Chapter Fourteen
ELI PINKAS - A MYSTERY STORY
col·lec·tor (ke-lek’-ter) n. A person employed to collect taxes, duties, or other payments.
The American Heritage Dictionary of the English Language
Just after dawn on Tuesday morning, June 10, 1980, the Lausanne police received an emergency call from an hysterical maid at the Villa Gentilhomiere, the luxury estate of a local businessman named Eli Pinkas. She kept babbling on about a dog being murdered and intruders. Several cars were dispatched. Arriving at the large gates that guarded the villa, the police found them unlocked, so they hurried inside the grounds. There was a Jaguar coupe in the garage and when one of the officers routinely touched the hood, he noticed that it was hot. Not simply warm, he later wrote in his report, but hot. The car had obviously been driven for a long time during the night.
The villa seemed otherwise quiet.
As soon as the officers rang the front bell, the maid threw open the door, insisted the dog had been murdered by intruders and brought the officers inside. They found a German shepherd dead in the hallway at the bottom of the stairs. Later, the police were able to determine that the cause of death had been cyanide.
Fanning out through the house to search for intruders, one officer went upstairs. In the master bedroom he found Pinkas’s body. On the nightstand next to the bed there was a handwritten note. In it, Pinkas asked that his friends forgive him. Later, the police were able to determine that the cause of death had been cyanide.
No intruders were found. There were no signs of a break-in. As far as the police were concerned, it was obvious that Pinkas had killed the dog then taken his own life.
Normally, an autopsy confirmation of suicide would have closed the case. Except, sometime that very same morning --- but definitely before the Lausanne police went to La Gentilhomiere --- an anonymous phone call to the police in Cannes, France summoned them to a penthouse apartment at the Grand Hotel.
The front door to the apartment had a whole series of locks but when the police got there, none of them were bolted. Nothing in the apartment led them to believe there had been intruders. But in the master bedroom they found a woman’s body. Later they were able to determine that the cause of death had been cyanide.
On the floor at the foot of the bed they found a note ripped into small pieces. "Flo, m'amour, I give you some last advice because I love you. Open these two packages and swallow these four capsules which operate very quickly so that you can join me." It went on to warn that if she stayed alive she would suffer great difficulties and dishonor. "I've tried for years to reestablish my financial situation but without success." It was signed, "I love you always and until the last breath of my life, your Eli."
At first glance, the matching suicides of two lovers, 208 miles apart, had a Romeo and Juliet quality about it.
But first glances are often deceptive.
*****
Eli Pinkas was a cultured man who spoke French, English, German, Italian and Bulgarian. Of average build but with heavy features --- he had extremely large hands and a very large forehead --- he always dressed in a traditional, conservative manner. His thinning dark hair was just on the verge of turning white.
Born in 1920, his family had settled in Lausanne in 1941, war refugees from Bulgaria. He earned a degree in chemistry from the local university and over the next 39 years enjoyed the trappings of a successful and respected businessman. His home was aptly named, translating to mean "The Gentleman's Manor" and he spent a great deal of time there, much of it in his garden tending to his roses. He was a private person, although some people preferred to think of him as aloof and slightly distant. His personal annual income would have been in the range of $1.5 million, yet he showed very little outward sign of extravagance, except perhaps for his love of Jaguars. He had several.
His business life was a multi-layered series of interests almost all revolving around his background as a chemist. Being a serious man, other serious businessmen invited him to serve on their corporate boards and one of the boards he sat on was the very conservative Banque Vaudoise de Credit.
The company he ran was called Socsil and his factory in Lausanne was a large, heavily-guarded, fully mechanized plant operating in three distinct fields: the manufacturing of mechanical pumps, a process that Pinkas had patented; the chemical testing of raw materials being used to make a certain soft drink, the name of which was kept secret. Although Pinkas once confided in close friends that it was Coca Cola and that he was the only person outside the United States to possess the secret Coke formula; and finally, the most important and by far biggest share of his business, the production and sale of the highly explosive gas, nitrous oxide, popularly known as laughing gas.
Many years before, Pinkas had invented a chemical process that rendered the gas inert. Understanding the potential of non-explosive nitrous oxide, he designed a medical kit for use in battlefield hospitals. Accordingly, he sold these kits to dozens of militaries around the world. Among his clients were the NATO armies and the armed forces of several Arab nations. A lucrative enterprise, it brought him into contact with people in the Middle East. Because a military build-up somewhere in the world was clearly reflected in increased orders for his battlefield kit, Pinkas was privy, albeit as an incidental party, to certain military intelligence and information that might otherwise be considered classified.
Not that classified information was something he was unaccustomed to. He saw a lot of it because in his spare time he was a major in the Swiss Army Reserve. Or maybe he wasn't.
In Switzerland, just about every male citizen has a commitment to the military for a good part of his life. That's why it was hardly surprising when friends spotted Eli Pinkas walking through the streets of Lausanne wearing his reserve officer's uniform. Nor did any of those friends ever doubt him when he admitted to being the Swiss Army’s Reserve Chief of Gas Warfare. After all, he was a chemist with a thorough knowledge of gases. And the Swiss, who are not a nuclear force, have historically depended on gas warfare as a last line of defense. When attacked, their battle plan is to retreat into the mountains and fill the valleys with gas. They believe it makes the country just about impregnable, at least to an army advancing on foot.
So Major Eli Pinkas, Reserve Chief of Gas Warfare for the Swiss Army seemed totally plausible. What’s more, Lausanne is a small a town where everyone knows everyone else and if Pinkas wasn’t who he said he was, word would have gotten around very quickly.
However, the Swiss Ministry of Defense insisted that Pinkas never had anything to do with the Army Gas Warfare Department. In fact, they claimed he wasn’t even a reserve officer.
*****
In addition to the three main parts of Socsil, Pinkas had his fingers in a few other pies. In the mid-1960s he bought a 283 acre tract of land outside Lausanne with the intention of developing it into a resort area. He had intended to enlist the help of an American consortium but Swiss laws discourage foreign ownership of property and as a result, the Americans shied away. Instead, he used the land as collateral with the banks when he wanted to swing other deals.
Then, he also seemed to be in the scrap steel business. While selling nitrous oxide to the US Army --- at least this is what he told friends --- he stumbled across the curious fact that where the Americans were concerned, there was a difference between gas bottles that were "full" and gas bottles that were "almost full." When he shipped the bottles to them, they were checked and certified full. But as the valves on those huge steel cylinders often leaked, not all of them were 100 percent full by the time the US Army got around to using them. Through some eccentric accounting regulation, bottles that were not 100 percent full, Pinkas explained, were written off by the Americans as unusable and discarded as scrap steel. Discovering this, he immediately started buying the scrapped bottles, repainting them, topping them up with gas --- he said there was usually no more than 15-20 percent missing --- and selling them back to the Americans for the full price.
He used to brag to friends that it was a truly wonderful business, and even let some of them in on it. Every now and then, he’d invite a few pals to invest. He’d even show them their gas cylinders whenever they visited the factory. And he did send them regular dividend checks. Because those friends were making money with him, none of them bothered looking any deeper into it. Although an official report later claimed Socsil was only doing $4.2 million a year worldwide in nitrous oxide sales, Pinkas flaunted records which showed he was doing $27 million a year just with the Sanitary Division of the United States Army.
As a contractor to the United States Government, Pinkas was in a position to discount US paper. It’s a standard procedure. When a company invoices the government for say, a million dollars, and the government acknowledges the debt, promising to pay in 60-90 days, a businessman can take the invoice to a bank and get $1 million right away, minus whatever commission he’s negotiated with a bank for taking over the debt. It goes without saying that Uncle Sam's signature on US Army invoices meant that any bank in the world would welcome Pinkas and his US paper.
Except, Pinkas didn’t actually discount the paper. Instead he borrowed against it. He put the invoices down as security for loans. It was a slightly quirky thing to do, but most of the bankers he dealt with figured he was just trying to save a little money. So they went along with it. They couldn’t know that Pinkas never intended to give a bank the opportunity to collect on this paper.
When a bank wanted to see balance sheets for Socsil, Pinkas showed them balance sheets. When they wanted to see his personal accounts, he showed them his personal accounts. Everyone who asked for paperwork got paperwork. And in every case, the bank looking at his accounts was listed in those reports as Pinkas’s only creditor.
Pinkas’s borrowing against US government paper has now been traced as far back as 1948.
So banks gave him money against that paper as collateral. By backing it up with his balance sheets and, wherever necessary, his personal guarantee, the bankers with whom he dealt conveniently forgot the most basic lesson of the lending business: Always check with the originator of a collateral note.
Astonishingly, not one bank --- not even American banks --- ever bothered checking with the United States Army Sanitary Division.
*****
Enter now the former Mrs. Pinkas. Her name was Florence, she was two years older than Pinkas and a hopeless alcoholic. Before she and Eli were married in 1943, she appeared on the scene as a dark-haired lady from Argentina who spoke beautiful Spanish and French with a heavy accent. After they were divorced in 1964 she left Lausanne, preferring to live in the south of France and only rarely came to Switzerland. They never had children, which some people felt accounted for the touch of melancholy that often surrounded her. Or maybe she loved him and just didn't want to live apart. They divorced in 1964, although their affair continued on a regular weekend basis. He would openly tell anyone who asked that he was totally devoted to her. And the proof of it was that every Thursday night he flew to Nice, telling anyone who asked that he always spent the weekend with her.
Oddly, it now turns out that she was not from Argentina. Instead she was born near Lausanne --- she still has family there --- and met Pinkas when she was working as a barmaid in a local hangout. Why the masquerade about being from Argentina, no one seems to understand. The important thing is that everyone either believed it or was at least willing to play along with it.
*****
The first week of June 1980 is one which, in the scheme of world history, probably doesn’t mean much. It’s wasn’t as remarkable as the first week of June 1900 when the Boxer Rebellion engulfed the southern provinces of China. Or the first week of June 1920 when the Treaty of Trianon redrew the map of Europe. Or even the first week of June 1960 when President Eisenhower sent 120 USAF planes to Southeast Asia, marking America’s toe testing of the waters that would become the war in Vietnam. Although Henry Miller died during that first week of June 1980. And it was the final week of Eli and Florence Pinkas’s lives.
It was also the week that a clerk in the Banque de Paris et des Pays-Bas in Geneva was auditing the lending portfolio and noticed that ink had rubbed off his hands. Curious, he sorted back through the stack of paperwork on his desk until he found some smudged letterheads from the United States Army Sanitary Division.
How bizarre, he thought, imagining that the Americans ought to have better printing facilities. He’d never seen anything like that. So he studied the letters more closely, then reminded himself that ink on US government forms wasn't supposed to rub off, then sent a memo to his superior to report the matter. The only thing his superior could think to do was wire the bank's office in Washington DC and have them inform the Sanitary Division of the United States Army that there was a minor problem with their letterhead. Accordingly, someone in the bank’s office in Washington phoned the Pentagon and asked to speak with the US Army’s Sanitary Division.
The operator on the other end wanted to know, "What’s a Sanitary Division?"
For the price of better ink, the world was about to cave in on Eli Pinkas.
A telex went back from Washington to Geneva. The smudged paperwork was sent to a senior officer at the bank who inspected it, then studied the rest of the file. He was inclined to phone Pinkas, to ask him what this was all about, but just to be prudent, he decided first to show the entire dossier to his lawyers. They demanded he call the police.
Being so well connected, Pinkas must have learned what was happening because by the middle of that week he began paying back a number of small loans that were then outstanding. A few thousand dollars here. A few-thousand francs there. And in every case, he paid cash. He also wrote letters to at least six people asking that they forgive him, although he never spelled out what for.
On Friday, June 6, the public prosecutor in Lausanne saw for the first time a document charging Eli Pinkas with fraud. And he was absolutely stunned. The thought of someone as reputable as Pinkas being involved in such a crime was so worrying that he rang Pinkas to say, "I must see you."
Pinkas laughed, then agreed to meet with the man later the following week. Hanging up with the public prosecutor, Pinkas now called two friends in the hierarchy of a local bank, asking them to meet him at his factory first thing Monday.
Almost as soon as they stepped into his office that morning, he informed them, "I’m being indicted."
They too were stunned.
Without going into detail, he admitted to "a few wrong-doings." He assured them, "It's very little. But it's so embarrassing."
Back at the bank, they decided they both liked Pinkas enough to want to do something for him. So while one checked the bank's records to establish the extent of Pinkas's borrowings there, the other approached the public prosecutor to see if their personal intervention might help Pinkas save face.
By Monday afternoon, everyone concerned was quickly coming to the conclusion that "a few wrong doings" and "very little" was hardly the case.
Before dawn on Tuesday, Eli Pinkas was dead at La Gentilhomiere and Florence Pinkas was dead in Cannes.
*****
The Swiss press announced the Pinkas affair with headlines labeling him a "Fraudster Bulgarian Jew."
But he wasn’t a Bulgarian. He’d taken Swiss citizenship and carried a Swiss passport for nearly 40 years.
Nor was he still a Jew. He’d become a Protestant in the 1950s. Whether he did that for business reasons, or because he particularly believed, no one knows. The point is, he did not openly acknowledge Judaism for at least the last 25 years of his life.
That he was a fraudster, however, is another matter.
When the police went to the Socsil offices after his death, they found that a large number of documents had been destroyed. They merely assumed that Pinkas had gotten to them first. Yet from what remained, they were able to determine that he’d used United States Army Sanitary Division invoices, plus similar invoices from the German army, plus a guarantee for $30 million from the Swiss bank UBS as collateral for loans that totaled a staggering $300 million.
When the police established that the bogus invoices were printed in Cannes, the French were called in. The printer who did the work for Pinkas later claimed that he didn't know what he was printing. He said he didn’t speak English and besides, it wasn’t any of his business what a client wanted printed on a form. All he’d say was that Pinkas paid for his work on time and in cash. In the end, the printer was the only person to go to jail in connection with the affair, doing two years for not declaring that cash to the French tax authorities.
As investigators got deeper into his affairs, it became obvious that Pinkas had somehow managed to convince American banks to make wire transfers to Switzerland by order of the US Army Sanitary Division. He needed to do that in order to make everything look absolutely official. He needed to have payments coming in to Switzerland from the US Government. After all, if he was supposed to be doing business with the Army, he couldn't deposit money in Switzerland and simply ask his bankers to believe that it was from the Army. But they were never able to, figure out exactly how he managed that.
Over the course of the next two years, the Swiss tried to trace the money Pinkas brought into the system. Believing at first that the sums involved were perhaps "as much as" $300 million, they located hundreds of companies around the world that Pinkas was using to launder money and were forced to revise their estimate. "As much as" $300 million was changed to "perhaps as high as" $800 million.
Yet the grand total of liquid assets attributable to Eli Pinkas once every book was examined came to only $1.5 million.
At that point, bizarrely, the case was officially closed. It was as if the Swiss suddenly didn’t want anyone to know exactly how much was missing or where it might have gone.
Six week’s after Pinkas’s death, the Washington Post reported that Pinkas had effectively stolen $140 million. Just over $112 million of it came from 18 banks around the world: eight in Switzerland, four in France, one in Britain, one in Israel, and four in the US, including Citibank and First National of Minneapolis. The rest of whatever money Pinkas had, at least according to the Washington Post, came from his friends and business associates.
Other newspapers have since suggested that, on top of the $140 million, there might be as much as $20 million more that’s been written off by creditors who, for legal or personal reasons, cannot publicly admit to having been involved.
Within two months of Pinkas' death, the Wall Street Journal quoted someone inside the Swiss banking authority as saying that the $140 million originally estimated was being revised down to $108.7 million. What’s more, the Federal Banking Commission seemed content to write off the scandal as a bit of temporary craziness. They said that because Pinkas was so heavily in debt, he had to keep borrowing just to pay the interest. That created more debt which in turn created the need for more borrowing. In other words, it was a Ponzi scheme. They noted that Pinkas was all right as long as interest rates were low. But when he had to borrow at 19 percent to pay off loans that had been made at 12 per cent, that strangled him.
Except that temporary craziness does not answer the question, where did the money go?
Finding someone in authority these days who’ll speak about Pinkas isn’t easy. Their first reaction is, it was a long time ago. They suggest you just forget it. If you persist, they tell you in a whisper --- as if they’re doing you a favor and finally letting you in on a genuine secret --- the money went to pay for his lifestyle. They tell you, he lost it gambling. They insist, there’s nothing else to say.
The only problem is that Pinkas clearly lived within his own income and he was not a gambler.
He was, however, an extraordinarily talented laundrymen.
The mechanics of his sink revolved around three companies. First there was Socsil. Next there was an investment company he’d founded in 1970 called Vilro. And finally there was a land development company, Villas La Roche, which owned that property outside Lausanne he’d once hoped to develop with American partners. Like spokes on a wheel, they branched out to those hundreds of companies he’d scattered around the world. To create cash flow he over-subscribed the three main holdings, selling each share three and four times. Because every share is numbered, he needed to keep his creditors from comparing notes, so he skillfully used the "He’s got a big mouth" technique.
It worked like this: Pinkas would strike up a relationship with Monsieur A. They would be discussing a business possibility when, by chance, Monsieur B's name came up. Immediately Pinkas would say to Monsieur A, "Listen, B is a great guy and I really like him, but this deal has got to be just between us. You see, the problem is that B has a big mouth. He talks too much. If you mention our business to him it will be all over Lausanne in an hour," Naturally, Monsieur A would then make a point of shying away from Monsieur B. However, when Pinkas brought Monsieur B into his confidence, which he invariably would, and offered him a piece of the deal, he’d tell Monsieur B the same story about Monsieur A. "He’s got a big mouth."
As simple as it was, it played on a common human trait, that most people don’t want other people to know the details of their business. And it wasn't until long after his death that all sorts of people who otherwise knew each other's business, or at least thought they did, started comparing notes and realized that Pinkas had successfully kept them apart.
They also started to understand Pinkas’s apparent aloofness. Some of his friends noted that he was a man with extraordinary control, a man who didn’t seem to have a temper, who never seemed to get into an argument with anyone. They once thought it was just his nature. Now, they admit, considering the glass house where his finances lived it's obvious why he never threw stones.
Spinning money through the three main companies, sending it out to the others, then bringing more in when he needed to, made the three main assets seem that much more liquid. And as capital built up from his borrowing schemes, he moved that money out.
But where to?
All those companies on the outside rim of the wheel were empty shells.
*****
Sometime around 1975 there was a terrible accident at the Socsil factory. At six in the morning, while doing some sort of experiment with a gas that couldn't explode, it did explode and the laboratory's chief engineer was killed. There was an official investigation and the coroner’s report settled on misadventure. No one thought again about that conclusion until Pinkas died. Some people began to wonder if perhaps the chief engineer had stumbled onto something odd at the factory, and for whatever reason, had been eliminated.
Although some dark conspiracy remains nothing more than conjecture, with hindsight, it’s plausible. Consider this: Some months before his death, Pinkas had added a clause to his will specifically to provide for his own funeral. He wanted a Valkyrie-like affair where his ashes would be sprinkled across Lake Geneva. Perhaps it was just a coincidence that he wrote the provision when he did. Or perhaps it wasn’t. And what about the woman he loved so much that he asked to die with him? Could he possibly have forgotten to provide for her? He was by anyone's accounting a wealthy man. The apartment in Cannes was filled with antiques, paintings and Oriental carpets. Florence had jewels. She also had 470 pairs of shoes in her closet. Yet she was buried in a commoner's grave because there wasn't enough money to pay for a funeral.
Did Florence actually take her own life? When the police got to Pinkas’s home on the morning of his death, his car was hot. Could he have driven to Cannes the night before and killed her, trying to make it look like a suicide? Could he have murdered her then raced back to Lausanne and taken his own life.
Or maybe he drove somewhere else to meet someone else. Or maybe he didn’t take his own life. The note next to Florence's body looked as if it had been written by Pinkas, but it was never officially checked by experts. Why was it ripped up? Perhaps he failed to provide for her funeral because he didn’t knew she needed one. The door of Florence's apartment had so many locks that friends who visited there joked that it looked like a fortress. Pinkas had keys to her apartment. So why, when the police arrived, were all of those bolts unlocked. Could she have let someone in who didn't have any keys to lock up on the way out?
Pinkas was a very proud man, someone who would have been incapable of suffering the torture of a public trial or coping with a jail sentence. For those people who knew him well, suicide seems logical, a fast and simple way out of the problem. Negotiating a discrete settlement seems equally logical, at least it does if he still had any of the money. There’s nothing a jilted banker wants more than to see his money returned. Especially in Switzerland, bankers genetically avoid the sort of adverse publicity that would have certainly followed the arrest and trial of a man like Eli Pinkas. And he would have understood that.
The most logical reason that he didn’t try to return the money is because he didn't have it. If the money didn't go to any visible private causes, is it possible then that it went to a public cause? Could there have been a circuit somewhere in Pinkas's brain labeled, fanatic.
Consider this: Having had access to certain military information, it was not surprising that the Swiss authorities found some classified military documents stored in his factory office safe. There was the Cold War with the super powers, the Gulf war with Iran and Iraq, heightened tensions throughout the Middle East and brush fire wars throughout the rest of the world. Perhaps there were also people on one side of the fence or the other --- or someone sitting in the middle of that fence --- who wanted to know whatever he knew.
The most obvious contact he might have had was Bulgaria. After all, he was 21 when he came to Switzerland and there were all sorts of people he would have befriended while growing up there. The possibility exists that he was selling them information. If nothing else, it would be a source of cash to help in times of financial difficulties. But that would have brought money in, not made $300-$800 million disappear. Unless he was buying something from the Bulgarians. But they didn’t have much to sell, except perhaps drugs and Pinkas wasn’t a drug trafficker. Although, they did have access to Russian weaponry. They might also have access to certain Russian nuclear secrets.
If he was dealing with the Bulgarians, whatever he was buying wasn’t coming back to Switzerland.
Now the plot thickens.
Every Thursday evening, Eli Pinkas drove to Geneva Airport for
the short flight to Nice, France. He returned to Switzerland on Monday morning. He always said he was going to Cannes to spend the weekend with Florence.
Except he didn’t.
The reason he flew to Nice on Thursday nights, instead of say Friday evening like so many people who regularly spent weekends in the south of France, was because he could change flights there on Thursday and not on Friday. El Al doesn't fly on Fridays after sundown.
The inconvenience of spending a few hours waiting in the tiny airport at Nice for the late night flight to Tel Aviv was outweighed by the benefit that no one in Switzerland knew where he was going and no one in France cared. On those very limited occasions when he bumped into someone he knew in Nice airport, Pinkas quietly confessed that he kept an apartment in Israel and had installed a lady friend. It seemed plausible enough.
Israeli law required that foreigners owning a property, even if it was only a weekend residence, register it. Since Pinkas’s death, the Israelis have categorically denied knowing anything about him, claim to have no record of his supposed apartment or any information about his supposed lady friend. Nor does Israeli immigration admit to his frequent visits.
Now consider this: It is known that the Israelis were only able to fully develop and maintain their nuclear capability with help from several sources. The United States was one. But Washington didn’t foot the entire bill and couldn’t be depended on for unhindered support. So the Israelis raised some money on their own, selling high-tech military equipment to low-tech nations, such as Iran, South Africa and Chile. They raised the rest with "Collectors."
Since independence in 1948, they have actively courted prominent people scattered around the world who address themselves to selected sources of wealth in order to make those sources available when a need arises. This is nothing like an organized appeal by conscientious Jewish organizations who throw massive dinners, or doorstep charities that plant trees.
This is done very quietly and very discretely.
For example, in 1960 the Israelis put together their so-called "Group of 30" --- an ad hoc brotherhood of two and a half dozen American millionaires quietly united by a common cause. The $40 million they collected helped to pay for Israel’s first nuclear reactor and the neighboring plutonium separation plant.
But Eli Pinkas never spoke about Israel. He wasn’t even a Jew any more. Yet he kept a residence there. Except, the Israelis insist he didn’t exist. But he was a man who knew how to launder money, how to make the paper trail disappear to obscure it’s source or, even better how to obscure it’s destination. The Israelis built their bomb with other people’s money. Did they spend any of it inside the Iron Curtain, perhaps buying secrets or expertise or designs or perhaps weapons grade plutonium that the Bulgarians might have stolen from the Russians?
The Israelis don’t talk about their nuclear weapons program any more than they talk about their Collectors.
But then, $300-$800 million later, why should they?
*****