Do You Sincerely Want To Be Rich?

    

    
First published May 1971 by

    
Andre Deutsch Limited

    
105 Great Russell Street, London WC1

    
Second Impression July 1971

    
Copyright © 1971 by Times Newspapers Ltd All rights reserved

    
Printed in Great Britain by

    
Ebenezer Baylis and Son Ltd

    
The Trinity Press, Worcester, and London

    
isbn o 233 96328 6

    

    Contents

    

    Preface 9

    I. A Warning to Investors from Mr Bernard Cornfeld 13

    In which we introduce Bernard Cornfeld in the role of international economic statesman, and give a preliminary statement of the real nature of Investors Overseas Services.

    2. The Making of a Conceptual Salesman 26

    In which we examine the political and psychological background of Bernard Cornfeld, and the early growth of his talents.

    3. The Financial Revolutionaries 38

    The rise of the mutual fund idea, and Bernard Cornfeld's early days, both as social worker and fund salesman. In which a young lawyer named Edward Cowett also learns about mutual funds.

    

    4. The First Missionary Journeys 57

    Paris, Geneva - and many other places, from Caracas to Cox's Bazaar. How a sales force was mustered, a technique was refined, and young men learnt to 'put their egos in their pockets'. Also, some observations on Swiss banks.

    5. Early Travels in the Offshore World 79

    In which we explain the capital structure of a dream, and the way that Bernie and Ed kept the salesmen loyal to IOS. The birth of the first IOS fund, and the Trust which was not a trust.

    6. Ed Cowett's Problem 89

    In which the learned author of
Blue Sky Law
tries his hand at promoting speculative companies. In which he gets into deep financial trouble, and is helped out by Bernie Cornfeld.

    

    7. The Birth of a Superfund104

    In which we examine the Fund of Funds, which is really a Gimmick of Gimmicks. How it worked to the advantage of its inventors, Ed and Bernie, and to the disadvantage of its investors.

    

    8. The Jungle Jangle Jingle 118

    The real sources of IOS's wealth: why IOS was in trouble with the police in Portugal, Colombia, Brazil and other places. In which we crack some codes, uncover some clandestine financial arrangements, and make some calculations about hot money.

    9. They May be Schmucks - But They're the Government! 147

    The clash between IOS and the US Securities and Exchange Commission. A Cuban lady skindiver enters the stockbroking business. We examine some other things that IOS never told the customers, and also a deal that 'scared hell out of the sec'.

    10. A Little Question in Switzerland 164

    In which IOS nearly gets thrown out of Switzerland, the vital base. There is some sparring with the Swiss Bankers Association. Bernie makes a tactical, but precipitate, withdrawal.

    11. Pacem in Terris… and Goodwill to All 174

    Great efforts are made to improve the image of Investors Overseas Services. Eminent international citizens are brought into the company. They are carefully excluded from real power.

    12. Reminiscences of the Court of the Emperor Cornfeld 190

    In which Cornfeld gives some views of sexual codes, and some of his followers show how to suppress a scandal in the Court. Some examination Cornfeld's old friends.

    

    13. The Off-White Cliffs of Dover 208

    The boys find a way to beat the sec - operating through the City of London. They go into the life insurance business, and show the Bank of England a thing or two. In which it is shown how the Winston Churchill Close should be applied, and generally how sales techniques became refined.

    

    14. Germany: The Super-super-supermen 222

    In which the salesmen find the last great market. Under the remarkable Eli Wallitt, the sales force becomes a kind of chainletter game, and it multiplies like the amoeba.

    

    15. The
Bella Figura
of Harvey Felberbaum 242

    In which we show that IOS's good resolutions about currency smuggling were not always kept. How IOS went into business with an interesting bank. 'Few large investors', as one sales boss put it, 'would be interested in investing legally.'

    

    16. 'Good Evening, Comrade Prospect!' 259

    Before going on to see what they did with the customers' money, we look at some other markets: France, Scandinavia, Communist Europe. IOS was ready to assume almost any form and go almost anywhere so long as the salesmen could still collect.

    

    17. The Master Financiers 271

    In which we investigate 'the best investment advice two billion dollars can buy'. IOS and its stock-market speculations - stoking the flames of the conglomerate blaze. IOS goes into the investment banking business-which is bad luck for the customers.

    

    18. A Very Long Way Offshore 302

    In which respectable financiers strip off their watch-chains, and leap into the warm offshore waters. The techniques and consequences of IOS’s competition: Gramco invents 'liquid real estate', and Jerome D. Hoffman signs up some politicians. IOS, on the basis of a very curious prospectus, becomes a public corporation at long last.

    

    19. John M. King: The Power of Natural Gas 333

    In which we introduce Ambassador John M. King, and describe an industry built upon tax avoidance. Together with their new chum, our heroes get mixed up in the Middle East crisis, hunting oil in Arab waters. Ed Cowett discovers the Arctic: nopis and other strange animals appear. Handley Page Aircraft becomes a casualty

    

    20. The Book of Revelations 370

    The people'who 'sincerely wanted to be rich'… become rich. A tally of millionaires and multi-millionaires. Joel Mallin and the 'lifetime system of tax deferral'. Ed Cowett buys some shares, and the money runs out at last.

    21. The Feeling of the Meeting 392

    How the minutes came to record that 'Mr Cornfeld voluntarily tendered his resignation'.

    22. Terminating Bernie 417

    A great desire is manifested to 'save IOS for capitalism'. But the rescuers are afraid of Bernie, who isn't quite dead. An intrigue is mounted to dispose of the Emperor, who is rubbed out effectively, if none too tidily.

    23. The Customers' Yachts 433

    In which we find that the IOS sales force remained conspiratorial. Allen Cantor discourses upon Truth, Responsibility and the Little People. In which we examine the actual, as against the supposed, performance of the IOS funds, and figure out what happened to the customers' money.

    

    24. A Game of Strategic Withdrawal

    In which Bernie sells out, and Ed Cowett plays backgammon. In which a young man gets on a train in Bangkok.

    Index 460

    

    Preface

    

    No book worth reading is easy to write, and this one was harder than most. It could not have been done if there had not been a large number of people who were prepared to help us to discover the truth about IOS - even when it was embarrassing or painful for them to do so.

    We lost count of how many people we talked to, after the number passed five hundred. Apart from IOS salesmen, secretaries and executives, there were bankers, brokers, accountants, oilmen, policemen, government officials, and lawyers. There were IOS’s competitors, and IOS’s customers. The particular difficulty was that, in the nature of the case, these people were scattered all over the world. The three authors conducted interviews in Geneva, Zurich, London, New York, Munich, Berlin, Paris, Rome, Luxembourg, Denver, Amsterdam, Los Angeles, Washington, Miami, Toronto, the Bahamas, and some other places which cannot be named because to do so would betray the sources of confidential information. Researchers and correspondents made inquiries for us in Philadelphia, Seoul, Tokyo, Bangkok, La Paz, Sao Paulo, Beirut, Montreal, Athens, Malaga, Manila, Taipeh, Tel Aviv, Teheran, Madrid, Dusseldorf, Hamburg, Stockholm, Sydney, Guatemala City, Hong Kong, Bonn and some other spots beside. It would be impractical to list all of the people who helped us during the process. But we would like to thank at least some people by name.

    Chief among these are Bernard Cornfeld and Edward Cowett. This may seem odd in a book which is so critical of their activities: however, we can only say that our relations with them both remained courteous and personally agreeable even after it was apparent that our attitude to the IOS phenomenon was not one of admiration. We were also greatly helped by Allen Cantor, Harvey Felberbaum, Henry Buhl, George Landau, Kenneth Beaugrand, Martin Seligson, James Roosevelt Pasquale Chiomenti, EH Wallitt, Harold Kaplan, and Sir Eric Wyndham White.

    We received much patient help from fellow reporters in the United States: in particular Morton Margolin of the
Rocky Mountain News,
of Denver, Colorado, Paul Steiger of the
Los Angeles Times,
and Philip Greer of the
Washington Post:
also C£sar Tacito Lopes Costa, editor of
0 Estado
of Sao Paulo, Brazil.

    We owe a great deal to the foreign correspondents of our own paper,
The Sunday Times
of London, and of its stable-mate,
The Times.
We especially think of Anthony Terry, Richard Hughes, Christopher Reed, Eric Marsden, Geoffrey Sumner, Paul Martin, Stephen Holmes, Tim Brown, Philip Jacobson, Desmond O'Grady and Stacy Waddy. Stephen Fay, the
Sunday Times'
New York correspondent, and Robert Ducas, New York advertising manager of Times Newspapers, filled in many holes and overcame many difficulties for us. Our thanks also go to Sheila Robinette, Laurie Zimmerman and Joe Petta of the New York staff, and to Wendy Hughes, who reinforced them in summer 1970. Sue Dakin undertook, with unfailing patience and dispatch, the typing and retyping of our manuscript.

    Any book like this, drawing on the resources of a newspaper group, benefits from the help of enormous numbers of people, but there were certain talented reporters who made indispensable contributions to our project: Alexander Mitchell, now of Granada Television, Andrew Hale, our Italian economic correspondent, William Shawcross, who trekked back and forth across Germany and South-East Asia on our behalf, and Phillip Knightley, who conducted some critical interviews for us in Switzerland and Spain. Another indispensable contribution was that of Nelson Mews, our chief researcher, who must now know more about IOS than any other one person.

    In a special category is Murray Sayle, who might well have written a book about IOS himself, but was too busy winning awards as a foreign correspondent. Had he done so, Murray's conclusions would probably have been different from ours. All the same, it was he who introduced us to some of the people in this book, and to the title.

    This book could not have been published at all but for the shrewd and patient counsel of our legal advisers - or without the conviction of Harold Evans, the editor of
The Sunday Times,
that it is important to do the big stories really thoroughly and to go on until you sort out what really happened.