King Larry

by James D. Scurlock

  By the time I reach the village of Merizo to board a small ferry that is the only means of accessing Cocos, more than half of the island’s beaches have been swallowed by typhoons, and U.S. military operations have injected enough PCBs into the surrounding waters to scare off most of the thousands of scuba divers and fishermen who used to come here every week. The ferry is nearly empty, as are the narrow, sun-drenched beaches and the tiny buffet restaurant. A local wearing a monogrammed Cocos Island polo shirt informs me that the present owner is an American video game tycoon; his strategy for reinventing Cocos as a profitable enterprise remains as mysterious as the tropical storms that descend in sudden bursts of wind and rain, only to leave as quickly as they’ve arrived.

  The island that Larry Hillblom, Steven Kroll, and Curt Carlsmith bought on a whim in the mid-1970s has vanished. Then, hundreds of young Japanese honeymooners canoodled on its white-sand beaches or beneath its scores of coconut trees, snorkeled around its edges, and dove down to a shipwreck just off its long pier, as jumbo jets connecting the United States with Asia roared overhead. In the late 1970s, Hillblom rented a house across the bay, in Merizo, a charming village of Quonset huts whose Spanish-built bridge had somehow survived the American bombing campaign of ’45. In the lush hills that separate Merizo from the more populated parts of Guam, the islanders still hunt deer by burning fires to attract their prey. There is no easy or quick way to reach Merizo; it would take government agents—or anyone else—at least an hour to get there.

  Steven Kroll was one of Hillblom’s only regular visitors there. “We would go over to Cocos Island,” Kroll remembered warmly. “It’s not a big island, obviously, but you could walk through the jungle, and we came upon a Quonset hut and concrete bunker, which I was told was a LORAN* station. The vines and the jungle had eaten everything. Larry and I were fantasizing about what had happened in the war, like one of those flashback scenes in Titanic. We were making plans for a railway. He was looking at this in the way that people building casinos in Las Vegas look at their thing—like something more than a beautiful spot is needed here if you want to make money. So the ideas were a little railroad and a water park—things that were cheap to do that would make money! We had all these Japanese tourists, honeymooners. It was popular!”

  Kroll fondly remembers showing Hillblom the parks in Guam where he cruised navy boys and locals for gay sex. Hillblom seemed to be experiencing a delayed, maybe permanent, adolescence. At one point he invited Kroll into bed with a girlfriend, though the threesome was not successful. “Larry was promiscuously into heterosexual sex the way I was into homosexual sex.” Kroll shrugs. “If he could’ve been gay, he would’ve been gay. He was fascinated at the idea of going to a park and getting it on and getting on with your business.”

  In the winter of 1976, as Hillblom explored, the CAB suddenly released DHL’s operating certificate. Then, on October 24, 1978, a press release from Postmaster General Bolger’s office announced the suspension of the postal monopoly for urgent letters—an urgent letter being defined as any piece of mail sent for a cost of at least twice the first-class mail rate or three dollars, whichever was higher. The policy was calculated to prevent Congress from passing a bill sponsored by Trent Lott, a pro-business junior senator from Mississippi who had met with both Hillblom and Lupo, that would have explicitly limited the postal monopoly. The government had surrendered. Loomis capitulated a short time later, agreeing to pay DHL more than a million dollars in damages. Any hope of acquiring Hillblom’s company had long since passed; during the litigation, DHL had leapfrogged its storied competitor and was now many times larger.

  Hillblom began to feel invincible. The Pacific Ocean, he realized, was the impenetrable curtain behind which he could pull the strings. It empowered him, shielded him from confrontation, and even made him more effective. When Pan Am, DHL’s only carrier to Latin America and Asia, threatened to limit the amount of bags that its couriers could carry—probably a greater threat to the network than either Loomis or the CAB—Hillblom did not bother to make a personal appearance, as he always had in past crises. Instead, he instructed Patrick Lupo to spend all of DHL’s available cash—approximately $10 million at that moment—to buy Pan Am stock and then request an audience at the airline’s annual meeting in Boston. The plan was that Lupo would make an impassioned plea to the airline’s gathered shareholders and directors, noting how much business they stood to lose if their management followed through on its threats; by acquiring that much stock, DHL simply guaranteed Lupo some time on the floor. But Pan Am’s CEO, unable to see behind Hillblom’s curtain, assumed that DHL was launching a hostile takeover bid and capitulated before the meeting ever took place.

  By the end of the decade, in fact, only one enemy remained tenacious enough to roust Hillblom from his island paradise. That enemy was a friend.

  Thirteen

  Curt

  One afternoon between DHL’s victories against the CAB and the Postal Service, the company’s former president, Curt Carlsmith, walked into the clerk’s office of Honolulu’s District Court armed with a thick complaint alleging that DHL Corporation, Adrian Dalsey, and Hillblom had all committed fraud by inducing him to purchase Dalsey’s shares in the company. Attached was the doomed “letter of understanding” that he, Larry Hillblom, and Dalsey had signed three years earlier—and that DHL had since assumed on Carlsmith’s behalf without his knowledge. The complaint did not mention that Carlsmith had not paid for the shares, nor did it elucidate what, if anything, he had lost on the transaction. In fact, the document was little more than a character assassination—a detailed portrait of Larry Hillblom as criminal mastermind and insecure prick.

  A photocopy of the complaint was made and time-stamped. Carlsmith, a familiar face in the clerk’s office, walked out with his receipt. Thanks to DHL, it would take less than twenty-four hours for a copy of his allegations to reach Hillblom’s legal office in San Francisco and another day or two to reach Hillblom himself, depending on where he happened to be at the moment.

  My copy of Carlsmith’s complaint, edges frayed but otherwise unchanged, resides at the federal archives facility in Burlingame, not far from DHL’s former headquarters. It is an extraordinary document, both in terms of the viciousness of its tone and the seriousness of its allegations. For starters, Carlsmith alleges that a substantial portion of DHL’s revenues came from “illegal operations”—an allusion to the company’s failure to be certified by the CAB and to long-standing rumors that DHL couriers were smuggling drugs and pornography across international borders. He claims that both Hillblom and Dalsey routinely bribed foreign officials for special treatment. The company was also, he claims, violating a host of federal statutes, securities laws, and CAB regulations. And Hillblom secretly controlled DHL, International via a sham nominee. The CAB’s attorneys had suspected as much ever since Hillblom had turned over the wrong business card to its auditors, but here Carlsmith fingers Po Chung, DHL’s diminutive Hong Kong station agent, as the straw man. According to Carlsmith, Po received just two hundred shares of the international company’s twenty thousand shares—a one percent bribe for pretending that Hillblom’s company was an independent enterprise in compliance with CAB regulations. Not only did the arrangement allow Hillblom to thumb his nose at regulators; he was, according to Carlsmith, using it to evade income taxes.

  But Carlsmith’s most damaging claim is that Hillblom conspired to keep DHL Corporation operating at a loss or, at best, a break even, by siphoning money to the international division, which he operated as a tax-free slush fund. Though Carlsmith’s complaint lacks hard evidence, DHL’s cash-starved franchisees-turned-shareholders now had a legal record of their long-standing suspicions.

  But the last paragraph of Carlsmith’s complaint makes it clear that he has not filed the lawsuit for their benefit. He demands that DHL pay him $6 million, including $750,000 in punitive damages—twenty-four times the original value of the contract.

  Hillblom’s reaction was immedi
ate. He flew back to the States and huddled with his consigliere and general counsel at the San Francisco law office. They were not sympathetic. Lupo felt that his boss had only himself to blame, that he should have confronted Carlsmith years before and worked out an amicable settlement. Instead, by undermining Curt’s presidency and assuming the contract unilaterally, Hillblom had left the entire DHL network open to assault and himself exposed to a fishing expedition. Lupo was pretty confident that he could win the case, but Carlsmith had made some compelling points; worse, Adrian Dalsey, Hillblom’s codefendant, would make a terrible witness. After all, Dalsey too had been effectively forced out of the company by Larry. Negotiating a settlement was the obvious solution. Otherwise Larry’s brilliant end run around Dalsey and his shareholders was stymied, with him exposed and surrounded by enemies too big to run through.

  But Hillblom was adamant: Carlsmith could not own any shares in DHL, and he wasn’t getting $6 million. So Donnici & Lupo fired back with a lawsuit of their own, accusing Curt and his family of stealing airplane tickets and failing to deliver on promises to make his family’s connections available to DHL, among other things. Carlsmith then warned that he had taped his phone conversations with Hillblom and others at DHL. “It was nasty,” Lupo moans.

  Discovery dragged on for three years, filling up several boxes in the clerk’s office in Honolulu but otherwise accomplishing nothing. Depositions sometimes devolved into shouting and threats. It was Steven Kroll, Hillblom’s and Carlsmith’s partner in Cocos Island, who finally convinced Hillblom that he would have to broker a settlement himself, as he should have done in the first place. He would have to confront Curt.

  A meeting was scheduled for a spring weekend in 1980 at Kroll’s modest condo overlooking North Lake Tahoe. Hillblom flew in from Guam, Carlsmith from Honolulu. When they arrived, Kroll ushered them to his deck overlooking the water and the snow-drenched mountains that cradle the pristine lake. For three days, the preppy rich kid and the peach farmer’s stepson disagreed about Carlsmith’s agreement with Dalsey and his brief tenure as DHL’s president while Kroll brought them homemade snacks and mediated.

  The scene was tense, occasionally theatrical. Carlsmith was prone to storming off while Hillblom literally dug his heels into the deck. By the end of their last day in Lake Tahoe, they had gotten nowhere. Carlsmith still refused to withdraw his lawsuit and Hillblom would not allow any of the allegations in his lawsuit to stand unchallenged. But at two o’clock that morning, amid cool evening air, Kroll proposed an ingenious solution that would sidestep Carlsmith’s accusations while still making him a multimillionaire: DHL would purchase Carlsmith’s share of Cocos Island for just under $4 million and Carlsmith would simultaneously withdraw his legal actions. There would be no more depositions, no trial, no evaluation of whether or not DHL had acted illegally or whether or not Hillblom had deceived the CAB—or his fellow shareholders—by secretly holding on to his stake in the international operations.

  They shook hands. Kroll drafted a brief memorandum of understanding on his IBM Selectric. Hillblom called Lupo immediately and told him to draw up the contracts. After three years of inaction, Hillblom was suddenly panicked. “This is it!” he shouted over the phone. “This deal has to get done!”

  “If Larry saw problems with it he wasn’t saying anything,” Lupo recalls. Then he raises an eyebrow. “Of course he saw problems with it! I’m sure that I tried to defend myself and explain the problems to him but he wouldn’t listen. I started to question, ‘Well, wait a minute, if they’re paying all this money to Curt and they’re telling me there’s nothing in his case, maybe there’s more to the case than they let on in the first place, right?’ So anyway, I had some great intellectual problems with this settlement, and Larry was just furious.”

  By the time Lupo convinced a federal judge to bless the settlement agreement, he knew that DHL’s other shareholders were not all convinced that Curt Carlsmith’s exit was in their own best interests, because the effect was to hand a supermajority of DHL to Larry Hillblom. Maybe, several of them mused, there was a lot more truth to Carlsmith’s allegations than they’d been led to believe. Maybe Hillblom had used the CAB and Carlsmith to take over the company. Maybe he’d lied outright. But there was only one person who knew for sure, and he was slipping farther and farther away from them, toward yet another island paradise, where he would build his next empire: Saipan.

  Part II

  The Island

  The Trust Territory of the Pacific, often referred to as Micronesia, whose stretch of 2,041 islands in the Western Pacific sparkle with such jewels as Majuro, Ponapei, Koror and Saipan, is doing its best to remain a virgin Lorelei. It will take all the persistence of the early American pioneer to penetrate either as an immigrant or as an investor.

  —The New York Times, December 26, 1971

  In the land of the blind, the one-eyed man is king.

  —Erasmus

  The ethos is that if you can afford it, you can do it. That is Hillblom’s legacy on Saipan.

  —Professor Samuel MacPhetres, Northern Marianas College

  Fourteen

  The Island of Thieves

  “Mr. James?” The voice pierces a muggy darkness; it is female, dreamlike, and vaguely familiar. More than a little salacious. The digital clock radio, a relic of the eighties, reads 3:01 a.m. Besides those three red numbers, the room is utterly black. The air is hot and nearly silent, excepting the whir of an elderly air-conditioning unit that is not doing its job nearly well enough.

  “I think you have the wrong number,” I say when the voice repeats my name.

  “It’s Joy!” she says. Giggle giggle.

  “Who?” I reply, groping the air for a moment and choking the neck of a lamp with my left fist, searching for a switch . . .

  “Joy! From downstairs.”

  “Downstairs?” Right. I am in a hotel room, second floor. I remember checking in not long ago after a twenty-hour, three-flight marathon; my eyes took a snapshot of the room before turning off the lamp: spare, dormlike, cement walls painted off-white . . .

  “Joy from the front desk!”

  “Okay . . .” I squint in order to re-create Joy: petite; Filipina; thirty-something; big, toothy grin. Was she flirting with me? I wonder. I am normally oblivious to come-ons—particularly ones that are not welcome. My friends call it “pulling a Scurlock.” Did I encourage her unknowingly?

  “How are you doing?” Joy purrs.

  “Is there a problem with the credit card?” I ask, rotating my jet-lagged feet out of a thin, sweat-soaked sheet to the edge of the bed and onto a thin, fuzzy floor. Worn carpet is what you get for thirty-nine bucks a night, for being on a writer’s budget, though when I reserved the room I remember congratulating myself that this was the type of hotel that Hillblom himself would have patronized.

  “No!” Joy giggles. “How are you, James?” she asks, as though reading from a script.

  “I’m tired.”

  “You need to relax. Would you like massagee?”

  “What?”

  “I give very good massagee.”

  “No. No, thank you.”

  “You sure?” she asks.

  “Yes. Thank you.”

  “Okay. Good night.” Joy does not hang up.

  “Good night.”

  So goes my first conversation on Saipan, the largest and most important of the islands that comprise the Northern Mariana Archipelago. It will take several months to acclimate to the constant offering of sex that, as a white man, seems to be my birthright in much of Asia. My internal clock is still set to Los Angeles, where it is midafternoon, meaning that any chance of returning to sleep will be futile. And because nearly all of the flights into Saipan arrive between midnight and 3:00 a.m., I must wait several more hours to actually see my surroundings, though I have no doubt that beneath the darkness outside my window lies the island paradise I’ve been reading about for months: lush tropical foliage atop a massive reef that hovers just below the W
estern Pacific Ocean, 120 miles due north of Guam, 1,200 miles southwest of Tokyo and a slightly longer distance east of Manila. Discovered by the great Spanish explorer Ferdinand Magellan in the early sixteenth century and known among the Spaniards as La Isla de las Ladrones (translation: Island of Thieves),* Saipan is one-half the size of Manhattan and shaped like a giant monkey wrench. An interior of thick pea-green jungle ascends in three distinct peaks while the perimeter forms a series of pencil-thin beaches and two massive bluffs to the north: Suicide Cliff and Banzai Cliff.* Knee-deep coral lagoons sandwich the eastern and western shorelines, transforming the deep blue swells of the Pacific and Indian Oceans into placid sheets of aquamarine. On the northern shore lies a beautiful grotto popular with Japanese scuba divers—or so I have read—and dotting the western coast a dozen world-class resorts, each with its own sparkling beach. A short drive over Navy Hill is a championship golf course designed by Greg Norman that overlooks pristine Lao Lao Bay. Not to mention the botanical gardens, the charming restaurants, the historic Paseo in Little Ginza, and the recently expanded jewel of Saipan: the Duty Free Stores mall, an edifice of pink marble and black lacquer emblazoned with the logos of Hermès, Prada, Louis Vuitton, and Chanel.

  But Sunrise illuminates another island—a beautiful landscape littered with hideous structures, many unfinished. There is the massive concrete skeleton of what was to be a luxury hotel, occupied only by already hot, humid air and ubiquitous jungle. There are empty apartment buildings by the dozen and strip malls, some with rebar creeping skyward; later, I will be told how the Asian financial crisis of 2006 pulled the rug out from under everything in this part of the world. Occasionally I am reminded that my shoes are touching American soil: a military recruiting station that is the sole tenant of a large shopping center; four mammoth military ships anchored just off the reef, waiting; several gas stations; many more video poker shops, some advertised with hand-painted signs, all with the windows blacked out so that the gamblers inside are not distracted by the passage of time; a McDonald’s and the carcass of a Wendy’s; a Costco; a Ford dealership; Marianas High School—established in 1969 and home of the Dolphins, a mobile marquee announcing a UFC-style mixed martial arts fight this weekend.