by David Howard
Phil Kitzer opened the front door and welcomed Schlaefer and his team of fellow agents. Schlaefer, an agent in the Minneapolis office, showed him the warrant, explaining that they were to search the house and take all relevant business records. Kitzer waved everyone in.
Unlike on other, similar assignments Schlaefer had been part of, the house was devoid of tension. Schlaefer asked Kitzer whether he had any questions, and Phil said no, he understood they were merely doing their jobs. As the agents pawed at his closets and desk drawers, Phil chatted about the weather, about Minnesota, about Fran Tarkenton and how this might be the year for the Vikings, even though they’d lost their first game to the hated Dallas Cowboys. He watched the agents lift a Western Union telex machine from the upstairs closet. They loaded up his address book, a key from the Hôtel International in Geneva, a Disneyland Hotel phone message from John Calandrella.
Kitzer told Schlaefer that he’d intended to spend some time organizing his papers, and he was grateful that the FBI was doing it so that he would know where everything was if he needed to defend himself in court. He told them to be sure they had everything.
“It was,” Schlaefer later said, “a very friendly atmosphere.”
Jack and J.J. hadn’t seen Phil in more than five weeks, having dipped into their bag of creative excuses for being absent while Phil pressed on with First National Haiti. Not long after the team of agents packed up and left, Phil’s phone rang. It was Jack, calling with the news that the FBI had just hit him with a search warrant. J.J., too.
“I don’t know what to do,” Jack said, repeating lines he’d rehearsed with Wedick. He was sitting inside J.J.’s apartment, doing his best to sound scared.
Phil told him to relax. He’d been through this before and had always come away unscathed. Phil peppered him with questions: What did they say while they were there? Were they looking for anything in particular?
Before they hung up, Phil again told Jack not to worry and said he would call back. Jack had accomplished the agents’ first goal: Deflect suspicion. The promoters would be on the lookout for a rat, and Jack and J.J. wanted Phil to think the FBI was targeting them. Jack hoped his anxiety, and the revelation that he had been searched, had tamped down any doubts.
But the agents had another goal, too: They wanted to know what Phil was thinking. If anyone planned to destroy evidence or flee, they hoped to find out in advance. A few minutes later, J.J. called Phil from the Indianapolis office. It was four-thirty p.m. The FBI had a “hello line”—a phone set up in a back office, where the surveillance equipment was stored, with an unlisted and untraceable number. The agents could safely take calls from Phil there.
J.J. and Jack had created an official, signed search warrant for J.J.’s apartment—1934 North Mansard Boulevard, in Griffith—that they could show the promoters. At Phil’s request, J.J. read out loud the list of everything the FBI had asked for in the subpoena. J.J. was required to furnish any documents he possessed related to Executive Enterprises, Seven Oak, FNCB Haiti, and Trident Consortium.
The agents talked to Phil numerous times the next day, too. Jack said he was considering leaving the country, and Phil joked about the resurrection of the Parking Lot Fugitive. J.J. and Jack took turns calling, asking different questions—a technique the FBI calls “tickling the wire.” They wanted a clear sense of what he was up to. If Phil destroyed evidence, he could be charged with obstruction of justice, which in some cases could result in stiffer penalties than the original charge.
Phil told them that the FBI had also executed search warrants on Jack Elliott’s Costa Mesa office and Newport Beach home. Fred Pro called from New York to say that Myron Fuller and his crew had emptied Trident Consortium of small quantities of several types of drugs, $10,540 in cash, a telex machine, and a vast trove of records. “He had literally a room full of documents,” Fuller said. The FBI also raided promoter Tom Bannon’s business, Bannon International, on State Street in Boston, seizing voluminous quantities of records, including many generated by John Calandrella during various dealings with Phil.
Digesting these revelations, Phil explained the mechanics of a grand jury, how they could be called to testify. Jack called Pro and they explored the idea that Andy D’Amato might be a snitch.
On September 22, two days after the searches, Phil and Jack talked about getting a copy of the affidavit attached to the search warrants. Phil explained that the affidavits spell out the evidence the FBI agents have to present in order to convince a judge to green-light a search. If they could get a lawyer to the courthouse wherever the case originated, they might find out what the FBI was up to.
Jack obviously didn’t say so, but the judge had sealed the warrants for that very reason: Phil and his attorney, Frank Oliver, knew the system intimately. That afternoon, Phil asked the agents to come to Chicago so they could all meet with Oliver the following day.
The government would undoubtedly have more questions, and the promoters needed to be sure everyone knew what to say.
—
Wedick and Brennan hustled to prepare for the meeting. At J.J.’s request, the FBI outfitted a rental car with a recording device. J.J. also wore a concealed Nagra to ensure that they would get an audio record of whatever took place. If Phil and Oliver discussed defense strategies, that could be useful later. Once the undercover agents revealed their identities, they’d never be party to such a conversation again.
Phil waited for them outside the arrival gate at O’Hare. The agents hadn’t seen Phil for six weeks, and he smiled as he slid into the front passenger seat for the drive to the Hilton downtown. Jack and J.J. greeted him enthusiastically but quickly launched into a recitation of their anxieties. They didn’t know who the feds were after, or who might be talking to the FBI. “What about that fucking Calandrella?” Jack asked, leaning forward from the back seat.
Phil held up a hand as the Junior G-Men buzzed about not wanting to go to jail. “Guys, listen,” he said. “You don’t understand how this works.”
They stared at him while sitting at a traffic light.
“Look,” he said. “The FBI is interested in other stuff. They don’t give a goddamn about these kinds of cases. Think about it: Let’s say Phil Hanlon goes after us. He’s gotta convince his supervisor to open up a case, okay? What are the chances his boss is even gonna understand what it’s about? And even if the supervisor agrees, this agent has to go down to the U.S. attorney’s office and convince a prosecutor to act on it—like they don’t have anything better to do? Now that guy’s gotta convince the U.S. attorney that they’ll be able to prosecute us. The chances of that are nil and none. They hate these kinds of cases, because they’re too complicated for juries.
“But let’s just say that all happens. They open a case up. That don’t mean nothing. They now have to go around and find witnesses and collect evidence. You know what the chances are of them doing that and succeeding? Not very good. Our deals are spread all over the place. Huge headache. And we can explain everything they have, and come up with our own evidence that shows it was just a deal that went bad.
“Maybe this one time, they get enough evidence. Now they gotta convince a judge to start up a grand jury. Even if that happens, that grand jury has to understand the case enough to indict us. And if we get indicted, we’re gonna have our day in court. And before the trial begins, we’ve got months to file motions and delay, and that’s the best time to do new deals.”
Jack and J.J. sat listening, astonished, while Phil explained that the single most opportune time to rip people off was when you were already under indictment. The FBI and the U.S. attorney’s office has just invested months or even years building a case. The idea of piling on new charges as the process moves along—that was logistically impossible. An indictment was a free pass to commit more fraud, as Phil saw it.
And when the case came to trial? Phil anticipated from his escapade a decade earlier in Bismarck how that would go. Oliver would be outraged and swish his cape and co
nfuse everyone with accounting figures, then distract them with peripheral drama. Phil laughed at the memory. “Your Honor, I was trying to do this complicated deal right, but I guess we made some honest mistakes. It’s high finance.”
“Maybe the judge makes a mistake and we get off on a mistrial or technicality. But say we get convicted. We post bond and go free while we appeal—and that’s another good time to do more deals, make more money. That can go on for a year or more, and the prosecutor will say, ‘This guy’s already been convicted, why try to get him again?’
“We might lose the appeal. Big deal! Most judges don’t get worked up about these kinds of cases and might let us off with probation. But worst case, we might get three years at the Danbury Hilton.”
Phil said the minimum-security prisons were great places to meet politicians on the take, corrupt bankers, executives. With all that time to talk, they could cook up some incredible deals. Then, with good behavior, they’d be out in nine or ten months.
Think about it, Phil said. He spread his arm across the top of the seat, his hand landing within inches of where a wire ran over J.J.’s shoulder, connecting the Nagra to a microphone. “We’ve made a few million dollars over the last year, and we’ve had more fun than most people can imagine. And when we get out, we’ll get to do it all over again.”
He looked at his friends. “So, all right. Is it worth it? Are you having a good time?”
J.J. and Jack looked at each other and nodded. They were.
“Then all right,” Phil said, grinning. “Let’s get to that meeting.”
—
They checked into a suite at the Hilton, Jack and J.J. in one room, Phil in another. J.J. excused himself to run errands and headed for Johnson’s room, where he met a bureau engineer who had developed a new wearable recorder.
Wedick had griped all summer that the Nagra was too cumbersome—it felt like a brick on his back. Just before he left for Chicago, a technology specialist named Bruce Koenig had told J.J. that he’d recently developed a new device in which the tape wound around a single reel rather than two, allowing him to halve the recorder’s dimensions. The six-figure prototype was the only unit in existence, but OpFoPen was now Major Case Number One, so Koenig had decided to hand-deliver it to Chicago.
With the device situated on his lower back under a blue three-piece suit, J.J. studied himself in a mirror. He was impressed. The thing was just about impossible to see, which was a huge relief. After six weeks away from the promoters, he and Jack had no idea what to expect from that day’s meeting. Under the circumstances, Phil and the others would be suspicious of everyone.
When they gathered in late afternoon in the Hilton’s saloon, to their surprise, Paul Chovanec was there. Phil explained that he wanted to quiz his former associate on what he knew.
Oliver arrived with his law partner, Mitchell “Mickey” Kaplan. Phil and Oliver had been friends and business associates for almost thirty years, going back to when Phil was an assistant in his father’s bail-bond business. In the autumn of 1975, Phil had rented space in Oliver’s law offices to run Mercantile Bank, and he had cut the attorney in on a few deals.
At fifty-seven, Oliver was an eccentric and erudite man who kept a library of more than four hundred old and rare books in the areas of science, math, history, and philosophy. He had represented countless Chicago gangsters, along with war protesters, draft dodgers, and two men accused of plotting to poison Lake Michigan. (A few years later, Oliver would turn up in a Chicago Tribune story headlined “Missing Porn-Theater Owner Found Dead in Car Trunk”—as the lawyer and former business partner of the dead man.) He was known to clash with judges and torment hostile witnesses with sharp interrogatories. Another Chicago attorney described him as “one of the most feared cross-examiners that anyone has ever seen.”
Oliver issued simple, cursory advice. He suggested that everyone keep their mouths shut—particularly with the FBI. You want to talk, he said, talk to me alone, so it’s privileged conversation. Once they determined what the FBI was after, they would meet for a more detailed strategy session.
Happy hour arrived, and Oliver and Kaplan left the others to chat and order drinks. After a few rounds, Phil went into Friday-night mode and dragged the Junior G-Men into a wedding reception taking place in another part of the hotel. J.J. groaned and rolled his eyes at Jack.
Phil began working the crowd, asking women to dance. J.J. urged him to go easy; he and Jack were worried that Phil would start insulting people if they were confronted, and security would be summoned. But Phil was relatively subdued. A surveillance team hovered on the fringes, but J.J. slipped out after midnight and told them to go home. “We’re into nonsense now,” he said.
Jack and J.J. eventually hauled Phil upstairs to his room. J.J. lay on the suite’s couch to mull over how to safeguard the expensive new recorder. It was two-thirty a.m., and Johnson was likely asleep. J.J. would feel bad about jarring him awake—but then again, he couldn’t safely leave the device lying around.
Pondering all this but fatigued beyond the grasp of his anxieties, he fell asleep on the couch with the Nagra still lashed to his back.
—
They hung around for one final round of business meetings the next day. Phil had reached some sort of détente with Chovanec, who stayed to discuss an idea to defraud the Mexican government. Chovanec suggested a new scheme that involved renting labor-union funds to fraudulently obtain loans. The agents memorized as much as they could, aware that they were drawing water straight from the well possibly for the last time.
When everyone departed the next day, Jack and J.J. knew they might be embracing Phil for the last time. Soon there would be indictments, then arrests. They couldn’t guess how he would react once they revealed their deceit. That moment loomed like a wall of swollen clouds before a heavy storm, but they shoved those thoughts aside to focus on the tasks ahead.
—
Becky Brennan was within days of her due date with their third son. For Jack, this brought a tumble of conflicting emotions and thoughts. He was thrilled, but his family’s safety worried him more than ever. Once the promoters and their mob associates learned that they were FBI agents, Jack and J.J. would become targets.
The government took a few final steps to protect them. Prosecutors asked the courts to seal the indictments, like the search warrants, to shroud the agents’ identities for a few more weeks. Lowie sent a teletype to headquarters asking that J.J. and Jack be relocated. “As a result of activities and conversations they witnessed while in this capacity, it is anticipated that numerous individuals will be indicted in approximately 12 divisions, ranging geographically from Honolulu to New York City,” the memo stated.
Beginning in mid Oct., 1977, and for one year or more, [Brennan and Wedick] will be in nearly a constant travel status, as their testimony will be required before grand juries and at time of trial in every division where prosecution is attempted.
It is noted that [the agents’] testimony is crucial in proving intent on the part of subjects and that their identity as [special agents] will be exposed at the time of discovery motions, which is expected to occur in late Oct., 1977. It is also noted that subjects know [Brennan’s and Wedick’s] residence to be in the Lake County, Indiana area and that [the agents’] activities brought them into direct and indirect contact with several known LCN members, which included hit men.
Given Becky’s status, Lowie asked that Jack be transferred to Mobile, Alabama, near her parents. Jack would never have requested Mobile himself, because the bureau so rarely awarded anyone the office they actually wanted, but he was hopeful. J.J. asked for a California assignment—he hated the cold, and he wanted to be as far away as possible from Sonny Santini and company.
On October 6, Jack rushed Becky to the hospital for what proved to be false labor—but Jack insisted that she stay in a room overnight. That was because of the drama that had surrounded the arrival of their previous son, Chris. He was coming so quickly that Jac
k had raced a train to a crossing to get Becky to the hospital, and the baby was born before he returned from parking the car.
Their third son, Matthew, arrived on his due date, October 7, at a robust ten pounds, six ounces. Becky, in agony because of the size of the baby, conjured up some creative names for Jack during the delivery.
Over the next few weeks, Jack and J.J. kept tabs on Phil by phone.
The con man was plowing forward at full steam. Phil and Chovanec flew to Panama to try to defraud a Panamanian bank using the rented-money gambit. Phil was having a blast, and he tried repeatedly to talk J.J. into rounding up Jack and flying to Central America.
On October 7, a teletype clacked through to FBI offices in Indianapolis, Boston, Louisville, Miami, and New York. It stated that the Department of Justice would ask the court to seal a Louisville indictment connected to a case involving Seven Oak “so as to preclude any advance notification reaching subject Kitzer prior to finalization of surrender.”
Even with Operation Fountain Pen shuttered, Phil was still creating logistical challenges. Jack and J.J. had no way to know how long he would linger in Panama, but the feds didn’t want him fleecing a bank there while an indictment awaited back in the States. On October 13, J.J. called Phil at El Continental Hotel in Panama City and asked him to return home so they could get together. Phil sounded jaunty; he said he loved Panama and was negotiating with one of Manuel Noriega’s deputies. J.J. heard bar chatter and laughter in the background. “We’re having a great time,” Phil said. “Get yourself down here.”
Lacking any other options, the FBI arranged for the Panamanian police to arrest Phil for suspected fraud and expel him from the country. J.J. gave them Phil’s room number at El Continental.
Later that day, it was done. The Panamanian authorities reported that they’d taken Phil into custody and would put him on a flight to Florida. At some level, this step left J.J. breathless. He could now clearly see the moment coming when they would have to confront Phil, tell him what they’d done. The dread he felt surprised him.