The board went on to consider whether the bank should continue to support Interstate Airways. Tony Simmons convinced them that the FAA’s findings would come out in Interstate’s favour, and that in time the bank would recover all its money. He had to admit to William after the meeting that this could only help Rosnovski in the long run, but the bank had no choice if it wished to protect its reputation.
Simmons was proved right on both counts. When the SEC published its findings, it declared Lester’s ‘beyond reproach’, although it had some stern words for Guaranty Investment Corporation. When the market started trading the following day, William was not surprised to find Interstate’s stock rising steadily. Within weeks the shares were back to four and a half dollars.
Thaddeus Cohen informed William that the principal purchaser was once again Abel Rosnovski.
‘That’s all I need at the moment,’ said William. ‘Not only does he make a large profit on the whole transaction, but now he can repeat the exercise whenever it suits him.’
‘In fact,’ said Thaddeus Cohen, ‘that is exactly what you do need.’
‘What do you mean, Thaddeus? I’ve never known you to speak in riddles.’
‘Rosnovski’s made his first error of judgement. He’s broken the law, so now it’s your turn to go after him. He probably doesn’t even realize that what he’s been involved in is illegal, because he’s doing it for all the wrong reasons.’
‘I still have no idea what you are talking about?’
‘Simple,’ said Cohen. ‘Because of your obsession with Rosnovski - and his with you - it seems that both of you have overlooked the obvious: if you sell shares with the intention of causing the market to drop, in order to pick up those same shares at the bottom and make a profit, you’re breaking Rule 10b-5 of the Securities and Exchange Commission, and you’re guilty of fraud. There’s no doubt in my mind that making a quick profit wasn’t Rosnovski’s original intention; in fact, we know very well he only wanted to embarrass you. But who’s going to believe him if he says he dumped the stock because he thought Interstate was unreliable, then bought it back when it touched rock bottom? Answer, nobody - and certainly not the SEC. I’ll have a full written report sent around for your consideration by tomorrow, explaining the legal implications.’
‘Thank you,’ said William, feeling relieved for the first time in months.
Thaddeus Cohen’s report was on his desk at nine the next morning, and once William had considered its implications, he called an emergency board meeting. The directors agreed the course of action that should be taken, and Thaddeus Cohen was instructed to send a copy of his report to the Fraud Department of the SEC.
‘Should we send a copy to the Wall Street Journal?’ suggested Simmons.
‘That won’t be necessary,’ the company secretary assured the board. Within moments of the report landing on the SEC desk you can be sure it will be leaked to the Journal. They are not known as the securities and exchange colander without reason.’ The board members laughed for the first time that day.
Alfred Rodgers’s judgement turned out to be correct, because the Wall Street Journal ran a front page article on the Wednesday morning which couldn’t have been more helpful if it had been dictated by Thaddeus Cohen.
The story went on to give SEC Rule 10b-5 in full, and a leader commented that this was exactly the sort of test case that President Truman had been looking for. A cartoon below the article showed Truman catching a businessman with his hand in the cookie jar.
William smiled as he read through the item, confident that he had heard the last of Abel Rosnovski.
Abel frowned and tapped his fingers on his desk as Henry Osborne read the article a second time.
‘The boys in Washington,’ said Osborne, ‘won’t be able to resist setting up a full inquiry, especially if there’s some political capital to be made of it.’
‘But, Henry, you know very well I didn’t sell Interstate to make a quick killing on the market,’ said Abel. ‘I had absolutely no interest in making a profit.’
‘I know that,’ said Osborne, ‘but you try and convince the Senate Finance Committee that the Chicago Baron wasn’t interested in financial gain, that all he really wanted to do was settle a personal grudge against William Kane, and they’ll laugh you right out of court - or out of the Senate, to be more exact.’
‘Damn,’ said Abel. What the hell do I do now?’
Well, first you’ll have to lie low until this has had time to blow over. Start praying that some bigger scandal comes along for Truman to get himself worked up about, or that Washington becomes so preoccupied with the election that it doesn’t have time to press for an inquiry. With luck, a new administration may even drop the whole thing. Whatever you do, Abel, don’t buy any stocks that are in any way connected with Lester’s Bank, or the least you’re going to end up with is a very large fine. Let me see what I can swing with the Democrats in Washington.’
‘Remind Truman’s office that I gave fifty thousand dollars to his campaign fund during the last election, and that I will be doing the same for Stevenson.’
‘I’ve already done that,’ said Henry. ‘In fact, I’d advise you to give fifty thousand to the Republicans as well.’
‘They’re making a mountain out of a molehill,’ said Abel.
‘A molehill that Kane will turn into a mountain if we give him half a chance,’ replied Osborne.
Abel’s fingers continued to tap on his desk.
PART SEVEN
1952-1963
47
THADDEUS COHEN’S next quarterly report revealed that Abel Rosnovski had stopped buying or selling stock in any of Lester’s affiliated companies. It seemed he was now concentrating all his energies on building new hotels in Europe. Cohen’s opinion was that Rosnovski was lying low until a decision had been made by the SEC following its Interstate inquiry.
Representatives of the SEC had visited William at the bank on several occasions. He had spoken to them with complete frankness, but they never revealed how their inquiries were progressing, or suggested who was responsible for the share collapse. The SEC finally concluded its investigation and thanked William for his cooperation. He assumed he would have to wait a few months before they published their conclusions.
As the election grew nearer and Truman began to look more and more like a ‘lame duck’ president, William began to fear that Rosnovski might have got away with it. He couldn’t help feeling that Henry Osborne must have been able to pull a few strings in Congress, and remembered that Cohen had once underlined a note about a $50,000 donation from the Baron Group to Truman’s campaign fund. He was not surprised to read in Cohen’s latest report that Rosnovski had donated a further $50,000 to Adlai Stevenson, the Democrats’ candidate for President. But he was shocked when he discovered that he’d also given $50,000 to the Eisenhower campaign fund. Cohen had underlined the second figure.
William had never considered supporting anyone for public office who didn’t run on a Republican ticket. He wanted Eisenhower, the compromise candidate who had emerged on the first ballot at the convention in Chicago, to defeat Stevenson, even though a Republican administration was less likely to press for a share-manipulation inquiry.
When General Dwight D. Eisenhower was elected the 34th President of the United States on November 4, 1952 (it appeared that the nation did ‘like Ike’), William assumed that Rosnovski had escaped any charge. He only hoped that the experience would persuade him to leave Lester’s affairs well alone in the future.
The one small compensation to come out of the election for William was that Henry Osborne lost his congressional seat to a Republican. The Eisenhower jacket had turned out to have long coattails, and Osborne’s rival had clung to them. Thaddeus Cohen was inclined to think that Osborne would no longer exert quite the same influence over Abel Rosnovski now he was no longer in office. The rumour in Chicago was that since Osborne’s wealthy second wife had divorced him, he’d started gambling again, and was running up debts all over town. William was feeling more relaxed than he had for some time, and looked forward to the prosperous and peaceful era that Eisenhower promised in his Inauguration speech.
During the first months of the new President’s administration, William put Rosnovski’s threats to the back of his mind, assuming he’d learned his lesson. He told Thaddeus Cohen that he believed they’d heard the last of Abel Rosnovski. Cohen didn’t comment, but then he hadn’t been asked to.
William put all his efforts into building Lester’s, both in size and reputation, increasingly aware that he was now doing it as much for his son as for himself. Some of the younger board members at the bank had already started referring to him as the ‘old man’.
‘It had to happen,’ said Kate.
‘Then why hasn’t it happened to you?’ he asked gallantly.
Kate smiled. ‘Now I know how you’ve closed so many deals with vain men.’
William laughed. ‘And one beautiful woman.’
With Richard’s twenty-first birthday only a few months away, William revised the provision of his will. He set aside $5 million for Kate, $2 million for each of the girls, and left the rest of the family fortune to Richard, ruefully noting the bite that would be extracted for inheritance taxes, despite a Republican majority in both houses. He also left $1 million to Harvard.
Richard had been making good use of his time at Harvard. By the beginning of his senior year he not only appeared set for a summa cum laude, but he was also playing the cello in the university orchestra and was second pitcher for the baseball team. As Kate liked to ask rhetorically, how many students spend Saturday afternoon playing baseball against Yale, and Sunday evening playing the cello in the Lowell concert hall?
Richard’s final year passed all too quickly, and when he left Harvard armed with a Bachelor of Arts degree in mathematics, a cello and a baseball bat, all he required before reporting to the Business School on the other side of the Charles River was a good holiday. He flew off to Barbados with a girl named Mary Bigelow, of whose existence his parents were blissfully unaware. Miss Bigelow had studied music, among other things, at Vassar, and when they returned two months later, Richard took her home to meet his parents. William approved of Miss Bigelow; after all, she was Alan Lloyd’s great-niece.
Richard began his graduate course at Harvard Business School on October 1, 1954, after taking up residence in the Red House. The first thing he did was to throw out all his father’s cane furniture and to remove the paisley wallpaper that Matthew Lester had once thought so fashionable. His grandfather’s winged leather chair survived. He installed a television in the living room, an oak table in the dining room, a dishwasher in the kitchen and, more than occasionally, Miss Bigelow in the bedroom.
48
ABEL CUT SHORT a trip to Europe in November 1952 immediately upon hearing the news of David Maxton’s fatal heart attack. He attended the funeral in Chicago with George and Florentyna, and later told Mrs Maxton that she could be a guest at any Baron in the world whenever she pleased for the rest of her life. She could not understand why Mr Rosnovski had made such a generous gesture.
When Abel returned to New York the next day, he was delighted to find on the desk of his 42nd-floor office a report from Henry Osborne indicating that the Eisenhower Administration didn’t appear to be interested in pursuing an inquiry into Interstate Airways, possibly because the shares had retained their value for over a year. Eisenhower’s Vice President, Richard M. Nixon, seemed more involved in chasing the spectral communists whom Joe McCarthy had missed.
Abel spent the next two years flying back and forth across the Atlantic as he continued to build his overseas empire. He only wished the Europeans could erect new hotels at a pace the New World took for granted.
Florentyna opened the Paris Baron in July 1953 and the London Baron in December 1954. Barons were also at various stages of development in Brussels, Rome, Amsterdam, Geneva, Edinburgh, Cannes and Stockholm, all part of a ten-year expansion programme.
Abel had so many deadlines to cope with that he had little time to think about William Kane. He had not made any further attempt to buy stock in Lester’s Bank or its subsidiary companies, although he had held on to six per cent of the bank’s shares, in the hope he would still be given the chance to deal Kane another blow from which he would not recover quite so easily. Next time, Abel promised himself, he’d make sure he didn’t unwittingly break the law. He would have been the first to admit, if only to George, that Curtis Fenton would never have allowed him to make such a foolish mistake.
Abel had already suggested to Florentyna that she should join the board when she left Radcliffe at the end of the academic year. He had decided that she should take over responsibility for all the shops in his hotels and consolidate their buying, as they were fast becoming an empire in themselves.
Florentyna was excited by the prospect, but insisted that she must get some outside training before joining her father. She did not think that her natural gifts for design, colour coordination and organization were any substitute for experience. Abel suggested that she train in Switzerland under Monsieur Maurice at the famed Ecole Hotelie`re in Lausanne. Florentyna balked at the idea, explaining that she wanted to work for two years in a New York store before deciding whether or not to take charge of the Baron Group’s shops. She was determined to be worth employing, ‘And not just as my father’s daughter,’ she informed him. Abel thoroughly approved.
‘A New York store? That’s easily arranged,’ he said. ‘I’ll give Walter Hoving a call, and you can start at Tiffany’s.’
‘That’s exactly what I don’t want to do,’ said Florentyna, showing that she’d inherited her father’s streak of stubbornness. ‘What’s the equivalent of a junior waiter at the Plaza Hotel?’
‘A salesgirl at a department store,’ said Abel, laughing.
‘Then that’s the job I’ll be applying for.’
Abel stopped laughing. ‘Are you serious? With a degree from Radcliffe and all the travelling you’ve done, you want to be an anonymous salesgirl?’
‘Starting out as an anonymous waiter at the Plaza didn’t stop you from building up one of the most successful hotel groups in the world,’ replied Florentyna.
Abel knew when he was beaten. He had only to look into the steel grey eyes of his beautiful daughter to realize she had made up her mind, and that no amount of persuasion, gentle or otherwise, was going to change it.
After Florentyna had graduated from Radcliffe she spent a month in Europe with her father, while he checked progress on the latest Baron hotels. She officially opened the Brussels Baron, where she made a conquest of the handsome young managing director, whom Abel accused of smelling of garlic. She had to give him up three days later when it reached the kissing stage, but she never admitted to her father that garlic had been the reason.
