Do You Sincerely Want To Be Rich? (7 page)

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Authors: Charles Raw,Bruce Page,Godfrey Hodgson

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BOOK: Do You Sincerely Want To Be Rich?
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    What is clear is that his work had nothing to do with the usual impression that the words 'social worker' convey, especially in Europe: that is, of a public employee of some sort, spending most of his or her time caring for aged tramps or abandoned families. What Cornfeld was entering was a profession of service to the middle class less glamorous than the law, but conferring reasonable status. Seymour Cohen, who was then his boss, and is now head of B'nai B'rith says: 'Bernie worked with us as a group counsellor among middle class children.' Cornfeld's job was to lead a programme of religious, social, cultural, athletic and philanthropic activities. Another thing which is clear is that Cornfeld was already feeling the fascination with mutual funds which was moving bright young men all over America. Sol Kaslow, who was then a lay officer in B'nai B'rith, recalls: ‘I had just moved from an insurance business into a brokerage office when Bernie arrived. He asked a lot of questions about mutual funds, about how they should be presented, how the investments worked, and so on.'
    Cornfeld had acquired considerable qualifications before he arrived in Philadelphia. After his brief return to seafaring, he decided to push ahead with his psychological studies, and in February 1952 he had signed up at the Columbia University
    School of Social Work to take a master's degree in a new field which was then called 'group study'. This was a natural development of his completed, formal studies at Brooklyn, and of his continuing informal studies with the Adlerian circle he had brought together around the Beechers.
    The essential feature of the group study system is the communal analytic session, in which the psychiatrist goes into a room with several patients at the same time, and prods them into expounding their own, and each other's problems, motivations, weaknesses, shortcomings and the like. The Columbia group study students did some practical work with groups of patients at the Yale Psychiatric Institute, where Cornfeld acquired a reputation for great sensitivity, and for interest in his patients. While working at the Yale Institute, he used to bring patients and fellow students back to Brooklyn on occasion and introduce them to the Beechers. 'He thought it was his duty to bring us as much business as possible,' recalls Willard Beecher, who was a little startled by the gesture.
    Cornfeld cut a considerable figure as a postgraduate student, driving around town in a yellow Chevrolet, with a much-prized Siamese cat perched on his shoulder. Ever since his youth, when early operations as a lollipop seller at Coney Island developed into a part-interest in a guess-your-weight stand, Bernie's friends had been impressed by his ability to get cash together. The first car, however, seems to have been a product of his discovery of the credit system. Hubert Cornfield, who was then living in Greenwich Village, remembers Bernie bursting in with the news that he had just bought a car by an ideal system, which required no capital outlay. 'For some reason,' said Hubert, 'he just would never put oil in that car. Sometimes he just could not get round to doing the smallest material things.' However, the yellow Chewy did get as far as Philadelphia, where it was eventually abandoned in a snowdrift.
    With the Chevrolet, and subsequent cars, Cornfeld habitually acquired extraordinary numbers of parking tickets. In Philadelphia he used to carry a cigar box crammed with tickets. Seymour Blau, a B'nai B'rith executive, used to puzzle over Cornfeld's attitude. ‘I couldn't see who he was fighting.'
    Cornfeld was not elegant in those days. 'Today you'd probably call Bernie a hippy,' says Steve Adelman, who knew him then. 'To us he was a Bohemian. I can see him now-always in a red checked shirt and a black suit. He had some kind of black string tie hanging round his neck, but he never did it up properly.' And the first function he organized, the Purim festival in March 1954, was something of a break with the staid existence of B'nai B'rith in Philadelphia. 'In past years,' says Seymour Cohen, 'the carnival had been modestly organized -dancing, that sort of thing. Well I asked Bernie to look after it that year. It was the biggest thing that ever happened at Purim. At the end of the festival we had several thousand dollars collected, instead of a few hundred. When I saw the amount, I called Bernie in and said: "Hey, Bernie, you've got something there. You can really turn a dollar." '
    Perhaps Seymour Cohen was the man who really started Bernard Cornfeld off on the road to Geneva. In any case, Cohen declares stoutly that Cornfield was a 'great social worker… because of his ability to relate to people.' Others seem less sure. Dr Florence Kaslow, now an assistant professor of social work at Pennsylvania, says Cornfeld had a 'creative spark' and 'operated with youth groups in a way which was out of the traditional realm', but rates him 'just fair' as a social worker.
    Cornfeld's salary was only $400 or so a month, but at this time his interest in money seems to have been an intellectual fascination rather than a desire for consumption. Steve Adelman says: 'He didn't buy clothes. He didn't buy food. A snack to Bernie was a meal. He didn't smoke. There was always a bottle of whisky or wine in his flat, but it wasn't for himself. The only expense he had was gas.'
    Whatever the problem - some people suggest that the B'nai B'rith matrons thought the aza Sweethearts' Dance rather too swinging in Bernie's year - something brought the appointment to an end rather prematurely. Seymour Cohen says he cannot recall how Cornfeld came to leave B'nai B'rith. Edward B. Schifreen, says: 'Bernie wasn't fired. We made some arrangement.' There was, naturally, a collection before Bernie took off for New York. Suitably enough, they presented him with a wallet.
    Cornfeld returned as a serious recruit to the ips sales force, at a time when sales of mutual fund shares were about to touch the billion-dollars-a-year mark. By this time, at the end of 1954, Walter Benedick had four full-time coaches training salesmen at day and night classes.
    Several versions have given the impression that the eighteen months or so Cornfeld spent with ipc were somewhat undistinguished, but this can be a misleading impression. It is based on Walter Benedick's remark that Cornfeld did not bring in a large volume of shares for ipc personally, although he made some 'nice sales'. But his capacity for making sales was never especially important. While at ipc, he began to demonstrate a more valuable capacity for impressing his own personality upon groups of people whose trade in turn consists in impressing their personalities upon others. Bernie, as Richard Roberts recalls, was always the centre of events.
    'Whenever you rang Bernie and said: "Hey, what's doing?" - there was
always
something doing. He was trying to make some time with an actress, he was driving up to Montreal for the weekend, he was dating some girl from Manhattan. It was just like when he had IOS: if you wanted some action, you rang Bernie.'
    It was impressive, when other ipc salesmen were saving subway tokens, that Bernie always had a car. 'He used to keep it parked outside his house in Brooklyn. The keys were kept under the mat in the front seat. Anybody could use it. If you asked Bernie for it so you could take out a date, Bernie would say: "You don't have to ask me. It's yours. Take it, take it." '
    Cornfeld's prominence is the more remarkable in that it quite transcended the formal hierarchy which Walter and Ruth Benedick had worked out with some care.
    There were four grades in the ipc sales force which depended upon the volume of sales made: each recruit started as a Basic Salesman, rose to Advanced Salesman, then Senior Salesman and then Career Senior. With each promotion, the salesman received a larger share of the sales charge extracted from the customer at each sale. Above these four ranks, were three more: Supervisor, Group Manager and Branch Manager.
    In order to break into these upper levels it was necessary to actually recruit other salesmen, and promotion through them depended partly upon further recruitment, partly upon the volume of sales made by the Supervisor or Manager and his team.
    Gladstone had reached the level of Supervisor, and one of the recruits who enabled him to do so was Bernard Cornfeld. But within a fairly short time, Gladstone found himself in the intolerable position of having a mere Basic Salesman as a rival for the informal dominance of his group. It was very shortly after having recruited Cornfeld that Gladstone came storming into Walter Benedick's office with a demand. 'I'm the greatest group salesman you've got,' declared Gladstone, 'And I'm asking you to get that Cornfeld out of my group.' It was probably a mistake on Gladstone's part to see Bernie as a rival; almost certainly, Cornfeld's ambitions already went beyond competing for a position as a supervising salesman in the
IPC
sales force. But the Benedicks, somewhat alarmed by the outburst, agreed and moved Cornfeld into another group.
    What impressed Cornfeld's colleagues was his life style more than his sales. His most remarkable achievement, perhaps, was the apartment known jocularly, but incorrectly, as 'Bernie's Whorehouse' - which was also a considerable piece of financing, as far as it went. One day, he saw advertised in the
New York Times
a huge apartment in the West Sixties. It had ten rooms, a triplex living room of cathedral proportions, a room with an organ whose pipes ran up all three floors, and other splendours.
    'Bernie,' said Richard Roberts, 'you must be mad. You can't live there.' But Cornfeld took the apartment, canvassed eight friends, and formed a syndicate to cover the rent: the result must have been the Ultimate Pad of the Fifties. The rooms were hung with tapestries, and in a corner of the master-bedroom stood an object of most
outre
fashion, an orgone box, crackling and flashing with electrical energy. It would appear that Cornfeld, the follower of Adler, had some consideration for the rival guru Wilhelm Reich, and his amazing theories about the relationships of 'orgone energy', orgasm and electricity. Of such feats is personal charisma made.
    At this precise mid-point of the Fifties, financial charisma was accumulating at great speed around the person of a forty-year-old member of the New York Stock Exchange named Jack J. Dreyfus Jr, who had bought a mediocre open-end concern named the Nesbett Fund and relabelled it with his own name. On January 1, 1955, there was $2.3 million in the Dreyfus Fund. By December 31, that sum had risen by 143% to $5.6 million, and the fund was firmly established in its explosive pattern of doubling, or more than doubling, roughly every year over the next half-dozen years.
    The daring, and eventually frantic 'go-go' funds which proliferated over the next few years nearly all represented some kind of attempt to emulate the brilliant assault which carried the Dreyfus Fund from obscurity to eminence inside a decade. And Dreyfus was also, quite clearly, the exemplar of the 'offshore' funds, and of the IOS funds in particular.
    To people making their own discovery of mutual funds, there was a magic aura around Dreyfus. Especially, legend attached to his famous hunch about the Polaroid camera, and to the Fund's purchase, at $31¾ each, of 400 Polaroid shares which were not even listed at that time on the New York Stock Exchange, but which eventually rose to a value of $6,372 apiece. Hopes of encountering his own Polaroid glowed somewhere in the bosom of every money manager in New York, Geneva, or San Francisco who purchased an unregistered curiosity during the ten years after Dreyfus' coup. But the Polaroid legend misrepresented what Dreyfus was about.
    Dreyfus capitalized on two propositions. One was that there was a new class of people available to become investors, willing to respond to the Dreyfus Lion in the television commercials for the fund, and to the efforts of newly-raised armies of salesmen using a prospectus in which Dreyfus made a serious effort to translate financial terms into language that ordinary people could understand. And Jack Dreyfus' other proposition was that such people, exactly like wealthier investors, were anxious to make money with their money.
    Previously, the manager of mutual funds had tended to assume that it was their job to employ the clients' money to buy a mixture of good class shares and bonds, and leave it there regardless of peaks and troughs in the graph of stock exchange prices. Jack Dreyfus and his colleagues took the view that the investors wanted a mutual fund manager to be constantly looking for new growth shares, and to move their money into them.
    It was inevitable that a well managed fund, growing rapidly in a period of generally rising stock exchange prices would acquire some meteoric stocks. But it was an optical illusion, indeed a kind of wish fulfilment, that caused the spectators to imagine that it was the acquisition of meteoric
stocks that caused the rise of the fund, rather than the other way round. The illusion, on the subsequent record, seems to have been imparted especially powerfully to two young men who sat, so to speak, at Jack Dreyfus' feet during those vibrant years in New York.
    One was Bernard Cornfeld who was growing rapidly dissatisfied with his role as a Basic Salesman at Investors Planning Corporation. And the other was Edward Morton Cowett, a distinguished graduate of the Harvard law school, employed in the Wall Street law firm of Stroock & Stroock & Lavan, counsel to the Dreyfus Fund. From the moment that he joined Stroock & Stroock, it was obvious that Ed Cowett was more interested in business than in the routine tasks of the law. He was always round at the Dreyfus office, trying to learn about mutual funds from Jack Dreyfus.
    In physique, and in manner, there has never been much in common between the creator and the assistant creator of IOS. Cowett, with his slim build, black hair slicked down, dark-rimmed spectacles and sharp, precise lawyer's manner, is the antithesis of Cornfeld, with his soft, slow voice, his tendency to plumpness, his slightly unkempt hair. Even today, when Cowett wears a Pierre Cardin suit, it is likely to be cut along much the same lines as any other business suit.
    Cowett was born on April 10, 1930, in Springfield, Massachusetts, where his father had a law practice. Edward was sent to Deerfield Academy, and then to Harvard.
    Having completed his undergraduate degree, Cowett hesitated for some time about postgraduate studies. He could not decide whether he was more attracted by the Harvard Business School or the Harvard Law School, but he was never in much doubt, it seems, that he would turn his legal training to business use eventually. 'Ed was brilliant academically,' recalls Lewis Kaplan, who was a couple of years behind him. 'He has a very challenging personality, and he didn't accept the orthodox answers.' In the event, Cowett graduated from the Law School within the top forty students, a graduation which made him automatically a member of the American elite. His educational record, and his upbringing were incomparably more advantageous than Cornfeld's: he could have taken his pick of politics, law, the State Department or business. It would have seemed most obvious for him to follow the path of his brilliant elder brother, Wilbur, already on the way to distinction as a partner of the investment bankers, Wertheim & Co.
    However, Cowett wanted to marry a fellow student one year behind him in the Law School, and so he needed to stay around Harvard for a year. He teamed up with an eminent Harvard professor, Louis Loss, and helped him in the preparation of a definitive work on Blue Sky Law, the picturesquely named body of regulations which are supposed to prevent American investors being deceived by unscrupulous company promoters. (The name is derived from a judge's remark that a certain security seemed to have 'about the same value as a patch of blue sky'.) Loss and Cowett's book was addressed to the problem that blue sky laws exhibit many complicated differences in different parts of America, so that activities legal in one state may be illegal in the one next door. So, while Carla Cowett concluded her studies at the Law School, her husband and Professor Loss combed through the security statutes of every State in the Union, analysing the differences between them, and drafting a model statute which could unify practice throughout the country. Loss and Cowett on Blue Sky Law became the standard textbook on the subject.
    With all this behind him, Ed Cowett must have seemed exactly the kind of young man that Stroock & Stroock & Lavan were looking for, but he clearly flourished better in the more freewheeling fund world. 'Jack Dreyfus like him a lot,' said one friend, 'and I think there was even some suggestion that Ed might join Dreyfus, but it didn't come to anything.' Indeed, Cowett's direct connection with Dreyfus broke off after a couple of years, when he left Stroock & Stroock. But he was there long enough to negotiate on Dreyfus' behalf with Bernard Cornfeld, who was making considerable impact as a Dreyfus Fund dealer in Paris. One might have expected the two of them to have run into each other while Cornfeld was selling in New York. But Cornfeld's impatience with ipc had boiled over too soon. By Richard Robert's account, he was planning an expedition to Paris almost as soon as he started work at ipc, and originally, indeed, a group removal was proposed. 'The idea was that we would land in Paris and contact Bernie's uncle Albert Cornfield, who was vice-president of Twentieth-Century Fox in Europe by then,' says Roberts. Cornfeld, Roberts and friend booked passage for Paris. 'But Bernie missed the boat. He missed it by several months.'
    It was not until 1955, while Ed Cowett was still researching at Harvard, that Cornfeld finally did get on the boat. By that time, Roberts and his companion had given up and sailed back to New York.
    Bert Cantor's account is that Bernie left New York because, at long last, his backlog of parking tickets was catching up with him
1
, and he wanted to avoid being caught and fined. This is not so: Cornfeld was caught and fined rather heavily for an impressive log of unpaid tickets. And there is no need to assume any such motivation on his part.
    The likeliest thing is that he left New York because he was still looking for the environment which would let his talents flower to their fullest. A relatively short acquaintance with mutual funds seems to have left him in no doubt about the nature of those talents.
    But New York was a difficult environment, where the competition between rival fund-selling organizations was already intense. It was a highly developed and regulated market, in which the fund organizers and sellers had to contend with each other, and with the sceptical officials of the Securities and Exchange Commission. It was the home of the brave - but no country ruled by the Securities Act (1933) could ever be the land of the free to a man with Bernie's ambitions.
    Before he left New York, Cornfeld sought and obtained an interview with Jack Dreyfus himself. 'At that time, you could
    
1
The Bernie Cornfeld Story,
by Bert Cantor.
    walk in off the street and get to see Jack,' recalled a Dreyfus executive of that period. 'We were still, relatively, a small fund; we were sti
ll hungry for dealers.' If Cornfeld angled for a dealership at this meeting, he did not do so very hard. He complimented Dreyfus effectively upon the simplicity and excellence of the Dreyfus prospectus, and made enough impression for the great man to remember him by. In the autumn of 1955, with a few hundred dollars in his wallet, Bernard Cornfeld arrived, alone, in Paris.

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