The second Poland agreement also contained some extraordinary protections for International Match, terms that would have impressed Lee Higginson’s bankers, if they had seen them. For example, Ivar obtained an agreement that if “for one reason or another” Garanta did not earn enough profit to pay the 24 percent interest payments due to Poland, those payments would be covered by “the income of the Polish Alcohol Monopoly or … the Polish Tobacco Monopoly.”34 In other words, Ivar obtained a promise of payment supported not only by the match monopoly, but by unaffiliated monopolies on alcohol and tobacco. Ivar also included a binary foreign exchange option, a kind of derivative contract, to protect International Match from any declines in the value of the dollar: “International Match Corporation shall have the right to obtain payment of interest in Dutch guilders or US dollars according to its choice and for all such payments one dollar shall be counted as 2½ guilders.”35
Given that Garanta’s shareholders would be nominated by Dr Glowacki, how would Ivar retain control of Garanta? Here, as well, Ivar created another innovative financial provision:During the first four years until October 1, 1929, International Match Corporation shall have the right to appoint the managing director of Garanta who is alone entitled to sign for the company. On or after October 1, 1929, International Match Corporation has the right to acquire 60 percent of the shares at par.36
This option term secured both initial control over Garanta and the right to own a majority of Garanta’s shares in the future. Either way, Ivar, not Dr Glowacki, would have control.
When Donald Durant asked to see this Garanta contract, Ivar said no. The deal was too sensitive for him to reveal anything but the most general terms. Ivar said he was using an intermediary corporation domiciled in Holland, not Poland, because of “unsettled Polish political conditions.”37 Like Switzerland and Liechtenstein, Holland did not impose currency restrictions, so it would be easy for Ivar to transfer money in and out of the country. Moreover, there was no annual auditing under Dutch law and no taxes on undistributed profits. Durant always had appreciated the tax angle, so Ivar emphasized that.
Ivar also explained to International Match’s directors that their company would not pay any cash to the Holland company. Instead, International Match would pay 17 million dollars to Swedish Match, to wipe out a prior debt, and Swedish Match would then pay 17 million dollars to the Holland company. International Match would still hold the right to receive interest payments from the Polish government at a rate of 24 percent, but it would do so indirectly, through Swedish Match. Ivar argued that International Match nevertheless should list the Polish loan as an asset on its balance sheet. Liabilities might belong off balance sheet, but assets looked better on.
This arrangement might have seemed strange to the directors, and the interest rate of 24 percent looked usurious. Yet everything worked, just as Ivar said it would. International Match began receiving quarterly interest payments on the debt, about 1 million dollars each quarter, just as the agreement with Poland provided.38 As more cash flowed in, the directors’ questions went away.
In late July 1925, International Match sold 450,000 new preferred shares for 45 dollars per share - a full 10 dollars more than the issue just eight months earlier. Including dividends, investors in the previous issue already had profited by almost 30 percent. With that track record, it was easy for Lee Higginson to raise an additional 19.6 million dollars for International Match.
After paying expenses and other obligations, about 17 million dollars remained. That was exactly the amount of Ivar’s obligation to Poland. At Ivar’s direction, the cash banked like a billiard ball from International Match to Swedish Match to Garanta to Poland - from New York to Stockholm to Amsterdam to Warsaw. It was a complex transaction, but the pieces seemed to fit.
Or did they? Did the money make it through those last steps? Did Ivar initially send Poland only the 6 million dollars that Torsten had agreed to lend, the initial amount that the Polish government had approved? Or did he also send the additional amounts that supposedly were part of his secret agreement with Dr Glowacki, but were not yet approved by the government? No one in America knew, and Ivar intended to keep it that way.
In fact, the main reason Ivar had insisted that the money move to Swedish Match in Stockholm first was that he didn’t want to have to answer too many questions about the Polish deal. He didn’t want his bankers and auditors to know about Garanta, his Dutch subsidiary. Like Continental, Ivar’s Vaduz subsidiary, Garanta was to remain secret.
Although Ivar’s relationship with A.D. Berning was improving, at this point he couldn’t trust Berning to audit, or even to know about, Garanta. He could use a paper trail to show Berning the details, if he ever discovered Garanta. But Ivar needed to hire an entirely different kind of person to perform an audit - or at least an “audit” - of Garanta.
When Ivar first saw Karl Lange, he had to agree that, indeed, the man looked exactly like Santa Claus. Lange was elderly, with a thick white beard and an imposing torso. Unlike Santa, he recently had been fired from a Stockholm bank after arranging a secret loan to himself.39 Ivar was a director of this bank, and when he learned about Lange’s firing and the secret loan, he immediately offered Lange a job. Like Ernst August Hoffman, the underqualified head of Continental, this man seemed to fall into the category of people Ivar could trust.
As with Hoffman, Ivar gave Lange a few small jobs at first, as tests. Lange happily did whatever Ivar asked: travel to Berlin, help promote a stock, assist one of Ivar’s Swedish brokers.40 Ivar opened a two-room office in Amsterdam and installed Lange as the new chief financial officer and auditor of Garanta. For months, Lange’s primary job was simply to stay in Amsterdam and collect checks. Lange was not yet ready to “audit” Ivar’s new Dutch company.
Finally, during fall 1925, after Garanta had funneled the loan money to Poland, Ivar asked Lange to travel to Sweden and meet him at his apartment in Stockholm. Ivar’s apartment was a private lair, and had been off-limits to virtually everyone save a few women. Ivar kept most of his colleagues, particularly his bankers and accountants, at a safe distance. Lange was about to get a rare glimpse of Ivar’s private life.
Ivar lived at No. 13 Villagatan, in one of Stockholm’s most distinguished neighborhoods, a short walk from Tekniska Högskolan, the engineering school he had attended during the late 1890s. Kreuger & Toll had been the construction firm for the apartment building, and Ivar had followed the plans carefully. When the firm’s workers had finished the structure six years earlier, Ivar took over the penthouse maisonette flat on the west half. Villagatan was, in every sense, Ivar’s creation. He designed the plantings and shipped in statuary. He even arranged for Ingeborg Eberth, a dark-haired and attractive long-time female companion,41 to buy the mirror apartment on the east half. It was easy to drop in for a quick visit, and even easier to hear her piano across the hall.
The rare visitor entered Ivar’s public rooms on the building’s fourth floor. The front door opened to a dining room with a wide wooden staircase leading to the private rooms on the upper floor. Ivar spent most of his time up there, either in his library or in a winter garden on the roof, which he reached by climbing a narrow corkscrew staircase. The rooms upstairs were formal and spotless. Both his bedroom and bathroom were laden with Italian marble. There was an additional, smaller dining room upstairs, where Ivar usually ate, alone.42
Although Ivar had staff, he didn’t like being waited on. He still carried his own luggage, answered the telephone, greeted visitors, and opened his copious letters and cables. Ivar preferred to spend most of his time in Stockholm by himself, in silence. He had not lost the extraordinary memory skills he had as a child, and he spent much of his time devouring information about his companies, politics, and the global economy, all of which became permanently lodged in his mind.
Now in his forties, Ivar had become a creature of habit and discipline. He was anxious not to become fat, so he ate little throughout the day. Ivar preferred veg
etarian dishes, especially fruit. He rarely drank alcohol, and never at lunch, though he was capable of consuming large amounts of vodka, usually without the slightest sign of being drunk. Ivar didn’t smoke in the apartment either. He was a highly disciplined man, his one weakness being a fondness for sweet things, especially jams, marmalades, and all kinds of desserts, which he rarely kept at home.43
Ivar also had developed a habit of giving good luck taps to his favorite items in the flat. When he passed a small carved Renaissance table in the hall, he would say, “This is the loveliest table in the world,” and tap it with his finger. He was superstitious in other ways, too - or at least he liked people to think he was. Ivar was credited with spreading the story that using one match to light two cigarettes was fine, but a third was bad luck. Whatever the source, that idea caught on and boosted match sales. But if Ivar really was superstitious, he was selective about it. For instance, his address at Villagatan was apartment No. 13, and he once remarked that “For me, even thirteen is a lucky number.”44
If the morning of Lange’s visit was typical, Ivar would have woken at six a.m. and immediately weighed himself on the scale in his bathroom. For breakfast, he might have had a few cherries, his favorite fruit since childhood, and maybe a piece of toast. When he walked downstairs, he would have stopped on the last step, as he always did, to pat the heel of the small wooden bear on the lowest banister of the handrail. That little bear’s foot was worn smooth and shiny from Ivar’s patting.
Ivar, not a servant, would have answered the door for Lange, and welcomed him into a formal reception room adjoining the dining room on the lower floor. The men likely would have sat in straight back chairs facing away from a grand piano. That was where Ivar received his rare visitors. Ivar might have mentioned some of the contemporary Swedish artwork that covered the walls: etchings by Anders Zorn, a realist, and paintings of wildlife by Bruno Liljefors. Zorn and Liljefors were two of Sweden’s most famous artists, but Ivar typically was modest when he described the collection. In any event, Lange probably would not have appreciated the work, unless he intended to steal it.
The men quickly got to the business of Garanta’s audit. Ivar showed Lange a balance sheet for Garanta listing millions of dollars of assets and liabilities and abruptly asked him to sign, attesting that the figures were correct. That was it - then he could go.
What was Lange to do? He told Ivar he’d like to look over the balance sheet first, as such huge sums were involved. According to one account, Ivar stared at him stone-faced in response, and, when Lange mumbled that it would be nice to know where all the money was going, Ivar said it was being spent secretly in Poland and shouldn’t be mentioned. Ivar told Lange, “If you don’t believe me, go to Poland and see for yourself.”45 Lange nodded, and signed. Ivar had always treated him well. Why would this time be any different?
Then Ivar told Lange he was closing the Amsterdam office of Garanta, ostensibly to save costs, although part of the reason was to make it more difficult for others to trace Garanta and its records. Ivar asked Lange to keep the corporate books at his home or, better yet, carry them around with him. Even the most suspicious investigator wouldn’t suspect that Garanta’s financial statements were in the bag of a man who resembled Santa Claus.
Lange had never handled any cash, and he never would. When the 17 million dollars flowed to Garanta from Swedish Match, and Lange wasn’t sure how to adjust the accounts, Ivar told him, “Just debit it to me.”46 That was precisely what Lange did. Ultimately, Garanta’s books showed that it had received a total of 25.4 million dollars from International Match and Swedish Match, and that it had paid all of that money to Ivar. Some of the money eventually went to Poland. But no one would ever be able to trace it all.
When Ivar finished his instructions to Lange, he showed the burly man out. They would have remained on the downstairs floor throughout the visit; male guests never saw Ivar’s upstairs rooms.
After Lange left, Ivar would have resumed his evening habits, reading his mail upstairs while nibbling at dinner. If Ingeborg Eberth was in town, he might have stopped in to hear her play a piano sonata or some jazz, or just for the comfort he drew from her smiling, enigmatic eyes.47 Frau Eberth set a lovely calm in him, the kind of simple peace he rarely received from other women.
After tea or coffee in his apartment, Ivar would take his evening stroll. Walking was his primary form of exercise and he loved it, just as he had as a young man. Sometimes, when Krister Littorin was in town, they would walk together. But more frequently, Ivar would go alone. Every night he spent at Villagatan, Ivar would step out past the Carl Milles sculpture in the courtyard, turn his collar up so he wouldn’t be recognized, and wander the streets and parks of Stockholm for hours.
In 1925, A.D. Berning and his wife finally got the summer vacation Ivar had been promising. Ivar arranged for the trip to coincide exactly with the closing of the new International Match financing and the Poland deal with Garanta. Berning discussed the trip with the Ernsts, and got permission to be away while the details of the participating preferred deal were finalized. Berning wrote, “Mr Ernst felt that it was rather important that there should be a clear understanding of all of the essential factors so that the International Match Corporation’s financial record here be proper in every respect, particularly in view of the plans for its future which you have often mentioned to me. Mrs Berning is indeed pleased at the prospect of the trip.”48
Ivar arranged for the Bernings to sail for Southampton on June 9. He booked them on Aquitania, the longest-serving member of the Cunard fleet, an elder sister to Berengaria, the liner he had sailed to America in 1922. The Bernings had never seen anything like Aquitania. The ship’s walls were adorned with English seaport prints and portraits of royalty. The public rooms were stylized versions of galleries from a major museum: the main restaurant in Louis XIV style; the grill room in Jacobean style; and the first-class drawing room in the Adam style, copied from Lansdowne House in London. There was even a smoking room modeled on Greenwich Hospital with oak panels and beams.49 Mrs Berning must have been so pleased with her A.D.
Always a details man, Berning had been careful to arrange travel instructions from Southampton. Instead of consulting maps or a book on European travel, he asked his new friend Ivar directly: “As I am somewhat unfamiliar with the best route to take in order to reach Stockholm, I would appreciate it very much if you will let me have your suggestions.”50 If Ivar was surprised that an assistant manager of an accounting firm would ask him for directions, he didn’t let on. He gave Berning several options, and advised that the “best and most convenient route from London or Paris to Stockholm is Berlin-Sassnitz-Trälleborg,” a trip he estimated would take some forty-eight hours.51
When the Bernings arrived in London, A.D. received a cable from Ivar suggesting that they should meet. It sounded like there were some exciting developments in Poland. Ivar asked the Bernings to go to the Savoy Hotel, where he had arranged a suite for them. Ivar said he would travel from Stockholm soon. Meanwhile, perhaps the Bernings would enjoy some time in London at his expense?
Several days later, Ivar cabled that his trip to London had been canceled and asked the Bernings to go to Paris instead. Ivar wrote, “I am expecting news from Poland every day and if you can conveniently do so I would ask you kindly to stay in Paris until further so as to be prepared to return Stockholm if we decide to go ahead with business now.”52 Meanwhile, perhaps the Bernings would enjoy some time in Paris at his expense?
Finally, on July 23, six weeks after the Bernings had sailed from New York, Ivar and Krister Littorin, his engineering school classmate, cabled Berning at the Hotel Continental in Paris. The Bernings should come to Stockholm, now that the latest International Match issue of preferred shares had closed. Ivar said the “issue was made last Tuesday at $45. It has been very well received by the market. We thank you for your valuable cooperation and wish Mrs Berning and yourself a pleasant trip.”53
The money Ivar h
ad spent on the Bernings’ vacation was well worth it. As the details of the new preferred issue were being finalized, Ivar’s auditor - the one man who might have asked penetrating questions about the accounting details of the deal - had been just where Ivar wanted him: strolling the streets of London and Paris with his wife.
Ivar said he wanted A.D. Berning to meet Krister Littorin in Stockholm. He also wanted to take care of Mrs Berning. Ivar advised that “Miss Littorin asks if Mrs Berning should like to stay with her in the south of Sweden a couple of days in which case she would meet you in Malmoe.”54 Mrs Berning was delighted to receive such royal treatment.
In Stockholm, Ivar even invited the Bernings to see his apartment, where they had the same experience as Karl Lange: the Carl Milles statue of Diana at the entrance, the straight back chairs, the grand piano, the Zorn and Liljefors paintings. They saw everything Lange had seen, but they certainly did not see Lange. Nor did A.D. Berning see any of the Garanta financial statements Lange had signed and now carried with him. In fact, Ivar and Berning hardly discussed business during the visit, and Berning left Stockholm with no keener sense of Ivar’s companies. He still didn’t even know of the existence of Ivar’s key subsidiaries, Continental and Garanta.
The only new items on Ivar’s agenda had been some additional cash payments to Ernst & Ernst, and to Berning. Ivar agreed to pay an extra 6,000 dollars a year of consulting fees to Ernst & Ernst, in addition to other fees he already was paying. He also agreed to pay an extra 3,000 dollars of “special expenses” related to the Bernings’ trip to Europe.55 Those payments alone were more than A.D. Berning’s annual income. With this new money, Ivar had made A.D.’s year.
The Bernings left Sweden and spent a week in Switzerland, the original home of Garanta, before Ivar had moved it to Vaduz. Finally, they sailed home on Berengaria. The ship was quiet without Ivar on board, and the radio shack was less used than it had been during Ivar’s 1922 trip. But the first-class cabins were just as luxurious and by the time the Bernings arrived in New York, in August, they were glowing. Berning met with Durant for an update on the participating preferred issue, and then wrote to Ivar:Messrs. Lee Higginson & Co. are naturally much pleased with the manner in which the public received the new offering of securities and the splendid market which the shares have maintained. Everyone seems to be quite enthusiastic. Mrs Berning and I enjoyed a very delightful return voyage and have many pleasant recollections of our stay in Sweden.56
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