Salgo also knew how to spot a bargain. He bought fifty cases of 1982 Lynch-Bages from Bordeaux, at eight dollars a bottle. For years, it was the Jean-Louis house wine, sold by the glass. “People were flabbergasted we could do this,” Slater recalled. As of 2017, the same vintage was available online at nearly $300 a bottle.
ON JULY 23, 1984, SYNDICATED COLUMNIST JACK ANDERSON revealed that Senator Mark O. Hatfield, a Republican from Oregon, was assisting a Greek financier win approval for an oil pipeline across Africa, at the same time the man paid Hatfield’s wife, a real estate agent, $40,000 in “real estate fees.”
Basil Tsakos, a powerfully built Greek in his sixties, described himself as an “international businessman.” Federal investigators later determined his international business experience included arranging the sale of 120 West German tanks to Morocco. He was enormously wealthy, with apartments in Paris, London and Geneva, and a yacht on the French Riviera. In 1980, Tsakos moved to Washington to advance his plan for constructing a 2,200-mile pipeline that would carry Middle Eastern crude oil across sub-Saharan Africa from the Red Sea to the Atlantic Ocean, thereby avoiding the Strait of Hormuz. He incorporated TAPCO, the Trans-Africa Pipeline Company, and set up offices at the Watergate 600 office building on New Hampshire Avenue. According to the FBI, Tsakos was an “imperious, arrogant and obnoxious man who manages to offend most everyone he meets.” But he could also be “quite charming or generous to those in a position to help him.”
Antoinette Hatfield met Laura Tsakos, Basil’s wife and an heiress to a Greek banking fortune, through a mutual friend over lunch in July 1981. Mrs. Hatfield showed the Tsakoses several potential residences, including some at the Watergate. On August 23, 1982, Basil Tsakos had dinner with Senator Hatfield to discuss the $15 billion trans-African pipeline project. Senator Hatfield told investigators this was his first exposure to the idea, and he became interested in it as an alternative to increasing the U.S. presence in the Middle East. The pipeline could allow the United States to import oil from Saudi Arabia even if the Persian Gulf closed. “This appealed to me from a geopolitical point of view,” Hatfield said. The senator became an energetic booster of the trans-African pipeline: He hosted a meeting in the Senate dining room to introduce Tsakos to U.S. energy secretary Donald Hodel, mentioned the project to defense secretary Caspar W. Weinberger after a meeting at the White House, arranged for Tsakos to meet with Exxon Corporation president Howard Kauffmann and discussed the proposed pipeline with President Jaafar Nimeiri of Sudan.
After Jack Anderson’s column broke, Senator Hatfield asked the Senate Ethics Committee to review the controversy and turned over his files to Senate investigators. He changed his story, telling the Washington Post his wife was paid a fee of $15,000 for showing the Tsakoses several apartments, including some at the Watergate, although not the apartment eventually purchased by the Greek couple. “I don’t believe that I intended to say it was that particular apartment she introduced them to,” Hatfield said. “She had introduced them to the Watergate as part of her duties.” He said his wife did not keep records of her time and he could not explain why the payments, in several different checks, totaled $40,000. “There was no rhyme or reason as to when they sent a check,” he said. When the Washington Post interviewed Basil Tsakos in his Watergate office, the matter became further confused. Tsakos, contradicting Senator Hatfield, said he paid Mrs. Hatfield a $30,000 finder’s fee for locating the apartment and $10,000 for help with the decorating.
The FBI and the Senate Ethics Committee opened separate investigations in August 1984. Hatfield was up for election that fall, and as Election Day approached, he and his wife revised the total value of payments received to $55,000 and said they would donate the same amount to charity.
FBI agents interviewed an employee of Tsakos’s firm over three days, who told investigators he had overheard Tsakos tell Senator Hatfield in a telephone call: “We’ll take a long walk in the woods . . . talk about nature, the animals and lots of things.” According to the FBI, the employee said these comments were “very strange inasmuch as Tsakos had no interest in walking or in nature.” The employee also said Tsakos had directed a TAPCO accountant to record a $10,000 expenditure marked “A.H.”—the initials of Antoinette Hatfield—as a “business expense.”
As the FBI investigation got under way, Laura and Basil Tsakos left the country. On August 20, their attorney informed the FBI that Basil was in Greece and Laura was in Switzerland, under the care of doctors for “heart spasms.” The lawyer said he could not provide a date by which either of them would be available for an interview by the FBI.
Hatfield skipped the Republican National Convention that year to campaign in his home state at county fairs, ice cream socials and Lions Club luncheons. He won a fourth term by the biggest margin in his Senate career. The justice department investigation, however, kept going.
According to documents released in 2012, under a Freedom of Information Act request filed by Jeff Mapes, a reporter for the Oregonian, Tsakos was ready to plead guilty—in exchange for an assurance he would serve no time in jail—and admit paying Antoinette Hatfield $55,000 to gain her husband’s support for the trans-Africa pipeline. According to FBI investigators, Hatfield was “the only American official to go out on a limb and support a questionable project.” The FBI concluded Antoinette Hatfield “performed literally no work” for three of the four payments she received from Tsakos. Senator Hatfield was never indicted.
After they fled the country, the Tsakoses stopped paying their monthly cooperative fee to Watergate West. That triggered a vote by the co-op board to terminate the Tsakoses’ interest in Apartment 602, which the board then rented out for $1,700 a month to Dr. and Mrs. Ahmad Esfandiary. After the Esfandiarys decided to purchase a different apartment in Watergate West and moved out, the Tsakoses’ former apartment was used by Watergate West as storage until it was sold in 1994.
In November 1985, a federal grand jury indicted Tsakos for bribery. His attorney informed federal officials his client was in a Paris hospital undergoing treatment for a heart condition and was too ill to travel. The justice department decided not to extradite Tsakos and a federal judge dismissed the grand jury indictment against him in April 1989. Tsakos eventually recovered, left the hospital—and disappeared.
ALTHOUGH SHE HAD BRISTLED AT BEING LABELED A “HOSTESS,” Anna Chennault continued throughout the Reagan years to throw dinner parties at the Watergate, mixing top White House aides and cabinet members with defense contractors, foreign diplomats, and U.S. and foreign military officials.
In March 1984, White House aide Michael Deaver came for dinner, along with Ambassador Zhang Wen-jin of China, one month before Reagan’s visit to China. In May 1984, she hosted a buffet reception for the deputy secretary of defense, the commandant of the Marine Corps, the ambassadors of Thailand and Singapore, and several members of Taiwan’s army and navy. In June 1984, she hosted a dinner for the ambassadors of South Korea and Malaysia; Under Secretary of State for Political Affairs Michael Armacost; Vice Chief of Staff of the U.S. Air Force General Lawrence Skantze; and executives from defense contractors Northrop, Loral and Grumman. In October 1986, she hosted a dinner at the Watergate Hotel in honor of General Chiang Chung-ling, the commander in chief of the Taiwanese army. And in October 1987, she hosted a dinner at the hotel for General Hau Pei-tsun, the Taiwanese army chief of staff, inviting Watergate neighbors Audrey Mars and Senator and Mrs. Larry Pressler of South Dakota.
Anna also kept pressing for a presidential appointment, even after Reagan named her vice chairman, in April 1981, of a commission tasked with promoting U.S. exports. She asked Edwin Meese to assist in getting her reinstated as a member of the Kennedy Center Advisory Committee “and the privilege of using the Presidential Boxes as we had the privilege during the other Republican Administrations.” In late 1984, Senator Strom Thurmond wrote President Reagan and White House chief of staff Donald T. Regan to recommend Chennault as “Ambassador-at-Large” or “a
similar position of ambassadorial rank.” In 1985 and again in 1988, she asked to be appointed to the president’s Foreign Intelligence Advisory Board. None of these appointments came through. She was a guest of the Reagans, however, at the July 1985 state dinner for Chinese president Li Xiannian and Madame Lin.
“WATERGATE: A WASHINGTON NEST FOR HIGH-FLYERS” read the headline in the February 1982 issue of Washington Dossier magazine. “An architectural landmark of Washington’s cityscape as familiar as the Capitol dome and the fountains of the White House,” wrote Mickey Palmer, “its riverside mooring carries with it an exclusivity that’s as ultimate a status symbol as the capital city offers.” Nicolas and Josseline Salgo posed next to a buffet table in their Watergate South apartment, groaning with dishes prepared by the Watergate Terrace Restaurant and a massive pair of Hungarian silver candlesticks. The walls of their apartment—one of their six homes—were filled with miniature rugs from Persia, Tibet, Arabia and China, giving it the atmosphere of a Middle Eastern bazaar. Elsewhere in the apartment, Salgo displayed a rack of Chinese swords, his collection of old Hungarian silver and artifacts covered in shagreen, a material typically made from sharkskin.
Nicolas Salgo was downsizing. He sold his 1.3-million-acre ZX Ranch in Oregon, the largest cattle ranch in the Pacific Northwest, which was also where he parked Elizabeth Taylor’s trailer from the Italian location of her 1963 movie Cleopatra, which he had purchased as a souvenir in 1966. Despite his intermittent irritation with his partners, Wendy Luscombe and the National Coal Board pension funds, the Watergate was operating smoothly. Yet, at age sixty-seven, he was restless.
With a Republican in the White House, Salgo thought it might be a good time to try for a federal appointment. He called Bob Page—who had steered him to Continental Illinois in 1977, when Salgo was trying to find a loan to help him purchase the Watergate from Banca di Roma—for advice. Page was from Wichita, Kansas, and recommended Salgo talk to Bob Dole, who lived in Watergate South. Senator Dole in turn connected Salgo with Elizabeth Dole at the White House, who in turn introduced him to Bill Clark, Reagan’s national security advisor. Clark invited Salgo to stop by the West Wing and “discuss a few options.”
Keith C. Smith, who served under Salgo as the deputy chief of mission in Budapest, later offered a different chronology. He said Salgo had contributed $550,000 to the first Reagan campaign and “gave a discount on the sale of a Watergate apartment to Charles Wick,” the head of the U.S. Information Agency. Keith said Salgo wanted to become the U.S. ambassador to France—Josseline was French—but settled for Hungary.
Salgo noticed Clark’s cowboy boots and mentioned he was selling the ZX Ranch in Oregon. Clark laughed. “Here are my souvenirs from the ZX Ranch,” he said, pointing to his leg. “Two pieces of silver.” During the Great Depression, Clark and his father had worked as “buckaroos” at the ZX Ranch. Clark’s job was to tame wild horses, one of which tossed him, breaking his leg. It was put back together with pins.
Salgo raised the possibility of becoming U.S. ambassador to Argentina. He had recently visited the Falkland Islands, where he observed lingering bitterness over America’s support for Britain during the 1982 Falklands War. Several months later, Salgo’s FBI background investigation was complete. The Argentinian ambassador to the United States tipped him off that he had been informed by the U.S. State Department that Salgo was about to be nominated. Clark called Salgo and asked him to come back to the West Wing for another conversation.
Salgo assumed the purpose of the meeting was to discuss the timing of his departure for Buenos Aires, but Clark said he wanted to send him to Budapest instead. Salgo, a native-born Hungarian who had become a U.S. citizen in 1953, worried he would be a target of the Soviet Union, as Hungary was now part of the Eastern Bloc. “I’m not worried about that,” quipped Clark. “I know a cowboy when I see one. You’re a cowboy. You’ll do alright.” On September 20, 1983, President Reagan nominated Nicolas M. Salgo to be the U.S. ambassador to Hungary, the first native-born Hungarian to represent America in Budapest. Wendy Luscombe attended his swearing-in ceremony at the State Department.
Salgo placed all of his assets in a blind trust under the management of Bob Page, including his half-interest in the Watergate. “Frankly, I couldn’t have cared less,” said Salgo. “I enjoyed my new work as ambassador very much. When I quit Watergate, I quit.”
Almost immediately, however, Page and Luscombe locked horns. According to Salgo, Luscombe proposed “updating” the hotel, at a cost of $8 million. Page considered the expense unnecessary, but Luscombe persisted. “You want to go ahead?” Page asked. “You will have to do it on your own because we are invoking the clause.”
Under the “Salgo formula” in their renegotiated partnership agreement, Luscombe now had to respond by naming a price for Salgo’s share of the Watergate. If her offer was high enough, Page could accept it. But if she came in too low, Page had the option of buying the National Coal Board’s stake in the Watergate at that price. The British, Salgo wrote later, “changed their underwear, asked for an extension and then named a price which was incredibly high.”
Although Salgo’s assets were placed in a blind trust, Page sent a message to the U.S. embassy in Budapest containing a password that meant Salgo was to contact him immediately. Salgo got in a car, drove to Vienna and called Page.
Page explained the situation and presented Luscombe’s offer, which was about 20 percent above what he thought the Watergate was worth. Salgo suspected the British came in with a strong bid because they thought Page, who managed the finances of Willard Garvey, a wealthy Midwesterner, could easily arrange financing and buy their half of the Watergate.
“You have two options,” Page told Salgo.
“What are they?” Salgo asked.
“For the first option, I found a most desirable, elegant, well-run lunatic asylum and reserved a suite for you there.”
“And the second option?”
“Let me sell the Watergate to the British.”
“My whole fortune comes from there,” Salgo recalled years later. The Watergate was by far his most valuable asset, but it was not liquid in any sense of the word. Nor were most of his other investments. In fact, Salgo was cash-poor.
He instructed Page to accept Luscombe’s offer. He put part of the proceeds into trusts for members of his family. “Each one of us is on easy street because of that sale,” he said later. “For the first time in my life, I had cash.”
IN 1984, HER MAJESTY’S HIGH COURT OF JUSTICE IN ENGLAND turned down a petition by National United Mineworkers chief Arthur Scargill that pension funds make no further investments overseas or in any energy-producing concerns other than coal. The effect of this ruling, according to a London real estate journal, meant pension fund managers were freed “from the strangle-hold placed on them by the miners’ trustees” and could make investments as they saw fit. Luscombe promptly bought another American real estate trust, with prime buildings in downtown Los Angeles and San Francisco, making the pension funds by far the largest British investor in the United States. At age thirty-five, she was on a roll: In August, she reported to the joint boards of the pension funds that operating cash flow for U.S. real estate assets was running $426,000 ahead of budget. Occupancy rates across her American portfolio was 99 percent. By 1986, she and her team of twenty-five were managing more than seventy properties, including an almond orchard in California.
With 100 percent ownership of the Watergate, Luscombe focused on every dollar coming in or going out. The Watergate Office Building was home to several embassies, including one which decided not to pay its rent. When the managers of the building launched eviction proceedings, the embassy claimed “diplomatic immunity” and protested to the U.S. State Department. It was a steamy August in Washington. Luscombe ordered their air-conditioning turned off. Within twenty-four hours, she received a rent check.
In 1985, Hugh Jenkins left his position as investment director for the National Coal Board. His repl
acement, David Prosser, interviewed firms in New York about the possibility of taking over the management of the coal board’s entire U.S. real estate portfolio, then valued at 600 million pounds, or about $1.4 billion. Prosser’s maneuvers inevitably appeared in the business press, perhaps intentionally—he was, after all, planning to put Luscombe and her entire team out of a job. His idea went nowhere, but Luscombe knew she could not count on Prosser to give her the support she had enjoyed from Jenkins.
In spring of 1986, the Watergate Hotel occupancy rate was an unimpressive 68 percent—just below the citywide occupancy rate of 69 percent. The outlook was grim: There was a glut of hotel rooms in Washington, and experts predicted the city’s vacancy rate could drop to 50 percent. Luscombe solicited proposals from various hotel management companies to take over the hotel from Watergate Companies, Inc., the current management firm, which had previously been headed up by Nicolas Salgo. An industry insider said the Watergate Hotel needed refurbishing and should look abroad for help. “Europeans would put the charm back into it,” the source said.
The Wall Street Journal reported the Watergate Hotel was losing money on its flagship restaurant, Jean-Louis. Although the cheapest meal was $40, the restaurant was running in the red, due to its high cost of ingredients, $25,000 of Limoges china and $5,000 in tablecloths. “Fear is drifting through the corridors of the Watergate Hotel,” Ann Mariano and Phyllis Richman wrote in the Washington Post. “Word that a change in management is imminent has touched off speculation that the hotel may shed its panache in the process—not to mention one of its most celebrated attractions, chef Jean-Louis Palladin.”
“The future is really uncertain here,” said Palladin. “It is totally a black hole.” He wanted to stay in Washington—“my kids are American now,” he said—but was seriously considering an offer to return to France to run a restaurant on the Château Margaux estate, which could potentially fulfill his dream of getting a third Michelin star. If he were to remain at the Watergate, he told the Post, his kitchen would need new equipment and the dining room would need new decorations, including new tables and chairs, at a total cost of about a half-million dollars.
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