The Billionaire Who Wasn't by Conor O'Clery

month.
    â€œWe had no idea what we were doing financially,” recalled Mahlstedt. “If an office was opened somewhere, whoever had money sent them money. It was crazy. There was no accounting. It was not that we weren’t keeping a record. We sent money to Hong Kong, or Hong Kong sent money to Canada, but there was no tying together.” With the business expanding so
rapidly, they hadn’t paid enough attention to bookkeeping. “We hadn’t spent any time on corporate structuring or anything like that, we were just simply busy selling cars, duty-free liquor, making the cash, putting the cash in the bank, cash in, and cash out,” recalled Miller.
    The Cornell graduates had learned well how to operate hotels and restaurants in the Hotel School, but they were now having to master the principles of managing a global business network on the run. They passed around among themselves Alfred P. Sloan’s 1963 bestseller, My Years with General Motors, in which Sloan attributed his success in running GM to decentralized management and financial controls. Tourists International had the former but not the latter. “Financial controls weren’t necessary,” quipped Feeney, looking back. “We didn’t have any money!”
    One of their problems was that the car business was now coming up against serious competition from the U.S. military. Before 1960, the Army Exchange Service stores overseas, known as PXs, did not sell automobiles and luxury goods made in the United States. Now the PXs had begun selling American cars—duty free—to military personnel in Europe, for delivery back home. They gave showroom space to the three American car manufacturers: General Motors, Ford, and Chrysler. “And of course they had very attractive deals,” said Feeney. “You arrived back from your overseas tour, went to your local Ford dealer, and picked up your car, which you had ordered in Europe. They sort of closed us out of that.”
    In Hong Kong, car sales were also coming up against other competition. Feeney and Miller’s salesmen had the Pacific to themselves until a ship from the Seventh Fleet was transferred from the Pacific to the Mediterranean and docked at Naples in Italy, and the first rival car salesman to come on board found that the officers had already bought cars in Hong Kong. With that, the secret was blown.
    Money had been pumped into the arteries of Cars International from Feeney’s mail-order liquor business on the Canadian border, but as it had been assailed by copycat competitors, it too was in decline. It went from $20 million per year in 1963 to $5 million per year in 1964.
    Through a chance encounter on a New York street a year earlier, the partners had learned that they were in deep trouble of a different kind—that could land them in court. Lee Sterling bumped into a rookie lawyer, Harvey Dale, an old school friend from Great Neck, New York, and a fellow Cornellian, and told him about the car business in which he was involved. Dale
had just started work with the law firm Curtis, Mallet-Prevost, Colt & Mosle in New York. The rookie lawyer knew enough about international law to realize that the entrepreneurs had potentially serious tax problems. “You guys better get yourselves sorted out, because the laws are changing,” he said.
    When Lee Sterling reported back what he had heard, Feeney and Bob Miller went to the Curtis Mallet office at 101 Park Avenue to find out more. The lawyers shook their heads in amazement when Feeney outlined how they financed their operations. They explained that the United States had that year tightened tax regulations for U.S. citizens living and doing business abroad and that the partners in the car and liquor business faced enormous tax and liability issues.
    Harvey Dale sat in on the meeting. The young lawyer knew Feeney slightly from Cornell, where he had studied philosophy before going on to graduate cum laude