Broker, Trader, Lawyer, Spy (9 page)

BOOK: Broker, Trader, Lawyer, Spy
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Creative Capital hired a law firm to obtain restraining orders and Lipset’s firm to plan a more forceful corporate ouster. To prepare for the takeover, Lipset hired twenty operatives and developed a written plan for going into the garment company and forcing Maris out. Lipset also retained a six-foot-six bodyguard for the CEO of Creative Capital, in case Maris became violent during the confrontation. Lipset said: “The dress factory was a big building with half a dozen floors. We knew we would have to keep people from moving around and telephone calls from going out. It was the same as securing a whole building, as you would do in an army or police action.”

He planned the attack for a Thursday. That morning, Lipset strode onto the property and planted agents in the parking lot at the back of the building to keep employees from getting into
their company-owned cars. He placed one man on the front door, one man on the elevator, and a man on each stairwell to keep employees from moving from floor to floor. Another agent guarded the computer room to keep Maris or his executives from destroying records.

Arriving on the executive floor, Lipset stepped out of the elevator and told the switchboard operator to step aside for one of his detectives, who would handle all inbound calls for the rest of the day. Lipset’s team went through the floor office by office, stopping at the key executives’ locations with court documents ordering them to be fired. Each one was replaced by an executive handpicked by Creative Capital who began the tedious process of figuring out where the garment company’s money had been going.

Lipset and his remaining team burst into Maris’s suite last, confronting the surprised entrepreneur at his desk.

“What is it?” he asked.

“Paul Maris,” Lipset intoned, “I’m here to serve papers on you.”

“Oh, you’re trying to scare me. OK, go ahead. I’ve got the best law firm in San Francisco, so just try it.”

“Mr. Maris,” Lipset replied, “I’m serving these documents on you in addition to a complaint allowing Creative Capital to take over this company. These papers specifically restrain you from removing any company property. You are not allowed to take your company car when you leave. You are not allowed to take business papers from this office. You are not allowed to take printouts from the computer room. You are not allowed to take plans from the designing room. You are not allowed to take any samples, and furthermore, according to paragraph 16 of this order, you are restrained from discussing this matter with any employees until this case is heard in court.”

After some back-and-forth bickering about what he was allowed to take from his office, Maris left—without throwing a punch.

In the aftermath, Creative Capital kept Lipset on the case—
trying to find out if Maris was violating the court order by meeting with company employees or was still in possession of any company property. Lipset sent a woman operative to tail Maris, and she followed him to the Stanford Court Hotel on San Francisco’s posh Nob Hill. With cable cars clattering up the hill nearby, the operative began taking clandestine pictures of Maris and the people he was meeting with. But Maris and the others spotted her, closed in, and grabbed her wrists. They snatched her camera and pulled out the film, ruining the surveillance images.

Shortly after that unpleasant episode, Lipset got another surprise: Maris was suing him for $5 million.

Planning to fight back, Lipset demanded that Creative Capital tell him everything it knew about Maris. The CEO of Creative Capital told Lipset that he’d had Maris checked out by a prestigious investigative firm, Proudfoot Reports, which was based on the East Coast and was headed up by a former FBI agent. Proudfoot reported that Maris was on the up-and-up. He went to a filing cabinet and turned over a copy of the investigative report on Maris.

Lipset scanned the report by the Proudfoot team, and felt that something was wrong. The document listed Maris’s army career but didn’t identify the unit he’d served with. It included a list of stocks that he held, but they were all in privately held companies, with no addresses listed. It said Proudfoot had checked with the schools Maris had listed on his résumé, and the information checked out. But the document didn’t list the name of the registrar Proudfoot’s investigators had spoken to, which Lipset knew his own operatives would include as a matter of accuracy.

Lipset realized that Maris was not who he said he was. He insisted that Creative Capital hire him to figure out who Maris really was.

Creative Capital’s CEO scoffed at the idea. His investigators at Proudfoot were top-notch. Why would he want to hire Lipset to redo their work? Lipset was probably just trying to generate more fees. The conversation ended badly, with Lipset and his client shouting at each other. The stressful operation and the new lawsuits were getting
to them both. Lipset announced that he’d conduct the investigation on his own dime, and stormed out of the CEO’s office.

Lipset was burning money, desperate to fend off Maris’s $5 million lawsuit. He deployed his own network of investigators to find out who Maris really was, starting in Philadelphia, where Maris claimed to have been born. Lipset had an investigator check for a birth certificate and school records—on his résumé, Maris said he’d attended John Bartram High School in Philadelphia and Baldwin Wallace College in Ohio. Lipset’s detectives fanned out to both campuses. Next, Lipset had another colleague check Maris’s military record in Washington, D.C.

The investigator in Philadelphia could find no records of Paul Maris at either the high school or the college. Maris’s old address was a vacant lot in an African-American neighborhood. Maris, who was white, probably hadn’t grown up there, the investigators figured. The Washington end of the investigation came back empty, too. Maris had never served in the army at all.

What’s more, Lipset found that Maris, his wife, Lillian, and his father had similar Social Security numbers, each just one number higher than the last. He knew that couldn’t be a coincidence. But his team of investigators still had no idea who Maris was. They developed a working theory: he’d changed his name from something he felt sounded too ethnic, like Maresh or Mariscal.

So Lipset called Patrick Murphy, the former FBI investigator at Proudfoot, to find out what he knew. Over the phone, Murphy said he remembered Maris well, he’d checked Maris out, and everything was fine.

But, Lipset wanted to know, did the investigators check where Maris had gone to school?

Murphy said he had, and he’d spoken to a registrar at the school who confirmed Maris’s dates of enrollment.

Now Lipset knew that Murphy was lying: the schools did not have a record of Maris. But why would this private investigator be in on the cover-up? Lipset couldn’t figure it out.

The six-foot-six bodyguard who’d accompanied Creative Capital’s CEO had the final piece of the puzzle. The bodyguard’s name was Ed, and he was a former narcotics investigator with an entrepreneurial streak of his own. He knew Maris was a valuable prize, and he demanded that Creative Capital pay him thousands of dollars to reveal what he knew. The company paid Ed off, and he said he had heard from his buddies in the federal marshals’ service that Maris was actually a gangster from New Jersey. Years earlier, he’d testified against the Mafia, and he’d been offered a spot in the government’s witness protection program.

Maris, it turned out, did have a fake identity—one that had been created by the FBI itself. Eventually, Lipset found out that Maris’s real name was Gerald Zelmanowitz. The Mafia had a contract out on his life.

Zelmanowitz was a stock cheat who had been born in Brooklyn and whose testimony against the Mafia capo Angelo (“Gyp”) DeCarlo had put DeCarlo behind bars in 1970.
Zelmanowitz, who described himself as a “securities analyst,” told the court that he’d seen DeCarlo’s associates brutally beating an insurance broker who had fallen behind in loan payments to the Mafia. The broker later died under suspicious circumstances, and the government thought he’d been murdered. Zelmanowitz’s testimony was one of the keys to the case. During the high-stakes proceedings in a courthouse in Newark, New Jersey, the feds went to great lengths to keep Zelmanowitz safe. He was escorted into and out of the courtroom by four federal marshals, and every person in the courtroom was screened for weapons by a metal detector. In those days, such screening was rare enough to be noted prominently in the newspaper.

Still, Zelmanowitz exuded the confidence of a veteran con man on the witness stand. Under cross-examination, he said he’d earned $1 million over five years in a complicated Mafia-backed stock scheme. Zelmanowitz was used to living high. He and his wife drove new Cadillacs, his home was crammed with expensive
furniture, and he was in the habit of flying back and forth to Europe to tend to his secret Swiss bank accounts.

He readily admitted that he’d filed no tax returns and paid no taxes on his ill-gotten gains. Asked why he hadn’t paid taxes, he responded blithely, “I didn’t file because I stole the money, and had no job, and couldn’t show how I earned it.”

The mobster DeCarlo and his associates weren’t about to forget Zelmanowitz, but by 1973, they had no idea where he was. That’s why “Maris” was so angry when Lipset’s operative took pictures of him in the hotel lobby in San Francisco. And it’s also why the private investigator Murphy had returned a clean, but unverifiable, report on Maris. Murphy was helping his former colleagues at the FBI maintain Zelmanowitz’s fictional identity lest the mob find him and kill him.

In the end, Creative Capital got its company back, Lipset got out of the lawsuit, and Creative Capital was stuck with the bill for his extra investigation. “Maris” disappeared from sight in 1973, relying once again on the FBI to build a new life for him somewhere else. On the lam that year, Zelmanowitz called a reporter, but refused to say where he was calling from.

“My whole entire cover is being destroyed and torn apart,” Zelmanowitz said. “At this moment, I am traveling very far and very fast.”

Lipset noted that Zelmanowitz sued the FBI for $12 million for failure to protect his identity, but he lost that case, too.


Capital saga, Lipset had a client who had been wronged. But not all his clients were so virtuous. Like many of
today’s corporate intelligence operatives, Lipset was happy to work for anyone who would pay. By his own account, he didn’t flinch when he was asked to work for Jim Jones, the founder of Peoples Temple, the infamous religious cult in San Francisco. At the time Lipset went to work for him, Jones was still masquerading as a Christian preacher, although there were already rumors that some of his followers were being held against their will.

This case would end in a spectacular tragedy in 1978, when the insane Jones ordered the followers who had come with him to the jungles of Guyana to kill themselves with poison. More than 900 church members—men, women, and children—died there. While the suicides were going on at the jungle settlement, some of Jones’s followers drove a truck to a nearby airstrip, opening fire and killing a United States congressman and several reporters who were trying to leave Guyana after conducting an investigation of the cult.

The horrific tragedy didn’t seem to weigh on Lipset’s conscience. In an interview conducted for Patricia Holt’s biography, Lipset said his work for Jim Jones began in the late 1960s, when Jones began to feel that he was under threat of assassination. Lipset went to Jones’s facility in Ukiah, California, and offered some advice: how to set up a defensive perimeter around the church, how to avoid driving on the same roads twice, and how to avoid repetitive schedules. Lipset passed along other basic security tips to Jones, including how a security team could serve as bodyguards, each man responsible for keeping his eyes on a certain sector so the team could maintain 360-degree awareness of people around the preacher. Lipset said that Jones didn’t seem crazy in those early days.

But when pressed on whether he felt it was right or wrong to work for a man like Jones, who was facing allegations that he deprived his followers of their freedom, forced odd sex practices on
them, and confiscated their money, Lipset responded with a blithe comparison of Jones to the U.S. Army, in which he’d served, and to the Catholic Church.

Asked if he would work for a group if he knew the people in it had lost their ability to make choices for themselves, Lipset said:

It’s a matter of degree. I see people giving up their choices every day…. If you’re a soldier in the Army, you give up even more freedom—that’s because you wanted to when you joined up. You made the decision. That’s your business. It’s certainly none of

Applying that stunning moral analogy allowed Lipset to work for just about anybody who could afford his services. It’s a trend we’ll see over and over again in the corporate intelligence business. Though clients as evil as Jim Jones are rare, today’s operatives are selling the talents they developed in government intelligence careers to any client: corrupt companies, Russian oligarchs, Middle Eastern sheikhs—anyone, really, who can afford to pay.

Lipset put it this way: “I’m in it for the money.”

The Man Is Gone

Hal Lipset began as a small-time private eye, presiding over a tiny firm operated out of his house in San Francisco, and his outfit was a far cry from those of his predecessors at Pinkerton and elsewhere. Later in the twentieth century, corporate sleuths would once again build much more elaborate intelligence empires—some would become intertwined with United States government intelligence, offer their services to the nation in times of crisis, work the opposite side of the street for foreign governments, ride the ragged edge of morality, and grow extraordinarily wealthy.

The first claimant to the Pinkerton legacy was International Intelligence, which was often referred to as Intertel and was known as the “private CIA” of the reclusive billionaire Howard Hughes. Intertel terrified the Nixon administration, which worried that it was being used by the Kennedys to help elect Teddy Kennedy as president. In just a few years after it was founded by veterans of Robert Kennedy’s Justice Department, Intertel had extended its reach into the worlds of Hughes, the Kennedys, Richard Nixon’s incompetent plumbers, vicious Mafia figures, and the elusive CIA. As a result, its history has become something of a touchstone for conspiracy theorists, many of whom have concocted elaborate fantasies about Intertel and the dastardly deeds of elites controlling
the world. Much of that is no more than fantasy, or fiction. But Intertel did exist, and for about a decade it was involved in some of the country’s most secret episodes.

Howard Hughes was an oilman, a Hollywood bon vivant, and an aviator. He lived in Texas, Las Vegas, and the Caribbean, among other locales around the world. But today, his last remaining secrets can be found in an unlikely place: the small town of Fairfield, Pennsylvania, amid the rural countryside just north of the Mason-Dixon Line. Here, alongside 400 acres of soybeans, sit a small brown farmhouse, two silos, and a barn. Intertel’s founder, Robert Dolan Peloquin, and his wife, Peggy, live here.

Peloquin, who is nearly eighty, is an imposing man: tall, with a firm handshake, swept-back white hair, a welcoming manner, and a deep voice edged with a southern Massachusetts accent. He relishes telling stories about the old days. Peloquin was once an intelligence officer at the National Security Agency and a Mafia hunter at the Department of Justice. In later years, there were Christmas-morning requests from Howard Hughes, sudden trips to Switzerland to track down a con artist, and jaunts to the Caribbean to play Twenty Questions with Merv Griffin. (Griffin, a famous entertainment executive and talk show host, kept the topics focused on Hollywood, and so usually won the games.) Robert Peloquin was one of the world’s greatest corporate spies.

He began his career, like so many other corporate spies, in the military. After graduating from Georgetown University at the beginning of the Korean War, Peloquin entered the navy. He figured it would be easier duty than slogging through the mud in the army. But after midshipman school at Newport, Rhode Island, he was assigned to Norfolk, Virginia, and a navy unit called the beach masters—an amphibious force designed to take charge of beachheads during the first wave of any invasion, making sure that the troops and matériel got forward as fast as possible. Peloquin didn’t like what he saw of the beach masters. This was a first-wave invasion force training to go to war in Korea. Its commanding officer,
whose name was Peterson, had been a hero in World War II—wounded seven times in action. The unit drew many of its enlisted men straight from the brig at nearby Camp Allen: these men had been told that they could either rot in a navy jail or report to the beach masters. To Peloquin and his fellow ensigns, it seemed that the unit was being stocked with cannon fodder, and led by a man who wouldn’t hesitate to charge into the most brutal combat. Peloquin came to a conclusion: “If I hang around this place, I’m not gonna live long.”

But how to get out of this assault unit? Peloquin solved the problem by deploying two talents he would rely on for the rest of his life: an ability to curry favor with important older men and a talent for job hopping ever upward.

His boss, Peterson, had a problem that Peloquin could solve. The bad seeds and ex-cons in his unit were racking up courts-martial at an astonishing pace. And the Uniform Code of Military Justice—which was then new, and which governs the way military personnel should be tried and punished—was causing Peterson fits. He was of the old school and didn’t understand how the new rules worked. He sent Peloquin to the Naval Justice School in Newport, Rhode Island, far from the fighting in Korea. On returning to the beach masters, Peloquin helped solve Peterson’s backlog of court-martial cases. From then on, Peloquin recalls, “I was kind of his boy.”

After seeing some combat at Inchon in Korea, Peloquin took advantage of a navy loophole and went to law school without promising extra years of service in return. He spent a few peaceful years at Georgetown Law, and after graduation received orders to join a destroyer in Pearl Harbor. Peloquin protested to his superiors that the bar exam was just a few months away—why send him to Hawaii before he had passed the bar? The answer was clear. Navy rules required only that he graduate from law school to practice law in the navy. He didn’t have to be a member of any bar. Passing the bar, as far as the navy was concerned, was his own business, to be conducted on his own time.

Peloquin didn’t like that answer. He resigned from the navy. During his time in law school in Washington, Peloquin had reported to the same navy facility that also housed a supersecret code-breaking and electronic eavesdropping entity: the National Security Agency. It was so covert that its acronym, NSA, is still jokingly said to mean No Such Agency. The NSA happened to be just down the hall from Peloquin’s navy office. He worked his connections there, and landed a job in 1954.

Peloquin found the work fascinating. It was his first exposure to the world of intelligence. He worked in the security office, helping to vet and investigate the agency’s own employees suspected of being spies for the Soviet Union. While working there, he became familiar with the case of two American defectors: William Martin and Bernon Mitchell. In 1960, these two men defected to the Soviet Union, saying that they opposed U.S. policy on spy flights over enemy countries.

Martin and Mitchell had gotten advance word that Peloquin and other NSA investigators were snooping around. That prompted panic: the two men had long been selling information about the NSA’s code-breaking abilities to the Soviet Union, and getting caught could mean spending the rest of their lives in federal prison. They decided to make a dash for freedom, taking planes to Mexico City, then Cuba, and finally Moscow. All they left behind was an anti-American manifesto in a safe-deposit box at a bank.

But Peloquin says the NSA wasn’t nearly as close to discovering the truth as Martin and Mitchell thought. It was investigating the two men, but not for spying. The investigators were instead trying to figure out if Martin and Mitchell were gay. This was a time when even a suspicion of homosexuality created doubts about a person’s loyalty to the government—and could end a career. Peloquin says the NSA had no idea the two men were active spies for the Soviet Union. But rumors of their sexual orientation had prompted the NSA’s security people to start an internal investigation. If Martin and Mitchell had stayed, it is possible that they would have been
drummed out of the NSA for being homosexuals instead of locked up for being spies.

At about the same time, Robert Peloquin hopped to a new job. His supervisor had a contact at the Department of Justice, and Peloquin went to work at its internal security unit. From there, he jumped, again, to the Justice Department’s Organized Crime and Racketeering section. This was the early 1960s, and John F. Kennedy had been elected president, naming his brother Robert as the attorney general of the United States. Bobby Kennedy was fascinated by the organized crime section, and Peloquin became Bobby Kennedy’s boy. Peloquin would spend most of the next decade tracking down high-level Mafia figures and putting them behind bars.

At one point, while Peloquin was in New Orleans on an investigation, Kennedy called to see how it was going. The phone rang, and a voice with a New England accent asked, “Is this Bob Peloquin? This is Bobby Kennedy and I just wanted to see how you’re doing.”

Not believing that the attorney general would call such a low-level investigator, Peloquin suspected that one of the other investigators was having fun with him.

“Sprizzo, cut that shit out,” he said.

“No, this really is Bobby Kennedy,” came the reply. Peloquin leaned back in his chair and saw that the man he suspected of playing the joke, John Sprizzo, was in the next room—and he wasn’t on the telephone. Peloquin was horrified. But Kennedy didn’t mind. The Kennedys invited the young criminal division investigators, FBI agents, and others involved in the fight against the Mafia to Hickory Hill, the family estate in suburban Virginia. On one evening, a nervous Peloquin sternly warned his wife not to bring up certain topics in front of the boss. “Don’t embarrass me,” he told her. As he and Peggy settled their buffet dinners on their knees, though, Peloquin himself mishandled a piece of roast beef, sending it skittering onto the floor. That attracted the Kennedys’ enormous
dog—a Newfoundland called Brumus—who came lumbering across the room, scattering tables and chairs. All eyes turned to the hapless Peloquin. Peggy leaned over and whispered, “Don’t embarrass me.” Her husband has never forgotten the lesson.

At the Justice Department, Peloquin learned another lesson he’d never forget: how to combine forces. While he was there, the department came up with an innovative structure for going after the mob. Using strike forces, the government pooled senior-level people from every agency that had a hand in the fight: the IRS, the bureau of narcotics, the FBI, the border patrol, and more. Each strike force would take a particular organized crime family and devote all its disparate resources toward taking that family down.

Peloquin headed up the first organized crime task force, and set his team on the Magaddino crime family in Buffalo, New York. Working with the Canadian Mounted Police, they broke up this long-reigning Mafia family, sending nine of its members to prison. Soon, the Department of Justice deployed similar organized crime strike forces across the country.

At the time, the Mafia was making inroads into all types of businesses. With a foothold in Las Vegas gambling, mob bosses were now poised to go big-time: into the National Football League (NFL). For owners of professional teams, the prospect of the Mafia influencing players to throw games or referees to make bad calls was a nightmare. Millions of dollars in future profits depended on the fans’ belief that the game was honest. The football commissioner, Pete Rozelle, knew that the league had to develop some defense. He brought in Peloquin’s boss, and Peloquin tagged along, jumping to a cushy job as associate counsel at the NFL.

The new team put together an innovative solution to the problem. Fixing football games was illegal, and so was gambling on them. But in order to weed out illegal attempts to fix the games, Peloquin’s security team cultivated sources in the illegal gambling world.

“The last guy in the world who wants to see a fixed football game is a bookie, because if he’s not in on it, he’s going to get taken
badly,” Peloquin reasoned. He saw the irony of illegal gamblers working to protect honest games, but still, the bookies became his best source of intelligence about the Mafia’s attempts to fix games. If an unusual amount of money flooded in on bets on one team, Peloquin heard about it from his bookie informants and checked it out.

Before long, Peloquin and his boss Bill Hundley—who had been born in Brooklyn and had worked at the Department of Justice as an anti-Mafia fighter
—began to get restless. They’d both been commuting to New York during the week and living in Washington on weekends. They both had large families (each had six children). And both thought they could make even more money selling their services to clients beyond the NFL.

Once again, a powerful senior player stepped in to boost Peloquin’s career: Pete Rozelle agreed to set Peloquin and Hundley up in a law firm of their own in Washington. After all, he was already paying their hotel bills and dining and travel expenses. The two men were getting expensive. Rozelle put up the first six months of their office rent and provided cash to hire a secretary and pay the phone bill; and the two men started their own law practice, with the high-profile NFL as their premier client. Soon they added others.
magazine signed on for help with a series of articles it was doing on the Mafia. Each time
published an article on a Mafia family in a given city, lawsuits would be filed, alleging that the magazine had libeled people not connected to the Mafia. It was Hundley and Peloquin’s job to prove that
had been right, and get the lawsuits thrown out of court. Leaning on their contacts inside the Department of Justice, they succeeded.

One morning, a former contact at the Justice Department called Peloquin. Could they meet at the office? Someone was there whom Peloquin should know.

The man was James Crosby, the owner of the Mary Carter Paint Company. He’d just purchased Hog Island, in the Bahamas, and was in the process of developing it as a resort and renaming it Paradise Island—a better draw for the tourists he hoped would flock to it. Crosby was maneuvering in local Bahamian politics to get a gambling license for Paradise Island, but he was terrified of getting into the gaming business, which was rife with gangsters and hoodlums. Crosby wanted Hundley and Peloquin to make sure his new employees weren’t connected to the mob. “I didn’t know diddly-shit about gambling,” Peloquin recalls. But he knew the mob. And he got the job.

He hired a staff to work on the project, bringing in several of his old pals who had retired from the organized crime strike force, including an imposing former director of enforcement at the U.S. Bureau of Customs. This man, who had entered Peloquin’s circle as the senior representative from customs to the Justice Department’s organized crime task force, relocated to Paradise Island full-time and used his government contacts to screen new hires at the resort, determining if they had Mafia connections or any other criminal connections.

BOOK: Broker, Trader, Lawyer, Spy
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