Michael Hirsh

Stories by Michael Hirsh

  • A Man With Enemies

    IT WAS A TYPICAL TOUR DE Holbrooke. He had recently resigned from the State Department, heralded by one and all as the peacemaker of Bosnia, when in 1996 Richard Holbrooke flew to Seoul to deliver a speech. And, being Holbrooke--a big hitter in U.S. foreign policy--he thought he might drop in on his old pal, the then South Korean President Kim Young Sam, with U.S. Ambassador James Laney tagging along. He and Laney planned a lunch, too, with the foreign minister. And oh, yes, there was the matter of a ribbon-cutting to open a new office for Credit Suisse First Boston, which Holbrooke had just joined as vice chairman. For Holbrooke, who slips easily in and out of his roles as ace negotiator and Wall Street rainmaker, this was just the usual multitasking. ...
  • The Samba Effect

    Brazil's currency crisis spooked markets around the world last week. But if investors can shrug off this latest turn, the financial panic that began in Asia and spread to Russia may finally be over. ...
  • The Strains Are Finally Showing

    MADELEINE ALBRIGHT read the headline with pure incredulity. ANNAN SUSPICIOUS OF UNSCOM ROLE, The Washington Post blared on page one last Wednesday. ""Confidants'' around U.N. Secretary-General Kofi Annan, the article said, believed that the United States was using the U.N. inspection team in Iraq as a spy's nest in order to take out Saddam Hussein. The secretary of State was livid: this was just the kind of propaganda the Iraqi tyrant himself had been peddling. So Albright's tone was less than respectful when she got Annan on the phone. ""What the hell is going on here?'' she snapped--or words very close to that, recalls one senior official. The soft-spoken Ghanaian diplomat replied that the article was flatly wrong. He didn't suspect U.S. spying. And the so-called confidants cited in the story simply weren't close to him. ...
  • It Only Gets Worse

    IN THE ANNALS OF BAD TIMING, SOUTH Korea's presidential election this week is up there with some all-time doozies. Like Caesar's fateful trip to the Forum. Or Herbert Hoover's vow of "prosperity around the corner." At the very moment the world is waiting for Korea's government to get its act together-and avoid imminent default on some $20 billion in short-term foreign debts-the country finds itself without a government. Its lame-duck president, Kim Young Sam, is disgraced and virtually powerless. Its central-bank governor is resigning. With overseas investors seeking some sign of stability, a boisterous election campaign will be decided Thursday. And neither of the two leading candidates is someone to bet a nest egg on. ...
  • Lone Ranger At The Irs

    IMAGINE TAKING OVER AS skipper of the Exxon Valdez--just as it's about to run aground. For Charles O. Rossotti, running the Internal Revenue Service has been a little like that. The former management-systems whiz came on board as IRS commissioner i n the face of the fiercest congressional and public criticism the agency has faced in decades--widespread allegations of systemic corruption and abuse of taxpayers. The worst of the storm has passed. But Rossotti's been bailing water ever since he was sw orn in on Nov. 13, and early signs are that he's begun to rid the agency of some of its alleged excesses. ...
  • Into The Deep

    SEIICHI TANIGASHIRA LEFT NO note. Nor did he give a warning. Perhaps the 40-year-old investment manager believed there was no need to explain what he was about to do. At 8 a.m. last Thursday--an hour when, in months past, he would have been bent eagerly over the phone, selling stocks for an affiliate of Yamaichi Securities--Tanigashira went to the roof of a seven-story Osaka office building, stepped up to the ledge and jumped off. Only days before, his corporate parent, Yamaichi, announced it would fold in Japan's biggest postwar bankruptcy. Its president broke down and bawled before the cameras--an astonishing paroxysm of shame that officials later learned was well justified. For hidden in Yamaichi's books was a nightmare for regulators and investors alike: evidence of huge losses secreted in the Cayman Islands, $2.1 billion in tobashi, or illegal compensation paid to customers, and other irregularities. The giant brokerage's books were so riddled with hidden losses that some fear...
  • And Now, It's Korea

    NOT MANY PEOPLE HAVE HEARD of Tong Yang, South Korea's biggest investment bank. But it wasn't very long ago that its hot-handed execs, like Kim Chong Dae, envisioned their firm as an Asian Merrill Lynch, a rising star on the international capital scene. Such hopes were routine in Korea in the '90s. Kim's countrymen saw their newly industrialized nation emerging from centuries of twilight as a plaything of empires, a ""hermit kingdom'' repeatedly invaded and colonized by Mongols, Chinese and Japanese. Only last year Korean papers proudly bannered the news as Seoul joined the Organization for Economic Cooperation and Development, the Paris-based rich nations' club. Per capita income surged past $10,000 for the first time, and the government confidently studied Bonn's absorption of East Germany as it prepared for the imminent collapse of its own cold-war alter ego, North Korea. ...
  • Trumping The President

    FOR THE REPUBLICANS, IT WAS A rare instance of trumping the master. Bill Clinton, a wizard of political timing, has been one-upping GOP leaders for years by seizing their issues just as they ripened into public view, whether it was balancing the budget, welfare reform or the big-government-is-bad Zeitgeist of the '90s. Not this time. When it came to reforming the much-criticized Internal Revenue Service, the president's internal clock appears to have been badly off.In recent months, as the administration dawdled over its own IRS-restructuring plans--which long predated the GOP's--the Republicans ran away with the issue. First the Senate Finance Committee held dramatic hearings in late September detailing IRS abuses of taxpayers. Those had scarcely ended when House Republicans like Majority Leader Dick Armey and Ways and Means chairman Bill Archer took to the road, thumping for tax reform. By the time Clinton belatedly backed Archer's IRS-reform bill last week, the headlines were all...
  • Infernal Revenue Disservice

    IN THE SPARE, CLOISTERED WORLD OF THE INTERNAL Revenue Service, Ronald James lived like a prince of the church. A barrel-chested fellow given to wearing white cowboy hats and bow ties, James made what was virtually a royal progress through Oklahoma City headquarters each day, tailed by three or four aides on constant pager call. There was good reason for his confidence: from his perch on the prairie, the man known as ""King'' James ran a tax-collection division judged one of the top performers in the nation. In fiscal '97 the IRS's Arkansas-Oklahoma district ranked No. 3 among the 33 districts in the country, thanks largely to property seizures that were eight times the national average per agent. Rewarded with bonuses, James bought a red-brick ranch house in a leafy suburb of Oklahoma City and, says one of his managers, ""viewed himself as a potentate.''But the success story of Ronald James concealed a dirty secret: many of his employees, the frontline IRS agents who carried out...
  • Behind The Irs Curtain

    IT WAS, AS THEATER, REMINISCENT OF those great old mob trials--back when the mob really meant something. Wearing black cotton hoods, six witnesses filed into a Senate chamber last week to tell an astonishing tale of corruption and abuse of power. But this wasn't about the Mafia; this was about mainstream America. It was all the more frightening that the witnesses weren't colorful thugs like Jimmy the Weasel or Sammy the Bull, but solid citizens who, acting as Internal Revenue Service agents across the nation, had wives, kids, well-tended yards. And, it seems, scruples. Seated behind a screen, their voices altered electronically--most sounded like Munchkins with Deep South accents--the whistle-blowers heaped dirt on their employer. They told of an IRS that is a virtual police state within a democracy, a Borgia-like fiefdom of tax terror at the heart of the U.S. economy.The IRS, witnesses said, is almost never held accountable for its many errors and sins. It is an agency that audits...
  • On The Spot

    Alan GREENSPAN DOES HIS BEST thinking in the tub at 5:30 a.m.a time when, the Federal Reserve chairman has told friends, his,,"IQ is about 20 points high&er. Engrossed, his thick eyeglasses steaming, Greenspan pores over reams of data each day. It was during such a water-soaked reverie in the last few months that, like Archimedes of old, the world's most influential economist may have had his "eureka" moment. There was no escaping the facts, no other way to explain the central conundrum of the U.S. economy: why inflation isn't picking up and profit margins aren't shrinking this late in the business cycle. Something was wrong-and it probably had to be the government's own productivity numbers. They were low. Far too low. After a two-decade wait, America was finally getting a return on its investment in new technology; thanks to computers, voice mail and other automation, workers were cranking out more and more per hour, swelling profits without inflating prices. That in turn...
  • At Last, A Tally Of Pain

    AMERICAN AMBASSADOR Madeleine Kunin was sitting in her office in Bern, Switzerland, last Wednesday morning, casually scanning the Financial Times. Suddenly she found herself caught in a diplomat's worst nightmare - a direct, emotional conflict between her personal life and her official duties. There, among the 1,756 foreign owners of World War II-era ""dormant'' accounts published by Swiss banks was her own long-dead mother, Renee May. ""Needless to say, I was very surprised,'' Kunin told NEWSWEEK. ""It gave me a strange feeling to be linked in this way.'' ...
  • The Mad Bombers

    THERE'S A WILD CONSPIRACY THEORY going around Capitol Hill, and it's not about Chinagate. Call it the mad-bomber approach to tax reform. Here's how it works: overload the tax code with a collection of mind-bending complexities, the likes of which haven't been seen for more than a decade. Give the Internal Revenue Service, which Rep. Bill Archer once said he wanted ""completely out of the lives of Americans,'' new authority over everything from education to welfare policy. Reduce capital-gains rates so that tax shelters take off again. And finally, force ordinary folks to line up outside H&R Block offices to receive meager tax benefits they barely comprehend. The result: far from thanking Washington for tax relief, Americans will rise in revolt against the income-tax code. ...
  • Begging For Bosses

    DOUG KELLAM HAD HEARD ALL the stories. So when he was laid off from his job as a marketing manager at a beverage com- pany in January, Kellam saw only worn shoe leather in his future. He expected a yearlong, painful trek through the corporate offices of Downsized America. What Kellam didn't reckon on was just how hot this economy is - and how much fast-growing businesses have come to regret their slashing tactics of the past decade. Within a few weeks he felt like a sweepstakes win- ner as headhunters phoned, dangling million-dollar stock-option packages. ""I was expecting to be pounding the pavement, calling and asking for favors, digging and digging and digging,'' says Kellam, 38, who signed on in April - at a higher salary - as vice president of marketing at First Alert Inc., the Aurora, Ill., smoke-detector company. ""I was back in the perfect job - a better job - within three months.'' ...
  • It's Rubin, Stupid

    ROBERT RUBIN, NOT ONE TOduck a question, is cringing. Literally. Repeat to him what so many of his admirers in Washington and on Wall Street now say - that he may be the best U.S. Treasury secretary in memory - and Rubin visibly stiffens. His eyebrows arch high, and he averts his face with a comical grimace, as if you'd just raised something totally inappropriate, like rumors about his sex life (there are none). For the Treasury chief, whose self-effacing reputation in a town of monster egos is at the core of his influence, talk of his growing profile is like nails on a blackboard. ""I just don't think those kinds of comparisons are useful,'' Rubin snorts. Then, after a few more questions and a genial apology to his visitor, he's gone. He's off to a meeting next door at the White House and his newest fight: scrapping over the nasty details of balancing the budget. Clearly, Rubin believes it's far too early to write his legacy. ...
  • Reed Hundt Goes Offline

    Reed Hundt, the chairman of the Federal Communications Commission, announced last week that he was stepping down. In his three years in office, Hundt was charged with setting guidelines for the most dramatic liberalization ever in telecom and cable. But recent consolidations raise questions about whether deregulation is really working. Are we seeing the return of a telecom oligopoly? He discussed his legacy in an interview with NEWSWEEK'S Michael Hirsh. Excerpts:Some are calling deregulation a failure. Even giants like Rupert Murdoch and AT&T seem to be having difficulty breaking into, respectively, the cable and local phone markets. What does that say about competition?You're looking at a three-step process. First, we have to take away the laws that support monopoly. Second, we have to write rules at the FCC that permit competitors to enter previously monopolized markets. And third, only after you have the competitive entry can you have deregulation. Right now, we're still in...
  • Switzerland's Reckoning

    IT'S A LONG WAY FROM THE glass-littered slums of South-Central Los Angeles to the shimmering glass towers of Zurich, Switzerland. Two worlds, utterly disconnected - or at least Dermot Givens used to think so. Then the L.A.-based black activist began picking up a strange trail in the press, and it led straight to Zurich: millions in profits allegedly stashed by Latin American drug lords in Swiss bank accounts. Much of this dirty money, he believes, comes from crack and other drug sales to ravaged U.S. inner cities. ...
  • But Nary A Trust To Bust

    Robert Pitofsky is no Teddy Roosevelt, though he'd like to be. Curly-haired and a bit pudgy, the chairman of the Federal Trade Commission has the absent air and serene smile of a scholar. And he knows he'd look pretty silly carrying a big stick, like Teddy the trust-buster in the populist cartoons of nearly a century ago. Nonetheless, Pitofsky says, he has the Roosevelt religion. "I'm a true believer in antitrust," he says. "I believe the best thing for consumers and for shareholders is to require companies to compete aggressively with each other." And for U.S. regulators to bring down the mighty. ...
  • Money On The Move

    THE TWO SCANDALS BEDEVILING the Clinton administration, Whitewater and Donorgate, don't have much to do with each other. After all, one involves questions about an obscure Arkansas land deal in the early 1980s, and the other the financing of the 19 96 presidential campaign. But there's one suspected link between the two controversies: the Riady family of Indonesia. The founders of Lippo Group, a $6 billion banking, insurance and real-estate empire, reportedly paid $100,000 to former associate attorney general Webster Hubbell after his resignation from the Justice Department. And John Huang, who ginned up millions in Asian donations to the Democrats last year, is a former Riady executive. ...
  • The Price Is Right

    MCDONALD'S IS ONE HUMONGOUS company. With 21,000 restaurants in 101 countries, it is everywhere--which is why the global economy is sometimes called McWorld. But back home in America, the execs who run this vast empire aren't feeling very lordly. More than ever, they find, they have to kowtow to the price demands of ordinary folks like Alonso Reyes, a 19-year-old Chicagoan who works at a local car dealership. Never mind that Chicago is Micky D's world headquarters; he splits his fast-food patronage between McDonald's and its archrival, Burger King--and counts every pennyworth of beef when deciding where to eat. So Reyes perked up when he heard last week that McDonald's had announced "an unprecedented value offering"--a 55-cent Big Mac that the company boasted was "bad news for our competition.f" "Cool," said Reyes. "Coupons, specials, sales. I'll take whatever I can get." ...
  • The Holocaust In The Dock

    AS A MORAL ISSUE, THE CASE SEEMS SO clear-cut. On one side, the Nazis and their accomplices, the Swiss banks. On the other, Holocaust survivors whose money and property were stolen by the Germans and laundered through Switzerland, or whose bank accounts the Swiss may have plundered. Thus have the lines been drawn for a year, as new revelations forced Switzerland to confront the darker side of its "neutrality" during World War II. But the Swiss have admitted their complicity oh so slowly-and that has enraged many Jews. "The victims," said World Jewish Congress chairman Edgar Bronfman, "aren't getting any younger." Finally, after months of mounting public pressure, Switzerland moved last week to salvage its reputation. Three big Swiss banks established a $70 million Holocaust fund for survivors. ...
  • The Evils Of Markets

    FREE-MARKET CAPITALISM is the secular religion of our time. It is a creed triumphant. It won the cold war--and then the ideological battle in Washington, turning liberal Democrats into "Eisenhower Republicans" and ordinary Republicans into small-government zealots. Today, whether the issue is stealth-bomber contracts or schoolbooks, the central precept of laissez-faire capitalism--that markets are much better than governments at allocating so- ciety's resources--underpins most economic-policy decisions. Free-market fever has given a new, savage look to the American corporation as well: Downsizing. Deregulation. Decimated trade unions. "Employability" over employment. All are symptoms of the jostling, desperate grab for markets that rules the day. ...
  • The Norman Conquest

    DEFENSE WONKS CALL IT "The last supper." Secretary of Defense Bill Perry, then No. 2 at the Pentagon, gathered together the nation's biggest arms contractors one night. Like a commander addressing a flak-wary bomber squadron, he gave it to them straight: about half would shortly be gone from the Pentagon's payroll, victims of post-cold-war budget cuts. Norman Augustine's company seemed as likely a candidate for oblivion as any. Martin Marietta was a smallish firm best known for building the Challenger's ill-fated fuel boosters. Augustine's friend Bill Anders, head of powerful General Dynamics, put it bluntly. The industry would soon consist of "one gorilla, two chimpanzees and six marmosets." And Augustine, he gibed, was clearly a marmoset. ...
  • Gm Vs. Vw

    IN AN INDUSTRY KNOWN FOR ITS wooden ways, Jose Ignacio Lopez de Arriortua was a lit match. His specialty wasn't just change, but scorched earth. He was a revolutionary, and Detroit had never seen anything quite like him. Other execs "outsourced" the production of parts for their auto-assembly lines. Lopez refined that into an art. With monkish devotion, he would stalk into the plants of General Motors' suppliers and show them how to make things more cheaply and efficiently--saving hundreds of millions of dollars for GM (and making scores of enemies in the process). Brilliant and charismatic, he once bought an antique refectory table and urged his men to pound it whenever they drove a particularly hard bargain. GM was his fraternity, his family, his life. Chairman Jack Smith wasn't just his boss, he once declared rapturously, "he is my brother." Lopez, an ascetic Spaniard with sunken cheeks, banned his ample-waisted American purchasers from eating junk food like Twinkies and fries...
  • A Small World After All

    BET ON IT. ANY TIME THERE'S A BIG international merger--and 1996 has had a record number--you're going to get all sorts of fretting about ""culture clash.'' Since British Telecom announced it was buying MCI a few weeks ago, we've been hearing about whether the stodgy Brits can work with those sock-it-to-'em Americans. Same thing when any ""foreigner'' gets the top slot at a company far from home. When Marjorie Scardino, a tall, wisecracking Texan, was named to head Britain's blue-blooded Pearson publishing firm in November, the company's stock plunged for a day in London. Earlier this year Ford Motor named Henry Wallace, a Scottish executive, to take over its Mazda unit. As the first gaijin in memory to head a major Japanese company, he faces a nation of skeptics. ""Ford sends people who don't speak Japanese at all,'' grumbles Goro Matsui, a business leader in Hiroshima, Mazda's hometown. ...
  • Nazi Gold: The Untold Story

    THEY WERE ""A SORT OF CLUB,'' Thomas McKittrick explained. Banking buddies, pals, confidants. He and Emil Puhl and Per Jacobsson. Theirs was a typical old-boy camaraderie of cigars and bar talk and walks along the quiet cobblestoned streets of Basel, Switzerland. It didn't seem to matter that the year was 1943, and they were an American, a Nazi and a Swede. Or that beyond their Swiss sanctuary, a hellfire was raging. Young men were dying by the tens of thousands. Jews packed into cattle cars were crisscrossing Europe toward slaughter, stripped of property that, in one form or another, was often funneled as loot through Switzerland. In fact, these genial clubmen don't appear to have been bothered by their complicity in that horror. They simply went about their work, helping to cash looted gold--gold that they must have known, as officers of the Bank for International Settlements, was stolen by the Nazis from treasuries and cities across Europe. Gold that financed both the war and the...
  • Mr. Chips In America

    AS HE TALKS, SOL KERZNER CONstantly fingers silver worry beads, his crutch since kicking a three-pack-a-day habit a few years back. The South African entrepreneur does have worries. Kerzner, a barrel-chested former boxer, makes his debut this fall as America's next gaming mogul--and a serious East Coast rival to Donald Trump. With two big casino deals in Atlantic City and Connecticut, Kerzner is suddenly poised to tempt gamblers from their money at two ends of one of the nation's most populous corridors. But he faces huge risks as well, including fresh allegations of bribery back home that could delay or derail his investments. ...
  • Secret Bankers For The Nazis

    AS A SMALL CHILD, Elizabeth Trilling-Grotch was smuggled out of the Warsaw Ghetto by her Christian nanny, who hid her in a load of laundry. Her parents perished in World War II, like so many other European Jews, but Trilling-Grotch, who now lives in California, says her mother told the nanny "not to worry, there was money in a Swiss bank account." Her father, Roman, had owned a textile factory, and he saw the war coming in time to get some money out of the country. "He had complete faith in Swiss honesty," his daughter says now. But after the war, her Uncle Max ran into a stone wall when he tried to recover the funds. He did not know the name of the bank or the account number, and the secretive Swiss weren't interested in looking for dead depositors. "They pretty much ignored him," says Trilling-Grotch. "He felt betrayed." ...
  • Getting All Pumped Up

    KILL! SAYS THE SIGN IN the oil-trading room at Mobil's Fairfax, Va., headquarters. KEEP INVENTORIES LOW AND LEAN. It's not clear who the target of this grim directive is meant to be. But in recent weeks gasoline buyers have had the funny feeling it's them. A double-digit price spike at the pumps since February has made headlines and sent journalists out to hunt Big Oil, that favorite bogeyman of politicians and populists. Critics have sought evidence of price-gouging conspiracies hatched from deepest, darkest Texas-or maybe Riyadh. The Clinton administration, quick on the draw in an election year, last week announced an investigation into whether the oil moguls violated antitrust laws. ...
  • The Great Debunker

    PAUL KRUGMAN LEANS BACK IN his chair, arms behind his head, relishing his notoriety. He is reciting, like verse, his favorite hate mail. "Your article made me want to throw up," says one letter. "Stanford should fire you, says another. "You snide elitist," writes a third fan. Vicious epithets are everyday fare in the voluminous correspondence of America's most controversial economist. "Arrogant assh--e' is the best phrase I've heard lately," Krugman chuckles, a little nervously. The anonymous missives can occasionally be scary, he admits, like the one that warned him to stay out of Washington-adding, for good measure, "Jew boy." ...
  • Goodbye, Mickey

    One blockbuster hit would have made all the extravagance at least seem worthwhile. Under Mickey Schulhof's pampering hand, Sony Corp. of America execs had two corporate jets, fresh flowers laid on each day (by an inhouse florist, of course) and a glitzy headquarters sushi bar with an artificial stream running through it. What they didn't have was a "Jurassic Park." And in the end Sony's U.S. president and his profligate studio chief, Peter Guber, never recovered from the string of megabombs that swamped their few box-office successes like "Sleepless in Seattle" in red ink. So when Schulhof announced his resignation last week just a step ahead of Tokyo's ax, the only real surprise was that it took his Japanese bosses so long. ...
  • After The Deluge

    No one would have noticed the gaggle of Japanese executives winding their way through the crowded white marble lobby. It was midsummer in New York, and well-heeled Japanese passed every day beneath the twin Stars and Stripes fluttering outside the Park Lane Hotel. This particular group may have looked a bit grimmer than most, for they had just arrived from across the Pacific, blue-suited and ready for business. But then, the Park Lane, with its mahogany furniture and Mercedes-Benzes idling out front, is nothing if not a place for doing serious business--and doing it discreetly. ...