The Go-Go Years (11 page)

His personal predilections, and the turning of the earth, imposed a strange and exhausting schedule on Gilbert in Las Vegas. The three-hour time differential meant that the New York markets opened at 7:00 A.M. Nevada time. Every morning, therefore, Gilbert would be up at the desert dawn and on the phone getting early New York quotations from brokers. Then at the market opening the pace of his telephoning would be stepped up, and he would keep the wires humming until lunch time in Las Vegas, when the day's trading ended in the East. In the afternoon he would wander into the casinos, where he would gamble on into the evening. Did he dream of the perfect
jeux,
the magic coup that would give him the means to bring Celotex within his grasp? If so, in vain; later he admitted that his gambling losses in Las Vegas had been heavy.

Sometimes, like a wary spider, he would make a quick foray out into the real world, and then hasten back into hiding. The exigencies of Nevada divorce law made such a procedure necessary. To qualify as a resident, he had to be certifiably within state boundaries at some time each day over a six-week period. He hired a permanent Nevada resident to be his witness—and, incidentally, his bodyguard; the witness would accompany him to the airport to see him off in the afternoon, and would be there to meet him, and take formal note of his presence, on his return the following afternoon. Twice, early in May, he made such trips to New York in search of additional cash. But the stock market had begun its descent in earnest now, and with it Gilbert's claim to solvency, and the moneylenders were unwilling to accommodate him. Indeed, his Nevada-based trips were not only worthless but probably counterproductive; the word spread swiftly among lenders that Eddie Gilbert was in trouble and running hard. At the middle of the month he went to Chicago to see Collins of Celotex (arising at midnight, touching foot to Nevada soil for the new day, passing the glittering lights of the Strip en route to the airport, and then flying off at 1:30 in the morning). In Chicago, Collins now offered Gilbert a seat on the Celotex board and the right to choose one other director. But Gilbert, for the sake of his crumbling credit status, needed the board seat immediately, and Collins insisted on holding up the announcement until after the next Celotex board meeting on June 20, so the victory Gilbert brought back to his desert hideaway was a hollow one.

Gilbert's Celotex holdings now amounted to over 150,000 shares, and for each further point that the stock dropped, he had to find and deliver $150,000 in additional margin or risk being sold out by his brokers. Those of his friends holding Celotex on his advice now numbered around fifty, and they, too, since most of them held it on margin, were being squeezed as the price continued to fall. Many of them also had positions in Bruce. Their alternatives were three: to sell Celotex; to sell Bruce to cover Celotex, which would depress the price of Bruce and thus be equally disastrous for Gilbert; or to find more cash margin.
Gilbert himself had all but exhausted his borrowing power. His debts to brokers, to friends, to Swiss bankers, to New York loan sharks on the fringes of the underworld, all loomed over him, and the market betrayed him daily by dropping even more.

The third week of May became for Gilbert a nightmare of thwarted pleas by telephone—pleas to lenders for new loans, pleas to brokers to be patient and not sell him out, pleas with friends to stick with him just a little longer. But it was all in vain, and in desperation that same week Gilbert took the old, familiar, bad-gambler's last bad gamble—to avoid the certainty of bankruptcy he risked the possibility of criminal charges. Gilbert ordered an official of Bruce to make out checks drawn on the Bruce treasury to a couple of companies called Rhodes Enterprises and Empire Hardwood Flooring, which were actually dummies for Gilbert himself, and he used the proceeds to shore up his personal margin calls. The checks amounted to not quite $2 million; the act amounted to grand larceny.

It was a bold stroke, based, of course, on the faint hope that the prices of Bruce and Celotex would suddenly rise enough to reduce Gilbert's need for margin and enable him to redeem the improper checks and repay Bruce. By his own calculations—which no doubt excluded his huge debts to his father—he was solvent were Celotex above 31 and Bruce above 32. On Friday, May 25, Celotex closed at 31 and Bruce at 32 3/8, actually up a fraction for the day. Thus he still had a fingerhold on survival. But for the first time Gilbert was not optimistic. That Friday he told a part-time secretary, “The way this is going, Monday will be murder.” Later he told M.J. Rossant of
The New York Times
, “I suddenly knew that I couldn't get through this without getting hurt and getting innocent people hurt.” It is ironic that Gilbert's market prescience, such as it was, should have worked so well at a time when, through pyramiding of debt and then through misappropriation of funds, he had trapped himself in a net so confining that it prevented him from taking advantage of what he knew. As the reader will recall, the Monday he said would be “murder” turned out to be Blue Monday, the Stock Exchange's second worst day of the century up to then.

5

That fateful Monday morning Gilbert was closeted in his motel room, his telephones in constant use, learning minute by minute of the progress of the Wall Street collapse almost three thousand miles away. All morning long, Bruce held teeteringly at 30. The blow fell at around noon, New York time, when a broker told Gilbert that Bruce was now quoted at—23. Stunned into disbelief, he hung up and called another broker, who confirmed the devastating news. Hardly a moment later, the phones began jangling with incoming calls from his frightened creditors in New York and Switzerland.

Gilbert now admitted to himself that he was beaten. He said later that he spent the rest of Monday “like a punch-drunk fighter going through the motions.” Bruce closed for the day at 23, down 9 3/8, and Celotex closed at 25, down 6. Gilbert's personal losses for that Monday came to $5 million. In addition to the creditors, he had to deal all afternoon with the friends he had tipped to buy Bruce and Celotex, who now had disastrous losses of their own. In the big turnaround on Tuesday, Bruce gained 5 3/8 points, but the recovery was too moderate and too momentary to save him; Celotex did not recover at all, and his other, unredeemable debts, including the $2 million he had taken from the unsuspecting Bruce company, remained outstanding.

Late on Tuesday, Gilbert assessed his position as coolly as he could. Clearly, the dream of capturing Celotex was ended. It was a question now not of building an empire or even protecting one, but of avoiding bankruptcy and, if possible, the penitentiary. His hope, as he saw it, lay in finding a block buyer for all or most of his Celotex holding, and using the proceeds to pay back what he had “borrowed” from Bruce. He remembered that a company in the building-materials business called Ruberoid had expressed interest in taking a position in Celotex. Whatever
the chances of swinging such a deal, they depended on his availability in New York for more than one-day flying trips. So, with only a couple of weeks remaining in his Nevada residency term, he abandoned another dream, that of getting his divorce, and on Wednesday, the Memorial Day holiday, he flew to New York and moved back into his suite at the Waldorf.

Thursday the storm around him gathered new force. Gilbert found that the earliest appointment he could get with the officials of Ruberoid was the following Monday, June 4. Yet all day Thursday his Waldorf suite was besieged by creditors, some of whom had come from Switzerland for the purpose. He could give them no satisfaction, only vague hopes of a possible sale of Celotex. On Friday, friends to whom he confided his position, and the criminal action it had led him into, urged him to declare bankruptcy at once. Rueful and contrite, but still stubborn, he refused.

In fact, Gilbert still had a little time—to be precise, six business days. Tuesday, June 12 was the scheduled date of the next Bruce board of directors meeting, at which the matter of $2 million loans to Rhodes Enterprises and Empire Hardwood Flooring was almost certain to come up; so he would have to have some solution ready by then or stand exposed. The six borrowed days were the last loan he could negotiate—a loan of time rather than money. On Monday the fourth—Day One—he met with Ruberoid officials as planned, freely admitted to them that he was in a squeeze, and suggested that, since they wanted to purchase a block of Celotex shares anyway, they might take profitable advantage of his distress by assuming his Celotex holdings. The Ruberoid men seemed interested, but stopped short of giving him a firm and binding commitment. On Day Two, still desperate, he told the whole story to his lawyers at the firm of Shearman and Sterling. Understandably, they were horrified, and set about taking such defensive steps as were available. To prevent Gilbert from compounding his felony in panic, they instructed Bruce officials not under any conditions to sign any more checks on his instructions. As a first step toward redeeming the felony he admitted to having committed, they
ordered him to give the company personal notes backed by his personal property.

Day Three passed without any promising developments, but on Day Four—Thursday the seventh—there suddenly appeared a ray of hope when the executive vice president of Ruberoid gave Gilbert the almost incredibly good news that he believed his firm was ready to buy 300,000 shares of Celotex at a fair price. The sale, when and as consummated, would not save him from bankruptcy, but it would enable him to save his friends and followers, and to bail himself out of his improper borrowing from Bruce.

Gilbert spent the rest of Thursday and then Friday frantically rounding up the Celotex shares from his friends, to have them ready for delivery; and on Monday the eleventh, the last day before the Bruce meeting, with the shares safely in hand, he savored for a few hours the feeling that he might still end the affair with some sort of honor, and perhaps without losing everything—his villas, his followers, his place in the great world. The Bruce meeting convened at 10:30 Tuesday morning; Gilbert was there smoking a cigar, dapper in a gray suit and black loafers. For two hours he told the other directors—some of whom already knew, or knew enough—the story of his frantic, reticulated dealings and of how they had led at last to an unauthorized withdrawal from the funds with which the men in the room were jointed entrusted. There followed a heated debate; some wanted Gilbert's immediate resignation, while others counselled caution, or at least a delay until after the day's market closing to forestall a further panic in Bruce stock. It was in the midst of this tense and gloomy discussion that word came to Gilbert from Ruberoid that the company had withdrawn its offer to buy his block of Celotex shares.

It was the coup de grace for Gilbert. The meeting broke for lunch, but he did not join his fellow directors in the meal. Instead, he went home and packed a suitcase, visited his bank vault and picked up $8,000 in cash, and made a reservation on a plane leaving that evening at 7:30 for Brazil. His last legitimate escape hatch sealed off, he had decided on literal and figurative
flight. Brazil at the time had become a secular sanctuary for erring American financiers; down there already, wasting time, boasting about old triumphs, playing poker, and putting together such penny-ante local deals as they could manage, were Lowell Birrell, the well-brought-up eviscerator of companies; the giant Texan embezzler BenJack Cage; and Earle Belle, almost equally Runyonesque by baptism, a youthful jobber of watered bank stocks. Gilbert must have hated the prospect of geographical association with these grimly comic rogues; later he would maintain with indignation that he had nothing in common with any of them. But the fact was that on June 12, 1962, he had one thing in common with them all—the pressing need for a distant jurisdiction like Brazil that had no effective extradition treaty with the United States.

Gilbert appeared back at the Bruce meeting, cool and confident, when it reconvened that afternoon at 2:30. His need now was to persuade the Bruce board to postpone public announcement of his resignation and its disgraceful cause until he was out of the country. Just until 7:30! he pleaded. Why that particular hour? He explained that he needed just five hours to approach one final potential lender. After another long and heated argument, the board acceded, and Gilbert breathed again. Of course, the potential lender was mythical. He departed his Bruce office around 5:30, ostensibly to see the last-hope lender, saying he would be back around 7:00 with news of the results. While the other directors waited tensely, Gilbert hired a limousine and picked up his parents, who then accompanied him to Idlewild Airport. In the car, Harry Gilbert said later, Eddie was “frantic and hysterical.” But at the airport he was calm enough to pay cash for his ticket and board his Rio-bound flight without attracting attention. The plane's departure was delayed for some reason, giving him a final fright, but shortly after 8:00 it took off.

At the Bruce offices, the directors became progressively more apprehensive. At 8:15 they called the S.E.C. and reported all that they knew. It was too late. At 8:30, as Eddie Gilbert's jet reached altitude and sped southward, Harry Gilbert called the Bruce directors to say, ruefully, that his son would not be back.

6

In Brazil he lived in relative quiet, taking an only moderately plush apartment in the Copacabana section of Rio, often going unshaven, avoiding nightclubs and casinos, writing letters, dabbling a bit in local business, exercising his language skill by studying Portuguese. (He did allow himself a chauffeur-driven Cadillac.) From time to time his ever-loyal parents sent him money. “I just can't face people,” he told the
Times'
Rossant, who visited him there; but he also said more resolutely, “I will pay back everything if it takes the rest of my life.” Meanwhile, he was sometimes heard to put the blame for his debacle on anybody and everybody but himself: on Lazard, on Loeb, Rhoades, on Collins of Celotex, on faithless friends, on President Kennedy. To one visitor from home he complained, “I'm just an ordinary guy. They called me a genius, but I'm not. If they hadn't blown the whistle on me, it could all have been avoided.”