postal authorities for improved telephone service. The whole bill came to over $4 million, not counting $128,000 for professional services. For the architects, shopkeepers, contractors and landowners of a remote corner of provincial France, it was as if they had struck oil.

    For the rest of the citizenry of Ferney, the arrival of IOS was a more mixed blessing. The population of their village doubled. Prices went up in the shops. Parking became a nightmare, and traffic accidents increased. There was a good deal of tension between the villagers and the new arrivals. For already, IOS had begun to affect a characteristic style, powerfully influenced by Bernie Cornfeld's personal attitudes. The key to it was the idea that the rules did not exist for them. You cannot import 1,300 foreigners, of every nationality, mostly young, disproportionately single, into a small French village, without creating powerful antagonisms. You couldn't import such a group into a comparable area in Texas either without stirring up similar resentments.

    The IOS spirit never did have any patience with such considerations. The move to Ferney was, however, an impressive feat. The contract for the Ferney buildings was signed on March 6. The first staff moved into their new offices on May 15. And by September 16, the whole complex of prefabricated buildings in plate glass and blue curtain-walling was finished.

    Bernie Cornfeld and his men had certainly risen to the challenge. But it was a challenge provoked by his own indifference to the Swiss authorities and their reasonable sensibilities. It is an article of faith with IOS men that the Swiss Establishment persecuted them. The record suggests that on the contrary Swiss only reacted under extreme and repeated provocation, and that they acted in the event with moderation. Bernie Cornfeld had only himself to blame for placing IOS under the absurd handicap of having to split its head office in two.

    

    

    

    
Great efforts are made to improve the image of Investors Overseas Services. Eminent international citizens are brought into the company. They are carefully excluded from real power.

    In 1931, shortly after he left Harvard, Franklin Delano Roosevelt's eldest son, James, was offered a job in the insurance business. The salary was $15,000 a year, a handsome sum in those days. The duties were not arduous: according to young Roosevelt, they consisted mainly of sitting behind a large desk. He took the job.

    ‘I wasn't being kidded,' the President's son told
Collier's
magazine later. ‘I knew perfectly well that they were paying me for the name… I was newly married, and I needed the money.'

    He was hailed as a 'young meteor' of insurance, but in the event he did not rise to great heights in the business. There are always difficulties, it is said, about being a great man's son, and there were special difficulties for FDR's son. The thirty-second president made plenty of enemies of the sort who would not hesitate to attack the son, where they feared to attack the father, and James Roosevelt's early years were studded with small but often damaging political controversies, which he did not always handle with the greatest possible tact. By 1966, when he went to work for Bernie Cornfeld, much of his career had slipped past in a pattern of bright hopes and disappointments.

    He went out to Hollywood to work for Sam Goldwyn. Then

    he set up his own business to sell coin-in-the-slot movies for

    bars, saying: ‘I want to make motion-picture production my

    life work.' But his interest in movies didn't last.

    He built up a magnificent war record, winning the Navy Cross for 'extraordinary heroism'. Few of his brother-officers in the Marines have forgotten the huge, enthusiastic man with the two big.45s strapped to his thighs. 'When he came to us,' recalled one professional Marine in affectionate reminiscence, 'he didn't know his ass from a hot rock. But he sure was hot to trot.'

    Yet even this had started in an aura of controversy, because at first James had gone into the Army as a lieutenant-colonel. It was an error, and he resigned quickly, to join the Marines as a captain.