The Watergate

by Joseph Rodota

  At a luncheon honoring Lola Aiken, wife of Senator George Aiken, a Republican from Vermont, Anna Chennault was seated near Carolyn Long. “We’ll have to vote on whether to let you into our building,” Anna teased, apparently forgetting the Longs already owned a unit in Watergate East, and could therefore skip both the co-op board interview and vote.

  UNDER ITS LONGTIME CEO ARTHUR T. ROTH, Franklin National Bank introduced many innovations to the banking business, including junior savings accounts, bank credit cards and the drive-up teller window. The Long Island–based bank opened its first branch in New York City in 1961; in 1967, Franklin merged with another institution, picking up thirteen new branches in Manhattan. To remain competitive in the New York market, Franklin gave loans to companies with low credit ratings who had been turned down by the major New York banks, charging these borrowers the same interest rates as prime customers and offering other incentives. In 1964, Franklin had assets of $1.5 billion; by 1972, it had $3.5 billion in assets, making it the twentieth-largest bank in the United States.

  In July 1972, Michele Sindona paid $40 million in cash—at a premium of 25 percent above market value—for a 21.6 percent controlling interest in the common stock of Franklin New York Corporation, the holding company of Franklin National Bank. At the time of his investment in Franklin National Bank, Forbes magazine reported Sindona had a personal net worth of $100 million, including his one-third stake in Società Generale Immobiliare. “I am going to make Franklin National a great international bank,” he told a reporter. “You must believe me. I only tell the truth.”

  “Sindona’s reasons for buying into the bank remain an enigma,” reported Fortune magazine. “What exactly has he got up his immaculately tailored sleeve?”

  Sindona refused to comment. “In Italy I would go to jail if I disclosed any information about my clients,” he said.

  His secrecy inevitably provoked suspicion, in Europe and in the United States. “Some people say he is a financial genius of our century, but then others say he is a financial gangster,” said one Swiss banker. “Probably the truth lies somewhere in between.”

  ON OCTOBER 9, 1972, THE LES CHAMPS AT WATERGATE shopping arcade opened for business. Built at a cost of $1 million, the “final touch” on the entire Watergate complex was the street-level collection of high-end retailers, including Yves St. Laurent, Gucci and Pierre Cardin, selling ready-to-wear clothing and accessories for men and women, and two dozen “international shops” including a Tunisian embroidery merchant; Batik Walla, which sold women’s clothing from India and Pakistan; Midnight Sun (Scandinavian glass, china and gifts); William Miller (English gifts); a Uruguayan vendor selling rugs and leather goods; and “an oriental gift shop.” According to the Washington Post, the arcade had an “airport bazaar flavor.” The Colette boutique sold “California sportswear,” Red Balloon sold children’s clothes and toys and Charles Schwartz carried china and fine crystal. There was a record store, a wig shop, an art gallery, a parfumerie and an optician “dealing primarily in fanciful sunglasses,” as well as barometers and telescopes.

  Les Champs was “very unique—very exclusive—different from any other mall in town,” said Cecchi.

  According to Henry Winston, general manager of the Watergate’s retail operations, Les Champs was designed to attract Kennedy Center tourists and patrons, Watergate residents and office workers, and shoppers from the District and its suburbs.

  To design the interiors, Cecchi hired Carlo Natale, who had designed the Les Champs mall in Paris, and George Lawson, a local designer familiar with the Watergate. Lawson designed the mall’s main restaurant to look “like a French storage depot”—different sections of the restaurant resembled a storehouse with “imports from the colonies spilling over into each other,” including rugs from the Orient and tiles from Morocco. An antique elevator cage served as a salad bar. Lawson told the Washington Post his goal was to create “something that will remind you of Humphrey Bogart in Casablanca.”

  In addition to the shops and restaurant, Les Champs boasted a cocktail lounge and an “espresso bar Italiano,” targeting patrons of the adjacent Kennedy Center. “If necessary, I’ll drink enough cups to keep it going,” said Cecchi.

  ON AUGUST 4, ROBERT M. CALDWELL, PRESIDENT OF THE Watergate East cooperative, sent a final report to residents regarding the pending proposal to refinance the Watergate East mortgage. “The serious financial and structural correction problems confronting the Board of Directors and Members of Watergate East, Inc.,” Caldwell wrote, “have reached the most critical stage in this Corporation’s six-year history.

  “It is important to recognize,” he continued, “that Watergate East is now an aging building, which has not been operated or maintained with an optimum of management supervision and direction.

  “The initial high hopes of many owners that Watergate East represented a prestigious facility, constructed with the highest quality of materials and workmanship which would be trouble free and economical to operate,” he added, “have repeatedly proven to be a constant and expensive disappointment.”

  He went on to itemize the problems, including leaks in the main roof; leaking windows and balconies; and the deterioration of the entrance marquee, requiring $60,000 to repair. Despite the developers’ assurances, he said, repairs were only partially made and, moreover, “neither were all major defects realistically identified” and fully calculated. In addition, management had failed to build up cash reserves sufficient for addressing normal wear and tear to either the structure itself or its electrical and mechanical systems. As a result of this neglect, parts of the building were breaking down and residents were hit with unpredictable “Special Assessments.”

  The proposal to refinance the building’s mortgage required a 75 percent affirmative vote of the owners, based on shares. As of August 4, the proposal was stuck at 70 percent support. Some residents questioned the repair estimates as “extravagantly high.” Other residents said they had no interest in spending any new funds on the building, or at least suggested any repairs should be the responsibility of the developers, but Caldwell noted that the building was now six years old. “Your present Board,” he said, “is not in as favorable a position as past administrations” in extracting payments from developers as a result of “the passage of time.”

  Maurice Stans was initially skeptical, but after careful review of Caldwell’s memorandum and supporting documentation, signed the referendum, helping to meet the 75 percent vote requirement. He thanked Caldwell for his leadership but added two requests: Could the management address the absence of humidity control in the heating and cooling system, and heat the outdoor swimming pool?

  ELIZABETH HANFORD AND HER BOSS, VIRGINIA KNAUER, director of the White House Office of Consumer Affairs, pitched Senator Bob Dole, a Kansas Republican and chairman of the Republican National Committee, to add a pro-consumer plank to the 1972 GOP platform. “It was the first time I met Bob,” Elizabeth recalled later. “When a side door of his office opened to reveal a tall, dark stranger, I thought he was awfully attractive.”

  Dole noticed the Harvard-trained lawyer from North Carolina as well, and wrote her name on his blotter.

  “Maybe so,” Elizabeth said later. “But I didn’t hear from him for several months.”

  Hanford and Dole crossed paths again at the Republican convention in Miami, when they ended up at the same party, thrown by GOP donor and insurance executive Clement Stone. Bob called her shortly thereafter and they talked for about forty minutes—“long enough to discover how many interests and friends we had in common,” Elizabeth said. He called her again a few weeks later and suggested it might be nice to go out to dinner sometime. “It certainly would,” she replied.

  She waited for him to suggest a time and place, but Bob never followed up.

  “Third time never fails,” she wrote later. After another long telephone conversation, he invited her to dinner at the Watergate Hotel restaurant. He told her later he had hesitated beca
use he was self-conscious about the thirteen-year difference in their ages. “He was a little shy,” she said. “I liked that. It contrasted nicely with the image some have of Washington as a town full of ladies’ men.”

  IN AUGUST, MICHELE SINDONA AND CARLO BORDONI WERE elected to the board of directors of Franklin New York Corporation. The Bank of England had before it an application from Franklin to open a London branch and was uncertain about Sindona’s resources and intentions. The bank was also concerned about Bordoni, a foreign exchange trader with a “poor reputation” in international banking circles. Bordoni had been asked to leave an Italian bank because he had concealed foreign trades; he was asked to leave the Milan branch of an American bank after he was accused of speculation and falsely reporting profits. The Bank of England delayed approval of the application and reached out to American regulators for more information.

  Sindona recruited Peter Shaddick to manage the international division of Franklin National Bank. Shaddick was known to the Bank of England, which welcomed news of his appointment. In November, the international division of the U.S. Comptroller of the Currency assured the Bank of England that Franklin was under sound management. Franklin’s London branch was authorized shortly thereafter. According to Shaddick, Sindona directed him to be aggressive and generate profits. According to the masterful and detailed history of the Franklin collapse by Joan Edelman Spero, profits from Shaddick’s unit were intended to compensate for losses in other divisions. Franklin’s foreign exchange trading, however, would “push the bank over the brink into disaster.”

  AS THE SCANDAL UNFOLDED THAT SUMMER AND FALL, Watergate residents turned on the evening news to see their complex as the backdrop to a criminal investigation. SGI executives in Rome asked Cecchi to keep them informed of any new developments, although there was nothing to be done. All Cecchi could do was pass along reports from the American press.

  Nicolas Salgo observed the unfolding events from New York. He knew immediately the incident would become a burden for the hotel. Watergate didn’t need the publicity. It was already known as the top luxury hotel in Washington. Hotel staff told him guests were taking anything that had the Watergate name on it and wasn’t nailed down. A maid entered a room just as its occupant, a senior executive with a major American corporation, was packing his bags. The room had been stripped bare. Even the bedspread was missing. Towels were disappearing at a rate of $4,000 per month, recalled a hotel employee. “We had to go with anonymous towels,” Cecchi recalled.

  The Watergate complex was the subject of a cover story in the Sunday New York Times three weeks before Election Day. “There is only one place in the world, outside of fiction,” Sherwood D. Kohn wrote, “where such a pretentious pot-au-feu of newsworthy people could simmer so richly and continuously in such a compact vessel.”

  Kohn called the complex “unsettling” and likened it to the decrepit Marienbad spa, depicted in the 1961 French-Italian film Last Year at Marienbad, directed by Alain Resnais. “Once disgorged into an empty hallway, visitors are likely to feel a little desperate,” he wrote. “In the curving beige corridors that run through the south and east buildings of the 10-acre development, you can see little more than four doors at a time, and if you’re looking for the elevator, there is nothing to tell you which way it lies. And of course you’ve forgotten which way you came from. Is that what it’s like to be eaten by a snail?”

  Kohn noted the constant presence of TV monitors throughout the complex. He wondered if it would be possible to knock on the doors of the apartments and “find out what kind of people” can make a dinner without producing “odors” that might seep into the hallways. That would be “gauche,” he concluded. “These are private people, very private.”

  Privacy was the first casualty of the Watergate scandal.

  Tourists gaped at the Watergate through glass-roofed buses and posed for pictures in front of the Watergate sign. Airline pilots approaching National Airport pointed out the Watergate to passengers, along with the Pentagon and the national monuments. The New York Times published a map of “The Watergate Tour,” with stops at 2600 Virginia Avenue, home of the Democratic National Committee, and at Watergate Wine & Spirits for souvenir bottles of Scotch ($5.99 a bottle) or gin ($3.79). The map also suggested souvenir hunters stop at the Watergate Hotel and pick up, for 50 cents, a plastic black widow spider with a silver W on its back.

  Cassie Mackin, an NBC Capitol Hill correspondent, was reading the Sunday edition of the New York Times in her Watergate West apartment. “All of a sudden,” she said, “I had the feeling that someone was looking at me. I told myself that was ridiculous, but finally, I got up and looked out the window and on one of the top floors of the Howard Johnson’s Motor Lodge across the street, a lady with a pair of binoculars was looking at me.”

  A WEEK BEFORE ELECTION DAY, MICHELE SINDONA AND PAUL LUFTIG, president of Franklin National Bank, met with Maurice Stans in New York. Stans had been informed that Sindona was willing to support Nixon “in a large way” and came right to the point.

  “I understand you are convinced that Nixon’s re-election is important and are willing to help us out financially in the campaign,” Stans said.

  “I believe it is important to the United States and the world and for all of us that he continue in office,” Sindona replied, “and I am ready to give a million dollars.”

  Stans smiled and said he was delighted.

  “There is only one condition,” Sindona continued. “Because I am well known, I do not want any publicity or public recognition. And I am not asking any favors.” Sindona later revealed he wished to conceal the source of the funds “so as not to subject the donors, including myself, to persecution by Italian leftists.”

  Stans explained that federal law required full disclosure of campaign contributions. Sindona expressed regret and told Stans that if he could find a way to proceed, the offer was still on the table. “I just turned down a million dollars,” Stans confided to an aide. A few days later, he sent a letter “regretfully declining” the contribution. Stans’s letter soon found its way to the leftist Italian press (“certainly not by me,” Sindona later claimed), which accused Sindona of “exporting capital” from Italy “to support a capitalist, an enemy of the people.”

  ON NOVEMBER 7, 1972, RICHARD NIXON WAS REELECTED IN A landslide. Anna Chennault drafted a letter of congratulations. “I am not looking for a job,” she wrote, but she reminded him others, including Defense Secretary Melvin Laird and Senator John Tower, had “independently” pushed her for a post in Nixon’s first term. “However, due to some complications at that time,” she wrote, “I decided not to approach this matter further.” Now, however, she wanted to “be in some position where I could really help with the difficult Asiatic problems that lie ahead and about which I have some knowledge.”

  Chennault asked to be named “consul or goodwill ambassador to Asia.” She recited her long résumé of Republican activism and business activities throughout the region, suggested there was “something to be gained politically by an appointment of a first woman of Oriental descent to a significant national job” and asked the president for a personal appointment to discuss the matter.

  On January 8, 1973, Rose Mary Woods told President Nixon that Chennault had sent him a letter. “I didn’t bother you with it,” Woods said. “And I don’t know whether it should see daylight. She sent it down to my desk saying she’d be appointed your special ambassador to the Far East, because nobody else understands the Far—you know, the Oriental mind.”

  Woods suggested forwarding Chennault’s letter to the White House personnel director for handling. “And then he’ll just brush it off,” Nixon agreed. “It’ll never reach the light of day.”

  A week after Nixon was sworn in to a second term, Transportation Secretary John Volpe, Anna’s neighbor in the Watergate, appointed her to a three-year term on the Federal Aviation Administration’s women’s advisory committee. Chennault was unsatisfied with the token appointme
nt and kept up the pressure for something more significant.

  Tommy Corcoran met with Nixon one-on-one in the Oval Office on March 6. “You know, I have a protégé,” Corcoran said. “Her name’s Anna Chennault.”

  “Yeah, sure,” said Nixon.

  “She is one of the best and loyalest friends you’ve ever had.”

  “I know, I know.”

  “Mr. President, I have never written a book. I don’t kiss and tell.”

  “Yeah.”

  “I am amazed at some of the people in your administration that break under pressure and talk too much.”

  “Yeah, yeah.”

  Corcoran told Nixon he knew what was “going on” in the 1968 campaign, “when Anna kept her mouth shut” at the request of Nixon’s top aides.

  “I know,” said Nixon.

  Anna Chennault “wrote you a letter not so long ago and she wonders whether you ever got it,” Corcoran said. “She’s asked you if she may have an interview with you alone by herself.” Corcoran handed Nixon another copy of the letter. “That’s her own writing,” he said. “She’s worth her weight in gold.”

  Anna Chennault never got her private meeting with Nixon.

  AFTER THE DEMOCRATS’ DISASTROUS 1972 ELECTION, IN which Richard Nixon carried forty-nine of fifty states, Robert Strauss was elected chairman of the Democratic National Committee. He asked former party treasurer Pat O’Connor to find new office space for the DNC. A commercial agent investigated the District’s rental market and reported back, “You have the best deal in town.”

  Spencer Oliver advised Strauss to stay put in the Watergate indefinitely, as “a constant reminder of what the Republicans did.” Oliver saw the political value of having every news story about the DNC, every press release the party issued, connected to the now-infamous word “Watergate.” But Strauss, Oliver suspected, wanted to “turn the page” and erase any connection to the Watergate, perhaps to aid a future presidential bid by his friend John Connally, a former Democrat who was now Nixon’s treasury secretary.