Real Lace

by Birmingham, Stephen;

Though the Democratic Party might not, strictly speaking, be considered a charity, there are ways in which it can be treated as one. If, say, one wishes to contribute $10,000 to the Democratic Party, which is not tax-deductible, he can make a gift of $100,000 to the Church, which is. The Church then, quietly and without fanfare, can transfer $10,000 to the party, keeping the $90,000 for itself.

  Non-Catholics often assume, of course, that the Church itself is immensely rich, and therefore hugely powerful. It is indeed rich, but in many archdioceses, including the largest ones, it is land-rich and cash-poor. In New York, for example, the nonparochial real estate owned directly by the Archbishopric is worth about $105 million, with the high school properties alone worth about $51.9 million. It is true that the Chancery’s cash accounts receivable and securities holdings amount to an additional $97.4 million, but these “liquid assets” are actually somewhat less liquid than they appear to be. Of the $97.4 million, $76.4 million is in the form of cash mortgage loans made over the years to individual parishes, and because only a small fraction of this sum would be collectible in any one year, to call the whole $76.4 million a liquid asset is, to say the least, optimistic.

  The total parish and nonparish assets of the New York Archdiocese have been estimated at $750 million, a goodly sum indeed, and a full list of the Chancery’s real-estate holdings would be a lengthy one. And yet, with a single exception, these holdings are institutional properties used entirely for religious, educational, and charitable purposes. The exception is the Sperry & Hutchinson Building at 330 Madison Avenue, which the Archdiocese bought in 1967 and now wishes it had not. It has not been a successful venture. Harry Helmsley of the Helmsley-Spear realestate firm in Manhattan has been quoted as saying, “There is no way for the Church to come out in good shape” on the S-H sale and lease-back. And another real-estate man has said, “John Reynolds [the Archdiocesan real-estate broker] better see to it that the Cardinal gets lots of Green Stamps.”

  Perhaps the charge that disturbs the Irish the most is that, in not supporting the arts, sciences, and non-Catholic education to the extent that Jews do, they are “nonintellectual.” The picture is often drawn of the Jew going out to concerts, operas, theater, and ballet, acquiring paintings and giving them away to museums, and buying books, while the Irish Catholic sits home watching football games on television, drinking beer. A Catholic sociologist, Father Andrew M. Greeley, has even lent support to this. The Irish, he insists, are not really “dumb Micks,” but while Jewish intellectuals have boldly asserted themselves and imposed their vision upon the rest of America, the Irish have sat back passively, immobilized by their sense of inferiority. Irish intellectuals capable of publishing often don’t, he says, because they fear making themselves vulnerable to criticism.

  Their fear, he says, comes about from the repressive way in which the children of the Irish are often reared. Too many Irish, Father Greeley feels, fear that to be “different” risks loss of the “respectability” that took them such hard work, over so many generations, to achieve. As a result, he says, the vast majority of brilliant young American Irishmen are doomed to “lead lives of noisy desperation, availing themselves of all the mechanisms of self-destruction that the Irish have traditionally made available for themselves—drink, obesity, temper tantrums, unending quarrels.” Their preoccupation with being accepted by the “nice” people accounts for the fact, he implies, that there are no Irish Einsteins.

  Well, people like the Murrays would take rather strong exception to Father Greeley’s generalizations. Grandpa Murray and Uncle “Atomic Tom” Murray may not have been intellectuals exactly, but they were certainly smart. Nor did they drink much. They were a handsome lot, and kept their figures, and they did not encourage quarrels—though there was a bit of that. The Murrays also have a published author in the family, John F. (“Jake”) Murray, Jr., whose novel The Devil Walks on Water (Little, Brown), about a rich Irish Catholic family in Southampton, caused a bit of a stir in the family when it was published in 1969. In Jake Murray’s book, a number of the family recognized themselves, while others preferred not to, and quite a few Murrays found the title blasphemous.

  Then, consider Patent Number 3,038,030, recently awarded to the Jesuit priest in the family, Father D. Bradley Murray, who teaches mathematics at the Georgetown Preparatory School in Garrett Park, Maryland. He is one of Grandpa Murray’s grandsons, and his patent is for an electronic translator designed to convert the dots and dashes of Morse code into the binary code, the common language of modern computers. His invention’s primary usefulness will be in naval and military communications. Once a radio message is translated into the binary code, it is a quick step from there to the teletypewriter. This is the first Murray patent in the third generation, but clearly young Father Murray is following in the footsteps of his grandfather and his father, Atomic Tom. Clearly, the family feels, there is good cause to speak in the same breath of Einsteins, Oppenheimers, Salks, Freuds, and Murrays.

  Part Four

  WHAT DID HAPPEN

  Chapter 23

  PROBLEMS IN THE BACK OFFICE

  From the end of World War II on, the stock market was going pretty much straight up. It was easy for bankers and stockbrokers to believe that it would glide steadily upward forever. Everybody, it seemed, wanted to invest, and at firms like McDonnell & Company there seemed to be no serious problems. The McDonnells continued to live lavishly, with their fourteen children, in their vast apartment at 910 Fifth Avenue, and at “East Wickapogue Cottage” in Southampton. In those days, brokerage firms were making money almost in spite of themselves, and, when James Francis McDonnell died in 1958 at the age of seventy-nine, control of his firm was taken over by his second oldest son, Murray McDonnell, and the company’s future seemed secure.

  Murray McDonnell is a slightly built, amiable, easy-to-please fellow, who looks rather like a college English professor as cast by Hollywood. He loves horses, and has also inherited his father’s taste for splendid living. He and his wife, the daughter of New York banker Horace Flanigan, and their nine children were widely written about in the society columns, where he was frequently mentioned as the “second father” of Mrs. Jacqueline Kennedy’s children, often entertaining the Kennedys at his horse farm in New Jersey, and inviting Mrs. Kennedy to his castle in Ireland. True, Murray seemed to spend more time with his horses and his social life than with his business, but that was all right. After all, wasn’t that what a rich man was supposed to do? Murray had been placed in charge of the firm’s day-to-day operations as early as 1945, when he was only twenty-three. But his real preference was selling, and he maintained a number of large accounts, including several for the Church, which yielded between one and two million dollars in annual commissions. After his father’s death, Murray McDonnell announced grandiose plans for McDonnell & Company. It would become, he said, “another Merrill Lynch,” a Cadillac among stockbrokerage houses. He opened more new offices and, as usual, had them lavishly furnished and decorated. Even the chairs for the secretaries cost three hundred dollars apiece.

  There were a few problems, but they seemed minor. The third brother, Charles—nicknamed “Bish” because he had been named after the Bishop of Brooklyn—resigned from McDonnell & Company as a result of a disagreement over Murray McDonnell’s business methods, and joined another Wall Street firm. One of the two men’s sisters has described the differences in Murray’s and Bish’s personalities by saying, “Bish would take two strokes away from a golfer’s handicap. Murray would add two.” But one of the firm’s greatest assets—in terms of both prestige and credit—was the presence in the family of Henry Ford. It was an intangible asset, to be sure, but it had become a general assumption on Wall Street that if ever Murray McDonnell needed money he could always tap the almost limitless resources of his brother-in-law. In fact, there is evidence that Ford did lend McDonnell & Company something in the neighborhood of a million dollars at one point to help the firm consummate some deal. If this is true, it is unli
kely that this loan has been repaid.

  The importance of the Ford name and “connection” with the family was brought home dramatically to one of the McDonnell cousins, young John Murray Cuddihy, when he and another cousin were junketing around Europe one summer. “We were just college kids,” he recalls, “and traveling on a very limited budget, but the minute the word got out that one of my cousins was Mrs. Henry Ford, we got treated like royalty. Naturally, we made the most of this, wherever we went.”

  Henry Ford II is a burly, roly-poly, extremely sociable man who loves to give and go to parties. He tossed an extravagant coming-out party in 1959 for his oldest daughter, Charlotte. The party, which featured a Middle Ages decor, was held at the Detroit Country Club and was billed as “The Party of the Century.” There were twelve hundred guests ranging from the Gary Coopers to Lord Charles Spencer-Churchill, and the whole thing cost $250,000, a record for a debutante affair. Two years later, Henry Ford threw another “Party of the Century” for his second daughter, Anne, which cost just as much. The fact that Ford would give such publicity-ridden parties was an indication that he did not have the aristocratic social inhibitions that would prevent, say, a Thomas J. Watson or a Rockefeller from indulging in such gaudiness. Anne McDonnell Ford, meanwhile, was a coolly blonde thinlipped beauty who had some of the iciness and reserve of her father, whom the family called “Little Caesar.” She saw to it that her daughters went to strict Catholic schools, and were raised as “perfect convent girls.” She taught them to do the proper things and to go to the proper places. At their mother’s urging, the girls went to Paris to study, Gstaad to ski. The girls traveled to Europe often, frequently with their father, while their mother stayed behind quietly in the Ford mansion in Grosse Pointe on the shore of Lake St. Clair. Henry Ford bought a yacht and took Mediterranean cruises regularly, entertaining friends on board and throwing parties whenever the boat came into port—again, often while his wife stayed home. When Anne Ford went to Europe, she was usually alone.

  By early 1960 there were rumors that all was not well with the Fords’ marriage, which Monsignor Sheen had proclaimed to be “unbreakable” and “for all eternity.” There was talk that Henry Ford was being seen in the company of a mysterious “contessa.” He even appeared with the “contessa” at a New York restaurant. The headwaiter refused to seat them, and, when Ford protested, the headwaiter whispered that Ford’s daughter Charlotte was dining at a table inside. Presently, the “contessa” turned out to be an untitled and lively Italian-born divorcee named Christina Austin, whom Ford had met in Paris at a party given by Princess Grace. Again, Ford showed no particular reticence about escorting his new lady friend to and from fashionable parties, while his wife kept a stiff and silent upper lip.

  While the Fords were having their marital difficulties in Detroit, 1960 was also the beginning of trouble for McDonnell & Company in New York. Suddenly there was a greater volume of stock being transacted on the New York Stock Exchange than anyone had ever imagined there could be. In the quieter days before the war, for the Exchange to have a “million-share day” was something of an event. By 1960 as many as twelve million shares were being traded in a single day. Soon, trading volume would climb to fifteen million shares a day, and then twenty million. There were more individual shareholders than ever before in history, and there had developed the big institutional buyers—mutual funds, bank trust accounts, insurance companies. It was becoming impossible for the back office—the accounting areas of brokerage firms—manually to handle the large numbers of orders that were daily coming in. In the old days, it had been simple. A firm might have a hundred different orders in a day, or even two or three hundred. Tickets were written up, confirmations were sent out, and each transaction was entered in the books according to normal bookkeeping procedures. But when orders leaped to tens of thousands a day, human hands became incapable of handling them, and many firms in the 1960’s began to computerize their accounting systems in an effort to cope with the deluge of paper work.

  In 1962—perhaps a little later than other firms—McDonnell installed a computer firm in order to deal with the situation. But what the firm couldn’t realize was that the situation was far worse than they had thought, and that the computers they had put in—at enormous cost—were quite unequipped to handle the steadily increasing volume of trades that were taking place. McDonnell & Company now had two thousand employees in twenty-six offices around the country and one in Paris on the elegant rue Cambon, and yet the firm still did not have any real business management. Murray might be an effective salesman, but it was doubtful that he was a strong operations head. McDonnell & Company was still a family-run concern, and at the time Murray, his wife, his mother, his brother Morgan, and his sister Anne Ford were the principal owners of the firm.

  Many of the then currently successful brokerage firms were able to realize, quickly enough, that the computer systems they had installed simply were not up to handling the loads of orders that were pouring in. But McDonnell & Company was not one of these, and it continued limping along with its computer firm. In 1964, Anne McDonnell Ford, to the distress of others in the family, divorced Henry Ford in Sun Valley, and a year later Henry married his beautiful Christina. Earlier, the McDonnells are said to have approached Ford for another million-dollar loan, but, with his marriage to Anne disintegrating, they were turned down.

  Lemming-like, the company now seemed to be heading inexorably toward self-destruction. Early in 1968 the firm had $18 million in equity and subordinated capital, and was doing a business of about $35 million a year in commissions and fees. And yet, at the same time, the back office was so hopelessly entangled that a feeling of panic had begun to set in. The accounting system was so inefficient that no one knew for sure whether trades were being made for the correct customers, whether stock certificates were being sent to the right people, or who was owed what. To this day, at least one member of the family, John Murray Cuddihy, is not entirely sure whether he really owns shares of stock credited to his account. In that grim summer of 1968, while the stock market was being coincidentally battered by the storm warnings of recession, the firm was forced to admit that out of 47,000 customer accounts there were at least 4,000 that showed errors. There were, furthermore, some $872,000 worth of uncollected dividends for McDonnell customers. The firm had some $9 million worth of securities of which it didn’t know the owners. It also owed $1.3 million worth of securities to individuals and other brokerage houses that it couldn’t seem to locate. Perhaps the most staggering error of all was the firm’s overestimation, by $91.8 million, of the amount of fully-paid-for securities that its customers had on deposit. Meanwhile, it was $87.4 million short in other securities which, by law, must be segregated. In 1968, McDonnell & Company was ranked thirty-fifth in efficiency out of thirty-eight top Big Board firms.

  Record-keeping procedures were simply a disaster. For example, a customer might order 1,000 shares of Standard Oil of New Jersey at $64 a share, and get a bill for 1,000 shares of Standard Oil of Ohio at $34 a share. The customer would pay the bill—$34,000—and then, when he went to sell his stock, say, “I don’t own Standard of Ohio. I paid for Standard of New Jersey.” The company would be out some $40,000 as a result of that sort of back-office mistake.

  Day-to-day existence within the McDonnell & Company offices had become chaotic. “Every day there was some sort of flap,” one employee recalls. Switchboards were jammed with incoming calls from customers wanting to know what had happened to their orders, their certificates, their dividends. McDonnell brokers were often more than a week late returning their customers’ calls and, even then, couldn’t give them satisfactory answers. Salesmen, instructed to buy and sell only for the biggest, most lucrative accounts, disobeyed orders and bought and sold as they chose. As one of them said, “I want my commissions, and to hell with the company.” Clerks complained that they had to work standing up, since there was no place for them to sit. There were no three-hundred-dollar chairs this time,
but stools were brought in. Meanwhile, weekly orders fell from 17,000 to 4,000.

  At one point during this hectic period, the McDonnells brought in Murray’s friend and fellow Irishman ex-Postmaster General Lawrence F. O’Brien to head the firm as president. There were some who considered O’Brien—who had been in the official entourages at the time of the shooting of both John F. Kennedy and Robert F. Kennedy—an ominous choice, as though O’Brien carried with him some mysterious kiss of death. At any rate, O’Brien left after seven months, saying only that the job had not fulfilled his expectations. A curious footnote to the brief O’Brien interlude was that, though O’Brien had brought a certain sum of money into the firm, that sum exactly equaled the cost of an apartment that the company purchased for his use at the luxurious United Nations Plaza. When O’Brien resigned, an arrangement was made whereby the apartment became his property, indicating that O’Brien may have been a better politician than a banker.

  One ray of hope glimmered. Sean McDonnell, the youngest son of the McDonnell clan, was a handsome, athletic man who lived elegantly with his pretty wife in a big house in Greenwich, Connecticut. He had graduated from Fordham in 1954, and spent two years with the Wall Street firm of Blyth & Company. After Naval Officers’ Candidate School, he had spent three years in the Navy and entered Harvard Business School, graduating in 1961. He then came “home” to McDonnell & Company, joining the firm first as a senior vice president. He was made executive vice president in 1967, when he was thirty-two. Sean McDonnell was something of a family pet, and many felt that he was his mother’s favorite son. He, not his brother Murray, was considered the real financial genius in the family, and Anna Murray McDonnell, who had a large personal stake in the company, considered Sean to be her husband’s true successor, the young white knight who would lead the family company to further riches and glory. In its present difficulties, Sean might be the only man to help the company out. Murray McDonnell, meanwhile, was perfectly happy to let Sean handle the day-to-day operations of the company, while he, Murray, concentrated on trading for his accounts, including those of the Church (Murray was chairman of the financial committee of the Archdiocese of New York), and his horses. Sean, a stickler for physical fitness, was often seen on weekends, in sweat pants, jogging up and down the shaded lanes of Greenwich near his house on Round Hill Road.