ADMINISTRATIVE PRACTICE AND PROCEDURES SUBCOMMITTEE
OF THE COMMITTEE ON THE JUDICIARY
Hillblom did not have an appointment and, because Congress was on recess, there was no receptionist to announce him. As always, he was too shy to introduce himself, but an amiable young man in slacks and shirtsleeves eventually peeked in from the office hallway. The young man introduced himself as Jim Campbell, a staff researcher.
“I was the only one in the office,” Campbell tells me over the phone from his home in suburban Virginia. “He started mumbling about the conspiracy—they’re out to get him and all this other stuff, which didn’t make any sense.”
Campbell walked Hillblom across the street to the Senate cafeteria and bought him a cup of coffee. As Hillblom methodically led the staffer through Loomis v. DHL, Campbell found himself rapt. He already knew that the CAB was corrupt, but individual cases were not something that Congress intervened in, so he steered the conversation beyond Loomis v. DHL. As Hillblom emptied his coffee in sporadic gulps, Campbell explained that he was setting up a panel on the anticompetitive consequences of regulatory activities in the transportation sector. Hillblom offered up his view that the government should always promote competition—the philosophy that he’d espoused since law school. Campbell heard echoes of Kennedy’s campaign rhetoric. He thought that DHL’s story illustrated a not so well known and very anticompetitive effect of airline regulation, so he invited Hillblom to testify in an upcoming hearing.
But Hillblom hedged. “What about the possibility of retribution?” he asked. After all, DHL still didn’t have its operating certificate.
Campbell shrugged his shoulders. That was Larry’s call.
Several months later, Hillblom, Carla, Steve Kroll, Marilyn Corral, and Bill Robinson, the cofounder of DHL’s Los Angeles station, who had become a key player in its international growth, flew into Washington from Honolulu—as couriers, naturally. In preparation, Hillblom had spent a huge amount of time at the law library, poring over case records. His opening remarks alone came to thirty pages of single-spaced text. “I said, ‘Hillblom, what’s that?’” Campbell laughs. “He says: ‘That’s my testimony.’ I said: ‘You can’t read that! This is a United States Senate hearing. You have to cut it by 75 percent!’”
When Hillblom returned to Campbell’s office later that night, the remarks still ran to nearly twenty pages. The young staffer immediately blacked out the case names. Hillblom objected but Campbell cut him off. “Ted Kennedy doesn’t care what the law is,” he admonished. “We make the law.”
At 9:30 the following morning, Senator Edward M. Kennedy entered a paneled fifth-floor hearing room in a navy blue blazer and striped tie, waves of chestnut hair curling just below the neck, a little long for someone of his age and stature. He was surprisingly tan, tall, and athletic. As he assumed the chairman’s seat and raised the ceremonial gavel, Kennedy flashed his family’s famous smile toward the gallery. He’d just appeared on the cover of People magazine a few months earlier, at the wheel of a sailboat beside his handicapped son, smiling and looking skyward. Kennedy’s celebrity easily overpowered the others on the dais, even the famously conservative Southern bulldog, Senator Strom Thurmond of South Carolina.
Hillblom was listed as the morning’s fourth witness, behind an assistant attorney general, an independent trucker, and the owner of a moving and storage company—and before the actor Warren Beatty, representing the Hollywood studios. His statement had undergone two major edits the night before—once by himself and then again by Campbell, who had deleted so much that it could have passed for the redacted version of a classified memo.
As soon as testimony began, Hillblom understood why Campbell had censored him so mercilessly. Witnesses were lucky to get off more than a few sentences before Kennedy interjected. Just as Campbell had warned, the senator was interested in changing the law, not analyzing it. But even with Kennedy’s interruptions, the witnesses were moved in and out of their chairs with Japanese efficiency.
Hillblom’s panel was called forward inside of an hour. He waited for the first two witnesses to finish, then pulled his chair slightly forward, adjusted the microphone, and began his opening statement. He was wading into the Loomis-CAB conspiracy when Kennedy suddenly leaned forward.
“In what way are you under the jurisdiction of the CAB?” the senator queried.
“The CAB,” Hillblom replied, “suddenly decided that courier operations were freight forwarding operations; prior to that time the only decision on record indicated they had no jurisdiction.”
“Does the DHL Corp. fly a plane?” Kennedy asked.
“No,” Hillblom replied.
“Does the corporation own one?”
“No,” Hillblom replied again.
“Are you leasing a plane?” Kennedy asked.
“No,” Larry said a third time.
“How, then,” asked Kennedy, “is the CAB connected with your corporation?”
Hillblom tried to explain the CAB’s reasoning that made DHL an “indirect air carrier,” but that seemed to confuse the senator even further.
“Do you understand this policy?” Kennedy interrupted.
“No,” Hillblom said. “But”—he smiled—“we didn’t believe it was intended to make much sense for us.”
The gallery erupted in laughter. Even some of the senators chuckled. Seated behind his star witness, Campbell thought to himself that Larry had nailed it, just as he’d hoped—maybe better. A few seconds later, Hillblom found his place in the prepared remarks and resumed his statement with a new confidence. He had finally put the CAB on the defensive. With a joke, not a pleading or an appeal! DHL’s problems in Washington were going to be solved.
Eleven
The Operator
“I’ll put it this way,” Jim Campbell says. “Larry had a much better idea of how things are done than most people and how change happens.”
That fall, a newly focused Hillblom was invited to recount his side of DHL’s battle with the CAB to yet another Congressional committee. He estimated that nearly a quarter of his company’s revenue was being spent to comply with regulatory costs and admitted that he had considered giving up. “We don’t wish to continue our operation subject to the present type of policies,” he warned the assembled congressmen, one of whom was taking a nap. But he soon went off topic, urging Congress to abolish regulations for companies smaller than DHL.
On the topic of deregulation, Hillblom was now a player. He understood the direction that the country was headed. Five years before the Reagan Revolution would sweep the capital, Hillblom was already spreading the gospel that government was the problem—not the solution. At Boalt Hall, his professors had found his economic rationale of the law inscrutable and his classmates had scoffed at his apathy to social issues. But now, age thirty-two and barely six years out of law school, he was interacting with Washington’s boldface names and receiving public kudos from the scion of America’s political dynasty. And he had become a public speaker! He’d found his voice. He bragged to his friend Steven Kroll that he’d taught himself to cry on the stand. When the tour ended, Hillblom boarded a jumbo jet back to paradise, convinced that he had vanquished his most powerful foe. He could not have been more wrong.
William Bolger was of Hillblom’s stepfather’s generation—lean, hardworking, and proud. Like Andy Anderson, Bolger had learned the value of loyalty during World War II, where he’d served as an air force bombardier. After the Japanese surrender, Bolger had gone back to work for his former employer, the U.S. Post Office Department, where he’d risen up the ranks with military certainty, eventually trading in his postal worker’s uniform for dark suits, solid ties, and polished leather shoes. As postmaster general of the U.S. Postal Service, the graying septuagenarian’s most exciting moment may have been the unveiling of a Harry S. Truman stamp, but his perfect posture and still chiseled features belied a fighter. He presided over hundreds of thousands of troops—none of whose jobs he in
tended to surrender.
Technically, Bolger did not report to the government but to a nine-member board of governors. That’s because, five years earlier, President Richard Nixon had abolished the Post Office Department after an illegal postal strike had crippled the nation for two weeks. The new Postal Service, known by its acronym, USPS, was an independent federal agency—a structure that was supposed to make the post office more efficient, more businesslike, and, ultimately, more profitable. Instead, USPS had lost a record amount of taxpayer money and raised the cost of sending a letter by 50 percent. Bolger found a scapegoat in DHL and its compatriots in the burgeoning courier industry. While he readily admitted that express carriers might be wonderful for business and even for the economy, the postmaster general argued that they were “cream-skimming,” i.e., taking the most profitable mail routes and ignoring the more expensive ones—precisely the market failure that the postal monopoly was supposed to protect against. Bolger warned that the onslaught of private courier operations like DHL would have to be driven back to protect the greater good: the jobs of USPS’s more than half a million employees.
He’d already possessed a sledgehammer known as Section 601 of the postal code, which allowed private carriage of letters only if the correct amount of U.S. postage was affixed—as though they were being sent via the mail. But in late 1973, Bolger had gone one step further and defined a letter as “a message directed to a specific person or address and recorded in or on a tangible object.” After howls of protest from businesses and the Interstate Commerce Commission, he announced that USPS would “suspend” its monopoly over letters in a few very limited instances—for computer tape that was delivered within twelve hours, for example. But private carriers like DHL, even those carrying materials covered by the suspensions, would now have to register with USPS and allow postal inspectors access to their delivery records. If the inspectors decided that a particular company was not compliant, Bolger could withdraw its suspension on a case-by-case basis. Couriers like DHL would now formally exist at the whim of both CAB and USPS edicts.
No private company could afford to launch a preemptive strike against the Postal Service, so the entire industry, including DHL, ignored the new regulations. Within a year, however, Bolger launched the first wave of troops. Platoons of postal inspectors, exposed pistols strapped to their belts, began to appear at the mailrooms of known express company customers. They would demand access to the mailroom’s shipping logs, especially noting destinations and weights. Occasionally, on their way out, they would grab the pile of outgoing correspondence intended for DHL or another express company and drop it in a USPS mailbox. The next day a Postal Service salesman would show up in the same mailroom, reminding its manager of Section 601. Then the salesman would make a pitch for the postal service’s express mail product by posing the obvious question: Why pay twice?
Having thus struck fear into the hearts of both the express companies and their clients, Bolger then opened up a second front. At the request of his postal inspectors, customs agents confiscated a large shipment of inbound DHL traffic. When DHL managers, including Pat Lupo, showed up to claim their clients’ shipments, arguments ensued over what and what was not a letter. “They went through it,” Lupo recalls, “and they found interoffice memos and they found invoices and things like that and they said, ‘See, this is a letter!’ And I remember arguing with these guys. It was stupid. They kept them for forty-eight hours and then they released them, and because they released them, it was almost impossible to go to court.”
Lupo raced to assure his most important clients that the company he himself had once felt sheepish working for was, in fact, legal. He also tried to maintain his sense of humor in the face of Bolger’s attack. “Because a blueprint has some words on it,” he would deadpan, “then under the Post Office’s definition of letter, it has to go via USPS.” Engineering giants like Bechtel and Brown & Root were then developing the massive oil fields of the Middle East, and using DHL to send blueprints back and forth on a daily basis. DHL could not afford to lose them any more than they could afford to lose DHL. The Postal Service would have added two to three weeks to the delivery time of every shipment and even then, delivery was far from assured. How ingrained DHL had become in the global economy hit Lupo during a courtesy call on a client’s shipping manager. “I’m getting ready to go,” Lupo recalls, “and this guy says, ‘What do you think we should do with these?’ And we go over to this massive filing cabinet about as big as this sofa and about eight feet high and it rolls out. For two years, they had weighed up the blueprints and calculated what it would cost to send them by first-class mail to Saudi Arabia and then bought the stamps. And there was, in this thing, I want to say hundreds of thousands of dollars of stamps. They’d been buying stamps so that they could then send it by DHL—and DHL would charge plenty!”
Based on the research they’d already done with Henry Litton, Hillblom and Lupo penned a fifty-six-page treatise asserting the rights of private carriers to exist. Donnici, credited as a coauthor, submitted it to the University of San Francisco Law Review, where it was published. Bolger’s attorneys countered with a 200-page piece that appeared in the Texas Law Review. Donnici used the letterhead from his law firm, in which Lupo was now a partner, to draft opinions stating that DHL was a legal enterprise and that its customers did not need to pay postage on shipments that were not, in fact, letters. (Lupo wanted it to appear that an objective party had made the judgment, although the firm of Donnici & Lupo was little more than DHL’s outsourced legal department.) To gain credibility in Washington, where Bolger was a familiar figure, Hillblom joined the National Association of Manufacturers, a pro-business lobbying group. Then he hired Jim Campbell and flew him out to Donnici & Lupo’s downtown San Francisco offices to brainstorm. Hillblom’s first proposal was a winner-takes-all volleyball match against the Postal Service. Campbell joked that Bolger knew he would lose. Instead, Campbell got to work on a postal “notebook” for shippers that explained their rights while questioning the Postal Service’s most basic assertions of its monopoly as overreaching. But with customs now routinely confiscating DHL’s shipments, legal arguments would be inadequate. More than manuals or law articles (or jokes), Hillblom needed allies. Many of DHL’s loyal clients testified to the need for its service and, in his prepared testimony, Hillblom had often quoted a letter from Matson, the shipping giant, that read in part: “Until the inception of DHL, Matson’s use of the U.S. mail and/or air freight and other alternatives proved to be a miserable failure.” But as well connected as Matson and other customers might have been, there was only one organization in the United States that could come close to matching the Postal Service job for job and vote for vote. So Hillblom hopped back on the red-eye to Washington, this time taking his favorite lieutenant with him.
“Bloody Hillblom,” Lupo recalls, “who always had issues with organized labor, the first place he takes us is the Teamsters. The national office in Washington, D.C.! So Larry and I go to the Teamsters and Larry starts arguing on behalf of UPS of all people! Because UPS had 100,000 workers organized by the Teamsters. Larry’s saying, If the U.S. enforces the private express statutes, it will put UPS out of business. And the more we argued—mostly him—they picked up that this could be serious. And finally we ended up talking to somebody who was like the number two guy in the Teamsters and Larry is just passionately arguing that the post office can’t compete: they’re inept, and they’ll put UPS out of business. And Larry got so fired up that we used to walk out of these meetings onto the street, and I swear, Larry used to go up to people on the street and start arguing with them. And I’m like, ‘Larry, relax!’”
Lupo’s voice betrays the exasperation he felt back then—maybe some resentment as well. His boss had no interest in the mechanics of running a company, the minutiae that Lupo estimates to be 95 percent of a business. While his minions—Lupo and Donnici in the San Francisco law office, Campbell in a rented suite in Washington—dealt with the CAB
, the Loomis lawsuit, the postal inspectors, and belligerent customs agents, Hillblom was usually jetting 30,000 feet over the Pacific Ocean, his jeans pockets stuffed with news clippings torn from the magazines and newspapers he devoured with a pathological intensity. One article in particular engrossed his imagination—and amplified his paranoia. It was published in a science magazine. The author described a new machine that would make DHL obsolete.
In the future, communications satellites will be used to facilitate an automatic mailing for every organization and every family or individual. You may visualize that it will be possible to subscribe to a service, similar to the telephone service, whereby the customers will be issued an instrument that will transmit and receive letters via satellite.
You write or type a letter, insert it in a slot (almost like a copying machine), dial the recipient’s code number (perhaps his Social Security number) and push the “transmit” button. Within seconds the recipient’s machine will print out the letter, like a photocopy, and drop it in a “mail box” attached to the machine.
The inevitability of satellite mail would haunt Hillblom in the years ahead, but developing that kind of technology was out of the question for what was still a fledgling hodgepodge of courier stations. Still, Hillblom now insisted that his DHL-1000 send and receive data. He filed the more ambitious notion of electronic mail away in his brain somewhere and kept flying west, to explore his latest conquest.
Twelve
Cocos
Cocos Island is so tiny that, after living in Micronesia for months, I had no clue of its existence. To reach it, you must first fly into Guam. Twelve hundred miles south of Tokyo, Guam is familiar to members of the U.S. armed forces as home to two huge bases and a bayside resort district that reminds one of Honolulu’s Waikiki Beach with its veneer of Las Vegas–style glitz superimposed on a mass of rusting apartment buildings, poker dens, massage parlors, strip clubs, and meth dens. Tamuning Bay is a popular destination among jarheads because nubile young women in tight jeans tend to emerge from opaque glass doors at all hours of the day like The Odyssey’s sirens.
King Larry Page 9
