This dissonance may have contributed to missteps in the all-important bidding process. The four had stepped down from managing the business, but they kept control of the company, and this meant getting together when the time came to calculate a bid. In 1987, they got it wrong in Hong Kong, their original base. The system in Hong Kong was different from everywhere else. On a given date, bids were dropped into a tender box situated in the lift lobby of Central Government Offices on Lower Albert Road. The four owners would walk up together and drop in the bid and wait to be notified by official letter who had won. Once, they nearly lost it by default, remembering at the last minute that they needed to include two copies and not just one.
After they submitted their tender on June 4, 1987, to renew the three-year liquor and tobacco concession, they found themselves outbid by Kiu Fat Investments Corporation, a consortium of three Chinese companies backed by the People’s Republic of China. It was led by former left-wing movie star Fu Chi and his actress wife, Shek Wai, famous for their role in a 1967 real-life political melodrama when they spent twenty-seven hours on a bridge between Hong Kong and China protesting at Hong Kong’s attempt to deport them for Cultural Revolution activities. Kiu Fat outbid DFS by more than 25 percent.
Hong Kong was different from Hawaii, however. This need not be a disaster. Duty free still applied only to alcohol and tobacco; DFS was selling watches, pens, apparel, and everything else the tourists might want. Feeney took the view that it was unethical to try to undermine the Chinese, and that they should be honorable and take their losses while continuing to do retail business like all other Hong Kong stores. Alan Parker agreed. “We just decided we would stay in business,” he said. “The whole issue of duty free in Hong Kong is false. The whole of Hong Kong is duty free except for a tiny little bit of duty on booze, alcohol, and perfume. We had developed this whole thing, Duty Free Shoppers, we used the name [but] we sold every product in the world.”
John Monteiro, who had returned to run the Hong Kong operation after a number of years in Alaska and Hawaii, took the defeat personally, however. The Chinese organization poached 20 percent of his staff, including managers, salesgirls, and supervisors, and set up a downtown store with a sign saying “Official Duty Free.” He resolved to fight to get the liquor and tobacco concession back. The Hong Kong travel agents—the crocodiles—told Monteiro they might have to support the new store, not least because it was backed by the Chinese government that would one day take over the British colony. But Monteiro dropped the price of his duty-paid liquor to 5 percent below that of the new duty-free store, and every time Kiu Fat dropped its price, he dropped his further. The agents remained loyal after all and kept bringing Japanese to DFS rather than the new store. DFS also did everything it could to discourage European designer houses from supplying an operation backed by Red China.
At Kai Tak airport, the Chinese consortium had the monopoly on selling duty-free items for delivery on board the planes—a major convenience for overloaded tourists—but Monteiro went to his friends in the airlines, and they agreed to belly-load the duty-paid liquor and tobacco from DFS stores as unaccompanied baggage to be picked up in Japan. The airport authority tried to stop him, but Anson Chan, secretary for economic services in Hong Kong, who had been a director of the DFS charity board, ruled that it was not illegal.
“It was a huge fight, and the Chinese suffered such tremendous financial loss because they had a minimum guarantee to pay the government, and they didn’t have the sales,” said Monteiro.
An official from the New China News Agency, which represented the People’s Republic of China in Hong Kong, asked to meet Adrian Bellamy for lunch. “He was a very intelligent guy and very impressive,” said Bellamy. “He put a lot of pressure on me and on DFS to stop the fight. He said, ‘When two lions fight, they both get hurt.’ It didn’t deter us in any way. Johnny Monteiro was the really aggressive one. He didn’t like his marbles being taken away.”
Already camera-shy. Chuck Feeney (age thirteen), front row, second from left, at St. Genevieve’s graduation, 1944.
Chuck Feeney (right) with Joe Costello in Japan, September 1951.
Chuck Feeney, fresh out of the Air Force, 1952.
Already well on the way to their first billion, Chuck Feeney (left) and Bob Miller pose for a mid-1970s DFS promotion. The golden partnership would end in acrimony two decades later.
Smallest of the DFS owners with 2.5 percent of the shareholding, Tony Pilaro (left) still made it to the Forbes magazine list of the 400 richest Americans. Lacking the fare to go home to Europe, Alan Parker (right) stayed on in New York as DFS accountant and is today worth several billion dollars. He lives in Switzerland.
Chuck Feeney with Patrick, Diane, and Leslie.
Lifelong friend and colleague Bob Matousek (left), then president of the European Division of DFS, relaxing with Chuck Feeney in the south of France in the summer of 1975.
Chuck Feeney with daughter
Caroleen in panda suit,
promoting Chinese products
at the Hawaii store.
Feeney celebrating the DFS
sale with Harvey Dale.
Feeney, in background, failing to
avoid the camera at a meeting in
Belfast in 1994 with Sinn Fein
president Gerry Adams.
Directors of the Atlantic Foundation advisory board don Groucho Marx masks to mock Harvey Dale’s insistence on secrecy. Feeney sits in front row, first left.
Chuck Rolles, Chuck Feeney, Ray Handlan, Fred Eydt, and Bob Gallagher relive their youth at Couran Cove.
Harvey Dale and Chuck
Feeney in a typical
lunchtime setting in
San Francisco.
Le Nhan Phuong, Atlantic
Philanthropies country manager in
Vietnam, who came to regard Chuck
Feeney as a father figure.
Former Australian diplomat Michael Mann,
founding president of the first foreign-owned
university in Vietnam, aligned with the Royal
Institute of Technology in Melbourne.
According to him, “Without Chuck Feeney, we
would not have this university.”
Feeney in Johannesburg
with former ANC general
secretary, Cyril Ramaphosa,
with whom he exchanged
cloak-and-dagger stories
of their involvement in
the Northern Ireland
peace process.
Then-president of South Africa, Nelson Mandela, with John Healy, chief executive of Atlantic Philanthropies from 2001-2007.
By July 1988, Kiu Fat couldn’t pay the staff, and its 600 disgruntled workers staged a fifty-hour sit-in. It conceded defeat. After two weeks of day-and-night negotiations with DFS, represented by Monteiro and Tony Pilaro, it ceded the concession for a management commission that allowed it to save face. DFS officially got the concession back through the bid process the following year.
The unnerving setback in Hong Kong was a factor behind the biggest miscalculation the four guys in a room ever made, the bid they lodged to renew the Hawaii concession the following year. The new bid was for a four-and-a-half-year concession, from 1986 to 1991. Hawaii had become so important that DFS moved its international corporate headquarters from Hong Kong to Honolulu in 1982, the first non-Hawaiian company to do so. Sales at the hanger-size Waikiki store in Hawaii had soared to $400 million a year, equivalent to $20,000 a square foot in revenues—compared with $800 a square foot at Bloomingdale’s in New York. By this time, Japanese investors in Honolulu owned two-thirds of the major hotels, several big office blocks, plus condominiums, golf courses, restaurants, and construction companies. Thousands of Japanese with high purchasing power—tourists, business executives, couples getting married—were arriving in Honolulu on the six-hour flight from Tokyo every day. With the strong yen, Hawaii was for the Japanese like Mexico was for Americans. Everything wa
s cheap, and DFS was like a giveaway store.
The Waikiki store was taking in so much cash every day that DFS had created its own bank known as the “Central Cashier” to which armed guards would bring the cash every evening in armored vehicles for processing at special currency counters. The store had 300 cash registers, which meant 300 deposits every day for the Central Cashier, which had bulletproof doors and security cameras. The yen were counted separately in a special strong room. The amount of American and Japanese currency taken in every day was so great that a special department of currency traders was set up inside DFS to trade it on the overnight money markets.
Chuck Feeney, Bob Miller, Alan Parker, and Tony Pilaro flew into town to calculate their bid. They imagined they spotted rivals at a question-and-answer session with Hawaii state officials. They became neurotic, recalled Parker. “You would see people wander around outside the store, and you would imagine that every person who walked past the store was somebody who was going to bid.” To put up the required 2-percent bid deposit, they started accumulating cash and buying cashier’s checks from different banks. They picked up intelligence about a rival Korean company preparing to make a bid.
The day came when the four guys gathered a last time to determine how much they should put on the table. They kept nudging it upward as they studied the projections. “It was led by Chuck,” said Alan Parker. “The simple bottom line was that we would have ended up bidding the highest anybody in the room wanted to bid because nobody wanted to be the guy who lost the bid.”
“The dynamics of the bidding were always—where was Chuck?” said Adrian Bellamy. “His influence over the other three was very powerful. He was always a few steps ahead of everybody with his gut instinct about what to do. Chuck generally persuaded Bob on it. Alan’s point of view almost always was that he couldn’t be the guy who puts his number on the table, but he could always control it by waiting for one of the big guys to decide and then side with whichever won. He was in the catbird seat.”
They finally settled on $1.151 billion, the highest price ever bid for a duty-free concession anywhere in the world, before or since. It was an unimaginable amount of money. It was in some ways just a number, the end figure in their calculations, but if stacked in actual dollar bills it would have been seventy-two miles high.
They were offering to pay the State of Hawaii some $2 million every three days, for the next five years, just for the right to run a couple of stores. It was more than six times what they had paid the previous year, $185 million, for all their concessions around the world. According to Pilaro, “Alan vigorously opposed the bid.” But he wasn’t in the majority.
They trooped along to the transportation office for the now-familiar ritual of the opening of the sealed bids and the chalking up of the figures on the blackboard. It emerged that there was indeed a rival. It was Hotel Lotte of South Korea, which owned a shopping complex and duty-free store in Seoul. But the bid was a mere $372 million. The DFS owners sat there, aghast. They had bid $779 million more. “We left a shitload of money on the table, three-quarters of a billion dollars,” said Pilaro. “What happened? I wish I knew. We were rather foolish. We were all responsible. Maybe we were all making too much money. The last person who came up with a number prevailed.” There was one upside, apart from winning the concession, he said. “In the most generous analysis, never again was anybody going to come and bid against us.” Five years later, there was no counterbid when DFS secured Hawaii for a further four years for $401 million.
Looking back years later, Feeney defended the bid. “The worst thing to do was lose,” he said. The truth was, they could pay this amount and still make huge profits.
In the aftermath of the Hawaii setback, Adrian Bellamy retained consultants from McKinsey & Company to do a study on how bids should be calculated. He arranged for McKinsey to do a presentation in Geneva and invited Feeney, Miller, Parker, and Pilaro to hear their conclusions.
The four owners seethed as they gathered to hear what the consultants had to say. No one had talked to them about how they arrived at their concession bids. “They came with this long complicated presentation, typical McKinsey bullshit of how you solve something,” said Alan Parker. “I said to them, ‘You know there’s sixty-three years of experience around this table of guys who have done bids. Why did you not come and talk to any one of these people?’” Pilaro was enraged “that Adrian could conceivably go out and spend two million bucks of our dough for these goddamn consultants and these people never asked us how we approached it. We made a mistake in Hawaii. So what? These ‘yo-yos’ sat there and talked about decisions in uncertainty, and it was all predicated on oil and how one made a decision to drill for oil when one didn’t know if there was oil or how deep it was. I blasted them about the fallacy on oil because usually oil is in quadrants, and you can drill here, and if you don’t hit, you can drill sideways, you can drill different blocks. This is duty free. You miss it, you go home. There is no second shot.” Feeney listened for a while and then made his own views clear by just getting up and walking out of the room.
The following year, in 1988, even in the wake of the huge bid in Hawaii, the cash dividend paid to the owners from the profits of the duty-free stores was $400 million. Of this, Chuck Feeney’s foundation received $155 million. On top of the profits from its own business portfolio, and multi-million-dollar dividends from the Camus agency, the foundation was raking in more than $2 million every five days, in cash. He had worked hard to stay out of the limelight. But this couldn’t go unnoticed.
CHAPTER 17
Rich, Ruthless, and Determined
On Friday, October 7, 1988, a colleague handed Chuck Feeney a copy of Forbes magazine, folded over at page thirty-six with the headline, “Rich, Ruthless and Determined.” “Have you seen this?” he said. “Oh shit!” responded Feeney.
Feeney read with dismay that he had been included in Forbes magazine’s list of the 400 richest Americans. According to the New York-based journal, Charles F. Feeney was the twenty-third-richest American alive, worth $1.3 billion, richer than Rupert Murdoch, David Rockefeller, or Donald Trump. Paul Hannon’s prediction three years earlier that they were getting “too big and interesting” to be ignored by Forbes had been borne out.
Bob Miller was not on the rich list, as he had given up his U.S. passport and taken British citizenship, but the magazine estimated that he, too, was a billionaire. As an English national, Alan Parker did not get a rating. Tony Pilaro was on the rich list, coming in at 231st place with an estimated worth of $340 million, though Forbes wrongly reported his share of DFS at 10 percent, rather than 2.5 percent.
The Forbes article got the whole Feeney family in a tither. Chuck’s sisters in New Jersey found the sums “mind-boggling.” Danielle called Arlene and told her that Chuck was furious, though she privately thought part of him was quite proud that he was recognized as a successful businessman by his peers. In New Jersey “everybody from St. Mary’s went out and bought Forbes,” said his school pal Bob Cogan. “We were flabbergasted. We never knew what the hell he did. He could have been in the CIA. He wouldn’t tell. Maybe he didn’t want anyone to think he was better than us. And here is a guy coming out of nowhere and up there with the Rockefellers.”
What concerned Chuck most about the 2,750-word Forbes article was that it disclosed that he lived in London with his French wife and had five children and had invested in or established dozens of enterprises in Europe, Asia, and the United States through Bermuda-based General Atlantic Group Ltd.
Harvey Dale moved immediately to limit the damage. He asked the Rockefellers for advice on how to handle the publicity. He suggested that Feeney travel under an assumed name and hire a bodyguard. Feeney did not change his daily routine, but he did heed the advice of Cornell alumnus Jules Kroll, who ran a security firm: “If you are looking for a cab and there is one waiting for you, never take that cab, take the next one.”
The title “Rich, Ruthless and Determined” referred
to Feeney and Miller. Forbes described Feeney as highly strung, fast-talking, fast-thinking, frugal, and a frenetic economy-class traveler who was most content at 36,000 feet, and Miller as an extrovert who wore his silvery hair modishly long and favored bespoke suits. It had an account of Feeney appearing one day at a business meeting in London with a pin holding up his trousers.
“He did that because he liked to show he was a common man,” recalled Bonnie Suchet, his office manager in London. Feeney saw the humorous side: He sent associates a note with the Forbes article attached by a safety pin.
The Forbes reporters, Andrew Tanzer and Marc Beauchamp, knew nothing of Feeney’s philanthropy, but they clearly had a good inside source in DFS. They described how DFS had forged close links with Japanese tour groups, evolved complex tactics to get them into their downtown shops, and squeezed suppliers to mark up goods by up to 200 percent. They also knew of the Camus relationship. They quoted Desmond Byrne, who had set himself up in Honolulu as an analyst of the duty-free business. The DFS shareholders guessed that Byrne had soured on them because of his mistake in leaving the company; if he had stayed on as accountant, he could have been Alan Parker. Earlier that year, Byrne had sent a letter to the Honolulu Star-Bulletin accusing DFS of greed for seeking special government treatment by organizing a golf tournament for Hawaii legislators.
Forbes estimated that DFS sales the previous year had soared to $1.6 billion. They were close to the mark. A confidential internal memo prepared by the DFS finance department that year for the four partners revealed that in the decade before 1988, annual sales had increased from $278 million to $1.543 billion. It was an astonishing growth rate—almost 19 percent per annum. What only the four owners knew was that during that period, they had received cash dividends of $867 million, of which Chuck Feeney had got $334 million.
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