Feeney had been dismayed when Bob and Chantal Miller threw a lavish three-day party in Hong Kong’s Repulse Bay in 1978, with a Caribbean steel band, a South American rock group, and a disc jockey flown in from Paris, during which Chantal descended among her guests in a hot-air balloon dressed as an Inca princess. It was reported in the social columns, along with the Millers’ announcement that they gave the equivalent cost to charity.
“I always said, and I was preaching it, the less you speak and the less ostentatious you are, the fewer people who will be angry and jealous,” said Harvey Dale. “Bob Miller did not keep to that style, but the other partners really did. From Feeney’s point of view Bob was increasingly ostentatious, a shogun, a big man in Hong Kong, all of which was personally distasteful to him.”
Tony Pilaro was less troubled by Bob Miller’s high-society profile. “The fact that Miller drives a Rolls Royce doesn’t mean people will make assumptions about the business model. Everyone, the travel agencies, the people who sold us Chanel, the airlines, they all knew we must be making a lot of money.”
The perception that duty-free shopping may not always be such a great bargain for shoppers was also something they did not want publicized but which was gaining ground. In March 1985, an article in the Far Eastern Economic Review warned travelers to be careful about the duty-free shops in Hong Kong, “which charge at least ten percent more than the thousands of shops in this duty free city.”
Ironically, after 1984, when he gave the vast bulk of his fortune away, everyone not in the know continued to think Chuck Feeney “was another guy who has got a lot of money.” By keeping what he did a secret, he allowed people to assume he was still very rich. Even his DFS partners did not know that Feeney or his wife personally no longer owned 38.75 percent of the company. He still turned up as co-owner of DFS when concession bids had to be decided, and he continued to act as chairman and chief executive of General Atlantic Group Ltd., drawing a reduced salary of $200,000 a year. His philanthropic foundation owned all the business assets in GAGL, but outwardly nothing seemed to have changed.
Feeney, however, would sometimes hint at the real state of affairs. “He spent about two and a half hours explaining to me that he did not own what he owned, as it were, that he was its custodian and that he saw himself as being lucky enough to have made money but it was not his money, he was just essentially recycling it,” recalled Adrian Bellamy, who succeeded Bob Futoran as DFS chief executive in 1983. “I don’t know that I ever knew he had irrevocably given it away.”
Paul Hannon recalled that after he was hired as general counsel for General Atlantic Group Ltd., Feeney gave him a copy of “Wealth,” and Harvey Dale took him aside to explain he would be working for a charity. “Chuck has a love-hate relationship with money,” Dale told him. “He likes to make it because it is his scorecard, but he doesn’t like to keep it.” Hannon realized that Feeney wanted him to know he was working for something more important than making him rich. The Yale-educated lawyer was surprised to discover that his annual salary would be greater than Feeney’s. “That made it difficult for me. If the boss is making a lot less than you, and you ask him for a raise, he says, ‘OK, but you’re taking it from the starving children in Africa!’”
By the mid-1980s, General Atlantic Group was getting too big to stay under the radar of financial institutions and the media. Aside from DFS dividends, General Atlantic Group’s annual income in 1984 was $30 million.
On May 23, 1985, Hannon presented Chuck with a confidential report, “The Benefits and Burdens of Secrecy,” in which he warned that a great deal of information had become a matter of public record. If domestically owned, the U.S. Internal Revenue Service would have taken half the $30 million and if the IRS focused on General Atlantic and prevailed in such a determination, “the cost would be horrendous and could easily reach into hundreds of millions . . . hence strenuous efforts should be made to conceal from the IRS by all legal means the offshore corporate structure, the identity of the owners and the extent of the wealth they control.”
It was difficult, Hannon warned, to deal with banks, partners, and employees when the company was presented as a “pool of capital of mysterious origin,” conjuring up “images of oil sheiks, mafiosi and others who need to conceal their identity.” The banks they dealt with had agreed to keep separate secret files on transactions with General Atlantic, but Hannon guessed about 200 members of the financial community knew something about the undisclosed wealth, and that someone called Feeney was behind it. Atlantic’s part ownerships of a number of U.S. companies were filed in those companies’ Securities and Exchange Commission (SEC) returns. Acquisitions in the United States of a certain size had to be filed with the Justice Department, and it was already a matter of public record from concession bids in Hawaii and Alaska that an entity called General Atlantic held 38.75 percent of DFS. He concluded: “I believe it virtually inevitable that within the next few years, if we continue to invest as we have, we will be the subject of a big investigation by Forbes, the Wall Street Journal, or another member of the financial press. We are just too big and interesting to be ignored.”
To make his point, Hannon compiled a mock version of a story the Wall Street Journal might run if a dogged reporter got on their tracks, with some of the damaging assumptions that a reporter might make.
AMERICA’S UNKNOWN MULTI-MILLIONAIRE
The Feeney Fortune: Is It Millions or Billions?
Despite Obsessive Secrecy, Mafia Ties Unproved
Around noon last Tuesday, Charles F. Feeney passed through the swinging doors of Clarke’s, the raffish Irish saloon on New York’s Third Avenue. . . . the slight, agile Feeney made his way to his regular table, accompanied by several business associates, [and] settled the affairs of the vast General Atlantic empire over a meal of hamburgers and white wine.
Feeney and his associates consistently declined to answer questions and return telephone calls from the Wall Street Journal. However, an in-depth WSJ investigation reveals that Feeney’s wealth far exceeds that of the far better known American rich. T. Boone Pickins, Ivan Boesky, Donald Trump and Doris Duke are pikers compared with the self-effacing Feeney . . .
The Feeney financial empire is characterized by obsessive secrecy. Its holdings are concealed in a web of foreign foundations, trusts, various family members, and over 50 separate corporations. However, legally compulsory filings with Government agencies, a handful of sometimes contradictory press clippings, and background interviews with bankers and former employees who uniformly decline to be quoted for attribution reveal the outlines of Feeney’s extensive holdings.
A 38.75% interest in Hong Kong’s Duty Free Shoppers is the keystone of the General Atlantic Group . . . reports filed with airport authorities lead WSJ investigators to estimate DFS sales in the $750 million-$1 billion range and profits after tax of approximately $60-$100 million per annum.
A small shareholding in DFS by New York financier A. M. Pilaro has given rise to persistent rumors . . . Pilaro was at one time a close adviser to fugitive financier Robert Vesco. . . .
In Feeney’s sole example of personal extravagance, he maintains homes in New York City, Paris, Bermuda, Honolulu, San Francisco, and reputedly owns, through nominees, several large homes at Saint-Jean-Cap-Ferrat, a secluded enclave of the Super-Rich on the French Riviera.
Feeney’s smaller, but specialized, holdings in retail sales operations include Andrade, the second largest chain of retail stores in Hawaii, Solo Serve, a profitable string of off-price department stores in the South West, Carl’s, a group of traditional department stores in upstate New York, and N. Peal, an elegant cashmere shop in London’s Burlington Arcade.
General Atlantic . . . has invested shrewdly in computer software companies, oil and gas operations, and health care concerns . . . General Atlantic also owned for some years a significant interest in Inflight Services. Typically, SEC filings show Feeney’s interest in Inflight held indirectly in the name of his wife, Danielle
J. Feeney, a French national, purportedly resident in Bermuda. However, neighbors report seldom sighting any Feeneys at Woodlands, the palatial, though somewhat neglected Feeney house in Bermuda.
Feeney was horrified that such a worst-case newspaper story might actually appear, and Harvey Dale was so alarmed that he wanted to destroy all copies, recalled Hannon. If anything, it reinforced Feeney’s determination that everything be kept secret and security tightened.
CHAPTER 14
Don’t Ask, Don’t Tell
At the time he set up the Atlantic Foundation in Bermuda in 1982, Chuck Feeney created a structure for giving in the United States that would protect his anonymity. He established an office in Ithaca, New York, the hometown of Cornell University, and gave it the innocuous name of the Atlantic Foundation Service Company (later known as the Atlantic Philanthropic Service Company). It was registered as a “for-profit” company to avoid disclosure rules. Ray Handlan was put in charge to help identify beneficiaries and arrange payments.
Feeney also created an advisory body made up of several trusted friends, including Chuck Rolles, to vet grant recommendations. He transferred $25,000 of the foundation’s money to each member per year to donate to a charity of their choosing. This enabled the service company to claim, as it did in a brochure, to be a consulting company that dealt with “a number of individuals” who wished to make grants anonymously. They said they had eight or ten donors on their books. “This was not an outright lie,” said Handlan. “It was all Chuck’s money, but other people were giving it away.” Handlan maintained the fiction even in his confidential internal reports to the directors in Bermuda on the work of the service company, once noting, “It is a pleasure and joy to work for and with our clients, who are such caring people.”
The same discretion was employed by Sterling Management, a private company in Hamilton, Bermuda, commissioned to manage Feeney’s and GAGL’s bank accounts and other affairs. Sterling Management’s account manager, Margaret Hern, established a full-time office for what the company described, accurately if somewhat misleadingly, as a “group of substantial private charitable foundations.”
As a further measure to ensure that beneficiaries could not know who the “donors” were, grants were transferred from the foundation’s bank in Bermuda to the Bessemer Trust Company in New York, a private bank that serviced high-net-worth clients, family endowments, and foundations. Bessemer made the checks out to the donees, without any indication of the source of the money.
The check arrived in the mail, accompanied by a letter that laid out the conditions to be observed by the donee.
The basic message of the letter was, “Don’t ask, don’t tell.” It stated: “The donors do not want to receive any recognition for this gift. And our ability to seek out, assess, and assist worthwhile projects on their behalf is greatly dependent on being able to do so confidentially. Thus the issue of confidentiality is a matter of the utmost importance to the donors. We specifically request that this gift is referred to—both externally and internally—as a private donation and that it is not stated, orally or in writing, that it has been received from our principals. Please list it in this way in your annual report and in internal reports. In addition, it is recommended that the papers relating to this gift be retained in a confidential file. . . . I would ask you to confirm your acceptance by countersigning a copy of this letter and returning it to us.”
“It was all very strict and there was a convoluted way of getting the donees the money so it couldn’t be traced,” said Cummings Zuill, who recalled that the anonymity rules created a problem for foundation staff as they couldn’t tell their families what they were doing or get a job reference. “People would tell their wives they were in a pub to keep secret that they were at an Atlantic Foundation meeting,” he said.
Harvey Dale, as president of the Atlantic Foundation, would often lecture the advisory board members on the need for absolute confidentiality. “My favorite definition of a secret is something that you tell other people one at a time, and I did not want that scenario, so I was busy pushing the pendulum as far as I could on this,” said Dale. “Almost every time we got together I would remind them that this was confidential so they had no excuse for not knowing it and how they couldn’t say it.” It got to the point where even Chuck felt that Dale was laying it on too thick. On one occasion when he and Dale were conducting a meeting with board members Ray Handlan, Chuck Rolles, Fred Eydt, Jack Nordeman, and Bob Beck in the office in Ithaca, the secretary, by arrangement, called Dale out to take an urgent phone call. When he came back, he was momentarily nonplussed to see everyone had their backs to the door. On a signal, they turned toward him. Everyone was wearing a Groucho Marx disguise—false nose, mustache, and big glasses—that Handlan had handed out. Dale roared with laughter, and they all posed for a photograph.
The members of this covert group also derived some amusement from the fact that the program manager appointed by the foundation was named Angela Covert.
Dale had his own reasons for enforcing secrecy. He worried about how people would relate to him if it were known he controlled a huge foundation. It was a truism in philanthropy that once a person became a philanthropist or a foundation executive, he had eaten his last bad meal and told his last bad joke, he said. He cited the warning of an adviser to the Rockefeller family that “if you are perceived to have the ability to give away money, everybody lies to you, always.”
“I was always terrified by this,” he recalled. “I worried that I would become ‘very handsome and a good dancer.’ I think Lord Acton understood human nature better than anybody when he said that ‘power tends to corrupt and absolute power corrupts absolutely.’ You get seduced by being in the position of giving money away, and the arrogance and certitude that comes with that is awful. I hate it, it’s really evil, but the tendency for that to happen is very big. I was much more comfortable not having my friends and colleagues thinking that I was president of a major foundation.”
Looking back long after leaving Atlantic, legal counsel Paul Hannon thought the secrecy made it more difficult for the foundation to operate properly. “Harvey Dale liked to play Santa Claus, in my view,” he said. “Chuck would say, ‘I’m interested in aging,’ for example, and so Harvey would go out and find somebody who was big in the field, and they went out and supported a guy called Bob Butler, and we gave quite a bit of money to him.” Dr. Robert Butler, president and CEO of the International Longevity Center, later met Feeney when pitching for finance to an advisory board that reviewed grant proposals but had no idea he was his anonymous benefactor.
The main beneficiary of the foundation in the early days was Cornell. Ernie Stern, who secured the first big gift from Feeney in 1981, believes that Feeney’s giving to Cornell, like his own, derived from a sense of owing. Neither could have expected early in life to have ended up graduating from such a prestigious university. Stern was born in Nazi Germany and escaped with his parents to America in November 1938, four days before Kristallnacht, and had risen in the corporate world to become chairman and CEO of Thales Components Corporation, a global supplier of professional and defense electronics. He reckoned they both felt enormously indebted to Cornell for their success and their friends.
After that first gift, Feeney and Stern cooperated to get their class to set new levels of giving when it was required, by tradition, to make a special effort once every five years. They would meet to figure out a way to encourage the class to give more. Stern would send the word out to alumni: If anyone gives $5,000, a group of anonymous donors—that is, Feeney—would match it two to one, or even three to one. “His motivation was to prime the pump,” said Stern.
Feeney primed the pump for construction of a new 150-room Statler Hotel on the Hotel School campus. There was a down-at-heel fifty-two-room hotel on the site that was losing $150,000 a year. Jack Clark, who succeeded Bob Beck as Hotel School dean in 1981, and who was let in on the secret of Feeney’s giving to the university, got
the idea of replacing it in 1983. Feeney came to look at the architect’s drawings in Clark’s office. “I like the plans,” he said. “But if you are looking into the future, how big should the hotel be?” Clark replied, “To be honest, if I could I would make 150 rooms instead of 100.” Feeney said, “Let’s do it!” Feeney’s initial funding of the $50-million project helped pull in gifts from industry leaders like Bill Marriott of Marriott Hotels, Dick Ferris of United Airlines, and John F. Mariani Jr. of Banfi Vintners. On completion, it became a “cash cow,” said Clark, and today is always full and makes over $1 million a year.
The Billionaire Who Wasn't Page 16