Bernie Cornfeld; Ran Ill-Fated IOS Fund
Bernie Cornfeld, the sullied jet-set playboy and international financier whose Investors Overseas Services mutual fund company collapsed in the 1970s, defrauding some 250,000 investors, has died in London. He was 66.
Cornfeld, who suffered a stroke in Israel in December, died Monday of pneumonia in London’s Chelsea and Westminster Hospital.
Surrounding himself with beautiful young women, including Heidi Fleiss, Cornfeld spent his fluctuating fortunes on the 40-room Douglas Fairbanks mansion in Beverly Hills, a castle in Switzerland and homes in London and Paris, jetting between them in his own planes.
Cornfeld spent almost a year in a Swiss jail in 1973 while a case connected with his company was pending. He was acquitted on fraud and swindling charges in 1979 and complained that he had been a victim of Swiss justice.
“I never understood what was so terribly important about habeas corpus,” he later told the financial publication Barron’s, “until I had this experience with Napoleonic law.”
When bail was set at $1.7 million, the man who once estimated his personal fortune at $150 million was unable to post it without help from friends.
In 1975, a federal grand jury in Los Angeles charged him with telephone fraud for using “blue boxes” in his Beverly Hills operation to sidestep charges for long distance calls. He was convicted and sentenced to 90 days in jail.
Nevertheless, when the unabashed Cornfeld put the Fairbanks mansion up for sale in 1986, he insisted to The Times: “Life is still cheery.”
As recently as 1992, Cornfeld continued to propose California deals, including a $500-million cash offer to take over MGM.
Born in Turkey, Cornfeld was a social worker who had no training or experience as a money manager when he began his Paris-based sale of Dreyfus Corp.’s Dreyfus Fund to Americans.
He started his own mutual fund, Investors Overseas Services, in 1962, investing its resources in mostly American mutual funds. At its peak in the late 1960s, Cornfeld’s Geneva-based holding company had offices in 100 countries with 15,000 salesmen and operated a $2.5-billion mutual fund business.
In January of 1970, the magazine Business Week called Cornfeld “the king of Europe’s cash” and listed IOS’ estimated earnings at $30 million for the previous year.
The company collapsed later that year when its 1969 earnings turned out to be only $10.3 million and the portfolios in the funds that had subsidized all the other ventures stopped performing. The flamboyant Cornfeld was unceremoniously ousted.
IOS was already in trouble for violating various U.S. securities laws. In 1967, after it was charged with selling unregistered securities and making illegal brokerage commission rebates, it made an agreement with the Securities and Exchange Commission that it would no longer sell shares of its funds to U.S. investors.
Cornfeld tried to negotiate a rescue for IOS from blue-blooded banks such as Paris’ Banque Rothschild and by hiring wise negotiators such as James Roosevelt, son of President Franklin D. Roosevelt, to establish national funds in Europe, Canada and Australia.
After Cornfeld’s efforts failed, IOS was turned over to Robert Vesco, a New Jersey financier who offered a $5-million loan to bail the company out. Vesco later became a fugitive in the Bahamas after the SEC charged him and more than 20 other businessmen with looting $224 million from the company. Vesco was also accused of giving a secret $200,000 cash contribution to the Richard Nixon presidential campaign in the hope of securing an end to the SEC investigation.
Cornfeld abandoned Southern California and moved to Europe in the 1980s after several successful but protracted clashes with the Internal Revenue Service over tax claims of as much as $12.5 million. Forbes magazine reported in November, 1990, that the IRS had outstanding claims totaling $15 million dating back over 30 years.
Cornfeld is survived by an 18-year-old daughter, Jessica, who lives in London.
