The Billionaire Who Wasn't

by Conor O'Clery

  In the same edition of Forbes that listed him as a billionaire, Feeney noted an editorial by Deputy Managing Editor Lawrence Minard, in which he wrote that the only ways to get off the Forbes 400 were to (1) lose your money, (2) give it away, or (3) die. Five days later, Feeney wrote a memo to Harvey Dale. “I have come to the following conclusion,” he wrote in his slanting backhand. “For personal and family reasons I do not intend to appear on the Forbes list next year. Forbes has stated the conditions under which one can get off the list. Option (1) is unlikely. Option (3) is undesirable. That leaves Option (2).” The best thing to do would be “to convince Forbes to delist for the future and be cooperative with our desire to minimize foundation exposure.”

  Feeney suggested that a private meeting be arranged with the vice chairman of Forbes, James J. Dunn, to advise him about their need to maintain confidentiality.

  Dale and Hannon turned to the public relations firm of Fleishman Hillard in New York for professional advice. Senior Vice President Peter McCue told them bluntly, “There is no way for Chuck to be removed quietly from the Forbes list.” He advised instead that they prepare for a public announcement on their own terms. “We can ill afford to have it misrepresented by a crusading journalist, eager to ascribe sinister or dubious motivations to Chuck, so that we will be forced into defending what should have been praised in the first place,” he warned them. After that, they could arrange a private meeting with Forbes.

  Over the following weeks, Fleishman Hillard produced voluminous assessments of the prospects for getting Chuck dropped from the Forbes list. On November 22, Peter McCue submitted a 2,000-word memorandum saying they could give the true story of Chuck’s net worth to a rival journal, hold a press conference to reveal the existence of the Atlantic Foundation, or set up a private meeting between Chuck and Malcolm Forbes, proprietor of Forbes magazine, at which Chuck would offer proof of the error—that he was a billionaire—in exchange for a correction in his magazine. He ruled out the first option as it would humiliate Forbes and the magazine might seek to dig up dirt on Feeney to prove it was right: “Rats don’t become more lovable by placing them in a corner.” A press conference would similarly embarrass Forbes, “swiftly, openly and globally all at once.” However, by going to Malcolm Forbes himself, Chuck would be giving him a wonderful Christmas present, “the chance to feel truly good about himself by doing the only honorable thing.” (Beside this suggestion, Feeney scrawled “Huh!”) If Forbes failed to do the “decent thing,” they could fall back on options one or two.

  The favored option had one flaw. Feeney would not subject himself to an interview with Malcolm Forbes, as he made clear in a comment on the margin.

  Chuck Feeney and Harvey Dale had good reason to be apprehensive about public scrutiny of the still-secret foundation. With a fortune estimated by Forbes at $1.3 billion—and it was certainly greater—the Atlantic Foundation, if registered in the United States, would be one of the ten largest American charitable institutions, about the same size as the Mellon Foundation and close behind the bellwether $1.6 billion Rockefeller Foundation. Yet as Paul Hannon pointed out in a memo that he sent to Feeney by courier on November 30, 1988, the Atlantic Foundation’s annual giving over the previous three years ranged from $10-$20 million, well under 2 percent of its assets, and it had only five employees. By contrast, the Mellon Foundation had distributed nearly $65 million the previous year. This made the Atlantic Foundation look very stingy, or worse.

  Forbes might in fact conclude that the Atlantic Foundation was a tax-efficient method for Feeney to retain control of most of his fortune. Why else would he create a secret offshore foundation over which he had retained effective control, not subject to American laws requiring extensive disclosure and a higher rate of annual giving? American law prohibited large investments in related enterprises, but Feeney, through the foundation, could continue to invest in profitable opportunities without restriction, with income from offshore investments flowing into Bermuda free of U.S. tax. Forbes might also claim that as a foreign entity, the foundation paid no capital gains tax on sales of U.S. investments, and Feeney could pay himself from the foundation without interference from the IRS.

  “Harvey was very draconian about not trying to get exposure, I shared that view, but the problem was that when you come to the point you are not telling people what you are doing, they suspect, they say, ‘What’s goin’ on here? They must be up to something,’” Feeney recalled.

  Hannon suggested that even after a visit to Malcolm Forbes, the magazine might still refuse to remove Feeney from its rich list on the grounds that it could not be certain that Feeney had really given his fortune to charity or that he had simply found a clever way to multiply his millions tax free outside of the clutches of the United States—or both.

  After months of mulling it over, Chuck Feeney decided to do nothing. They would let Forbes and other magazines with rich lists print what they wanted. The existence of the foundations must be kept secret. Everybody must continue stalling reporters. The culture of omerta would remain. Even Feeney bound himself to a code of secrecy. As chairman and chief executive of General Atlantic, he signed a formal contract with the group for his salary, which that year was recorded as only $75,000. It contained a clause stating, “You will not disclose any information acquired by you during your employment.” So he had legally obliged himself to remain silent.

  Staff working closely with Feeney could not help but know his secret. However, said Bonnie Suchet, “the circle was so devoted to Chuck they wouldn’t betray him.” New senior recruits continued to be put through rigorous procedures. When David Smith was hired as chief financial officer of InterPacific, the Pacific subsidiary of General Atlantic, he was instructed to meet an official from Fleishman Hillard, who told him not to say anything to anybody about anything, and if in doubt to say, “I don’t know.” “I had many dinners and lunches with Harvey Dale,” recalled Smith, “and each time he would impress on me the need to keep things quiet.” Smith got adept at handling questions from financiers. “When I needed to go to a bank to secure borrowings for an investment, there were good questions about where the equity was going to come from, and I had to artfully dodge those questions by just saying that it was from a private individual, and he was going to remain so,” he said. “The reaction usually was, ‘Oh! That’s very good. Can we meet him?’ I would say, ‘No, you can’t.’ At the end of the day, they just accepted that this person was not going to be revealed, and they were not going to meet him.”

  Although Forbes identified General Atlantic Group Ltd. as the parent company for Feeney’s businesses, it did not make a connection with its highly profitable investment subsidiary, General Atlantic Inc., which had established itself in a leafy suburb of Greenwich, Connecticut, as an engine producing liquid assets for Feeney’s charitable foundation. (In 1989, it became independent as General Atlantic Partners, but the philanthropy remained its main client.) One of its most profitable ventures was the creation in July 1981 in Denver, Colorado, of the General Atlantic Energy Corporation as an oil exploration company that they sold to the Presidio Oil Company in December 1988 for over $100 million. A New York publisher, Niall O’Dowd, recalled a Texas businessman saying, “You know, they are all talking about this guy Feeney down here. He got in at the bottom, and he sold at the top of the oil market. They’re all saying, ‘How the fuck does he know to do that? Who is this guy Chuck Feeney anyway?’”

  Ed Cohen, the head of Feeney’s investment firm, recruited a friend, David Rumsey, a real estate specialist and owner of one of the world’s largest collections of old maps, to negotiate property deals for Feeney in New York and San Francisco. “Chuck Feeney is not your usual businessman,” Cohen told Rumsey. “He’s a philanthropist. You will be doing real estate business but you will also be helping in that.” He told Rumsey they needed to invest the flow of cash coming in from DFS in good strong investments and try to get a mix of real estate, oil and gas, “and something they call sof
tware.” “What’s that?” asked Rumsey. “Oh, it’s computer stuff,” said Cohen.

  The “computer stuff” was providing the Atlantic Foundation with some spectacular successes. A $3-million investment in Morino Associates, a high-flying computer software firm later renamed Legent, was parlayed in 1988 after five years into approximately $52 million in marketable securities that could be liquidated tax free.

  Rumsey recalled how he, like Smith, had to convince bankers they were not laundering hot money. “I would go to the bank and say, ‘We are General Atlantic,’ and the banker would say, ‘Oh yes! We’ve heard about you guys. Can you give me your complete statement?’ I would reply, ‘Well, we can only go so far up the chain because our principal is a very private person. Going up the chain would show this company is worth hundreds of millions in cash.’ At this point the banker would roll his eyes and ask, ‘What kind of business are you guys in?’” Rumsey always refused to say.

  Rumsey negotiated major property purchases in San Francisco, including the eighteen-story JH Dollar Building and the landmark Humboldt Bank Building, and the most ambitious San Francisco investment Feeney got involved in—the development of an 865-apartment complex of one- and two-bedroom apartments and studios on the Embarcadero in the heart of the South Beach neighborhood known as Bayside Village. The original site was covered in old pipes and abandoned warehouses, and the neighborhood was run down, but Feeney, who loved San Francisco, saw the potential for reviving the area and providing affordable housing within walking distance of the famous Fisherman’s Wharf tourist district.

  Feeney formed a partnership with ForestCityRatner to build the complex with $12 million in equity and a bond issue of $80 million. When David Rumsey and Steve Albert from ForestCityRatner brought Jack Masterelli of Bankers Trust, from whom they wanted the $80 million loan, to see the site, he said, “You guys must be out of your mind.” They convinced Masterelli the investment would work. Then Delancey Street, a foundation that ran rehabilitation centers for victims of poverty and abuse and former gang members, announced it had acquired a 400,000-square-foot space across the Embarcadero from the apartment site. It was run by cofounder Mimi Silbert as “a Harvard for losers.” The prospect “freaked out” the banker. Mimi Silbert sent Feeney a message complaining that his partners were “bad-mouthing” the proposed center as a den of drug abusers, whereas “it is more likely that people will be smoking pot in your place than over here, where the rule is one strike and you are out.” Delancey Street had in fact a reputation as a self-sufficient rehabilitation center where those who survived got an education or training in marketable skills. This was right up Feeney’s street, in every sense.

  Mimi Silbert offered to help placate the banker, so Rumsey brought Masterelli to her Pacific Heights headquarters for a dinner. “So we all went over, you know, a bunch of young suits, with Masterelli, and she charmed everybody,” he recalled. Masterelli closed the deal. Bayside Village was completed in three phases from 1986 to 1990, to become the biggest apartment development in the southern part of San Francisco. General Atlantic Group retained a small apartment there that Chuck Feeney could use when in town. It became one of his favorite stopping places on his global travels, and he would dine in the restaurant established by the Delancey Street residents.

  In 1989, David Smith negotiated the purchase for InterPacific of Western Athletic Clubs, a San Francisco company that would grow to eleven private health, fitness, and athletic resorts along the U.S. West Coast and employ approximately 2,000 people. Western Athletic Clubs became another “cash cow,” for Atlantic Foundation, said Smith years later in San Francisco. “It is a dues-based business so the cash flows are steady, unlike the retail stores in Hawaii, where the income fluctuated from season to season. We paid $37 million, of which I borrowed $30 million: it’s probably worth now $300 million.” With Feeney’s encouragement, the Western Athletic Clubs set high standards for corporate philanthropy, donating 5 percent of all profits to community charities. “They also put on events and sponsor them to raise money for cancer, things like that,” said Feeney. “They call it social responsibility.”

  Having acquired health clubs and an address in Savile Row, Feeney liked to joke, pointing to the girth that stretched his Hawaiian shirt, that he still managed to be out of shape and shabbily dressed.

  InterPacific Group under Feeney’s guidance also developed Pacific Islands Club Resort hotels as models of high-end holiday destinations in Guam and Saipan and invested in the exclusive Bali Golf and Country Club (the setting for the 1995 Johnny Walker World Classic of golf), and the elegant Laguna Beach Resort spread out over twenty acres in Phuket, Thailand. Paradoxically, for a frugal person uncomfortable with the trappings of wealth, Feeney devoted much effort to providing luxury vacations for wealthy people. He would stay in the five-star hotels when on business, though he displayed his by now well-established frugal habits. John Green, a former manager of Laguna Beach Resort, recalled sitting down once for a strategy session with Chuck and slipping his Montblanc pen out of sight when he saw that Feeney was using a pencil.

  Feeney extended his—or Atlantic’s—hotel ownership in Texas and Oklahoma, where he bought a number of upscale hotels that were branded under the name “Medallion,” and run by Sidney Willner, a former vice chairman of Hilton, and Feeney’s associate, Fred Eydt. The star of the Medallion group was the 322-room Seelbach Hotel in Louisville, Kentucky, which was featured in F. Scott Fitzgerald’s The Great Gatsby. Feeney sometimes attended the Kentucky Derby with his brother-in-law Jim Fitzpatrick, and this was another fine hotel he liked to frequent. The Oklahoma Medallion was located four blocks from the federal building that was blown up on April 17, 1995, when Timothy McVeigh parked his Ryder truck outside with its freight of 5,000 pounds of homemade explosives. Feeney immediately sent word that the hotel, part of which was closed for renovations, was to open its doors and give free rooms to the injured and rescue workers. Staff were also sent from other Medallion hotels to assist.

  In London, Feeney was also opportunistically investing in new business ventures. One day at Heathrow Airport he came across a magazine called Airport, distributed free by Redwood, a London company that published trade magazines. It looked like a good investment, with advertising revenue that would cover the cost of production. He went to a pay phone and called the co-publisher, Christopher Ward, a former Daily Express editor, who, he learned right away, was contemplating shutting the magazine down as it was losing money. Feeney abandoned his travel plans, caught a taxi into London, and bought the magazine. But it failed to recover, and he had to write it off. “We were blindsided,” he said. “Having agreed to give publishing rights to this magazine, the airport authority started their own.” However, he became a major shareholder in Redwood, helping ensure the survival of the company.

  At the end of the 1980s, it was evident to anyone following the news—as Feeney avidly did—that there would soon be opportunities for investment in the disintegrating Eastern Bloc of Communist states. After the Velvet Revolution and the overthrow of the Communist government in Prague in November 1989, Feeney flew there to look at the possibility of developing hotels in what was then Czechoslovakia. He checked into the Art Nouveau- style Palace Hotel near Wenceslas Square in January 1990 and got into conversation with the front-office manager, Jiri Vidim, about what was going on in the newly liberated city. For once, Feeney’s cheap watch—he was wearing a plastic Casio—made an impression. “It was a luxury product to us,” recalled Vidim, “everyone wanted a Rolex or a Casio!” The Czech hotelier took Feeney around the snow-covered streets, but every hotel was still state-owned and nothing was for sale. Feeney saw, however, that the Czechs were hungry for Western things, just as the Japanese once had a pent-up appetite for luxury goods and spirits. He gave Vidim funds to create a joint venture company with General Atlantic and sent Jim Downey and an Irish colleague, Martin Kinirons, to set up shop in Prague. They refurbished a hairdressing salon in a house off Lesser Town Square, c
alled it New Age Shoppers, and stocked it with TV sets, record players, electronics, watches, jewelry, ties, and cosmetics brought in a forty-foot trailer from Dublin. The shop was besieged when it opened on December 18, 1990, and it took less than sixty seconds to sell the first watch. Two more New Age Shoppers stores followed shortly afterward, but the venture lasted only four years. It was not the duty-free story all over again. Eastern Europeans lacked the hard-currency savings that the Japanese had accumulated. But Feeney was a pioneer. He was the first businessman to open a Western shop in post-Communist Prague.

  With his Catholic, Irish American background, Feeney was most pleased, however, that he was able to help rehabilitate an order of nuns struggling to survive in Prague after the fall of communism. In 1950, the Gray Sisters of the Third Order of St. Franciscus, who traditionally looked after the sick, had been ousted by the secret police from their five Prague convents, including a monastery at 9 Bartolomejaska Street in the heart of the historic old city. The Communist government had converted this convent into an interrogation center known as Ruzyne Prison. Its most notable inmate had been Vaclav Havel. After the Velvet Revolution, the 150 surviving nuns were able to return to their convents but many were elderly, and they had no money for renovations.

  Chuck Feeney and Jiri Vidim came up with a plan. They traveled to see the seventy-eight-year-old mother superior of the order in Lomec, deep in the pine forests of southern Czechoslovakia, to broker a deal whereby Vidim and a partner would acquire the monastery from the nuns and convert it into an eighty-room budget hotel named the Cloister Inn, with special cloisters set apart for the nuns on the top floor. As an added tourist attraction, guests could stay in Cell No. 6 down below, where Havel had been incarcerated. General Atlantic provided a letter of credit for $800,000 drawn on Chase Manhattan Bank to finance the renovations.