Do You Sincerely Want To Be Rich? (25 page)

    After the war, he served as a liberal Democratic Congressman from California for ten years. He ran for Mayor of Los Angeles and Governor of California, but lost each time. His political career was marred by allegations that a savings-and-loan company in Maryland paid him a salary while he was in Congress.

    Barney Rosset, president of the Grove Press and best known as the distributor of
I am Curious Yellow,
has known Roosevelt for twenty years, and his family had been in several business ventures with him. Rosset sums him up as shrewdly, 'a really nice guy and a courageous congressman, who had a strange career: he always seemed to be just missing.'

    In 1966, when he was introduced to Bernard Cornfeld, Roosevelt was the US Ambassador to the United Nations Economic and Social Council, a job which essentially involved dealing with the under-developed nations of the world. If he was feeling, at 59, any disappointment about the way his career had developed, he was not showing it. James Roosevelt is a huge, hearty man, standing six feet four, with horn-rimmed glasses, and as bald as an egg. He remained unfailingly affable and sociable, a great party man, knowing everybody worth knowing between Geneva and Los Angeles.

    Americans with a degree of political sophistication were perhaps not very much impressed when Cornfeld 'captured' James Roosevelt. But they underestimated Bernie's coup. Franklin Roosevelt may have had detractors as well as admirers within the United States: outside the United States, he had for practical purposes nothing but unqualified admirers. Even in

    Communist countries, FDR's son carried a name automatically taken as a guarantee of judgement, absolute probity, and perhaps most important, generosity. The benefits that Roosevelt brought to IOS could scarcely be measured.

    Cornfeld originally asked him to be an outside director of the Fund of Funds, without quitting his diplomatic post. The recruitment did not go smoothly.

    Roosevelt asked for time to consider the offer, and set off back to New York by boat. While he was still in the Atlantic, Cornfeld released the news of his appointment. The press in America, led by the New York Times, immediately questioned the propriety of a serving ambassador taking that particular job. Roosevelt, reached on the
United States
by a
New York Times
reporter over the ship-to-shore telephone, sounded unconcerned about his new associates' troubles with the sec. 'Questions are raised about the United States Steel Company too, aren't they?' he said. But the State Department, deeply embarrassed, had to concede that there did seem to be a certain possibility of conflict of interest. A small but nasty row blew up. 'Ambassador James Roosevelt,' thundered the
New York Times
editorially under the headline 'Dubious Association', 'has shown poor taste and judgement in becoming a director of the Fund of Funds… it is clearly a matter of national embarrassment for an ambassador to be a director of a company involved in litigation against the Government of which he is a part.'

    By the time poor Roosevelt's ship docked in New York, a small army of reporters, photographers and television crews was waiting for him, Ed Cowett had flown to New York to do what he could to improve the image-improver's image. In a meeting the same day, Roosevelt agreed to resign from the Fund of Funds to satisfy the State Department. And Cowett proposed that Roosevelt should come to IOS as a full-time executive with a splendid salary, not to mention the benefits of the stock option plan. Roosevelt accepted, and started work formally for IOS on December 16, 1966.

    Cornfeld was delighted with his new personal ambassador to the international establishment, and quickly put him to work improving IOS’s external relations, which sorely needed improvement at the time, as we have seen. But he also took good care that neither Roosevelt nor anyone else should get any wrong ideas about the true strength of Roosevelt's position inside IOS.

    Very soon after he joined, Roosevelt characteristically proposed to give a splendid party to celebrate his new functions. Cornfeld enthusiastically agreed, and put the company's lakeside villa, Bella Vista, at his disposal.

    Roosevelt went ahead with the arrangement for a banquet in the grandest style. An impressive guest list of un delegates, ambassadors, bankers, generals and politicians was invited, and a distinguished chef was hired with an entire kitchen staff to do justice to the occasion.

    An hour after the time appointed on the invitation cards, the ambassador's party was in full swing. By ten, it was still getting noisier, and by eleven the last limousine had disgorged the last general. Only one person was missing to make it the most glittering social occasion Geneva had seen for many years, the person they had all been invited to meet: Bernie.

    By half-past eleven, the chef was threatening to commit hari-kari amid the ruins of his dinner.

    Roosevelt was frantic. Around midnight, he surrendered, and asked the guests to take their places for dinner. 'Gentlemen,' he said, 'I'm sorry, but Mr Bernard Cornfeld will not be with us this evening. We work for an extremely brilliant man, a man with a peculiar personality. He may even be a genius. And we must give genius its due.'

    It is said that Roosevelt did not forget this first lesson.

    One of the many countries where IOS was in bad odour at the beginning of 1967 was Iran. And Iran was also a place where the name of Roosevelt executed an even stronger magic than elsewhere, for the excellent reason that the Shah of Iran owes his throne to a man called Roosevelt.

    Kermit, or Kim, Roosevelt in 1953 pulled off there one of the most daring and successful of all the cia's secret operations in the Cold War.

    The Shah was then at loggerheads with his left-wing Prime Minister, Dr Mossadeq, who had expropriated the assets of Western oil companies, and assumed near-dictatorial powers, including explicitly the power to sell the Shah's estimated $50 million worth of jewels, and the Eisenhower Administration sided with the Shah.

    Kim Roosevelt slipped into Iran to help the Shah, who had fled to Rome. A few days later Roosevelt infiltrated a large number of supporters of the Shah into Teheran disguised as a religious procession. At a prearranged signal, the 'fanatics' whipped out arms from under their robes, and headed for various key points. By midnight Operation Ajax was completely successful, and Mossadeq was under arrest. Two days later the Shah came back to Teheran.

    James and Kim Roosevelt are only remote relations. Kim is a grandson of President Theodore Roosevelt, who belonged to the Oyster Bay branch of the family. James's father, FDR, belonged to the Hyde Park branch of the family.

    In 1965 Ira Weinstein, who became the boss of IOS in Canada, handed over a flourishing operation in Iran, and indeed in Afghanistan, Pakistan, India, Ceylon and Nepal, all of which were controlled from Teheran. The man he chose as his successor was Bill Haller, a former schoolteacher who spoke Farsi (i.e. 'Persian', the principal language of Iran).

    Weinstein admits that he had turned his attention from the expatriates to the Iranians as early as 1962. 'The Iranian people are no different from any others; they want to make more than bank interest on their money, and to send their children to good schools in Europe and the States.' But he insists that all the Iranians who bought IOS funds in his time had external accounts, IOS’s own lawyer in Teheran, Dr Chahin Aghayan, has confirmed to us that one of the reasons for IOS’s troubles there in 1966 was 'foreign currency transactions not made through the Central Bank'.

    It would seem that after Haller became manager the salesmen turned to less wealthy Iranians. The outflow of money became more noticeable, and the clients became less discreet. Some of the salesmen paid no taxes, for one thing. And Haller himself had a passion for clandestinity. He used codes and ciphers, and if a client's name appeared on a document he would snip it off.

    Gradually his affairs got into a hopeless tangle, which was made even worse by what Weinstein called 'some maniacal deals', one of which involved shrimping in the Persian Gulf. To cap it all, a large mail pouch containing cheques to be invested in Geneva was handed to an Iran Air hostess who turned out to be an agent of savak, the secret police.

    At the end of 1966, the Iranian government had had enough. 'They lowered the boom in the direct way they have there,' one Geneva executive remembers. But Iran was a valuable market. With James Roosevelt's help, Bernie Cornfeld and Allen Cantor were determined to get back into it if they could.

    We have described the Iran crisis in some detail because in many ways it was a model of the world-wide campaign by IOS’s new 'diplomatic service' under Roosevelt to deal with what were euphemistically called 'sensitive areas'.

    The first step in this instance was a little untypical. Haller was summoned home and terminated. He was perhaps a little unlucky. True, he had made the supreme mistake of getting caught. But other managers - Tregea, Jessen and Borlin in Brazil, for example - had been caught without losing status.

    The next step was more imaginative. James Roosevelt used his contacts to get an audience with the Shah, who was having a skiing holiday at St Moritz. Roosevelt and Cornfeld went up to St Moritz to see the King of Kings and succeeded in persuading him at least to allow them to negotiate with the Central Bank and tax authorities.

    Cornfeld almost spoiled this promising beginning by bragging about his chat with the Shah. The Shah was understandably annoyed, but Roosevelt was able to soothe his ruffled feathers in time, and with Allen Cantor, he flew off to Teheran to talk to the Iranian officials.

    A whole series of meetings followed, with several negotiators involved on the IOS side. They enlisted the good offices of the Shah's nephew, Prince Shahram. IOS also promised to pay all the salesmen's unpaid back taxes, and to give an undertaking of good behaviour.

    But IOS diplomacy in all the countries where it was Roosevelt's job to improve IOS’s relations with the government did not only rely on promises to go and sin no more, or even on Jim Roosevelt's talent for making friends and influencing top people.

    The central argument Roosevelt was able to use was designed to appeal to the host country's own economic advantage.

    This was the 'national fund' concept. Essentially the idea was that where it was objectionable for balance of payments reasons for citizens of a particular country to buy foreign currency to buy foreign mutual funds, thus in effect exporting capital, IOS would provide a local fund. This would invest a high proportion of the money raised in the country itself.

    The 'national fund' was a sound enough concept in principle in a country with a developed securities market. It could be made to work in Britain, in Germany, in Canada, or even in Italy, where Fonditalia was being developed at this very time, and has been successful in spite of the limitations of the Italian stock exchanges. But the 'Iranian Fund' which Roosevelt and his colleagues now proposed to set up as a
quid pro quo
for being allowed to go on selling in Iran was something else again.

    There is a stock exchange of sorts in Teheran. But only a handful of Iranian companies are listed on it. Few have shares widely held by the public, and fewer still are large enough to offer any hope of liquidating in a hurry without heavy loss. If an IOS Iranian fund was to put half its money in Iran, which is what was proposed, what could it be invested in?

    And here we meet one of the characters who was to play a role in the
denouement
of the IOS story: none other than John M. King, the Denver entrepreneur who was looking for 'natural resources' to put his clients' money into.

    We shall have to describe in greater detail later how King came to be so closely associated with IOS. What matters here is that he was very close, and that he was interested in a major copper field in Iran. It was only in the exploration stage, and would therefore have made a highly unsuitable investment for an open-ended mutual fund, especially one for small savers in a poor country. But several of those involved in the negotiations on the IOS side agree that the copper project was used as a providential answer to the question: 'What will, your Iranian fund find to invest in here?'

    In the end, plans for an Iranian fund never came to fruition. Nor did plans for an Iranian insurance company, which were also discussed. On November 28, 1968 the Iranian government suddenly declared the activities of IOS and all other foreign mutual funds illegal. All foreigners connected with the company were given from 24 hours to two weeks to leave the country, and all Iranians were asked to sign a statement saying that they would have nothing further to do with IOS. The IOS men were impressed by the smoothness of the close-down. They were also impressed by its firmness.

    'Could IOS or any similar organization ever operate in Iran again?' we asked an official of the central bank.

    'No-one in their right mind would ever buy anything from IOS now,' was his reply.

    So Jim Roosevelt's diplomacy failed in Iran in the end. But the scope of his efforts over the three years after he joined the company was breathtaking. The subsidiary he was in charge of was called IOS Overseas Management Ltd for a while. Later its name was changed to IOS Development Ltd. The assignment remained the same: to improve relations with the governments that had 'lowered the boom', or threatened to, either because IOS had been selling illegally, or because it was taking too much capital out of their countries, or because of some other 'sensitive area'. In each case Roosevelt's prescription was the same: either an equity-linked national insurance plan, or a national fund, or both.

    As a solution to the 'sensitive areas' problem it can hardly be said to have worked brilliantly. For it was in the developed countries that IOS was able to establish successful national funds. In the countries where Roosevelt was trying to use national funds to prise open markets that had been closed to IOS, very few funds ever came into existence.