Five days after she’d arrived, Carla called New York and asked her mother to take care of her cat and close down her apartment. She wasn’t coming home; Larry had only bought her a one-way ticket anyway. Her mother was thrilled, but when she came to Honolulu herself, she found her daughter in the middle of a power struggle. Adrian Dalsey, Carla says, immediately cornered her mother to deliver his increasingly desperate pitch. “He knew how to speak to women of her generation,” she recalls. “He would sit next to her and say, ‘Your daughter’s missing the boat. This is a now or never opportunity. If we sell to Loomis, she could be provided for,’ and on and on.”
But there was no driving a wedge between the two young lovers. “I liked Carla a lot,” Corral tells me. “She was a sweet kid. I felt sorry for her because Larry would tease and prod her all the time, but I was impressed with how smart she was. They were inseparable, and hanging on each other. It was a big joke about the two of them because they were constantly clinging to each other. You learned to knock first. You were never sure what you might find.” Carla helped Hillblom research his Loomis pleadings at the law library, scouring the stacks for law journals as he struggled with words. “He really agonized over whether something was done,” she remembers. “He had to write a lot of first drafts. He was afraid of what Steven would have to say.” She accompanied him on the grueling trips to the CAB, where, despite the fact that they seemed to be getting nowhere, Hillblom would act as though victory was just around the corner. “The CAB thing was totally frustrating,” she remembers, “but Larry always portrayed it to me like he would win. He was kind of macho about it. But clearly, they didn’t take two kids in jeans seriously.”
When Judge Conti scheduled a second hearing on a Loomis motion for summary judgment, Carla flew to San Francisco to serve as a courier between Kroll and Hillblom, who drafted their response late into the night at Kroll’s aunt’s apartment above Ghirardelli Square, and Marilyn Corral, who was staying at a downtown hotel along with DHL’s IBM typewriter. “Steven took it very seriously,” Carla recalls, “He took it personally and he was a perfectionist [but] Larry’s mind was always going faster than his ability to type. . . . He had the concepts, but had great difficulty putting them on paper. So Steven would get very upset and he was very hyper and God knows what drugs they had been on to get the work done. I think Larry just really had a fear of being called to task when he wasn’t prepared.”
Arriving at the courtroom the next morning with Corral, Carla, Kroll, and the response that they’d just finished—a novella that admonished the judge not to destroy an enterprise that “once had a place in the American Dream”—Hillblom was ambushed with an amicus brief written by the same CAB attorney who had promised a certificate if DHL improved its “compliance disposition.” He was rereading it when Conti appeared, cast a disparaging glance at himself and Kroll, and quickly granted summary judgment in favor of Loomis—exactly what the CAB was requesting in its amicus brief. DHL, Conti ordered, was to cease and desist all operations by the end of 1973, only a few months away, unless the CAB explicitly authorized the company to continue.
Seated in the gallery, exhausted from crisscrossing Geary Street the night before, Carla knew how devastating a blow the ruling was—not just to DHL, but to Larry personally. “We were all feeling ourselves drowning.” She sighs. “We were scared.” They needed a savior, someone who knew his way around a federal courtroom, who’d taken on big corporations and huge bureaucracies and expensive law firms and won. Someone who was not a kid in blue jeans.
Five
The Professor
The University of San Francisco School of Law occupies one of several three-story buildings clustered atop a modest hill that crowns a quiet neighborhood adjacent to Golden Gate Park. Founded as part of a Jesuit mission in 1912, USF has spent the better part of a century shrouded in fog, a not-so-subtle reminder of its relative obscurity. Reputation-wise, the school is eclipsed by Boalt Hall to the east and Stanford to the south, though USF consistently ranks in the nation’s top 150 law schools and publishes a respected quarterly journal.
In the fall of 1973, constitutional law was taught by a middle-aged antitrust lawyer named Peter Donnici. Recently divorced, Donnici looked and acted like a favorite uncle: pudgy and cerebral but also patient and approachable. Outside of class, Donnici had for years worked beside the legendary San Francisco mayor, civil rights activist, and antitrust lawyer Joe Alioto. The son of Italian immigrants, Alioto had pioneered the private use of antitrust statutes, the laws passed by Congress in the 1920s to thwart the monopolistic ambitions of the robber barons. Alioto’s strategy was revolutionary: instead of using the law like a hammer to shatter a corporate behemoth into smaller bits, as the Justice Department had done, he would sue on behalf of clients that had been harmed by their anticompetitive behavior. This market-driven application of antitrust law had made Alioto a legend in legal circles and a millionaire many times over. In the late sixties and early seventies, his junior partner, Pete Donnici, had helped him take on some of the largest corporations in the world, including the mother of all trusts, Standard Oil. Donnici had also argued a defamation case against Look magazine, after it published a salacious article linking his boss to the Mafia.
In early 1974, Donnici was preparing an appeal to the Ninth Circuit of a lawsuit that the Alioto firm had just lost—a dispute between International Harvester, the farm equipment giant, and one of its dealers—when a colleague who taught antitrust across the bay asked the professor if he would meet with a former student named Larry Hillblom, now the vice president of DHL, a small but rapidly growing courier company based in the Bay Area. Hillblom, he said, had evidence that one of his larger competitors was conspiring with a government agency to put him out of business. Donnici had never heard of Hillblom or of DHL, nor was he especially familiar with the courier industry. But Hillblom’s predicament sounded like the classic antitrust case that Donnici had spent his professional career training for: six-hundred-pound gorilla beats the small guy into submission. If DHL’s competitor was really in cahoots with a federal agency, that would certainly be an interesting twist, especially considering what the papers were just now uncovering about Richard Nixon’s administration.
So Donnici told his colleague that yes, he would be interested in talking to Larry Hillblom.
Peter Donnici once referred to himself as “Darth Vader.” The last writer to interview him received a twelve-page, twenty-one-point itemized letter threatening legal action after her story was published in GQ ten years ago. For months, I have been warned that he would either not talk to me at all or try to charm me. But the man presently holding court behind a polished conference table overlooking a quaint man-made marina in Petaluma, a small town one hour north of San Francisco that is now home to the Larry Lee Hillblom Foundation, is none of these things. Eased into one of those high-backed leather chairs that dominate most conference rooms, he simply looks apprehensive—and very tired. Here is a man on the far side of middle age: overweight, skin embalmed with nicotine, face hung slightly lopsided from the skull, someone who has voluntarily shrouded himself in dark suits for so long that his neck seems to slouch a bit without a tie to hold it in place. Consigliere is the word that comes to mind. On his desk in the adjoining office is a framed photo of himself and his second wife, Diane, formerly a DHL receptionist, on their wedding day. They are smiling in front of a white Rolls-Royce limousine.
“I don’t know what you’ve heard but there’s no way Larry’s alive,” the funereal Donnici begins in a very deep voice. “He wouldn’t be able to stay out of the action this long.” Then he ticks off a few random thoughts—how Larry might have regretted fighting for airline deregulation considering the perpetual nightmare that air travel has become; how Larry would have hated the yellow-and-red DHL color scheme; how he never would have sold out to Deutsche Post. When I ask him to recount the story of their first meeting, a smile emerges. “I was in my academic office at the University of San Francis
co,” Donnici says, “when a young man poked his head in the door. I assumed that he was one of my students because of the way he was dressed and the way he carried himself. I asked him to return a little later because I had a previously scheduled appointment. He kind of grunted or nodded. Then he walked back out into the hall.
“About twenty minutes later, he poked his head into my office again. ‘I think I’m your appointment,’ he mumbled. ‘I’m Larry.’ He had been waiting just outside the door the entire time!” Donnici chuckles. “‘Well, okay,’ I said. ‘Come right on in.’”
Antitrust attorneys and college professors hear their share of sob stories on a daily basis, but I imagine that Larry Hillblom’s came harder and faster than most. From the edge of his seat facing Donnici’s, Hillblom launched into the background of Loomis Armored Car v. DHL Corporation, ending with Judge Conti’s death sentence. Donnici did not need a calendar to know that, if he took the case, there would be almost no time to save Hillblom’s company.
“After he finished,” Donnici says, “I told him that he had a fascinating case, and that his enthusiasm was contagious. But, I also told him, ‘One of the things that a lawyer takes into consideration when deciding whether or not to take a case is the fee involved.’”
“We don’t have any money,” Larry had interrupted. But, he’d promised, the judge would eventually award Donnici attorneys’ fees—when they won the case. Not surprisingly, Donnici did not agree to take the case right away. He could not have believed that DHL would win, much less that a judge would award him a generous fee, but DHL held two trump cards: Steven Kroll had filed the antitrust lawsuit in Honolulu, and Hillblom could provide a limitless number of plane tickets there. “Donnici took the job,” Marilyn Corral recalls, “because Larry told him he could have free flights to Hawaii. He had girlfriends, so he would take all of his girlfriends to Hawaii.”
“The funny thing”—Donnici grins—“is that most of the people who started DHL came from humble backgrounds and they were just very energetic and had good ideas and were willing to sacrifice. They did not live the good life during those early days.” Even senior managers like Marilyn Corral were forced to travel as couriers, which meant flying at night and arriving with little or no clothes, often red-eyed and exhausted. Then they were expected to work a full day. After all, Hillblom had worked around the clock at Boalt Hall, and he was now involved in every facet of DHL’s operations, including, of course, the Loomis case.
Despite the CAB’s ambush, Hillblom still counted at least one friend in the bureau’s legal department and he had made a huge compromise in the hopes of receiving an operating certificate. Hillblom had agreed that DHL was an air freight forwarder, an innocuous classification that should have entitled him to a certificate as a matter of course, much like a driver’s license. Instead, the CAB had issued only a temporary authorization attached to a long list of recommendations—actions that its attorneys claimed were necessary to prove DHL’s “compliance disposition.”
The first recommendation was that DHL fold all of the independent stations into DHL Corporation, meaning that the major station managers would no longer be small business owners; they would be minority shareholders in Dalsey and Hillblom’s company. Second, DHL would be forced to issue airbills and tariff schedules—voluminous lists of the prices that DHL charged per pound of freight; these schedules would have to be approved by the CAB at least three months in advance; finally, the agency had decided that Hillblom and Dalsey could not own any part of DHL’s international stations because that would constitute an illegal “tie-up”—in other words, the exclusive agency agreements that Hillblom had envisioned as the glue of the DHL network were illegal.*
The CAB’s recommendations would be expensive to implement and onerous—particularly the last one. But Hillblom felt he had no other choice. He had to play by their rules now because he wanted Donnici to argue that only the CAB—and not Conti or any other judge—had the authority to regulate a freight forwarder. Acknowledging the CAB’s authority was an extremely risky strategy considering that the bureau had already issued a cease and desist order of its own and had sided with Loomis in its lawsuit. If Donnici succeeded in reversing Judge Conti’s opinion using this argument, Hillblom would still have to convince the CAB to essentially reverse itself and look favorably on his company. He could not ignore them a second time. They were the lesser of his two evils.
At first, Hillblom’s new strategy appeared to work. On December 19, two days before Judge Conti’s deadline, the Civil Aeronautics Board suddenly issued an order authorizing DHL to operate on a probationary basis. Six months later, Hillblom and Peter Donnici appeared before the Ninth Circuit to argue that Conti had never had the authority to shut DHL down in the first place and that the CAB should have exclusive jurisdiction over DHL. Hillblom spoke first but was shot down after only a few minutes. “You understand that this is an appellate court,” one of the judges interrupted, with the unctuous tone of Adrian Dalsey or Samuel Conti, “because you are arguing issues that a trial court decides.”
Humiliated, Hillblom sat down and let Donnici deliver the arguments that they’d crafted, along with a few other defenses—that DHL had not been aware that a certificate was needed, for example, and that the company had worked tirelessly to prove its “compliance disposition” to the CAB, including manufacturing tariff sheets and airbills and divesting its founders’ shares in DHL’s international operations.
Unfortunately, Donnici does not remember much more, other than the rather obvious fact that his efforts eventually won what he calls “the good result.” Unable to answer any of my requests for more specifics, he apologizes for his imperfect memory and then dismisses a few of my lame attempts to probe into other aspects of Hillblom’s life—and death. Only as I am being led out of the conference room does Larry Hillblom’s former consigliere touch on the controversial: “I know that you’ve been speaking to some of our enemies,” he says. “You know that we were totally exonerated in a court case here in San Mateo.”
“No,” I said. “I did not know that.” And we leave it at that, because neither one of us wants to go down that road, at least not quite yet.
Six
Interlopers
Adrian Dalsey died less than a year before Hillblom’s disappearance and only a few months after he reunited with his young partner to celebrate the twenty-fifth anniversary of their creation. He had almost become an octogenarian. Dalsey was survived by his second wife, Annie, whom he’d met while establishing DHL in the Philippines, and their young son, Jonathan. Dalsey’s tiny obituary in the New York Times noted that the company he cofounded had grown to serve 223 countries and territories, employ 33,400 people, and have annual sales of approximately $3 billion. A DHL spokesperson contacted by the paper stated that neither Dalsey nor Hillblom had held a title at the company, which was not true. The last line of the obituary claimed that Dalsey had helped build the company until the mid-1980s, when he retired from day-to-day operations, which was also not true. Dalsey’s ouster had come far before then, thanks partly to Larry Hillblom’s long-held suspicions that his partner had conspired with Loomis but ultimately due to Peter Donnici’s doggedness.
The smoking gun is buried among acres of court records stored in the federal archives in San Mateo, squeezed into a box filled with documents that Donnici had subpoenaed almost immediately upon taking the Loomis case. One of these documents was an internal memorandum from Loomis’s Honolulu office based on the notes of an executive named George DeBon, who had attended a meeting in June 1973 between one of Loomis’s vice presidents and Adrian Dalsey. Loomis and DHL were then knee-deep in very acrimonious litigation. DeBon’s notes make it clear that Larry Hillblom was not present that day, as Adrian Dalsey paid a visit to a handful of Loomis executives. According to DeBon’s notes, the silver fox had been very generous with information, sharing DHL’s financials and details of his and Hillblom’s compensation—including the curious fact that he received $400 more per
month in salary than his equal partner. He’d revealed that DHL had bought an armored truck in Guam and was trying to diversify into Loomis’s core business there. He had even taken some potshots at his stubborn younger partner. “Hillblom is a much more technically and operationally oriented person than a people-oriented person,” he’d said euphemistically when asked about Larry’s importance to DHL’s success. Perhaps worried that that might be too subtle, Dalsey had added: “He probably wouldn’t be someone we would seek to continue to employ because he is kind of an eccentric—good for only limited kinds of corporate things.”
According to DeBon, Dalsey had then offered up his 50 percent of the company for $250,000, give or take, plus a five-year employment agreement that would float him until he was two years from retirement.
When Donnici unearthed what Dalsey had said about him, Hillblom went ballistic. But he did not confront his partner about the incident directly. Confrontation was not his thing. “He would get coldly explosive,” Steven Kroll recalls. “His eyes, slits anyway, would close even further. He’d clench his jaw and he had a certain look when he was displeased—a set in his mouth. He had very full, lovely lips and the squint and the focus and that mouth, that was how he expressed his anger.”
Carla’s recollection is less dramatic: “He told me, ‘Adrian has to go,’” she says. “That’s when Larry saw the silver lining of being in a regulated industry. He used the computerized stuff to get the books moved out of Marge’s hands.”
Ever since Adrian Dalsey had signed Seatrain, his wife had handled DHL’s accounting with the help of an elderly CPA. Even considering DHL’s growth, Marge’s job had not been difficult because clients were charged a single monthly fee depending on the size of the pouch (or pouches) they used. But now, as a licensed freight forwarder, DHL was required to publish quarterly tariff schedules and file them with the CAB. The company also had to generate airbills for every single shipment—i.e., no more four-pound pouch with twelve pounds of documents stuffed inside. Once Hillblom had classified DHL as a freight forwarder, the simple, self-regulating system he’d invented had suddenly become a data-intensive accounting nightmare. To generate the necessary paperwork, he rented time on an IBM mainframe above an aloha-shirt shop in Honolulu. From dusk until nearly dawn, Hillblom and Carla programmed the giant machine to create airbills and invoices for each DHL shipment—though they were mostly just backing out numbers based on what their clients were paying anyway.
King Larry Page 6
