Chasing Phil

by David Howard

  Kitzer said Lord once sent FBI agents to Chicago banks to inquire into loans made to his businesses, causing the banks to shut down lines of credit and call in loans and forcing the insurance empire to spiral toward receivership. He described a meeting in April 1965 in which Lord, determined to follow through on his plot, grew “very, very angry. He was red hot.”

  “He asked [David] Kroman, ‘Where’s the money?’ ” Kitzer testified. “Kroman asked, ‘What money?’ Lord said, ‘The money of the insurance company.’ The questions started coming thick and fast and finally I said, ‘Wait a minute.’

  “Then [Lord] came out of his chair, slammed the table, and said, ‘Don’t wait a minute me. If you don’t like the way I’m running this investigation, you can get out of here.’ He said that at the top of his voice. I fell back in my chair. I was scared.”

  At another point, Kitzer said, Lord “came up to me, took his finger and drove it against my chest.” Lord said, “You’re going to jail, kid.”

  Kitzer asked Lord why.

  “I don’t know, but you’re going there.”

  Kitzer testified, “At that point my mind went blank.”

  He also claimed that he jokingly offered Lord a job, and Lord replied, “No, kid, I’ve got bigger things in mind. I’m going to be a federal judge and you’re going to be my stepping stone.”

  Two days later, Kitzer testified, Minnesota Insurance Department examiners began investigating Allied.

  Lord also ordered that certain correspondence be destroyed to protect both Rolvaag and Vice President Humphrey, Kitzer claimed.

  His richly detailed yarns, told with an air of Shakespearean outrage, pulled the jury’s attention away from his financial skullduggery. “You won’t let me explain,” he complained to Foley. “I thought that’s why we came to Bismarck, so we could tell our side of the story. You don’t want to know the truth, do you?”

  Kitzer bantered, parried, blustered. At times he turned the attorney-witness dynamic upside down. “What is wrong with borrowing money?” Kitzer asked Foley.

  When Foley pointed out that the web of businesses was built entirely on loans, Kitzer questioned his patriotism. “Borrowing money to start a business is the American way of life. The only place you can’t borrow money to start a business is Russia.”

  After a grinding, bewildering, often surreal fourteen weeks, the jury began deliberating on Wednesday, June 21. After two and a half days, the jury returned late on Friday afternoon to a tense federal courtroom. The unanimous verdict: not guilty on all counts. The room “erupted into tears and shouts of joy,” one reporter wrote.

  Kitzer sobbed, covering his face, then triumphantly walked out with his father and attorney.

  The state of Minnesota later reduced the campaign-contribution charge for the illegal campaign check and fined him $100. There would be more difficulties to contend with—lawsuits and millions of dollars in claims. But such nuisances were eventually settled for whatever assets remained when the family’s companies were liquidated. Kitzer skated off unharmed—if anything, his reputation was burnished by his having survived a showdown with a cast of powerful and prominent politicians. He had even gone out drinking one night in Bismarck, wrecked a rental car, and walked away from it.

  Kitzer picked up several lessons from his battle with the government: Confusion is useful. Sleight of hand works. But mostly what he absorbed was that given the chance to tell his story, he could win over the regular folks in the jury box.

  In the end, he was the one they believed.

  —

  Phil, Jack, and J.J. finally reached Frankfurt on April 4, to yet more heightened security. Soldiers with machine guns marched around the terminal, ready to suppress another terrorist incident. Jack and J.J. were also on high alert. In those pioneering days, the few long-term undercover FBI agents espoused the idea that if they got into a jam and got arrested, they should avoid telling the arresting officer what was going on. To avoid getting exposed, you simply went along with the bust and let FBI officials running the investigation figure out the next move. But they hoped it wouldn’t come to that. Acting as nonchalant as possible, the threesome moved through customs, handing over their passports and blending in with tourists and businessmen. They entered West Germany without incident and checked into a suite at the Intercontinental Frankfurt—Phil in one room, J.J. and Jack in another—jet-lagged but exhilarated by their harrowing, epic journey.

  J.J. wanted to shake off the mental fog from their travels. He didn’t feel up to a run, which would involve navigating unfamiliar foreign streets alone. He flipped through the hotel directory and found a listing for a spa facility. They could sweat out their journey. He pitched the idea to the others and was surprised when they agreed to it, because Phil was not one to exercise (not that the spa required him to elevate his heart rate).

  Within minutes they were wrapped in towels and headed into a wood-lined sauna, the stocky Jack next to the reed-thin Phil and J.J. At first, Phil seemed skeptical: Sitting in a hot room with other guys was not an activity he usually sought out. Then a woman walked in, also wearing only a towel, and sat down nearby. The two younger men watched Phil’s face light up: Okay, now this has possibilities. They hadn’t realized it was a communal facility. Phil appeared to be formulating an opening line when the woman stood up and left. He nonetheless joked that the spa was a fine idea, and it was a good thing he’d thought this up. The door opened again, and a tall, blond, and powerful-looking woman wearing a hotel uniform entered, and—in brusque, broken English—ordered them out of the sauna. They weren’t following the spa protocol, she said—the specific order in which to do things.

  Phil tried to brush her off, but she was having none of it, and she divined from this interaction that he was the leader of their little group. She snatched his arm and led him toward the shower, their next designated stop. Phil began calling her “Sarge” and gave a sarcastic salute. After they’d showered and pulled on bathing suits, Sarge led them to a small plunge pool. Phil dipped a foot in and yanked it back.

  A brief standoff ensued while Phil and Sarge debated the merits of enduring the full spa experience. Jack, meanwhile, studied the pool. It looked shallow enough that if he slipped in, the water would come only to his navel; he could quickly dunk his head and pop back out. That doesn’t seem so bad, he thought. He broke the impasse and hopped in.

  Within a millisecond, he realized his miscalculation. He was immediately fully submerged, and the water was as frigid as anything he’d ever felt—an icy thirty-eight degrees. Jack surfaced like a shipwreck survivor clawing for floating debris, gasping, eyes bulging. He lunged for the ladder and clambered out.

  His two friends laughed, and in this moment of inattention Sarge saw her chance. She grabbed Phil and shoved him into the pool. He, too, exploded to the surface, moon-eyed, sucking air into his lungs, yelling that Sarge was going to give him a heart attack.

  J.J. wasn’t about to wait around to be manhandled. He followed Phil in, leaving Sarge satisfied that her work was done. After the men spent more time in the sauna and showered again, she wrapped them in enormous towels and settled them onto chaise longues, where, within minutes, their skin tingling, the three of them surrendered to a deep, baby-like sleep.

  14

  The Ha-Ha Certificate

  APRIL 5, 1977

  “Did you ever find the train station?”

  Jean-Claude Cornaz smirked at Phil as he asked the question. They’d just located each other inside the Intercontinental, and both men laughed. Phil turned to Jack and J.J. and told the story. During a previous trip, he’d arrived at Cornaz’s office in Geneva to find a handful of Swiss federal police interviewing Cornaz about a recent scam involving the City of Los Angeles. Phil and Cornaz had helped cash a forged $902,000 municipal check, moving the money through a series of European banks before a Lebanese co-conspirator withdrew it in Amsterdam. Phil and Cornaz each collected more than $300,000 for that one.

  Seeing the p
olice, Phil, without skipping a beat, asked, “Can anybody tell me where the train station is?”

  A cop gave him directions, and Phil walked back out.

  As one of Phil’s top cronies, Cornaz was the marquee attraction in Frankfurt. A distinguished-looking gray-haired gentleman in his mid-fifties, Cornaz brokered authentic deals for several banks, including the venerable Union Bank of Switzerland, for which, he boasted, he’d once served on the board of directors. He had a reputation as a lawyer who wielded awesome powers in Switzerland’s famously lax banking system, capable of manipulating officials into verifying fraudulent securities. He claimed (rather preposterously) that he was the only attorney in Geneva licensed to practice in front of the Swiss Supreme Court.

  He liked working with Phil. Their symbiotic criminal relationship had begun in 1970 and included many profitable capers. Whenever Phil opened or purchased a new vehicle, Cornaz provided a $20 million credit reference. And Cornaz could always provide a Swiss banking operative to say, “Yes, Seven Oak is a customer in good standing.” Cornaz had made several hundred thousand dollars from Kitzer’s Mercantile vehicle alone.

  Cornaz’s son Pascal, who was in his mid-twenties and had followed his father’s career path, was also in Frankfurt, as was Harold Silverkur, a promoter operating a vehicle called Silver Pool in Copenhagen. John Calandrella had flown in, too, with a longtime promoter named Lucy Trajkovski.

  The Kealohas hadn’t arrived, and Andrew D’Amato and Mark Iuteri were missing, but Phil seemed unfazed. He introduced the Junior G-Men to everyone and explained to Jack and J.J. that he was pleased that so many operators had gathered under one roof—the gathering was a kind of promoter summit. A festive atmosphere pervaded the sleek five-hundred-room Intercontinental, which—as the largest hotel in West Germany—was Kitzer’s platonic ideal: vast, showy, and anonymous. The promoters rolled out their latest anecdotes about bribing bank officials and pulling off cons around the world. Calandrella told everyone about two developers who had been sitting in Geneva’s Hôtel Bristol for the past month, waiting for paper that would help them land a $14 million loan for a project in the Bahamas. Calandrella had already taken their money, and the financing, of course, would never arrive. Everyone found that hilarious.

  The first night, Phil, Jack, and J.J. ran into Calandrella and Trajkovski in the Intercontinental’s posh Silhouette supper club, its huge windows offering panoramic views of the neighboring Main River. An elegant woman in her mid-forties, Trajkovski said she was now president of an entity called Val-International and Associates, of Pacific Palisades, California. She claimed to have been secretary to the president of Mexico for several years, during which time she’d obtained an exclusive contract to export fish from nearly five hundred Mexican fishing cooperatives to Japan. This was how she’d met Calandrella, who had worked as a fish broker near Boston.

  Trajkovski was intent on launching her fish-export enterprise with one of the more convoluted scams the agents had ever heard of: a “two-for-one deal.” The concept was to simultaneously manipulate securities on two continents in order to trick Credit Suisse Bank in Los Angeles into lending her $5 million on zero collateral. On paper, the deal would be collateralized by Seven Oak and guaranteed by the Union Bank of Switzerland. Except for Phil and Trajkovski, everyone at the table struggled to grasp the mechanics of the deal. The agents felt like college freshmen who had wandered into a graduate-level microeconomics class, and they grimaced at the thought of having to explain this one back in Indianapolis.

  Calandrella stood and left, and Jack followed. Outside the restroom door, Calandrella mentioned that despite the indecipherable nature of that deal, he was going to make a boatload of easy money in Frankfurt. Jack agreed about how great it was and laughed along with him.

  —

  The agents set off alarm bells at FBI headquarters when they reported in from Frankfurt, immediately shifting focus from the progress of the investigation to dealing with the diplomatic breach. Officials wrestled with when to tell the U.S. ambassador to West Germany and how best to avoid creating an embarrassing situation for him. FBI leadership decided to send word of the incident after J.J. and Jack had returned home—the United States would have to issue an official apology regardless, so the bureau decided to let the agents’ work continue undisturbed.

  Jack and J.J. settled into Phil’s both-ends-of-the-candle routine. One night, they headed to the St. John’s Inn, an English-speaking pub in Frankfurt’s lively Sachsenhausen district, where they drank and danced and teased Phil. When Kitzer spotted a woman, J.J. murmured into his ear, “Nah, she’s not your type, Phil—let’s see, are there any attractive men here?”

  They hit several more clubs, engaging in a tug-of-war over each check, before returning to the Intercontinental at one-thirty a.m. to find Calandrella in the lounge with John Packman from Seven Oak. The banker, who’d just flown in from England, was eager to see Phil. Packman said that a group of Seven Oak depositors wanted to withdraw $400,000, which was a problem because their money was gone. Packman was, for the moment, serving as a human shield. But British authorities were constantly sniffing around.

  Phil told him not to worry so much. They tried to calculate how many weeks they had left before Seven Oak cratered, and Calandrella interjected that he wanted more paper before the window closed—he had $5 to $7 million worth of deals to push through. Calandrella also mentioned a Copenhagen bank for sale that Phil and the Junior G-Men might obtain for their next vehicle. Nobody wanted an interruption in the flow of paper, he said.

  The conversation finally gassed out at around four a.m., but the meetings started again at eight. Brokers or corrupt bankers connected to one scam or another floated in. Jack and J.J. sat at tables with eight or more people, straining to remember conversations and faces and trying to parse the driving forces behind each. It was like puzzling through a Möbius strip of agendas and motives.

  One surreal aspect of the proceedings involved the promoters’ intramural rivalries. One evening, Trajkovski came downstairs to the dining room at eight. She was introduced to Cornaz and pitched her fish-to-Japan scheme as she ordered dinner. Cornaz agreed to take part and told her to get things rolling on her end—to ask her Los Angeles bankers to send an inquiry for the loan guarantee. Trajkovski left to make the call, and when she returned she said her man was on vacation, so they would have to wait a couple of days—but in the meantime, maybe Cornaz could start the process with Union Bank.

  This, Phil explained later, was a ruse. Trajkovski was trying to play Cornaz—to scam him and UBS, too. Cornaz was too seasoned to fall for it.

  This kind of Spy vs. Spy subterfuge seemed to be the norm. Phil commented that when members of the Fraternity gathered for dinner, everyone ordered extravagant meals and pitched $5 million deals. But when the check came, everyone got up to go to the restroom or to make a call and never returned.

  Reeling with a glut of information for their 302s, Jack got a jarring reminder that he and J.J. were vulnerable, too—that Phil was fun, and they’d bonded in a way, but they were also locked into an adversarial relationship. He walked into his room at one point and found Phil on the phone. Phil hung up and said he’d been talking to American Express; he’d found a receipt showing Jack’s credit card number among Jack’s possessions and wanted to see what he could find out.

  This was an ongoing worry for Jack, who was disorganized and prone to misplacing things. His desk in Gary was a scrap heap of paperwork and mail and coffee cups. The AmEx receipt had been a slipup—the kind of mistake he couldn’t afford.

  Phil said the AmEx representative had refused to divulge any details, but Jack didn’t know how to respond. Did Phil suspect something, or was he simply curious about Jack’s credit limit so he could mastermind some scheme with it? Jack sometimes felt a tinge of something: Phil seemed vaguely troubled about who he and J.J. were and how they’d suddenly turned up in his life.

  Phil was hard to read, partly because he was a skilled, habitual lia
r. He lied to con his marks, of course, but in the past seven weeks they’d watched him fib to just about everyone else—including them. On days when he woke early, he sometimes roused J.J. and Jack to tell them there were people waiting to meet them in the lobby. After the agents got dressed and headed down, Phil confessed that in fact he’d just wanted company for breakfast. If he didn’t want to go outside, he would say that it was raining. He routinely offered letters of credit for 10 percent of face value, and after a client agreed, he would say he’d forgotten an extra fee and jack the price up another few thousand dollars. One of his mottoes seemed to be: Don’t tell the truth if you can avoid it.

  Some part of Phil viewed everything he did as a lark, a massive inside joke. In his room at the Intercontinental, Jack and J.J. looked through a stack of fraudulent Seven Oak CDs Packman had brought to Frankfurt along with the “backup,” or confirmation paper, they used to give a financial transaction the appearance of legitimacy. The CD contained the letters “ha” followed by a blank line.

  “What’s this mean, Phillip?” Jack asked.

  Phil explained that the letters were meant to create the word has or have, as in: “John Kaye has deposited $100,000 with Seven Oak.” But Phil said he sometimes left the “ha” intact, then wrote the same letters in next to it—making a ha-ha CD. They all laughed at this.

  Phil had once considered naming a vehicle the Royal Overseas Bank so he could use the acronym ROB. He liked the idea of leaving clues in plain sight, dangling “little telltale jokes,” as Wedick put it, that his marks would recognize later, in forehead-smacking moments, after it was too late. Like 219 Dearborn Corp., his taunt at the FBI.

  Of course, the agents lied, too, with the counterintuitive purpose of winning Phil’s trust. Maybe some part of him trusted them, as much as he was able to. Given the slippery there/not there quality of truth that permeated Phil’s world, all they could do was play their roles as faithful subordinates—and hope.