The last tycoons: the secret history of Lazard Frères & Co

by William D. Cohan

  For Rohatyn was the boss of many lawyers, including the ones who were negotiating with McLaren; he had behind him a prodigious career of putting corporations together and taking them apart; Geneen's purpose in dispatching him to Washington obviously was to raise the ITT argument to a more potent level than mere lawyers had been able to do. When Rohatyn was not educating Kleindienst, moreover, he was closeted with Mitchell, helping the Administration to prevent the collapse of Wall Street firms that had used their customers' money and couldn't pay up. So far as impact on the negotiations was concerned, it would have been better for the public weal if Kleindienst had negotiated with one hundred ITT lawyers rather than one Rohatyn.

  Felix also volunteered his thoughts about how he had come to be mentioned in Anderson's second column on the unfolding Dita Beard scandal. He said he had been at Kennedy Airport awaiting an outbound flight and "talking with my children on the telephone," who told him that Hume had called from Washington "asking urgently that I speak with him." Even though he did not know Hume, he returned his call from the airport. For those people who know Felix and have tried to get him on the phone and who never get a return call, this must have come as quite a revelation. In any event, he testified that Hume read him the Dita Beard memo and asked him if the ITT contribution figured into the settlement discussions. "Let me say now that I do not know Mrs. Beard and, in fact, had never heard her name before talking with Mr. Hume," he explained. "Moreover, I never knew of an ITT commitment of the San Diego Convention Bureau until December 1971"--despite being an ITT board member--"when I read about it in the public press. This was six months after the antitrust settlement had been reached. Therefore, it was literally impossible for me to have participated in any conversation regarding the commitment."

  Throughout the first day of the hearings, other senators pushed Felix, McLaren, and Kleindienst on the circumstances surrounding ITT's antitrust settlement and the implications of the Dita Beard memo, but the troika held firm in their incredulity about any connection. Still, a clear impression had been left that Felix had asked for and received extraordinary access to the top government officials charged with deciding to pursue, or not, a historic antitrust case against his biggest client. What's more, Felix's intervention worked, even though he told Senator Bayh that he felt "my influence and persuasiveness was obviously wasted" when he went back to see Kleindienst in his office to complain about the harshness of the settlement proposal after the June 17 telephone conversation. Felix moments later recanted his false modesty.

  "Is it a fair assessment of your value to ITT to say your influence was wasted when the one divestiture that was going to do the most damage to the company, Hartford, was not successful?" Bayh wondered.

  "I would hope I did play a good part, Senator, because I think it was the right thing to do," Felix replied.

  "So you cannot say your influence went to waste?" Bayh replied.

  "No, sir, I amend that statement," Felix said.

  From there, not surprisingly, the senators wanted to hear from Dita Beard, especially after Kleindienst testified that the implications of her memo were "categorically false" and McLaren said about it, "I think those are terribly serious charges and I implore the committee to bring her in here and make her say under oath what she said in there." Kleindienst later testified that the Beard memo was "nothing but a memorandum written by a poor soul, a rather sick woman." Several Democratic senators agreed they would not approve Kleindienst's appointment as attorney general until Beard had testified. But she had disappeared. When she resurfaced a few days into the hearings, the FBI reported that she was in a Denver hospital with a serious heart ailment after none other than G. Gordon Liddy, an ex-FBI agent working for Nixon's reelection campaign who had previously organized the arrest of Timothy Leary in Millbrook, New York, had whisked her out of town after Anderson's first two columns appeared. (She did eventually testify, from her hospital bed surrounded by senators, without conveying much of substance.) The remainder of the hearings had a theater of the absurd quality, whose folly is far less amusing when one considers that not one but two attorneys general--Mitchell and Kleindienst--perjured themselves in their testimony. Kleindienst was eventually confirmed, but not before the prelude to the Watergate tragedy had been played.

  Indeed, at the White House, there was growing concern about the tenor of the Kleindienst hearings. Two of Nixon's closest advisers, Chuck Colson and John Dean, from the outset had questioned the wisdom of Kleindienst's insistence on the hearings. Now there was word that the SEC was beginning its own investigation into possible insider trading charges against some ITT executives, who may have sold ITT stock in and around the announcement of the merger with the Hartford (and later reached settlements with the SEC). As part of that investigation, the SEC had begun to demand of ITT all relevant documents, a subject of much controversy in the wake of the reports of document shredding in Dita Beard's ITT office as she was whisked out of town. The task fell to Colson to investigate the contents of the increasingly worrisome trove of ITT memos that had been produced. Ehrlichman and Fred Fielding, an assistant to John Dean, also reviewed all of the ITT documents, including thirteen "politically sensitive" ones that ITT's lawyers had delivered to Ehrlichman at the White House on March 6. On March 30, Colson authored a confidential memorandum of his own to Haldeman, Nixon's chief of staff, about what he had discovered. The memo is nothing short of astounding; it would have been explosive had it come to light at the time it was written.

  Colson warned his boss, "The most serious risk for us is being ignored...there is the possibility of serious additional exposure by the continuation of this controversy. Kleindienst is not the target; the President is...but the battle over Kleindienst elevates the visibility of the ITT matter and, indeed, guarantees that the case will stay alive. Neither Kleindienst, Mitchell nor [Robert] Mardian [a Justice Department official] know of the potential dangers. I have deliberately not told Kleindienst or Mitchell since both may be recalled as witnesses and Mardian does not understand the problem." Colson proceeded to describe the contents of a handful of, to that point, supersecret memos that directly contradicted the testimony Mitchell, Geneen, and Erwin Griswold, the solicitor general, had given in the previous weeks to the Senate Judiciary Committee. Kleindienst repeatedly perjured himself in his testimony. Colson revealed to Haldeman his discovery of letters that voided Griswold's testimony that he had made the decision not to appeal the Grinnell case to the Supreme Court. These letters credited John Connally, then Treasury secretary, and Pete Peterson, then commerce secretary, with directly intervening in the decision. (Felix became the trustee of Peterson's blind trust, created when he joined the Nixon administration, on May 25, 1971, in the middle of Felix's and ITT's intense lobbying of the government for a settlement of the antitrust lawsuits; Peterson is, of course, now the uber-respected chairman of the Blackstone Group, one of the world's biggest private-equity firms.)

  There was also a memo to Spiro Agnew, the vice president, from Ned Gerrity, at ITT, addressed "Dear Ted," that outlined Mitchell's agreement to talk to McLaren after Geneen had his meeting with Mitchell to talk only about antitrust policy, not the ITT cases. Both Mitchell and Geneen testified they only spoke about antitrust policy in their thirty-five-minute meeting in August 1970. "It would carry some weight in that the memo [from Gerrity] was written contemporaneously with the meeting," Colson wrote. "The memo further states that Ehrlichman assured Geneen that the President had 'instructed' the Justice Department with respect to the bigness policy. (It is, of course, appropriate for the President to instruct the Justice Department on policy, but in the context of these hearings, that revelation would lay this case on the President's doorstep.)" Colson revealed another internal ITT memo "which is not in the hands of the SEC" that "suggests that Kleindienst is the man to pressure McLaren, implying that the Vice President would implement this action. We believe that all copies of this have been destroyed."

  Colson also reminded Haldeman of a memo f
rom Herb Klein, Nixon's communications director, to Haldeman dated June 30, 1971--one month before Justice reached its settlement with ITT--outlining ITT's $400,000 contribution to the San Diego convention. Mitchell was copied on the memo. "This memo put the AG on constructive notice at least of the ITT commitment at that time and before the settlement, facts which he has denied under oath. We don't know whether we have recovered all the copies. If known, this would be considerably more damaging than the Reinecke statement," where Ed Reinecke, the California lieutenant governor, recanted statements he made that he had spoken to Mitchell about the ITT contribution.

  In the Justice Department files, Colson found a number of incriminating documents, among them an April 1969 memo "from Kleindienst and McLaren to Ehrlichman responding to an Ehrlichman request with respect to the rationale for bringing the case against ITT in the first place." A year later, Ehrlichman wrote a memo to McLaren explaining that he had discussed with Mitchell his meeting with Geneen. Mitchell could give McLaren "more specific guidance," Ehrlichman wrote. Five months later, Ehrlichman wrote to Mitchell again complaining about McLaren's pursuit of ITT and reminding Mitchell of an "understanding" with Geneen.

  Finally, on May 5, 1971, came the piece de resistance: another memo from Ehrlichman to Mitchell "alluding to discussions between the President and the AG as to the 'agreed upon ends' of the ITT case and asking the AG whether Ehrlichman should work directly with McLaren or through Mitchell." Colson also wrote about a memo sent to Nixon on the same topic at about the same time. "We know we have control of all copies of this," he said, "but we don't have control of the original Ehrlichman memo to the AG. This memo would once again contradict Mitchell's testimony and, more importantly, directly involve the President."

  Colson knew that his discovery of these memos--indeed their very existence--meant trouble, big trouble. He had locked away in a safe most of the dangerous memos, but not all copies of all of them could be located. So, that same day, in the early afternoon, Colson and Haldeman spent an hour with Nixon in the Oval Office. Thanks to Nixon's penchant for recording conversations in his office, even a small portion of the taped transcript of their meeting reveals Colson's extraordinary concern about how explosive it would be for Nixon politically if the hidden memos were discovered and released publicly, the depth of which was quickly conveyed to the president.

  COLSON:...merely to say to you that, that I've looked at every shred of paper and...

  PRESIDENT: You've seen it all?

  COLSON: I've seen it all.

  PRESIDENT: And it isn't good.

  COLSON: It scares the living daylights out of me.

  Colson then told Nixon he had found the explosive May 5, 1971, memo, where Nixon and Mitchell spoke about the "agreed upon ends" of the ITT antitrust cases.

  COLSON: The most dangerous, the most dangerous one we don't know how many copies were made of which is, which is our problem. And we have all of our copies [noise] in a safe, uh, but we don't know what happened to it in the Justice Department and we can't find all the copies at Justice. And that's a May 5, 1971 memo from Ehrlichman to the Attorney General in which he talks about the sessions between you and the Attorney General on this case and on...

  PRESIDENT: That's right.

  COLSON:...these quite agreed upon ends in the resolution of the ITT litigation. Well that memo, if that came out in that Committee would, would be pretty tough right now, uh, because that would lay it right into here. And we think we've got control of it, but the point Bob makes this morning, and I've discussed some [of] these memos, is very valid that with or without these hearings if these goddamned things leak out now they're gonna be just as big an explosion.

  HALDEMAN: Well, if someone's got a copy of that memo, it's gonna be used.

  COLSON: Whether there's hearings or not.

  HALDEMAN: Whether there's hearings or not, whether Kleindienst stays here or goes...

  PRESIDENT: Yeah.

  HALDEMAN:...off to the moon.

  Colson's March 30 memorandum to Haldeman, the one-hour conversation between them and Nixon the same day, and more than thirty years of historical perspective combine, in retrospect, to make the final ten days of the Kleindienst hearings more or less irrelevant. Kleindienst and Mitchell lied throughout, to protect the discovery of the fact that Nixon had ordered the Justice Department to go easy on ITT.

  For Nicholas von Hoffman, then a Washington Post columnist, the absurdity of the hearings--even without the full extent of the conspiracy being then known--was reason to pen a column replete with pointed zingers questioning the morality of all involved. One of these barbs would stick in Felix for years. "Very occasionally," von Hoffman wrote in summarizing the first two weeks of the hearings, "they'll ask a question of Felix Rohatyn, the little stock-jobbing fixer from ITT who went to Kleindienst to get an antitrust break for his wee, tiny multi-billion dollar conglomerate." Von Hoffman continued, "Kleindienst let it out that little Felix the Fixer, Rohatyn, is a Muskie adviser on economic matters. The presidential candidate's headquarters confirmed this, saying Felix had worked with Muskie on an ignoble piece of legislation which allows stockbrokers to gamble with their customers' money." He said the biggest loser of all was McLaren, who "walked into the hearing room less than two weeks ago a highly respected man," but that his "fumbling" answers about why he had reached a settlement with ITT on more favorable terms than he had first proposed were pathetic. "They don't want antitrust, not Felix the Fixer, not the troubled McLaren or Kleindienst, who says he can sleep at night," he concluded. Felix the Fixer. That hurt and annoyed Felix for years.

  As his final testimony and the hearing itself wound down toward the end of April, Kleindienst chose to emphasize the "important" role Felix played in the settlement. He said he'd come "to regard" Felix "with a very high degree of regard."

  At one point, nearing the end, Kleindienst described himself as unmovable in the face of outside pressure and influence. "I am kind of a stubborn, bullheaded guy myself," he said.

  "Why did Rohatyn keep coming back if you are so stubborn and bullheaded?" Senator Kennedy wondered.

  "He is a persistent little fellow himself," Kleindienst answered, to laughter. "And it did not do him any good, you know. It did not do him any good. He achieved one thing, and Mr. Rohatyn is a very bright, able man, and I think a very fine man, he achieved one thing, he got me to inquire of McLaren whether he would be willing to hear this presentation and I think, as Felix will tell you right now, that that is all he got."

  "That is pretty significant the way it turned out," Senator Kennedy said. "Yes, it was," Kleindienst replied.

  "It was not any small achievement," Kennedy continued.

  "Yes, I agree," Kleindienst said.

  Indeed, the record is crystal clear that the last words uttered in this extremely controversial, convoluted hearing, where perjury and obfuscation abounded, involved the role a diminutive refugee investment banker from New York played in settling, to that time, the largest antitrust case on record.

  On April 28, the Judiciary Committee voted, 11-4, to reaffirm its support for Kleindienst's nomination, in effect ratifying its unanimous February 24 recommendation.

  Kleindienst, the perjurer, became the country's sixty-eighth attorney general on June 8. Nine days later, on June 17, the Washington police arrested five burglars, organized by E. Howard Hunt and G. Gordon Liddy, as they were installing more bugging devices in the Watergate offices of the Democratic National Committee. On June 30, the Senate Judiciary Committee asked the Justice Department to reexamine the entire seventeen-hundred-page record of the Kleindienst hearings for possible evidence of perjury. So now, incredibly, three weeks after his confirmation as attorney general, Kleindienst's Justice Department was investigating the potential felonious behavior of its leader. On April 30, 1973, Kleindienst resigned as attorney general, after less than a year in office, and eventually pleaded guilty to the misdemeanor of lying at his own confirmation hearing. The controversial plea bargain sa
ved him from jail time and from disbarment. He was the first former Nixon cabinet official to plead guilty to a crime as part of the Watergate scandal. What role ITT's $400,000 pledge and Dita Beard had in all of this was never made clear, although Larry O'Brien said later in his life that he believed the burglary of his Watergate office was done in large part because of the questions he raised in his letter to Mitchell about the connection between the ITT antitrust settlement and ITT's $400,000 pledge to the San Diego Convention Bureau. And of course, we all know where the break-in at the Watergate led. It is not crazy to see the thread that connected ITT's acquisition of the Hartford, and the ensuing fight for antitrust approval, to the Watergate scandal and the resignation of President Richard M. Nixon--and the corresponding loss of confidence in the institutions of American government. The blueprint for Nixon's cover-up of the Watergate scandal can easily be seen in the lies that Mitchell and Kleindienst uttered before the Senate Judiciary Committee--Kleindienst at his own confirmation hearing no less, a hearing he himself demanded and at which he still committed perjury--and in the clandestine, but secretly taped, conversations of Nixon, Haldeman, and Colson to try to figure out what to do if the shit hit the fan. And Felix's role in all of this, although not nefarious by the standards of the Nixon gang, cannot be overstated.

  A MAN AS assiduously public as Felix is has had many opportunities over the years to buff the stories that constitute the Felix Rohatyn genome. His years spent explaining his treacherous actions in the ITT-Hartford merger are no exception. In an October 1975 profile of him in the Wall Street Journal--while the public ITT controversy had died down but the private investigations still raged on--he chalked up his mistakes to simple naivete. "One thing I learned from it all is that I should never talk to a government official alone, not even just to have a beer," he said. "Now when I talk to one, I make sure to have eight other people in the room with me." Some thirty years later, his own naivete remains his explanation, the story by now having acquired the Vermeer-like gloss of many of his tales. "I did something stupid," he explained, "because I think I was very inexperienced in terms of public things. I clearly was used by ITT and by the Nixon administration as part of the scenario that would get McLaren to change his antitrust position."