Broker, Trader, Lawyer, Spy

by Eamon Javers

  Crossing into the Eastern Shore from Washington over the Bay Bridge, a visitor travels down Route 50, passing the Kent Narrows and the town of Wye Mills before entering Easton. Along the side of the road, past an Applebee’s but not as far as the Denny’s, sits a rental facility called Bay Tree Storage. Inside one of its metal-lined storage units, in cardboard boxes precariously stacked from floor to ceiling, are the last remaining business records of Beckett Brown International.

  Sitting next to those boxes, sorting documents by hand, is John Dodd, the man who put up most of the money to launch Beckett Brown in 1995. Dressed in a faded blue striped polo shirt, jeans, and a Florida Gators 2006 National Champions baseball cap, Dodd perches on a folding chair alongside a card table. He opens a worn briefcase to reach for documents, tapes, and supporting evidence. Dodd launches into a long tale, explaining how a company he partly owned deployed undercover operatives into gun-control groups, spied on Greenpeace, and gathered intelligence on Mars, all without his knowledge.

  Even as he lays out the details of years of diving in Dumpsters, intercepting phone records, conducting physical surveillance, and engaging in other spy tactics, Dodd insists he was appalled when he found out what had been going on at his company.

  IN 1994, DODD had been enjoying the resort atmosphere of Chesapeake Bay, and spending some of his time in the bars of Easton. His family had sold its regional beer distributorship for millions of dollars several years earlier, and Dodd hadn’t needed to work full-time since then.

  In Easton, he met Richard Beckett, a local businessman who ran a small executive search firm, helping corporate clients find and place executives in high-level jobs. Beckett, as it turned out, was friendly with several law enforcement officers, current and former Secret Service agents, and a veteran officer of the Maryland state police.

  Over beers, Beckett told Dodd that he’d come up with a plan for an exciting new business. Using their skills and connections from the Secret Service, the Maryland police, and the corporate world, the group would form a security company to provide protective services for executives at several of America’s largest companies.

  All they needed, he said, was an investor.

  John Dodd was hardly a wheeler-dealer. He was just a guy who’d inherited a beer company, sold it, and grown rich; and he didn’t know the first thing about running a security business. Still, he was intrigued. He was also impressed by Beckett’s team members when he met them several weeks later. The men took Dodd to see the Secret Service headquarters building in Washington. They introduced him to Daniel D’Aniello, a founding partner of the $80 billion private equity firm Carlyle Group. At a meeting at the firm’s spacious offices on Pennsylvania Avenue, D’Aniello sang Beckett’s praises: This is a great idea. I might even invest in this company myself. In the elevator as he was leaving, Dodd spotted the former secretary of defense and former CIA deputy director Frank Carlucci—now a partner at Carlyle. Dodd was starstruck.

  At Easton’s Sidetrack Saloon and McGarvey’s Saloon and Oyster Bar in nearby Annapolis, the group pulled together a detailed business plan for the new company. Opportunities were everywhere for a company staffed by veterans of the Secret Service and the Maryland state police—Steve Forbes’s presidential campaign, then in its infancy, was a prime prospect as a client for protective services. And CSX Corporation, the railroad giant, might need help reviewing its security plans for its enormous real estate holdings.

  But they had to act fast. One member, Joe Masonis, was under pressure to tell the Secret Service whether he’d be staying or going. The opportunities could go to another firm.

  Under that time pressure, Dodd agreed to put up $120,000 in start-up funding, and the company was officially started as Beckett Brown International* in August 1995. His total investment in the firm, he says, would eventually grow to about $700,000.

  BY THE SPRING of 1996, the new company had begun to get traction. Beckett Brown hooked up with Nichols Dezenhall, a little-known Washington public relations firm that began to feed it business. The PR outfit specialized in crisis communications, the delicate art of helping companies in the midst of various corporate disasters: scandals, lawsuits, environmental catastrophes, and the like. As a result, this firm was in close contact with companies whose executives were desperate for solutions. At the same time, Beckett Brown began adding big-name intelligence veterans to its ranks. It hired Vincent Cannistraro, a former chief of the CIA’s Counterterrorism Center, as a consultant.* It also added David Bresett, a former chief of the Secret Service’s foreign intelligence branch, who had been a key liaison officer with the CIA while he was in government service. But it was the relationship with Nichols Dezenhall that kept Beckett Brown afloat as it struggled through its first year.

  Nichols Dezenhall, having just landed its own first big project for Nestlé, put Beckett Brown to work for this lucrative client: Nestlé wanted all the information it could get on Mars.

  The assignment wouldn’t be easy. Even though Mars is a global giant that produces well-known products such as Snickers and M&Ms, it has a secretive corporate culture and remains privately held by the reclusive founders, the Mars family. There’s no sign outside the company’s headquarters building at 6885 Elm Street in McLean, Virginia. All a passerby sees is what looks like a brick two-story suburban office building. The parking lot is unremarkable, and there’s no indication on the front door that you’re entering the offices of a global conglomerate; there are just white letters on tinted glass: “No Soliciting.” (Even the Central Intelligence Agency, which is situated two miles down the road, has a prominent sign visible to street traffic.) The e-mail addresses of Mars employees are cloaked, too. If you are e-mailing an executive at the company, you don’t send the message to name@mars.com; you send it to an address ending with the suffix@effem.com. That makes it much harder for outsiders to figure out how to get in touch with key Mars personnel.†

  Penetrating this secrecy meant going beyond the typical competitive intelligence techniques. After all, as a private company, Mars produced no detailed filings with the Securities and Exchange Commission, and left almost no other paper trail for the public to peruse.

  BECKETT BROWN HAD arrived on the scene just in time to become Nestlé’s own private intelligence agency in the chocolate war.

  In late 1997, the candy giants were battling over a new product: Nestlé Magic, a two-inch chocolate candy ball encasing a plastic shell that in turn held a small Disney-themed toy. Nestlé planned to market the candy for children as young as age three. Given that age group, Nestlé knew safety would be a concern. What’s more, the FDA had already warned Nestlé that the new product ran afoul of a decades-old law banning combinations of food and toys.

  But Nestlé’s executives were satisfied that they’d tested the candy sufficiently, and they argued that the Consumer Product Safety Commission had signed off on it. They thought their disagreement with the FDA was a minor technical point, nothing that would stop the rollout of Nestlé Magic. They signed a deal with Whetstone Candy, a family-run manufacturing company based in Florida, to set up an assembly line for the new chocolates. The deal called for Nestlé to spend up to $6 million to construct a new building at the facility in Florida, and Whetstone hired as many as 125 employees to operate new machines to turn out the chocolate balls.

  Nestlé began selling the candy in July 1997, sending marketing material to retailers with the tagline “The power of Nestlé. The excitement of Disney.” The product was an immediate success, moving swiftly off the shelves. The Disney tie-in was sure to be a winner. The toys inside the candy were based on the hugely popular animated film The Lion King and included such characters as Simba the lion and his sidekicks Timon and Pumbaa. There were also figurines of other characters from great Disney films: Cruella de Vil from The 101 Dalmatians, the genie from Aladdin, and more.* Nestlé also knew that children four to twelve years old have an astonishing amount of purchasing power in the economy. The company calculated that parents o
f children in that age group spent about $3 billion every year. The Nestlé team predicted that Magic would soon be generating $1 billion in annual sales. “There was an obsession with Magic,” recalls one person who was involved. The chocolate pros knew how powerful the new rollout could be: “Whoever gets the toy-chocolate combination right, they’ve got the holy grail.”

  But almost immediately, Nestlé came under a wave of assault from critics across the country. Complaints about the candy with a toy inside were being heard at federal agencies, on Capitol Hill, and in the offices of consumer groups. Even the Centers for Disease Control and the state attorneys general in Minnesota and Connecticut registered alarm. To Nestlé’s embattled executives, it looked like a coordinated attack. But they weren’t sure where it was coming from. In a 1997 memo stamped “Confidential,” a top officer at Nestlé summed up the few facts the company had: “We are aware that an individual (or individuals) are attempting to create questions about the safety of Nestlé Magic (i.e., that its marketing is illegal and/or presents a choking hazard for young children).”

  Nestlé and its consultants decided to winnow down the list of potential suspects in the attacks, and consider the evidence before them. There were complaints about children who had choked, but Nestlé’s team couldn’t identify a single actual child who’d been harmed by the product. Science-minded Nestlé executives spent an inordinate amount of time examining and reexamining the product. They inserted the little plastic toys every which way into a plastic cylinder known as a “choke tube”—a device designed to mimic the opening of a small child’s throat. If any object fits entirely within the cylinder, the U.S. Consumer Product Safety Commission considers it a potential choking hazard for kids. None of the Disney toys fit inside the choke tube, although the little Timon figure caused some worry. Still, Nestlé had designed the figurine to have overly large feet—feet that conveniently poked just over the lip of the choke tube. Nestlé concluded that its product was safe. Also, it still couldn’t find any kids who had been harmed.

  To the veteran crisis experts at Nichols Dezenhall, the fact that no children had actually choked suggested that the campaign against Magic wasn’t prompted by one group often behind such publicity: trial lawyers. After all, if trial lawyers planned to sue for huge damages, they’d need plaintiffs. Without any actual children in evidence, that wasn’t happening. There was only one other possibility: the attack was coming from competitors.

  In the candy business, a victory for one company often comes at a direct cost to another. Suddenly, Nestlé Magic was making the Mars market share disappear. Nestlé suspected that Mars was behind the sudden flurry of complaints about the new candy. Perhaps Mars was using friendly consumer groups to start an ostensibly grassroots campaign against Nestlé. Mars reminded some people at Nestlé of the dark paranoia of the Nixon White House. Surely the secretive company was capable of orchestrating a dirty-tricks campaign?

  Nestlé needed to know for sure, and quickly. It wasn’t clear that all the attacks were coming from Mars, but the charges were starting to sting:

  A letter to the deputy commissioner of the FDA called the candy “extremely dangerous.”

  An anonymous fax to columnists and food writers across the country called the idea of toys inside candy a “crazy gimmick,” and complained that “this lunacy proposed by Nestlé to the FDA today should be loudly branded a bad idea by anyone who loves children.”

  And—going right to the top, or almost—someone sent a letter to Vice President Al Gore’s fax number at the White House, urging a ban on Nestlé Magic.

  The chocolate war was raging in Washington. Soon, even odder things began to occur. In late 1997, a mysterious stranger stopped by the offices of the activist group US PIRG, which issues an annual report on toy safety. The mystery man chatted with the receptionist at the front desk—and left behind a package that included damning information about Nestlé Magic.

  Over the next several months, the man continued to send packages to US PIRG, encouraging the group to take a stand on the issue. When the people at Nestlé found out about this anonymous source, they nicknamed him Deep Chocolate—a reference to the most famous secret source of all, Watergate’s Deep Throat.

  Anxious to unmask Deep Chocolate, and eager to hear any information its allies could gather about him, Nestlé put out the word: Help us expose Deep Chocolate. One afternoon a lobbyist from Nestlé’s law firm, Hogan and Hartson, came to the offices of US PIRG for a meeting on an unrelated subject. She started asking questions about the mysterious stranger, and sent her impressions to other executives in a high-priority e-mail headed “Deep Chocolate Strikes Again”:

  I met with Ed Mierzwinski, with US PIRG, today on another matter. At the conclusion of that meeting, I asked if he had been contacted by Deep Chocolate recently.

  If Mierzwinski knew the true identity of the spy, he wasn’t going to reveal it to a corporate lobbyist. The e-mail continued:

  Ed said he couldn’t remember whether the most recent package had been mailed or delivered by Deep Chocolate. A staffer with Ed reminded me that Deep Chocolate had delivered the first package in person and had chatted with the person at the front desk. However, the staffer became a little nervous when I asked him what Deep Chocolate looked like or how he sounded. Clearly, he didn’t want US PIRG to be the one that gives the guy away.

  Mierzwinski did offer the lobbyist one clue: “Ed told me that he believes Deep Chocolate is being paid by or in league with Mars, probably working through a public relations firm,” she wrote. But who was he?

  To unravel the mystery, Nestlé hired Kroll Associates, which investigated Mars’s Washington team, gathering background information, addresses, media clips, and in some cases Social Security numbers and children’s names. They researched the lobbying firms involved, pulled the records of campaign contributions from key officials, and noted which people involved in Mars’s effort had gone to the same schools, which ones were old family friends, and which were former colleagues.

  Kroll’s investigator was James Bucknam. He had retired the year before from government service as a senior adviser to the FBI’s director Louis Freeh. At 11 A.M. on September 30, 1997, Bucknam sent a thirty-two-page fax to Christine Pfeiffer, a senior counsel in Nestlé’s legal department, laying out a strategy for Nestlé to fight back against the maneuvers by Mars:

  The general theme for the response should be that Mars will do anything to stop Nestlé Magic. The reason is that Mars does not have a product that it can put on store shelves this year; thus, pending entry of its own product on the American market, Mars cannot afford for Magic to be sold unabated. In other words, this matter involves corporate greed and market share, not child safety.2

  Kroll also noted that Nestlé should underscore the political connection: Mars was using a “cadre of Democratic Party operatives” in Washington to make its case.

  But it was too late. The FDA had granted a damning interview to the New York Times about Nestlé Magic, including one comment that made it all but impossible for the Nestlé company to continue to market the product: “This product is illegal under our act,” William Hubbard, the associate commissioner for policy of the FDA, declared to the Times reporter.3 That was the end. Nestlé surrendered. In a defensive-sounding press release issued on October 1, the company said, “Nestlé Magic meets all Consumer Product Safety Commission (CPSC) safety standards; however, due to an unresolved technical, legal question related to food/toy combination products, Nestlé has agreed to voluntarily withdraw the product.” Frank Arthofer, president of Nestlé’s Confections Division, conceded that the company faced “an unfavorable environment to market the product.”4

  Losing a skirmish in the ongoing battle with Mars was a blow to Nestlé’s pride—as well as its bottom line. Nestlé had put enormous resources and effort into Magic. Now all this input had vanished. Hank Whetstone, who ran the company in Florida that was churning out the candies, got the word to shut down the assembly line on the same da
y the Nestlé press release went out. He walked over to his brand-new building, told the 125 workers that they were fired, and turned off the main power switch for the machines. “It made me so sick,” he says.

  Whetstone says that Nestlé officials told him they’d lost $30 million on Magic. The hole in their balance sheet was a far cry from the dreams of billions that had nourished the Magic project from the outset. Soon, the manufacturer in Florida would find himself in a protracted legal battle with Nestlé over who had to pay the costs of the new manufacturing facility, now sitting idle. Nestlé’s hired spies would find their way to his facility, too, this time eager to learn whether Nestlé’s former subcontractor was using the factory that Nestlé had built to produce candy for the enemy: Mars.

  The “chocolate war” was about to see a new offensive. Nestlé continued to pour in resources. It needed better intelligence to unravel what had happened in the defeat of Magic. Nestlé wanted to know the players, the techniques, and the time line of the effort. After all, Nestlé suspected that other battles were looming.

  Now Nestlé turned to Beckett Brown, which set up elaborate surveillance on a small consulting firm, the Hawthorn Group in Alexandria, Virginia. This firm is almost entirely unknown outside public relations circles. But it has a close association with Mars, and James Kiss, the chairman of Hawthorn’s advisory board, is an elder statesman of the public relations business. He has earned the rare privilege of being allowed to cite his work for the highly secretive Mars in his marketing material.

  Beckett Brown decided to target Richard Swigart, a consultant with Hawthorn who seemed to be deeply involved in its strategic work for Mars. Could Swigart have been Deep Chocolate? Beckett Brown knew that Swigart was an important figure: when the former Secret Service men at Beckett Brown drew up an organization chart of the Mars team, Swigart was shown working closely with Edward Stegemann, the general counsel of Mars, who was said to be one of the few close personal friends of the reclusive Mars brothers.