A glance seaward reveals the satellite island of Managaha, the Cocos of Saipan as well as the northern bluffs of Tinian, not quite a mile distant and home to several airfields that, for a few years in the 1940s, were the world’s busiest—a massive cement grid that launched hundreds of Japan-bound B-29 Superfortress bombers, including Enola Gay and Bockscar. Although the twin bomb pits that held their atomic payloads are commemorated by a dwindling clique of World War II buffs every year, Tinian has since rebranded itself as the CNMI’s Reno; it is home to the Tinian Dynasty Hotel & Casino—described in the travel magazines as a gleaming five-story seaside resort featuring a Vegas-style flashing sign, dancing fountains, a world-class Chinese restaurant, a private club staffed by at least two dozen young Chinese girls, and rooms painted the color of Pepto-Bismol.
Beach Road ends abruptly at a war memorial, necessitating a U-turn. Polished monuments to the 55,000 or so lives cut short over a few terrible weeks in 1945 ring the island like a charm bracelet, but in 1976 the U.S. State Department dropped an explosive that has molded Saipan’s landscape far more than dynamite: $16 million in cash. The money was to be divided among 7,000 islanders as war reparations for the losses they’d sustained during the American bombing of their island—everything from papaya trees to relatives.
“It was gone in a week,” Samuel MacPhetres tells me over coffee in a small café across from the war memorial. The elderly MacPhetres is a professor at Northern Marianas College and Saipan’s unofficial historian. “I had one student who sold a piece of family land and bought all of his aunts brand-new Mercedes sedans,” he continues, raising a thick gray eyebrow. “But then people began to lose faith in the United States because they lacked citizenship, even though the Covenant with the United States had already been adopted.”
He is referring to the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America, ratified by a 78.8 percent majority in the same year that the massive money drop occurred—not a coincidence, according to its critics. By then, the citizens of the Northern Marianas—Saipan, Tinian, Rota, and a smattering of sparsely populated islands that constellate north in a crescent, the last lying just south of Japan—had been subjects of four separate empires over more than three centuries. By most accounts, they were extremely eager to become American citizens, in part because the United States had finally liberated them, more so because an American passport guaranteed freedom, but the Covenant’s passage had also been a clear victory for the U.S. military. By creating what is known as the Commonwealth of the Northern Mariana Islands (CNMI), the plebiscite had denied Communist China and the Soviet Union any influence in a strategically important region.
But the Covenant was also a humiliating rebuke to the islands’ minority Carolinians, who had been brought to Saipan more than a hundred years earlier by the Spanish, who’d developed a habit of consolidating natives in order to convert them more efficiently. Carolinian leaders had helped draft the CNMI’s constitution in the early 1970s. Like their neighbors, the majority Chamorros, they had been treated like second- or third-class citizens by their American occupiers, who fed them navy rations like Spam and corned beef, then rushed them into a relationship with America to fit some kind of secret, predetermined schedule. The Carolinians had an even better reason to resent the Covenant: the State Department had never bothered to print it in their language.
President Jimmy Carter issued a proclamation that the United States would implement most of the terms of the Covenant anyhow and the CNMI’s constitution became effective on December 8, 1976. Thirteen months later, the Commonwealth seated its first elected governor and legislature, becoming the world’s newest self-governing nation. There was one final catch according to the United Nations mandate, under which the United States administered Micronesia as a Trust Territory. The United States could not fully implement the Covenant without approval of the United Nations Security Council; nor could the U.S. terminate the Trust Territory with regard to just a single archipelago, like the northern Marianas chain. If any of the islands of the Trust Territory were to be removed from UN oversight, they would all have to declare independence at the same time. But the archipelagos of Palau, Yap, Truk, and Phonopei had yet to make a deal with the United States. The Northern Marianas had jumped the gun.
When Larry Hillblom arrived on Saipan in the early 1980s, he found a beautiful island bustling with flame trees and legal ambiguity. Despite the Covenant, hundreds of islanders had been denied American passports because they lacked birth certificates or for other technicalities; countries in Europe refused to recognize the CNMI because of the dubious way in which the Commonwealth had come into being; even islanders who had been told they were now American citizens did not possess the right to vote, while it was not entirely clear which constitution—the CNMI’s or the United States’s—ruled. Hillblom had grooved on legal conundrums since his days at Boalt Hall, and he would soon inject himself into the nucleus of Micronesian politics, but in his first few years on the island, the issue of citizenship obsessed him for reasons that were not at all academic.
For seven dollars (and approximately forty-five minutes’ stewing in a humid government office alongside a dozen or so guest workers) the Commonwealth of the Northern Mariana Islands will issue you a driver’s license. While mine more closely resembles the student ID I received at college—the spelling is incorrect, the address is a post office box that does not belong to me, and the lamination began peeling off immediately—it entitles me to the locals’ rate at a name-brand hotel with clean carpeting where I won’t be woken up at 3:00 a.m. by an insistent Filipina prostitute.
Those who establish that they are truly local, however, receive something far more valuable than a better room rate at the Hyatt: a 91 percent rebate of their federal income taxes under a special “mirror tax” provision of the Covenant. When Hillblom arrived, the rebate was an even more mouthwatering 95 percent. Better yet was a “fresh start” clause, whereby the cost basis used to calculate capital gains would be assessed at the time that the islands became a commonwealth rather than at the time the assets were acquired. In other words, Hillblom, who had started DHL with a few thousand dollars in 1969, could theoretically recalculate the cost basis for his shares as of 1982—when their worth was in the tens of millions. But it got even better. Because the CNMI theoretically retained sovereignty over its own affairs, it was unclear whether or not its citizens were required to submit tax returns to the Internal Revenue Service at all. Instead, they might be able to take their rebate in advance and submit the reduced amount due and their return directly to the Commonwealth’s Department of Finance, bypassing the feds entirely. The U.S. government would thus be denied any right to audit Hillblom’s tax returns—even as he maintained his U.S. passport. All Hillblom had to do was establish himself as a citizen of the CNMI. Which he did with typical fervor.
“The thing about Larry”—the professor smiles with a tinge of admiration—“is that he didn’t let anything stand in his way. Hillblom wanted his own telephone system because he was afraid that the feds were bugging his, so my friend Bud White installed two mainframes for him at his office. When Hillblom wanted first-run movies, he opened his own theater, and then he created the Supreme Court when he wanted an appellate court on the island. He bought the Bank of Saipan because he didn’t want FDIC-insured banks on-island. He gave a friend of mine a Bank of Bahrain Visa card with no limit and told him to open up a computer company.” MacPhetres takes a breath. “He was like a kid in a sandbox.”
But two of the first things that Hillblom did when he came to Saipan—after securing a driver’s license, naturally—were to purchase a bank and buy real estate. These were things that only a citizen of the CNMI could do.
Fifteen
The Great Bird
A great bird sailed into the Port of Saipan in the spring of 1982, spread a pair of shimmering stainless steel wings, and took off down Beach Road toward Garapan, whe
re it banked left before settling in the carport of a modest cement home.
By now everyone on Saipan who mattered knew that Larry Hillblom was the H in DHL and therefore a very important man, but the arrival of the brand-new DeLorean DMC-12, the most talked-about vehicle of its time and the star of the hugely popular Hollywood film Back to the Future, was an event in and of itself, a coming-out ritual for someone who had thus far preferred to operate under the radar. Word that the exotic automobile was a gift from Prince Naif bin Abdul-Aziz Al Saud, a member of Saudi Arabia’s royal family and DHL’s partner in the Middle East, circled the island faster than the supercar itself. And while Larry Hillblom’s new toy may have inspired more than a few jealous stares from the expats up on Navy Hill, it conferred a certain kind of cultural legitimacy upon a people who were not yet considered American enough to have a McDonald’s; the Saipanese would have to wait another several years for the Golden Arches to arrive.
Hillblom hated the car—not because of its many quirks, but because the prince had not covered the import duties. Hillblom was forced to pay more than the entire price of his trusty Honda Civic just to take delivery. But the DMC-12 would become far more useful than he imagined. When he was off-island—which was often—he loaned it to the politicians and businessmen whom he hoped to befriend. And the DeLorean, with its tinted windows and futuristic digital display, was a perfect foil for the way that Hillblom dressed and carried himself. Already he had endured a few disconcerting episodes where people simply refused to believe that he was who he said he was. When told that the scraggly guy in the T-shirt was his boss, a DHL courier had shot back, “And my dad’s the president of the United States!”; on Saipan, a local photographer, upon being introduced to Hillblom in the customary fashion (“Meet the H in DHL”) had looked Larry up and down and, convinced that he was on the receiving end of a practical joke, growled: “Fuck you and the horse you rode in on.”
Relaxing in the lobby of the ill-fated Cowtown, not long after the Cessna accident (Courtesy of Michael W. Dotts)
“Larry was larger than life!” Roger Gridley crows over the phone from Florida. Gridley arrived in Saipan in the sixties, one of hundreds of young Americans who came to serve the island in the Peace Corps, which was an inexpensive way for the U.S. government to appear that it was educating the locals. At the end of his term, he stayed on as a contract teacher and indulged in the local hobbies: fishing and drinking. He also dabbled in a number of business ventures, but none of them came close to making money. By the time Hillblom’s DeLorean arrived, however, Gridley had set up a fledgling realty company with a Texas attorney named Jack Layne. Layne, who had come to Micronesia to serve as attorney general, had figured out a way for nonnatives to lease—and sometimes even buy—land: partnerships where locals legally owned a majority of the shares, even if they did not maintain control. Given Saipan’s close proximity to Japan, its shimmering beaches, and its unusually temperate weather, Layne’s innovation provoked a speculative tsunami. The Asian Bahamas.
“By the time Hillblom approached me,” Gridley recalls, “people were making fortunes overnight. Lao Lao Bay was bought by one investor for five dollars per square meter and flipped for eighty.”
Hillblom bought several parcels of land from Gridley, forming corporations that were technically owned by his local friends or employees. Then he created a venture called Saipan Cattle Corporation, which took over the lease of the northern tip of the island, already envisioned by another businessman as a kind of Wild West Disneyland. “Cow Town!” Gridley laughs. “It was originally going to be a dude ranch for the Japanese businessmen as well as a brothel. They imported some cowboys from Montana but they caused too many fights. Then they got some Mormons from Utah, but it just never worked. Larry ended up showing films there, installed some bleachers in the cow field, and then it kind of died.”
Hillblom’s most important venture in Micronesia remained Cocos Island, however, where he was determined to build a miniature Las Vegas. Here he had a very different problem. Since the Spanish invasion, virtually all of the Micronesian islands had become devoutly Catholic. While politicians were tasked with running the government, the bishops called the shots on social issues. And the bishop of Guam was not inclined to allow gambling anywhere in his diocese. His churches were dealing with enough problems from two other American imports: beer and fast food. Gridley recalls an undaunted Hillblom rushing into his office after trips to Guam, bragging that he was converting the bishop. The plan was to allow slot machines on Cocos but nowhere else on Guam, effectively restricting gaming to Japanese tourists.
“But at the same time,” Gridley recalls, “Jack and I had introduced ten slot machines at the Hyatt Regency in Saipan. Larry was angry—rightfully so, I guess. He saw that was really going to screw up his deal on Cocos Island if it got bad press.” Which is exactly what happened. Gridley and Layne sold their modest operation to a couple of mobster-looking businessmen from Las Vegas, who started building video poker dens under a loophole in the law that allowed machines as long as they were not imported. Since they were technically coming from the Hyatt Regency, the hotel could import the machines and resell them elsewhere. Video poker dens became as ubiquitous as sugarcane, a phenomenon that did not go unnoticed in the bishop’s sermons.
Gridley tells me that he and Hillblom had a second—and final—falling-out after he was asked to sell Cocos Island in the mid-1980s. When the sale to Japan Airlines took longer than Hillblom wanted, Gridley discovered that Larry had gone behind his back. By then, Cocos had become a liability and a huge embarrassment. Pat Lupo still recalls the hotel’s disastrous grand opening—with fireworks shooting into the crowd of dignitaries Hillblom assembled, followed a short time later by the discovery that Cocos’s management had neglected to pay the IRS.
Saipan energized him. Hillblom was at his happiest and most adolescent crawling its handful of paved roads in his gull-winged DeLorean, imagining future golf courses, hotels, and apartment complexes and checking in on his hobbies. “Isn’t this great? It’s just like college!” he would crow to visiting friends, as though he’d found a place in which to remain forever young. He bartended at a local beachside restaurant, where he was known less for the quality of his drinks than for his proclivity to throw people out—even his friends—if he didn’t think that they were spending money fast enough.
Peter Donnici became a frequent guest; Bill Robinson, one of the few original DHL shareholders who remained friendly with Hillblom, lived there briefly. When Hillblom was not entertaining statesiders or racing his cigarette boat—another gift from the Saudi prince—in the lagoon, he could usually be found in one of his three offices. He kept desks at the Bank of Saipan’s only branch, Saipan Computer Services, and the Nauru Building—each of which became a clone of 911 Alakea, with papers strewn everywhere. Visitors arrived to find Hillblom crouched on his hands and knees, searching for whatever paper he was interested in at that particular moment. They came away impressed by his enthusiasm and almost childlike insouciance, but the truth was very different.
On Saipan, Hillblom often awoke before dawn to desperate faxes from DHL’s new headquarters south of San Francisco. The U.S. company had rarely posted a profit; now it was building its own airline in a last-ditch attempt to compete with Federal Express, which had ironically entered the document business after the USPS victory. The increased debt and the lease payments on airplanes put further pressure on the company’s finances. Worse, DHL-US did not have an experienced leader. Thousands of miles away, Hillblom was trying to pull the strings, but nothing was working.
Overseas was the opposite. DHL’s operations in the Middle East, where the company enjoyed a monopoly on express shipments, were pouring untold millions of dollars into DHL’s coffers. The region had even embraced the DHL-1000. Runoff from DHL’s Middle Eastern cash cow was stuffed into nylon DHL packs in bricks of pristine $100 bills and invested in residential property on Maui, as well as a 1,200-acre ranch in Half Moon Bay, where Hi
llblom envisioned a fog-shrouded Xanadu that would include a disco and a huge lake stocked with bass. Maybe he assumed that International’s success would overwhelm the problems in America. Or maybe he thought his problems would simply disappear, as they always had. Either way, Hillblom had a new focus: He was determined to build an empire in Micronesia.
“Has anyone mentioned a company called UMDA?” Roger Gridley asks suddenly.
“No, “ I reply.
UMDA, he explains, is an acronym for United Micronesia Development Association. The conglomerate was founded in the mid-sixties by a civil servant named Russ Curtis. “Curtis was a true pioneer,” Gridley says. “He was a fascinating man. He had been in Micronesia as a civil servant during the McCarthy era. He was stationed in Yap for a long time. He helped a lot of local businessmen start their businesses and grow their businesses.” But Curtis also happened to be a Quaker—something that did not sit well with Senator Joseph McCarthy. When Curtis refused to sign a loyalty oath, he was fired. So he stayed in Micronesia and started UMDA in the mid-1960s in order to bring in sugar, cement, and rebar. UMDA was the first corporation owned by Micronesians to service the few Micronesian businessmen who were starting their own companies. Curtis embedded UMDA’s purpose in the charter: at least 60 percent of its shares had to be owned by islanders.
King Larry Page 11
