Broker, Trader, Lawyer, Spy (8 page)

It turned out that the tenant in the apartment was thirty-year-old Warren Shannon. An employee of the telephone company, Carl Ruh (also thirty years old), was involved in the plot as well. But those two were junior players. They reported to a tough-looking, heavyset fifty-two-year-old attorney and private eye, John Broady,
who hired the wiretappers and encouraged the scheme.
*
Broady was already infamous, having been indicted twice during the 1940s on wiretapping charges, and this new case would mark the fedora-wearing lawyer as one of the most legendary wiretappers of the twentieth century.

Investigators found that five active wiretaps were secured to the lines of executives of the pharmaceutical company E. R. Squibb and Sons—today, Bristol-Myers Squibb—and it was apparent what the tappers had been up to: “The circumstances make it clear that business intelligence may have been the reason behind them,” William Keating, counsel for the New York City Anti-Crime Committee, told a reporter for the
New York Times
several days later.
†
⁴

Court testimony revealed that Broady’s biggest client was Charles Pfizer and Company, the corporate parent of today’s pharmaceutical giant Pfizer. Its executives worried that their corporate secrets were leaking to competitors. They hired Broady to tap the phones of several of their own employees, paying him $60,000 (a hefty sum at the time) for the project.

Working closely with Pfizer’s general counsel, Broady learned that the company was having trouble securing a patent for tetracycline, a cutting-edge antibiotic, that has been used in years since to treat many kinds of infections, from gonorrhea to acne. The development of this chemical was a significant breakthrough, but Pfizer’s patent application was stalled. Executives muttered darkly that a rival drug company, Bristol-Myers, must be holding up the process, and that this competitor had been selling illicit tetracycline to a third company, Squibb. Broady placed taps on the phones at Squibb, hoping to find out what it was doing to block Pfizer’s patent. He also had an accomplice tap long-distance phone lines that ran all
the way to the Bristol-Myers headquarters in Syracuse, New York.

Broady met with Pfizer’s general counsel once a week, near the entrance to the Holland Tunnel, as his spying activities got more and more elaborate. At one meeting alongside the traffic-choked entrance to the tunnel, the corporate lawyer handed Broady a list of about fifty employees and asked him to check their living standards, friends, and work habits. A government investigation later found that Broady’s reports became so detailed that Pfizer executives didn’t have time to read through all the intelligence he produced. The company asked him to condense the reports to just the most important findings.
⁵

No one knows what Broady discovered during his elaborate eavesdropping scheme, but Pfizer won the fight over tetracycline, securing the coveted patent on January 11, 1955—just a month before authorities uncovered the wiretapping conspiracy.
⁶

The whole matter ended badly for Pfizer, though. As a result of other activities unrelated to the wiretapping, the feds concluded that Pfizer had submitted false and misleading information to the U.S. Patent and Trademark Office, and that it had colluded with five other antibiotic manufacturers to keep competitors out of the business and attempt to monopolize the market. The Federal Trade Commission (FTC) mandated that Pfizer and another company grant nonexclusive licenses at specific royalty rates to any qualified American company that applied to sell tetracycline. Indeed, the entire tetracycline industry became a magnet for allegations of wrongdoing: the FTC conducted investigations in the late 1950s, and the Department of Justice investigated again ten years later.
⁷

Not all of Broady’s work involved advanced science and corporate intrigue. In a subsequent trial, the millionaire John Jacob Astor testified that he’d hired Broady in the early 1950s to tap the phones at his own posh apartment at 598 Fifth Avenue in Manhattan. Astor, whose father had perished in the sinking of the
Titanic
in 1912, needed evidence in his divorce from his second wife. He hired Broady to tap the phones not only in his apartment
but also in the home of the private investigator his wife had hired during the bitter marital battle. Their divorce became final in 1954.

Broady also trolled the phone lines for juicy secrets, which he used to generate divorce clients for himself. In one case, he tapped the line of a famous burlesque dancer, Ann Corio, hoping to learn who she was sleeping with—and sell that information to the wives of the unlucky men.
*

During his trial, Broady denied that he’d been a party to the wiretapping scheme. He claimed that he had used the apartment for a different purpose. He spun an elaborate tale, claiming that he’d been working on a secret investigation of a Chinese air force general who had stolen $7 million from the Republic of China. On the witness stand, Broady burst into tears, saying that he feared for his life, and that one of his employees had been killed by the Chinese.

“I didn’t want them to knock me off like they did my man,” he blurted out. “I have a wife and kids.”
⁸

The jury didn’t buy the story. Broady was convicted and sentenced to two to four years in a New York state prison, stripped of his private investigator’s license, and barred from practicing law.
⁹

I
F
B
ROADY WAS
one of the quintessential private eyes of the mid-century on the East Coast, the ultimate investigator on the West Coast was Hal Lipset, a detective based in San Francisco, who was active for several decades after Broady’s misadventures in New York. Lipset’s work has not been forgotten. One of today’s leading corporate detectives told me, “If you want to understand this industry at all, check out Hal Lipset. We’re all still copying him.”

Hal Lipset applied new technologies to the science of bugging. Now, instead of phone taps or microphones with wires attached, investigators could use transistor technology to place wireless microphones almost anywhere they wanted. Moreover, Lipset argued that secret recording wasn’t an invasion of privacy—but a way for good citizens to protect themselves against fraud and government abuse.

Lipset was an accomplished detective, a great storyteller, and something of a showman. He was purely a private detective—he had almost no interest in the outcome of his cases with regard to law enforcement. “Judgments belong in a court of law,” he told his agents. “Our job is to earn the fee.”
¹⁰
But he didn’t look the part of a hard-boiled detective at all. In his later years, his receding hairline, thick glasses, and gentle expression made him look more like a doting uncle than an aggressive investigator.

By the mid-1960s, Congress had become increasingly concerned about the rise of a private eavesdropping industry that used bugs and telephone taps on citizens across the country. Senator Edward V. Long of Missouri launched an investigation to find out if Americans’ privacy rights were being trampled by new technology, and he turned to Lipset as his star witness. Lipset accepted the invitation to testify before the committee, hoping to make the case that the new technology was not scary at all. What Lipset didn’t understand was that his dramatic testimony would have just the opposite effect, showing a startled public just how far bugging technology had come.

Shortly after 10
A.M.
on February 18, 1965, Long convened a hearing in the Senate office now known as the Russell Building. Long’s chief counsel had let Lipset into the hearing room early to make a few preparations. Lipset began by introducing himself to the Senate committee, mentioning that he’d served as a captain in the army’s Criminal Investigative Division during World War II and had been awarded the Bronze Star. He held up a series of items from the table in front of him, each of which he said was
in common use by private detectives: a microphone hidden in a package of cigarettes, a wristwatch microphone, and a tie clasp microphone.

Then he held up a martini glass. “It is missing a special ingredient, an olive the senator is holding there,” he said, gesturing toward the chairman. “That is a transmitter unit and the toothpick is the antenna. That is a complete transmitter and will work when covered over with liquid that fills the glass.”

The senators were fascinated. Though more than a few of them were familiar with martinis, they’d never seen an olive like this one.

“How far will it transmit?” asked Long.

“That should be good for a block,” Lipset responded.
¹¹

And, by the way, Lipset told the committee members, he’d bugged their conversations during the hearing. The mike was hidden in a vase of flowers he’d placed on the rostrum where the senators sat.

“When you made your opening remarks we caused that to be recorded by using the transmitter concealed in the rose flowers in front of you,” Lipset said. “And we will play back a little bit of your opening remarks right now.”

Feigning surprise, Long said, “Be sure it is just the remarks I read for the record.”

The implications were tremendous. Thanks to the miracles of science—a mixed blessing—private investigators and corporate snoops could now listen in on a conversation without being in the room, and without needing to run a physical wire onto the premises. Voices could be taped from as far as a block away. Almost any conversation anywhere was recordable.

People in the media, too, were fascinated. The new technology caused a stir. “To think that the martini, to which the harried man turns for solace and comfort, should now turn on
him
,” wrote Art Hoppe, the reigning humorist at the
San Francisco Chronicle
. “A splendid development,” proclaimed the columnist Russell Baker of
the
New York Times
. “With his olive, an agent can pick up disloyal comments during the cocktail hour.”
¹²

Lipset became one inspiration for the character Harry Caul, the paranoid bugger played by Gene Hackman in the 1974 movie
The Conversation
.
*
And although Lipset didn’t want Americans to become even more frightened of bugging technology, he couldn’t help seizing an opportunity to make a buck: he accepted the director Francis Ford Coppola’s offer to serve as a consultant on the movie.

I
T WAS THANKS
to the U.S. government that Lipset had become a spy in the first place. In a pattern that’s still being repeated today, Lipset got his training from the U.S. Army before going into the private sector. During World War II, he was responsible for rooting out criminal behavior by American soldiers on the battlefield and in U.S.-occupied areas of Europe. He told tales of chasing down soldiers who’d killed civilians, looted villages, and committed other crimes. In one case, he investigated a brutal crime in which a twenty-year-old woman leaped from a second-story window to escape from two American soldiers who tried to rape her. The men shot and killed her where she landed.

In another case, recounted by Patricia Holt in her biography of the detective, Lipset said that the army’s criminals weren’t always the smartest crooks, but they could be brutal:

Crimes like these left a lasting impact on Lipset, who for the rest of his life kept every file and report from his World War II days—along with every grisly crime scene photo of hacked and mutilated bodies—locked in his attic in San Francisco.

But another lasting legacy of World War II was the rigorous training the army gave him. Although Lipset grew frustrated with the bureaucracy and petty corruption of the officers he worked for in the service, he appreciated their methods and attention to detail. The record-keeping system he used in private practice and even the format of his reports resembled systems he’d followed in the army.

The army taught Lipset almost everything he needed to know to become a private eye, including how to search a crime scene without disturbing evidence, how to interview witnesses, and how to analyze documents. Thanks to exacting supervisors, he also learned how to use ethyl alcohol to test for blood, how to take fingerprints, how to detect gunpowder burns, and how to make a plaster cast of a tire print. In one training exercise, instructors sent students into town to spend thirty seconds in front of a store window, and then turn around to be quizzed by an officer on the exact details of the display. How many objects were there? How many inches away from one another were they? What color was the backdrop?

Lipset was also taught how to conduct surveillance, with teams of investigators leapfrogging the suspect or bracketing him, with
one in front and one behind the target. The importance of attention to detail was relentlessly hammered into each trainee.

In the 1970s, Lipset was a wealthy man, working for San Francisco’s most prominent law and financial firms. He was at his most powerful during a project his biographer Patricia Holt called “the case of the elusive entrepreneur.”

In 1973, Lipset received a call from Creative Capital, a venture capital company based in New York, which wanted his help in unraveling a bad investment. Creative Capital—along with an entrepreneur, Paul Maris—had invested $3.5 million to buy a garment manufacturing business: the Alvin Duskin Company in San Francisco. But now, as CEO of Duskin, the stylish, dark-haired, thirty-five-year-old Maris was running behind on his debt-service payments and spending a lot of money on the company, putting several members of his family on the payroll, and giving expensive Mercedeses, Maseratis, and Ferraris to his executives. Creative Capital felt Maris had become a bad investment and wanted to force him out of the company. But when representatives of the board of directors attempted the ouster, Maris threatened to punch them in the nose.