The Billionaire Who Wasn't (26 page)

Harvey Dale moved immediately to limit the damage. He asked the Rockefellers for advice on how to handle the publicity. He suggested that Feeney travel under an assumed name and hire a bodyguard. Feeney did not change his daily routine, but he did heed the advice of Cornell alumnus Jules Kroll, who ran a security firm: “If you are looking for a cab and there is one waiting for you, never take that cab, take the next one.”

The title “Rich, Ruthless and Determined” referred to Feeney and Miller.
Forbes
described Feeney as highly strung, fast-talking, fast-thinking, frugal, and a frenetic economy-class traveler who was most content at 36,000 feet, and Miller as an extrovert who wore his silvery hair modishly long and favored bespoke suits. It had an account of Feeney appearing one day at a business meeting in London with a pin holding up his trousers.

“He did that because he liked to show he was a common man,” recalled Bonnie Suchet, his office manager in London. Feeney saw the humorous side: He sent associates a note with the
Forbes
article attached by a safety pin.

The
Forbes
reporters, Andrew Tanzer and Marc Beauchamp, knew nothing of Feeney's philanthropy, but they clearly had a good inside source in DFS. They described how DFS had forged close links with Japanese tour groups, evolved complex tactics to get them into their downtown shops, and squeezed suppliers to mark up goods by up to 200 percent. They also knew of the Camus relationship. They quoted Desmond Byrne, who had set himself up in Honolulu as an analyst of the duty-free business. The DFS shareholders guessed that Byrne had soured on them because of his mistake in leaving the company; if he had stayed on as accountant, he could have been Alan Parker. Earlier that year, Byrne had sent a letter to the
Honolulu Star-Bulletin
accusing DFS of greed for seeking special government treatment by organizing a golf tournament for Hawaii legislators.

Forbes
estimated that DFS sales the previous year had soared to $1.6 billion. They were close to the mark. A confidential internal memo prepared by the DFS finance department that year for the four partners revealed that in the decade before 1988, annual sales had increased from $278 million to $1.543 billion. It was an astonishing growth rate—almost 19 percent per annum. What only the four owners knew was that during that period, they had received cash dividends of $867 million, of which Chuck Feeney had got $334 million.

In the same edition of
Forbes
that listed him as a billionaire, Feeney noted an editorial by Deputy Managing Editor Lawrence Minard, in which he wrote that the only ways to get off the
Forbes
400 were to (1) lose your money, (2) give it away, or (3) die. Five days later, Feeney wrote a memo to Harvey Dale. “I have come to the following conclusion,” he wrote in his slanting backhand. “For personal and family reasons I do not intend to appear on the
Forbes
list next year.
Forbes
has stated the conditions under which one can get off the list. Option (1) is unlikely. Option (3) is undesirable. That leaves Option (2).” The best thing to do would be “to convince
Forbes
to delist for the future and be cooperative with our desire to minimize foundation exposure.”

Feeney suggested that a private meeting be arranged with the vice chairman of
Forbes,
James J. Dunn, to advise him about their need to maintain confidentiality.

Dale and Hannon turned to the public relations firm of Fleishman Hillard in New York for professional advice. Senior Vice President Peter McCue told them bluntly, “There is no way for Chuck to be removed quietly from the
Forbes
list.” He advised instead that they prepare for a public announcement on their own terms. “We can ill afford to have it misrepresented by a crusading journalist, eager to ascribe sinister or dubious motivations to Chuck, so that we will be forced into defending what should have been praised in the first place,” he warned them. After that, they could arrange a private meeting with
Forbes
.

Over the following weeks, Fleishman Hillard produced voluminous assessments of the prospects for getting Chuck dropped from the
Forbes
list. On November 22, Peter McCue submitted a 2,000-word memorandum saying they could give the true story of Chuck's net worth to a rival journal, hold a press conference to reveal the existence of the Atlantic Foundation, or set up a private meeting between Chuck and Malcolm Forbes, proprietor of
Forbes
magazine, at which Chuck would offer proof of the error—that he was a billionaire—in exchange for a correction in his magazine. He ruled out the first option as it would humiliate
Forbes
and the magazine might seek to dig up dirt on Feeney to prove it was right: “Rats don't become more lovable by placing them in a corner.” A press conference would similarly embarrass
Forbes,
“swiftly, openly and globally all at once.” However, by going to Malcolm Forbes himself, Chuck would be giving him a wonderful Christmas present, “the chance to feel truly good about himself by doing the only honorable thing.” (Beside this suggestion, Feeney scrawled “Huh!”) If Forbes failed to do the “decent thing,” they could fall back on options one or two.

The favored option had one flaw. Feeney would not subject himself to an interview with Malcolm Forbes, as he made clear in a comment on the margin.

Chuck Feeney and Harvey Dale had good reason to be apprehensive about public scrutiny of the still-secret foundation. With a fortune estimated by
Forbes
at $1.3 billion—and it was certainly greater—the Atlantic Foundation, if registered in the United States, would be one of the ten largest American charitable institutions, about the same size as the Mellon Foundation and close behind the bellwether $1.6 billion Rockefeller Foundation. Yet as Paul Hannon pointed out in a memo that he sent to Feeney by courier on November 30, 1988, the Atlantic Foundation's annual giving over the previous three years ranged from $10-$20 million, well under 2 percent of its assets, and it had only five employees. By contrast, the Mellon Foundation had distributed nearly $65 million the previous year. This made the Atlantic Foundation look very stingy, or worse.

Forbes
might in fact conclude that the Atlantic Foundation was a tax-efficient method for Feeney to retain control of most of his fortune. Why else would he create a secret offshore foundation over which he had retained effective control, not subject to American laws requiring extensive disclosure and a higher rate of annual giving? American law prohibited large investments in related enterprises, but Feeney, through the foundation, could continue to invest in profitable opportunities without restriction, with income from offshore investments flowing into Bermuda free of U.S. tax.
Forbes
might also claim that as a foreign entity, the foundation paid no capital gains tax on sales of U.S. investments, and Feeney could pay himself from the foundation without interference from the IRS.

“Harvey was very draconian about not trying to get exposure, I shared that view, but the problem was that when you come to the point you are not
telling people what you are doing, they suspect, they say, ‘What's goin' on here? They must be up to something,'” Feeney recalled.

Hannon suggested that even after a visit to Malcolm Forbes, the magazine might still refuse to remove Feeney from its rich list on the grounds that it could not be certain that Feeney had really given his fortune to charity or that he had simply found a clever way to multiply his millions tax free outside of the clutches of the United States—or both.

After months of mulling it over, Chuck Feeney decided to do nothing. They would let
Forbes
and other magazines with rich lists print what they wanted. The existence of the foundations must be kept secret. Everybody must continue stalling reporters. The culture of
omerta
would remain. Even Feeney bound himself to a code of secrecy. As chairman and chief executive of General Atlantic, he signed a formal contract with the group for his salary, which that year was recorded as only $75,000. It contained a clause stating, “You will not disclose any information acquired by you during your employment.” So he had legally obliged himself to remain silent.

Staff working closely with Feeney could not help but know his secret. However, said Bonnie Suchet, “the circle was so devoted to Chuck they wouldn't betray him.” New senior recruits continued to be put through rigorous procedures. When David Smith was hired as chief financial officer of InterPacific, the Pacific subsidiary of General Atlantic, he was instructed to meet an official from Fleishman Hillard, who told him not to say anything to anybody about anything, and if in doubt to say, “I don't know.” “I had many dinners and lunches with Harvey Dale,” recalled Smith, “and each time he would impress on me the need to keep things quiet.” Smith got adept at handling questions from financiers. “When I needed to go to a bank to secure borrowings for an investment, there were good questions about where the equity was going to come from, and I had to artfully dodge those questions by just saying that it was from a private individual, and he was going to remain so,” he said. “The reaction usually was, ‘Oh! That's very good. Can we meet him?' I would say, ‘No, you can't.' At the end of the day, they just accepted that this person was not going to be revealed, and they were not going to meet him.”

Although
Forbes
identified General Atlantic Group Ltd. as the parent company for Feeney's businesses, it did not make a connection with its highly profitable investment subsidiary, General Atlantic Inc., which had established itself in a leafy suburb of Greenwich, Connecticut, as an engine
producing liquid assets for Feeney's charitable foundation. (In 1989, it became independent as General Atlantic Partners, but the philanthropy remained its main client.) One of its most profitable ventures was the creation in July 1981 in Denver, Colorado, of the General Atlantic Energy Corporation as an oil exploration company that they sold to the Presidio Oil Company in December 1988 for over $100 million. A New York publisher, Niall O'Dowd, recalled a Texas businessman saying, “You know, they are all talking about this guy Feeney down here. He got in at the bottom, and he sold at the top of the oil market. They're all saying, ‘How the fuck does he know to do that? Who is this guy Chuck Feeney anyway?'”

Ed Cohen, the head of Feeney's investment firm, recruited a friend, David Rumsey, a real estate specialist and owner of one of the world's largest collections of old maps, to negotiate property deals for Feeney in New York and San Francisco. “Chuck Feeney is not your usual businessman,” Cohen told Rumsey. “He's a philanthropist. You will be doing real estate business but you will also be helping in that.” He told Rumsey they needed to invest the flow of cash coming in from DFS in good strong investments and try to get a mix of real estate, oil and gas, “and something they call software.” “What's that?” asked Rumsey. “Oh, it's computer stuff,” said Cohen.

The “computer stuff” was providing the Atlantic Foundation with some spectacular successes. A $3-million investment in Morino Associates, a high-flying computer software firm later renamed Legent, was parlayed in 1988 after five years into approximately $52 million in marketable securities that could be liquidated tax free.

Rumsey recalled how he, like Smith, had to convince bankers they were not laundering hot money. “I would go to the bank and say, ‘We are General Atlantic,' and the banker would say, ‘Oh yes! We've heard about you guys. Can you give me your complete statement?' I would reply, ‘Well, we can only go so far up the chain because our principal is a very private person. Going up the chain would show this company is worth hundreds of millions in cash.' At this point the banker would roll his eyes and ask, ‘What kind of business are you guys in?'” Rumsey always refused to say.

Rumsey negotiated major property purchases in San Francisco, including the eighteen-story JH Dollar Building and the landmark Humboldt Bank Building, and the most ambitious San Francisco investment Feeney got involved in—the development of an 865-apartment complex of one- and two-bedroom apartments and studios on the Embarcadero in the heart of the
South Beach neighborhood known as Bayside Village. The original site was covered in old pipes and abandoned warehouses, and the neighborhood was run down, but Feeney, who loved San Francisco, saw the potential for reviving the area and providing affordable housing within walking distance of the famous Fisherman's Wharf tourist district.

Feeney formed a partnership with ForestCityRatner to build the complex with $12 million in equity and a bond issue of $80 million. When David Rumsey and Steve Albert from ForestCityRatner brought Jack Masterelli of Bankers Trust, from whom they wanted the $80 million loan, to see the site, he said, “You guys must be out of your mind.” They convinced Masterelli the investment would work. Then Delancey Street, a foundation that ran rehabilitation centers for victims of poverty and abuse and former gang members, announced it had acquired a 400,000-square-foot space across the Embarcadero from the apartment site. It was run by cofounder Mimi Silbert as “a Harvard for losers.” The prospect “freaked out” the banker. Mimi Silbert sent Feeney a message complaining that his partners were “bad-mouthing” the proposed center as a den of drug abusers, whereas “it is more likely that people will be smoking pot in your place than over here, where the rule is one strike and you are out.” Delancey Street had in fact a reputation as a self-sufficient rehabilitation center where those who survived got an education or training in marketable skills. This was right up Feeney's street, in every sense.

Mimi Silbert offered to help placate the banker, so Rumsey brought Masterelli to her Pacific Heights headquarters for a dinner. “So we all went over, you know, a bunch of young suits, with Masterelli, and she charmed everybody,” he recalled. Masterelli closed the deal. Bayside Village was completed in three phases from 1986 to 1990, to become the biggest apartment development in the southern part of San Francisco. General Atlantic Group retained a small apartment there that Chuck Feeney could use when in town. It became one of his favorite stopping places on his global travels, and he would dine in the restaurant established by the Delancey Street residents.