Howard Hughes: The Autobiography

27

NOW THAT WE’VE investigated my domestic life, I’ll get back to TWA: Act Three of the horror story. Be aware that from this point on, I was without Noah Dietrich. No one except my lawyers was advising me.

TWA was flying at 96% capacity, which is phenomenal. Our net profit per day pole-vaulted to an average of $175,000. The airline under my guidance was making big money. But suddenly I got wind that the Luce empire had decided there was a crack in the Hughes empire, and this was the time to pour troops through the breech and batter down the gates. They used Fortune, their most prestigious and conservative magazine, to do the job.

This attack had nothing to do with journalistic ethics or the search for truth. It had to do with the fact that Clare Booth Luce still hated me for turning down Pilate’s Wife, and she wanted revenge. So Henry Luce, her accommodating husband, did the job for her.

The guy who was going to write the Fortune story was a writer named Charles Murphy, who had already pilloried me once before, in 1953, when Fortune published an article about Hughes Aircraft. Now it was the turn of TWA.

Murphy had been around already talking to people, and he made no bones about what he intended to do. I did a lot of banking then with the Bank of America, and my man there was Keith Carver. Murphy had gone to Keith and told him he was going to pick up a literary axe and bury it in my skull.

I was still in Rancho Santa Fe when I called Frank McCulloch, Los Angeles bureau chief for Time, and the last reporter I ever let interview me. He was a good man, a fair man, and he could speak his mind to Henry Luce, the pope of Madison Avenue. I begged him to call off the wolves. I said, ‘Frank, I don’t deserve this. You people are doing an unfair thing.’

McCulloch went to Luce on my behalf. Luce turned him down. All my begging came to nothing. They went ahead and printed the article.

Aside from Luce, who was trying to cut my throat in public, there were plenty of men trying to cut it in private, and the foremost among them was the president of Boeing, William Allen. Mr. Allen had never forgiven me for holding off on my purchase of Boeing jets while I was dickering with Convair. When I was sitting out there at Palm Springs at the municipal dump with Jack Zevely, Bill Allen in Seattle wanted to know, ‘Why doesn’t Howard Hughes invite me to the municipal dump?’

My order for sixty-three jets was the largest in history, and thirty-three of those were supposed to be supplied by Boeing. That was a $186 million order, and I paid $39 million cash in advance in order to show good faith. And now they were dunning me for more money.

I staved them off a little bit because the Medical Institute owed Toolco $18 million, and after a little maneuvering we were able to use that to pay some of what we owed Boeing. But we were still short. In the meantime, the situation was that Toolco owned all the planes and was leasing them to TWA day by day. That was absurd. I owned both companies, Toolco and TWA, I had to take it from my left-hand pocket and put it in my right-hand pocket – but with all sorts of financial and governmental restrictions on it.

Considering that I needed money to get Boeing off my back, I’d just about make up my mind to go along with Fred Brandi of Dillon Read. He’d worked out a way to come up with $350 million where I’d still have a reasonable measure of control and wouldn’t have to give up any part of Toolco. The only hook in it, and this had been proposed by Haggerty of the Met, which made me figure he was the villain of the piece, was a little rider in the financing agreement. That rider said that if there were any major adverse developments in the airline itself, or in its management, then the banks and the insurance companies had the right to pull out of the deal.

And there was a hook in the hook, which turned out to be more pertinent. Once the financing was completed, if there were any adverse developments in TWA’s management after that date, they’d have to be rectified within ninety days or else my stock – which the syndicate was holding as collateral against the loan – would go into a trusteeship.

I considered stepping in and taking over the presidency of the airline. I thought that might be the solution. I tentatively suggested it to one of those insurance companies, I think to Equitable, and I was told if I did that they’d foreclose immediately – like I was a leper. Believe me, these lepers at Lambaréné got better treatment, more respect, than I did from these Eastern bankers. And they invoked the ‘adverse-development clause,’ which meant I had ninety days to pull a rabbit out of a hat.

What were your choices? What could they have done to you?

What they wanted to do was get me to turn my stock over to a trustee – namely them, or some guy who was fronting for them. The alternative was for me to find the money elsewhere so I could pay off my creditors. Or else I could declare TWA bankrupt.

While I was trying to figure all this out, suddenly, from out of left field, the Civil Aeronautics Board got after me. Not about TWA, but about Northeast Airlines.

What did you have to do with Northeast Airlines?

Somewhere alone the line I had picked up a significant share of a company called Atlas, a holding company, and kind of tucked it away into a part of RKO, and then it got transferred to Toolco. Atlas owned about 60% of Northeast Airlines.

The CAB got wind of this, and since they have to earn their salaries by poking into other people’s businesses, they started another investigation. I controlled TWA, and the idea is that you can’t run or control two major airlines. You can’t do that because you might run a more efficient business that way and make more money than your competitors. But the alleged reason is conspiracy in restraint of trade.

The CAB wanted a voting trust established over the stock, they wanted me to appear, they wanted me to stand up before the board and sing La Cucaracha for them, which I only do for select audiences and certainly not for the CAB.

It dragged on forever, and during that time I pumped a lot of money into Northeast through Toolco and some New York banks. We did concoct some interim trust agreement concerning my stock in Northeast, but that was just a formality. The trust was revocable any time Toolco wanted to revoke it. The truth is, I owned Northeast Airlines and told them what to do, as simple as that.

At one point I timidly suggested we merge Northeast with TWA – then I’d only own one airline. The CAB howled and said that if I didn’t divest, give up my Northeast stock, they’d cancel the Northeast route from New York to Florida. They don’t fool around – there are no Marquis of Queensbury rules; it’s ‘You try that merger plan, and we’ll take away your New York-Florida route to show you that we mean business. And that’s just for openers.’ It’s the American way of business, which is the same as saying the American way of life. Dog eat dog. Who’s the lion and who’s the donkey, let’s find out.

And who was the lion? Did they take that New York-Florida route away from Northeast?

They held that club over my head. I stalled, but it didn’t work with them. Finally they said, ‘Okay, Hughes, you lost the route.’

We went to court in Boston to the Federal Court of Appeals. I had friends there, meaning that they’re friends as long as you keep their bank accounts fat. Finally we went to Congress – we got the guy from Massachusetts to get the ball rolling and a new law was passed.

It was meant to get Northeast out from behind the eight ball. It said that any carrier that had been flying a route since a certain date, even though it didn’t have permanent authority to fly that route, under this law the route became permanent. That applied specifically and uniquely to Northeast Airlines and the Florida run and everybody goddamn well knew it, which made the CAB – in particular its chairman, a guy named Boyd, who hated my guts – go raving mad.

Still, that was just a sideshow. The main event was always TWA. Everybody was putting the screws to me. TWA still owed Irving Trust about $15 million, and Irving Trust wanted it. ‘Pay or die,’ they said. Worse, from my point of view, was that I personally had borrowed eleven million from Irving Trust, which was due around that time, and I’d pledged Toolco, lock, stock and barrel, as security for the loan. Of course I could have found $11 million without any difficulty, but that was only part of the over-all debt and it would have been like putting my finger in the dike when a tidal wave was coming our way.

We needed a total of $165 million. By that time I had about five business days to get it. The consortium of banks and insurance companies offered it, but they also slipped in a little proviso there – because, understand, if I borrowed $165 million to pull TWA out of the hole, theoretically all I had to do was pay back the money one day and I’d be out from under the thumbscrews. But they put in a proviso that if I wanted to pay back the money, I had to pay a 22% interest premium on it at the moment of payback. They call it a premium but any five-year-old would know that it’s a penalty at 22% interest. That harks back to the days of Shylock – it’s usury, but no one cared because it was Howard Hughes who had to pay it, and he deserves to have his wrist slapped, if not his throat cut.

And then in the midst of all this, something terrible happened. I had a Toolco lawyer named Ray Cook handling certain things for me, doing in part the sort of job that Noah did before I fired him. Cook decided that the way I was dealing with the TWA situation was proof that I was losing my mind. Behind my back, he contacted Noah Dietrich. Noah, to give him credit, just laughed. He’d heard this phrase many times before, relative to me, from people who didn’t understand how I operated. But in this instance Cook happened to be serious. He wanted to start legal proceedings against me, on behalf of all the Toolco management and employees, to prove that I was incompetent.

Not just incompetent to manage Toolco and TWA – I’m talking about incompetent in the full and legal sense of the word. He wanted to have a guardian appointed to take care of my financial holdings while he milked me dry. He alleged, among other things, that in the midst of the most delicate and vital negotiations for control of TWA, I had taken three days off to organize a posse for a missing cat. That may have been true, but so what? I was just acting like a decent human being and that meant I was crazy.

Cook managed to bring Verne Mason, my doctor, into the picture. Verne Mason, who had been my personal physician for forty years, and was the head of my medical foundation, was going to help certify me as a loony and come to court and give all sorts of testimony about the crazy things I had done and my addiction to codeine as a painkiller. They wanted to take everything I had and put me in a straitjacket, lock me up in a closet. I’d scratch at the closet door like one of those poor people who are shut away in attics in the Ozark Mountains. It gives me the shakes just to think about it.

How did you find out?

A loyal employee in Houston tipped me off, and then I got some more information from people around Cook and Mason, and sure enough, those people came up with a copy of a secret memo from Cook to Mason that revealed everything – it was a list of people who would testify to my insanity and a list of psychiatrists who would offer affidavits, and also the names of some hospitals they were considering for me.

How did you stop them?

I had Ray Cook fly out to California and meet with me on the Santa Monica pier. I said, ‘I know what you’ve been doing, you double-dealing son of a bitch. You want to have me put away.’

He turned white as chalk and he denied it, but finally he saw that I knew what I was talking about. ‘Well, Howard,’ he said, ‘it would have been for your own good.’ He knew already he was fired, he had nothing to lose by telling the truth then, and he tried to tell me it would have been for my own good. ‘And you would have gotten well again. And when you were well you could have come back and taken over.’

I grabbed him by the collar and almost shoved him off the pier into the Pacific Ocean. But I restrained myself in the nick of time. That might have given them just the evidence they wanted.

Firing Cook right in the middle of the negotiations put me in a terrible plight. I saw everything that I’d worked for all my life about to slip out from under my fingers like an ice cube. My back was to the wall, and the entire Eastern banking establishment – that’s a lot of muscle – had hold of the carpet and was trying to yank it out from under me. I didn’t see how I could hold out, how I could win. My strength was giving out.

I got Greg Bautzer, a Hollywood lawyer, to take Cook’s place. I sent Bautzer to New York to Merrill Lynch. Dillon Read was handling things but I thought I might get a better deal from Merrill Lynch. But everybody construed this the wrong way and thought I couldn’t make up my mind and was stalling. Of course I was stalling, but my mind was made up. I had to get the money, and I’d do anything to get it, short of giving up Toolco and Hughes Aircraft.

Merrill Lynch wouldn’t play ball and we went crawling back to Dillon Read. By then they’d come up with the final touches on that famous, or should I say, infamous, trustee agreement, which I consider the most unfair thing that’s ever been done publicly to an American businessman of high repute and good financial standing. Shameless. But par for the course, the way they operated.

The idea was that three men would have control over my stock in TWA. Toolco could appoint one of them, and this consortium of banks and insurance companies would appoint the other two. This was a ten-year trusteeship agreement. At the end of the ten years I was supposed to get it all back. So they said. They appointed their trustees. One was Ernest Breech of Ford and the other was Arnold Oldman, former Chairman of U.S. Steel.

Now is this a horror story or isn’t it? Lon Chaney never starred in anything to match this one. ‘Howard Hughes, who brought you Hell’s Angels, The Front Page, The Outlaw, Toolco Versus the Relatives, and Hercules Versus the Dragon from the State of Maine, proudly presents: Trans World Airlines Versus the Wolves of Wall Street. The plot: a simple Texas boy turned pilot, financier and medical benefactor, loses his head, and from his secret laboratory in the mountains high above Los Angeles inadvertently looses upon the unsuspecting world a monster of his own creation. Is it a man? Is it a bird? No! It’s TWA! But all is not lost. The heroes –Prudential, Irving Trust, and First National Bank of Boston – charge to the rescue to protect the American public from this raving monster. Battling singlehandedly against tremendous odds, with only $20 trillion in assets and a ragtag army of 7,500 lawyers to help them, they vow to achieve a just solution.’

That’s the script they tried to play. I was desperate. And I felt I had to have a man on the inside to know what those guys were really up to. I had to sign by the last day of 1960. I stalled as much as I could until I could find someone who I knew was going to be on that board, someone I could trust, so I could get access to the private meetings of the board.

Greg Bautzer had power-of-attorney for me to sign and I had to get him to pretend he was sick. He was staying at the Hampshire House in New York and just before the signing I said, ‘Greg, tell them you’re dying. And if they don’t believe you, if you feel that there’s the slightest doubt on their part, check into some hospital.’

He claimed he had stomach ulcers and back pains. You can never diagnose back pains. He went into Roosevelt hospital.

Why did you have him delay in this way?

Because I was still trying to get to one of those trustee guys. I would never have agreed to the whole arrangement if I didn’t feel that I’d know what they were going to be doing behind my back. I thought of Breech at first, because I’d known Ernie Breech for years. When I came back from my trip around the world there was some dinner in New York and Breech was the toastmaster and I remembered he had been very friendly to me.

I checked out his financial position and my men reported to me on his personal and family life, and I realized there was no leverage. I needed leverage.

That left Arnold Oldman. He was vulnerable, in his bank account. I don’t mean to say he was a poor man, but for reasons of his own, which I won’t go into, he needed money. There are only two things in the long run which will appeal to a man in a situation like this – one is money, and the other is the satisfaction of any perverse desires he may secretly harbor. As far as I was able to find out, Oldman was not a secret pervert. And in any case that’s not my style. I won’t stoop to that. But everybody needs a little extra cash, and if it’s tax-free and out of the country, so much the better. Oldman was no exception. So we had a little talk.

Face to face?

This wasn’t something I could do over the telephone or trust to Bautzer. I flew to New York in a private jet with a few of my aides. Oldman and I arranged a meeting out on Long Island one evening, at East Hampton. We drove around near Georgica Beach, where a high wind was blowing that kept anybody from eavesdropping. We came to an agreement. We both knew that he couldn’t overtly function as my man on the board, that was never even suggested, but he could let me have word in advance of any moves that were planned and I could take steps to counter them. And he could help me that way.

How much did you pay?

A lot of money, in cash, deposited to a special offshore account.

A lump sum or spread out?

In this kind of deal there are no time payments. I don’t reveal this to blacken Arnold Oldman’s reputation. The reason that Oldman was willing to do this for me was that he didn’t have the prejudices that all these other guys had accumulated over the years. I hardly knew him and he hardly knew me, and he was able to take me at face value for the man that I was. I probably could have gotten him on my side without paying him at all, but a man is worth his salt. In fact, let’s say for the record that the money was not for services rendered, but in appreciation of his understanding of me. Because Arnold Oldman was a fine man.

And what did Oldman do for you?

He did a few little things, and then one thing which made the payment almost worth it. Well, it might have, but it didn’t work out – we couldn’t foresee that. He got word to me, in advance, that TWA’s new counsel, Cahill, Gordon, Reindel & Ohl, had recommended that TWA sue me and Toolco for violating some obscure anti-trust laws – and that they’d do it if I didn’t come up with some money right away. But Oldman let me know they were going to sue me. It gave me the chance, at the time, to make a counter-offer.

Unfortunately, my counter-offer boomeranged. They panicked. They had to sue before I paid them back. The last thing in the world they wanted was their money. They wanted control of TWA.

What else did Oldman do for you besides that?

The poor man died before anything else of major interest came up. The timing of his death was disastrous. By then TWA was suing me and I was suing TWA, and I was counting on Oldman, and he got sick and died.

Why exactly did TWA sue you?

All those banks and insurance companies had been telling me for years that I’d endangered the financial security of TWA by buying too many jets, and the first thing that the new management did was place an order for twenty-six new Boeings – that meant $200 million more debt – which they were going to finance through another loan of $147 million. The hypocrisy of these people was so blatant that I didn’t know whether to laugh or cry. Three insurance companies were going to put up the money. You won’t need three guesses; they were Equitable, Metropolitan, and Prudential. That was enough to make me see red, but then I found out – through Arnold Oldman – that one of the covenants of the new loan stated that if the voting trust of my stock was ever terminated the $147 million had to be paid back immediately in cash.

Of course that arrangement was completely against TWA’s interests. It was aimed at me alone. I was still the majority stockholder. The purpose of the covenant was to keep me from making any legal effort at any time to terminate the voting trusteeship over my stock. Because if I succeeded, it would throw TWA into bankruptcy and wipe out my equity overnight. That’s how far these people went to tie my hands behind my back. So I fought the expansion program. I got my lawyers to raise a stink – I said it would ruin TWA financially and the Board of Directors was acting out of total irresponsibility. If they wanted new jets, I said, why don’t they buy the ones I’d already ordered from Convair when I was still the boss? I raised such a fuss that one of the insurance companies, the Prudential, got cold feet and pulled out. I went out on a limb, in TWA’s interests and in my own, and that’s when they decided to sue me.

The other reason – maybe the main reason, although it was never spelled out in their arguments, because it would lay them open to too many counter-charges – was that there was a merger in the works between TWA and Pan American, which I unalterably opposed. They feared that I could put a stop to this if I still had control. The only way to get me out was to sue me and vilify me. They sued me for all sorts of anti-trust violations, interlocking directorates between Hughes Tool and Hughes Aircraft and TWA, and they also claimed that I had personally mismanaged the airline to the brink of ruin.

That hurt me in the deepest way. Really, whatever was good about TWA was my doing. I countersued on the grounds that the whole deal they had set up was a conspiracy to defraud me and my companies of our rightful interests. I also accused Metropolitan Life and Equitable Life and Irving Trust of conspiring to gain control of TWA and make it a captive outlet for high-interest loans. The man behind it all, I believe, was Juan Trippe of Pan Am, who happened by coincidence to be a director of Metropolitan Life.

This all came to a head when I was supposed to appear in court in Los Angeles. I didn’t show up, and that cost me $137 million.

The reason I didn’t show up is that I was fed up. I didn’t care about the money anymore. What had money ever brought me other than more money and more headache? I talked it over with someone whose opinion I respected, and that person helped me to see that it wasn’t worth demeaning myself in front of these people in public. I could have fought and I might have won, but even that didn’t make it worthwhile. As for TWA, by that time I was able to say to myself, ‘It’s only an airline. Just another company.’ I was able to say that because many things had changed in my life. My marriage had become a failure. Jean had moved out. She was starting to say things like, ‘Howard, you’re losing your mind,’ and, ‘I can’t stand this kind of life anymore.’ So the handwriting was on the wall. I knew it was a matter of time before she filed for divorce.

And I thought, why am I involved in all this lunacy? I used to design planes, and fly them, and make good movies. My companies and I used to be creative. Now all we’re doing is fighting to make money or borrow money or hold on to the money we’ve got. It’s demeaning, it’s destructive, it’s disgusting. It’s not what I want to do with my life, with what’s left of it.

My view of the past had changed completely. This was partly the result of new feelings I had about my life, and new insights into life in general. It’s time I told you about them, and how I acquired them.