Finding out where the ships were going was often the biggest problem. As a security measure, the U.S. Navy would schedule visits to Naples or Barcelona, then change the destination at the last minute. Often the best sources of information were the hookers in the ports. Miller courted a young woman in the U.S. consulate in Nice who tipped him off about movements of the Sixth Fleet. She told him once that an aircraft carrier and a destroyer were due to dock in Rhodes, Greece. Miller took the train to Naples, another train to Brindisi, then an Olympic Airways DC-3 to Corfu, Athens, and on to Rhodes. On the last leg, he found that he wasn’t the only trader who possessed classified information about U.S. fleet movements. There was a “skinny Chinese guy” from Hong Kong named Smiley Chow, who sold bespoke (custom-tailored) suits to the navy. When they arrived in Rhodes, the two had to share a hotel bedroom. Miller saw that the tailor had a huge bundle of U.S. dollar bills sewn into his shorts. He also had an army knife, and said, “So don’t get any ideas!” Smiley Chow told Miller he would make more money selling suits than liquor, and that there was a better place to make money. Like the priest in Barcelona, he told Miller, “You should go to Hong Kong.”
The orders, and the money, piled up. Feeney boasted to Miller that they were on their way to making a million dollars. They called themselves the Young Turks. Out on the road the two American salesmen stuffed cash and U.S. Treasury checks into their pockets, and when they got a chance, lodged them in an account at Lloyds Bank in Geneva, Switzerland, where, said Miller, operating a U.S. dollar account was “less complicated” than in France. It also had tax advantages. Making money while paying minimal or no tax was part of winning in the game in which they were engaged. When Miller brought his parents to Villefranche, his father saw a pile of U.S. Treasury checks on a desk in the little garden house Miller had rented. “Heavens, how much money is in that pile of checks there? Must be thirty or forty thousand dollars,” his father said. “He couldn’t imagine it,” said Miller. “I got quite a kick out of that.”
CHAPTER 4
Cockamamy Flyers
With World War II becoming a distant memory at the end of the 1950s, American tourists began turning up in Europe in large numbers. For the first time since before the Great Depression, members of America’s growing middle class had disposable income and did not have to confine their purchases to necessities. The cocktail was their social lubricant and television advertising was pushing up the demand for liquor. Chuck Feeney discovered one day that these vacationers with their cameras and gaudy jackets could buy duty-free booze abroad and bring it home, as long as they resided in one of fifteen American states. They were permitted by U.S. Customs to import a five-pack of liquor—five one-fifth bottles amounting to one gallon—once every thirty-one days, without paying duty. “I all of a sudden realized, shit, you can sell this to anybody, anywhere,” said Feeney. “It didn’t matter where you bought it or where you shipped it from, as long as you declared it when you got back into the States.”
The problem for Feeney was figuring out how to persuade the American tourists to buy five-packs of liquor from him and Miller, and then how to get it delivered to their homes. It had been relatively simple to ship liquor for the navy customers from bonded warehouses to American ports, where it was picked up by the incoming sailors. This was a bigger challenge. He took a flight to New York to figure out what to do.
He found the answer in the Railway Express Agency, the national small-parcel delivery service, since defunct, whose green trucks were a familiar sight on U.S. roads. Railway Express was obliged by law to accept all shipments destined for anywhere in the United States. Feeney printed up tens of thousands of brochures to tell American tourists traveling in Europe the good news, that they could buy duty-free liquor from Tourists International—as he and Miller called their venture—and have it shipped to their doorstep, as long as they lived in one of the fifteen states: New York, Connecticut, Rhode Island, Massachusetts, Pennsylvania, New Jersey, Delaware, Washington, D.C., Ohio, Arizona, Idaho, Illinois, Missouri, West Virginia and North Dakota. He organized for a ship chandler in Antwerp to take the orders and transport the duty-free liquor in cardboard valises packed into containers to the U.S. ports, where Railway Express picked them up. Tourists who bought and paid for their liquor declared that they had unaccompanied baggage when passing through U.S. Customs, and when they sent the receipt back to Feeney’s office in Europe, the liquor was dispatched. Those travelers who were prepared to cope with the form-filling and the wait got good value. A five-pack of Seagram’s VO costing $47.75 in New York could be bought for $22.50 from Tourists International and delivered to their door. There were similar savings on Jack Daniels, Tullamore Dew, Jameson, Johnny Walker, Haig, and Bells.
The constant traveling did not leave Chuck Feeney much time for his personal life, but he and Danielle Morali-Daninos met up again, a year after their first encounter on the beach at Villefranche. Danielle came to New York for a vacation while Chuck was setting up his five-pack postal scheme. They later managed to spend some time together in England, and when Chuck came to Paris in May 1959, they decided to get married.
Danielle’s family was Jewish and she would have been expected to marry a respectable Jewish Parisian working with her father. But like Chuck, she had an adventurous spirit, and Feeney had opened up a whole new world for her. Young, educated, and stylish, she brought to the relationship the sophistication of France. She had a vivaciousness that matched Feeney’s restless energy. She and her family were in turn enchanted with the young American, who by then spoke fluent French and always seemed keen to help. They were married in Paris in October 1959, first in a civil ceremony at the town hall of the Sixteenth Arrondissement Prefecture of the Seine, and the next day in church, with Chuck Rolles as best man.
After their wedding, Chuck and Danielle drove to Switzerland in his turquoise Renault Dauphine to establish a permanent European residence there. He had to have what he described as a “perch” someplace in Europe. They found an unfurnished apartment in Ebikon, just north of the medieval town of Lucerne, took a yearlong lease, and put in a bed and a sofa. But they did not spend more than half a dozen nights there. They drove on to Lichtenstein, Feeney’s real destination. The principality, barely as big as Washington, D.C., and landlocked between Switzerland and Austria, had strict residency laws that prevented them having an official perch there. “But it was a tax haven,” said Feeney, “and people like us went there to do business.” Banking and tax regulations were almost nonexistent. Chuck and Danielle checked into the four-story Waldhotel in Vaduz, the thirteenth-century capital on the banks of the Rhine dominated by a castle on a rocky outcrop. However, they found they had to pack their bags and check out again once every seven days, when the police called to ensure that people posing as tourists were not overstaying.
Feeney set up the first world headquarters of Tourists International in two small rooms in the hotel, which was located among fir trees overlooking the Rhine Valley, and hired two young resident Englishwomen to come every day to do the typing and paperwork. They got a brass plate made saying “Tourists International” and displayed it among dozens of shadowy “offshore” companies registered at Obera House, Altenbachstrasse 534, so they could have an official business address.
A year later, a letter arrived for Feeney at the Waldhotel from Leon P. Sterling, a fellow Cornellian from New York state who had been doing his military service in Germany as manager of officers’ clubs in the Stuttgart area. Like Chuck, Lee Sterling had fallen in love with Europe and was looking for a job to keep him there after his discharge. He had seen from the Cornell Hotel School alumni newsletter that the Sandwich Man was in Lichtenstein. He inquired whether there were any good hotel jobs in Vaduz. Feeney invited him to join the company instead. Sterling arrived in Lichtenstein by train on October 24, 1960. Shortly afterward, Feeney asked him to take over the Vaduz office. “He said, ‘This is what we are doing,’ and then he left,” said Sterling. “That was something I learne
d about Chuck. He was the kind of fellow that would give you responsibility and then let you do it. He didn’t hover, he wasn’t around; he was out making more deals.”
Feeney was heading for Geneva to try to make a deal with an upstart American company that threatened his business. One of his salesmen had come across a full-color glossy catalog issued by a firm called Duty Free Shoppers with an office on Rue de Rhône in Geneva and trading under the name of Transocean. The twenty-eight-page brochure offered American tourists “fabulous values” for items such as Le Galion and Molyneux perfumes, cashmere, watches, and other luxury goods, many at half the U.S. retail price.
Feeney believed this company was way ahead of the game. But he thought they might agree to insert his liquor brochures into their next catalog if they weren’t selling booze themselves. On December 19, 1960, he arrived in Geneva, booked into a modest hotel in Longemalle by the lake shore, then phoned Transocean and asked for the manager. He was surprised when the manager answered the telephone himself and invited him to come over right away. Feeney made his way through the Christmas shoppers to the address on Rue de Rhône.
Duty Free Shoppers was the brainchild of Stewart Damon, a U.S. Navy exchange officer who had been based in Naples. Its goal was to sell duty-free goods to American tourists abroad. He and another entrepreneurial American, Harry Adler, had persuaded seventeen investors in New York to put up $95,000 worth of shares, and they arranged for manufacturers to package and ship their products. They printed half a million catalogs and opened the office in Geneva to process what they expected would be an avalanche of orders. Only a trickle came in.
Damon had returned to the United States that September to restructure the company, but he failed and then resigned, leaving Harry Adler in Geneva with debts of $3,700 and assets of $1,700 in perfume stocks. On the day Feeney turned up, Adler was paying some overdue bills and clearing out his desk. He and his wife and two small children were getting ready to fly back to New York on money borrowed from relatives. It was his last day of business.
Then this “blond, blue-eyed youngster appearing no more than twenty-ish” walked into the office and introduced himself as Chuck Feeney, recalled Adler. Not knowing the dire straits the company was in, Feeney, who was in fact almost thirty years old at the time, told him that he thought that his idea was tremendous and was surely very successful, and proposed to Adler that if they inserted his liquor brochures in their next catalog, he would give them a commission on all liquor orders that resulted.
“The irony of it all!” wrote Adler later in a personal memoir. “Here was another fellow who thought that the idea could not fail and was coming to us to help him distribute his cockamamy flyers. I really had no choice but to be honest. ‘Dear friend,’ I said, ‘Our distribution was a huge one-time gamble and is, at this time, a dismal failure.’”
Feeney was visibly shocked but not at a loss for words, said Adler. “He spoke very fast with a high-pitched voice, asking what is to become of this company, these offices, and what of the orders that were still in the pipeline?” The “engaging young fellow” then pulled out a Parker pen and started making copious notes in his back-slanted handwriting. Feeney said he would call his associate Bob Miller and would come back the next day to talk business.
Feeney was convinced that the principle was sound, and that the company could still survive and thrive with proper marketing. It was the logical extension of his own ventures into the world of duty free. The next day he proposed a deal to Adler. He and Adler would travel to the United States early in the new year, where Feeney would make an offer of up to $10,000 for the company stock. Tourists International would in the meantime hire Adler at $1,000 a month, with three months’ salary in advance, to work for them. Adler could hardly believe what he was hearing.
That evening, Chuck took Adler and his wife, Ella, a survivor of the Holocaust, for what he remembered as a “rather extravagant” meal. “I impressed him by picking up the tab,” recalled Feeney. He impressed Adler even more by sending him a contract from Vaduz two days before Christmas, accompanied by a check for $3,000 for three months’ salary in advance, and a round-trip ticket to New York. “In a matter of four days my world had changed from abject failure to a person of worth with an exciting future ahead of me,” recalled Adler.
Meanwhile, the operation in Vaduz was running into trouble. The Lichtenstein authorities decided that they had tolerated Feeney’s presence long enough. In March 1961, the owner of the hotel came to him in some agitation. “You’ve got to go. I can’t hold off the police anymore,” he pleaded. Feeney decided they would have to find another business-friendly location in Europe. The nearest was Monaco, the world’s second-smallest independent country, situated on the Mediterranean just east of Villefranche. Tourists International in Vaduz had by then accumulated voluminous files and company records, as well as typewriters and cabinets. They could not simply hop into a car and drive across the border. “We had to cross several frontiers, the first into Switzerland,” said Feeney. “We had no authorization to be there. Officials would ask, ‘What’s all that shit there, what are you guys doing with all these papers?’ Everybody knows how the Swiss work those things out. If you have no authorization they fine you.”
They decided to do a midnight flit. Lee Sterling first drove to the U.S. Army base in Ludwigsburg, Germany, where he temporarily swapped his smart little Sunbeam Alpine for the roomier station wagon of an old friend, Lieutenant Colonel Sean O’Mahony, the commanding officer of the military hospital. In Vaduz, they loaded filing cabinets and office equipment onto the U.S. Army vehicle and covered them with laundry. Feeney put files and other papers in the back of his Renault Dauphine, throwing linen and dirty shirts over them. They left Vaduz late at night on March 16, 1961, and headed south on the N-13, driving through Switzerland and arriving at the Italian border at 3:00 AM. Sterling showed his U.S. Army lieutenant ID to the border guard and explained that he had just finished his military service. The immigration official had also just been demobilized. “What can you do for an old soldier?” he asked. They tipped him and he waved them through. They reached the French border and drove on to Monaco without further incident. Though no longer physically based in Vaduz, Feeney had no intention of giving up Lichtenstein as a tax haven. He hired a permanent Lichtenstein resident named Arno Scalet to act in future as secretary and front man for Tourists International headquarters in the principality. The nameplate on Vaduz’s Altenbachstrasse stayed in place.
The Mediterranean city-state of Monaco had a tolerant attitude toward foreign businesspeople. Feeney established Tourists International’s new office on Rue Suffren Reymond, a quiet street of old residential houses with red-tiled roofs, and put Lee Sterling in charge. As in Lichtenstein, they had no work permits. To avoid bringing attention to themselves, they needed a local fixer, someone who could work the system, get them out of trouble when necessary, and identify French suppliers.
They found one by accident. “One day I hear someone yelling, and I come out and there is this young, fairly big guy,” said Sterling. “It turns out we were blocking his truck. Several days later the same happens. He speaks English and seems sharp so I say, ‘Why don’t you come and work for us?’” The truck driver, Jean Gentzbourger, a French veteran of the Algerian War, was delivering wood to building sites for 600 francs a month. Sterling offered him 800 to work for Tourists International. Gentzbourger went to his boss and said he was leaving. “I’ll give you 200 francs more,” his boss said. Gentzbourger replied, “Too late.”
The Frenchman quickly established that the American salesmen coming in and out of the Tourists International office were all illegal. “You’ve got to get permission to work here or you will all be in trouble,” the Frenchman told Sterling. “You are the only legal person so you will be our representative,” Sterling told him. Gentzbourger became the gérant—the legal responsible person—for the office. Part of his job was to get the sales guys out of trouble if they came to the attention of
the Monaco police. Once, a salesman arrived on his moped from Genoa covered with mud, and the police picked him up. Gentzbourger went to vouch for him. His military connections got the man released. “That was the way the business was run in those days,” he recalled in the villa overlooking Cannes, where he now lives.
Feeney occasionally came and went, always walking fast, even when lugging heavy suitcases filled with brochures for the fleet. He was forever thinking up new ideas. His next venture was to open a shop in Paris at 12 Rue de la Paix with a novel approach: American tourists, many of whom were doing four countries in four days, could do one-stop shopping at the store and order such items as a cashmere sweater from Scotland, a beaded bag from Austria, Waterford crystal from Ireland, and a leather wallet from Italy and have them all shipped from the country of origin to the customer’s American home as an unaccompanied gift item. There was no need for an inventory, just samples of the merchandise. The shop employed glamorous sales girls to take orders in the lobbies of five big tourist hotels around Paris. Feeney sent Gentzbourger to run the Paris shop. The French fixer said he felt like a pimp when the young women arrived every evening with purses full of cash from the orders. Feeney would drop by when in town. “He would come for a couple of days, and have lunch at La Quesh,” he recalled. “We would sit at the bar. He used to order the plat du jour and when it arrived, it was hoofed down, and we would go. I learned to eat fast. He was always talking, talking, his mind was like Speedy Gonzales, always racing.”
The Billionaire Who Wasn't Page 4