The Fish That Ate the Whale (20 page)

Zemurray had become increasingly aware of the direness of the situation. America teetered on the edge of an abyss. He would see it in the collapse of the national economy, in the army of men who had taken to the roads, in the shuttered factories. He would hear it in the hush that settled on the docks, where only half the shipping lines were running and the stevedores had little to do. He would recognize it most clearly in his own dividend checks and the reports that came from the Boston headquarters of United Fruit. The company, which had weathered the stock market collapse of 1929, was being crushed by the economic depression that followed. As one of the world's first truly global corporations, United Fruit—its entire product line grown overseas, most of its market domestic—was uniquely vulnerable. In 1930 and 1931, the company diminished in ways that would have stunned Preston and Keith. Collapse of demand, labor unrest, deflation—there was serious trouble. In 1928, U.F. had made $45 million in profit. In 1932, it made just $6 million, an 85 percent decline. This meant fewer workers employed, fewer fields planted, fewer bananas grown, which meant even lower profits, which meant still fewer fields planted and fewer bananas grown. The less we produce, the less we profit; the less we profit, the less we produce. The company was caught in a death spiral.

For Zemurray, the collapse of United Fruit would have been devastating. Most of his net worth was tied up in U.F. stock. The more the company struggled, the bleaker his prospects became. When Sam merged with United Fruit, its stock was trading at just over $100 a share. Two years later, the same shares were going for $10.25. The Zemurray fortune, once figured at $30 million, was valued at less than $3 million by 1932. Whether he was sitting on his porch or walking on the docks, Sam was watching it all go away.

The greatness of Zemurray lies in the fact that he never lost faith in his ability to salvage a situation. Bad things happened to him as bad things happen to everyone, but unlike so many he was never tempted by failure. He never felt powerless or trapped. He was, as I said, an optimist. He stood in constant defiance. When the secretary of state teamed up with J. P. Morgan and the Honduran government in a way contrary to Zemurray's interests, he simply changed the Honduran government. When United Fruit drew a line at the Utila River and said, “You shall not cross,” he crossed anyway. When he was forbidden to build a bridge, he built a bridge but called it something else. For every move, there is a countermove. For every disaster, there is a recovery. He never lost faith in his own agency. With his fortune fast diminishing, it was time to act.

He started by asking two questions. First: Are the challenges facing United Fruit part of the systemic failure of the global economy, meaning there's nothing to do but hope and pray? Second: If the answer to the first question is no, what can be done to move the product, increase profits, resuscitate the company? How can U.F. be saved?

Where did Zemurray go for answers? Did he meet with economic experts and college professors? Did he call Daniel Wing, the chairman of U.F.'s board, and Victor Cutter, its president, and ask, “Do you have a plan?” And even if they did have a plan, so what? These were the same men who had run the company into a ditch. He went to the docks instead, where he spent the winter of 1932 walking through warehouses and standing on the decks of banana boats, talking to fruit peddlers and captains, loaders and stevedores—the people who really knew. (It was the end of his retirement, though few realized it at the time.) He peppered them with questions. He wanted to know specifics, the mood on the isthmus, the color and size of the latest harvest, the speed of the crossing. How fast is the captain running her? Is he letting out all the stops? In this way, he learned, among other things, that the banana captains were on orders from Boston to lay off the throttle and cross the Gulf at paddle speed, thus saving gasoline. But a man focused on the near horizon of cost can lose sight of the far horizon of potential windfall. By quick calculation, Sam realized that whatever money was being saved on fuel was being lost on the high percentage of fruit that ripened during the extra days on the water.
The schmucks! They're losing more than they're saving.

Zemurray wrote his findings in a letter—unusual for him, as he liked to leave no record—which he sent to Boston. He pointed out obvious problems, then went on to paint a troubled big picture pieced together from details picked up on the docks: banana boats running half speed, half full, ripes dumped into the sea, fields of undernourished stems, labor unrest in banana towns where the company had stopped spending. He included suggestions, ideas. Repurpose the boats, fallow the fields, control supply.

The members of the United Fruit board, the financial elite of Boston, were not interested in the ravings of the Russian. They had, in fact, taken over Cuyamel with the purpose of keeping him out of the conversation. Having been well paid for his silence, he was supposed to stay away and shut up. The letter went unanswered. There must have been a moment when Zemurray felt that the sale of his company to these fools had been the mistake of his life. He was like the gambler who had won all night, only to lose everything on the last hand. His concerns, which had been those of an investor—three hundred thousand shares!—grew into something deeper. More than anger, it was the rage of the self-made man who's been treated like something he used to be: the fruit peddler, the immigrant, the schnorrer.

In June 1932, Zemurray traveled to Boston to attend a meeting of the board of directors. The details were reported in
The American
Magazine
and
The Wall Street Journal
: Zemurray sat quietly as a secretary read through minutes and notes, reports from various tropical divisions. The corporate officers then discussed a request from a plantation manager, who wanted $10,000 to build an irrigation ditch in Guatemala. The executives called on experts, who detailed the costs and benefits of the project. Zemurray grew restless. To him, such a debate was symptomatic of a greater problem. The executives running United Fruit did not understand their role, what they could and could not do. He raised his hand, stood to speak. “This man in Guatemala, he's your manager, isn't he?” Zemurray asked.

Yes.

“Then listen to what the man is telling you. You're here, he's there,” said Zemurray. “If you trust him, trust him. If you don't trust him, fire him and get a man you do trust in the job.”

Zemurray went on to explain his frustration with how the company was being run, then offered a few ideas. He had some experience. He wanted to help. His offer was rejected at the meeting, rejected again later by Victor Cutter, who dismissed Zemurray's complaints as the griping of a man who did not comprehend the business cycle.

“I became worried,” Zemurray told a reporter. “I attended a directors' meeting and told the management I was not satisfied. I could see that most of the others also weren't satisfied. I had previously worked hard and had built up a big company into excellent shape. I knew that I could render great service to United Fruit, if given the opportunity. But the directors turned me down.”

*   *   *

My mother says, “Don't go away mad, just go away.”

Zemurray went away mad. He was not used to being slighted, condescended to, rebuffed, ignored. He spent the following weeks on the road, traveling from city to city, sitting in the offices and living rooms of shareholders. He made the same case over and over. The current management is not up to the task. Don't believe me? Just look at the most recent quarterly report. The board must change course, follow the plan I have outlined or something similar. If allowed to continue on its current path, the value of the stock—then selling at $10 a share—will dwindle away to nothing. The company will become a relic: overgrown fields, ships sold for junk. Within five years, United Fruit will be a story of the once-upon-a-time variety.

When Zemurray spoke to the board again several months later, he had with him a bagful of proxies, the voting rights turned over to him by other stockholders. Along with his own shares, these proxies could give Zemurray control of the company, though he kept their existence a secret—for the moment, anyway. The best tycoons are like magicians; they know when to share information and when to withhold.

The meeting took place on the tenth floor of the United Fruit Building at 1 Federal Street in Boston on a January morning in 1933. It was an iconic corporate showdown of the era, remembered and discussed to this day. The outsider finds himself in a room of sneering insiders, the board of United Fruit being made up of the elite as it existed before the levees broke and the Catholics and Jews flooded in: Thomas Jefferson Coolidge, a descendant of two presidents; Channing H. Cox, the former governor of Massachusetts; Bradley Palmer, the company officer who negotiated the buyout of Cuyamel—one of the few people in the room sympathetic to Zemurray; Francis Hart, the oldest son of an original investor in Boston Fruit. A former division head, Hart had published three books on Caribbean life. He was famed for his planter's punch. To such men, Zemurray, with his diets and love of the vernacular, was comical, offensive, crude. This meeting epitomizes the moment the establishment began to give way to the strivers.

The chairman of the board was Daniel Gould Wing, who descended from an old New England family. The president of the First National Bank of Boston, Wing looked askance at uncredentialed, ill-bred strangers who wandered in off the street. To him, Zemurray was still Sam the Banana Man, the fruit jobber from the docks. He already knew what Sam could teach him about the business: nothing.

Wing welcomed Zemurray without looking up, greeting him, as Thomas McCann characterized it, “frostily at best.” Zemurray waited as the board went through its tasks. When it was finally his turn to speak, he chose each word carefully, explaining his ideas in the thick Russian accent that he never could shed. It was the accent of neither the Russian bourgeois nor the peasant; neither the voice of Tolstoy nor the voice of Khrushchev. It was the voice of the Jewish Pale of Settlement, the Yiddish-inflected voice of our grandparents, the fruit peddler, the street haggler, the Yid.

When Zemurray finished, Wing smiled and said, “Unfortunately, Mr. Zemurray, I can't understand a word of what you say.”

The men at the table started to laugh. Zemurray's pupils narrowed to pinpricks, his hands turned into fists. He muttered, then stormed out. Perhaps the board members believed Zemurray had been chased away, was fleeing back to New Orleans. In truth, he had only gone to retrieve his bag of proxies. Returning to the boardroom, he slapped them on the table and said, “You're fired! Can you understand that, Mr. Chairman?”

What followed was the sort of graveyard silence in which each board member recalculated his own prospects.

“You gentlemen have been fucking up this business long enough,” Zemurray told them. “I'm going to straighten it out.”

Much later, analysts pointed out the flaw in the noncompete clause Zemurray signed at the time of the merger: it barred Zemurray from working for a rival or starting a new fruit company, but it did not foresee the outlandish possibility of Zemurray taking over United Fruit itself. “[I didn't want to watch] the greatest company in the world go to hell in a hand bucket,” Zemurray explained.

Victor Cutter was fired. He had run United Fruit for eight years, had served in its ranks for thirty. His earlier triumph over Zemurray had suddenly been revealed as stage one of his eventual defeat. By merging with Cuyamel, he had invited the wolf into the house. Zemurray retained just a few members of the United Fruit board, including T. J. Coolidge, who would become one of Sam's confidants, and Francis Hart, whom Zemurray made president, a figurehead position perfect for Hart, who was a link to the old banana royalty. His presence would reassure certain partners and politicians, as well as more tradition-minded investors. It gave the illusion of continuity, suggesting there had been no radical break. Of course, there had been. The past was dead and gone. All power would now be concentrated in the hands of one man: Samuel Zemurray, who named himself United Fruit's managing director of operations. When Francis Hart died several years later, Zemurray added “President” to his title.

It was in these years that Zemurray became known as the dictator of the banana trade, a man who, with a single phone call, could undermine governments. It was a moment of triumph, a decisive coup d'état in a career that was nothing but coup followed by coup. When Zemurray showed up at the first meeting of the new board, he said, “I'm ready to go to work.”

Here's how the above events were reported in
Time
on January 23, 1933:

One day last summer Samuel (“Sam”) Zemurray of New Orleans strode belligerently into a room at No. 1 Federal Street, Boston, where the directors of the potent, far-flung United Fruit Co. were holding a meeting. Down on the long table from his old enemy, President Victor Macomber Cutter, he flung a handful of proxies. Said he: “You've been 
____
ing up this business long enough. I'm going to straighten it out.”

To most of the reporters and stock analysts who covered United Fruit, Zemurray was a mystery.
The New York Times
called him “the fish that swallowed the whale.” “Except for a comparatively limited circle of friends and acquaintances in Honduras and Louisiana, few people actually knew him,” Charles Morrow Wilson wrote in
Empire in Green and Gold.
“Outside of the New Orleans telephone directory, where his residence and office addresses were listed, the new boss's name was not to be found in any widely used directory. For the most part Eastern financiers knew Zemurray only by name, if at all. During his occasional attendance [at] directors' meetings in Boston and New York, United Fruit men knew him only as an extremely tall, rather well-dressed man, who listened thoughtfully, spoke little, rarely wrote letters, occasionally argued vehemently and asked questions of devastating directness, then lapsed into deeply reflective silence. Observers also noted that the
hombre
from the far south had an amazingly good memory, that he knew Honduras like the contours of his hands, which he frequently studied thoughtfully while listening to others talk.”