In the first of two extracts from his new biography of Chuck Feeney, Conor O'Clerytraces his journey from billionaire businessman to global philanthropist whose generosity favoured Ireland
Chuck Feeney, a blue-collar Irish-American from New Jersey, co-founded the first chain of duty-free shops in the Asia Pacific, just as the Japanese tourism boom was starting in the 1960s. By the 1980s his company, Duty Free Shoppers (DFS), had become the biggest retail chain in the world, and Feeney was listed in Forbes as one of the richest 25 Americans. Forbes was wrong, however. Feeney had by then transferred his vast fortune, irrevocably, in its totality and in secret, to his charitable foundation in Bermuda, a unique act in the history of philanthropy. Until recently his giving has also been secretive: beneficiaries were simply informed that the money was coming from a group of anonymous wealthy Americans. So far Feeney's foundation, Atlantic Philanthropies, has made donations worldwide amounting to $4 billion and it will spend down the remaining $4 billion in the next decade. He has directed more than $1 billion, mainly to education, research and political reconciliation, to the island of Ireland alone over the past two decades. Time magazine said he may go down in history as the most generous American giver of all time. Noted for his frugality - he wears a plastic watch and flies economy class - Feeney, 76, has co-operated in his biography now, primarily to promote giving-while-living among the very wealthy.
As he became more wealthy, Chuck Feeney began giving some of his money away in a piecemeal fashion. He was generous to colleagues and often paid for hospital treatment for staff or their kids. The earliest significant act of giving that he remembers was a donation of $10,000 that he sent in the 1960s to his friend and former professor, Robert A (Bob) Beck, who was dean of the Hotel School [ in Cornell University] from 1961 to 1981. The Hotel School had asked for $1,000, but "I wanted to make a gift that was meaningful, and I reckoned $10,000 was meaningful," he said. He recalled with a laugh how Beck, who had lost a leg in Normandy, told him that he was so excited at getting such an amount that he held up the cheque to get a good look at it and a gust of wind came along "and the next thing he was running across a field to catch up with it."
The first instance of active philanthropy was the provision of a sports centre for the Blanche de Castille Catholic school in Nice, which his children attended. He paid to have a sports complex carved into the slope of the hill, with indoor facilities and outdoor tennis courts that could also be used for basketball and handball. Thereafter he contributed to various charities, but he was not satisfied with being just a donor. He told a persistent correspondent from Pacific Business News who caught up with him in Honolulu in June 1980 that his idea of helping charities was not simply handing money over but personally seeing that it was effectively used to help as many people as possible.
"I am not really into money," he told the reporter. "Some people get their kicks that way. That's not my style." He was "intensely competitive", but his motivation was derived from the creative challenge of applying a better approach to something that already existed. His definition of success, he said, was not having all the money one desired, but being able to raise a happy, healthy family. "There has to be a balance in life. A balance of business, family, and the opportunity to learn and teach." He had already begun to tease out these themes in conversation with Harvey Dale. Feeney and the lawyer had become friends since Dale first advised Tourists International on restructuring company finances in the early 1960s. The New York attorney had established himself as the Feeney family consigliere, advising Chuck and Danielle, mostly on tax issues.
An accomplished pianist with a passion for Mozart and a gift for mastering complex tax issues, Dale had become a partner in a number of New York law firms and was made professor of law at New York University in 1979.
He was intense, focused, and legalistic, but had no operational background, a perfect foil for Feeney, who was restless and business oriented.
Over a number of lunches and dinners in the late 1970s, as Feeney's estimated wealth approached a quarter of a billion dollars, he and Dale began talking about serious philanthropy. Fond of telling business associates that they should think big, Feeney applied the same advice to himself as he struggled with the concept of serious giving. It wasn't long before Dale realised that what was gestating in Feeney's mind was something radical, that while Feeney relished his continuing success in business, he wanted not just to be a generous donor but to shed the burden of wealth and assume responsibility for its charitable use.
As their conversations progressed, Dale introduced Feeney to the literature of giving. He quoted to him the advice the Reverend Frederick Gates gave to his employer, John D Rockefeller, the world's first billionaire: "Mr Rockefeller, your fortune is rolling up like an avalanche! You must distribute it faster than it grows! If you do not, it will crush you and your children and your children's children!" They discussed the writings of Andrew Carnegie, the son of a Scottish immigrant to the United States, who accumulated a massive fortune providing iron and steel for American railways in the late 19th century, and who gave away much of it during his lifetime to fund the establishment of libraries, schools, and universities.
Feeney reread several times Carnegie's famous essay, "Wealth," first published in the North American Review in 1889. The philanthropist argued that there were three ways to dispose of surplus wealth: It could be left to the family, bequeathed to the government, or given away while alive, preferably to those who could use it well. The first was motivated by vanity and a misguided affection for the children, who were so burdened that it amounted to a curse; the second required the owner to die before the wealth was used and his wishes could then be thwarted; and the third ensured that surplus wealth was put to good use and not dispersed over hundreds of years in trifling amounts. The best way to use wealth, concluded Carnegie, was to provide "the ladders upon which the aspiring can rise"- such as universities and libraries. Carnegie also cautioned that a man of wealth should set an example "of modest, unostentatious living, shunning display or extravagance."
What Carnegie advocated was to have a profound effect on the New Jersey entrepreneur. "I do remember somebody gave me a copy of a speech that Carnegie had given at Cornell, and for some reason I researched that speech and read two books on Carnegie," recalled Feeney. Harvey Dale, who is Jewish, also introduced Feeney to the writings of Maimonides, the 12th-century Jewish philosopher who taught that the highest of eight levels of tzedakah, or giving, was to help a fellow Jew to become self-sufficient through training and education, and that the second-highest level was giving in such a way that the donor did not know the donee, nor did the beneficiary know where the money came from.
They discussed the fact that among all religions, the highest form of giving had always been that which was not motivated by ego, or by the prospect of political or social leverage, which relieved the beneficiary of any feeling of shame or indebtedness or the expense of a public ceremony to honour the donor. Jesus Christ advised givers in the Sermon on the Mount: "When you give alms, sound no trumpet before you, as the hypocrites do in the synagogues and in the streets, that they may be praised by men." The Qur'an stated, "If you declare your charities, they are still good. But if you keep them anonymous and give them to the poor, it is better for you and remits more of your sins."
Dale guessed that Chuck wasn't initially motivated by anything that had to do with Carnegie or Maimonides, or indeed with any religious teaching.
He felt it was inevitable, given Chuck's natural goodness and the culture he brought with him from his boyhood in New Jersey, that he would consider using his fortune to help others. "He just became more and more interested in giving back and not owning," he recalled.
Feeney also decided that whatever he did it would be done anonymously.
There were two principal reasons for this, he reflected. He did not want to "blow my own horn" - just as his mother never let the neighbour with Lou Gehrig's disease know she was going out of her way to give him a lift - and he did not want to discourage other contributors from giving to the same deserving cause, which he thought would be the inevitable outcome of publicity.
He had also been inundated with requests after giving sizeable donations to Cornell, and he did not want that to continue.
Giving away large amounts required the setting up of a specific foundation in a carefully chosen location, especially if Feeney decided he wanted to transfer to such a foundation any of his business assets as he seemed to be indicating, and if he wanted his giving to be international in its scope. Harvey Dale set out to do a worldwide survey of jurisdictions that would accommodate Chuck's requirements. The United States was ruled out as a base. Anonymity would be almost impossible, and the US government was at that time moving to bar foundations from holding a concentration of business assets, as federal authorities had found evidence that many wealthy Americans were using philanthropies simply to perpetuate control of their corporate interests.
Dale considered the Channel Islands and the Bahamas and finally settled on Bermuda. The 21 square miles of self-governing British territory in the middle of the Atlantic imposed no direct taxes on personal or corporate income, did not levy taxes on charities or foundations, and did not require public disclosure of foundations. Bermuda also allowed a philanthropy to fund good causes worldwide. It had a highly developed economy and financial structure, and Feeney's company, General Atlantic Group Ltd, was already registered in Bermuda, in a little office opposite a bakery delicatessen on Washington Mall in the capital, Hamilton.
But to set up a foundation in Bermuda, a person had to be a resident for a year. And that meant not just Chuck but Danielle, as everything was in her name. In March 1978, Feeney bought a large villa in Bermuda with the help of a local banker, Cummings Zuill, a member of an old Bermuda family whom he had met when Zuill was working in Hong Kong for the Bank of Bermuda. The Feeney family moved there in the summer of 1978. "Chuck will say that was my punishment visited on him," said Harvey Dale.
"Danielle will certainly say that!"
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THE DIALOGUE BETWEEN Chuck and Harvey, meanwhile, had evolved to the point where it became clear that he was intending to put everything into a foundation - the DFS shareholding, the businesses, and all his investments.
He would make sure Danielle and the children were taken care of, and the houses would remain in the family, but that was all.
It was a progression of his thinking, a "slope line," recalled Harvey Dale, who thought Feeney reached the decision some time between 1980 and 1982. "Chuck's time clock is different from that of anybody I know. He quite often takes important decisions and sort of lets them marinate. Time passes until he gets to some place internally where he has comfort with a direction." Feeney himself cannot remember a "going-over-the-cliff" moment.
Nor did he philosophise much about his decision after he reached it.
"I came to the conclusion I didn't need a lot of money because I didn't intend to live a lifestyle that required it," he said simply.
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SETTING UP A registered charity with the specific provisions Feeney wanted proved complex. The foundation had, for example, to get around Bermuda's very narrow interpretation of charitable activities - which did not permit giving to sports, something that, with his love of sport, Feeney might want to do. Establishing a unique charity that could give anonymously, possess businesses, and operate worldwide required in the end a special act of the Bermuda parliament. In 1981, Harvey Dale engaged an English-born lawyer, Frank Mutch, from the island's biggest law firm, Conyers Dill & Pearman, to help draft the necessary legislation. A year later, they presented their draft bill to the Private Bills Committee in the Bermuda Assembly. It provided for setting up a charitable foundation to be called the Atlantic Foundation. To reassure the parliamentarians they were genuine, the bill empowered the Bermuda Charity Commissioners to oversee the Atlantic Foundation's operations. The committee approved the Atlantic Foundation Company Act, 1982, and it was nodded through the red-carpeted House of Assembly.
The foundation documents were lodged with the company registrar at 30 Parliament Street in Hamilton, and the Atlantic Foundation was officially set up on March 1st, 1982, with an initial lodgement of $5 million and the declared aim of helping projects across the world to relieve poverty and suffering, to advance education, and to help causes such as health, children and youth, old age, and international justice.
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ACQUAINTANCES REMARKED THAT they never heard him engage in introspection and that he used his sense of humour to keep his inner self at a distance. Instead of explaining what was going on in his mind, he would give friends and family members articles or cuttings from magazines and newspapers.
They had to infer the message. Giving out copies of "Wealth" was a clever way of enlightening them on the essence of his giving. He also kept a copy of Carnegie's essay on his desk.
Andrew Carnegie was not a precise role model for Chuck Feeney. The Scottish philanthropist made his fortune through harsh and ruthless business methods, and he loved having his name on libraries and schools, neither of which applied to Feeney. But his basic message was clear - give while alive. Those to whom Feeney handed a copy of "Wealth" were left in no doubt that he was intent on giving away most if not all of the fortune he had accumulated in the duty-free business, and that he meant to turn his back on the conspicuous consumption that in the 1980s was coming to characterise what would be known as the "Decade of Greed". All Feeney's instincts, instilled in him by the example of his parents, by the sharing culture of his blue-collar upbringing in New Jersey, by his desire not to distance himself from his boyhood neighbours and friends, and by his own innate kindness and concern for others, undoubtedly shaped his decision.
In New Jersey's Elmora neighbourhood, you helped people and you didn't flaunt riches that came with success or boast about your good works.
Although the mechanism had been put in place, Dale was unwilling to let Feeney commit substantial assets to the foundation until he saw that it was working in the way they intended. He counselled Feeney to run it for a couple of years as a "pass-through entity" with money going in and being donated out. Also, there had not been complete discussion or agreement between Chuck and Danielle about the amount that would be set aside for her and the kids. "But Chuck was clear then that this was the only exception. Everything else was going to go in."
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FEENEY AND DALE had "serious conversations" about the enormity of what he was set to do. "One of the things we both understood was that whatever the value of the assets was, except for the amount that was set aside for Danielle and the kids, all of that was going in, and this was a very unusual decision, probably unique in the history of the world. I said, 'You ought to be sure about this because if you change your mind in three weeks it's too bad. The assets are gone, and you can't get them back, and you can't use them', and I was very stern with him about that. That made no impact on him because he knew that he understood that, and that was exactly and precisely what he wanted."
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WITH THE FUTURE of DFS secured for several years after the renewal of the Hawaii and Alaska concessions, Chuck Feeney reached an agreement with Danielle that when the day came to sign everything away, $40 million and the houses would be held back for her and the children, and the money paid out over a few years. It was the figure thought necessary to take care of "the houses and the kids and education and clothes and boats and artworks, jewellery," recalled Harvey Dale.
The Atlantic Foundation had worked well in the two years since its creation in 1982. The Feeneys channelled $15 million through the foundation in that time, of which $14 million went to Cornell. Cornell had given him everything, his Ivy League education, his launchpad to the world, his network of loyal friends. It would always have first call on his generosity. Feeney was overwhelmingly grateful to the Ivy League university for giving him the self-confidence to prosper in business.
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BY NOVEMBER 1984, they were ready to transfer everything into the foundation.
But a wealth transfer of great magnitude in the territory of Bermuda would require the payment of stamp duty that their lawyer Frank Mutch reckoned could be in the region of $40 million. They decided to do the transaction in the Bahamas. There would be no stamp duty, if it was not a gift to the foundation but a purchase by the foundation, and if this occurred outside Bermuda. As everything was in Danielle's name, it was arranged that the foundation would issue promissory notes to purchase the assets from her, namely, the DFS shareholding and the businesses, over a specific time period.
They set a date for the transaction: Friday, November 23rd, the day after American Thanksgiving. It required the presence of Chuck and Danielle and the two lawyers, Frank Mutch and Harvey Dale. The Feeneys and Mutch arrived that morning at Nassau International Airport on flights from New York and Bermuda. Dale was due to fly in from West Palm Beach, but a thunderstorm lingered over the airport and delayed his flight. When the passengers were finally boarded and the captain announced, "I think there's a window in the weather, and we can get out if you all are willing," he found himself almost shouting, "We're all ready to do it." He remembered the occasion as being as near to a disaster as he could imagine.
"It was mid-afternoon, almost four, when I arrived," said Dale. "The Trust Company closes at 5.00pm.The plane landed, I ran out of the plane, jumped into a taxi, ran up the stairs to the conference room, everybody was sitting around twiddling their fingers waiting for me. The closing had been scheduled to take two to three hours.We had one hour." "Good to see you," said Feeney as Dale entered, and they rushed through the closing.
When all the documents were signed, the Atlantic Foundation had purchased the assets from Danielle by issuing non-negotiable promissory notes, through an underlying company called Exeter, for payment to her of $40 million over a number of years. In addition, Danielle retained the nonbusiness assets, principally the Feeney homes in various parts of the world, valued at $20-$30 million.
With the stroke, or several strokes, of a pen in the law office, Chuck Feeney, at the age of 53, had signed away his fortune, though as chairman of his foundation he could influence what was done with it. He was by no means a pauper, and he would also still be running the businesses as chairman of General Atlantic Group Ltd and drawing an annual salary, even though his business empire was now wholly and irrevocably owned by his foundation. But he had gone from the cusp of billionaire status to someone with a net worth of less than $5 million. He would joke later: "How to become a millionaire? Become a billionaire first!"
Although it was one of the biggest single transfers of wealth in history, not one of the people intimately involved could put a precise figure on what it was worth, even to the nearest hundred million. The foundation would later put it conservatively at $500 million. Frank Mutch believes that the total value of Feeney's assets then could have been $600 million. Harvey Dale reckons it could have been as high as $800 million, a sum equivalent to the gross domestic product of Fiji or Barbados (that if invested at an annual return of 7 per cent would be worth $3.8 billion in 2007). Paul Hannon, hired by Feeney as his general counsel two years earlier, suggested in a contemporaneous private memo that the assets were worth between $500 million and $1 billion, rivalling the capital of sizeable investment banking firms such as Bear Stearns and far outstripping Morgan Stanley.
The difficulty in making a precise calculation arose from the fact that DFS was a private multinational and the value of Feeney's 38.75 per cent shareholding was "in the eye of the beholder", as he put it. On the basis of an offer for the company that Tony Pilaro had made that year to buy out the other owners for $610 million (in the end he couldn't raise the cash), Feeney's equity was worth some $236 million. But if DFS had been floated on the stock market, its value could have been much higher. On top of that, General Atlantic's fast-growing holdings and investments were by this stage worth several hundred million dollars, perhaps half a billion or more.
Among themselves, Feeney and Dale referred to the foundation's assets as being divided into "church" and "state," with "church" signifying liquid assets for making grants and "state" being the businesses and the DFS shareholding.
With the transfer, 90 per cent of the assets were in "state" - an unheard of proportion among modern charitable foundations, which rarely control any businesses at all.
There was no celebratory drink or meal after the signing. Everyone rushed to catch their evening flights out of Nassau, Chuck and Danielle heading to New York, Harvey Dale back to West Palm Beach, Frank Mutch to Bermuda.
As far as Danielle was concerned, it was just another of her husband's business transactions, though one of great importance. She always did what her husband decided in such matters and she knew the assets weren't hers, though they had been in her name. Harvey Dale was her lawyer, too, and they were both friendly with Dale's family. She felt it was not for her to refuse, and she did not want it to become an issue in their marriage.
She did not feel deprived in any way, though the $40 million was a fraction of the actual value of the assets.
But she would not look back on it in time as a happy event. As the 1980s progressed, friends noted that she and Chuck were living increasingly separate lives. Feeney was always on the road, now more than ever, as his business and philanthropic interests consumed almost all his time. Some time afterward, she began to feel resentful and confused about the future.
She felt something very bad and serious had happened in her life. She began to worry about the children being disinherited. Her relationship with Harvey Dale became very strained. She believed that the lawyer had too great an influence on her husband, and she made her feelings known to him in verbal exchanges in no uncertain terms on a number of occasions when they met.
The Feeney children were not sure what to make of their father's relationship with the New York lawyer. They wondered among themselves about the extent of Harvey Dale's influence, whether he had manipulated their father in any way, or if it was a case of Maimonides influencing Dale and Dale influencing their father. But they had little doubt that the idea of giving while living had germinated in their father's mind for a long time.
Feeney readily agreed that Harvey Dale was the most influential person in his life. "Yes, absolutely," he said. "He is impeccably honest and is also a good person as a human being. He knew my motivations. The idea never changed in my mind - use your wealth to help people, use your wealth to create institutions to help people. I think he has the same pragmatic view that I have."
"Harvey was very influential," said Frank Mutch. "He was the one behind it all, really. He espoused Chuck's ideas. The unique feature was that Chuck never made any arrangement for himself to be provided for."
Feeney's legal counsel, Paul Hannon, felt that Dale not only interpreted his wishes but "to some extent he created Chuck's wishes."
Diane Feeney, the youngest daughter, recalled that some time after 1984, Harvey Dale explained the implications of the creation of the foundation to family members. "I remember Harvey coming to see every single one of us," she said. "I was in Cornell at the time. He dragged me out of a football game, so you knew it had to be pretty major, sat me down and explained that Dad wanted to give all his money away to charity, this was in the process of being implemented, and he wanted to tell us about it."
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NO ONE IN the world of philanthropy in the United States or elsewhere was aware that a major new player had come on the scene. Dale, who assumed the role of president and chief executive of the Atlantic Foundation, required everyone involved in setting up the foundation to sign a highly lawyered confidentiality agreement, drawn up by the Manhattan law firm Cadwalader, Wickersham & Taft, to protect Feeney's privacy. Strict rules were formulated for the conduct of the foundation. No solicitations would be entertained. Gifts would be made anonymously, and those who received them would not be told where they came from. The recipients, too, would have to sign confidentiality agreements. If they found out anything about the Atlantic Foundation or Chuck Feeney and made it public, the money would stop. The Atlantic Foundation would be the biggest secret foundation of its size in the world.
From the start, Chuck Feeney was adamant that he did not want recognition for his giving. There would be no plaques or names on buildings he funded, no black-tie "thank-you" dinners, no honorary degrees. People should not know that he was behind the foundation. Beneficiaries should not even be told its name.
From the book The Billionaire Who Wasn't: How Chuck Feeney Secretly Made and Gave Away a Fortune by Conor O'Clery. Copyright © 2007. Published and reprinted by arrangement with Public Affairs, a member of the Perseus Books Group (www.perseusbooks.com). All rights reserved. The book will be published in hardback on September 3rd