The Watergate

by Joseph Rodota

  When Roxie heard the National Labor Relations Board ruling had been overturned, she was working full-time organizing hotel workers. She saw the decision as simply another in a long list of setbacks for unions during the Reagan era. “Just par for the course,” she lamented.

  IN MARCH 1989, THE NATIONAL COAL BOARD PENSION FUNDS announced plans to sell their entire portfolio of U.S. property, including the Watergate. “They want to get liquid and go into something else,” Wendy Luscombe said. The funds “had been given a good run for their money” and have “not been burned by their investment,” she said. “And they are not dumping it.”

  After Hugh Jenkins left the National Coal Board pension funds in 1985, Luscombe received no new funding to enlarge her U.S. real estate portfolio. It was clear to Luscombe that the U.S. market was simply not a priority for her new boss back in London, David Prosser. She did not want to sit around and watch the unwinding of the $1 billion real estate portfolio she had assembled over the past ten years, and in July 1989, she resigned from both Pan-American and Buckingham Holdings and took a job managing U.S. real estate operations for the Carroll Group, a private real estate company owned by one of the wealthiest families in Great Britain.

  The National Coal Board retained Morgan Stanley Realty to handle the sale of its entire U.S. real estate portfolio. News reports estimated the Watergate complex would fetch between $28 million to $71 million—which meant, at the low end, a loss of more than $20 million or, at the high end, a profit of about the same amount. “I think it’s tired,” said a Washington real estate investor. “I think it needs some work.” A commercial real estate report estimated the Watergate Office Building on Virginia Avenue was 30.6 percent vacant and the 600 New Hampshire Avenue building was 11.6 percent vacant—far above the downtown Washington office vacancy rate of 5.3 percent. The hotel’s average occupancy rate was 62 percent, below the citywide average of 69 percent.

  “The Cunard people were running the place like a cruise ship,” recalled Lynda Clugston Webster, a former marketing director for the hotel, “posting menus in light boxes and bringing in the tourists in tennis shoes.”

  Complicating a potential sale, Cunard Hotels and Resorts, the Cunard Line subsidiary managing the Watergate Hotel, had a contract giving it the right to continue operating the hotel, even after a sale. Retail tenants in the Watergate shopping mall had options to renew leases at below-market rates. Although the National Coal Board pension funds owned the land underneath the three co-op apartment buildings, each co-op had rights to purchase their land at any time. Further complicating the transaction, John Hancock Life Insurance Company owned the land underneath the Watergate Office Building.

  On Friday, March 23, 1990, Cunard Hotels and Resorts agreed to suspend its management contract. The following Monday, the National Coal Board announced the sale of the Watergate Hotel to Trusthouse Forte LLC, a British catering and hotel conglomerate.

  Charles Forte immigrated to London from Italy at the age of four with his family and started his first venture, a milk bar on Regent Street, at the age of twenty-six. Two decades later, his company was the largest hotelier in the United Kingdom. His catering division had the contract for London’s Heathrow Airport. Charles was knighted by the Queen Mother in 1970 and became Baron Forte of Ripley in 1982. The same year, his son, Rocco Forte, became the CEO of the company, while Lord Forte remained as chairman.

  Trusthouse Forte paid $50 million for the Watergate Hotel. A spokesman said the company would spend up to $8 million renovating the hotel’s elevators, health club, entrance, and laundry and banquet facilities. The sale did not include the adjacent Watergate Office Building, or the Watergate Mall nearby, both of which remained on the market for another two years.

  As a legal entity, the Watergate was breaking apart. For its first decade and a half, the Watergate had been owned by Società Generale Immobiliare back in Rome and managed by Giuseppe Cecchi or Nicolas Salgo, who had been with the project since its inception. After Salgo left for Hungary, Wendy Luscombe watched the Watergate closely, perhaps with a closer eye to the bottom line than Salgo, but with the same level of dedication. Twenty-five years after the Watergate first broke ground, there was effectively no one in charge of the entire complex. A succession of owners would go on to manage—or mismanage—their parts of the Watergate, including the hotel, the office buildings, the shopping mall, as they saw fit.

  From its beginnings, the Watergate brand meant two things: privacy and luxury. The 1972 break-in and its aftermath undermined its privacy. As ownership fell into new hands, the Watergate’s reputation for luxury would suffer.

  Trusthouse Forte brought in a new general manager for the Watergate Hotel, Ibrahim Fahmy. As part of his orientation, the hotel staff informed him he had access to a white Jaguar sedan that had been left behind by the previous general manager, a flamboyant homosexual in his fifties with a penchant for young Asian men.

  One day, shortly after he started at the Watergate Hotel, Fahmy took the Jaguar out to run an errand. He returned a few hours later, visibly shaken. He had driven through Washington’s Dupont Circle neighborhood, which at the time was the center of the District’s gay community. Young Asian men had thronged around the car, waving and smiling, and knocking on the windows. “What is going on?” he asked his staff. “Why is this happening to me?”

  A hotel employee pulled him aside and, in a whisper, explained the situation.

  Fahmy ordered a new car.

  SHORTLY AFTER TRUSTHOUSE FORTE TOOK OVER THE WATERGATE, an executive summoned Jean-Louis Palladin for a meeting. Palladin declined, and sent his sous chef Jimmy Sneed to represent him. When Sneed entered the office, he recalled, the Trusthouse executive was clearly perturbed.

  Palladin’s $90,000-a-year salary, the executive said, was excessive and needed to be cut back.

  “Absolutely not,” replied Sneed. “He needs a raise.”

  The executive was astonished.

  If you don’t increase Jean-Louis to $110,000 a year, Sneed warned, “he’s gonna walk.”

  Sneed returned to the restaurant and delivered the news to Palladin. “I got you a raise,” Sneed said, smiling broadly.

  WASHINGTON LAWYER PAUL ZANECKI HAD WANTED TO LIVE in the Watergate since 1968, when he saw a listing for a two-bedroom apartment for $35,000. Still just a law student, he could not buy it, but many years later he rented a duplex apartment on the first floor of Watergate South, next door to Elizabeth and Bob Dole. In the mornings, Paul would sometimes look out of his second-floor master bedroom window to a surreal scene: Bob Dole in his “tighty whities” on the terrace below, chasing the Doles’ dog Leader. At night, when Paul returned home from a long day at a land-use law firm, he would sometimes pass by the Doles’ apartment and a small patch of “thank you” bouquets stacked outside their front door. Occasionally, when there was no one around to observe him, Paul requisitioned a floral arrangement, discarded the note and presented it to his wife with a grin.

  One morning, after a late night at the Sea Catch restaurant in Georgetown, Paul awoke to the sound of loud banging. Still groggy, he got out of bed, wrapped a towel around his naked waist, walked downstairs and opened the door to the hallway. He recognized the real estate agent he had retained to find someone who could sublet the apartment, so he could take a brief assignment overseas. But he had forgotten all about the appointment to show the apartment that morning. He apologized for his appearance.

  The agent introduced the prospective tenants: Marcia Lewis, a writer from Los Angeles, and her daughter, Monica Lewinsky.

  Chapter Nine: Monicaland

  One of the reasons so many people love hotels so much is the joy of feeling so pampered that all they need to do is lift a finger, push a button on the phone and someone will bring them a five-course meal, a bottle of champagne or maybe just a soda and a handful of peanuts.

  Whatever you want, it can be provided. If you need a shirt cleaned and pressed for your meeting, someone will do it. If your air con
ditioning isn’t working, you just call downstairs, and someone will fix it.

  Savvy Washingtonians know there is a place just like this, but even better: You can buy a cooperative apartment there and live as if you’re on vacation full time. Where is this paragon of pampering? The Watergate, of course.

  Washington Times, April 25, 1997

  FOR CHRISTMAS 1993, THE WATERGATE HOTEL PRESENTED Jean-Louis Palladin with a custom-made La Cornue stove, in azulejo-blue porcelain with brass trim. He designed it himself. It formed its own ten-and-a-half-foot-long island, so cooks could pass dishes from one side to the other, and generated 23,500 BTUs—60 percent more than a typical restaurant stove. Four of its ovens were electric, for pastry; four were gas, providing moist heat for meats and poultry in a vaulted shape that eliminated the need for basting. The price tag: $88,000.

  Washington Post food critic Phyllis Richman described Palladin’s new toy with a string of superlatives: the power of a Lear jet, the roominess of a Rolls-Royce, the durability of a sable coat and the efficiency of a Rolex watch. “Like a teenager making a case for a new car,” she wrote, “Palladin has promised to be ever more creative and productive.” In addition to sixteen powerful gas burners, the new oven came with strings: Palladin agreed to take over food service for the entire hotel.

  His duties now included, in addition to Jean-Louis, the Riverview restaurant in the hotel, which was transformed into a brasserie, the hotel room service and all banquet catering. He told Richman he planned to make the best breakfast in Washington, with his own preserves, create new recipes for egg dishes, and work with Marvelous Market, a local bakery, to create “croissants of beautiful quality” and not mere “little packets.” “My job?” he said, laughing. “Everything, A to Z, to take care of the entire hotel. I will be in the back, I will be upstairs, I will be everywhere.”

  “The banquets were hard on him,” recalled the hotel’s catering manager, Cathy Arevian. “It just wasn’t the way he wanted to do things.” His kitchen was still small—the walk-in refrigerators were around a corner—and whenever there was a large banquet upstairs at the hotel, he was forced to set up an entire food preparation line in an adjacent room. His dissatisfaction with these makeshift facilities sometimes drove him to unleash profanity-laced tirades, which were audible in the adjoining banquet room. And it wasn’t easy to adapt Palladin’s inventive recipes to large-scale events at the Watergate Hotel. One day, Arevian planned a menu for two hundred guests, including one dish with a fava bean puree. She had seen fava beans on the menu at Jean-Louis. Palladin was furious. He gave her a seat in the kitchen and pointed to a mountain of fava beans. “Get to work!” he shouted, and stomped away. “I shelled fava beans until I felt as if my fingernails would fall off,” Arevian recalled.

  Lynda Webster brought groups of VIPs in for special luncheons. Palladin found these events annoying. One day, Webster booked a group of congressional wives. Palladin prepared a first course of Pacific geoduck clams, which were known for being flavorful and crunchy—and shaped like a large, uncircumcised penis. Palladin burst through the kitchen door and paraded a steaming plate of phallic clams around the restaurant, grinning as he presented the dish to each table of mortified women.

  For Jean-Louis Palladin’s fiftieth birthday in 1996, friends and colleagues, including food writers Phyllis Richman and Joan Nathan and all the top chefs of Washington, surprised him with a party aboard an Odyssey cruise ship. As they sailed past the Watergate, Jean-Louis released balloons into the air. Across the water, in the Riverview restaurant of the hotel, lights flashed in response.

  Jean-Louis’s contract with the hotel expired in April 1996. He chose not to renew it, he said, because Trusthouse Forte, the hotel’s new owners, had refused to invest $250,000 in renovations. “After 17 years, it looks a little tired.” Instead, he had been told he could lease the space from the hotel, in exchange for 5 percent of gross sales. “New people bought the hotel,” he told a reporter, “and we don’t have the same view.”

  Philip Wood, vice president of operations for Exclusive Brand, the luxury hotel division of Trusthouse Forte, said the decision was Palladin’s alone. “Jean-Louis didn’t want to negotiate,” Wood said. “He didn’t respond to our initial offer to lease the premises. He was looking for someone to set him up in business, and that is not our market.” Wood also suggested Palladin was distracted by other ventures. “He has a lot of external interests,” Wood said, “and we wanted a chef who would be dedicated to us.”

  On June 15, 1996, Jean-Louis Palladin served his last meal at the Watergate. The restaurant was originally scheduled to close on June 30, 1996, but the hotel ordered him to close two weeks earlier. More than five hundred reservations had to be canceled.

  Phyllis Richman described one of the last evenings at the famed restaurant for her readers at the Washington Post. A magnificent flower arrangement greeted diners as they arrived. Maurice Mony, the maître d’, escorted guests to their table. Daniel Nicolas, a captain who had been with Palladin during the restaurant’s entire run, offered drinks and explained the menu: five courses at $85, six courses at $95 and a truffle menu at $150, not including tax and tip.

  Vincent Feraud, the young sommelier, explained the wine list. When he arrived six years earlier, the cellar held sixty thousand bottles. But the hotel cut off Jean-Louis’s wine budget in 1993. By Feraud’s estimate, they would be down to about two thousand bottles when it came time to close.

  Nicolas took the order in triplicate—one for the kitchen, one for the cold station (soups, salads and desserts) and one for himself. The chef sent out “a little treat”—Jean-Louis’s rings of tempura squid. “They’re famous,” Richman wrote, “these incomparable rings of squid with an airy puff of batter made only of flour, baking soda and ice water, fried in grape-seed oil at exactly the right temperature to make the outside crisp and the inside silky.”

  Back in the kitchen, Palladin tasted a strip of bacon. He called out for the mushroom soup.

  Palladin and his sous chef, Jose Hernandez, stirred and tasted. “At Jean-Louis, soup is art,” Richman wrote.

  For the main courses, Palladin roasted small racks of lamb with sage. He sliced a pan of duck breast “with the concentration of a surgeon.”

  The pace didn’t slow down until ten-thirty, when the second seating started to wind down. “The last diners are growing louder with each new pouring of wine,” Richman wrote. “And now that it’s almost over, the staff is getting a little gregarious, too. Almost a family, this group, about to be broken up.”

  “Where do you go from Jean-Louis?” asked Kathy Dinardo, a captain since day one.

  Feraud looked around the room.

  “This is a haunted house now,” he lamented.

  Jean-Louis opened restaurants in Las Vegas and New York, but never again achieved the same level of notoriety he enjoyed at the Watergate. Unlike other celebrity chefs, he never made money from cookbooks or television shows, and after he was diagnosed with lung cancer, his friends—including chefs he had nurtured, and customers for whom he had cooked—held fund-raisers around the country to cover some of his medical costs. He died in 2001 at the age of fifty-five.

  “No matter what, Washington will never again see a restaurant like Jean-Louis at the Watergate,” Richman wrote. “Palladin didn’t come to show us French food, he came to reinvent American food.”

  PLÁCIDO DOMINGO FREQUENTLY STAYED AT THE WATERGATE HOTEL, out of gratitude to the owner, Trusthouse Forte, which had underwritten one of his concerts with a $1 million contribution. On February 12, 1996, Domingo walked from the Watergate Hotel to the Kennedy Center. Patricia Mossel, the Kennedy Center’s executive director, introduced him at a press conference as the new artistic director of the Washington National Opera and proclaimed a new beginning for the company: “the Domingo Era.” At Giants Stadium in July, Domingo and two other opera superstars, Luciano Pavarotti and José Carreras, performed the final show of their “Three Tenors in Concert” worldwide tou
r. The top ticket cost $1,500. A recording of their Rome concert was the best-selling classical album ever; their concert video was the best-selling classical movie video; and 1.3 billion people in seventy-one countries tuned in to watch their Los Angeles show live. At the end of 1996, Carol Publishing and Birch Lane Press released The Private Lives of the Three Tenors: Behind the Scenes with Plácido Domingo, Luciano Pavarotti and José Carreras. The author was Marcia Lewis, a writer for the Hollywood Reporter.

  Following a bitter divorce, Marcia Lewis remained in Los Angeles in order to provide some stability to her children, Monica and Michael. When Monica left for Lewis & Clark College in Oregon in 1993, Marcia decided it was time to try out someplace new. In order to be near her sister, Debra Finerman, Marcia rented an apartment on the first floor of Watergate South. Debra and her husband, Bill, lived in Virginia but kept a pied-à-terre at the Watergate. Bronia Vilensky, Monica’s grandmother, had an apartment upstairs in Watergate South.

  After she moved in, Marcia had a conversation with Walter Kaye, a prominent Democratic donor, whose grandson had recently been a summer intern at the White House. She suggested her daughter apply for an internship, and Monica embraced the idea. She submitted an application and was accepted, starting as an unpaid intern in the office of White House chief of staff Leon Panetta in July 1995. During the November 1995 government shutdown, President Clinton stopped by the chief of staff’s office for a birthday party, where he struck up a conversation with the young intern. At one moment during the party, she playfully showed Clinton her thong underwear. Later that evening, in an empty West Wing office of a staff member, Lewinsky and Clinton had the first of several sexual encounters.

  Lewinsky took a full-time job at the White House Office of Legislative Affairs, processing congressional correspondence, but was transferred to a public affairs position in the office of Pentagon spokesman Kenneth Bacon in April 1996. She called President Clinton on Easter Sunday to tell him she had been transferred, and he promised to bring her back to the White House after the election.