The Chair: Volume I

Chapter 2 Leann-4

When the Dow Jones Transportation Average stock market index for the New York Stock Exchange (NYSE) was created in 1884, Western Union was one of the original eleven all-American companies tracked. This was when insider trading was not only allowed, it was encouraged.

By 1900, Western Union operated a million miles of telegraph lines and two international undersea cables. Technically, most atomic clock people nowadays, not all, will tell you “the century turned on January 1, 1901, not January 1, 1900. You have to get a hundred years in before you can complete a century.”

In 1909, AT&T, under indictment of the Sherman Act, sold its shares in Western Union due to the threat of antitrust action.

The company continued to grow, acquiring more than five hundred smaller competitors. Its monopoly power was almost complete in 1943 when it bought Postal Telegraph, Inc., its chief rival.

Cligg Naleone, up until then a sportswriter for The New York Times focused on tennis, badminton, and rowing, wrote the blockbuster book “Monolith,”© which cut deep into the world of corporate takeovers. It was published in 1967 by Random House, and became a guide for many financial executives, stockbrokers, hucksters, grifters, pool players, and bingo enthusiasts, and anyone hoping to “beat the odds.” By focusing and explaining in detail “the hedge,” Naleone provided both a blueprint for all types of financial persons to hedge, and concurrently forced the Security & Exchange Commission (SEC), (not to be confused with the Southeastern Conference, the athletic league of universities aligned geographically with the Confederate States of America) and other governing bodies to legislate regulations and oversight. However, the SEC does not to this day oversee “hedge funds” in “any way, shape, or form.”

In 1914, Western Union offered the first charge card for consumers and in 1923 it introduced teletypewriters to join its branches. Singing telegrams followed in 1933, intercity fax in 1935, and commercial intercity microwave communications in 1943. In 1958, it began offering Telex service to customers in New York City. In honor of Valentine’s Day 1959, Western Union introduced the Candygram, a box of chocolates accompanying a telegram featured in a commercial with the rotund Don Wilson, not to be confused with the Houston Astros pitcher of the same name who no-hit the Cincinnati Reds one day after Reds hurler Jim Maloney had done the same to the Houston ballclub at Crosley Field in early May of 1970. On the 1970s version of “Let's Make a Deal,”© a television game show hosted by Monty Hall, Western Union Candygrams, with a cash message inside, were offered to contestants as a prize during a deal. In 1964, when Lyndon Baines Johnson (“LBJ”) was elected President, Western Union initiated a transcontinental microwave system to replace land lines. At his inauguration in January of 1965, at one of the many parties that day, LBJ supposedly pleaded with fellow democrat and longtime friend, Sen. Everertt McKinley Dirksen (D- Ill.), “Ev, I sure hope you can help me figure out this whole telecommunications regulatory mess, podnah.” With the beaming of direct X-rays all over, some groups, citing early studies of the risk by doctors, protested vehemently in Washington, D.C. over the possible links to cancer.

During World War II, families with sons in military service dreaded the Western Union “boy on his bicycle” to arrive at their home with a telegram from the War Department or the Navy Department. The message began: “The Secretary of War (for soldiers and airmen) or Secretary of Navy (for sailors and marines), regrets to inform you that--name, rank, and serial number of the man in the military service--was killed in action or missing in action.”

Western Union became the first American telecommunications corporation to maintain its own fleet of geosynchronous communications satellites, starting in 1974, when President Nixon resigned later that August. The fleet of satellites, called Westar, carried communications within the Western Union company for telegram and mailgram message data to Western Union bureaus nationwide. It also handled traffic for its Telex and TWX (Telex II) services. The Westar satellites’ transponders were also leased by other companies for relaying video, voice, data, and facsimile (“fax”) transmissions.

Nearly all Americans working in offices at the time of the advent of facsimiles, some having recalled the pneumatic tube messages in their buildings once upon a time, mail drops by elevators, and before that, the messenger boy dispatches sent and received delivered by young boys dressed as hotel bellhops with various headgear adorning and protecting their fragile eggshell minds, many of whom worked, notably in New York, Boston, Philadelphia and primarily Eastern cities, although Los Angeles, Chicago, and San Francisco were all in on it for a while, were now flung into a new realm, that of telephone office convos and actions comprised of “Did you get my fax?” “No, I did not? “No? Double check.” “Okay, I will.” And the intended recipient of the subject facsimile runs back down to the other end of the hall to the fax machine and again, after seeing the fax did not arrive, runs back to the phone on their desk and says “No, it did not come. I just checked again.” “Okay, I am sending it again.” “Fine, I will check in two minutes.” “Okay, call me when you get it.” “I will.” “It is a very important confidential message.” “I understand.” This type of exchange in many cases went on for hours, even into the next business day.

In 1963, Western Union had organized its international cable system properties and its rights-of-way, many along continental train tracks, or connecting international telegraph lines into a separate company called Western Union International (WUI) which it divested that same year to American Securities. In 1983, American Securities sold WUI to MCI Communications which renamed it MCI International and moved its headquarters from New York City to Rye Brook, New York, thirty miles northeast of “The Big Apple,” right on the Connecticut border, so you will know. Oh, and be sure anytime you see the word “Securities” anywhere, be sure to completely read the prospectus. And remember, “Past performance is no guarantee of future results.”

In the 1970s, WUI installed and leased to the U.S. Department of Defense (DOD) dedicated 50 Kbps high-speed telecommunications facilities between the continental U.S. and Hawaii, Germany and the United Kingdom to provide a test bed for the DOD’s Advanced Research Projects Agency (ARPA). This test bed provided ARPA with a proof of concept for the technology of packet switching which later became the Internet. This was part of the CIA clandestine operational arsenal beginning in Europe under the leadership of Barbara Lippincott, European Bureau Chief, who communicated from West Berlin by cryptic messages on a network termed “Honeysuckle Rose,” or “Geißblatt Rose.”

In 1976, Western Union partnered with E. F. Hutton & Co., who, surprisingly, when they spoke, not everyone listened, contrary to their television advertising claims.

In 1981, Western Union purchased a fifty percent interest in Airfone. It sold Airfone to GTE in 1986 for thirty-five million dollars in cash, but actually received a cashier’s check, not bags of money, in the transaction. All kinds of people were now talking on airplanes, most for no good reason, and the cost per minute was exorbitant. Many salesmen, and women, got into heated debates once back at their office when oft times “Accounting” would disallow upon initial review of expense reports calls over, many times, $200 were listed as part of the submittal. Larry Don Hagerfeldt, of Caterpillar, Inc. headquartered in Peoria, Illinois, once submitted an expense report from a month’s travel that included over $26,700 dollars in Airfone charges, part of his $103,298.43 charge for the month of July 1983, which Keith Longo, junior accountant, a two-year Caterpillar employee, denied. Corporate Treasurer Pierce van Brocklin interceded and finally approved the request, but “issued a stern written warning” on company letterhead paper to Hagerfeldt to “…be very careful in using telephones on airplanes. It is very expensive. Can’t you use a pay telephone once you arrive at an airport?” Along with the written notice, van Brocklin had included a roll of quarters to emphasize his point. But van Brocklin knew he could not really say too much because Hagerfeldt had been the No. 1 salesman at “Cat” since 1968, bringing in over $300,000,000 in new business over a five-year period, focusing on “large, strategic, and key accounts.” As a result of this “incident,” Longo, van Brocklin, and Hagerfeldt became in fact good friends and golfing buddies and once played in a Cat charity golf event benefitting children with cancer at Riviera Golf Club in Pacific Palisades (Los Angeles) California with Jack Nicklaus as the celebrity golfer in their foursome.

Due specifically to declining profits and mounting debts, Western Union slowly began to divest itself of telecommunications-based assets starting in the early 1980s. Because of deregulation at the time, Western Union began sending money outside the country, re-inventing itself as “The fastest way to send money worldwide” and expanding its agent locations internationally. NFL football hall of famer Merlin Olsen would hawk FTD Flowers which was affiliated with the money order segment of the Western Union business.

In 1987, Investor Bennett S. LeBow acquired control of Western Union through “an outside of Chapter 11 process” that was a complex leveraged recapitalization. The transaction was backed by a total of nine hundred million in high-yield bonds and preferred stock underwritten by Michael Milken’s group at Drexel Burnham Lambert as part of an exchange offer. Milken then went to jail for massive securities fraud, got into the hair replacement business, allegedly found Christ, but then created in 1997 a major league baseball “Home Run Challenge,” doing all he could to fight a disease that had attacked him, prostate cancer. During the Home Run Challenge, the Prostate Cancer Foundation®, invites fans to pledge a donation for every home run hit for June 1 through Father’s Day each year. Fans may also choose to make a one-time donation. LeBow installed Robert J. Amman as President and CEO who led a complete strategic, operational, and balance sheet restructuring of the company over the subsequent six or seven years. “If you are going to have a company, by damn, you have to have the people who can actually run it, it cannot be just about financial transactional illusions and shell games,” Amman once said to a young Donald J. Trump, a real estate mogul and eventual President of the United States of America, at the Royal Rhiga Hotel at lunch in New York on West 54th Street on a cool, breezy, overcast April day. Amman had the Oriental Mandarin Orange Salad, and Trump had a N.Y. Strip, medium well. The two later that evening attended a New York Yankees game as guests of owner George Steinbrenner. They all talked about the yachting business. After a few bourbons, Steinbrenner explained to everyone why his close personal friend, Otto Graham, was “the best quarterback who ever lived.” Trump had a Dr. Pepper and two chili cheese hotdogs with onions and mustard, and Lay’s® potato chips. Amman had a scotch and soda and ate some Fritos®. Steinbrenner said, “I may get something to eat later, I dunno.” The game versus Baltimore was called on account of the rain that had been forecast and expected all evening in the fourth inning but was rescheduled as now a double header the following afternoon at 1:00 o’clock PM prior to the scheduled night game that next night with the Orioles.

Mr. Amman executed a strategy of redirecting Western Union from being an asset-based provider of communications services, with a money transfer business as a large but less important part of the business, into being a provider of consumer-based money transfer financial services. In so doing, Mr. Amman ran the company as two separate companies. One business consisted of the money transfer business, which was funded and operated to take advantage of the significant growth opportunity. The second unit consisted of all the non-strategic communications assets such as the long-distance analog voice network, satellite business, and undersea cable assets. In the three-year period through 1990, Mr. Amman was supported by Robert A. “Shug” Schriesheim, also installed by Mr. LeBow, as a special advisor who oversaw the divestiture of the four non-strategic telecommunications assets for about two hundred eighty million dollars.