Jack got himself invited out on the President’s yacht, in the Potomac. Clark Clifford was on board that yacht. He’d been a naval captain during the war and he handled the yacht, made sure Harry Truman didn’t fall overboard without a life preserver. Clark told me later he didn’t really like Truman. Truman wasn’t classy enough for him. Also, Clark Clifford liked shrimps and Truman hated them. Truman said, ‘That’s rich man’s food,’ and he wouldn’t eat them. Clark worked for me later on – he was my lawyer in Washington, but he was really a lobbyist for TWA. He was paid $50,000 a year to see that things went right for TWA, but I can honestly say – and I’m not being vindictive – he earned about fifty cents of that money.
Anyway, while Jack Frye was with Truman on the Potomac he reminded him about the money. Jack said, ‘I was lucky I didn’t have to swim home. The President almost kicked me off the yacht.’
That was one time I felt I didn’t get my money’s worth. Perhaps the mistake I made was I should have given him four hundred thousand, as I did later to Dick Nixon.
I tell you all this background to show you that Jack Frye, although he didn’t make any headway with Harry Truman, was a well-placed man. At least he could get on the yacht. He knew everyone who was anyone in Washington, which was an advantage to me at one time, and proved a terrible disadvantage at another.
Then TWA stock just fell over the precipice after the war, crashing down to nine dollars a share. The airline was on the verge of bankruptcy. Lee Tallman, the treasurer of TWA, said they needed $17 million to get it off the ground again. I disagreed. I think they were afraid to deal in large numbers. My estimate was that we needed forty million.
That’s when Noah Dietrich came into the picture, and I want to give Noah all the credit that’s due him, despite our later differences.
‘Go to New York,’ I told Noah. ‘Go to the largest and most powerful brokerage house – Merrill Lynch, Pierce, Fenner and Smith. Talk to Maury Bent, because he’s the man who swings the weight up there.’
Noah talked to Maury Bent, and Maury talked to a man named Parkinson, head of Equitable Life Assurance Company. It turned out, by sheer coincidence, that Equitable Life at the time was keen to make a major investment in one of the airlines. They had liquidity, and they were looking for a growth-oriented situation in a progressive company. TWA filled the bill. Equitable, within three days of Maury Bent’s approaching them, came up with a guarantee of $30 million cash on a debenture, with a reserve of ten million.
There was a little hook on it, though, which played an important role later on. None of the money was to go for deficit financing. It all had to be pumped into capital assets.
So we had what we needed. And Jack Frye pissed it away. Most of the money went toward salaries and operating costs, but some of it found its way into deficit financing, which was Jack’s mistake. I can’t call it a misinterpretation of the terms of the loan. It was dire necessity, and that thirty million vanished like sweat from your forehead in the desert. That year we lost $20 million.
There was no question in my mind as to who was responsible. Jack was down in Washington entertaining politicians and screwing Russian ballet dancers, and he didn’t have his finger on the button. Some people, like me, are able to control a large corporation from a distance. Jack couldn’t.
There was only one solution: Jack had to go. This pained me deeply, because I knew Jack and I knew his wife, Helen – a lady in every sense of the word. She had married one of the Vanderbilts, and then she married Jack, and I was very fond of her. I think I worried even more about what this would do to Helen than to Jack.
The problem was, Jack didn’t want to go. He had fought like a gladiator when the board of directors of TWA tried to get rid of him in 1938. I had bailed him out then. Now I was playing the role of the board of directors, and Jack put up the same kind of fight that he had in 1938 – only tougher. And this is where Jack’s contacts in Washington worked against me.
The airlines, even today, are in the grip of the government. The airlines carry the mail, and that mail is awarded on contract. The way you get those contracts is to have friends on Capitol Hill. Jack had those friends. He’d done a lot of favors for them. Not just cash – other things too, like call girls, and even call boys. When the crunch came, and it was Jack Frye against Howard Hughes, Jack Frye had his allies. They didn’t want to offend him, because he knew too much. As soon as I realized that he wasn’t going to step down meekly, I decided I had to fight this as best I could, and with whatever weapons I had at hand.
The major weapon I had at hand, as usual, was money.
So I went to Mr. Parkinson at Equitable Life and said, ‘TWA is in trouble – therefore your forty million is in jeopardy. I’ll bail out the operation, personally, through Hughes Tool. And I’ll pump another ten million into the airline. I have one condition. I want Jack Frye out.’
Parkinson didn’t know whether he could arrange that, but Noah came up with an idea. Because Jack had used some of that money for deficit financing, Equitable could throw the loans into default, which would force Jack out.
Again we faced a problem, which was that until Equitable received the next quarterly financial report from TWA they couldn’t legally default the loan.
Time was of the essence, because Jack and I were already at loggerheads. Christ knows what he would have done in the remaining three months of his tenure. I didn’t wait until that next report came in. I wouldn’t put in my ten million until Jack Frye was out on his ass. This, you understand was to save the airline, because I loved the airline. I believed in the airline. There was nothing personal in it. Jack Frye was a friend.
Parkinson made a tactical mistake, which you can’t blame him for. He put the proposition to Jack and tried to talk him into leaving for the good of the airline. Next thing we knew, practically all of Washington was lined up against us. The Tong wars in Chinatown are like snowball fights compared to what happened next. This is one of those inside battles that never gets into the headlines, because it demonstrates the possibility of corruption in the government, which of course, as you know, is nonexistent.
The postmaster-general himself, Bob Hannigan, was a friend of Jack’s, and he called Parkinson and TWA.
He didn’t mince words. ‘If Jack Frye goes, your airmail contracts go too.’
Once again the solution was to fight fire with fire. Parkinson, at my instruction, sat down and wrote letters to every member of the board of directors of TWA. He said to them, in effect, that if they turned down my offer of ten million, which meant that Equitable would fall on its ass with their forty million, he was going to pillory every single one of them, hold them responsible, and run them out of American business.
You understand that all this time the airline was losing a fortune every day under Jack Frye’s mismanagement. A few more months and TWA could have gone on the Canadian Stock Exchange, where they trade penny stocks.
Then we got the biggest break we could possibly have had. The pilot’s union decided to strike against us. They didn’t know what was going on behind the scenes, and neither did the newspapers. We couldn’t even meet the payroll of TWA at that time, and then the pilots came along and threatened to strike, which would have shut down the airline.
Naturally I gave it out to the newspapers at the time that I was extremely upset about it – you can’t very well tell the newspapers that the strike is sent from heaven. I think if the head of any large American corporation ever told the truth to the newspapers he should be given the Congressional Medal of Honor by the government and thrown into a mental home by the stockholders. It’s the First Commandment of business: ‘Thou shalt not tell the truth to the public, ever.’