On May 1, 1974, the Federal Reserve rejected an application by Franklin National Bank’s parent company to acquire Talcott National Corporation, another financial entity in which Sindona held a 53 percent stake. “In rejecting the bid,” Business Week reported, “the Fed dropped a trail of hints suggesting it had little confidence in Franklin’s management.” On Friday, May 10, Franklin National Bank canceled its second-quarter dividend—the first time since the Depression that a major bank had skipped a dividend—and announced losses of approximately $40 million in its foreign exchange unit. On Monday, May 13, Peter Shaddick resigned from Franklin, and the Securities and Exchange Commission halted trading in Franklin’s stock.
On May 14, Italian newspapers reported Franklin’s staggering losses in foreign trading, which led to rumors that Edilcentro Sviluppo, the SGI subsidiary reporting to Carlo Bordoni, was involved in the losses. SGI’s stock price began to fall.
A reporter who visited Michele Sindona in his Milan office described him as “nervous” and “high strung.” As Sindona sat for the interview, he folded multicolored squares of paper into little boats, which he stacked meticulously on his desk. By June, his stake in Franklin National Bank, for which he had paid $40 million in 1972, was worth less than $9 million.
Customers of Sindona’s Italian banks began withdrawing funds and Sindona was forced to inform Italian regulators that his banks faced a liquidity crisis. At the direction of the Bank of Italy, the Banca di Roma extended $100 million in credit to Sindona, who put up his shares in SGI as collateral.
ON JUNE 21, 1974, WALTER PFORZHEIMER RETIRED FROM THE CIA. When the Historical Intelligence Collection at the CIA had been established eighteen years earlier, it had 1,190 books. Now, the collection had grown to 22,000 volumes. Pforzheimer’s worldwide scavenger hunt had brought to the CIA at least 150 different books about the Dreyfus affair; more than fifty books about intelligence failures on the eve of the Japanese attack on Pearl Harbor; and a small, privately printed book on the Boer War, written by an eight-year-old named Allen Dulles, who would grow up to become director of the CIA.
The same day, the New York Times, citing “well-informed sources,” reported Republican officials in 1972 drew up a list of companies and individuals who had “problems” with the government and targeted them for campaign contributions.
THE JULY 1974 BOARD MEETING OF SGI WAS HELD IN MILAN rather than Rome. The chairman, Count Enrico Pietro Galeazzi, informed his colleagues that Carlo Bordoni had resigned as a director and delegate board member, a post he had held only since March, as well as from all other offices held in SGI affiliates, in Italy and abroad. In his letter of resignation, Bordoni assured the board his decision “was motivated by the desire to have the greatest freedom to defend himself from tendentious and defamatory insinuations published in recent days in the national press in connection with the well-known events.” Michele Sindona reassured the board that Bordoni was “extraneous” to the “problems” with Franklin National Bank, which he said were limited to “operazioni non registrate” (“unrecorded activities”) which were completely the fault of “funzionari” (“certain executives”) who had either been fired or resigned already, possibly referring to Peter Shaddick. Sindona confidently said he expected Bordoni to mount a vigorous attack on newspapers that had spread “calumnious” reports.
Sindona then proposed as a new board member Giovanni Battista Fignon, the central manager of Banca di Roma. Fignon lasted only a few weeks on the board before resigning; he was replaced by a more senior executive from Banca di Roma, Danilo Ciulli, the bank’s vice chairman, who was immediately elevated to delegate board member and vice chairman, giving him the same rank and powers as Aldo Samaritani.
ON AUGUST 5, 1974, THE “SMOKING GUN” TAPE WAS REVEALED. Three days later, President Nixon addressed the nation a final time from the Oval Office and announced his intention to resign the presidency. “By taking this action,” he said, “I hope that I will have hastened the start of that process of healing which is so desperately needed in America.” He resigned on August 9 at noon, and said goodbye to his closest staff in the East Room of the White House, before boarding a marine helicopter and beginning the long flight to California.
As President Gerald Ford moved into the Oval Office, Nixon’s personal effects were removed to his former hideaway office in the Old Executive Office Building next door, under the watchful eye of Rose Mary Woods. The office was exactly as he had left it. His glasses rested on his desk. His ashtray held a half-smoked cigar.
Robert Gray, the executive vice president of Hill & Knowlton and former secretary to the Eisenhower cabinet, escorted Rose to parties and dinners around town, even when she said she was too tired to go out. They went out two or three nights a week. She seemed more comfortable at large parties, friends said, because it was easier for her to make small talk and avoid discussing Watergate. Gray told a reporter he had no idea how long Rose would remain in Washington. “When your mother comes to visit, do you ask her how long she’s going to stay?” he said. “She’s living one day at a time. She loves her apartment, and all of her friends are here in Washington. But a year from now, who knows?” In February 1975, the contents of Nixon’s hideaway office were finally crated and sent to the former president’s home in San Clemente. Rose, however, did not follow the boxes to California. She sold her Watergate East apartment and returned to Ohio.
The youngest member of the Nixon administration to appear in the August 1969 issue of Life magazine was White House press aide Nancy Lammerding, who was photographed at the time wearing a cast—the result of a fall—which kept her out of the Watergate swimming pool. During the 1968 Nixon campaign, Nick Ruwe was known as one of the top advance men—staffers who traveled ahead of the candidate, making logistical arrangements for political rallies and other events—in Republican circles and Nancy was considered “the best-dressed girl in the Nixon campaign.” Before the cloud of Watergate descended on the Nixon White House, Nick recruited Nancy to work with him at the State Department’s protocol office, hiring her away from White House press secretary Ron Ziegler’s staff. After Nixon resigned, Nancy went back to the White House to become First Lady Betty Ford’s social secretary and Nick stayed at the State Department. Nick proposed to Nancy over dinner at the Sans Souci restaurant and the couple planned a formal engagement announcement in the New York Times. In the steam room of the Watergate health club, however, Nick told a friend he and Nancy were getting married. Their conversation was overheard by a reporter from the New York Daily News, who phoned Nancy for confirmation, thereby scooping the Times.
IN SEPTEMBER 1974, MARIO BARONE, PRESIDENT OF Banca di Roma, disclosed that Sindona’s entire $200 million line of credit had been used up and future losses from “unrecorded speculation and transactions” by Sindona could be “major.” Italian regulators discovered an additional $50 million in foreign exchange losses at SGI and prosecutors in Milan issued a warrant for Sindona’s arrest. Italian newspapers called the collapse il caso Sindona—“the Sindona case.” Business Week had another name for the scandal: “Italy’s Watergate.”
Back in Rome, at the September meeting of the SGI board, Danilo Ciulli, the vice chairman of Banca di Roma, revealed that an investigation into SGI’s finances, made difficult by “imperfect accounting and, above all, by the incompleteness of information,” had confirmed heavy losses in the financial division—as much as 40 billion lira, or about $64 million. Despite several attempts to find him, Carlo Bordoni could not be located. The board voted unanimously to abolish the ill-fated financial division and extend a “formal invitation to Bordoni” to appear before them and explain his actions in full.
Samaritani informed his colleagues the company could absorb these losses and honor its debts, including $23 million owed to the Banca di Roma. But all foreign activity of the company—including the Watergate-style complex planned in Alexandria, Virginia, and the massive development planned for outside Mexico City, an original part of Samaritani�
��s grand plan for North America—would have to be abandoned.
In September, Michele Sindona resigned from the board of Franklin National Bank. On October 3, he resigned from the board of SGI. Franklin National Bank was declared insolvent a week later, the largest bank failure in U.S. history. On October 9, Frank Willie, chairman of the FDIC, announced Franklin had been taken over by the European-American Bank & Trust Company, owned by six of Europe’s largest banks. As Willie announced the bank’s new owners, Italian authorities issued a warrant for the arrest of Michele Sindona in connection with irregularities on the balance sheets of one of his Italian banks.
ON OCTOBER 24, 1974, CBS AND THE NEW YORK TIMES BOTH reported Maurice Stans was under investigation on five possible charges, including bribery, extortion, knowingly accepting illegal contributions, sale of ambassadorships and failure to disclose campaign contributions.
Through his attorneys, Stans maintained his complete innocence and refused to engage in plea bargaining. The prosecutors, a team of “eager-beaver” lawyers led by Tom McBride, forty-four, a former assistant district attorney in New York and a veteran of the Organized Crime Section of the U.S. Department of Justice, made it equally clear that unless Stans submitted to questioning under oath, they would indict him on a multitude of charges.
Following the break-in at the DNC, Stans had been sued by the Democratic National Committee and its chairman, Larry O’Brien, for conspiring to disrupt the 1972 election, for $6.4 million; the Association of State Democratic Chairmen and its director, R. Spencer Oliver, sued Stans for another $10 million. A federal grand jury indicted him on ten counts of conspiracy, obstruction of justice and perjury, carrying potential sentences of fifty years in prison and a fine of $100,000. His successful defense against those charges lasted a year, but cost him hundreds of thousands of dollars in legal fees. He was sued in various civil actions for a total of more than $95 million, nearly a hundred times his net worth. And since August 1972, when his wife, Kathy, collapsed at their Watergate apartment early one morning, she had been in and out of hospitals, battling a rare blood disease.
Stans gave in to the prosecutors’ demands. Without legal immunity, he answered questions from McBride and his staff for 110 hours. “When we finished, I was sure that everything had been fully covered and resolved to their satisfaction,” Stans wrote later.
He could not have been more wrong.
McBride insisted Stans was not being forthcoming and was shielding “guilty people.” He threatened to indict Stans on six counts.
“It was a no-win situation,” Stans wrote later. His legal fees had already topped $700,000—some of which was reimbursed by the 1972 Campaign Liquidation Trust—and another trial might cost $250,000 or more. “Our analysis of the chances of fairness in a trial was not reassuring. I gave up, reluctantly, and in anguish.”
Stans pleaded guilty to non-willful receipt of two illegal campaign contributions, including $30,000 from the 3-M Company and $40,000 from Goodyear, and three violations of campaign reporting laws, including one count involving a $30,000 cash contribution from Ernesto Lagdameo, arranged by Anna Chennault.
After checking with counsel, who concluded foreign contributions to the campaign were illegal, Stans had returned the funds to Chennault, who then returned the money to Lagdameo. But Stans did not disclose the contribution at the time. “No purpose would have been served by reporting a transaction that was never completed,” he wrote later. The Nixon campaign in fact reported the contribution on June 10, 1973, following an internal audit. For the late reporting of that transaction, and for each of the other four misdemeanor charges, Stans was fined $1,000.
AT THE OCTOBER 22 BOARD MEETING OF SGI, DIRECTORS confronted more bad news. Debts totaling 58.8 billion lira—about $86 million—were owed to various banks. The company owed dividends to shareholders. Revenues were lower than expected. With the company’s credit in tatters, there were no options for short-term borrowing. Samaritani informed his colleagues that they would need to consider selling “important properties,” including the galleria Les Champs in Paris, the hotel Le Mirabeau in Monte Carlo, the Port Royal building in Montreal and two buildings designed by the late Luigi Moretti: SGI’s own headquarters in Rome’s EUR district, and Moretti’s masterpiece on the shores of the Potomac River, the Watergate.
In November 1974, the board of Società Generale Immobiliare was informed Banca di Roma had sold its controlling interest in the firm to “a group of noted and qualified exponents of the construction industry.” The new shareholders were members of a class of builders known in Rome as palazzinari.
A palazzina is a small building. A palazzinaro, Giuseppe Cecchi explained to a visitor years later, was a “displeasurative term” used within Rome’s real estate circles to describe a “builder of small buildings.” La Repubblica described the heyday of the palazzinari as “a huge feast: of bogus contracts, but above all of buying and selling under a shadow of ill repute.” The future of SGI was now in their hands.
After more than thirty years as a member of the SGI board, including six years as chairman, Count Galeazzi announced his resignation. “The unexpected cyclone that has fallen upon the Company,” he said, “makes even more pressing my desire to make room for someone better adapted for the special needs of the moment and less handicapped by age.”
Aldo Samaritani spoke next. He asked his colleagues not to reelect him vice chairman of the board. At the conclusion of his term, he would leave the company and surrender all responsibilities he held in its subsidiaries. He said he had arrived at his decision carefully, motivated by “his strong desire to dedicate himself to his family” and by the “necessity of looking after his health.” After forty-two years with SGI, Samaritani “considered his mandate concluded, although with profound bitterness and disappointment caused him by the events which had lately troubled the Company.”
IN MARCH 1980, MICHELE SINDONA WAS CONVICTED ON Sixty-Eight counts of fraud, perjury and misappropriation of bank funds. He was sentenced to twenty-five years in the federal prison at Otisville, New York, but was extradited to Italy in 1984 to stand trial for his role in the collapse of Banca Privata Finanziaria and for illegally diverting funds from Italy to banks he owned abroad. On March 22, 1986, four days after an Italian court convicted him of arranging the assassination of Giorgio Ambrosoli, the liquidator of his bank holdings, Sindona was found dead in his prison cell after drinking coffee laced with cyanide. “They have poisoned me,” he told a prison guard, just before collapsing into a coma.
The board of Società Generale Immobiliare dissolved the company and liquidated its assets in 1988. At the time of its demise, the company was 126 years old.
ON AUGUST 12, 1975, KATHY AND MAURICE STANS SPENT their last night in their Watergate apartment. Kathy served dinner in their Africana room, among the artifacts from various safaris and other adventures. More than three years had passed since the Sunday morning Maurice Stans picked up the Washington Post and first learned of the break-in at the DNC.
“The maelstrom was over,” Maurice Stans wrote. “Its sheer revolving force would draw no more bodies and souls into the depths of its destruction, spewing out their shattered remains.”
As the sun set over the Potomac, they reflected on the disasters that had engulfed so many friends. Some had admitted guilt; others had been convicted after lengthy, humiliating trials. Kathy and Maurice considered themselves fortunate. They were older than most of their friends, and had lived rich and full lives before it all happened.
The next morning, movers came and packed up their belongings. Everything went into storage. Kathy and Maurice decided to become nomads and travel a bit.
Their next home? They had no idea.
Part II
Chapter Six: A Little Blood
Does your dog need “a meaningful walk”? Is your old chess set worn from overuse and do you crave a $500 “hand-carved solid walnut Renaissance style” substitute? Are your scattered curios orphans and would a $250 l
ighted curio cabinet of solid fruitwood provide them with a decent home?
The various bulletin boards at the various Watergates take care of all these basic needs and much more. No cheapie post-Christmas sales are offered here. The bulletin boards are the gleaming reflections of the gleaming incomes of the gleaming residents, after all.
Washington Post, January 18, 1975
IN OCTOBER 1974, IN A COURTROOM IN BORDEAUX, PROSECUTORS presented their opening arguments in the trial of eight wine dealers for charges of fraud.
Since 1819, the Cruse family had been at the center of Bordeaux’s commercial and social life. They had cellars on the Quai des Chartrons and a magnificent chateau in the Médoc. “The wine trade is to France what the automobile business is to the United States,” observed New York Times wine columnist Frank J. Prial, “and the Cruse concern is easily the General Motors of the French wine world.”
In June 1973, French tax inspectors, acting on a tip from an informer, entered the Cruse offices and demanded to review records. The owners tossed the inspectors out onto the street and denounced their “Gestapo methods.” But the government’s inquiry continued, culminating in a wide range of charges against the Cruse empire and a number of smaller vintners and exporters, including: upgrading cheap Midi wines to expensive Bordeaux by falsifying documents; sending lower-quality wines to the American market and labeling them Puligny-Montrachet or Meursault; and selling German consumers inexpensive 1970 white Bordeaux, misrepresented as the prized—and costly—1969 white Graves. French authorities also charged some undrinkable wines were “recovered” by the use of chemicals, including 84,000 gallons of wine that were “deodorized” by passing through charcoal filters. The legitimacy of two million bottles of red Bordeaux Superior was in doubt.
The Watergate Page 18