Category Archives: Howard Hughes
Hughes in Vegas
Hughes responded to divestiture aggressively by using his $486 million cash in hand (he was lugging it around the country in suitcases) to go after the Lansky Syndicate’s monopoly of big-time gambling. He hovered for a moment in Boston undecided whether to attack in Montreal, the Bahamas, or Las Vegas, but shortly determined upon Las Vegas. By Thanksgiving 1966 Hughes was sliding quietly into his new headquarters at the Desert Inn penthouse which his advance man – reenter Robert Maheu – had prepared for him. He would remain there, for four years to the day, then disappear under circumstances much more mysterious than those of his coming.
There can be no serious doubt of Hughes’ intentions of establishing a Nevada empire and of competing head-to-head with Lansky. Editor Greenspun of the Sun pushed for such an establishment from Hughes’s first day in town on the shortsighted argument that Las Vegas’s best weapon against the Syndicate was such a capitalist as Hughes – strong and independent.
And of course, ambitious. We have already cited Dietrich to the effect that in the West Coast phase, Hughes tried to buy up the entire local governing infrastructure from tax assessors to senators. In 1974, the then-deposed Maheu testified to the same ambition in Hughes: “I clearly recall explaining to [Hughes’s Nevada lawyer] Tom Bell the desire of Howard Hughes to own the state of Nevada, to own the judges in Nevada, to own all the officials of Nevada. I was concerned about the desire of Mr. Hughes to want to own the President of the United States.
By 1968, Hughes’s Nevada operations had grown under Maheu’s management to a worth estimated at well above a half billion dollars. Hughes was the state’s biggest employer with a staff of over eight thousand and a $50 million payroll and a private security force (under another ex-FBI man, Jack Hooper) easily a rival of the official and criminal agencies with which it might have to contend. He had put some $400 million into hotels and casinos. He owned the Desert Inn, the Sands, the Castaways, the Fontier, the Landmark, and the Silver Slipper. He was angling for the Silver Nugget, the Stardust, and the Dunes. He also owned Alamo Airways and McCarran Field and was on his way to getting Air West. He owned KLAS-TV. He owned the Krupp Ranch and thousands of square miles of other Nevada real estate and some $30 million in mining claims. Governor Paul Laxalt said flatly, “Howard Hughes’s operations are as important to Nevada as U.S. Steel is to the nation or General Motors to Michigan.”
Reflecting and furthering that eminence, Hughes in 1968 gave $150,000 to Nixon (two-thirds of it covertly), $100,000 to his presidential opponent Humphrey (half of it covertly), $70,000 to Senator Cannon, $50,000 to Senator Bible, and – strangely – $25,000 to the estate of the recently assassinated Senator Robert Kennedy.
Let us take a moment with this Kennedy contribution, superficially so out of character for Hughes. It has been explained as a Hughes sympathy gift to help with the costs of the funeral. But Hughes? The Kennedys? We might find a more plausible explanation if we set this $25,000 in the context of another gesture Hughes was making at the very same moment in the direction of the again-bereaved Kennedy camp.
On June 28, 1968 two weeks after Robert Kennedy’s death in Los Angeles, Maheu concluded a lengthy handwritten memo to Hughes with the following item:
Larry O’Brien – He is coming here on Wednesday next for a conference as per our request after the assassination of Senator Kennedy. He is prepared to talk employment and has received a commitment (without any obligation whatsoever) from the four or five top men in the Kennedy camp that they will not become obligated until they hear from him.
O’Brien Associates of New York and Washington did indeed subsequently sign a consulting contract with Hughes-Mahue, but my efforts to find out from O’Briens’s office and home what he was doing for Hughes were unproductive. No one better equipped to get an answer seems interested, even though as I write one of the prevailing theories of the Watergate DNC break-in is, in substance, that the Nixon people were afraid that O’Brien’s stint with Hughes-Nevada had taught him, and thus the Democrats, something useful about the Nixon-Hughes relationship, and that they sent the Plumbers into the DNC to try to find out what that could be.
But what was Hughes’s original interest in Larry O’Brien and the other superliberals of the RFK staff? What could have been O’Brien’s interest in a figure of Hughes’s far-right ideology? And was it not a little early after the prince’s murder for his ministers to be sifting job offers from a kingdom of the ideological opposition?
Investigator-journalist Jim Hougan, who has made a special study of Intertel (see below), buesses that by the phrase “the for or five top men in the Kennedy camp,” Hughes actually meant the attorneys, notably Robert Peloquin and William Hundley, who played roles in Robert Kennedy’s early 1960’s campaign against organized crime. By 1968 Hughes was moving irreversibly toward his confrontation with the Syndicate over control of Las Vegas gambling. Hougan thinks that in reaching out to the RFK anticrime staff, Hughes may have been simply seeking to strengthen his front.
We do not know whether this was the basis of Hughes’s interest in the Kennedy staff people or of theirs in him or how far any such common interests might have been realized in joint projects. We do not know how to evaluate the importance of Hughes’s now exposed special relationship to the CIA, Glomar, the Maheu-Roselli link, etc.) in terms of the antagonism between elements of the CIA and the Kennedy group. But we do know for a fact that the Hughes contact with the RFK staff was made, that it came about at Hughes’s initiation through Maheu, that Hughes did contribute the $25,000, that the job offers were made and at least in O’Brien’s case accepted, and that all this coincided (a) with Hughes’s efforts to reverse several antitrust decisions limiting his further expansion on the Lansky Strip and (b) with his tortuous payment via Richard Danner to Nixon of $100,000 in cash for which Nixon would be accountable to no one – not even Lansky.
The following passage from Maheu’s June 1968 memo to Hughes shows how conscious Maheu and Hughes were of the anti-Syndicate aspect of their expansion. Maheu wrote:
Howard Cannon called me this afternoon to inform that he and Senator Bible have been told all day long – by fellow Senators – that they can depend on full support and assistance in sustaining their position that we obtain the Stardust. Cannon stated that Justice was severely ridiculed for having taken action which precluded the accomplishment of what the criminal division has tried to do for fifteen years – when particularly the result was only 52 hours away.
And Hughes answered:
Now also, re the club being a gathering place for North Las Vegas’s less respectable citizens, all the more reason for us to control this very dangerous gathering place for less desirables to the result that it no longer continues to be a gathering place for the less desirable element. For this reason, Bog, I am determined we under no circumstances bring Moe [Dalitz of Cleveland’s infamous Mayfield Road Mob] or any of his group in to run it under our control. This is the very very last thing I feel we should do. So please don’t discuss the Nugget with Moe or any of his group at this time.
Hughes goes on in the same memo to approve a Maheu offer to approach the chief of the Nevada FBI. “At the same meeting, please try to arrange that Mr. FBI of Nevada will convince Dickerson [of the Nevada Gaming Commission] also of the likewise importance of our buying out the Silver Nugget of NLF because of the criminal element no gathering there and the hope that under our management this would be discontinued.”
Whether this was indeed Hughes’s purpose or just convenient rhetoric, certainly Maheu’s buying spree was having the advertised effect. As crime-writer Richard Hammer wrote a few years later, “though the Organization never completely abandoned the Las Vegas gold fields, its influence and control began to wane with the increasing dominance of Hughes. Before, there had been a widespread feeling that only the mobsters could run casinos profitably; the Hughes operations proved this was only a Mob-perpetuated myth. And the arrival of Hughes also pushed some Nevada officials out of their easy chairs to take a closer look at the casinos that they had long claimed could not be controlled.
How and why did the Syndicate let this happen? It cannot be simply that Hughes was too strong to be kept out and that Lansky had no choice but to bow before his billions. The fact is that Hughes could never have come to Las Vegas to begin with if Lansky had not decided to permit and support it. Maheu cultivated a close relationship in particular with Moe Dalitz (see Hughes’s memo to Maheu, above). Maheu actually purchased from Dalitz the hotel-casino the Desert Inn, where Hughes made his headquarters. “Not only did I depend very much upon the advice of Mr. Dalitz,” said Maheu, “but so did Mr. Hughes. Repeatedly he would ask me to get Mr. Dalitz’s advice. Mr. Hughes recognized, as I did that we had no expertise in the gambling business and that there was no one in the Hughes world at that time who did.”
Fortune speculated that the Syndicate’s earlier friendliness to Hughes was predicated on Lansky’s sense that Hughes’s “entry into gambling lent respectability to a sleazy business; stock in gaming companies enjoyed a considerable vogue at the time.” There may be something to that. It conforms with Lansky’s usual style of legitimizing previously criminal business operations. But it would not tell us why Lansky let Hughes drive him out of one of his major bases without an apparent fight.
Could Lansky in fact have been playing on a bigger field than Hughes knew? I think there is a case he was, and that Hughes was ultimately no more the victor in the struggle for Las Vegas than in the struggle for TWA. The reason I say this involves the case of John Meier.
John Meier – do not confuse with Johnny Meyer, Hughes’s aid in the Brewster episode (above) – was in his early thirties when he joined Hughes’s Nevada operations in 1968. He was diagrammatically at Maheu’s level in the organization in that he reported to Hughes through the throneroom guard, though he had none of Maheu’s power in the larger works. He had a background in ecology, systems analysis, and the Rand Corporation and had been a member of Nixon’s Resources Aid Environmental Task Force. In 1970, he ran unsuccessfully for the Senate from Nevada. With Hughes, his special province was silver mining claims and other real estate. His job was to find claims worth buying and to recommend purchases to Hughes. The altitude this had him flyin at is roughly indicated by current estimates valuing Hughes’s Nevada land and mining holdings in the $20 million range.
Two grand juries in Las Vegas later decided that what was actually happening was that Meier was in cahoots with Syndicate fronts in a massive land fraud in which Hughes was the victim. One of Meier’s confederate groups was Georgetown Research and Development, which materialized in a Watergate address one day, sold off its worthless holdings to Hughes the next, and dematerialized that night. A more constant companion was the Toledo Mining Company of Salt Lake City, whose president, Anthony Hatsis, is identified by the Senate Select Committee investigators as an executive-level officer of the Lansky Syndicate. Hughes’s losses to such Syndicate fronts on land and mining deals may have totaled as much as $10 million in the brief period, less than two years, during which Meier occupied his advantageous position.
What happened to all this money? Part of it went into a trust in the name of Meier-Callandria at Overseas, Ltd., a Swiss bank with a Robert Vesco connection. A larger part was routed out of the country through banks in the Bahamas and Montreal holding companies into a Dutch firm called Maatschappil Intermovie.
The money, thus laundered in Europe, was then funneled back to the States, where Meier and Hatsis used it to finance business ventures involving Nizon’s brother, Donald. The three men visited the Dominican Republic in September 1969. Dominican Present Juan Belaguer staged a classy public reception and sold what the Wall Street Journal termed “valuable” concessions to Hatsis’s Toledo Mining, whose stock rose to $30 per share. In a splashy public ceremony, Donald Nixon conspicuous at the side, Belaguer decorated Meier for “Hughes’s charities” in the Dominican Republic, and Meier and Hatsis scratched back by giving blocks of Toledo stock to various Dominican officials “for services rendered in regard to securing a mining concession.”
The relationship developing between John Meier and Donald Nixon was observed from the White House with some anxiety. The president’s personal tax accountant, Arthur Blech, was told to review all of Donald’s proposed projects, including the Dominican ones. Blech is said to have turned them all down. Then White House pressure against Meier’s relationship to Donald intensified. Rebozo called Maheu in Las Vegas and told him to keep Meier away from Donald. Nixon’s famous brother-bugs were put in. Donald was put under twenty-four-hour White House surveillance. The FBI hassled Meier, Donald and Hatsis together at a Florida airport in September on one of their trips to the Dominican Republic. Maheu answered Reboxo that he too wanted to get rid of Meier, but that Meier worked for Hughes, not for him. Maheu said that Hughes liked Meier, and that all Maheu could do was to ask him to keep away.
Maheu also put a tail on Meier and thus found him and Donald Nixon trysting in October in the Orange County Airport. As a result of the intense reaction this provoked, Hughes at last cut Meier loose. Maheu said he was fired, Meier called it resigning. Meier was taken on at once by Hatsis at Toledo Mining as a $6,000-a-month consultant. IN the Summer of 1975, he was avoiding indictments in British Columbia.
The Thanksgiving Coup
The conflict developing here between Hughes and Lansky, with the Meier branch of it curving through the foreground, forms the strategic context of the events of November and December, 1970, the Thanksgiving coup of Hughes’s Nevada Operations and the overthrow of Maheu.
We are concerned in this coup with a power struggle between two parts of the Hughes empire in which various outside parties participated, not always openly. On one side, the main force was the Toolco board of directors and the main actor was Chester Davis. On the other side, the main force was Hughes’s $400-million Nevada Operations and the main actor was Maheu.
Davis and Maheu were not new men to the Hughes empire. Davis had come on to fight the TWA case in 1960 and was stilla stride it. Maheu had come in through the FBI and a private career in the security business. The hotel-dicks-at-heart who make up this insulfurated subculture must see their highest dreams realized in Maheu’s life. Before his fall, this entailed a $600,000 mansion to live in rent free and an annual salary of $520,000 to play around with, never mind the fishing and hunting lodges, the private airplanes always ready to go anywhere, the constant company of millionaires and their kind of people. He had come to Hughes in the late fifties as a security and intelligence expert with a background of FBI work in Chicago. As noted, he took charge of such seamier chores of Hughes-tending as matchmaking the CIA with the Rosselli-Giancana crowd in plots against Castro’s life and against the life of who knows who else besides. He got it on with Syndicate heavies like Dalitz in order to operate casinos successfully in Las Vegas. After the Castro work, he turned up next in the Boston interlude after the divestment of TWA when Hughes first decided to take on the Syndicate for control of Las Vegas. Maheu put together the whole secret move to Las Vegas, including the impenetrable security precautions, and allowed Hughes to arrive while Lansky slept or pretended to. He quickly became the chief officer in charge of Hughes’s boisterous Nevada expansion.
Maheu was fearful as early as March 1968 that the old Hughes guard of Houston and Los Angeles, the Toolco board, would grow jealous of his unique closeness to Hughes. The Toolco board’s authorization was still required for most of Maheu’s deals in Vegas. Although, the board would never refuse a specific order from Hughes, it could be dilatory in the absence of such an order. It could cut Maheu off. Maheu sought reassurance from Hughes in 1968 against any problems the intrinsically touchy situation could lead to. Hughes answered him as follows:
Bob, I have your message. I do not feel your apprehension in the least unjustified. If I give you my word to find a solution promptly, such as a voting trust for my Hughes Tool Company stock [which of course would have made Maheu the legal master of the whole Hughes empire], and if I put the formalities into a state of effectiveness for your scrutiny without any unreasonable delay, will you consider it done as of now, so your mind will not be filled with these thoughts in the near future? I will assume an affirmative answer and proceed accordingly.
Hughes never got around to doing that, but at the same time he stayed available to Maheu by memo and phone, sometimes (so ‘tis said) spending twenty hours a day on the phone with him.
In January 1970 Hughes put Maheu in charge of the TWA case, an act which set in train the events leading to the major climax of his career, the Thanksgiving coup, and possibly thence to Watergate. Hughes’s tone as he undertook this move was definite:
“Bob, please understand one thing which I do not think you have understood heretofore: you have the ball on the TWA situation. You do not need further approval from me to a specific settlement of a specific sum of money….If I am to hold you responsible for the overall outcome of this litigation, I must give you the complete authority to decide which law firm you want to handle each phase of it. I repeat, Bob, you have full authority.”
Maheu convinced Hughes to say this to the Toolco directors.
He did, they accepted the news with whatever inner murmurings but no recorded protest. And indeed issued Maheu “the necessary authorizations to handle all the phases and aspects of the TWA suit, including a settlement.”
This gave Maheu strength but left him exposed. There were first of all the troubles normal and natural to the TWA case itself. On April 14, 1970, Judge Metzner handed down a final judgment in favor of TWA against Hughes of $145,448,141.07. By the time the Supreme Court threw the whole thing out of court three years later, chargeable expenses had worked that amount up to about $160 million. That was what Maheu was looking at, and his job was to succeed where Davis had failed in finding a way not to have to pay it. On top of this, he had the additional problem of having to work without the sympathy of the powerful Toolco directors.
No sooner does Hughes turn the TWA problem over to Maheu than Maheu learns – this is in February 1970 – of a large-scale land fraud operating somewhere inside Nevada Operations. Now we can sense the Lansky pressure, but all Maheu had to go on then was a rumor. Taking up the TWA task with one hand, with the other hand he began to track down the silver mining swindle.
Maheu seems to have done everything you and I would have done to avoid getting shredded to pieces by the corporate violence implicit in this situation. Especially on the TWA matter, it is hard to see how he could have covered himself any better than he did, first in getting Hughes actually to tell the Toolco board that he was putting Maheu in charge, then in getting everything confirmed in explicit Toolco authorizations.
Maheu’s first step with TWA was to hear everyone out on the question of what to do. First he heard Chester Davis, whom he thought too defensive of his own role in the preceding legal defeats. Davis might well have been very defensive. These defeats amounted to the loss of a very large airline and the threatened loss of a very large amount of cash. The Supreme Court would finally agree in January 1973 that Davis was right and had been from the first day. But early in 1970, facing a damages bill for $160 million and a lost airline, Maheu thought Davis’s efforts to defend himself and his strategy too self-serving to be true.
So Maheu went to four blue-chip law firms with the question: Given everything that has happened and the situation as it is, what should Hughes do to save whatever can be saved out of the TWA mess? Maheu went to Washington to Clark Clifford’s firm of Clifford, Warnke, Glass, McIlwain & Finney. He went to New York to Welch & Morgan, the Morgan being Edward P., a close friend of Maheu’s and the Hughes lawyer whose advice originally decided Hughes on going to Las Vegas. He went to New York’s Donovan, Leisure, which represented Toolco throughout the damages hearings. And he went to the Beverly Hills firm of Wyman, Bautzer, Finell, Rothman & Kuchel, whose Gregory Bautzer was a long-time associate and Hollywood friend of Hughes.
Each one of these firms told Maheu to do the same thing; namely, get Davis off the case. This was not necessarily because they found Davis is a bad lawyer. It was because rightly or not the arguments he stood for had been rejected by the bar, and what was n ecessary for Hughes now above all was to get the case back in court. That required new arguments and new arguments necessarily required a new chief counsel. So Davis had to leave the case. One could think up the new arguments later. Perhaps there were even some good ones. It did seem strange, after all, that the largest damages claim ever yet awarded in the history of civil law should have been awarded in behalf of a company against the man who built, made, and owned that company. And it was also strange that the claim was not awarded on the merits of the case at all but because some inexplicable inner compulsion kept Hughes from appearing personally to testify in his own behalf.
What about Hughes solitude? Why could he not show his face to save $160 million? Does this not go beyond eccentricity? Sometimes it seems Hughes must have died, as so many insist, long before April 1976. The only people who claim definitely to have seen and had daily transactions with Hughes are the so-called Mormon Mafia, or the Big Five, the mostly Mormon superstraights who were said to tend him as nurses and secretaries. They were all recruited by Bill Gay of the Toolco board, and they are of course loyal to Gay. Parties to the events they served, partisans, these five men alone assured us of Hughes’s existence. That he did as they say he did, willed as they say he willed, we have no word but theirs.
But this is getting us too much ahead. We are thinking here of the standing mystery of Hughes’s reclusiveness, and we note that, come to think of it, with a tiny number of doubtful exceptions, the only people who actually saw Hughes since 1970 were Gay’s men. Maheu later took his place in the ranks of ministers who must observe ruefully, as he did, “All you have to do is control the palace guard, because that is who really controls the empire.”
But Maheu’s rue came a year later. In early 1970, armed with the best legal opinion Hughes’s money could buy, he opened his reign as strawboss of the TWA project by informing Toolco and Davis that Davis was off the TWA case. Not that he was no longer Toolco’s chief counsel; Maheu never claimed the power to fire Davis from his corporate bastion. Only that the universally recommended legal strategy in the TWA case required the use of new attorneys.
At that moment, Hughes suddenly moved Maheu in two new directions simultaneously. First, he launched him in an effort to penetrate gambling in the Bahamas. Hughes’ consciousness of what this entailed ins indicated in a fragment from an early 1970 phone conversation (taped) with Maheu: “If I were to make this move I would expect you to wrap up that government down there to a point where it will be – well, a captive entity in every way.
Hughees’ interest in the Bahamas was not new. His choice came down to the Bahamas or Las Vegas in Boston in 1966. But actually activating Maheu to start thinking of ways to take on and beat the Lansky apparatus in the Bahamas – that would look new and different from a Lansky perspective, all the more so because Hughes’s concurrent gyrations with Nixon in Washington.
And second, Hughes got Maheu going on a secret campaign to find out what Meier was up to in his theretofore secluded little silver-mining corner. In other words, Hughes was now opening two new fronts against the Syndicate on top of his already achieved preeminence on the Las Vegas Strip. He was expanding to the Syndicate’s other capital, and he was about to discover their man in his machine.
These were Maheu’s preoccupations as Davis mobilized his response to the TWA dismissal notice. Davis informed Maheu that his notice naturally meant nothing to him or to Toolco, and would Maheu please stay out of matters lying far outside the scope of his contact as a consultant on gambling and hotel security.
To date you have lost this case at every level with catastrophically adverse financial and other injury to the defendant….You were previously before the Second Circuit on this case and sustained a crushing defeat. This must not be repeated. You have repeatedly assured me that no antitrust violations were involved and that in consequence TWA could prove no damages. I must conclude that you were either wrong or wholly ineffectual, for the judgment now stands at a staggering figure. The time is at hand for other counsel to endeavor to achieve a favorable result….I deeply resent your presumptuous request that I “cease interference with the counsel in charge and responsible for the case.” There has been no interference on my part other than taking steps to accord other counsel an opportunity to salvage a case which you have tragically lost.
The Toolco directors behind Davis were meanwhile taking four concrete steps.
1: They voted the dismissal of Maheu.
2: They mandated Director Bill Gay to have the Mormon Mafia cut off Maheu’s communications. Maheu was from now on losing this particular game.
3: They ordered the two chiefs of the throneroom guardsmen, Howard Eckersley and Levar B. Myler, to enter in unto Hughes with a one-sentence proxy conferring full powers to the Davis group. This proxy was signed by Hughes, according to Eckersley who notarized it and Myler, who witnessed it. Hughes had now assigned to the Toolco board the right to run a large section of his empire.
This was November 14. Myler took the signed proxy to the Nevada State Bank in Las Vegas and put it in a strongbox.
4: Toolco promoted a whisper-in-Hughes’s-ear campaign against Maheu. “No outsider so far is privy to the exact details,” writes Tinnin, “but in essence, the reports informed Hughes that Maheu had developed into a disloyal and avaricious employee, who was taking his trusted employer for all he was worth.” The story on Maheu was that he was pocketing part or all of the finder’s fees for everything Hughes was buying in Nevada. These charges were never proved. It now is clearer that what was happening was that Toolco was accusing Maheu of the crimes that the Syndicate was committing and that maheu had begun to stumble onto.
Hughes’ Nevada security chief, Jack Hooper, left un-guarded the back stairway leading down from Hughes’s Desert Inn penthouse to a backdoor opening onto a parking lot, Hooper had taken off the door handle and assumed the doorway was now permanently closed. On November 26, 1970, the palace guards, the Eckersley-Myler group, took Hughes down nine flights of back stairs, out that door, and into one of several waiting station wagons. IN a variation on the Boston departure of 1966, a decoy caravan of black sedans with California plates was dispatched to Hughes’s McCarran Field, while the actual Hughes party drove to Nellis Air Force Base. There they were met by a Lockheed JetStar, leased from the Lockheed Aircraft Corporation, come to carry Hughes away to the Bahamas.
Hughes was met in the Bahamas on Thanksgiving Day by an Intertel official named James Golden, whose presence in the melodramatic escape episode is interesting because of his reputation as “Nixon’s man.” Secret Serviceman Golden was assigned to Vice-President Nixon in 1957. He accompanied Nixon to Russia and Central America. They got stoned together in Venezuela. They grew close. When Nixon left the White House in 1960, Golden left the Secret Service to take a job as security chief for Lockheed. In 1968 Lockheed gave him a leave of absence to join Nixon’s campaign as director of security. After Nixon’s election he became Resorts International’s deputy director of security on Paradise Island. He was a founding officer of Intertel and one of its vice-presidents at the time of the events of November. He later joined the Hughes Las Vegas staff. As of summer 1975, he was at the Justice Department as chief of the Organized Crime Strike Force of the Law Enforcement Assistance Agency.
Golden’s presence in the coup raises the question of a Nixon influence, since “Nixon’s man” either means nothing or something. Could Nixon have been involved in the plot of Thanksgiving 1970 to overthrow Maheu, abduct and confuse Hughes, and radically change the nature of the crime-connected, FBI-connected, and CIA-connected Hughes empire? Was the motive to protect the Meier-Donald Nixon racket against exposure? Was it to resolve the tensions of the Hughes-Lansky conflict within the Nixon coaliton? Golden’s possible role constitutes a workpoint for further investigations.
For the next four days, Hoopers’s guards kept routine vigil at their closed-circuit TV displays which showed every means of access to Hughes except the one actually used by the intruders. Then Greenspun got a tip from a Syndicate friend at the Desert Inn to the effect that Hughes’s suite had been strangely quiet lately. Greenspun got his intelligence to Maheu. Maheu tried to put through a call to Hughes. A second-level aide finally answered and told him Hughes was no longer there.
The next day, December 3, the Sun headlined, “Howard Hughes Missing.” A Toolco director later said that Hughes saw this headline on December 4 on Paradise Island and was infuriated. Throneroom guardsman Levar Myler claims to have heard Hughes say that Greenspun by himself would never have dared print such a headline and that Maheu therefore had to be behind it, and thus that Maheu should be fired at once. Myler said Hughes then told him to release the November 14 proxy.
On that same day, December 4, Toolco battle commander Davis summoned his adversary’s friend and lawyer, Ed Morgan, to a meeting in Beverly Hills. Morgan had been active that summer in the transfer of the Danner-Rebozo money (and would be again active in its return three years later). On this trip to face Davis, in fact, Morgan brought Danner along. Danner’s reputation is that of an intimate of Nixon’s. He was also at this time a manager of one of Hughes’s hotels in Las Vegas.
Morgan and Danner found Davis awaiting them in Beverly Hills with Toolco directors Bill Gay, Calvin Collier, and Raymond Holliday. Davis told Morgan that Morgan’s client, Maheu, was thereby formally and officially fired by Davis’s client, Toolco, which was sole representative of Hughes. Davis flashed the November 14 proxy to prove it. Hughes had lost confidence in Maheu, said Davis. Nevada operation were not doing well. Earnings were less than 5 percent on a turnover of about $5 million. Only the Sands was showing a good profit. (And Danner was also fired, screamed Holliday, “number five on a list of 155,” This was a mistake soon corrected. Holliday had perhaps not appreciated the importance of Danner’s relationship with Nixon. Danner is last seen, post-Watergage, running the Sands.) Both groups flew back to Las Vegas that same day.
December 4, 1970, transfigured Vegas night. In swooped the Davis command – secretaries, files and telephones going full speed from first landing. Davis commandeered the penthouse at the Sands. The Sands was at that time managed by Maheu, but like the rest of Hughes’s Nevada holdings, it was actually owned in the name of Toolco. The Sands and the rest fell within the legal authority of the Toolco board and Davis.
Davis liberated and occupied his chosen headquarters swiftly. He installed a tough-looking security guard and announced that he alone spoke for Hughes, that Maheu was now out, and that a whole new order reigned.
Simultaneously, Davis commanded his “small army of special agents form Intertel,” flashing their mysterious credentials, to move with no more than necessary force into the sacrosanct cashiers’ cages in all the Hughes casinos. The Intertel men stuffed the cash into paper bags and boxes with no explanation other than their story about “a new management” and no credentials other than their advantage in surprise and force. They could as easily have been robbers as cops. They completely succeeded in putting the law’s first nine parts to work for Toolco. Subsequent discussion about who actually should boss the casinos was much influenced by the fact that Davis did.
We noted above that Maheu had feared something like this all along and had repeatedly sought Hughes’s reassurances that he was doing just what Hughes wanted him to do. Now he had no access to Hughes and therefore no reassurances and therefore nothing. The lawyers Morgan and Bell were loyal to Maheu, as were Greenspun with his paper and Hooper with his shamefaced security force. These people gave Maheu some capability for tactical defense but not enough. Without Hughes’s voice to animate it, Maheu’s world turned back into a pumpkin.
But Maheu did make a good argument of it. He gave four solid reasons in support of his outrageous theory that Hughes had actually been abducted by his enemies.
1: Hughes’s health was too poor for so sudden and hurried a trip. Newsweek reported on these events in its issue of December 21, 1970. This story scornfully informed its readers that “Maheu’s group spread another story that Hughes had been visited by a heart specialist (or in one version, three heart specialists) in November, that he was too ill to be moved anywhere but to a hospital, and that he had been kidnapped.” But actually, one of the few hard facts in this case accepted by all sides is that in the early part of that month, Hughes’s health had so sharply declined that Hooper’s security agents and Gay’s throneroom guards were compelled to open the airlock and let a doctor-human from the normal world, Dr. Harold Feikes, come into the innermost bubble to examine Hughes in the flesh, forbidding task. Davis quickly got a court order shutting Feikes up on what he had observed behind the screen at Oz, but in the split second before the order fell, Feikes said enough to confirm the general lines of Maheu’s claim.
According to Feikes, Hughes stood six feet four inches and normally weighted about 150 pounds. Now, said Feikes, he weighed 97 pounds and was suffering from an active heart condition, pneumonia, and anemia stemming from chronic malnutrition. (Malnutrition in one of the world’s richest men? His routine lifelong diet was cookies and milk.)
Feikes gave him immediate blood transfusions and said later that he was still on transfusions at the time of his sudden departure for the Bahamas, a departure carried out so hastily, however long it may have been considered, that he actually left behind his till-then precious or even indispensable life-support equipment. Maheu may well have found this sufficiently improbable to raise doubts about Davis’s claims.
2: Maheu thought it was strange that Hughes should choose Davis and Gay as his personal trustees in a matter as sensitive as this. Maheu said he once suggested to Hughes that Davis be brought to Las Vegas for a certain legal task, and that Hughes answered, “God damn it, Bob, you must be losing your mind. If we allow this man to come to Las Vegas, in 24 hours the whole city will be devastated, and in 48 hours the entire state of Nevada will be in chaos. This is of course self-serving on Maheu’s part, but it was apparently ture that Davis had been in bad standing with Hughes. Hughes had tried to take Davis off the TWA case and may easily have sensed and resented his resistance. The Toolco directors of course knew all about this, having gone through the ritual transfer of authority from Davis to Maheu earlier in the year.
Gay was also on the outs with Hughes. In 1965, Hughes backed a new major corporate undertaking on Gay’s recommendation. This was a computer company, Hughes Dynamics, aimed at capturing a piece of IBM’s action. Hughes Dynamics collapsed within a year with a loss of about $9 millioin. When Hughes was preparing his clandestine entry into Las Vegas, he turned to Maheu for security, Gay’s former preserve. According to Maheu, Hughes also gave instructions that Maheu was “not to invite Bill… and not to permit him to be privy to our affairs….I no longer trust him. My bill of complaints against Bill’s conduct goes very deep.”
I explained this to bill Gay in great detail. But he resented it to the extent that he began to move into areas of my domain…Shortly after we had arrived here [in Las Vegas], I asked [Hughes] if, on land problems, I was to take instructions from Bill Gay. Whereupon he literally went into a tirade and explained…that Bill Gay was less important in his world than his aides [i.e., than the throneroom guard]. He said that Bill Gay’s only assignment in life was to keep his relationship with Mrs. Hughes intact…and to keep Mrs. Hughes’s name out of the newspapers. He said Bill was just a baby-sitter for Jean.
Maheu, then cited a passage from a later Hughes memo on Gay: “Bills total indifference and laxity to my plea for help in my domestic area, voiced urgently to h im week by week, throughout the past seven or eight years, have resulted in a complete, I am afraid irrevocable loss of my wife. I blame bill completely for this unnecessary debacle. I feel he let me down – utterly, totally, completely.” (Hughes and Jean Peters were formally divorced in 1970.)
3: Maheu argued that it was certainly peculiar for a man like Hughes, engaged as he was at that exact moment in a battle for control of the Las Vegas-Bahamas gambling axis, suddenly to abandon old friends and helpers in the game, people like Maheu himself and Hooper, and to leap headlong down the spiderhole of an organization like Resorts International, “a company which operates a casino in the Bahamas…in direct competition with those in Nevada.” This in spite of bad health and only on the counsel of formerly dispirited executives. On top of all, what would possibly lead him to employ as over-all manager of this trip a security organization, Intertel, 94 percent of which was owned by Resorts International?
So even if Intertel was not the CIA or the Lansky Syndicate, it was still the least the CIA of Resorts International, and that Resorts International, whether it was a Syndicate front or not, was still Hughes’s chief competion.
4: Lastly, Maheu raised the question: If Hughes was so down on him, why not simply terminate his contract? Why so much fuss? Why the seemingly deliberate attempt to provoke a public controversy? And was it not another stupendous coincidence that Hughes should have closed himself off to Maheu at the very moment the Toolco board felt most threatened by him? One moment Maheu is a good guy with Hughes doing a hard job honestly and well. His communication lines are open to the top. He bends over backward to keep his face and hands clean. He is studiedly correct in all things. Then, pop! The mandate he won by that very competence, the TWA mandate, brings him up against the power of Davis and Toolco. So Gay tells the throneroom guard not to carry Maheu’s memos to Hughes anymore, not to put his phone calls through, to tear up his Valentines and badmouth him to Hughes – and thus lead Hughes to the belief that Maheu was responsible for the Syndicate’s silver-mining swindle.
The force of Maheu’s self-defense grew with developments, the following two in particular.
First, after years of digging in the records of Maheu’s Nevada administration, Toolco attorneys were unable to find a single fault to stick him with. Then in July 1974, in Los Angeles, Maheu won a jury verdict in his multimillion-dollar libel suit entered against Hughes in 1972 after Hughes told reporters (in a telephone interview growing out of the Clifford Irving “hoax” biography affair) that Maheu was a “no-good, dishonest son of a bitch and he stole me blind,” a view Hughes held on the strength of information he got from the Toolco throneroom guard service, the Mormon Mafia.
The Las Vegas battle was finally resolved not by the force of anyone’s arguments or by the integrity of either side, but by the Eckersley-Myler proxy of November 14. Myler got it from the strongbox and presented it to the court on December 10. Eckersley arrived the same day from Paradise Island with a long letter purportedly from Hughes in support of Davis. Two days before, phoning from the Britannia Beach Hotel, Hughes spoke to Governor Laxalt and District Attorney George Franklin. Both of them said they were positive the person they heard calling himself Hughes over the phone was the same person they had heard every other time they believed themselves to be talking to Hughes. Hughes told them he was alive and reasonably well, that Maheu was a disloyal employee and had been fired, and that Davis spoke from him in all matters.
Maheu produced a handwriting expert who swore that the Hughes signature on the proxy was a fake. Davis produced another handwriting expert who swore it was genuine. The court found Davis’s expert the more convincing one. Maheu lost his job.
In the aftermath came a complete reconfiguration of the over-all Hughes empire. In place of the old Toolco, a new creature materialized, the Summa Corporation. And stock in the drillbit company from which it all had started was publicly traded on the New York Stock Exchange. The CIA relationship was continued within the structure of Summa and the Hughes Medical Institute of Miami.
Something had come full-circle. Hughes, the individualist tycoon had now disappeared altogether behind exactly the kind of closet corporation that had been hounding him all of his life – perhaps the master, but perhaps after Thanksgiving 1970, the slave and victim of an ambitious and resourceful staff in revolt.
The Greenspun Caper
Maheu could not prevail against Davis, but he protected himself against annihilation by stashing away, in the safe of his ally Greenspun, his large private collection of Hughes documents and tapes. It contained memorable items not only from the teeming four years of happiness in Las Vegas, but also from all Maheu’s adventures with Hughes before that, such as the time Maheu got the CIA and the Syndicate together. Since Maheu was at one time or another immersed in these activities, his documents presumably painted an insider’s picture of the larger relationship emerging between Hughes, Toolco, the CIA, and the Syndicate.
Rumor of the scope of Maheu’s document trove finally prompted Robert Bennett, president of the CIA-linked public relations firm of Robert Mullen and Company, to convene a meeting in Washington between himself, Howard Hunt and Ralph White. White was the new Hughes-Nevada security chief after the coming of Toolco. He has an Intertel background. Bennett assembled this group in order ot discuss “the communality of interests” among them in the contents of Greenspun’s safe. Bennett is the son of Utah Senator Wallace Bennett, a high official of the Mormon Church. He joined Mullen and Company as its president early in 1971, bringing the Toolco-Davis account with him.
Mullen and Company was incorporated in n1959. According to Senator Baker’s special report on the CIA and Watergate (July 2, 1974), Mullen “maintained a relationship with the CIA” from then on and was providing cover for agents in Amsterdam and Singapore at the hour of the Watergate break-in. Besides Hughes, Mullen was also close to ITT and CREEP. Douglas Caddy worked out of Mullen offices during the halcyon days of the Huston Plan.
Hunt told the Ervin Committee what he had told McCord, that there was some scandal on Muskie in Greenspun’s safe. Hunt’s tenacity in struggle is better than this story. Greenspun’s denial, the partial revelation of the Maheu papers, and the whole subsequent flow of the situation persuade us that McCord’s estimate the following December was better; that Nixon and Mitchell thought “Greenspun had other material which would personally incriminate the President and his friends.” We need only wipe away the dust to see that this material was the Maheu collection.
The February 1972 meeting at Mullen’s Washington office determined upon a straight-ahead, Liddy-style approach to the problem, i.e., burglary, a Plumber favorite. McCord’s testimony is that Liddy told him that he, Liddy, shortly thereafter handled a first-installment Hughes contribution of $50,000 to CREEP, the money flowing from Hughes through Bennett. In November, also flowing between Bennett and Liddy at the Mullen/CIA office, another Hughes cash dose for CREEP came through, this one for $100,000. Was Toolco hiring the services of the White House Plumbers?
In April, Liddy went to Las Vegas (again according to McCord) to case the layout of the Sun a second time. McCord does not say the break-in was actually attempted, but his account indicates that plans and preparations were carried to extensive detail. The Maheu documents and their White House thieves were to have been flown out of the country to a Central American haven in an airplane provided for that purpose by Toolco.
An unsuccessful attempt to open the Sun’s safe was reported that month. It has never been conclusively linked to the Plumbers. But whether the Greenspun document heist was abandoned in the planning stage or muffed in the attempted execution, it remains an abiding fact of American history that it did not end the interest of the Nixon people in the contents of Greenspun’s safe or the Hughes problem. The best current explanation of the actual Watergate break-ins of June 1972 is that they were motivated by fear that something on Hughes and Nixon – possibly on the whole question of Cuba, the CIA, and the attempted Castro assassination – had fallen into the hands of the McGovernites of the Democratic party. Even in the glaring publicity of the Senate Watergate hearings, the Nixon people still could not resist a last little try to get these papers back to Toolco. On May 23, 1973, the day after McCord told the Ervin Committee and the world of the Greenspun break-in plot, two IRS agents showed up at Greenspun’s office with a pretext for demanding the Maheu material. Greenspun went to court and got that stopped. The safe remained inviolate, and Maheu’s treasure helped serve him a victory in his Los Angeles libel suit against Hughes.
The Hughes-Nixon Connection
We opened this exploration of the political-economic Hughes with the words that first brought his name into Watergate, those of McCord to Ervin on May 20, 1973. In view of the specific light cast by the story just reconstructed, I think we now know how to decode the McCord statement. He is telling us the technical truth, but he is also telling us that a significant detail is wrong, that something else was afoot, that we should look for a twist. He is saying through clenched teeth that Nixon was the presidential figure whome the Maheu-Greenspun documents posed a threat to, not Muskie. Decoded, his original statement would then read:
Liddy said that Mitchell told him that Greenspun had in his possession blackmail type information involving NIXON [not Muskie] and Mitchell wanted that material, and Liddy said that this information was in some way racketeer-related, indicating that if this candidate, NIXON [not Muskie] became president, the racketeers or national crime syndicate would have a control or influence over him as president.
I submit that this is the “other motive” McCord hinted of, the unnamed motive he thought might actually have prompted the Greenspun caper. The link between the “presidential candidate” and organized crime existed, but if I am ever to be too obvious, the motive oof the attempt on Greenspun’s safe was to protect that secret, not to acquire it, because the link did not run between Lansky and Muskie, it ran between Lansky and Nixon and Hughes.
Theory: Hughes and Lansky both had a piece of Nixon.
When Hughes and Lansky got along, as they did so well on the Cuban question, things went well. They went badly after about 1968, when Meier appeared. The Hughes-Lansky conflict over Nevada was a conflict internal to the Nixon coalition, essentially a conflict for control of the presidency and the president.
The Yankee and Cowboy War
Watergate is a labyrinth we traverse in three directions in the following essays on Howard Hughes, Dorothy Hunt, and James McCord. My central claim is that the arrest of the Watergate burglars was the result of a set-up, that it was no more an accident that the Plumbers were caught than that they were in the offices of the Democratic National Committee to begin with, that there were actually two secret operations at Watergate, colliding invisibly as hunter and prey.
The issues joined in this incredible intrigue are the general issues of the struggle between Yankees and Cowboys. The essay on Hughes takes up the Yankee/Cowboy theme at length and sets out to show in concrete detail how the larger forces thus indicated can be seen at work in the history of Hughes and his battles and wars, first against the East Coast banking combines around the Rockefellers, then against the international crime Syndicate under Lansky. We follow step-by-step the evolution of the general features of the Yankee/Cowboy, Rockefeller/Hughes, Hughes/Lansky conflicts into the particular features of the Watergate confrontation.
The essay on Dorothy Hunt’s death in an airplane crash argues that the crash was the result of sabotage with a Watergate-related motive, bearing on the crisis of the Howard Hunt/White House blackmail scheme. I don not know or pretend to know how or by whom this plane was brought down, any more than I know who killed the two Kennedys and King. But just as in those cases, the careful review of the material evidence indicates that we are once again in the presence of an official deception in a capital case.
The McCord essay then explores in detail the anomalies surrounding McCord’s person and role in Watergate. The argument is that McCord did not blunder, that there was no slip-up to it when he left the telltale tape on the door, that he was actually an anti-Nixon double agent responsible to Yankee interests, pointman in another Yankee attempt at counter-coup – this one a success.
The Hughes Connection
Howard Hughes’s name surfaced in the story of Watergate on May 20, 1973. When James McCord told the Ervin committed and its media audience of an abandoned 1972 White House plot to steal certain documents from the safe of editor Hank Greenspun’s Las Vegas Sun. Greenspun was an ally of Robert Meheu, the top Hughes aide who connected the CIA and the Mafia in 1960, who came to prominence in the Hughes empire late in 1970. McCord testified that his fellow Plumbers, Hunt and Liddy, were to have carried out the break-in and theft of the papers and that Hughes interests were to have supplied them with a getaway plane and a safe hideout in an unnamed Central American country.
What could the Greenspun documents have been? Why should both Hughes and Nixon have been interested enough in them to attempt a robbery?
Liddy said [testified McCord] that Attorney General John Mitchell had told him that Greenspun had in his possession blackmail type information involving a Democratic candidate for President, that Mitchell wanted that material, and Liddy said that this information was in some way racketeer-related, indicating that if this candidate became President, the racketeers or national crime syndicate could have a control or influence over him as President. My inclination at this point in time, speaking as of today, is to disbelieve the allegation against the Democratic candidate referred to above and to believe that there was in reality some other motive for wanting to get into Greenspun’s safe.
For their own reasons, the senators were not tempted to follow that thread in their public examinations of McCord. But the investigative staff took a few more steps, and some independent but related court cases came to term, and it thus became possible to build a reasonably solid speculation about the role Hughes and his empire played in the Watergate confrontation. It is still not possible for outsiders – i.e., ordinary citizens – to form more than a rough sense of the underlying truth, but the following provisional reconstruction may sharpen our impression of the quality of the Hughes mystery and show why we cannot be satisfied with the conventional sense that it belongs only to the realm of the eccentricities of the rich, not to the realm of world-historical politics.
Hughes unites in his single person all the major sides of Cowboy capitalism’s current situation: its compromised relationship to organized crime, its servility towards militaristic authority, its last-ditch entrepreneurial desperation and bitterness, its gradual transformation into multicorporatized (i.e., monopolized) business structure in spit of all. Yet Hughes was not the ally of big crime, and he was not finally Nixon’s friend.
In 1935, when Bebe Rebozo was opening his first gas station in Miami and Richard Nixon was at Quaker school and Meyer Lansky was launching his Cuban projects and David Rockefeller was cutting his banker’s teeth on Depression economics, Howard Hughes at thirty was flying a widely admired aircraft of his own conception, design, and fabrication, the Hughes H-1 Racer, to a world speed record of 352 miles per hour. Two years later he set the coast-to-coast flying record of seven hours and twenty-eight minutes. In 1941 he flew around the world in a Hughes-modified Lockheed Lodestar, demonstrating the feasibility of a world air transportation network. Congress struck a medal for him in 1941 for his aviation exploits. He was a force behind the Lockheed Constellation, the first American high-speed passenger transport, replaced only by the big jets of the fifties. He was a force behind the big jets.
In World War II, as we noted in chapter 2, there was a great feeling of insecurity about the sea lanes. Industrialist Henry Kaiser suggested that the best way to beat the Nazi submarine menace would be to make giant airplanes that could take over the work of ships. Hughes found that idea congenial and got behind it. Shortly he and Kaiser had a contract calling for the delivery in 1944 of three monster flying boats designed to fly nonstop from Honolulu to Tokyo loaded with two battalions of armed infantry or equipment.
By delivery date, the hull was barely begun and at least another year of work remained. In a foretaste of later troubles at Hughes Aircraft, the works manager quit, Hughes dawdled at replacing him, and twenty-one engineers resigned en masse protesting they were without leadership.
In February 1944, the contract was cancelled. Hughes flew to Washington to tell the War Production Board that his and Kaiser’s HK-1 Hercules was not only the biggest airplane in the world, it was also a flying laboratory that would influence the direction of aviation development for decades. Would it not be foolish to waste the time and money already invested?
President Roosevelt was an admirer of Hughes. The contract was rewritten, cutting back from three planes to one.
Hughes returned to California, work resumed, FDR died, the war ended, Lansky founded the Strip, Nixon won his first election, and in 1947 Republican Senator Owen Brewster of Maine angrily exposed the fact that the U.S. government had paid Hughes $66 million for XF-11s and the HK-1 and had yet to receive a single airplane.
Hughes was not alone in his vulnerable position. The United States spent some $825 million for warplanes and some $6 billion for other weapons that were undeliverable at the end of the war. Possibly Brewster recalled the impact of the Merchant-of-Death hearings at the end of World War I and sensed that Hughes’s Hollywood playboyism would make him a soft target on profiteering. And Brewster knew that Hughes was connected in a potentially scandalous relationship with the late President’s son, Col. Elliott Roosevelt.
Hughes had a Hollywood aide by the name of Johnny Meyer whose job was to pick up the tab for the entertainments that Hughes provided those who would do him favors. Meyer told the Brewster committee that between 1942 and 1945 he laid out about $160,000 of Hughes’s money for entertainment of military and government officials. A large part of that, he said, provided for the entertainment of Col. Roosevelt.
Besides the connections of a good name, Col. Roosevelt had the additional advantage of being chief of the Requirements Division of the Army Air Force Reconnaissance Branch. He was treated with due respect when he visited Hughes’s Culver City works in the summer of 1943 and by the way plunged into a brilliant public romance, leading to marriage with actress Faye Emerson. Meyer and Hughes provided the Roosevelt-Emerson party with race-track tickets, liquor, hotel rooms, lavish dinner parties, black market nylons, and a wedding party.
The calendar showed that it was in the welter of those heady days that Col. Roosevelt made the recommendation that won for Hughes a $48 million contract to produce the ultimately unproduced forerunner of the XF-11.
The colonel got his piss and vinegar and charged into the committee room to defend his honor, but possibly helped Brewster make a larger point by denying “with all my heart and soul that Johnny Meyer ever got me a girl” and pushing hard the lame assurance that he never made “recommendations that would have in any way endangered the lives of the men under me.”
Now what could Hughes do? Had he not told Meyer to pay out this money? Had he not plainly hustled for the favors of a man whose influence was worth tens of millions to him in war contracts? Had his bribes not been shamelessly accepted by this officer-son of the president? Had the probably purpose of the bribes not been realized? Had not the contracts been awarded on the president’s approval? And then to top all, the planes had never even been delivered. Was it worse than wasteful? Was the XF-11 a straight rip-off? Was the Spruce Goose not an unflyable travesty from the start?
So Hughes came to the hearing tieless in an open shirt, sloppy work pants, and an old brown fedora to defend himself. He began by accepting and then brushing aside Brewster’s charges about influence buying: “All the aircraft companies were doing the same thing,” he said.
I believe Meyer patterned his work after what he saw in other companies. I don’t know whether it’s a good system or not. But the system did obtain. And it certainly did not seem fair for all my competitors to entertain while I sat back and ignored the government and its officials. You, Senator, are a lawmaker, and if you can pass a law that no one can entertain Army officers and you can enforce it, I’ll be glad to abide by it. I never wanted to bother with it. If you can get others to do business that way, I’ll be glad to do so, too.
Then he bore down. Influence was not even the real issue in the hearing, he said, no more than the issue was his guilt or innocence in the question of delivering the airplanes.
The hearings, said Hughes, were part of a well-heeled Wall Street conspiracy to force him out of control of TWA. Senator Brewster in particular was privy to this conspiracy, Hughes claimed. Brewster was acting as its agent in pushing these hearings on Hughes. Said Hughes to a startled committee:
If Senator Brewster really believed me guilty of obtaining war contracts by improper means, he would not be romancing me on the side, inviting me to lunch, and making appointments over the telephone to see me in California. I charge specifically that at a lunch in the Mayflower Hotel in Washington, D.C., last February, Senator Brewster in so many words told me that the hearings need not go on if I agreed to merge the TWA airline with Pan American Airways and go along with the bill for a single overseas airline.
And with that was launched an explicit and fateful confrontation between Yankee and Cowboy business forces.
Brewster was close to Juan Trippe, the president of Pan American Airways. Pan Am was (and is) controlled by a high-powered Wall Street banking consort around Rockefeller interests. Trippe’s proposal was that the Congress legislate the merger of all of America’s overseas airlines into a single giant carrier. The argument for this was of the essence of postwar Yankee consciousness. In the wake of the war and under the intense and numerous pressures of European reconstruction and the Cold War, European capitalism found it convenient to the point of necessity to organize government-industry cartels as a means of generating large amounts of finance capital quickly. In practical terms, that meant that America’s several transoceanic airlines would have to compete against one big united West German fleet (Lufthansa), one big united British fleet (BOAC), and so on. How could we maintain our competitive position in international air transportation unless we too resorted to a national cartel?
Hughes could see through that. So the Yankee banks had taken a liking to his airline, had they? And wanted to melt it into their airline, did they? Fancy that.
Tempers in the hearing room became short. At a certain point the subcommittee’s chairman, Senator Ferguson, wanted to go back to influence peddling and get away from the question of Brewster’s relationship to Rockefeller and the Trippe plan. To do this, he wanted to bring Johnny Meyer back to the witness chair, but Meyer was not in the committee room when his name came up.
“Do you know where Meyer is?” Ferguson said to Hughes?
“Will you see that he is here at two P.M.?”
Pause. “I don’t know that I will.”
Newsreels show Hughes calm and self-possessed. Ferguson could not think what to say, so Hughes sat back and continued, “Just to put him up here on the stand beside me and make a publicity show? My company has been inconvenienced just about enough. I brought Meyer here twice. You had time for unlimited questioning.”
“The chair feels that as president of the company, you should know where Meyer is. I must warn you of possible contempt. Give me your answer to the preceding question.”
“I don’t remember.”
“I’ve just asked what your answer was.”
“I don’t remember – get it off the record.”
Ferguson slammed his hand on the desk. “Will you bring Mr. Meyer in here at two P.M.?”
“No. No, I don’t think I will.”
In a matter of moments, the hearing had turned into a shouting match. Brewster was desperate to regain the offense and chose to attack Hughes’s pride by attacking the flying boat. He attacked its very concept, as though it were only the expression of the vanity of an individual and not of the hubris of an entire class. He called the plane “Hughes’s flying lumberyard”
I had to sweat five weeks in Washington to prevent cancellation of the contract from the start because a lot of people in government didn’t like it. We got pushed around everywhere. I had to build up a staff of engineers from scratch. I designed every nut and bolt that went into this airplane. I designed this ship to a greater degree than any one man has ever designed any of the recent large airplanes. I worked for eighteen to twenty hours a day for six months on this plane. If the flying boat fails to fly, I will probably exile myself from this country. I have put the sweat of my life into this thing, and $7,200,000 of my own money. My reputation is wrapped up in it. I have stated that if it fails to fly, I will leave this country, and I mean it.
The hearings adjourned till November. Brewster retired to his home base. In spite of the “poisoned arrows” Hughes had hit him with, Brewster was confident enough to say, “My moral code will compare favorably with that of this young man [of 42] who found time while others were fighting the war to produce The Outlaw.”
Early in November, before the hearings recommenced, Hughes moved the Hercules to specially built hangar at Long Beach, where it was reassembled and prepared for flight (and where it sat until 1975, when it was broken up for museums).
The Brewster side sneered at the Spruce Goose and predicted that the tables would be turned on Hughes when the hearings reopened. Hughes answered by inviting the whole of the Brewster committee to California for the Hercules’s first flight. Brewster did not accept, but others on the committee had fallen under Hughes’s charm or become intrigued with him and so came and saw and were conquered all over again, this time by his creation, this gigantic plywood flying boat with a tail ten stories tall and wings of 320 feet (60 percent larger than the 747’s). But though its pieces were “as neatly fitted as a mandolin,” it was still too early. It was wooden. Wood was wrong for such immense stresses and strains. It was powered by piston engines delivering too little thrust. It was a prefiguration of something still to come, not yet completely possible.
Yet on the last of several taxi runs at Long Beach that day, as Hughes explained, “it just felt so buoyant and light, I just pulled it up.” He climbed to seventy feet and sailed along at that altitude for about a mile, then brought it down, satisfied evidently, because that was the single solitary flight of the Goose-Hercules. Brewster was destroyed.
The unmasking of Brewster of a deep-dyed conspiracy of Yankee bankers plotting to take TWA off Hughes’s hands gives us a startlingly unobstructed glimpse into the workings of national power elites. It puts in sunlight the fact that a Yankee conspiracy against Hughes, aiming to take over TWA, existed as early as 1947. It shows us again how mainstream an instrument conspiracy is, how the best families do it, how it reaches the highest and squarest levels of business and government, how it is behind many events that seem disconnected, as with the Brewster hearings and the Trippe plan. It even shows how a rock-ribbed Republican stalwart from the superstraight state of Maine can thunder and roar and tear up about other people’s moral deficiencies at the very moment and in the very act of conspiring with other, higher powers in a rip-off scheme of his own, still more perverse because it uses and humiliates the Congress as a whole. This is very deep corruption. It says something about where the moral gloom that overcame America in the fifties came from.
The Soviet Union secretly exploded its first A-bomb late in August 1949. A month later Truman gave the world the news that the American nuclear monopoly was broken.
Shortly thereafter, Colorado Sen. Edwin Johnson accused Atomic Energy Commission Chairman David Lilienthal of conspiring to turn over U.S. atomic secrets to Britain. Lillienthal answered with an impassioned warning against the domination of the military in foreign affairs and resigned in the midst of a tense situation.
On February 1, 1950, against the advice of the AEC, Truman ordered the go-ahead on development of the H-bomb.
On February 9, in Wheeling, West Virginia, Sen. Joe McCarthy told an assembly, “I have in my hand 57 cases of individuals who would appear to be either card-carrying members or certainly loyal to the Communist Party, but who are nevertheless helping to shape our foreign policy.”
Yankees countered. In February and March the chairman of the Armed Services Committee, Sen. Millard Tydings of Maryland, spolke out in a series of Senate speeches against the “defeatism” of the Truman line on Russia and communism, arguing that the presumption of inevitable conflict would lead to conflict inevitably. Tydings urged Truman to start moves toward a world disarmament conference. Connecticut’s Sen. Brian McMahon, chairman of the Joint Committee on Atomic Energy, called also for conferences with the Soviet Union and argued that the best way to save the peace would be a program of massive aid to the poor countries. And Harrison Salisbury reported from Moscow that the Russians wanted to meet with the Americans to discuss A-bombs and disarmament – Yankees for an early détente.
Then on April 28, in a big speech to the always right-wing American Newspaper Publishers Association, Herbert Hoover proposed expulsion of the Communists from the United Nations and the formation of “a new united front of those who disavow communism.” The speech was met with a “thunderous, almost impassioned ovation.”
Yankee publicist and secret Round Table member Walter Lippmann leapt into the breech. Was there not a fatal contradiction in the stance of these “old guard Republican forces?” he asked. How could they “reconcile their warlike and crusading fervor against communism and Soviet Russia with their growing opposition to the European Recovery Plan, military aid, Point 4, and all the other measures of that sort?”
At the same time, the view which the Yankees denounced as isolationism was actually a rival internationalism – a rival strategy of expansion. Precisely in the manner of the Yankee Atlanticist looking to Europe, the Cowboy Frontierists looking to Asia were moved to view the problems of American life as originating in external pressures. As the Yankees were instinct with the need to reconstruct and consolidate in Europe, the Cowboys were instinct with the like need to maintain the Open Door in Asia.
And precisely as Hughes saw his wide open spaces being rationalize and regulated out from under him by the combined powers of the Establishment East, constantly encroaching, so he saw the traditional means of escape being sealed off by the rise of revolutionary communism in Asia. This is perhaps how he and so many other hard rightists could come to think of the New York bankers and the Reds as being in on the great rip-off together.
Hughes joined in the fight against banker’s communism so fiercely because it touched him so intimately, right in his airplane company. In the struggle that followed, like Joe McCarthy at the same time, Hughes found himself misaligned against the Pentagon, the institution with which has political relations might have been most agreeable.
The issue was the old and recurrent one of corporate control and accountability. Hughes Aircraft Company had built up its position dramatically in the previous few years under the management of former Air Transport Command Chief General Harold George and the technical leadership of Simon Ramo from Cal Tech and Dean Wooldridge from Bell Labs. At the end of 1953, when the trouble long brewing between Hughes and his management team broke out, HAC sales stood at $200 million a year, almost every dollar of it a top military secret.
The trouble between Hughes and his Hughes Aircraft Company team began in the late 1940s when Ramo, Wooldridge, and George demanded a face-to-face meeting with Hughes to argue for a new lab, needed they said, because of the expansion of the company’s defense contracts. Hughes agreed to a new lab, but proposed to build it in Las Vegas. The HAC people were horrified. They wanted the research center and the production center together. They fought their boss’s proposal. Hughes was angry and stubborn but at last gave way and let the lab be built in Culver City.
How can we characterize this rebellion? The technostructure, as John Kenneth Galbraigh and, after him, such other liberals as Andrew St. George would come to call it, wanted only to discharge its ultimate duties to its capitalist owner and master and therefore to its owner’s customers. It wanted to make big money and to help secure the country against military threats. So from its standpoint, it had not rebelled against its owner at all, it had only asserted the powers of rational action inherent to its contract, had only insisted upon its right to do what it was being paid to do.
But the more fundamental significance of this rebellion is that it showed that management and ownership, former indivisible politically, had diverged. Now they were not altogether as tight as before. It appeared now that management could actually sustain its bureaucratic interests over the objection of the owner, and especially could do this if the company was in effect a single-source-supplier to the Pentagon of major weapon system components. And if to own a (defense) company was no longer to control it, then which end was up in the world of private capital and the American state?
In approximately June 1952, HAC management concluded that HAC’s growth under their leadership had inspired jealousy in the parent organization, the Hughes Tool Company board of directors, to whom they were accountable, and that Noah Dietrich, the so-called financial wizard of the Hughes empire from the beginning was the main power on the Toolco board, was actually hatching a plot to seize control of HAC away from themselves.
The occasion of the clash was an HAC revolving credit fund that General George wanted to establish at $35 million. Dietrich unilaterally and arbitrarily cut this back to $25 million. The HAC management team insisted that this posed a threat to national security. They threatened to complain to the Air Force. Hughes met with them a second time, but was unwilling to listen to their most important general complaint, that the company’s once commanding position in the industry was being destroyed by Dietrich, who at best (they said) was misapplying the finance principles of boomtown oil to an altogether different business situation, and who at worst was maliciously engineering the troubles at HAC in order to fight off an imagined play for his own power.
Hughes reminded the rebels that Dietrich was a champion-class professional and that his sense of HAC’s true needs could not be discounted. There was a perspective, larger, after all, than that of a mere division like HAC, namely, that of the Hughes empire as a whole. And larger even than that was the perspective of Hughes the person, the rugged individual. What was good for HAC (or later, TWA) might not be good for Toolco, just as what was good for Toolco might not be good for Hughes the person. And Hughes the person, said Hughes, still happened to be in command.
Well, answered the technostructure, was national security not a perspective still larger than that of Hughes the person?
Which is when Hughes started thundering: “Communism! Communism!”
Fortune somehow saved the following dialogue:
HUGHES: You are proposing to take from me the right to manage my own property, I’ll burn down the plant first.
GEORGE: You are accomplishing the same effect without matches. I do not intend to preside over the liquidation of a great company.
George thereupon quit, soon followed by Ramo and Wooldridge and virtually the whole of the top technical staff behind them. Secretary of the Air Force Harold Talbott flew to Culver City to meet with Hughes and find out what was happening. He found Hughes furious. They were all troublemakers, he said. The company would be better off without them.
TALBOTT: You have made a hell of a mess of a great property, and by God, as long as I am Secretary of the Air Force, you are not going to get another dollar of new business.
HUGHES: If you mean to tell me that the government is prepared to destroy a business merely on the unfounded charges of a few disgruntled employees, then you are introducing socialism, if not communism.
TALBOTT: I intend to see that the Air Force contracts are protected.
The overriding issue of modern capitalism, the issue of individual control versus social accountability, could hardly have been more frontally joined than between these two forces, free enterprise and the anti-Communist military, more usually imagined as locked in embrace eternal.
Hughes being Hughes, with his capacity for putting all his excesses in one basket, was fighting out the very same issue at that very same moment in a separate province of his empire. He had picked up the movie studio RKO in 1948, and it had promptly begun crumbling in his fingers. The explanation universally given for this business disaster was the same as the explanation given in the HAC case tumbling along at the side, the Spruce Goose case a little behind, and the TWA developing underneath. The explanation was always that Hughes was a foolish, neurotic, procrastinating crank whose compulsive retention of control over the least rivet made him catastrophically unsuited for the management of large-scale corporate systems.
“It is impossible to estimate the damage done to RKO by Howard Hughes,” said Fortune from the commanding financial heights of Yankeedom. “Where is the accountant who can set a figure on the hundreds of intangible losses that came from Hughes’s inability to produce enough movies? With adequate production, RKO would have been able to develop stars of its own, rather than buying them from other studios at fancy prices…. The Hughes regime at RKO was about as dismal as it could be… “ The assault on his ownership continued with $30 million in stockholder lawsuits that suddenly materialized out of nowhere.
In a double jam, crossed two ways for being a good capitalist in America, land of the free, etc., Hughes was at last forced to roll up RKO into a ball and sell out to Akron interests. His profit was more than $7 ½ million over his purchase price, but now he was shut out of the movie business and he had not wanted that.
It is not known for a fact that Hughes supported Nixon financially in the early part of Nixon’s public career, from 1946 to 1952. Dietrich maintains that onward from the late forties, Hughes financed a great many politicians – “governors, congressmen, senators, judges, yes and vice presidents too.” Still this was written well before the fact and Dietrich may only have been recalling the famous “Hughes loan” of 1957.
This well-known but not so well understood episode is the first definitely recorded significant transaction between Hughes and Nixon. What Nixon got from Hughes was $205,000 for the benefit of brother Donald, whose Southern California fast-food chain was failing (it finally went broke anyway). What Hughes got from Nixon was approval of a previously denied St. Louis-Miami route for TWA, government reversal of a ten-year-old decision against letting Hughes lend TWA $5 million from HAC coffers, recomputation of mail transport credits to TWA generating a multimillion-dollar refund out of what had been a TWA debt, SEC approval of a TWA stock transfer that it had turned down four times previously, reversal of an unfavorable IRS judgment against Hughes’s Medical Institute in Miami, and the dropping of a Justice Department antitrust action against Toolco.
The Hughes loan was expensive for Nixon. In fact, the Nixon-Hughes relationship throughout is charged with negativity and mutual destructiveness. IN the current instance, word reached Nixon in the waning days of the 1960 presidential campaign that Kennedy scouts had discovered the Hughes loan and that Kennedy was waiting until just before the election to expose it, leaving Nixon no time to recover. Nixon decided therefore to break the story himself, hopefully thus to deflate it.
That proved a foolishly speculative decision. Nixon told the story and it erupted in his face. Possibly that was what kept Nixon out of the White House in 1960. Almost certainly it kept him out of Sacramento in 1962 when it boiled up again. Then came the crescendo of 1972, Watergate, the reappearance of Hughes as a weight on Nixon. Hughes is Nixon’s nemesis. It will appear in the following that Hughes may also be Nixon’s victim.
The Flight of TWA
To understand Nixon at the time of Watergate, we must understand Hughes in 1970 and thus his situation in Las Vegas. To understand that, we must first know what made him go there. And that brings us to the battle for TWA, the exemplary illustration from the world of contemporary big business of the Yankee/Cowboy conflict in play, paradigmatic of the working contradictions of American capitalism, and along with the wreck of the Penn Central, the towering commercial conflict of the sixties.
Hughes acquired Transcontinental and Western Airlines and four smaller lines in 1939 and merged them into Trans World Airlines, pumping up the new corporation with an investment of $90 million of his own funds. He controlled 70 percent of its stock. It was his airline in a sense that no airline has ever belonged to any single person.
And this was indeed the crux of the struggle about to take place. Hughes wanted a banker who would lend him what he needed, then let him run his own business, but the bankers wanted to change the private Hughes empire into publicly traded properties.
David Tinnin makes this the central point of his detailed account of the Hughes-TWA affair, Just About Everybody Vs. Howard Hughes (Doubleday, 1973),, upon which my summary is based. Hughes, ,he writes, “was fighting for a very personal cause – to retain sole possession of the country’s last individually owned industrial empire. The Fricks, the Rockefellers and the Fords had long since relinquished absolute ownership of their enterprises. This man alone held out.” One doubts Tinnin’s use of relinquish in this case, first because he is blurring the important distinction between “possession” or “ownership” and control, but more importantly, because the evolution of Rockefeller-Morgan magnitude power, displayed so awesomely in this fight, is in no respect of history of relinquishing; it is rather a history of how great financial power begets still greater financial power, and how financial power risen to new degrees necessarily begets new institutional requirements, and how these requirements ultimately come to transcend and dominate the personalities of specific princes. David Rockefeller does not share Hughes’s autonomy as of 1960, but that is not because he has relinquished anything, it is because his empire weights in the vicinity of $303 billion and is inextricably bound into a vast design of interlocking corporate powers reaching far beyond the Chase Manhattan Bank itself. As a consequence, it cannot be supported by the structures of individual personality. There was nothing smallish about Hughes’s estimated worth of $3 billion, but that didn’t even put him in Rockefeller’s class. Hughes’s control structures are therefore faster, but also lighter in weight.
This difference tends to be concealed in the Hughes-Rockefeller TWA fight as a difference of personal style. People on the Yankee side think themselves more cultivated. Those on the Cowboy side think themselves more virile. Tinnin might even be saying Rockefeller is more modest than Hughes, since he no longer struggles for so much personal control, and less eccentric, since his accomplished control seems so rationally bureaucratized. But the stylistic differences between them actually originate in the larger patterns of their unequal and differently structured empires. Tinnin’s own rich narrative makes it plain the Hughes lost because he was the weaker of the two powers, not because he was eccentric or old-fashioned or on the wrong side of the law, and a thousand times not because he was any more grasping than his adversaries or less willing than they to relinquish what he thought was his.
The Brewster prelude past, the great Hughes-vs-Rockefeller fight for TWA began to move toward its main battles slowly in the fifties with the coming of the age of jet transport aircraft. New engine technology developed under pressures of the Korean was made the Boeing KC-135 possible, and in 1955 the Air Force gave Boeing permission to produce it commercially as the 707. The airlines wanted and needed the new jets but were in no financial shape to buy them out of cash reserves, which were badly depleted in the Eisenhower recession.
Enter the big Eastern financial consortium formed up around Dillon, Read and Company and in one way or another involving the Metropolitan, the Equitable and the Prudential insurance companies plus Irving Trust, Chemical Bank New York Trust Company, Manufacturers Hanover Trust Company, the Bank of America, and the Chase Manhattan. They had the money the transition to jets would need, saw the airlines’ needs as opportunities, and were just willing to do whatever the could to establish control over this new high growth sector of the national transportation system.
TWA was in worse shape to receive the jets than the other big airlines. This was partly because Hughes miscalculated the tempo at which the transition to jets would take place. He thought there was time for one more generation of propeller aircraft and so he bought for TWA a fleet of Lockheed Jetstream Super Constellations, possibly the most graceful planes of their kind, the China Clipper of flight. Too late. Other troubles arose from his persisting too long in the hope that a jetliner partly of his own conception and design, the design forerunner of the Convair 880, could be produced on a competitive schedule. It was finally not produced at all owing to a decision made by Convair’s major creditors, Prudential and Chase Manhattan. Yankees everywhere.
So Hughes had been waiting for a jet that now was not coming. He had depleted his cash and credit in the top-dollar purchase of piston-engine airplanes that had become obsolete before they could be delivered. Antitrust regulations prevented his financing a TWA jet fleet from the immense profits of Hughes Tool or Hughes Aircraft, so he had to find external sources. And the Eastern banks were on the march to take the airline away, much more earnestly now than in 1947, their strategy the classic one: (1) make him a debtor, (2) foreclose.
First Hughes had to be convinced to take the Easterners’ money. Once that happened, TWA’s management could gradually be made accountable to the bankers’ combine rather than to Toolco’s board of directors. The plan drawn up by Dillon, Read & Company was many times revised, discarded, picked up and revised again, but its main elements stayed the same. The insurance companies would put up $90 million, the banks $70 million, and Toolco $100 million (through purchase of TWA subordinated debentures). With this loan of $260 million, TWA could pay off a sizable accumulation of debts and acquire its jet airplanes.
The terrible catch of it all from Hughes’s standpoint was that in order to get this loan he would have to turn over the management of TWA to a three-person voting trust in which he would have one vote and the lenders two.
Hughes badly wanted this not to happen. Through his chief counsel in the TWA matter, Chester Davis, he argued that he was being raided by a financial conspiracy whose underlying purpose was to take away his airline. Said Davis, “There is a conspiracy, certainly concerted action, among these defendants [i.e., the banks in Hughes’s countersuit]. These are not bare naked allegations.
The larger world got a small taste of Davis’s style in 1973 when he was called before an executive session of the Ervin committee to tell what he knew about the mysterious $100,000 Hughes gave Nixon on 1969 and ’70, the money Rebozo said he kept for three years without touching and then gave back. Davis came to the hearing with a suitcase packed with that much cash and the words, “You want the money, here’s the goddamn money,” dumped its contents on the table. Tinnen calls him “forceful, blunt…irrepressibly obdurate.” At the time Toolco retained him for this job, he was chief of the trial department of a powerful Wall Street firm. He soon set up his own office to deal exclusively with the Hughes case. (His partner in the new all-Hughes firm – one of the more engaging coincidences of Watergate – was Maxwell Cox, brother of the special Watergate prosecutor, Archibald Cox, who was fired by Nixon in the famous Saturday Night Massacre, according to some reports, for coming too close to the Hughes connection. Or was it because the Hughes connection was coming too close to him?)
Davis’s rival attorney was John Sonnett, another all-star of another super-heavy Wall Street firm. Sonnett was more conventional than Davis in manner but equally suited to his task. On June 30, 1961, he launched the struggle by filing a complaint in the U.S. District Court for the Southern District of New York (in Wall Street’s Foley Square), an antitrust action against Hughes on behalf of TWA.
An antitrust action by a company against its owner? Sonnett’s argument was that TWA’s chronic money problems and the constant and expensive turmoil of its upper management were all attributable (as usual) to the eccentricity of Hughes. If Hughes would leave TWA alone to behave in accordance with good business principles, TWA would make money, but he would not leave it alone, so it lost money. By rejecting the earlier versions of the Dillon, Read plan, Hughes had in effect kept TWA from getting jets at the same time as the other big lines, costing TWA money in lost profits.
How much? Scores of lawyers toiled for thousands of hours over TWA’s complex financial records and arrived at a precise figure. Hughes’s refusal to accept financing when financing was needed and available from the Yankee banks had cost his airline exactly $45,870,435.95. The rule of settlement in such cases is to multiply the damages by three, add fees, then start charging interest on the amount owed every day it remains unpaid. The bill to in this suit worked itself up to about $160 million.
To show the court the depth of Hughes’s managerial irresponsibility to his own airline and his unfitness for motherhood of a pubic utility, Sonnett fastened onto the episode in 1957 when Hughes flew off to the Bahamas with one of the first of the new Jetstreams to be delivered to TWA, No. 313. TWA was short of airplanes and losing blood rapidly. If it could get its big new liners into service on the lucrative long-distance routes quickly enough, it might recover. Hughes knew this. Had he not gifted the Nixon brother to the tune of $205,000 that very summer to win Civil Aviation Board approval of the plush St. Louis-Miami route for TWA? Then what possessed him to take this badly needed equipment on a vacation?
He flew No. 313 every day for a month, landing and taking off over and over in the bright Atlantic sunshine, as though he were its only possible test pilot. It made no apparent difference to him that his executives at TWA were screaming. They were his executives, they worked for him, not he for them, just as No. 313 was his airplane to do with as he pleased, as indeed what of TWA’s was not his personal property? If what he pleased to do cost TWA money, that meant only that it cost him money, and his money was his business, was it not, and was it not the whole meaning of American capitalism that nothing was allowed to interfere with that privileged intimacy between a businessman, his property, and his money? He flew No. 313 back alone one night across the country to Los Angeles. He told the mechanics to change the engines and said no more about it.
Well, what was the use of being a rich man if you couldn’t take off in your airplane for the Bahamas when you wanted to? One might ask why he didn’t fly his own plane instead of TWA’s, like other rich men. But this distinction between “his” and “TWA’s” was precisely the distinction he was fighting not to accept. The idea that TWA might have an identity, never mind a will, that was in any way separate and alienable from his own proper person was, for Hughes, simply wrong, was a bad idea, a mistake in thinking.
Remember too that Hughes’s tenacity in the cause of big airplanes was rooted less in proved successes than in a faith that solutions to the many technical problems that exist. The solutions would come with new metallurgy, new electronics, new magnitudes of concentration of technology and capital, mountain ranges of technical and administrative bureaucracy beyond anything Hughes’s generation had yet seen. These were still to come. IN his time, the task was still to determine whether the vision of “the airways” was illusion or reality. In retrospect, the airways may seem to have been realized quickly and logically. Hughes’s life bears out the old truth that for those involved in the actual making, the individual concrete steps are often uncertain and accidental and dangerous. Hughes had personally experienced nothing but trouble in getting big airplanes to fly. In 1946 he had nearly been killed test piloting the XF-11 when a but in the electronic control system suddenly, in mid-flight, reversed the thrust of the propeller on the righthand engine.
Then a scant year and a half later had come the failure of the Goose-Hercules. True, it had flown, had proved itself an actual airplane, had saved Hughes’s reputation and extended his legend and given him a dramatic final triumph over Senator Brewster. But for all its eight engines, it did not begin to have the power Hughes knew he needed for safe flight, and it took him just a few taxi runs up and down Long Beach and one mile-long flight at seventy feet to understand and accept that.
Ten years later, down in the Bahamas in 1957, Hughes at last found himself at the controls of an airplane that solved the former problems (in piston-engine terms) and with considerable engineering and design elegance. But the Jetstream was obsolete even as he proved it out. The problems it solved so well were being put behind. The jets were coming on and everything was being changed by this faster than Hughes thought it would be.
As Sonnett told the story of No. 313 before the New York court five year later, it was only more proof of Hughes’s madness, a madness, Sonnett argued, that disgraced TWA, spoiled its profitabilities, and made its sharpest executives want to resign. TWA could not be allowed to remain the plaything of a crank. The airlines were public utilities. TWA had a schedule to keep, like the rest of them. Its managers were morally bound to pursue maximum profit lines to the enrichment of the owners. Hughes’s eccentricity, in other words, had made it impossible for others to fulfill their bounden contract duties thoward him. And in this, said Sonnett, was Hughes himself not culpable on his own terms, a criminal under his own law?
Chester Davis answered that TWA had indeed been hurt, but not by Hughes. It was the Eastern banking cabal, he charged, that had nearly wrecked the company, and it had done this though conspiratorial efforts to force its financing plan upon Hughes, when Hughes had known perfectly well that his plan was only the opening wedge of a takeover campaign, a raid. Hughes did not need New York’s bankers to tell him that he needed money in the amount of $100 million a year for two or three years. That was plain on the situation’s face. If the Dillon, Read group actually cared that much about the health of TWA as an airline rather than as a future Rockefeller property, they would prove their concern better by staying out of Hughes’s efforts to secure more favorable financing terms elsewhere.
One of Hughes’s alternative plans, for example, involving nine banks plus Corvair and Lockheed, fell through at the last minute because Convar’s main creditors vetoed its participation. The creditors were Prudential and Chase Manhattan, leading members of the Dillon, Read consort. At about the same time, top officers of Equitable and Metropolitan, major TWA creditors, advised TWA President Charles Thomas to resign, which he did in a rancorous public episode that cost Hughes dearly in prestige.
Then the lenders drew on their powers as TWA creditors in a handful of smaller loans to force TWA not to accept any aircraft from Hughes. This crippled other financial schemes Hughes was working on which entailed the purchase of the new jets by Toolco. Toolco, which easily could afford them, would have leased them to TWA on easy term. The lenders also unilaterally advanced the due dates for two fo these loans.
Only after these moves had put him up against the wall did Hughes capitulate to the Yankee plan. He asked only that he be allowed to repay the loan at any time without penalty. But not even that was acceptable to the Yankee bankers. “We have made up our minds,” said Ben Sessel of the Irving Trust. “The banks do not want to do business with Howard Hughes.”
Either Hughes would accept the Dillon, Read plan with its penalty clause, its high interest rate, and its voting trust, or the lenders would foreclose, throw him into bankruptcy and TWA into receivership, seize Toolco and open its files, and sell off enough of its assets to meet Hughes’s obligations to themselves, his creditors.
Hughes’s cash and credit position was badly deteriorated by this time. He was forced to send a squad of his security men to the Corvair plant in San Diego to seize dome dozen 880s being readied for delivery to TWA and hold them at an isolated corner of the airfield. He could not allow them to be delivered because he could not pay for them. The angry Sessel said, “It is time for Howard Hughes to realize that he is in the hands of the banks and will do what we say.”
But how had this happened? It has happened, said Davis, because the banking conspiracy wanted to get TWA. The banks cared little how badly their manipulations might damage the airline before they got it. “During the years from 1947 through 1960,” said Davis, “TWA realized earnings before taxes of $95,600,000. Upon information and belief, TWA in 1961[when the banks were in control] lost in excess of $30 million.
So Davis attacked with a countersuit by Toolco against the banks. The major claim was that the Easterners had conspired, first, to keep TWA from getting capital from anybody else but them, and second, to impose the voting-trust stipulation that completed Hughes’s loss of control. This is what disrupted TWA’s jet procurement program, forced Hughes to accept financing at loan-shark rates, and created TWA’s bad situation. Hughes’s putative eccentricities had nothing to do with it. Because of this conspiracy, said Hughes, TWA had suffered damages in the amount of $45 million and Toolco in the amount of $77 million. Time three equals $366 million. That was Hughes’s answer to the bankers $160 million suit against him.
Sonnett’s original antitrust action against Hughes was based simply on the idea that Hughes owned Hughes Aircraft Company, presumably a manufacturer of aircraft, and so was disallowed under the antitrust laws from owning an airline too. To this, Davis answered, first, that as Sonnett ought to know, the Federal Aviation Act exempted the airlines from antitrust regulation; second, that issues such as those raised by Sonnett’s action ought to be raised before the Civil Aviation Board, not in the courts; and finally, that the CAB had in fact spoken on precisely these questions when it first approved Hughes’ s original acquisitions. Davis asked the court the throw the case out.
We jump ahead ten years to January 1973 when the Supreme Court at last spoke on TWA v. Hughes to note that this is exactly and completely the position finally upheld. Justice Douglas, writing for the majority, adopted the line of reasoning Davis had taken from his first day on the job, namely,, that the case ought never to have gone to court. Jurisdiction belonged with the CAB; the antitrust law did not apply. So much for a few hundred thousand hours of the highest-price lawyering downtown Manhattan has for sale, with combined fees running close to $10 million.
But that was 1973. Until then, Hughes lost every battle. In 1960 he was forced to accept financing he did not want under provisions that left him powerless over his own company. In 1965, on the strength of Sonnett’s ultimately flawed antitrust argument, he was forced to divest himself of his 78 percent holding and get out of TWA and the airlines altogether. And in 1970, he was told by the court that he owed $160 million in damages to the very people who had robbed him of his airline.
How could there have been so wide a difference between the final judgment of the Supreme Court and the earlier judgment of the district and appellate courts? The lower court judges involved and the special masters they appointed to hear the depositions were angered by Hughes’s refusal to appear in person and be deposed like everyone else. The 1970 judgment against him was partly motivated by their irritation over this. Yet to award, on grounds of mere default, the largest amount of money in damages ever awarded by any court seemed a large, wild thing to do. This is why Special Master Herbert Brownell, who heard the depositions for Federal District Judge Charles Metzner, took almos a year to study the arguments and make his report. Then Judge Metzner took nineteen months more to study Master Brownell’s report and affirm its recommendations.
Moreover, at every step of the way, Davis appeared to have the better of the debate with Sonnett, so clearly as to color the speculation that Hughes lost in some part because the game was being played in the other side’s arena with hometown referees. Once, in 1964, Davis almost won the Supreme Court review that might have given him his win ten years before it finally came. The Supreme Court hid just made a ruling in a strikingly similar case, the U.S. v. Pan American World Airways, W.R. Grace & Co., and Pan American-Grace Airways (shortened to Panegra). The ruling in that case seemed exactly to support Davis’s central argument, i.e., that jurisdiction lay with the CAB, not the courts. But the very next moment, with no explanation, the Supreme Court accepted Sonnett’s contention that the decision to review the TWA v. Hughes case had been “improvidently granted.” Apparently the justices thought either there was no need for a review or that a review was not yet possible, but the practical effect was the irrevocable dismissal of Hughes’s countersuit. The default judgment against him was allowed to stand and the presumption of his guilt was supported.
So the wheel would remain in spin for another eight years, first causing Hughes to divest his TWA stock, then requiring the painful hearings to determine the precise amount he would hav to pay the new owners of his old airline for the damage he had done in trying to keep it from them.
The divestment occurred on May 3, 1965. Ordinarily the sudden sale of so much stock would depress the price, but the community had followed TWA v. Hughes closely and understood why Hughes was selling, so the price was firm at $86 a share. Merrill Lynch handled the transaction with the h elp of 410 other domestic and foreign underwriters. Public sale of the six-and-a-half million shares took half an hour. The underwriters deducted their fee of $4 per share, then wrote Hughes a check for the remainder: $546,549,771. Taxes reduced this to about $486 million free and clear. Only the Ford stock sale of 1956 was bigger.
So Hughes was out one airline and his overall empire had been brutally shaken by those five years, and more was coming, and worse. But at the moment, as of the sale of TWA, he had ready cash again and could start looking for another game.
(To Be Continued)
The Yankee and Cowboy War