Iran Contra

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December 4, 1999: Iran-Contra & the Safra Mystery

Press accounts continue to state erroneously that banker Edmond J. Safra, who died mysteriously when a fire swept his Monaco penthouse apartment, was cleared over involvement in the Iran-contra scandal and related money-laundering investigations.

Contrary to reports in The New York Times and other leading news outlets, Safra’s Republic National Bank was implicated – not cleared – in connection with the Iran-contra affair. According to the final report by Iran-contra special prosecutor Lawrence Walsh, an officer of Republic National Bank in New York arranged clandestine cash transfers to Oliver North’s secret network in 1985-86.

Police in Monaco have given no indication about a possible motive for the apparent attack on Safra’s apartment and the fire that killed the banker and a nurse. As one of the world’s richest men, Safra would be an obvious target for robbery, kidnapping and other common crimes. But Safra’s connection to secret intelligence operations could become another possible area for investigation as would Safra’s questionable banking activities in Russia.

After escaping any Iran-contra fall-out – thanks largely to the U.S. news media’s failure to examine the details of Walsh’s investigation – Safra’s Republic National Bank went on to become a major recipient of money from Russia. Millions of rubles poured into the New York-based bank from Boris Yeltsin’s government and from the shadowy world of Russian business.

In reports about Safra’s mysterious death, major U.S. newspapers continued to ignore the evidence against Safra’s bank that emerged from the Iran-contra investigation. Iran-contra financial records revealed that Republic National Bank handled wire transfers for North’s Swiss accounts.

But Walsh also devoted a special section to what he called "the cash drops." That section dealt with surreptitious payments made to Oliver North’s operatives – illicit money arranged in New York City by an officer at Safra’s Republic National Bank, a woman named Nan Morabia. As part of an immunity deal with Walsh, Morabia described her activities that she said were directed by financier Willard Zucker, who oversaw North’s Iran-contra accounts in Geneva, Switzerland.

Morabia testified that she arranged for hundreds of thousands of dollars in "cash drops" to be made to North’s operatives, including Albert Hakim and Richard Secord, at Republic National Bank in New York City and at New York hotel rooms. Sometimes, the recipient was required to show a torn dollar bill that matched a torn dollar bill in the possession of the courier.

"Beginning in early 1985, Zucker would contact Nan Morabia and inform her that Hakim or Secord needed a certain amount of cash," Walsh’s report stated. "Nan Morabia would communicate this to her husband Elliot, who provided and delivered the cash or had their son, David, deliver it. Zucker wired from Enterprise accounts an equal amount to an account named ‘Codelis’ at the Trade Development Bank in Geneva. This account was controlled by two brothers, Edgar and Elie Mizrahi, who were family friends of the Marabias."

The purpose of making the dual transactions – the "cash drops" in New York and the parallel deposits in Geneva – was to circumvent U.S. anti-money-laundering statutes, Morabia acknowledged. A year ago, CIA inspector general Frederick Hitz also confirmed that North’s contra-support operation worked closely with major Latin American cocaine cartels and drug money launderers. [For details, see Robert Parry’s Lost History.]

The Trade Development Bank, where Zucker sent the Geneva funds, was founded by Safra in the 1950s. Beginning with only $1 million, the bank grew into the flagship of Safra’s international banking empire with nearly $5 billion in deposits by the early 1980s. Safra sold the bank to American Express in 1983 for $550 million.

After the deal, American Express executives grew suspicious about Safra’s rumored links to the Iran-contra operations and drug money laundering. Given their corporate responsibility for the Trade Development Bank, top American Express executives hired private detectives to examine those suspicions, some of which began surfacing in the international press.

When Safra got wind of the American Express investigation, he ordered counter-investigations of American Express, with Safra’s private investigators tailing the private eyes working for American Express. Safra then sued American Express for alleged defamation. At that point, American Express chose to avert a costly legal battle and limit the negative publicity by agreeing to apologize and donate $8 million to charities of Safra’s choice.

The American Express retreat was big news at the Wall Street Journal and other major newspapers that took Safra’s side and portrayed him as an innocent man smeared by a business competitor. Writer Bryan Burrough popularized this view in his 1992 book, Vendetta: American Express and the Smearing of Edmond Safra. The image of Safra as victim became the dominant conventional wisdom among U.S. journalists.

So, by the time Walsh’s report appeared in 1993 – confirming that Safra’s bank indeed was implicated in both the Iran-contra affair and illicit money laundering – the U.S. news media showed no interest in correcting the record. The false conventional wisdom held.

Now, with Safra’s apparent murder, authorities might be expected to begin a thorough examination of the banker’s mysterious history. But the American news media still is recycling the false conclusions about Safra’s Iran-contra "exoneration." None of the major newspapers, it seems, has examined the documentary record available in Walsh’s report and at the National Archives.

The New York Times summed up Safra’s alleged Iran-contra tie-in this way: "American Express executives … hired detectives to track down rumors that he [Safra] was involved in the Iran-contra scandal and that his banks were laundering drug money. None of the rumors proved true." [NYT, Dec. 4, 1999]

Ironically, Burrough prefaced his erroneous book, Vendetta, with a quote from Mark Twain: "A lie can travel halfway around the world while the truth is putting on its shoes." As the historical record now shows, it was Vendetta’s version of events – repeated by The New York Times – that turned out to be the lie.

But there’s no indication, at least not in the major American news media, that the truth is busy putting on its shoes.

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The Safra Affair: A Saga of Corporate Intrigue --- The Vendetta: How American Express Orchestrated a Smear Of Rival Edmond Safra --- Top Aide to James Robinson Oversaw Two Who Spread False Stories World-Wide --- Officers Deny Doing Wrong


24 Sep 1990

Mr. Freeman supervised and approved the hiring of the two American Express operatives who carried out the [Edmond] Safra campaign: One a private detective, the other a public relations executive who frequently worked directly for Mr. Robinson as an aide. For at least two years, the operatives investigated Mr. Safra and then spread rumors and news articles containing patently bogus information about him. The articles linked Mr. Safra to drug trafficking, money laundering and murder, and to criminal elements ranging from Colombia's Medellin drug cartel to the late Mafia figure Meyer Lansky. Mr. Freeman met often with one of the operatives, and approved expense vouchers for the other.

Mr. Robinson's efforts to bring Mr. Safra and TDB into the 21st century failed miserably. Mr. Safra abhorred memos; American Express demanded them. Mr. Safra emphasized longstanding relationships; American Express wanted more loans and higher margins. Mr. Safra deplored publicity; American Express thrived on it. American Express executives thought Mr. Safra high-handed and imperial; Mr. Safra felt excluded from Mr. Robinson's inner circle.

Mr. Smith, by his own admission, had become obsessed with stopping Mr. Safra. His aides began looking for anything that might harm Mr. Safra, investigating whether the banker might be using his corporate jet for personal trips -- although there is no evidence he did so -- and probing his U.S. tax situation for weaknesses -- although the IRS has never brought an action against Mr. Safra. "I said, `If the son of a bitch competes with us, we'll turn him in to the IRS,'" Mr. Smith recalls. When Mr. Safra learned of these efforts, he protested to Mr. Robinson on a number of occasions between 1985 and 1987. With regard to such protests, Mr. Smith recalls telling aides, "Screw {Safra}, we've done nothing wrong."

Slowly, with a hint here, a comment there, a question began to dawn on some American Express executives: Was a top aide to James D. Robinson III, the company's chairman and chief executive officer, up to something they would be wise to steer clear of?

Harry L. Freeman was given to flashes of both brilliance and bad judgment, but Mr. Robinson's reliance on him was unquestioned. The two frequently began their day at 6:45 a.m. over a pot of coffee in the chairman's corner office. Special projects were Mr. Freeman's bailiwick, and associates say that didn't please the company's top lawyers, Gary A. Beller and Lawrence Ricciardi, who fretted that one of Mr. Freeman's operations might one day blow up in their faces. "We've got to stop this guy," Mr. Ricciardi said on more than one occasion. "He's going to destroy us."

Few knew quite what Mr. Freeman was up to this time, but it was clear he had targeted one of the company's thorniest competitors, the international banker Edmond Safra, a man who some American Express officials were obsessed with defeating.
  
When Matthew Stover, then an American Express public relations executive, asked about the project, he says, "I was always told, `You don't want to know.'" Finally, in the summer of 1988, Mr. Ricciardi, the lawyer, confronted Mr. Freeman. "Harry, I don't know what you're up to," he said. "But if I were you, I'd stop what you're doing immediately."
The warning was apt, but it was too late. In a stunning disclosure, American Express admitted last year that it had engaged in a covert campaign to ruin Mr. Safra's reputation by spreading rumors and articles in the international press. The company made a painful, public apology for what its chairman, Mr. Robinson, called an "unauthorized and shameful effort," and paid $8 million to Mr. Safra and charities he selected. As part of the agreement, details of this "shameful effort" were to remain secret.

Afterward Mr. Freeman announced his retirement, saying he had done nothing wrong, but taking responsibility for the affair because it had happened "on my watch." Company officials privately blamed the incident on a handful of unnamed low-level employees. Other top officials to this day insist, as one puts it, "no one did anything he believed was wrong or beyond his authority."

But a lengthy investigation by this newspaper reveals evidence suggesting the effort to smear Mr. Safra was in fact overseen from Mr. Freeman's office, only steps away from Mr. Robinson's.

Mr. Freeman supervised and approved the hiring of the two American Express operatives who carried out the Safra campaign: One a private detective, the other a public relations executive who frequently worked directly for Mr. Robinson as an aide. For at least two years, the operatives investigated Mr. Safra and then spread rumors and news articles containing patently bogus information about him. The articles linked Mr. Safra to drug trafficking, money laundering and murder, and to criminal elements ranging from Colombia's Medellin drug cartel to the late Mafia figure Meyer Lansky. Mr. Freeman met often with one of the operatives, and approved expense vouchers for the other.
For American Express, a company that has enjoyed a virtually unrivaled reputation for integrity, the Safra affair reveals a willingness to engage in unseemly corporate revenge when confronting a rival, and, at the very least a jarring lack of oversight on the part of top company officials.

Despite regular contact with one of Mr. Freeman's operatives, there is no concrete evidence that Mr. Robinson knew of the smear campaign against Mr. Safra. Indeed, he and other top American Express officials, including Mr. Freeman, have vehemently denied any prior knowledge of the anti-Safra effort. Instead, they argue that a legitimate investigation of a competitor's activities was simply taken too far by overzealous employees.

The Safra affair is a story of corporate intrigue played out on three continents. Suspecting that American Express was behind the outbreak of specious stories that began surfacing in early 1988, Mr. Safra hired numerous detectives who engaged the American Express operatives in a cloak-and-dagger pas de deux that resulted in proof of the company's culpability roughly a year later.

In response to repeated inquiries, American Express yesterday issued a statement denying that any of its employees knowingly spread false information. The company has steadfastly declined to discuss details of the matter. Instead, it turned to Arthur Liman, the noted New York attorney, who in two phone calls over the past two months said he would urge the company to sue this newspaper if it published defamatory statements about the anti-Safra campaign, suggesting that "this is a textbook case of what libel is about." Mr. Liman emphasized that to comment further would violate "the moral spirit" of the settlement with Mr. Safra. In early August, Mr. Robinson telephoned Mr. Safra and said he had "personally told my people," including Mr. Freeman, not to talk to this newspaper.

Last week, an attorney representing Mr. Freeman, John Walsh, wrote this newspaper to say that this article would be "actionable" if it contained any statements implying that Mr. Freeman had engaged in or covered up "any campaign of disinformation" against Mr. Safra.

This article was pieced together from interviews with dozens of people involved in the Safra affair, including American and European journalists, private detectives and more than 15 current and former American Express executives. Among the few executives willing to comment on the record was Robert F. Smith, former chairman of American Express Bank, who left the company under a cloud last year.

The feud between American Express and Mr. Safra developed soon after Mr. Robinson's decision in 1983 to buy for $550 million Mr. Safra's Geneva-based Trade Development Bank, known as TDB, one of the crown jewels of the rarefied world of Swiss banking. Mr.

Safra, born in Beirut and descended from a long line of Syrian traders and bankers, had founded TDB's predecessor bank in 1956, after having founded his first bank in Brazil. In the 1960s Mr. Safra started a U.S. bank, Republic National Bank of New York, and the firms' rise made him one of the world's most influential bankers.

The union of American Express's international banking arm, American Express Bank, and TDB was doomed from the beginning, largely because of Mr. Safra's inability to function within the rigid framework of a multinational conglomerate. Associates say Mr. Safra might have stepped out of an 18th-century portrait, a formal, secretive billionaire whose Swiss bank offered unmatched personal service to its wealthy Middle Eastern and Latin American clients. Befitting his image, Mr. Safra lives in a castle-like villa, La Leopolda, the King of Belgium's former estate on the French Riviera.

In image and experience, Mr. Safra's new boss, Jim Robinson, could hardly have been more different. Mr. Robinson, a Harvard MBA and the son of a legendary Atlanta banker has in his 13-year reign generated generally strong financial results and reaped publicity so relentlessly favorable that, until this year's near-collapse of the company's Shearson Lehman Hutton unit, he was sometimes known as "The Teflon Executive." The formal, unfailingly polite Mr. Robinson speaks again and again of the importance of quality and integrity.

Mr. Robinson's image has had a paradoxical quality that has become more pronounced in recent years. Although he is portrayed as a hands on manager who pores relentlessly over briefing papers and knows the names of low-level employees at company field offices, he is also depicted as an executive who gives subordinates a great deal of leeway, a fact that has often forced -- or enabled -- him to plead ignorance when plans go awry.

Mr. Robinson's efforts to bring Mr. Safra and TDB into the 21st century failed miserably. Mr. Safra abhorred memos; American Express demanded them. Mr. Safra emphasized longstanding relationships; American Express wanted more loans and higher margins. Mr. Safra deplored publicity; American Express thrived on it. American Express executives thought Mr. Safra high-handed and imperial; Mr. Safra felt excluded from Mr. Robinson's inner circle.

After less than two years, the two men parted ways. In December 1984 Mr. Safra resigned as chairman of the TDB-American Express Bank combination, but agreed not to found a new Swiss bank until March 1988. Mr. Robinson, anxious to make the split appear amicable, gave him the means to do so, selling Mr. Safra some minor operations in Paris and London and, more importantly, TDB's Geneva headquarters, the symbol of Mr. Safra's Swiss power.

Simmering resentment burst into open hostility during Mr. Safra's severance negotiations, when the two sides couldn't agree on a price for the Geneva headquarters. Matters grew worse in the months following Mr. Safra's departure, when officials at American Express Bank suspected that Mr. Safra was hiring away employees with an eye to his 1988 re-entry into Swiss banking. Incensed, Bob Smith, the banker who succeeded Mr. Safra as chairman, launched a full-scale investigation, even hiring detectives to follow the employees in question. "I told Jim {Robinson} what we were doing," Mr. Smith says today. "I told him it was necessary to keep it secret."

Fear of Mr. Safra mounted as Mr. Smith constantly warned Mr. Robinson of the threat posed by Mr. Safra's looming return to Swiss banking. Inside American Express, the feeling spread that any effort by Mr. Safra to reclaim his former customers could be a death blow to the weakened bank.

Their worries were fanned by Mr. Smith's inability to trust his own executives, many of whom had worked for Mr. Safra, and by the bank's status as a poor-performing orphan within the American Express empire. Headquarters had tried to sell the bank in 1981; Mr. Smith and his aides also explored a leveraged-buy-out.

Mr. Smith, by his own admission, had become obsessed with stopping Mr. Safra. His aides began looking for anything that might harm Mr. Safra, investigating whether the banker might be using his corporate jet for personal trips -- although there is no evidence he did so -- and probing his U.S. tax situation for weaknesses -- although the IRS has never brought an action against Mr. Safra. "I said, `If the son of a bitch competes with us, we'll turn him in to the IRS,'" Mr. Smith recalls. When Mr. Safra learned of these efforts, he protested to Mr. Robinson on a number of occasions between 1985 and 1987. With regard to such protests, Mr. Smith recalls telling aides, "Screw {Safra}, we've done nothing wrong."

Mr. Smith's anger spread to other American Express executives. In early 1987 American Express finally took legal action, filing a criminal complaint against Mr. Safra in Geneva for unfair competition, mentioning the stolen employees -- the banker's companies had hired as many as 23 American Express Bank employees -- and a key computer tape that turned up missing. When Mr. Safra applied for his banking license that May, American Express lawyers filed papers to block it.

Months ticked away. Then, in January 1988 Swiss authorities approved the licensing of Mr. Safra's new bank, rejecting the American Express brief out of hand. The fight should have ended there, and to outward appearances it had: American Express declined to appeal, allowed its criminal complaint to lapse, and Mr. Robinson called and graciously congratulated Mr. Safra. In fact, it was only the beginning.

A Matter of Honor: The Hunter Is Hunted

The summer of 1988 began joyously for Edmond Safra. In March, he opened his new bank at the site of his old one, 2 Place du Lac in Geneva, the city's pre-eminent banking address. In August, he invited thousands of guests, including Prince Rainier and Princess Caroline of Monaco, to his birthday party at La Leopolda.

The celebratory mood ended two weeks later, when Mr. Safra was shown a curious article in La Depeche du Midi, a French newspaper based in Toulouse. A jumble of fact and fiction, the story linked Mr. Safra to the Mafia, South American drug traffickers, the CIA and the Iran-Contra scandal. To Mr. Safra's surprise, it also referred to similar stories in Peruvian and Mexican publications, and to a previous article in La Depeche that March linking Mr. Safra to drug money-laundering.

Mr. Safra's alarm grew when the other articles crossed his desk. A Lima-based newspaper named Hoy had run a full-page article July 4 profiling Mr. Safra and his banks as the pawns of drug traffickers and tying him again to New York gangsters, the CIA and the Iran-Contra affair. "Mafioso bankers turn their eyes to the south," the headline read. Five days later, a left-wing Mexico City paper named Uno Mas Uno had reprinted much of the Hoy story.

The articles posed a potentially devastating attack on Mr. Safra's reputation for honesty and discretion. But they also thrust at the dark underside of Swiss banking -- the fact that its vaunted secrecy laws attract money from criminal enterprises of all stripes to its institutions, including, from time to time, Mr. Safra's. Too many people, his aides could see, might believe the stories.

As Mr. Safra's aides studied what to do, a bombshell hit. In Paris, an extreme right-wing, anti-Semitic newspaper named Minute published on Aug. 31, 1988, an article charging that Mr. Safra was actively involved with cocaine traffickers and the Mafia. "Billionaire of the White Stuff," the headline read.

Horrified, Mr. Safra summoned his top aides to La Leopolda to discuss what to do. The articles had a number of common elements, and the assembled executives agreed on one thing: If the articles represented an organized campaign, only American Express had the world-wide resources -- and the motive -- to carry it off. "But you know," Walter Weiner, Republic Bank's chairman, said at one point, "we'll never be able to prove that."

In the meantime, Mr. Safra sued Minute, but only after the paper published four more lurid articles that fall, alleging Mr. Safra's ties to Manuel Noriega, the Medellin cartel and Meyer Lansky. Then, when proceedings in the libel suits began later that fall, one of Mr. Safra's French lawyers made a startling discovery. Near the top of a 1967 Life magazine article on the Mafia, which never mentioned Mr. Safra but which Minute had produced to defend information in one of its articles, a fax "telltale" could clearly be seen: "FEB 25 '88 21:26 AMEX CORP COMM NYC." The article had been transmitted by a fax machine at American Express's New York corporate communications department.

The Safra camp's jubilance over the discovery was tempered when they realized that the "telltale" was far from conclusive. Among the few other pieces of evidence they had was a name: Tony Greco. It had come thirdhand, from the boyfriend of a Minute clerk. When Mr. Weiner, Republic Bank's chief, hired a detective to look into Mr. Greco, he found nothing.

Then, in February 1989, as the Safra forces pondered their next move, they got a break. The Miami office of Republic Bank of New York received a call from a Peruvian named Victor Tirado, who claimed to have information about an organized smear campaign against Mr. Safra. The call was forwarded to Republic's general counsel, Ernest Ginsberg, who then called Mr. Weiner and exulted: "I just got a call and I can't believe my ears!"

A Safra detective traveled to Washington to meet Mr. Tirado, who, to the Safra team's surprise, turned out to be deputy press attache at the Peruvian embassy and a former press secretary to the then-president of Peru, Alan Garcia. The rotund Mr. Tirado told the detective that a friend named Antonio Greco was behind stories about Mr. Safra in Peru, and probably in Europe as well.

Mr. Tirado's second contention was even more provocative: "Greco claims he's working directly with Jim Robinson." While that assertion was never proven, it gave the Safra forces added incentive to probe Mr. Greco's activities.

Mr. Tirado offered little more, but said he would if paid a $10,000 "honorarium." After considerable soul-searching, Mr. Safra, worried about the propriety of paying a foreign diplomat, decided against making the payment.

It was the last time the Safra executives heard from Mr. Tirado, but his call persuaded them to bring in expert help. An even greater impetus was the continued spread of anti-Safra articles, which began appearing in U.S. publications that spring of 1989. Mr. Safra hired Stanley Arkin, a pugnacious New York attorney known for defending figures in Wall Street's insider-trading scandals, and charged him with stopping the articles.

Before he could stop the articles, Mr. Arkin saw, he had to know what was behind them. For investigative work Mr. Arkin turned to Palladino & Sutherland, a small but respected San Francisco detective agency known for work on behalf of fallen auto executive John Z. DeLorean. The firm is run by a husband-and-wife team, Jack Palladino, an attorney and former Ford Fellow, and Sandra Sutherland, who is also a published poet.

Mr. Arkin's charge was simple: Find out whether the anti-Safra articles represent an organized campaign. If so, was American Express behind it? And who was the mysterious Mr. Greco?

Aware that reporters don't typically turn over confidential sources to strangers, much less private detectives, Ms. Sutherland journeyed to Europe that spring under disguise. In visits to publications in France, Italy and Switzerland, she posed as an Australian free-lance writer researching Mr. Safra for a book on money-laundering. At Minute and La Depeche, journalists promised to put her in touch with their Safra sources. At both stops, she was shown the same strange, hand-drawn chart purporting to link Mr. Safra to many criminal organizations. Clearly, Ms. Sutherland reported to Mr. Arkin, the articles were coming from a single source.

Ms. Sutherland had hoped her inquiries might flush out the anti-Safra sources, and before long, she succeeded. Arriving in Geneva in April 1989, Ms. Sutherland had just checked into a hotel when her phone rang. A deep, ominous voice, speaking in Italian, told her: "I'm a friend. You don't know who I am, but we should talk." The talk went nowhere, but the American detective had a strong hunch her bait had been taken.

At the same time, Ms. Sutherland became aware that someone, perhaps the mysterious caller, was counterattacking, spreading rumors that she was working for the CIA. Some Swiss journalists canceled meetings with her as a result.

As Ms. Sutherland crisscrossed Europe, Mr. Safra's forces pressed parallel investigations in Latin America and the U.S. A Palladino detective was dispatched to Peru, where he posed as a journalist in search of information on Mr. Greco. In Peru, he found, Mr. Greco was known as an international businessman with a large home in Spain, outside Barcelona.

Mr. Arkin, meanwhile, was tipped that the elusive Mr. Greco had a second home on a secluded cul-de-sac in an Italian area of New York's Staten Island. The lawyer brought in a second detective agency, a Connecticut-based group of former FBI agents. These detectives kept Mr. Greco's home under surveillance and even went through his garbage. But Mr. Greco seemed to be constantly traveling, and they made little progress.

By May 1989, Mr. Arkin's luck was changing. In Paris, Ms. Sutherland had begun negotiations with a Minute reporter to meet the paper's source. One meeting fell through when the source didn't show. When the source finally arrived in early May, Ms. Sutherland was out of touch in Australia. In desperation Mr. Arkin directed that Ms. Sutherland's Parisian translator, an aging former starlet named Sophie Hardy, be sent to the meeting.

Identifying himself as "Jaime," a journalist based in Santiago, Chile, "the source" turned out to be a small, swarthy man of 50 or so who, over dinner at an expensive Chinese restaurant on the Champs Elysees, questioned Ms. Hardy intently about Ms. Sutherland. "He was a very strange person . . . acting like a spy," recalls Ms. Hardy. "He told me I had been duped, that {Ms. Sutherland} was working with the CIA." When Ms. Hardy was unable to reveal more about Ms. Sutherland -- she didn't know her true identity -- "all of a sudden he launched into this very brutal behavior" and abruptly ended the dinner, Ms. Hardy recalls.

When Ms. Sutherland reached Paris several weeks later, she showed Ms. Hardy pictures of several unidentified men, including a surveillance photo of Mr. Greco. "Yes!" Ms. Hardy exclaimed, pointing to Mr. Greco. "That's him!"

All that remained was linking Mr. Greco to American Express, something Mr. Safra's lawyers were uncomfortably aware they hadn't yet done. Frustrated, Mr. Arkin switched surveillance teams on Mr. Greco's Staten Island home, dropping the Connecticut detectives and hiring a third agency. Within days the new team got a break. An operative followed Mr. Greco's car to Bouley, a discreet, lower Manhattan restaurant, where Mr. Greco was photographed dining with an unidentified woman. Afterward the detective shadowed Mr. Greco as he dropped off the woman at an apartment building on Central Park West. On a hunch, Mr. Arkin put a second tail on the woman. The next day detectives followed her to work. As the surprised operatives looked on, the woman disappeared inside American Express headquarters.

Harry Freeman Launches His `Secret Weapon'

The woman's name was Susan Cantor, and she was a newly minted senior vice president at American Express Bank, specializing in wealthy Latin American clients. But as a former associate producer of investigative projects for ABC News, Ms. Cantor was no ordinary banker. More than a year before Mr. Greco's activities attracted notice, her mix of investigative and journalistic talents had made Ms. Cantor so valuable that Harry Freeman referred to her as his "secret weapon" in the fight against Edmond Safra.

Ms. Cantor joined ABC in the early 1980s after receiving a masters degree in international relations from Yale in 1981. Moving from posts in a documentary unit to World News Tonight to the investigative unit, she became known as an avid conspiracy theorist whose intelligence, ambition and Latin American expertise seldom translated into solid stories.

One of her former ABC supervisors describes Ms. Cantor as more adept at conspiratorial thinking than journalism. "She was great on the latest conspiracy theory coming off the Hill, the latest person running the secret war in Nicaragua," the supervisor says. "I would say, `Susan go nail it down.' And she couldn't nail it down."

In a statement released yesterday, Ms. Cantor says she resigned in 1986 to pursue other opportunities. Some ABC co-workers say that decision came after her boss repeatedly suggested she wasn't suited for network news. Her failure to translate rumor and theory into usable Latin American stories had alienated a number of correspondents.

In early 1987, at a time when American Express's fear of Mr. Safra was approaching its height, Mr. Freeman interviewed and hired Ms. Cantor for a job in American Express's public relations department. Walter Montgomery, then the department head, told co-workers Ms. Cantor's television experience would be invaluable. But Ms. Cantor wasn't destined to do much P.R. work. Almost immediately upon her hiring, Mr. Freeman tapped her for a top-secret "special assignment."

When American Express Bank officials began raising the alarm about Mr. Safra in the mid-1980s, they had found a willing ear in Mr. Freeman. Trained as a lawyer, he had come to American Express in 1975 after years of government work as an executive for the Overseas Private Investment Corporation. Of the four top aides who shared American Express's 51st floor executive suite, Mr. Freeman was probably closest to his boss. Though half his duties were supervising the company's extensive government, advertising and corporate relations apparatus, Mr. Freeman always said the other half was "crisis of the day" work with Mr. Robinson.

Though his ideas could be innovative, as when dealing with international trade, his penchant for unorthodox projects worried American Express lawyers. In 1987, for example, Mr. Freeman was blamed internally when American Express admitted it had secretly funded a supposedly nonbiased newsletter's survey of credit card interest rates that The Wall Street Journal routinely referred to until it learned of American Express' involvement. Mr. Freeman said at the time he saw nothing wrong with funding the newsletter.
As bank executives in Europe probed charges that Mr. Safra was hiring away employees, Mr. Freeman grew convinced that Mr. Safra was intent on destroying American Express Bank. He began collecting the darkest rumors about Mr. Safra, that he was involved in money laundering, drug trafficking and had ties to the CIA and French and Israeli intelligence.

Ms. Cantor's "special assignment" to investigate these rumors initially centered on allegations reported by Swiss papers and the New York Times in December 1986, that a plane owned by Mr. Safra may have been used to transport former national security advisor Robert MacFarlane to Iran as part of talks in the Iran-Contra affair. Interviews with European journalists, as well as current and former American Express officials, suggest that in the coming months, Ms. Cantor's mission evolved from gathering information on Mr. Safra's plane, to helping reporters investigate him, to spreading rumors and negative articles on the banker's alleged drug ties.

Ms. Cantor said in her statement: "I never intended or sought to disseminate false information concerning Edmond Safra to anyone, and I never instructed, asked or engaged anyone to spread such information."

From the beginning, she sought to hide her ties to American Express. In February 1987 she traveled to Geneva, where she met with at least two journalists, including Maya Jurt, a veteran Swiss writer who had reported the story of Mr. Safra's plane two months earlier. When Ms. Cantor dined at Ms. Jurt's home on February 8, she didn't mention American Express. "She said she was writing a big piece on Iran Contra for Time magazine," recalls Ms. Jurt. "She wanted to know what I had {on Mr. Safra}, what kind of proof I had. I showed her all my documents."

By the time Ms. Cantor returned to New York, she had gathered quite a bit of information. A former ABC producer who kept in touch with her recalls, "She begins to blow in my ear, `Hey, Safra this; hey Safra that; hey, MacFarlane and a plane that.' I said, `Hey, if you can confirm any of this, I might be interested.' But she couldn't."

Her file on Mr. Safra bulging with European news articles and records from Geneva's corporate registry, Ms. Cantor next traveled to Washington to share it with the House select committee investigating the Iran-Contra affair. Joseph P. Saba, a staff counsel probing Oliver North's various Swiss transactions, met Ms. Cantor in a public room in the capitol one day when she arrived unannounced, file in hand.

Ms. Cantor identified herself "as a former journalist whose current employer knew nothing of what she was doing," Mr. Saba recalls. "She said she was doing it for primarily journalistic reasons."

The lawyer, accustomed to zealots with similarly vague explanations, took Ms. Cantor's file and promised to investigate. In coming months, as Mr. Saba followed lead after dubious lead on Mr. Safra, Ms. Cantor phoned and visited frequently. "It was always, `Here's what I've got, what do you think?' And my answer was, `Not much,'" says Mr. Saba.
At one point, Mr. Saba asked the committee's press liaison to find out more about Ms. Cantor. When he learned that she worked for American Express, "we said that was fine," Mr. Saba recalls. "Motive wasn't something I was interested in." When Mr. Saba confronted her, Ms. Cantor acknowledged working for American Express. She told him stories about her snooping trips to Europe, insisting her work was for personal reasons.

When not probing Mr. Safra, Ms. Cantor assumed a number of duties at American Express that placed her in direct contact with the chairman, Mr. Robinson. Former executives say Ms. Cantor spent much of her New York time working for Mr. Robinson on his much publicized plan to solve the Third World debt crisis. Among her jobs was assembling briefing books for Mr. Robinson and arranging Mr. Robinson's schedule for his Latin American trips; in this role, she once quizzed a Wall Street Journal international banking reporter on officials for Mr. Robinson to visit in Mexico City. A former banker in Shearson Lehman's debt group says she also took on heftier duties, mediating, at Mr. Robinson's request, a dispute between Shearson and American Express Bank over how to handle the bank's Third World debt.

Much of her focus, however, continued to be on Mr. Safra. In the months to come, Ms. Cantor punctuated her increasingly frequent European travels with whirlwind stops by American Express's London office, where her appetite for dirt on Mr. Safra was matched only by her willingness to talk about it. To other executives Ms. Cantor spoke excitedly of how she changed her hair color and appearance on her travels and of how she secretly photographed Mr. Safra's villa, La Leopolda.

In September 1987 Ms. Cantor returned to Geneva, where she met with Irene Hirsch, a Swiss-based economic correspondent for a Spanish paper. She told Ms. Hirsch she was working on a "top secret story" on the Iran-Contra affair to appear in The Washington Post. Ms. Hirsch, who knew Ms. Cantor actually worked for American Express, was confused. "Why was somebody working for American Express saying they were working for The Washington Post?" she wondered. "I felt in some way she was fishy."
Ms. Cantor's poses seemed to change from stop to stop. While dining at Maya Jurt's Geneva home September 1, she told the writer she was researching a book on Mr. Safra and the Iran-Contra affair.

Ms. Cantor denies ever having posed as an author, or as a reporter for Time or the Washington Post. She also denies ever having disguised her appearance.
Ms. Jurt, who was working on a second article on Mr. Safra, responded eagerly when Ms. Cantor, offering to help, referred her to Mr. Saba, the Iran-Contra lawyer. Eager to swap leads, Mr. Saba faxed Ms. Jurt copies of telexes pertaining to the use of Mr. Safra's plane. Ms. Jurt used this information in an article exploring the banker's possible Iran-Contra connections in Bilanz, a Swiss magazine, two months later. (By that time Mr. Saba had met with Mr. Safra's attorneys and concluded that neither the banker nor his plane had any significant role in the Iran-Contra affair.)

When Ms. Cantor faxed the names of pilots believed to have flown Mr. Safra's plane, Ms. Jurt was surprised to see an American Express "telltale" on the fax. "I asked her point blank, didn't she think it was very incompatible, what she was doing," Ms. Jurt says. "She said, yes, it was very difficult," explaining that she was working for American Express part-time because she needed the money, Ms. Jurt adds. "She was very smooth about the whole thing." Later Ms. Cantor boasted of her Latin American travels with Mr. Robinson, although she never said that Mr. Robinson knew of her Safra activities.

For his part, Mr. Saba, who learned the full dimensions of American Express's activities years later, says of his dealings with Ms. Cantor, "I'm a little pissed that I got used."
Irked as well, Ms. Jurt says she refused to follow up when, in coming months, Ms. Cantor slipped her articles from Peru, France and Mexico alleging Mr. Safra's ties to drug traffickers. "That stuff she gave me, I just said, `I won't touch it,'" Ms. Jurt says. "It was ridiculous. Just because a paper reported something, that doesn't mean it's worth printing."

Ms. Cantor frequently telephoned Mr. Freeman from Europe in the presence of co-workers and journalists, and even told one journalist, Ms. Hirsch, she was working for Mr. Freeman. But some people sympathetic to Mr. Freeman insist he didn't know details of her work and didn't supervise her closely.

Trafficking in Rumor: The Evolution of a Smear

By early 1988, when Switzerland approved the licensing of Mr. Safra's new bank, Mr. Freeman's concern about Mr. Safra had deepened. To him, the Swiss move only showed how powerful the banker was. By the time Mr. Smith and his aides began scrambling to keep customers from defecting to Mr. Safra that spring, Mr. Freeman had approved the hiring of a private detective, Antonio "Tony" Greco. His activities would lead American Express' campaign against Mr. Safra into a new, more aggressive phase.

According to several former American Express executives, Mr. Greco's employment was suggested by Paul Knight, a former federal narcotics agent and chief of American Express security for Europe and the Middle East. Mr. Greco was said to be a discreet, professional investigator. He had done work for American Express for more than a decade.
Police records in two countries, however, paint a different picture of Mr. Greco. The detective has a record of arrests and convictions in Italy and the United States going back to 1962. He has also, several former law enforcement professionals acknowledge, operated as a paid informant for a number of government agencies. A Wall Street Journal request to review his file at the Immigration & Naturalization Service's New York office was denied because, in the words of spokesman Charles Troy, "the file appears to be classified."

"Greco peddles information; he's fairly well known in the law enforcement community," says Michael Hershman, a former federal investigator and head of Fairfax Group, a private security agency. "There's a thousand guys like him around; he's not unusual. What is unusual is that a company like American Express would use someone like that. That strikes me as poor judgment."

Working with government agencies and American Express, however, hasn't kept Mr. Greco out of trouble. According to a computer printout that appears to be Mr. Greco's complete Italian criminal record, he was convicted in 1982 of conspiracy and handling stolen goods by a court in Genoa, Italy, and sentenced to three-and-a-half years in prison. Earlier, in 1980, the document indicates, a court in Rome had convicted Mr. Greco of theft and sentenced him to a year in prison. According to the document, both sentences were commuted as part of a general amnesty. In the U.S., Mr. Greco was arrested at least five times between 1968 and 1972 for a variety of offenses ranging from smuggling to carrying an unlicensed pistol; each of the charges was subsequently dropped. Mr. Greco couldn't be reached for comment.

It is unclear whether Mr. Freeman or Ms. Cantor knew of Mr. Greco's criminal record. For Mr. Freeman, hiring a detective wasn't unusual: American Express retains an estimated 200 or more investigators, many of them former New York City policemen and FBI agents, to combat credit card and travelers check fraud.

Some at American Express say Mr. Freeman believed that Mr. Greco was only gathering, not spreading, information on Mr. Safra, and Mr. Freeman has told friends he has never even seen the detective. There is evidence that suggests Mr. Greco reported to Ms. Cantor, who reported to Mr. Freeman.

Still, when Mr. Greco began traveling on his new assignment, it was Mr. Freeman who approved his expenses. According to a person who saw Mr. Greco's contract in 1988, the detective was paid $15,000 a month, plus $500 a day in expenses.

Full details of Mr. Greco's travels for American Express are presumably still in the company's files. But he can be linked to at least three of the most widely distributed articles charging Mr. Safra with criminal activities. At La Depeche, the French paper that alleged Mr. Safra's drug links in March and August 1988, reporter Jacques Bertrand acknowledges knowing Mr. Greco, at one point calling him his "ami," or his friend, but wouldn't elaborate.

According to a person who has known Mr. Greco for 25 years, in early 1988 Mr. Greco looked up his old friend Victor Tirado in Lima, Peru, and told him he was interested in placing a story in the newspaper Hoy, where Mr. Tirado had once worked as a columnist. Mr. Tirado, this person says, gave Mr. Greco a contact at Hoy, then thought little about the matter until seeing the paper's article on Mr. Safra's drug ties and remembering Mr. Greco's own comments about the banker.

The selection of Hoy may not have been accidental. The Peruvian newspaper, like the French newspaper Minute, has carried anti-Semitic articles, according to Morton Rosenthal, a Latin American expert for the Anti-Defamation League of B'Nai B'Rith. Mr. Rosenthal, who looked into the Safra affair at Mr. Safra's request, says the Peruvian article was reprinted in the Mexico City newspaper, Uno Mas Uno, after being transmitted by a Lima representative of Prensa Latina, the official news agency of Cuba.

The most detailed version of Mr. Greco's activities comes from former journalists at Minute, the Parisian newspaper that printed articles linking Mr. Safra to criminal elements ranging from the Mafia to the Medellin Cartel. Jean Roberto, the senior reporter who wrote the articles, says in an interview that Mr. Greco first contacted Minute in August 1988, identifying himself as a detective probing money-laundering activities and hinting that he worked for the CIA or the FBI. Mr. Greco promised to supply information on a prominent banker -- who turned out to be Mr. Safra -- who was laundering money for, among others, former Panamanian dictator Manuel Noriega.

In coming months, Mr. Roberto says, he met regularly with Mr. Greco, often at his hotel, The Intercontinental. Each time Mr. Greco offered more sensational tales about Mr. Safra, complete with graphs charting his criminal contacts, and documents, including an Interpol inquiry on Mr. Safra's Iran-Contra links. Mr. Roberto printed the document alongside his first article on Mr. Safra, "Billionaire of the White Stuff."

When Mr. Greco claimed that Mr. Safra was living in fear of Colombian drug traffickers he had double-crossed, Mr. Roberto wrote in a second article that Mr. Safra was hiding out in his Riviera estate, "perspiring in fear" of the drug cartel's assassins. Mr. Greco also passed on clippings from Hoy and other newspapers as well as photos of La Leopolda, all of which Minute used in its increasingly lurid articles.

Whether by accident or design, the seed Mr. Greco planted spread to other publications, as Mr. Roberto shared his information and documents with other European journalists. Mr. Roberto, for instance, recalls "spending an afternoon" with Jean-Claude Buffle, a Swiss journalist who has since written extensively on Mr. Safra's supposed drug ties in a magazine named L'Hebdo. Mr. Buffle's stories, in turn, were followed by other Swiss reporters, who produced a spate of articles linking Mr. Safra to drug money in 1989. Mr. Safra has gained retractions from some publications; others, like L'Hebdo, he has sued.

"Mr. Greco had a lot of information about Mr. Safra, and that's why I had confidence in him," says Mr. Roberto, who has left Minute. Adds Jean-Claude Goudeau, Mr. Roberto's editor at the time: "Greco seemed solid." Asked why Mr. Greco would choose to pass information to Minute, which is known for anti-Semitism, Mr. Roberto says simply: "Because Mr. Safra is a Jew."

What Was Susan Cantor Up To, Anyway?

As anti-Safra articles began appearing in international publications, the Safra effort encountered some internal opposition. In mid-summer 1988, James McGrath, then American Express' world-wide security chief, telephoned Mr. Ricciardi, the associate general counsel whose duties included overseeing the company's security force. Mr. McGrath was curious why Ms. Cantor had called and, invoking Mr. Robinson's name, told the London security chief, Mr. Knight, to return to New York "for a very important meeting."

After Mr. McGrath related the call, a puzzled Mr. Ricciardi phoned Ms. Cantor. According to a person familiar with the conversation, their exchange went like this: "Who are you investigating?" Mr. Ricciardi asked.

"I'm not sure I can say," Ms. Cantor replied. But when Mr. Ricciardi pressed, Ms. Cantor said it was Mr. Safra. "This is very important," she explained. "I work for Harry Freeman. This is for Jim Robinson. This is his show."

Mr. Ricciardi seemed wary when Mr. Freeman's name was mentioned. "You tell Jim Robinson to call me if he wants to use Paul Knight," he told Ms. Cantor. There's no indication Mr. Robinson ever did so. It was at that point, however, that a worried Mr. Ricciardi, with Mr. McGrath in tow, went to Mr. Freeman's office and warned him to stop whatever he was doing.

In coming months Mr. Ricciardi repeated his concerns to Mr. Beller, and to his superior, Aldo Papone, head of the travel-related services unit, American Express' largest, and a member of the company's board. But those concerns weren't expressed to Mr. Robinson, the man in a position to stop the operation.

Despite intense secrecy, hints of the Safra project wafted through American Express. "We heard there was investigative work going on," says a former executive in travel-related services, "but the word coming down from corporate was, `Don't get your noses in it.'"

One person who grew curious was Bob Smith at American Express Bank, who became Ms. Cantor's new boss when she transferred from public relations into a bank position with loosely defined duties in mid-1988. Mr. Smith says he hired Ms. Cantor after a phone call from Mr. Robinson, who suggested she might be useful in courting Latin American clients.

Different people give different reasons for Ms. Cantor's transfer. Two people familiar with the move say Ms. Cantor was shifted after pressure from the general counsel, Mr. Beller, who purportedly wanted to distance her anti-Safra work from Mr. Robinson and other executives; Ms. Cantor told at least one bank executive this. Other people familiar with Ms. Cantor's work said they knew of no such pressure. Ms. Cantor, these people say, simply wanted a "line position" that would give her greater responsibility. "She told me Jim Robinson told her to get a line job, that it would be good for her career," recalls a former Shearson executive.

Whatever the case, in her new position Ms. Cantor continued reporting to Mr. Freeman, spending much of her time on the Safra project. Mr. Smith knew Ms. Cantor was investigating Mr. Safra, but says he was told her findings were to be passed on to Swiss and other European bank regulators, not newspapers. Ms. Cantor was handling payments to Mr. Greco, and at her request, Mr. Smith took over the task of approving them, sometimes in increments of $30,000 or more.

"I did it because Harry Freeman had approved what she was doing," Mr. Smith says today. "{Cantor} was working for Freeman, a corporate vice president, who worked directly for Robinson. I had no need to protect my ass."

Mr. Smith was the only bank executive with an inkling of Ms. Cantor's actual duties, and below him, rumors about her swirled. Ignorant of banking procedures, Ms. Cantor embarked on a training regimen that was frequently interrupted by unexplained overseas trips. Soon other executives, hearing of her journalistic background and Latin American expertise, began whispering that Ms. Cantor was secretly working on an unauthorized book about American Express, or with the Nicaraguan Contras.

Even Mr. Smith had doubts. "To tell you the truth, I always thought she worked for the CIA," he says. Mr. Smith adds: "She was always with Freeman. She had lunches with Freeman. She was always off with him . . . or on some Robinson project."

In addition, Ms. Cantor helped the bank, making introductions in Mexico and Venezuela. At a Mexico City dinner celebrating the election of President Carlos Salinas de Gortari in 1988, "she knew everyone at the table," Mr. Smith says, including a dozen senior Mexican officials. "I never went to a cocktail party with someone who knew so many people."

The bank wasn't the only one Ms. Cantor helped. At one point, according to a former Shearson executive, she urged Shearson to hire Mr. Greco in an effort to secure the Peruvian government as a client. After wrangling for weeks over a fee -- Mr. Greco insisted on being paid by the hour -- the detective arranged a meeting in New York between Shearson executives and a group of Peruvian officials, including the finance minister. Though Shearson never got the business, at Ms. Cantor's insistence Mr. Greco received about $15,000, says the former Shearson executive.

As Ms. Cantor settled in, Mr. Smith and his deputies watched the surge of negative articles about Mr. Safra. Soon customers were asking who was behind them. Mr. Smith was fairly sure he knew.

Worried that any wrongdoing might be blamed on the bank, Mr. Smith says he confronted Mr. Freeman about the Safra articles and Ms. Cantor's "special assignment" in the fall of 1988. "I said, `What the hell is going on? Are you doing anything?'" Mr. Smith recalls. "He just kind of looked at me and smiled. I said, `Look, if you are involved in this, you're out of your mind.'"

He continues: "I told Harry, I told Susan, I had no desire to know what they were doing. I didn't want to know. I wanted nothing to do with it." He says Mr. Freeman, while denying that he was spreading anti-Safra articles, told him: "`Well, Susan is so busy with her banking now, it's just about over.'"

After talking with Mr. Freeman, Mr. Smith says he began keeping a close eye on Ms. Cantor. "At that point in time, I said, `Let's make sure this gal is real busy,'" he says. "We started to really crank up the workload on her. We said, `Okay, you can't just fly off {someplace} if you feel like it. You've got to tell us why you're going.' From that point in time, she was pretty much under control."

Ms. Cantor was submerged in a crash course on banking and, by the fall of 1988, when Mr. Smith, Mr. Robinson and Ms. Cantor flew to Venezuela on an American Express jet, Mr. Smith was fairly certain her "special assignment" was over.

Final Confrontation: Safra Plays His Trump Card

By the spring of 1989 anti-Safra articles were appearing in U.S. publications for the first time. Mr. Safra was so desperate to end the articles that he began weighing criminal charges against American Express. In an effort to avoid such a high-profile maneuver, the banker flew to New York to confront Mr. Robinson with his growing suspicions.
"We know it's your people, Jim," he told Mr. Robinson in a mid-March meeting at Mr. Safra's Manhattan apartment. Mr. Robinson said he would be "dumbfounded" if it were true, but promised to look into the matter. Ten days later Mr. Robinson told Mr. Safra he had checked and found no evidence of a smear campaign. American Express' explanation, spoken privately, has been that Mr. Freeman, ignorant of the extent of what Mr. Greco and Ms. Cantor were doing, told Mr. Robinson this.

Then in May Mr. Safra's lawyer, Mr. Arkin, suggested a more subtle threat. After a thorough review by Mr. Safra's aides, the lawyer published, in his regular column for the New York Law Journal that June, the hypothetical story of a corporate executive who "cherishes his Boy Scout image," but whose aides had spread rumors that a competitor was involved in the drug business. "Spreading false of malicious rumor or flat-out lies . . . may well amount to a criminal fraud," Mr. Arkin mused in the column.

According to a top American Express executive, neither Mr. Robinson nor his aides initially saw the intended shot across their bow. The fact that Mr. Safra was mulling criminal charges came to American Express's attention via a circuitous route: Then Shearson Chairman Peter A. Cohen learned of it from a top private detective, Jules Kroll, who had heard it from a friend of Mr. Arkin.

Days later, Mr. Safra was in his Geneva office when a secretary told him Mr. Robinson was on the phone. "Jim Robinson?" he asked in amazement. According to a person familiar with their conversation, an angry Mr. Robinson didn't mention Mr. Arkin's column, but told Mr. Safra: "I know you've been following my people, and I want a stop put to it."

When Mr. Robinson finished, Mr. Safra replied simply: "I've got you, Jim. We've got mountains of evidence. Don't tell me about following your people. We've got you."

A Deal and an Apology, But Is It Over?

By the end of June American Express lawyers began negotiating a settlement with Mr. Arkin. To their inquiries of how much the Safra forces knew, Mr. Arkin's mention of a single name, "Tony Greco," seemed enough. American Express agreed to pay $8 million, half to Mr. Safra, half to four charities, to avoid a lawsuit or criminal charges.
American Express's subsequent internal investigation sent a number of executives diving for cover. The general counsel, Mr. Beller, brought in representatives from three outside law firms, including a former U.S. Attorney, John Martin, Jr., to handle the questioning.

According to a senior company official, Mr. Martin encountered unswerving denials from a number of key executives thought to have knowledge of the Safra project. In London, Paul Knight, the American Express corporate security official, walked into a colleague's office and announced that his Safra file had mysteriously disappeared, a statement the colleague took as a signal that his file should disappear as well. Mr. Martin might have learned more had he interviewed journalists like Mr. Roberto and Ms. Jurt, but they weren't contacted.

At American Express Bank, Ms. Cantor found herself an outcast. "Susan became a member of the lepers colony," says a former bank executive. "People didn't want to be seen with her. You didn't go into her office for fear you'd get a call from Gary Beller." In June, when Maya Jurt, the Swiss writer, last saw Ms. Cantor, she was pregnant, concerned about her baby's health, and "she looked 10 years older," Ms. Jurt says.

Within a week of Mr. Robinson's public apology, Mr. Freeman announced his retirement. Mr. Freeman's fall was cushioned by consulting contracts with an estimated total value of more than $100,000 a year. Privately, Mr. Freeman maintained that Mr. Robinson had tried to get him to stay on. He also said that Mr. Robinson pledged to make him whole financially if he did choose to leave. Afterward Mr. Freeman continued many of the same duties he had at American Express, including oversight of a lavish company-sponsored celebration of Dwight Eisenhower's centennial. Today, he is one of the most respected experts on the multilateral trade talks in Geneva.

The results of American Express's internal investigation were submitted to the audit committee of the company's board. That panel concluded, "while the people involved -- all of whom said they did not intend to disseminate inaccurate information -- were motivated by what they considered to be the company's best interests, their actions set off a chain of events that resulted in the maligning of a competitor." People familiar with the situation say the company has since tightened its internal controls and disciplined Ms. Cantor by withholding her 1989 bonus.

Ms. Cantor took a maternity leave, but if she thought she could leave the murky world of corporate espionage behind, she was wrong. As Edmond Safra sorted through the damage to his image, his operatives delved deeply into Ms. Cantor's life and reported back on all they found. Susan Cantor ultimately had her baby, and Mr. Safra's detectives know where, when and how it was delivered.

Though Mr. Safra won a clear victory, he was far from satisfied. American Express refused to accede to a key request: Identifying publications where its operatives spread misinformation. To do so, American Express felt, might be tantamount to taking responsibility for rumors it didn't disseminate. Without that knowledge, Mr. Safra has been unable to try to counter negative articles until they appear. Today he is regularly forced to rebut charges of money-laundering and other nefarious activities. This spring Safra lawyers scrambled to counter old charges in a Guatemalan newspaper, a French newswire report and a Swiss author's book. Mr. Safra is said to be resigned to the fact that such allegations may dog him to his grave.

[Admin]

December 2000: Death in Monaco

The official explanation for the death of multibillionaire banker Edmond Safra, who was asphyxiated a year ago in a locked bathroom of his Monte Carlo penthouse, is that one of Safra’s nurses set the fire in order to heroically rescue his employer. But why was the banker without his Mossad-trained guards? If reports of a second fire are true, who lit it? And were there two bullets in Safra’s body? With an ear to the jet-set whispers, and an eye on the feud between Safra’s brothers and his widow, Lily, the author explores the Riviera’s dangerous mystery.

On December 3, 1999, in Monte Carlo, Monaco, the multibillionaire banker Edmond J. Safra, along with one of his nurses, died of asphyxiation in a locked, bunker-like bathroom in a conflagration that engulfed his magnificent duplex penthouse, atop a building housing the Republic National Bank of New York, which he had made final arrangements to sell a few days previously. Early accounts said that two hooded intruders had penetrated the apartment, which was as solid as a fortress, and stabbed a male nurse. The bizarre death made headlines everywhere and sent shock waves through the banking community, as well as through the principality of Monaco, probably the safest, most tightly controlled tax haven in the world for the very rich. There is one policeman for every 100 of its 30,000 inhabitants. You can barely take a step in Monte Carlo without being monitored by closed-circuit cameras, which are on the streets, in underpasses, in the halls of hotels, and in the casino. Three days after Safra’s death, Daniel Serdet, the attorney general and chief prosecutor of Monaco, announced that a male nurse named Ted Maher, from Stormville, New York, had confessed to setting the blaze that killed his employer in order to win favor with the banker. Serdet said that Maher had started a fire in a wastebasket in an effort to draw attention to himself. “He wanted to be a hero,” Serdet said. There were no hooded intruders, and the stab wounds in Maher’s abdomen and thigh were self-inflicted. Serdet released a statement to the press about Maher, saying that at the time of the fire he was highly agitated, “psychologically fragile and under the influence of medication.” Serdet concluded, “From this moment on we can exclude with certainty all [conjectures] of any international conspiracy.” Marc Bonnant, the lawyer for Safra’s widow, announced in Time magazine, “The fact that Maher is unstable became apparent to us only after the accident.” The damnation of Ted Maher, the low man on the nursing staff’s totem pole, had begun. In no time the case had been all tied up with a neat bow: the guilty party was in custody, and the principality of Monaco was safe again.

From the beginning, very few people believed that the story was as simple as that. It seemed too pat, too quickly resolved. “Monaco wants it all hushed up,” observers said. “The Russian Mafia,” some suggested. Others whispered, “Palestinian terrorists.” Although the Safra name is little known to the public at large, it is very prominent in the worlds of international banking, philanthropy, and society. Several financiers have described Safra to me as the most brilliant banker of his time. At any moment during the catastrophe he might have saved himself, but he was reportedly so fearful of being murdered by the intruders he had been told were in his house that he refused to come out of the locked bathroom, in spite of the pleas of firemen and police. He put wet towels along the bottom of the bathroom door, but to no avail. When rescuers finally got into the bathroom two hours later, they found the billionaire dead, his body blackened with soot, his skin incinerated. His eyes had popped out of his head. Nearby was a cell phone, on which several calls had been made. Dead along with Safra was one of his eight nurses, Vivian Torrente, an American of Philippine origin. She also had a cell phone, which Ted Maher had given her to call for help. So far it has not been reported that Torrente’s neck was allegedly crushed.

One thing is certain: Edmond Safra, whose specialty was private banking for wealthy clients and who was said to know “all the secrets of the financial planet,” had his enemies. Although he pursued an image of great respectability among the very wealthy and powerful, a taint of scandal and suspicion dogged him. He was accused of having laundered money for Panamanian dictator Manuel Noriega, as well as for the Colombian drug cartels. And both his bank and his private jet were alleged to have been pressed into service to move money and personnel during the Iran-contra scandal. The rumors of Safra’s involvement were found to have been part of a smear campaign by American Express, and Safra ultimately won a public apology and an $8 million settlement, which he donated to charity. Nevertheless, his closest friend in New York has been quoted as saying, “Edmond was no choirboy.”

Another certainty is that Safra was obsessed with security. It was widely reported that he felt menaced, and considered himself a hunted man. Even before collaborating with the F.B.I. in 1998 and 1999 to expose the Russian Mafia’s international money-laundering operation, he was apprehensive for his safety. He spent millions each year on security for himself and his wife, her children, and her grandchildren. At each of his many residences he lived virtually surrounded by a private army. The penthouse over his bank had been rebuilt to accommodate the latest surveillance cameras and security devices. He had 11 bodyguards with machine guns, many of them veterans of the Mossad in Israel, who worked in shifts and were always with him, often to the consternation of friends who disliked being surrounded by armed men every time they arrived for a visit. One of the great mysteries of the case is that not one of the guards was on duty the night Safra died. They had been dispatched to La Leopolda, the Safra estate at Villefranche-sur-Mer, 20 minutes from Monte Carlo, one of the great showplaces on the Riviera. The unanswered, or inadequately answered, question is: Why weren’t any guards in the penthouse at the time of Safra’s death, doing what they were trained to do, protecting the life of one of the world’s wealthiest men?

Conflicting stories of Safra’s last days circulated in the European press. The Italian newspaper La Stampa reported that he had been seen at Cap d’Antibes with Boris Berezovsky, the Russian oligarch implicated in the 1999 Aeroflot scandal, in which tens of millions of dollars were alleged to have been diverted from the state-controlled airline. La Stampa reported that Safra was also seen at the restaurant of the Hotel Martinez in Cannes in the company of two other Russians, with whom he had quarreled before leaving angrily. People close to Safra dismiss such stories out of hand, saying that he was too ill and too medicated to have been at either place. The 67-year-old Safra suffered from an advanced case of Parkinson’s disease—he had donated $50 million to create a new foundation for medical research on it. In the last year of his life, several of his visitors remarked to me, he was often paranoid and delirious, which they attributed to his heavy medication. In addition to eight nurses, including Ted Maher, four doctors were on call around the clock. By the time of the fire, Maher had been in Safra’s employ for just under four months. The French magazine Le Nouvel Observateur quoted an anonymous Monegasque attorney as saying, “Safra denounced the Russian Mafia, and some of his clients who were concerned by that could have become afraid and used Maher.… It wouldn’t be the first time a poor soul was used in the service of a grand criminal scheme.”

In Stormville, New York, which is a two-hour drive from my house in northeastern Connecticut, I meet up with Ted Maher’s wife, Heidi, who is 30 and also a nurse, currently working overtime to support their three children. Without Ted’s income, she has had to give up their house and move in with her mother and father. “The kids miss that house,” Ted’s sister, Tammy, tells me when she drives me by the place, which is comfortable-looking and sits in a sylvan glade. Heidi’s parents’ house is small and a little crowded, what with four extra people living in it, and with Ted’s sister and Heidi’s brother stopping by all the time to find out the latest about Ted, whom they all love. Heidi’s mother, Joan Wustrau, looks after the kids when Heidi is working. The strain Heidi is under shows on her face as she pulls pictures and letters out of a large box to show me.

“Ted wasn’t supposed to be on duty that night,” she says. “Someone changed the schedule at the last minute, and they put Ted on.” She tells me that Ted was about to resign from his job with Safra so that he could return to his family in Stormville and his job at Columbia Presbyterian Medical Center. She says she heard the news from Tammy (who had heard it on television) that Edmond Safra and a nurse had died in a fire in Monte Carlo. Heidi at first assumed that the dead nurse was Ted.

Spotless & Brite, Inc., an employment service which tended to the affairs of the nurses and guards in the Safra employ, located in the Republic Bank Building at 452 Fifth Avenue in New York, provided Heidi and her brother with round-trip tickets to Nice and a car and driver to Monte Carlo. Heidi says a woman at Spotless & Brite described Ted as a hero and told her he had been stabbed trying to save Mr. Safra. Heidi thought she was going to see her husband in Princess Grace Hospital, where his wounds were being treated, but by the time she arrived in Monaco, Ted had been arrested, and she was taken to the police station instead. The return part of her plane ticket was canceled. She shows me records from Princess Grace Hospital proving that, contrary to Daniel Serdet’s assertions, Ted had no alcohol or drugs in his system. She was not allowed to see her husband.

The story that Heidi Maher tells about Ted’s “confession” is quite different from the one coming out of Monaco. She tells me her passport was taken from her by three policemen and shown to Ted. She says the confession was forced out of him in the hospital, and that during his first two days there, Ted was told that Edmond Safra was still alive. She says Ted lit the fire in a wastebasket to set off the fire alarm. Then she shows me a letter that Sue Kelly, a member of the U.S. House of Representatives from New York, wrote to His Serene Highness Prince Rainier III:

… We believe that the international human rights and civil liberties of this American citizen and his family have clearly been violated. After being bound hand and foot, catheterized, isolated, interrogated, and kept awake for three days, Ted Maher was forced to sign a confession written in French with no English translation. His wife, Heidi, was also interrogated for several days and kept under police surveillance.… She was grabbed off the street, thrown into a car by three unknown people wearing black, and taken to her hotel where her room and luggage were ransacked and her passport was taken. Ted was then shown his wife’s passport and threatened that she would not be able to return to their three children unless he signed the document confessing to the crime.

“The confession’s in French and Ted doesn’t speak French?,” I ask Heidi.

“He doesn’t speak French,” Heidi replies.

“What about the videotapes in the surveillance cameras?,” I say. “They don’t show any intruders.”

“The tapes have vanished,” she says. “The judge was given a blank tape and an old tape showing guests arriving at a party.”

Subsequently, one of the original tapes has been discovered, but the authorities will not reveal what is on it.

The saga of Ted Maher, the 42-year-old male nurse who now sits in the Monaco prison on a charge of “voluntary fire setting leading to the death of two people,” is an interesting and serendipitous one. For 10 years he was a highly regarded neonatology nurse at Babies & Children’s Hospital, part of New York’s Columbia Presbyterian Medical Center. Then, in a life-changing moment, he found an expensive camera that had been left behind by a patient who had been discharged. A source I talked to in Monaco who is familiar with the case said rather dramatically, “He was unable to read the sign of his own destiny.” Instead of turning the camera in to his superior or to the lost-and-found department, he removed the film and had it developed. He recognized the patient, a woman who had recently had twins. Her husband had taken the pictures of her and the babies. Through the hospital’s records, Maher was able to get the address of the couple, and he returned the camera and photos to them.

Their names were Harry and Laura Slatkin, and they were charmed and touched by Maher’s good deed. Their great friend Adriana Elia, who is the daughter of Lily Safra, Edmond’s widow, by her first husband, Mario Cohen, was also impressed by Maher. Harry Slatkin is the brother of Howard Slatkin, a New York decorator of palace-like interiors, who happens to be the favorite decorator of Lily Safra. On the side, Howard Slatkin has a successful scented-candle business, which Laura Slatkin runs. Howard Slatkin names his scented candles after various society ladies, such as Deeda Blair and C. Z. Guest.

It occurred to Adriana Elia that Ted Maher would make a perfect nurse for her stepfather. Maher was interviewed by a member of Safra’s staff, who offered him a salary of $600 a day, more money than he had ever earned. The nurses’ union at Columbia Presbyterian was about to go out on strike, which would have left Maher without an income. Moreover, he had incurred $60,000 in legal bills obtaining custody of a son by his first marriage. So he went on unpaid leave from the hospital and took the job Safra was offering. He had misgivings about moving to Monte Carlo, since he had a wife and three children, whom he hated to leave. Heidi Maher was briefly considered for a job on Safra’s nursing staff as well, but once it was discovered that the couple had three children, Heidi’s job offer was rescinded. In the end Ted went alone.

In the nearly four months he worked for Safra, Maher reportedly developed a hearty dislike for the chief nurse on Safra’s staff, Sonia Casiano. After having been a well-respected employee at Columbia Presbyterian, he was suddenly the most junior member of the team. He found himself having to take orders from people whose credentials were less impressive than his. And there was definitely a growing strain between Maher and Casiano. However, Safra was fond of Maher, and Maher was fond of Safra. Maher had scored extra points with both Edmond and his wife, Lily, by fixing an air conditioner, and the fact that Maher had been a Green Beret also impressed Edmond. A lot of people in the banking world were suspicious of Safra, but he had warm and affectionate relations with those who attended to him—assistants, servants, nurses, guards. These staff members had less affection for Safra’s wife, who disliked having so many nurses and guards underfoot all the time. The fire Maher allegedly started in the wastebasket was lit with one of Howard Slatkin’s scented candles. Heidi Maher told me there were always scented candles around Safra, because he was sometimes incontinent and had chronic diarrhea. Two nurses had to help him from his bed to the bathroom, which had been designed like a bunker so that the family could escape there in case of an attack. In the long run, its perfection as a refuge is what killed him.

As prisons go, the one in Monaco is pretty deluxe, from what I hear. I was not allowed to visit Ted Maher when I was there in July, but I was told he has a nice view. He can watch the boat traffic on the Mediterranean, and on clear nights the reflection of the moon ripples on the water. Below him are well-tended gardens. There are 41 cells, and in July there were 22 prisoners. Most of them were in for drug crimes.

The jet-set gossip started the day after the funeral. Le Monde reported that two Arab guests at the Hôtel Hermitage, which abuts Safra’s penthouse, had been questioned “because of their criminal histories,” but had been released and were no longer under suspicion. The deep hatred that had long existed between Lily Safra and the brothers of her late husband, Joseph and Moise Safra, who live in Brazil, came to the surface for all to see. The once very close Safra brothers—Syrian Jews born in Lebanon, where their father, Jacob, had established a bank—were not close at the time Edmond died, and Joseph and Moise blamed Lily for that. According to sources close to the family, the brothers claimed that Lily kept Edmond isolated from them as his condition worsened, and that their telephone calls were not relayed to Edmond by secretaries. By the time Joseph and Moise arrived in Monte Carlo from Brazil, the casket had been sealed and they were not able to see their brother’s body.

Lily Safra further outraged the siblings by changing the burial site from Mount Herzl, in Israel, where a space had been reserved, to the Veyrier Jewish cemetery just outside Geneva, Switzerland, where Edmond and Lily had another home. So bitter was the feeling between the widow and her brothers-in-law that she did not want them to be present at the Hekhall Haness synagogue for the religious service. The synagogue was placed under strict police surveillance, and armed officers prevented journalists and photographers from getting near the funeral. The guest list and seating for the service were prepared by Lily. Seven hundred attended—or a thousand, depending on which paper you read—including such celebrated names as Nobel Prize winner Elie Wiesel, who gave one of the eulogies, Prince Sadruddin Aga Khan, former U.N. secretary-general Javier Pérez de Cuéllar, and Hubert de Givenchy, the French couturier, who had been Lily Safra’s favorite designer until his retirement. No member of Monaco’s ruling family attended, a fact that was remarked on by many people, since Safra was considered the most important person in Monte Carlo after Prince Rainier.

I know several people who attended the service, and heard their stories afterward. The Safra brothers could not be turned away at the synagogue, and security guards carried chairs to the front for them, seating them prominently for all to see. “It was like a wall of ice,” one person said to me, describing the feeling in the air. The main eulogy was given by Sir John Bond, the group chairman of HSBC Holdings, the bank that had bought Safra’s Republic New York Corporation, who had met Safra only a limited number of times, in connection with the sale. At the end of the service Joseph and Moise elbowed their way in among the pallbearers and helped carry the coffin to the hearse. They made no attempt to attend the reception held later by Lily. Not everyone asked to the funeral was asked to the house afterward.

Several weeks later, a memorial service for Safra was held in New York at the Spanish and Portuguese Synagogue, on Central Park West at 70th Street. Again it was by invitation only, and again not everyone was asked back to the Safra apartment on Fifth Avenue, a fact that miffed several grand ladies of the city. Among the speakers at the service were Paul Volcker, former chairman of the Federal Reserve; James Wolfensohn, head of the World Bank; Neil Rudenstine, president of Harvard University; and Shimon Peres, former prime minister of Israel. Lily read a letter written to Edmond by her granddaughter, which was very moving. By sheer happenstance, I attended a dinner that night at Swifty’s restaurant on the Upper East Side, and 5 of the 12 guests arrived there after having attended the memorial service. For two hours they talked of nothing else: “Lily said she gave the key to her chief of security at La Leopolda, but the Monaco police put him in handcuffs.” “Lily said she had Edmond’s body placed on her bed afterward, and his face was black with soot.” “Lily said that the male nurse gambled.” “Lily said there were two fires.”

That was the first time I heard that there had been two fires, though since then I have heard it often. And therein, at least in my opinion, lies the second big question in this mystery: Who might have lit a second fire? A lady I know in Paris, who used to be a great friend of Lily Safra’s, told me at the Café Flore that an incendiary object had been thrown into the penthouse. Even if that was only her surmise, it might explain the raging inferno that erupted.

Lily Safra, a Brazilian of Russian Jewish heritage, is by far the most colorful figure in this story. Now in her mid-60s, she has had a fascinating and eventful life, rife with both splendor and tragedy. She is these days one of the richest women in the world. She came into $3 billion after Edmond’s death, and she had possessed a fortune before their marriage, courtesy of her second husband. She has suffered greatly in her personal life. Before the most recent tragedy, she had lost both her son Claudio and her three-year-old grandson in an automobile accident.

I had never met either of the Safras, but I had seen them on certain grand occasions in New York at the Metropolitan Museum and the Metropolitan Opera. Their wealth floated like an aura around them. Edmond Safra was a dignified, bald man of stocky build and medium height, more at ease in conferences about financial matters with world leaders than at society functions, where his glamorous wife was the attention grabber. With her slightly foreign manner, her marvelous clothes from the couture in Paris, and her spectacular jewels, Lily Safra has the presence and personality of a diva. One account I read of her youth said that her father was a British railroad worker named Watkins, who immigrated to Brazil, where Lily was born. Her first husband, Mario Cohen, was an Argentinean multimillionaire manufacturer of nylon stockings, whom she married when she was 19, and with whom she had three children—a daughter, Adriana, and two sons, Edouardo and Claudio. During the marriage they lived part of the time in Uruguay. After their divorce she married a Brazilian, Alfredo “Freddy” Greenberg—he later changed the name to Monteverde—who had fallen madly in love with her. Monteverde was the very rich owner of a chain of electronics stores. There is an adopted son from that marriage, named Carlos Monteverde, who seems not to participate in family matters. After Monteverde’s surprising suicide, Lily inherited a fortune estimated at $230 million, which she put into the hands of Edmond Safra, head of Banco Safra in Brazil but already destined for bigger things on an international scale.

Safra, then in his early 40s, had never married. His brothers often urged him to take a wife and have children so that the family could carry out its dream of having a bank that would last a thousand years. Safra always said he was worried that a woman would marry him only for his money. Lily Monteverde, however, had a fortune of her own, which set her apart. A family friend told me, “Joseph begged Edmond not to marry Lily.” Lily Monteverde was definitely not the woman Joseph and Moise had in mind for their beloved brother. The suicide of her second husband had been investigated twice by police, although nothing untoward was discovered. It also bothered the brothers that Lily was past the age of childbearing and would bring with her children of her own. They succeeded in talking Edmond out of the marriage, and that was the beginning of the enmity between Lily and Edmond’s brothers.

Edmond Safra returned to New York, where he had an apartment over his New York bank. Jeffrey Keil, who worked for him for 26 years, told me Edmond was brokenhearted to have lost Lily. He said Safra almost never left the building where he lived and worked. Then, in another dramatic episode unknown to most of her friends, Lily married her third husband in Acapulco in January 1972 and separated from him two months later. He was a 35-year-old Moroccan-born English businessman named Samuel H. Bendahan. The marriage surfaced when she applied for Monegasque citizenship; all past marriages had to be listed. If, as some think, Lily hoped the marriage would make Edmond realize what he had lost, it had the desired effect. He was soon begging her to marry him, and a year later she divorced Bendahan. Bendahan brought a suit against her and Safra, claiming that she had reneged on an agreement to pay him $250,000, but the suit was thrown out of court. The newspapers referred to her as the heiress to a chain of discount stores. Lily in turn charged Bendahan with extortion, but that case was dismissed as well.

The marriage of Edmond and Lily Safra took place in 1976. A Brazilian friend who knew both parties described the union to me as “the irresistible combination of a lady with a past and a man with a future.” A 600-page pre-nuptial agreement was reportedly drawn up—one colleague jokingly called it a merger—but the marriage turned out to be a successful one. It is an interesting fact that Edmond and Lily Safra’s Monegasque citizenship papers came through the day before he was killed. The sale of his Republic New York Corporation and Safra Republic Holdings had been approved by shareholders just days before that. Edmond had been so eager for the approval of the sale to go through that at the last minute he lowered the price by $450 million, a totally uncharacteristic thing for him to do, according to the European press. The New York Post reported in its financial pages: “The merger—originally worth $10.3 billion, now valued at $9.9 billion—had been delayed by allegations that a major client of Republic’s securities division committed a $1 billion fraud.” It broke Safra’s heart to sell his bank. He had wanted it to last for a millennium, but he was ill, and his brother Joseph, who had his own bank in Brazil, had declined to take it over. Safra’s great disappointment was that he had never had children of his own to whom he could hand over the reins.

There are probably not 200 people in the world today who live at such a level of grandeur as the Safras did over the last 20 years. They had a vast apartment in one of the finest buildings on Fifth Avenue in New York, as well as a spare apartment in the Pierre hotel, staffed and exquisitely decorated, for visiting friends to use. There were also homes in London, Paris, and Geneva, as well as the duplex penthouse over the bank in Monte Carlo and—the jewel in the crown—La Leopolda, one of the two most fabled houses on the French Riviera. I wrote about the other, La Fiorentina—which was built by the frequently widowed Lady Kenmare, whom Noël Coward nicknamed Lady Killmore—in Vanity Fair in March 1991. La Leopolda was planned at the turn of the century by the King of Belgium for his mistress, and was built by British architect Ogden Codman Jr., who was for a time the best friend and collaborator of Edith Wharton. More recently, La Leopolda was owned by the legendary jet-set figure and auto tycoon Gianni Agnelli, who, for a time, shared the villa with Pamela Digby Churchill Hayward Harriman during their sexy romance. The Safras added a landing pad for their helicopter and quarters for their Mossad guards. They reportedly also constructed an enormous underground habitable bunker that could serve as a bomb shelter. Everyone who has dined and danced at the villa raves about its beauty.

The Safras’ first foray into the big league of international society was their famous ball at La Leopolda in 1988, which was attended by such members of the crème de la crème as Prince Rainier and Princess Caroline of Monaco, Princess Firyal of Jordan, Christina Onassis, and a lot of Rothschilds. People I have spoken to who were at the ball get misty-eyed at the memory of its perfection. There was one gaffe, however. The name of Lily’s great friend Jerome Zipkin, the late famous walker of such important ladies as Nancy Reagan and Betsy Bloomingdale, who had helped put Lily across in New York, was inadvertently left off the guest list, and he made such a scene with the guards at the gates of La Leopolda that Rolls-Royces and limousines were backed up for miles on the Moyenne Corniche.

The notoriously snobbish social critic John Fairchild, for years the publisher of W and Women’s Wear Daily, wrote about what he called “the Safras’ meteoric rise to social power. They have taken the Riviera, Southampton, New York, the Metropolitan Opera, Geneva—all in a space of five years. What’s next?”

Lily Safra knows about 18th-century French furniture the way Candy Spelling knows about diamonds. So abundant is her collection of the finest of this furniture that a warehouse is necessary to hold the overflow from her many residences. Edmond Safra was once quoted as saying, “If instead of furniture I had bought paintings of the same quality, I would have made a more considerable fortune.” It has been sworn to me by a reliable source that Howard Slatkin’s re-decoration of Lily’s bedroom at La Leopolda—not including the 18th-century French furniture, which she already possessed—cost $2 million.

Lily Safra is famous for the extravagant gifts she gives. One year she sent Manolo Blahnik shoes to all her friends, after having a secretary call to get their sizes. Eleanor Lambert, the nonagenarian doyenne of American fashion, told me, “Lily sent me a shahtoosh before anyone ever had one.” Doctors who arrived from New York to treat Edmond in Monte Carlo or at La Leopolda always flew home with large gift packages. When her friend Zipkin stayed with her at the Safras’ Grosvenor Square apartment in London, a green Rolls-Royce and chauffeur were at his beck and call full-time. He visited so often that the guest towels in his bathroom were monogrammed with his initials, JRZ. Lily Safra’s extravagance earned her the nickname the Gilded Lily, a phrase that has been picked up by the European press.

On July 5, a little more than a week before I was to leave for Monte Carlo, I was at my house in Connecticut writing an article about the Skakel-Moxley case when the telephone rang. “Mr. Dunne?” Yes. “This is Lily Safra.”

You can imagine my surprise. I had never dreamed that she would talk to me. She said she was calling from London and was on her way to Paris. She said we had a mutual friend in Nancy—no last name, but I knew she meant Nancy Reagan. She speaks with an accent, probably Brazilian, since she spent much of her life in Brazil, up through her first two marriages. Her voice was deep and friendly, with a slight sound of widowhood in it. Then she got to the point of the call. She said she had heard I was writing about her husband. I said that was true. I told her I was sorry for the tragedy that had befallen her. She thanked me. Then she said some very nice things about my books and articles. I knew I was being charmed, but, quite honestly, she charmed charmingly. She said, “I have never given an interview, in all the years, but I would talk with you.” I was absolutely dumbfounded. She asked where I would be staying. The Hôtel Hermitage, I said. I had picked it because it is adjacent to the building where Edmond Safra died. Debris from the conflagration fell on the terrace of the Hermitage. She asked for the date of my arrival and gave me her telephone number at La Leopolda. She said I should call her and we would meet. I was thrilled. I wanted to hear about the fire from her point of view—what it was like for her that morning, how she heard, whom she called, how she escaped.

Then she must have called her lawyer, Marc Bonnant, and told him she had spoken with me. I can only imagine that he must have flipped out, because he was not in a good mood when he phoned me from his office in Geneva the next day. By coincidence, I had met him a few weeks earlier at the Carlyle Hotel in New York in connection with another case, involving the very complicated circumstances surrounding the suicide of the daughter of the Baron and Baroness Lambert of Geneva. This time he announced himself as the lawyer for Lily Safra, and his heavily accented voice conveyed deep annoyance. He happens to be one of Europe’s finest lawyers. He represented Edmond Safra in several libel suits connected to the smear campaign initiated by American Express against the billionaire. “What is this about an interview? It’s impossible. She can’t do an interview. What did you want to talk to her about?” I said I wanted to talk about the fire. “But that’s exactly what she can’t talk about, with the upcoming trial,” he said, his voice growing sharper. I reminded him that I had not called Mrs. Safra and requested an interview, that she had called me and offered one. Then he told me that I should send him a list of my questions, that he would decide which of them I could ask, and that he would be present at the interview.

I let six days pass and then sent him a fax stating that his terms were unacceptable. I said that Edmond Safra’s death was a major story, and that he was not going to be able to control the press. I said that Mrs. Safra had talked openly to many of her friends about the fire, and that her remarks had been repeated with great regularity at dinner parties. I gave him some examples of things she had said to mutual friends about the death of her husband, without revealing who had told them to me. I said I was aware of the hatred that existed between Mrs. Safra and Edmond’s two brothers. I suggested that Mrs. Safra and I meet at La Leopolda for tea, just to meet, and said that I would not ask her about the fire. I ended my letter, “Quite honestly, I wish I weren’t staying in Monaco. People tell me that my phone will be tapped and that I will be followed, all of which is quite nervous making, but good copy once I get home.”

Bonnant did not reply to my fax, but the next day I received a second call from Lily Safra. She said she was very sorry about the call from her lawyer and said that, yes, of course we could meet, but she would prefer doing it in Paris rather than at La Leopolda. She set a time for two days earlier than we had originally planned to meet. I was to call her on my arrival in Paris.

The night before I left for Monte Carlo, I had a telephone call from David Patrick Columbia, a New York society columnist with great connections in the social world. He had just had a call from a prominent resident of the principality who had heard I was coming to cover the Safra story. “Tell Dominick there were two bullets in Edmond’s body,” the Monegasque citizen had said.

After arriving in Monte Carlo, I checked in at the Hermitage. The first thing I did was walk out on the terrace and look up at where the fire had been. Reconstruction work was in progress. Workmen on ladders were installing a bright new mansard roof. After making myself known in the hotel, I asked one of the concierges if he had been on duty at the time of the fire. He had. He told me fire hoses had been dragged through the lobby of the hotel and out to the terrace to combat the flames. It took three hours to put the fire out. He said the lobby had been filled with Monaco police dressed in riot gear with masks, holding machine guns, because they believed that a terrorist attack was under way. He said there was utter confusion, with people running to and fro but accomplishing very little. Later, when I asked him his name for this article, he blanched. “No, no, Mr. Dunne,” he said, “please don’t use my name.” He drew a finger across his throat.

The fear of incurring the displeasure of Prince Rainier is rampant among the citizenry. A young woman who is a resident of Monaco and whose mother is a friend of mine had agreed to work as my translator while I was there. On my arrival, she told me she had decided not to take the job. She said she thought it might not be wise for her to be seen with me, since the renewal of her residence papers was coming up. Although I had been warned that I would be followed, I don’t believe I was, but I did have one slightly unsettling experience. I was out walking one Sunday morning when two men in gray suits approached me. I had an odd feeling and immediately said I was looking for the Catholic church to attend Mass. One of them courteously pointed it out to me. I went to Mass and stayed to the end. Later, I saw the same two men in the lobby of my hotel.

The rumor of the two bullets in Safra’s body was a constant in conversations among the fashionable element of the town, although it was spoken of in hushed tones and with caution. The fact that no such thing appeared in the autopsy report did not diminish the rumor’s popularity, for a very highly placed person was named as the source. People with whom I dined in public stopped talking whenever a waiter put a dish down or took one away, saying that you never knew who might report you. Furthermore, by then the word was out that members of the Safras’ nursing staff, as well as butlers, secretaries, and assistants, had been asked to sign confidentiality oaths. Certain of them received as much as $100,000 for not speaking to journalists or outsiders.

W. Somerset Maugham, the late British novelist who spent most of his life on the Riviera, once described Monte Carlo as “a sunny place for shady people.” There are no bums, no panhandlers, and no homeless people sleeping on the street. “I feel perfectly safe wearing my jewels out at night here,” a lady said to me at Le Grill, a restaurant on the roof of the Hôtel de Paris. But the fatal attack on Safra threw into question, in the words of Le Journal du Dimanche, “the legendary inviolability of the ultraprotected State.” It seems absurd that Edmond Safra was not rescued, with all that manpower running around the premises for two hours. One of the most intriguing examples of the botched police work was that, when Lily Safra’s chief of security, Samuel Cohen, finally arrived at the scene, she gave him a key that would have unlocked the door to the bunker bathroom, where Safra and Vivian Torrente were inhaling the fumes that were going to kill them. But the Monaco police seized the security chief and put handcuffs on him. It doesn’t seem unreasonable to me that someone in that battalion of rescuers could have informed the police that the man they were holding in handcuffs possessed the key to the locked bathroom, and that two people were dying as a result.

Safra’s death has come at a particularly bad time for the principality. France has recently accused Monaco of being a major center for money-laundering. Prince Rainier, 77, who enjoys the status of supreme authority as monarch, has been in ill health and has recently undergone three operations. His heir, Prince Albert, 42, has shown no sign of marrying and carrying on the 700-year-old Grimaldi line. Princess Stephanie’s unfortunate romantic alliances and inappropriate marriage have dominated the trash media and become a family embarrassment, and the beloved Princess Caroline’s third husband, Prince Ernst of Hanover, is proving unpopular with the populace for his unseemly behavior while intoxicated, for example beating up a cameraman and urinating on the Turkish pavilion at the Hanover World’s Fair, a prank that nearly caused an international incident. To get the Safra mystery solved and out of the papers as quickly as possible is obviously highly desirable.

There was no way that I could see Ted Maher in the Monte Carlo prison, and his lawyers, George Blot, who is a citizen of Monaco, and Donald Manasse, an American who lives there, would not be interviewed. From what I gather through friends in Monaco and Ted Maher’s family, the lawyers’ line is the party line. It occurs to me that Ted Maher needs an Alan Dershowitz to come to his rescue.

One night I went to a birthday party at the Villefranche-sur-Mer villa of Mr. and Mrs. Oscar Wyatt of Houston, Texas, who have summered on the Riviera for years. The villa, which is pretty special, looks right down on La Leopolda, which is utterly magnificent. Grace Kelly and Cary Grant shot To Catch a Thief in the Safra house, when it belonged to other people. I was hoping that Lily Safra would be at Lynn Wyatt’s birthday party, but she did not attend. Prince Albert appeared briefly before dinner, dressed in black-tie for a concert that was being held in the palace that night. We were not introduced. Subsequently I heard an unconfirmed report that Prince Albert had been helicoptered out of Monte Carlo on the night of the fire because his father believed that a terrorist attack was under way.

Lynn Wyatt said she had seen Lily Safra at La Leopolda the week before, at a small lunch party for the art dealer William Acquavella and his wife. She said that Lily was in a black T-shirt and black pants, and wearing no jewelry, and that she was staying in the guesthouse because the big house was so lonely without Edmond.

“I’m going to see her in Paris on Thursday,” I told her.

When I flew to Paris and checked in at the Ritz Hotel, however, I was handed a fax from Lily Safra canceling the interview. Although the fax bore her signature, there was a social faux pas in the letterhead that made me realize it was a legal letter faked as a personal one. Someone as socially adroit as she would never have a letterhead that read “Mrs. Lily Safra.” It would be either just plain Lily Safra or Mrs. Edmond Safra. “Mrs. Lily Safra” is the letterhead of a divorced woman, and Lily Safra has ascended in the ranks of the wealthy as possibly the richest widow in the world.

“Dear Mr. Dunne,” the fax read. “On reflection, it is my view that the privacy of my family and that of my husband’s family is so precious that it would be inappropriate for me to meet with you at this time. This is particularly so because my husband only died recently.” What didn’t ring true to me was the line about the precious privacy of her husband’s family, since I had been hearing from all sides for nearly a year stories of their mutual hatred. There were even rumors that the Safra brothers were going to contest Edmond’s will, which had been changed in Lily’s favor in the months prior to his death.

In Paris, Lily Safra’s great friend Hubert de Givenchy declined by fax to meet with me. But the crowd in that city that goes out to dinner every night had a lot of versions of what had happened on the fateful morning of December 3, 1999, when two people died who could very easily have lived. Everyone thought the story was more complicated than the official version—which was that the male nurse did it. “Sure, sure, he’ll do four years, and there’ll be $4 million waiting for him,” one man said to me. His wife didn’t agree with him. “You wait. He’ll conveniently die in prison in a few years of pneumonia or something.” A more conservative friend of the Safras said to me in Paris, “Among friends, we avoid talking about it. It might not be what it is.”

The well-known New York public-relations figure Howard Rubenstein called the editor of this magazine to say that he was Lily Safra’s new press representative and that he wanted to set up a meeting for himself and her lawyer, the notoriously tough Stanley Arkin, who had been one of Edmond Safra’s lawyers in his case against American Express. The editor said that he would not meet with the lawyer, and the get-together did not take place. But the point had been made that Lily Safra was distressed that an article was being written about her husband’s death.

I was then asked to have lunch with Jeffrey Keil at the headquarters of his business, International Real Returns (I.R.R.), on Wooster Street in the SoHo section of New York.

Keil, who is 57, left Edmond Safra to start his own financial-advisory firm. He remained very close friends with Lily Safra, and was the first person to arrive in Monte Carlo from the United States after Edmond’s death. According to informed sources, he helped Lily make up the guest list for the funeral in Geneva, arrange the seating in the synagogue, and decide which guests would be asked to the reception at the house after the service. He later performed the same function for the memorial service in New York.

The floor-through headquarters of I.R.R. are wonderfully stylish, in a spare, black-and-white way. Keil’s secretary took me into a conference room, where two places had been set at the table. Then Keil came in from another room, where a meeting was going on. He was carrying two presents wrapped in shiny white paper. He said that he had read several of my books and articles in the past weeks and felt he knew enough about me from the way I wrote to know the kind of books I would like. He gave me two beautifully preserved first editions from decades earlier, the memoirs of the Duchess of Windsor, entitled The Heart Has Its Reasons, and one called H.R.H., a character study of the Prince of Wales, published in a limited edition in 1926. He also knew that I preferred Perrier to wine.

I’d done my homework, too. I knew that he lived in a beautiful house in Brooklyn Heights. I knew that he’d once gone out with Bianca Jagger and also with Joan Juliet Buck, now the editor of French Vogue. His cook had come from his home to prepare our vegetarian meal. The lunch was interesting in a chess-match sort of way. When the social conversation lapsed, we still didn’t get to the point of the lunch, which I suppose was to find out what I knew. There was a long power silence, which I hear is supposed to make you nervous, but we both sat it out quite calmly. What he wanted to talk about was how Lily Safra was going to be portrayed in this article. I took out my leather notebook and pen and made no secret of writing down what he said. “It is important in this part of her life that she be well thought of. It would be devastating for her to be treated unfairly in New York, as she was in the French press. She should be thought of more as, say, Mrs. Astor than Mrs. Grenville—I mean the younger Mrs. Grenville.” I looked at him. I could hardly believe what he had said. Years ago I wrote a popular novel called The Two Mrs. Grenvilles, based on a tragic death in the Woodward family. In my novel, the younger Mrs. Grenville shoots and kills her husband. He must not have finished the book, I thought, remembering that he had just said he had read my books in the past few weeks.

I asked him why there were no guards on duty that night. “The thought was to reduce the show,” he said. “It is Monte Carlo, after all, with all its security, so all the armed guards weren’t needed.”

I was touched by his very sincere love and respect for Edmond Safra. He told me Edmond loved Lily’s grandchildren as if they were his own. He also said that Safra was sensitive about the effects of his disease. He worried that his saliva would drip, and he patted his mouth with a handkerchief constantly. Further, he would leave a room when he anticipated that he was going to shake so that people would not see him.

When I had to leave for another appointment, Keil went down in the elevator with me. I felt as if something had been left unsaid.

“You should really see her,” he said.

“Did you know we were supposed to meet twice, and each time it was canceled?”

He knew. I showed him the fax I had received at the Ritz in Paris. “She never wrote this,” he said instantly.

“But she signed it,” I said.

He told me Mrs. Safra was in New York for the Jewish holidays, which I knew. I said I would be delighted to see her. It never happened.

I keep in constant touch with Ted Maher’s family in Stormville. Heidi Maher and Tammy, her sister-in-law, E-mail me all the updates on Ted’s case. Things are not harmonious between Maher’s family and the lawyers representing him. When Heidi requested a translation in English of the French fire report, she was told by the lawyers that it would cost $1,000, which she does not have. Dateline is preparing a segment on the case. “Ted wasn’t supposed to be on duty that night,” Heidi Maher tells me again and again. “They put him and Vivian on at the last minute.”

In her widowhood, Lily Safra has remained mostly out of sight, although she is frequently discussed. A friend of mine and her husband dined at La Leopolda late last summer. My friend told me that their chauffeur-driven car had to be cleared by the guards at the outside gates, and as soon as they entered the grounds they were surrounded by four more guards, carrying machine guns, who escorted the car to the house. My friend described the experience as “unnerving.” In all probability, La Leopolda will be put up for sale. It’s too vast for one person, too lonely. A fascinating rumor made the rounds that Bill Gates had bought it for $90 million. Although there was no follow-up to that story, real estate has definitely been on Lily Safra’s mind of late.

She bought a second apartment in her Fifth Avenue building for her daughter, Adriana. A well-known real-estate broker told me that Lily was annoyed that the financial terms of the transaction had been printed in the New York papers. She has also bought a mansion on Eaton Square in London, where they say she will be spending more time. In late August she donated a spectacular fountain and garden for Somerset House, which is being restored in the manner that Jacob Rothschild restored Spencer House. Lily Safra and Lord Rothschild gave a very grand dinner with an international guest list to dedicate the fountain and garden in Edmond Safra’s name. The fountain has 55 jets of water shooting into the air. Five was Edmond’s lucky number. He believed it warded off evil spirits.

Early in October, I was dining at La Grenouille, one of the swellest restaurants in New York, with three friends. The ladies sat side by side on the banquette. The other man and I sat on chairs opposite them, our backs to the room, so I didn’t have an opportunity to case the joint, which I usually do. When the six people at the table directly behind us got up to leave, I noticed them for the first time. I recognized the banker Ezra Zilkha and his wife, Cecile, prominent citizens in the business, social, and cultural worlds of New York, whom I know. Among their guests was the heiress Amalita Fortabat, who is always described in the society columns as the richest woman in Argentina. The Zilkhas’ closest friends for years had been Edmond and Lily Safra. Then I found myself looking directly into the face of the elusive Lily Safra, who had been seated directly behind me for two hours, at the same time that I was talking about her at my table. We recognized each other. I could see it on her face. I could feel it on mine. She bowed her head slightly in a very elegant manner, more of a European gesture than an American one. I rose to my feet and put out my hand. “Good evening, Mrs. Safra,” I said.

She gave me her hand, replying, “Good evening, Mr. Dunne.”

She was all in black. With her left hand she tossed her shawl over her right shoulder and walked on to join the Zilkhas at the door. They looked so privileged. But I had heard from Heidi Maher earlier that day that there was going to be a re-enactment of the night of the deaths of Edmond Safra and Vivian Torrente for the Monegasque judge handling the case and that Lily had been ordered to be present. Donald Manasse, Ted Maher’s lawyer, told me over the phone, “We hope and expect that the charges will be reduced at the end of the investigation.”

The re-enactment took place on October 20, in great secrecy, at 10:30 at night. It was held in the penthouse, over which a new roof had been built, but which otherwise is as it was on the night of the fire. Everyone involved during the hours of the conflagration was there. It was the first time since Edmond Safra’s death that Lily Safra, who had been in her bedroom at the other end of the house when she was awakened by the report of the fire, was in the presence of Ted Maher. She was accompanied by three lawyers, and Ted Maher was under guard, wearing handcuffs and a bullet-proof vest. A source who was present told me they were “terrified of seeing each other.” Ted went through a re-creation of lighting a toilet-paper fire in a wastebasket with a Howard Slatkin scented candle. The re-enactment lasted until five o’clock in the morning.

Maher has now been in prison for 11 months. He gets to talk to his wife once a week for 20 minutes, and their conversations are monitored and taped. Once, according to Heidi, when Ted brought up the name Lily Safra, the connection between Monaco and Stormville was cut off.

[Admin]

March 17, 1992:

With A Uniform And A Line, Gunther Russbacher Eased His Way Into The Confidence Of Military And Law Enforcement Officials

ST. CHARLES, MO. — He carried himself with the imperious bearing of a military officer. He talked like a man who humbled enlisted men for sport. Gunther Russbacher looked the part of a Navy captain when his Learjet landed at Crow`s Landing Naval Air Station in California in the summer of 1990.

When asked to log his phone calls, he signed ``Capt. Gunther Russbacher.`` Forty minutes after landing, he was in the air again.

A few days later, wearing a Navy captain`s white uniform, he drove to Castle Air Force base, an arm of the Strategic Air Command, in Atwater, Calif., bluffed his way past the guard and secured VIP lodging.

No one tried to stop him at either base-even though the insignia on his uniform were upside down.

It has been a long run for Gunther Karl Russbacher, 47, an Austrian citizen-apparently-who has lived a life of intrigue, deception and crime and served little time for it. What sets the balding, steely-eyed Russbacher apart from run-of-the-mill con men is the ease with which he gained access to guarded military facilities and gained the confidence of law enforcement officials.

It finally came crashing down on him last month in a St. Charles County, Mo., courtroom when his probation was revoked and he was sentenced to 21 years in prison for one of the lesser of his masterful cons: stealing money from people while posing as a stockbroker.

He also has posed as an Army captain, an Air Force officer, an Air France pilot and a federal prosecutor. And these are merely the scams that authorities have caught him doing during the last three decades.

In addition to talking his way onto military bases, he apparently has persuaded government workers to give him blank vouchers, then passed himself off as a secret agent with the authority to charter Learjets. He has convinced the FBI he was a valuable informant, and he once faked a heart attack at the Immigration and Naturalization Service office in St. Louis when he feared deportation.

As he was being sentenced, his wife, Raye, insisted that Russbacher is actually a deep-cover CIA operative whom the government is trying to suppress because he piloted a flight that carried George Bush to meet with Iranians in 1980 to delay release of the U.S. hostages in Tehran-the so-called October Surprise.

Raye Russbacher, who has written a proposal for a tell-all book called

``I Call It Treason,`` has absolute confidence in her husband. She testified in court that Russbacher introduced her to former CIA Director William Webster at Offut Air Force Base in Nebraska, another of the military facilities where Russbacher gained access and slept in a bed reserved for VIPs.

He also has used a variety of names over the years, including that of Bobby Ray Inman, a retired admiral who was former head of the super-secret National Security Agency and deputy director of the CIA.

Investigators say Russbacher is brilliant, cunning, engaging and persistent. They say he is adept at taking public facts and marketing them as original information, which he spins into tales of intrigue and suspense that sound just authoritative enough to be credible. It`s almost uncanny, they say, how he can pick out a topic that interests law enforcement agents, such as organized crime or drug trafficking, and pass himself off as an expert.

All this may explain why prison officials denied requests to arrange an interview with Russbacher himself.

``He`s polished. He`s smooth,`` said one FBI agent who has tracked him for three years. ``He can give you the impression that he can do you a lot of good.``

Contradictions about him abound, beginning with his birth. When asked for his birthdate, both the FBI and the INS replied, ``He has several.``

Authorities believe he was born in Salzburg, Austria, either on July 1, 1944, or on Jan. 22, 1945. He has told authorities his mother married a U.S. serviceman after World War II.

He apparently moved to the U.S. when he was about 12. He lived in Oklahoma for a time, and his first recorded brush with the police, according to the FBI, was on Sept. 18, 1961, when he was charged with disorderly conduct and writing bad checks. The charges were dismissed. Records indicated he also was investigated for impersonating an Air Force officer.

The next month, he enlisted in the U.S. Army and was assigned to Ft. Carson, Colo. On Aug. 15, 1962, after being reported AWOL, he was charged with impersonating an officer by wearing a captain`s uniform and was sentenced to two months` hard labor.

By October of that year, he was AWOL again. He left the Army on Oct. 1, 1963. Just four months later, he was sentenced to one year in an Oklahoma state prison for writing bad checks, and on Nov. 21, 1965, he was charged with trying to impersonate a U.S. marshal in Dallas. That charge was dismissed.

Back in jail

On Dec. 3, 1973, he was sentenced in New Orleans in connection with impersonating an Air Force major and was placed on probation. Within two months, he had violated the terms of his probation and was returned to jail.

Apparently he served little, if any, time in New Orleans: on May 18, 1974, he was sentenced to five years in prison in Texarkana, Texas, on charges of securities fraud and impersonation.

After his Texas prison term, he moved to Missouri and, on Oct. 5, 1986, was charged with stealing by deception, violating his probation. He was sent to a federal prison in Minnesota, according to the FBI.

On his release, he returned to Missouri and opened a firm called National Brokerage Co. in St. Charles. The company`s letterhead listed him as chairman, using the alias Emery Peden, and said he held an MBA degree.

During this period, Russbacher started calling the St. Louis FBI office, telling them he had valuable information.

Russbacher said he would provide information about drug trafficking if the FBI helped him with some immigration problems. The FBI acknowledges paying him as an informant for a short time, but said it did nothing to help him with the INS. Payment stopped when agents determined that his information was useless.

He also successfully impersonated a commercial airline pilot, at least twice, in the summer of 1986. Wearing an Air France pilot`s uniform, and using a homemade identification card, Russbacher persuaded Trans World Airlines captains to approve him as an additional crew member, allowing him to fly in the cockpit.

He was arrested trying to pull the same stunt on a Southwest Airlines flight.

Philip Groenweghe, a St. Charles County assistant state`s attorney, said that in his work as a stockbroker, Russbacher bilked clients out of thousands of dollars for services he never provided. He was found guilty in 1990 and sentenced to 21 years in prison, but he was placed on probation and ordered to pay restitution. The money would come, he told the court, from a $150,000 contract to write a screenplay about his life story.

VIP treatment

Then, according to the public record, his odyssey took its most dramatic turn.

With his wife, Russbacher drove to the gates of Offut Air Force base, headquarters of the Strategic Air Command, on July 19, 1990.

Russbacher, posing as a Navy captain, had called ahead to make a reservation. He and his wife were given two keys to Room 3208 in the VIP headquarters. He also obtained a visitor`s pass and passes for his car. They stayed four nights.

His wife testified (her testimony later was stricken by the judge in St. Charles as irrelevant) that she and her husband talked with then-CIA Director William Webster at the officers` club. Her story has never been corroborated, and a spokesman at Offut said there is no record of Webster visiting the base. From Offut they traveled to Reno, where Russbacher picked up a military uniform from a surplus store. He also procured blank government vouchers from the federal Bureau of Land Management office there, which he later used to contract for charter service on the Learjets.

"They just handed them over to him," said Special Agent Terry Scott of the FBI`s Sacramento office.

According to relatives of Raye Russbacher, who has not been charged with any wrongdoing, the couple came to visit them in California`s Central Valley, but because of a family problem, they needed to leave quickly for Seattle.

As relative Carole Barry recalls it, Russbacher said he could command a plane at once-and he did, convincing a charter service that he was a federal prosecutor on a secret mission.

On July 27, 1990, Russbacher, again in a Learjet, arrived at Crow`s Landing Naval Air Station near the home of his wife`s relatives. Apparently, his only interest in landing there was that it was the closest airfield. Lt. Cmdr. William Carpenter, who was not on the base at the time, said Russbacher appeared to be flying legitimately in a government-contract plane. Lower-level officers did not confront him.

``If you realize you are dealing with a captain,`` he said, ``it`s so many grades removed, it would be like asking a congressman for ID. (But) they probably should have.``

On July 30, he drove to the gates of Castle Air Force Base, wearing a Navy captain`s whites, with a military decal on his car. He and his wife were issued keys for VIP quarters.

``He claimed to be a Navy captain,`` said Lt. Todd Vician, a public affairs officer at Castle, but his insignia were on upside-down.

Meanwhile, the FBI`s Scott, with help from Barry and other relatives, had pieced together at least a portion of Russbacher`s remarkable travels.

On July 31, in the VIP room at Castle, Scott arrested Russbacher on charges of impersonating a federal prosecutor. Russbacher was sentenced to 15 to 20 months in federal prison.

``They (the Air Force) realized it was pretty lax of them because of not wanting to ruffle feathers,`` Scott said.

After his federal prison term, Russbacher was returned to St. Charles. His probation finally was revoked and he was committed to the Missouri prison system for 21 years.

A CIA connection?

To Raye Russbacher, the fact that her husband was twice admitted to secure military installations merely bolsters her story that he was a deep cover CIA officer whose deeds were so politically combustible that he had to be completely discredited.


``The only way people can dismiss it is to say that we are absolute liars,`` Raye Russbacher said.

Is he CIA?

David Whipple, executive director of the Association of Former Intelligence Officers, says: ``It`s not a bad cover, because it`s very difficult to verify. If you say you are CIA and the CIA says nothing, it rather sustains the legend.`` However, he said he didn`t recognize

Russbacher`s name.

Harry Reeves of the Naval Investigative Service calls it ``absolutely ludicrous.``

The FBI`s Scott says: ``He`s a con man from the word go.``

Says Groenweghe, the prosecutor: ``I can`t prove or disprove his involvement with the CIA. (But) I would be amazed the CIA would use someone with his record and psychological profile. You can`t believe anything he tells you. He`s a liar.``