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The Mob takes Penn Central Peter Dale Scott, who turned up dozens of links between the Mafia and the intelligence community while investigating the JFK assassination, discussed the Great Southwest Corporation (GSC) in Deep Politics--pointing out that the stock, owned by the Wynnes, individually and through their corporate entities, had been sold over a period of years to the Pennsylvania Company--merged in 1967 into the Penn Central Railroad--resulting in its bankruptcy when the value of the stock collapsed in 1969. The collapse was triggered when Penn Central Transportation Co. defaulted on $200 million of short-term commercial paper, issued by Goldman Sachs soon after the merger with the New York Central. Because of the sharp decline in stock value, coupled with the largest Teamsters’ pension fund loan ever made up to that time, Congress began an investigation in 1970. Sound familiar? According to Connie Bruck in her book Predators' Ball, the potential value of Penn Central bonds had been discovered soon after the bankruptcy filing. As she states: "The renowned trader Salim 'Cy' Lewis of Bear, Stearns had made a fortune buying the bonds of bankrupt railroads in the forties. [Michael] Milken would follow in Lewis' footsteps by buying Penn Central bonds, on which his clients made killings.... As default was thought to be near and bond holders panicked, Milken was there to pick up the distress-sale merchandise, often at ten and twenty and thirty cents on the dollar." (pp. 33-34). How did Milken know these bonds would make money? Milken's first customer at Drexel, Burnham in Philadelphia in about 1970 was Meshulam Riklis, an eastern European Jew with a mysterious past that included service in the British 8th Army, 1942-46, followed by work with the Israeli Haganah. Riklis completed his B.A. from Ohio State in 1950 and got an M.B.A. there in 1968. He first worked for Piper, Jaffray & Hopwood in Minneapolis--brokers of commercial paper securities--which focused on Minnesota's growing grain elevator and milling industries. In 1956 he set up his own conglomerate called Rapid-American Corporation by acquiring companies such as Playtex International, Lerner Shops and RKO movie theatres. In 1967 Riklis paid cash for Lewis Rosenstiel's stock in Schenley Industries, while giving the other shareholders bonds for their shares. Schenley was a distilling company with a shrouded past. During 1967-71 Schenley employed a consultant named Charles Sydney Miner, a man who had been a journalist during WWII in the China-Burma-India theater assigned to the Quartermaster General (unit responsible for supply, distribution and transportation--including petroleum supply and logistics--for the Army) and then worked as "China manager" for American International Companies in Shanghai in 1948-56 where he would become "investment counsel" to C.V. Starr & Co., Inc. in New York until 1962. Miner's Who's Who is silent about his activities from 1962 to 1967, the year he became a consultant for Schenley and Rosenstiel. Schenley was a member of the syndicate formed at the end of the war between organized crime and military intelligence. Riklis served as a front to convert this liquor distributor from Rosenstiel's control. Today Starr International Company (SICO), owns 13.62% of the stock of the giant American Insurance Group (AIG), which is headquartered in the Bahamas. (7) Stephen Birmingham, in his book about the rise of the Eastern European Jews in America, called "The Rest of Us," states that Rosenstiel had been a bootlegger during Prohibition and caught the eye of Canadian Sam Bronfman. "Lew Rosenstiel had spent the Prohibition years boldly transshipping contraband liquor from England, Europe, and Canada via Saint Pierre and then, by truck, right into Cincinnati, Rosenstiel's hometown and center of operations. In the process, he was building what would become his giant Schenley Distillers Corporations. Bronfman and Rosenstiel had met often, during the latter's trips to Canada and had become gin-rummy-playing friends." (pp. 245-46) They worked out a 50-50 partnership deal in 1933 which required the Seagram's Co. to buy half of Rosenstiel's stock. The proposed merger soon fell apart, and the two became fierce competitors if not outright enemies, at least in business. They still maintained social closeness, according to Birmingham. Rosenstiel's second wife, Leonore Cohn--raised by her uncle Harry Cohn, the head of Columbia Pictures in California--was previously married to a Las Vegas businessman named Belden Kattleman. She left Rosenstiel to marry Walter Annenberg, whom President Nixon would name to be Ambassador to the Court of St. James. (8) Riklis financed stock purchases by issuing high-interest bonds payable by the new company to the former shareholders. He began teaching Milken in 1970 that bonds (debt) increased cash flow because the payments were deductible, whereas dividends paid on equity holdings were not. Milken would, however, remind Riklis years later, after buying $100 million of the debt of Riklis' Rapid-American: "You own a lot of the equity in your companies, but I own your debt. And your equity is not worth the paper it's printed on unless your bonds are valuable. Riklis is working for Milken." (Bruck, p. 39) Another of Milken's first customers, dating to around 1974, was Carl Lindner, Jr., who was also a major shareholder of Rapid-American. Prior to that he had acquired Cincinnati's Provident Bank in 1966 after starting out with milk retail stores. He quickly began buying Penn Central bonds. Victor Palmieri had gone to the Pennsylvania Company, and its subsidiary Great Southwest Corp. in 1969 as soon as the Penn Central bankruptcy was filed. He had just released the Kerner Commission's report stating that America was composed of two societies--one white and one black--and that the cities were going to smolder. This was the same time Pug left Defense and started the Inner City Fund. Penn Central was the first job Palmieri ever had other than land development. Why was he chosen? According to the Pittsburgh Post Gazette Monday June 22, 1970, the Penn Central had assets of more than $6.5 billion. Its stock after the merger climbed to $86 per share, but closed a year later at eleven and 1/8 cents. Many of the 23 million shares were held by the 94,000 employees of the railroad, who would soon lose their jobs. The price of the stock had soared in spite of the company's reported $121.6 million loss in 1969 and another $80 million in the first two quarters of 1970. The stock began to tumble after an appeal for a government guaranteed loan came on the heels of a failure in May to float a $100 million debenture at over 10 per cent interest. Nixon's Defense Department had also sought to push through a $200 million loan guarantee. ( http://www.trainweb.org/pt/pc.html ). Penn Central may have defaulted on the short-term debt, but that doesn't mean it didn't own a tremendous amount of illiquid assets. These were set out in the report issued by the Congressional Committee following its investigation. The primary asset was land, and lots of it. There was land in California, in Texas and in Florida. Penn Central Vice President William R. Gerstnecker boasted in 1968 before the crash: "We are ... large owners of undeveloped land in the center of big cities." The total value of Penn Central's nonrailroad land was estimated by Forbes at certainly over $1 billion. ("The U.S.'s Greatest Realtor," Forbes, 15 February 1968.) Great Southwest The Pennsylvania Co. first got involved in these land purchases by buying the corporate stock of the Great Southwest Corp. in 1963. This 2,500 acres of land was located between Dallas and Fort Worth and, before 1955 had been owned by the W.T. Waggoner Estate, whose attorney had been Robert B. Anderson. Anderson was also attorney for Sid Richardson, uncle of the notorious Bass Brothers. Richardson was also the best friend of Clint Murchison, Sr., whose attorney was Bedford Wynne. Say no more. These Texas oilmen and bankers had managed to elect Eisenhower president and then convinced him to appoint Anderson as Secretary of the Navy (in charge of the Elk Hills oil reserves in California among other things) and in 1957 as Secretary of Defense. This is the group Eisenhower was warning us about when he said to beware of the military-industrial complex. By the 1960s aircraft manufacture in Texas was located chiefly in the area of Grand Prairie, Arlington, and Fort Worth, and an expanded radius from there--and was second only to the entire state of California in aircraft production. North American Aviation's facility had been adapted by LTV (Ling-Temco-Vought), and the Fort Worth General Dynamics or "Convair" plant was completed in 1941, which by 1965 ranked first in the nation in the export of defense weapons. It was noted for bomber production and the controversial TFX contract awarded by Secretary Robert McNamara. The Great Southwest Corporation's land was in the center of this complex. Out of the total acreage only about 200 acres went into the amusement park called Six Flags Over Texas. The remainder was designed as an industrial district for defense contractors. It may be only a coincidence but a major investor in LTV was D.H. Byrd, who also owned the building leased to the Texas School Book Depository while Oswald worked there. D.H. Byrd, an oil associate of both Sid Richardson and Clint Murchison, was also a fellow-director of Jack Crichton's Dorchester Gas Producing Co. (see Part Two-B). In addition to creating an industrial district, Wynne had also made improvements to the spur railroad track leading from the land to the railroad connections owned as a partnership by the Texas and Pacific and the Chicago, Rock Island and Pacific railroads. The Texas & Pacific had connections to the Jos. E. Seagram Co., which had acquired the railroad's mineral rights. Seagram's also had a huge stake in General Dynamics along with Henry Crown. The defense contractor had actually started in Canada as Canadair. In 1964 the Chicago, Rock Island and Pacific sought approval for a merger with the Union Pacific, which was not forthcoming. This railroad owned 50 percent interest in the Galveston Terminal, 45 percent interest in the Great Southwest, and one-eighth interest in both the Houston Belt and Terminal and the Union Terminal Company at Dallas. These railroad interests are related to Santa Fe and Burlington companies, which have real estate and mineral assets in New Mexico and West Texas. These interests connect the Bush family to Robert O. Anderson, since ARCO also has interests in the same assets. The Bush interests go back to the days when G.H. Walker in St. Louis acted as investment banker for various lines in the railroads that became the Santa Fe and the Burlington railroads--which have since been merged. The ranch near Crawford, Texas that George W. Bush chose to buy, even though it wasn't on the market at the time, is tucked into a curve of this railroad. The Great Southwest railroad was not the only business in which the Bushes were involved with the Bronfmans. The former Dresser office building in downtown Houston (now Halliburton) was sold to TrizecHahn, which was a syndicate-owned company set up by Zeckendorf (Angus Wynne's partner in the Great Southwest Corp. before the Penn Central fiasco) with British, Canadian and Boston investors. Bush himself was involved in Barrick Gold with some of the same investors a few years ago. Macco Realty The next group of land was owned by Macco Realty which the Pennsylvania Co. began buying in October 1965 and ending in July 1966. According to the Congressional report, the properties consisted of 3,500 acres of the Porter Ranch in the San Fernando Valley, a 2/3 interest in the Bryant Ranch of 5,000 acres near San Juan Capistrano, and a 1/3 interest in the 87,500-acre Rancho California in Riverside County. The question is, who would have benefited from this sale had the stock of Penn Central not collapsed when it did? Macco also owned other land in California--the Vail Ranch which sold in late 1964 to a partnership composed of Kaiser Aluminum and Chemical Corporation, Kaiser Industries, Inc., and Macco Realty Company of Corona del Mar. The developers renamed the ranch land "Rancho California." Between 1965 and 1967 6,000 acres of Rancho California land were sold to the Boise Cascade Company, and another 6,000 acres to Palomar Land Company, a subsidiary of Richfield Oil. Robert O. Anderson's Atlantic Refining thus acquired Palomar in 1966 when it merged with Richfield. After Pug left ICF, it would later merge with the engineering company that had spun off from Kaiser. Arvida The Penn Central Co. at the time of its collapse also controlled the Miami-based Arvida Corporation, which owned hundreds of thousands of acres of land in Florida, as well as land in the Bahamas. The land was purchased from the Arthur Vining Davis Foundation after Davis' death in 1962. Davis had been president and chairman of Alcoa for many years. The company, perhaps through a subsidiary, is also connected to Alfred I. DuPont, founder of the St. Joe Paper Company, which is the parent of Arvida Realty Services. After the Penn Central Co. bought the land that had been owned by an Alcoa executive, it hired Charles Cobb, Jr., who had worked for Alcoa's competitor, Kaiser, to oversee the asset. Charles Cobb, Jr. was President and CFO of several subsidiaries of Kaiser Aluminum and Chemical Corp., 1964-1972 before he became President and Chairman of the board and CEO of Arvida Corp., 1972-1980. He then served as group president of the Penn Central Corp., 1980-1982, Director of the Penn Central Corp., 1982-1983, Chairman and CEO of Arvida Disney Corp., 1983-1987. In 1975, Charles E. Cobb, Jr. recruited John Temple to come to Florida. In 1967 Temple had been in charge of real estate acquisitions for the Kaiser Aluminum Co. in Oakland, California, and along with several associates, purchased Arvida from its parent Penn Central Company in 1983. In 1984 he merged Arvida with the Walt Disney Company. One of Arvida's properties was the Boca Raton Resort & Club, originally known as The Cloister. In 1983, Arvida sold the Resort to the Chicago-based VMS Realty Company, a real estate syndicator. However, by 1990, VMS was nearly bankrupt, because its main creditor, a savings and loan bank had failed, putting the Resort in danger of foreclosure. Mr. Temple then came to the rescue. In 1926 The Cloister was acquired by Chicago-based Central Equities Corporation (a subsidiary of Central Trust), run by Rufus Dawes and his brother, U.S. Vice President Charles Dawes, when they took over Addison Mizner's Development Corporation. Title passed to Clarence Geist, a utilities magnate, who had been an investor, then to J. Myer Schine who sold it to Arthur Vining Davis, in 1956. In 1997, the Resort & Club was purchased by H. Wayne Huizenga and Florida Panthers Holdings, Inc. for $325 million. In 1999, Florida Panther Holdings changed its name to Boca Resorts, Inc. Cobb was amply rewarded for directing the sale of Arvida to former contacts at Kaiser. He was named Under Secretary for Travel and Tourism at the Department of Commerce before becoming Ambassador to Iceland. His wife is now Ambassador Extraordinary and Plenipotentiary of the United States of America to Jamaica and was previously Managing Director and General Counsel of Cobb Partners, Ltd., a Coral Gables, Florida, based private investment firm with interests in several businesses including real estate, resort development, and tourism-related enterprises. Mrs. Cobb previously was in practice with the Greenberg Travis law firm where she was the founding partner of the firm's public finance department. Arvida is also connected to the Bass brothers of Fort Worth, who also have an interest in Burlington Industries. The Basses recently took a big hit on their stock in Disney. In 1987 Disney sold Arvida to JMB, a sale instigated by Barry S. Sternlicht then fresh from Harvard business school. "Sternlicht knew the assets, having analyzed Disney's real estate holdings as part of a Harvard project. 'Barry was just two months out of school, and he was opening doors for us at Disney,' says JMB President Neil G. Bluhm." JMB had been founded in 1968 by Robert Judelson, Judd Malkin, and Neil Bluhm; Judelson (the "J" of JMB) is no longer involved with JMB, but Malkin remains as chairman and Bluhm is president. Judd Malkin is married to Rachelle Belfer, daughter of Robert Alexander Belfer, of Belco Oil and Gas, which merged into Enron. Both the Malkins and the Belfers are huge donors to Harvard. Spooks in the Looting of Penn Central Maurice Stans The adviser for Penn Central was the investment bank of Glore Forgan, Wm. R. Staats, Inc.--which, like Arthur Andersen in Enron, had numerous conflicts of interest in advising both sides in the stock transfers that were made. In 1963 Maurice Stans (later finance chairman for Richard Nixon’s Committee to Re-elect the President--CREEP), became a partner in William R. Staats & Company, which merged in 1965 with Glore Forgan--an investment bank owned by J. Russell Forgan. During WWII, Forgan had been the boss of William Casey while they were in London in the OSS. After Nixon's election in 1968, Casey contacted Forgan and asked him "to write to Nixon's finance man, Maurice Stans," who was aware of the money Casey had given to the Nixon campaign. It was not until 1971, however, that Casey was offered the job as chairman of the Securities and Exchange Commission first by "White House personnel man" Peter Flanigan and a few days later from Nixon himself. Flanigan is now Senior Advisor with Warburg Dillon Read LLC; his family controlled the syndicate-connected Manufacturers Hanover Trust in New York, which in 1937 merged with Equitable Trust, then with Chemical Bank. It is now part of Chase Bank. Casey and Forgan, working for Wild Bill Donovan, had been primarily concerned with infiltrating German intelligence at the end of the war in order to gain information about the Russians. Another associate in their group had been Arthur J. Goldberg, labor lawyer and general counsel for the CIO until 1961--who would be appointed by JFK to be Secretary of Labor and less than two years later to the Supreme Court, from which he resigned in 1965 to be Ambassador to the U.N. It was his idea to use German laborers as agents in the OSS. Goldberg was also responsible, according to Fletcher Prouty, of devising a strategy that would allow Robert McNamara to award the largest ever defense contract to General Dynamics. Before Stans became associated with Glore Forgan, he spent many years as an accountant in Chicago before becoming Eisenhower's director of the Bureau of the Budget from 1958-61. He then moved to California as president and director of Western Bancorporation, Los Angeles (which would later become First Interstate), where other directors included Nixon's former law partner, Sherman Hazeltine from Adams, Duque and Hazeltine, and John McCone, former director of the CIA as well as director of ITT and Standard Oil of California. During this period, Stans also was vice chairman and a director of the United California Bank, a trustee of Pomona College, chairman of a committee in Los Angeles County government, and on a commission to revise the California state constitution. Pomona College is just east of L.A., a few miles north of Yorba Linda and northeast of Whittier--Nixon's home turf. Stans also served as director of Fluor Corporation from 1963 to 1969. Robert J. Fluor, the president of Fluor, was the 1964 Republican finance chairman for Los Angeles County and got in trouble for making illegal gifts to Goldwater in 1964. In "The Moneymen," an article by Stu Bishop and Bert Knorr included in Big Brother and the Holding Company: The World Behind Watergate, edited by Steve Weissman, the authors state that when Forgan stepped down from his job as commander of European operations for the OSS in 1946, he recommended Allen Dulles to be his replacement. Forgan had "close ties to European capital," including a directorship at Italian Superpower. His firm created the Eurofund, the first investment fund of its kind, to buy up holding in European corporations. One of his directors was Charles Englehard who owned Minerals and Chemicals Co. of Newark, New Jersey and controlled the world's supply of platinum. Other Glore Forgan partners were William Jackson, a member of the commission that set up the CIA in 1947, Richard Millar, a director of Northrop Aircraft and Charles Hodge of Penn Central. Hodge had helped David Bevan set up an investment firm called Penphil at the Pennsylvania Co. in 1962. Penn Central poured $21 million into Penphil's investment in Executive Jet Aviation. How did Stans become so politically connected in California in such a short time? Was he sent there specifically after Nixon lost to Kennedy to arrange financing for Nixon's next campaign, even though Nixon had by then moved to New York? |
