We were eighteen and a quarter at that time. It had dropped that far. Of course I had an ace up my sleeve – actually, a full house. And that was that those guys on the board, the board of directors of TWA, were Toolco people on my payroll. We’d done just about all the cute maneuvering we could. That had served its purpose, but in the end it came down to simple old-fashioned muscle.
A few telephone calls were placed. Maury went to the board of directors and the proposition was put before them. A little lobbying took place and, lo and behold, it came time to vote and they said, ‘Howard Hughes is our benefactor! Without Howard Hughes we’d have no airline! We’re going to give this man the right to convert his $10 million, that saved our necks, at ten dollars a share.’
You mean you managed to get it for what you could have got it originally?
No, I could have gotten it originally for nine and a half. I had to pay ten. But I’m not complaining. And I didn’t waste any time, I converted and I got over a million shares, because of course there was interest on the loan. I got an extra 40,000 shares in interest. Since I sold that stock eventually – which is another story – at over $80 a share, those million shares had cost me ten million and I made a profit of seventy-three million. That’s not what I call chopped chicken liver.
In many ways 1948 was a critical year. Apart from that Jack Frye business, Hughes Aircraft got into serious difficulties. Several of my employees, high-ranking people, were indicted on fraud counts by the United States government. One of them was Glen Odekirk, who was assistant then to the president of Toolco, about as high as I could get him up there, and he made a damned fool of himself in this operation.
At the end of the war there were a lot of surplus airplanes around, and Hughes Aircraft wasn’t doing much of anything at the time except working on the Hercules. Other than that they were buying scrap planes and converting them into luxury craft for executives. Then someone at the Aircraft Division got the bright idea of using veterans’ priorities to buy these planes cheap and make himself a nice pile on the side. Veterans could buy surplus C-47s for next to nothing, the idea being to get them started in small businesses. Government paternalism, which almost always backfires because of the nature of the beast – corrupt.
This doesn’t reflect credit on me, and it reflects even less credit as the story goes on. But I promised to show you Howard Hughes, warts and all.
This all started in Honolulu, where we’d picked up six planes for $100,000 through two veterans, and paid them $2,000 each for their trouble. The six C-47s were worth at least half a million dollars. The story leaked, and our men were indicted.
I got on the pipe to Noah and said, ‘This won’t do.’ I arranged to meet him somewhere north of San Diego.
Did you have an office down there?
My office, then as now, is in my hat. I was only in Romaine Street twice in my life – once to check the wiring system on the alarm buzzers, and the other – I don’t even remember why I went the second time. Oh, yes, wait, I do. I was driving around talking to Spyros Skouras about some business deal and we both suddenly had to take a leak. I realized we were only a few blocks from Romaine, so I said, ‘Come on, Spyros, I haven’t visited my office for ten years. Let’s go there and take a leak’ – which we did.
Anyway, I had one of my Chevies parked in Solana Beach, north of La Jolla, and I met Noah there, and I told him I wanted that indictment dismissed. I didn’t want Hughes Aircraft’s name blackened by this kind of thing. This applied to me also. Because I had specifically told my people not to use veterans’ priorities, and once I gave an order I figured that was that. Noah said it would cost plenty of money to get the case dismissed before it came to trial, and we couldn’t possibly get Odekirk and the others off the hook, since the veteran in Honolulu had blown the whistle loud and clear.
But I said to him, ‘I don’t give a damn what it costs, I want my company cleared. Try to save our people too, but I’m sure as hell not going to have the Hughes name tarred and feathered with this kind of thing.’
We worked it out and figured the only way to do it, as usual, was go right to the top. That’s the way to solve a major problem.
I sent Noah to Washington and I told him he had half a million dollars from the political fund at his disposal. I didn’t care how it was used, but I wanted Hughes Aircraft cleared. Noah spoke to someone at Democratic Party headquarters and, being Noah, he didn’t offer the half a million. He wanted to get it as cheaply as he could, so he told them he’d give them $100,000 in the form of campaign contributions, $5,000 each to any twenty men they picked.
But there was some backtalk from the Justice Department. The Justice Department had a hot case and naturally they didn’t want to drop it. Someone had to lean on them.
The man from the Democratic Party headquarters said, ‘Listen here, my friend, you’re running for public office’ – the Justice Department official he was talking to had announced his candidacy for a high post. ‘If you want to be elected, if you want the Democratic Party to back you, you better play ball.’
He played ball, and the company name was dropped from the case. And when it finally came to trial, two of the Toolco employees had to plead nolo contendere – no contest. They were fined a few thousand dollars each, and that was that.
I was personally exonerated by the United States Attorney. I wasn’t accused, but I wanted a more positive affirmation. The United States Attorney got up in court and said that Howard Hughes had had no knowledge of this and had nothing to do with the fraud. My hands were clean.
22
THE NEXT ITEM on the agenda – as they like to say in the board of directors’ meetings that I never attend – is Hughes Aircraft.
In some ways this was my most successful business venture. Toolco was the backbone of my fortune, but that was my father’s doing, not mine. I made it into a multimillion dollar company, but he founded it. On the other hand, Hughes Aircraft was my baby.
I originally started it way back in 1934, but it was just a workshop. I needed some space to develop the planes I used for my assaults on the various records, and then later of course we worked on the Hercules there, and we also did these conversion jobs on the surplus planes which got me into that legal mess I told you about. And during the war we made feeder chutes for ammunition.
What really got us off the ground was the electronics revolution. I saw this coming, and I backed up my hunch with a big stack of chips. I hired the best scientific talent around, built up a team of topflight R & D men, brought in a couple of retired generals into the top management spots – Ira Eaker and Harold George. They weren’t particularly knowledgeable in research and development, but they had knowhow in administration, and they knew the right people, which was even more important.
Ninety-five percent of our business at Hughes Aircraft was done with the Air Force, and both my top men, Eaker and George, were ex-Air Force generals. I could never get along with Eaker personally, but he was a good administrator. What I couldn’t stand about him was that he was a warmonger. You know I’m anything but a hawk, and this guy Ira Eaker was a screaming eagle. He would have torn a poor hawk to shreds, would have made it look like a sick pigeon.