Kane and Abel/Sons of Fortune Read online

  Alan Lloyd had a phone conversation with the Morgan bank and agreed that Kane and Cabot should join a group of banks who would try to shore up the national collapse in major stocks. William did not disapprove of this policy, on the ground that if there had to be a group effort, Kane and Cabot should be responsibly involved in the action. And, of course, if it worked, all the banks would be better off. Richard Whitney, the vice president of the New York Stock Exchange and the representative of the group Morgan had put together, went on the floor of the Exchange the next day and invested $30 million in blue chip stocks. The market began to hold. That day 12,894,650 shares were traded and for the next two days the market held steady. Everyone, from President Hoover to the runners in the brokerage houses, believed that the worst was behind them.

  William had sold nearly all his private stocks, and his personal loss was proportionately far smaller than the bank’s, which had lost over $3 million in four days; even Tony Simmons had taken to following all of William’s suggestions. On October 29, Black Tuesday, as the day came to be known, the market fell again. Sixteen million six hundred and ten thousand and thirty shares were traded. Banks all over the country knew that the truth was that they were now insolvent. If every one of their customers demanded cash—or if they in turn tried to call in all their loans—the whole banking system would collapse around their ears.

  A board meeting held on November 9 opened with one minute’s silence in memory of John J. Riordan, president of the County Trust and a director of Kane and Cabot, who had shot himself to death in his home. It was the eleventh suicide in Boston banking circles in two weeks; the dead man had been a close personal friend of Alan Lloyd’s. The chairman went on to announce that Kane and Cabot had themselves now lost nearly $4 million, the Morgan Group had failed in its effort at unification, and it was now expected that every bank should act in its own best interests. Nearly all the bank’s small investors had gone under and most of the larger ones were having impossible cash problems. Angry mobs had already gathered outside banks in New York, and the elderly guards had had to be supplemented with Pinkertons. Another week like this, said Alan, and every one of us will be wiped out. He offered his resignation, but the directors would not hear of it. His position was no different from that of any other chairman of any major American bank. Tony Simmons also offered his resignation, but his fellow directors once again would not hear of it. Tony looked as if he were no longer destined to take Alan Lloyd’s place, so William kept a magnanimous silence.

  As a compromise, Simmons was sent to London to take charge of overseas investments. Out of harm’s way, thought William, who now found himself appointed Investment Director, in charge of all the bank’s investments. He immediately invited Matthew Lester to join him as his number two. This time Alan Lloyd didn’t even raise an eyebrow.

  Matthew agreed to join William early in the spring, which was the soonest his father could release him. Lester’s hadn’t been without its own troubles. William, therefore, ran the investment department on his own until Matthew’s arrival. The winter of 1929 turned out to be an upsetting period for him as he watched small firms and large firms alike, run by Bostonians he had known all his life, go under. For some time he even wondered if Kane and Cabot itself could survive.

  At Christmas, William spent a glorious week in Florida with Kate, helping her pack her belongings in tea chests for her return to Boston (the ones Kane and Cabot let me keep, she teased). William’s Christmas presents filled another tea chest, and Kate felt quite guilty about his generosity.

  “What can a penniless widow hope to give you in return?” she mocked.

  William responded by bundling her into the remaining tea chest and labeling it “William’s Present.”

  He returned to Boston in high spirits, hoping his time with Kate augured the start of a better year. He settled down in Tony Simmons’s old office to read the morning mail, knowing he would have to preside over the usual two or three liquidation meetings scheduled for that week. He asked his secretary whom he was to see first.

  “I’m afraid it’s another bankruptcy, Mr. Kane.”

  “Oh, yes, I remember the case,” said William. The name had meant nothing to him. “I read over the file last night. A most unfortunate affair. What time is he due?”

  “At ten o’clock, but the gentleman is already in the lobby waiting for you, sir.”

  “Right,” said William, “please send him in. Let’s get it over with.”

  William opened his file again to remind himself quickly of the salient facts. There was a line drawn through the name of the original client, a Davis Leroy. It had been replaced by that of the morning’s visitor, Abel Rosnovski.

  William vividly remembered the last conversation he had had with Mr. Rosnovski and was already regretting it.

  CHAPTER SIXTEEN

  It took Abel about three months to appreciate the full extent of the problems facing the Richmond Continental and why the hotel was losing so much money. The simple conclusion he came to after 12 weeks of keeping his eyes wide open, while at the same time allowing the rest of the staff to believe he was half-asleep, was that the hotel’s profits were being stolen. The Richmond staff was working a collusive system on a scale that even Abel had not previously come across. The system did not, however, take into account a new assistant manager who had had to steal bread from the Russians to stay alive. Abel’s first problem now was not to let anybody know the extent of his discovery until he had had a chance to look into every department of the hotel. It didn’t take him long to figure out that each department had perfected its own system for stealing.

  Deception started at the front desk, where the clerks were registering only eight out of every ten guests and pocketing the cash payments from the remaining two. The routine they were using was a simple one; anyone who had tried it at the Plaza in New York would have been found out in a few minutes and fired. The head desk clerk would choose an elderly couple who had booked in from another state for only one night. He would then discreetly make sure they had no business connections in the city and simply fail to register them. If they paid cash the following morning, the money was pocketed, and provided they had not signed the register, there was no record that the guests had ever been in the hotel. Abel had long thought that all hotels should be required to register every guest. The Plaza was already doing so.

  In the dining room the system had been refined. Of course, the cash payments of any nonresident guests of a check for lunch or dinner were already being taken. Abel had expected this, but it took him a little longer to check through the restaurant bills and establish that the front desk was working with the dining-room staff to ensure that there were no restaurant bills for those guests whom they had already chosen not to register. Over and above this, there was a steady trail of fictitious breakages and repairs, missing equipment, disappearing food, lost bed linen and even an occasional mattress gone astray. After checking every department thoroughly, Abel concluded that more than half of the Richmond’s staff were involved in the conspiracy and that no one department had a completely clean record.

  When he had first come to the Richmond, Abel had wondered why the manager, Desmond Pacey, hadn’t noticed what had been going on under his nose for a long time. He wrongly assumed the reason was that the man was lazy and could not be bothered to follow up complaints. Even Abel was slow to realize that the lazy manager was the mastermind behind the entire operation, and the reason it worked so well. Pacey had worked for the Richmond group for more than thirty years. There was not a single hotel in the group in which he had not held a senior position at one time or another, which made Abel fearful for the solvency of the entire chain. Moreover, Desmond Pacey was a personal friend of Davis Leroy. The Chicago Richmond was losing more than $30,000 a year, a situation Abel knew could be remedied overnight by firing a large portion of the staff, starting with Desmond Pacey. This posed a problem, because in thirty years Davis Leroy had rarely fired anyone. He simply tolerated t