by David Howard
Among his most successful phony institutions was Mercantile Bank and Trust, also in St. Vincent. Most nations had a central bank operated by its government, and Kitzer fed the perception that a Mercantile guarantee was equal to a guarantee from St. Vincent itself.
Over time, Kitzer became a favorite underworld consultant on counterfeit and stolen securities, advising the black market on how to extract the greatest value with the least risk. He developed ways to slip them into banks as collateral for loans or acquisitions, or into company coffers as assets. For several years Kitzer ran a scam involving prewar bonds the Nazis had stolen; he provided counterfeit ownership papers that could be used to trigger a reparation payment from the German government.
He learned from his mistakes in Minnesota: He moved around constantly, between jurisdictions, never accumulating substantial property or wealth the government could seize. And he meticulously sealed himself off from prosecution. Marks rarely met him or knew his identity, because the brokers “provide insulation from you and the victim,” Kitzer later explained. “They will take the initial heat when the investigation starts.”
If the FBI investigated a bank, the broker became a conduit of information, conveying what the agents were looking for. Kitzer never kept a diary, phone log, or documentation of his scams. Instead, he would type up phony records or self-serving letters he could later claim to have sent. “Sometimes, or many times,” he recounted, “brokers will call and say, ‘I got trouble with this deal. The FBI is going to come here in twenty minutes. They called me. I’m going to type this letter and backdate it five days and tear up the original. Here is what it is going to say and if you are contacted, you acknowledge that you got this letter.’ ”
Everyone involved knew that a fraudulent bank might last only eight or nine months—“and sometimes you can get as much as sixteen months out of one before it explodes on you,” Kitzer said.
When that happened, “It is a matter of telling the brokers, ‘Okay, drop that one. This is the new one now, and start operating with this.’ And it is business as usual right into the new company.”
Despite his fastidiousness, Kitzer was gradually becoming known in global banking and finance—which was partly why, in the autumn of 1975, he began working with Paul Chovanec, a young con artist who had called him to propose partnering on a deal. Kitzer liked the idea of bringing someone up through his system. Chovanec was fresh-faced and relatively clean, an ideal front man. This arrangement pleased Kitzer in another way, too—one that never occurred to his acolyte.
If things really went bad, Chovanec would be there to take the fall.
—
Phil knew about the demise of the Hawaii scheme by the time he phoned J.J. on April 25. He called his protégés constantly to give them updates and to inquire about their activities. J.J. had eventually given him his home telephone number, after Phil complained about the answering service.
“Have you talked to D’Amato?” J.J. asked.
“No, I didn’t call him,” Phil said. “Wait till I see him. I’ll tell you what he pulled in Europe. Jesus Christ. They are so impossible.”
“Was Bimbo Boy there with them?”
“Yeah, Bimbo was there.” Phil recounted how he and D’Amato had had to explain to Iuteri that a German mark was legitimate currency: “Bimbo didn’t know that was money.”
J.J. burst out laughing. “Oh no. Did he show you he was illiterate or something?”
“Oh, yes,” Phil said. “Even Jimmy [Kealoha] said afterwards, he says, ‘You know,’ he says, ‘that Mark is not very smart.’ Even Jimmy picked up on that.”
They cracked up. “That son of a bitch,” J.J. said.
“He is not very smart,” Phil said.
“That goddamned son of a bitch.”
Eventually Phil changed the subject: “What is your schedule this week?”
“We’re down in Indianapolis right now again,” J.J. said.
“You’re down there again?”
“Yes. Brennan lost some bucks last week.” J.J. laughed. “Remember when I last talked to you? We thought we were coming out ahead.”
“Yes.”
“Well, we had a position we didn’t come out ahead on, man. We fucked up….Fucked up not too good. So we are down here trying to save it again.”
J.J. said they would wrap up by Thursday, and after that they would meet again.
—
A week later, the agents met Phil in Chicago for a flight to Miami. He was headed to Western Union to pick up money John Calandrella was sending, but all he wanted to talk about was their next big project.
The First National City Bank of Haiti would be his new vehicle—a crown jewel in his chain of fraudulent financial institutions. The briefcase bank would be a factory for fraudulent paper on a scale worthy of the potential of his two trainees. Jack and J.J. would be the bank’s squeaky-clean directors, and Phil would pull the strings from offstage.
By the time banks around the world figured out what they were doing, they would have made millions.
Minneapolis Star Tribune
Phil Kitzer, photographed on July 6, 1965, at age thirty-two, as president of American Allied, a Minnesota-based insurance company from which he was accused of fleecing millions of dollars.
Minneapolis Star Tribune
Facing sweeping fraud charges, Kitzer (left) heads into a pretrial conference in federal court in St. Paul, Minnesota, on November 22, 1966, with his lawyer and sometime co-conspirator, Frank Oliver.
Bismarck Tribune
Kitzer (right) and his father, also named Phillip, outside the federal courthouse in Bismarck, North Dakota, in 1967.
Courtesy of the Crypto Museum
This Nagra recorder was the smallest device of its kind in 1977. Agent J.J. Wedick concealed it on his lower back on multiple occasions while traveling with Kitzer.
Courtesy of Jack Brennan
Wedick took a few moments to relax with a pipe on the balcony of the tenth-floor room he shared with Agent Jack Brennan at the Ala Moana Hotel in Honolulu in late March 1977.
Courtesy of James J. Wedick Jr.
The FBI captured this surveillance photo of (left to right) Bob Bendis, Kitzer, and Armand Mucci in Cleveland Hopkins International Airport on February 16, 1977, during the FBI agents’ first trip with Kitzer.
Courtesy of James J. Wedick Jr.
Brennan and Kitzer in a hotel in Tokyo, April 1977. On their round-the-world trip, Wedick bought each of them a Kodak camera, and they snapped more pictures on this trip than during any other point on their travels together.
Courtesy of James J. Wedick Jr.
Mark Iuteri, a con man and mob henchman, traveled with the agents and Kitzer to Hawaii. This was his passport photo.
Courtesy of James J. Wedick Jr.
From left, Brennan, Kitzer, and Wedick pose next to a Japanese garden near their hotel in Tokyo.
Courtesy of James J. Wedick Jr.
Brennan and Wedick pose—pretending to perform—in an empty ballroom in their Tokyo hotel in an image taken by Kitzer. Though Kitzer didn’t like being photographed, he embraced the role of documentarian as the trip progressed. Wedick has cameras in his right hand and his right pocket.
Courtesy of the Black Swan Shoppe Ltd
Kitzer constantly carried this model of gold-plated lighter, using it as a conversation starter with women on nights out with the FBI agents throughout 1977.
Courtesy of James J. Wedick Jr.
Brennan on the group’s next stop after Tokyo. Wedick asked him to stand in front of the sign to memorialize that stop.
Courtesy of James J. Wedick Jr.
Wedick commissioned this cartoon at O’Hare International Airport in Chicago while traveling with Kitzer and Brennan in July 1977.
Courtesy of Jack Brennan
Wedick and Brennan share a light moment during their stopover in Tokyo.
Courtesy of James J. Wedick Jr.
During happy hour at the Intercontinent
al Frankfurt hotel, Kitzer invited two women to join them, and he provided everyone at the table with roses. The agents put theirs in their lapels; the woman on the right is holding hers in her right hand.
Courtesy of Myron Fuller
Con man Fred Pro appears here at bottom center, wearing a keffiyeh, or Middle Eastern scarf, in the 1970s. Pro later told FBI agent Myron Fuller that he was planning to use the Arab motif as a new angle in his scams.
Courtesy of Jack Brennan
On this July night at the Mayflower Hotel in New York City, an inebriated Kitzer considered calling the FBI to find out whether he was under investigation.
Courtesy of James J. Wedick Jr.
A group of FBI agents gathered in Indianapolis in September 1977 to coordinate their efforts as the bureau moved into the prosecution stage of Operation Fountain Pen. Pictured at the lectern are Brennan, Wedick, and Allen Ezell; Jim Deeghan appears directly over Brennan’s right shoulder; Phil Hanlon is the bald man kneeling just to the right of the lectern; Bowen Johnson looms directly above him. Gerry Lonergan, the agent Wedick met in Hawaii, is the second from the left, appearing to be asleep.
Courtesy of James J. Wedick Jr.
Because the Fraternity’s scams circled the globe, the agents often worked with agencies from other countries. Brennan and Wedick (in back row, with Phil Hanlon) met with Swiss law-enforcement officials in Los Angeles after the undercover phase of the investigation was complete.
Courtesy of Myron Fuller
For his work on Operation Fountain Pen and Abscam, Myron Fuller (right) was presented with a $1,000 bonus by assistant FBI director Neil Welch.
Courtesy of Jack Brennan
The front-page headlines in the aftermath of the investigation reflect both its significance and its undeniably colorful backstory. This newspaper was published on May 9, 1980, during Mark Iuteri’s federal trial in Honolulu.
Part III
FEAR CITY
Up to a brownstone, up three flights of stairs
everybody’s pinned you, but nobody cares
—The Velvet Underground, “I’m Waiting for the Man”
15
Pilgrims in the Mayflower
MAY 6, 1977
Gabe Cicale was quiet. That was one of the first things the agents noticed when they sat down across from him in the coffee shop of the Mayflower Hotel in New York City. A leathery man in his sixties with gray hair and a potbelly, Cicale lacked the cartoonish braggadocio of most of the promoters they’d met. Even after greeting Phil warmly—they were old friends—Cicale seemed reserved, guarded. His eyes darted to Jack and J.J. as he talked, as if he were watching them watch him.
Phil and the Junior G-Men had flown to LaGuardia Airport from Miami the night before with one primary goal: to move First National City Bank of Haiti closer to becoming a reality. They had checked into the Mayflower, an unpretentious but elegant eighteen-floor hotel situated at 15 Central Park West, just off the southwest corner of Manhattan’s signature park. One guidebook described it as “a good place to keep as your own little secret.” It had become Phil’s go-to spot in New York.
After the sit-down with Cicale, the threesome threaded their way south and east, through clods of tourists in Columbus Circle, then along Central Park South. It was unusually warm for early May, the temperature soaring into the eighties. New York City was like the Roman Empire in full tailspin: Eighteen months earlier, the city had teetered on the edge of bankruptcy. Central Park was weedy and brown; arson and crime were so rampant that the city had earned itself a new nickname: Fear City. About three weeks earlier, a serial killer with a .44-caliber handgun had gunned down two new victims as they sat in a car in the Bronx. He’d left a note near the scene identifying himself as the Son of Sam.
J.J. was within twenty miles of the buildings in the Bronx and Staten Island in which he’d grown up, and Jack was visiting New York for the first time, but there would be no family reunions or sightseeing. Before they reached their next meeting, Phil turned to his companions and mentioned that if the agents ever had any trouble with the Outfit, Cicale was a good guy to know.
The agents absorbed this. Until that point, they hadn’t brushed up against organized crime, other than their travels with the menacing but hapless Mark Iuteri.
That was about to change.
—
Fred Pro was large. He was more than six feet tall and nearly two hundred pounds, his frame swallowing up a chair in the swank Marriott Essex House lounge, located on Central Park South. The Junior G-Men had heard Phil mention him frequently. He wore a brown toupee flecked with gray, and his voice came out a register higher than one might expect for a man his size. Both of the agents thought of Liberace.
Pro opened a box of Dunhills, the long, narrow British cigarettes favored by Hunter S. Thompson, and held one between manicured fingers coated with a clear nail polish. Then he passed around a business card identifying him as United States director of the Trident Consortium Funding Corporation, 128 Central Park South, just a few doors down.
It was four-thirty on a Friday afternoon, so Phil ordered drinks. Pro asked Phil whether it was okay to talk in front of the two strangers. Then they began a reminiscence of their colorful shared history of con artistry. A native of suburban Philadelphia, Pro claimed to have graduated from Temple with degrees in industrial engineering and electronic engineering. By the late 1960s, he’d become an executive at the Budd Company, a behemoth Philadelphia-based maker of railroad cars. In the seventies, he struck out on his own, creating a holding company in Florida called Parker West, with which he snatched up bankrupted or financially imperiled firms with names like Classic Motor Car, Custom Metal Products, and Plastic Dynamics.
Pro said he veered into a life of fraud after being swindled out of $160,000, a calamity that drove Parker West into bankruptcy. “I had a severe emotional shock,” he later said of the incident. “I went through a traumatic emotional behavior pattern that got me into this con game.” Also, during a visit to Paris, a woman gave him a blow job at the top of the Eiffel Tower that changed his life, he recalled. After that, a life of legitimate work no longer seemed an option.
He credited Phil with helping him learn the trade. Kitzer was “basically my teacher in a sense that I have learned an awful lot from him in the use of fancy paper from the fraudulent banks and so forth,” Pro later said. “I considered him the top in the world.”
In one instance, they used a letter of credit to “bootstrap” Rel-Reeves, an $18 million telecommunications firm. Bootstrapping meant assuming control of a company without investing a cent, by presenting paper that promised an ability to pay later. They talked their way past a heavy-hitting, court-appointed law firm; then Pro executed a classic bust-out: He liquidated the assets, diverted the cash flow into his own pocket, and increased business expenses until the company went belly-up.
Pro quickly became one of Phil’s steadiest customers. He busted out a small airline called Span East using a photocopy of a check that Kitzer had given him, paying Phil $20,000 for a single mimeographed sheet of paper. Pro also bootstrapped Guyana Airways with a phony $250,000 Mercantile cashier’s check, and he used one of the planes to fly to Geneva, where Phil, thanks to his old U.N. connections, had moved into a former embassy building. The two men threw huge parties there. Pro bought packages of Mercantile checks two or three times a month for $1,000 to $5,000 a pop.
Phil and Pro howled about a recent caper in which Pro had sent in one of Kitzer’s Mercantile Bank cashier’s checks for an IRS payment. When a revenue official asked why the government had been unable to collect the money, Phil said he’d never received the check, then subsequently explained that the mail boat carrying it had sunk on the way to St. Vincent.
Then there was Elvis Presley’s Lockheed JetStar airplane.
Through another promoter, Pro had received word that Presley’s father, Vernon, was looking to unload a private plane that Elvis rarely used. Pro, who had extensive work with airlines on his
résumé, arranged for a meeting in Memphis, where he pitched a mutually beneficial deal. He engineered a $950,000 loan for a third party to buy the plane. The loan would pay off Presley’s mortgage on the plane and leave a balance of $338,000 to upgrade the JetStar for commercial charter flights, which Pro’s business would operate.
Presley would then lease the airplane back for $16,775 a month, and Pro would, in turn, lease it from him for $17,775. The bottom line: Elvis would make $1,000 a month, and Pro would make his money by operating charters.
Vernon Presley examined Pro’s background and was impressed with his business acumen, a complimentary article about him in Dun & Bradstreet, his college degrees. Presley also received a telex from Phil’s Mercantile Bank saying that Pro had the financial wherewithal to close the deal. (Phil and Pro had game-planned the transaction extensively.)
The closing took place in June 1976. Phil was home when Pro called from an air-to-ground telephone. “Fred, where are you?” Phil asked.
Pro sounded excited. “Phil, we got it,” he said. “We got it, I’m in the jet. We got Presley’s jet.”