3: Paragraph 48 That was around the same time that Hutton Trust acquired a new personal trust client, a corporation named International Development Programs Inc., the chairman of whose board was Wilbur Mills. An AE named John Jennison, in Hutton's C18 office in D.C. where Perry Bacon was BOM, had a client named Barton F. Walker Jr., who was president of Walker & Walker Associates, Inc., in Maryland and one of IDP's principals, so Walker had brought IDP to Jennison. IDP's president was Thomas M. Owen, whose phone numbers were in Virginia, and its lawyer was Francis L. Jung, who was also general counsel to American Pacific Trading Co. in D.C. The chairman of AmPac's board was Conrad K. Hausman, who was also one of IDP's principals. The other two IDP principals I dealt with were E. Doug Ward, executive vp of Astrotech International Corp. in Pennsylvania, and Daniel Craig, president of Norsud Corp. in California.
3: Paragraph 49 The companies these IDPers headed manufactured aircraft, and maybe tanks, guns, and other war toys — they had mostly been pilots in WWII and/or the Korean Conflict, and Hausman had worked for Alexander Haig in Vietnam and then at the White House. Owen had been on LBJ's re-election committee, and he told some of the best war stories I ever heard: some about the parties his cousin Tallulah Bankhead used to throw, some about his misadventures as a pilot during the war, some about LBJ, and all of them hilarious.
3: Paragraph 50 IDP's 'raison d' tre' was to borrow money from the pension funds of companies that manufactured industrial, agricultural, and defensive equipment (which we took to mean aircraft, tanks, guns, and related paraphernalia), invest it in U. S. Treasury notes, and lend the interest to developing Third-World nations (mostly in the Middle East and Central America) that would use the money to buy industrial, agricultural, and defensive equipment (wink, nudge), probably from the companies that had anted up their pension funds. They explained to us that this was all part of President Reagan's plan to cut back on foreign aid from the U.S. government and get the private sector more involved; they said they had the required approvals and gave us phone numbers at the State Dept. and White House to check them out, but Abbes forbade me to do any checking: He said the only checking would be by Hutton & Co.'s president Pierce through Barbara Bush to her husband the VP, and then later he told me we had not just their approval but their encouragement.
3: Paragraph 51 But the reason IDP had come to the Trust Company then, as they told us, was that they couldn't pry any money loose from the pension funds — remember I said that's where most of the investment money in the country is, but the trustees have to meet the high standards the law imposes on fiduciaries — so they'd gone looking for money overseas and found some: The royal family of Saudi Arabia had a lot of money to invest but couldn't be seen to do so because of the Islamic prohibition against usury, so they had created something called the Crusader Trust, run by one of the big Swiss banks fronting for them. The Crusader Trust was willing to lend IDP $100 million for some number of years I've forgotten now, but the Swiss bank insisted on having an American financial institution hold the bag, and IDP had been up one side of Wall Street and down the other and been turned down everywhere. Then Bush asked Pierce to have Hutton do it, and Fomon agreed and told Abbes to take care of it. It was, of course, a personal trust, so it fell squarely in my lap, and I had most of the dealings with IDP.
3: Paragraph 52 The last week of October 1984 I had to go to Basel, Switzerland, on rather short notice to meet with Owen, Hausman, Walker, Ward, Craig, and someone from the Swiss bank, and that's when I finally saw the printout of how the transaction was supposed to work. There were two kinds of problems with it: One was that the bank wanted Hutton to sign as the one liable for paying the interest for the term of the loan and paying back the principal in Swiss francs at the end, so we would in effect be guaranteeing not only the interest rate on Treasuries but also the exchange rate, and we wouldn't; the other was that there were so many finders' fees and up-front points to be paid to the various players that it would take every bit of income from the Treasuries, compounded by being repeatedly reinvested over the term of the loan, to get the principal back to the amount to be repaid, and that didn't leave anything to pay the income taxes with. When I pointed that out, Owen said, "But we don't want to pay any income taxes," and I said, "Nobody wants to pay income taxes, but how do you expect to get out of it?" So they put me on the telephone to Mills — whom they always referred to as "the Chairman" with such reverence that Abbes tried teasing them once by referring to Fomon the same way, but they were not amused — back in the States to find out what the story was on taxes. That was the only time I ever talked to him, and he didn't have any idea how to get out of the taxes, either, but he said he'd get the guys there working on it.
3: Paragraph 53 While I was in Basel — I went on Saturday the 27th and came back on Halloween of 1984 — IDP took very good care of me, and except for when I went back to my hotel to sleep and a couple of hours the last afternoon when I walked around town, I was always with one of more of them. One evening Owen wanted to drive to Zurich for dinner at the Dolder Grand Hotel, so three of us went with him — that's a whole story of its own, with Owen driving like Barney Oldfield on the autobahn and me falling back on my college German to navigate from an outdated map in the dark! While we were at the Dolder, Owen told us about the last time he'd been there, when he'd run into the exiled Shah of Iran and they'd talked about the good old days.
3: Paragraph 54 One day we drove across the corners of Germany and France on a little sightseeing excursion whose purpose seemed to be to let me see everybody's passports when we crossed the borders. They'd been hinting pretty hard that Hausman was CIA, but I kept acting like I hadn't caught on, and a day or so later Walker finally took me to brunch alone and just told me, but the two things I learned from their passports were that Hausman did, indeed, carry a diplomatic passport and that most of them, especially Owen and Walker, had been in and out of Iran a lot of times over the past year or so.
3: Paragraph 55 One evening when I got back to my hotel after dinner, there were some urgent messages from Abbes to call back, so I did, and because of the time difference he was still in the office. He got one of Hutton & Co.'s lawyers in New York on the phone with us to read us the riot act for my being there when the last thing the Legal Dept. had told me on Friday was not to go — they kept referring to IDP's plans as "gun-running" and wanting us to drop IDP as a client, but all we did was quit telling them stuff that was only upsetting them — but Bacon and Abbes had both told me later on Friday to go anyhow, with authority from Pierce and Fomon, and Jennison bought my ticket and wired me the money for traveler's checks. I'll always cherish the part of that phone conversation when Abbes asked the lawyer what they were afraid of, and he answered that after turning my head by getting me away from my own turf and into exotic surroundings IDP might get me to agree to something, to Hutton's detriment, that I wouldn't agree to at home; Abbes said, "If you think that, you don't know Kay very well!" Abbes knew, from trying to himself, it's virtually impossible to get me to do anything I don't intend to, and it really touched me to know he had so much faith in me, because by then I had a lot of regard for him, and I still do.
3: Paragraph 56 Some months later we started to realize why the Legal Dept. had been so hot about IDP when it hit the papers that Hutton had been involved in the money-laundering scheme the media called "the pizza connection." IDP kept talking to us for months about doing a deal, but nothing ever came of it.
3: Paragraph 57 Then on 2 May 1985 Pierce entered Hutton & Co.'s guilty plea to 2000 counts of federal mail and wire fraud in what came to be referred to as "the check-kiting." Too much has been written about that for me to have to describe it here; suffice it to say that Hutton had for several years taken advantage of the float on checking accounts by drawing checks to customers on accounts in banks at the other end of the country from where the customers were and then depositing the money to cover the checks later. Many of the AEs were shaken that Hutton had been doing anything so blatantly against both the law and the customers' interests, but I was surprised they were surprised, because it was the same thing Hutton was still doing through the Trust Company, and it was in keeping with everything I'd seen of the way Hutton was run.