Sign up for the daily CJR newsletter.

We talk of books standing the test of time. Second Read is an exploration of that maxim — journalists reflecting on books that shaped their own work, or whose lessons remain relevant.

As any follower of the grim judicial endgame of the Enron affair knows, the investment world can morph, at its speculative outer limit, into an empire of sandcastles. Fabulous sums of shareholder value wash away with the brutal ebb tide of a market correction, and before you know it, some $60 billion in shareholder value and employee pensions are good and sunk.

The real wonder, though, is how the financial press keeps missing the casual brigandry of the Kenneth Lays, Jeffrey Skillings, and Andrew Fastows in real time. Business writers had, after all, designated Enron the poster company for the brave new age of energy deregulation, routinely hymning its many market wonders until a Fortune scribe named Bethany McLean — thanks to a tip from a short-seller — noticed the distinct scent of eyewash arising from the company’s 2001 money prospectus. And so it has been with other failed and flailing wonder speculators, from Tyco and ImClone all the way back to the 1920s Florida real-estate bubble.

Whenever a speculative enterprise swerves confidently into fairyland, reporters tag along to marvel uncritically at the view; and whenever said enterprise crashes to the ground, it is just as credulously treated as something entirely new under the sun. To save embarrassment all around, these speculative collapses are subsequently treated as the handiwork of but a few greedy, misguided, or delusional bad actors. Like Messrs. Lay, Skilling, and Fastow, they may pay their individual criminal debt to society, but they will studiously stiff their employees and shareholders with the bulk of their paper-generated ruination, as press observers look on with tacit, self-flattering disdain for the many poor suckers drawn into the disastrous wake of it all. If the informal motto of the American financial press atop a bubble is “What, me worry?” it becomes, when conditions of financial gravity are restored, “Rubes? Who, us?”

All of which makes the reappearance of Do You Sincerely Want to Be Rich? a splendid market correction in its own right. First published in 1971, the book is the fruit of some five years’ worth of dogged investigative work from Charles Raw, Bruce Page, and Godfrey Hodgson of The Sunday Times of London. Do You Sincerely Want to Be Rich? is a financial farce worthy of Nathanael West, or perhaps David Mamet on acid. It is, in short, an exhaustive study of one of the strangest financial success stories of the swinging 1960s, Bernie Cornfeld’s Investors Overseas Services.

Raw, Page, and Hodgson attend with admirable clarity to the many fathomless mysteries of IOS balance sheets and their sweeping vistas of releveraged debt, but they also painstakingly reconstruct the go-go money culture of the 1960s that made such a mad enterprise possible. Just as important in a book often thick with forensic accounting detail, they relate the crazed IOS chronicle in an engaging narrative tone of stolid empirical bewilderment, nicely captured in chapter subheads composed in the voice of satirical Victorian novels: “in which respectable financiers strip off their watch chains and leap into the warm offshore waters . . . . IOS, on the basis of a very curious prospectus, becomes a public corporation at long last.” In all these respects — though most of all by virtue of the principled reporterly skepticism in which the authors told the IOS tale, in both real time and retrospect — Do You Sincerely Want to Be Rich? is a model of lively financial writing that journalistic specialists would do well to study and emulate.

IOS was a financial colossus entirely suited to its age. Toward the end of the postwar investing boom, stockbrokers boasted that they were “gunslingers” and began to herd investors accordingly into visions of higher investor returns and lower tax rates in far-off lands, well beyond the grid of square, flatfoot regulators such as the Securities and Exchange Commission.

Bernie Cornfeld was in many ways the age’s premier gunslinger — certainly a spur-jangling pioneer in an investing scene still dominated by blue-chip brokerages. Though Cornfeld gave precious little thought to the notion at the time, when he first alighted in Paris in 1955, alongside all sorts of other misfit American expats, he was launching a new phase in the accelerating modern wonder of mobile capital. It was the moment when money could functionally secede from nationhood; indeed, as it continued sprawling across the globe, IOS assumed the character of a cash-rich antistate, a collection of offshore transactions that, as the authors write, “should be as far as possible untaxed, unregulated, and uncontrolled.” This meant that IOS fund managers were sort of colonial bottom feeders, erecting their counter empire “out of the juridical anomalies left over by the Holy Roman Empire and the colonial systems of Spain, the Netherlands and Great Britain.” For all of the fund’s hectically advertised market sophistication, the reasoning behind IOS’s global growth was baby simple, the authors write: Since investment regulations took root in the aftermath of a global depression, they mirror the belief of every Western government “that uncontrolled financial speculation is a danger to the stability of the State. Ultimately, what IOS did was to get around virtually every control designed to prevent speculation getting out of hand.”

IOS was a pioneer of the offshore franchise, and true to its founding vision, it routinely repurposed its corporate identity so as to better exploit those spots around the globe that offered minimal regulation and/or law enforcement. A few years after Cornfeld launched the fund, IOS had to hotfoot it out of France when the authorities wanted to restrict its postal privileges. Cornfeld promptly shifted operations to Switzerland, but eventually ran afoul of that corporate paradise when the Swiss authorities began lusting after the fund’s incorporation revenues. (Cornfeld, of course, had procured for IOS a “brass plate address” in Panama, where it could operate virtually tax-free.) Rather than relinquish those tax breaks to the Swiss, Cornfeld actually split his home office and moved half of it back to France, while also maintaining a Swiss arm mainly for the prestige value it offered IOS sales reps as they courted global investors who wanted all manner of financial secrecy to conceal all manner of financial trespasses against their home-nation laws.

IOS’s chosen vehicle was the comparatively new financial instrument known as the mutual fund. The singular inspiration of IOS was to wed the flexibility of mutual funds to a globalizing investment community just beginning to stir to a fitful recognition of its own potential might. In short order, IOS went from being a minor franchise of a New York-based mutual fund into a hydra-headed financial shape-shifter, built on little more than the simple idea of liquid capital. It could be virtually all things to all people. In the new global financial frontier, it could become a de facto investment bank, putting together a takeover of a British-based aircraft conglomerate. It could play at real-estate moguldom, lining up eurodollars and petrodollars to erect retirement condominium settlements in Florida. Or it could become a freebooting arbitrageur of spectacularly bad judgment, as when it took over an unsightly corporate hybrid known as Commonwealth United Corporation, which began life as a jukebox manufacturer, managed to couple with an insurance agency and a film studio, before acquiring a cash-devouring California oil concern far past its prime, and dying unceremoniously amid a desperate effort to kite a whole wheelbarrow full of credit via the rights to a Julie Andrews musical movie, Darling Lili. Hey, it was the sixties, okay?

Cornfeld — along with his main associate gunslinger, a Harvard Law-credentialed highflier named Edward M. Cowett — kept the con running with voguish pronouncements of the financial revolution that IOS was midwifing across the globe. Hodgson, Raw, and Page bring a proper note of horrified fascination to their portrait of Cornfeld. They recognize that, much as IOS serves up a parable on the follies of unregulated capitalism without borders, Cornfeld was a veritable random search engine for bullshit theories of social leveling through investment.

To be sure, there had been a good deal of placid trickle-down boosterism in the market boom of the 1920s, whose essence was neatly distilled in the General Motors executive John J. Raskob’s 1929 Ladies’ Home Journal essay “Everybody Ought to Be Rich.” But the IOS credo, quoted in the title of Raw, Page, and Hodgson’s corporate biography, sported more than just the whiff of 1960s-era authenticity. In his more hectic, prophetic moments, Cornfeld cast himself as a vessel of full-blown social revolution. A former Socialist Youth League member who campaigned for the Socialist Party presidential candidate Norman Thomas and graduated from college with a degree in social work, Cornfeld routinely touted his bundle of mutual funds as a heroic blow struck against the brittle oligarchy of The Man, on behalf of the Common Investor. “World-Wide People’s Capitalism” was the struggle he celebrated, and his rhetoric took on a glow that the authors describe as “positively Messianic”: “ ‘The service we perform is vital not only to our economic system,’ ” Cornfeld preached, “ ‘but in a real sense it contributes to the survival of the democratic process.’ ”

Cornfeld’s success was as striking for the character of his sales force as it was for the ripe military clientele they approached. He recruited his first cohort of salesmen from among the American expat community. In the Paris of the 1950s, as the authors write, this was “a tolerant society: a mildly Bohemian life-style was expected, and some vague stirring of political radicalism was almost demanded. It was a world of frustrated intellectuals, mild neurotics, political nonconformists, and cultural misfits — with the occasional drunk or homosexual.” Conceptual salesman that he was, Cornfeld’s other breakthrough was to mint these wayward souls into an echt-60s sales force, versed in the motivational psychology that freed Cornfeld, a veteran of a number of encounter groups devoted to Alfred Adler’s “rational therapy” movement, of his stateside neuroses. This reclamation project was likely a fulfillment of a “deep need” of Cornfeld’s own, the authors write, “for it carried the promise that his recruits would become devoted followers of the man who could perform an act of liberation for them. In the beginning, Investors Overseas Services sometimes seemed more like a therapeutic community than a money-making device.”

An ancillary but far from negligible virtue of Do You Sincerely Want to Be Rich? is that it supplies a much-needed corrective to the stubborn mythology of the 1960s as an idealistic near-utopian era of cultural radicalism, in which the counterculture was by definition also countermaterialistic. The strange career of IOS points up very much the opposite trend, in which liberated nouveau Bohemian salesmen racked up absurdly inflated fees and rewarded themselves with lavish homes, vehicles, and retinues of models — all on the example of Great Leader Cornfeld, who commanded at the height of the IOS scam a genuine Swiss villa and his own jet. So tightly does the IOS saga merge the money culture and the let-it-all-hang-out dogma of sixties liberationism that Do You Sincerely Want to Be Rich? often reads like an extended finance-world appendix to Thomas Frank’s study of the sixties “creative revolution” in American advertising, The Conquest of Cool. In both Frank’s saga and this one, one appreciates that the jargon of maximum liberation was little more than a fig leaf concealing the hoary quest for Croesus-like excess.

Yet the quest for all manner of ultra-hip, ultra-global gratification turned back in on itself in curious ways, as IOS continued pursuing the main moneyed chance wherever it might lead. For one thing, the great wide world of investing proved on inspection to be disconcertingly small, especially when it came to the range of motion available to the masters of the IOS universe once they ran out of options.

For another, great wealth seems always and everywhere to confer an equally great longing for cultural respectability. So as IOS acquired its far-flung isthmus of extralegal offshore investments — ranging from Africa to South America to the Middle East — it also hotly coveted an image as a clearinghouse for great charitable pursuits, deep public thoughts, and the eminent personages who make all such things happen. Via a friendship with Barney Rosset, president of Grove Press, Cornfeld was able to engineer a most ironic coup by recruiting James Roosevelt — the eldest son of the president who created IOS’s great institutional nemesis, the Securities and Exchange Commission — to serve on the IOS board. Roosevelt fils was also to act, more informally, as a troubleshooting ambassador of good will to the many nations where IOS found itself running afoul of the law or the ruling financier class.

Then there was Pacem in Terris, the global peace conference that IOS sponsored in its highest-flying phase. The authors dub it, most accurately, a “solemn farce” involving representatives convened from seventy different nations at Geneva’s swank Intercontinental Hotel on May 28, 1967. Among its other difficulties, the authors note, the peace-themed gathering “coincided with a resumption of American bombing in Vietnam and with the outbreak of the Six-Day War in the Middle East.” Among the assembled unwitting luminaries were John Kenneth Galbraith, Senator William Fulbright, a Swiss cardinal, and the editor of Le Monde. (Galbraith was able to serve up some delayed rehabilitation to his reputation by lavishly praising Do You Sincerely Want to Be Rich? upon its original release in a review for The Washington Post.)

The great day of disillusionment came in 1969, shortly after IOS floated its initial public offering, a move that is hard to square with any notion of consensual financial reality. For IPOs are the great invitation for shareholders of all descriptions to cash in — to redeem plentiful stock shares as other investors rally to capitalize a growing company. But IOS was not, by then, really growing at all. Fully $8 million of the $52 million raised in the IPO went instantly to shareholder redemptions, meaning that IOS was quite literally mortgaging its future against its rapidly contracting present. Cornfeld’s frantic right-hand man Cowett promptly launched a clandestine, and probably illegal, campaign to buy up some $11 million in IPO shares in an effort to keep the stock price — launched at $10 a share — artificially high.

It failed. Global stock markets were contracting in 1969 anyway, and IOS was at the most exposed edge of every sort of market imaginable. Cornfeld and his corporate board still prayed for deliverance in the form of a deal with John McCandish King, a Denver-based financier who made his millions in exploiting tax breaks to oil investors — and producing precious little black gold in the process. Indeed, the IPO, in its most fundamental particulars, was a tissue of lies, placing IOS profits at $25 million for 1969 — $10 million of which being purely speculative returns from King’s forever-speculative oil holdings. Later inquiries disclosed that more than $7 million of that figure was fed into shell-game-style loans among IOS board members to leverage hot new acquisitions that usually went into their own profit-challenged deep freezes upon acquisition. An adjusted audit would show a $10.2 million profit, the authors write — and nearly all of that in the highly hypothetical form of paper profits on King’s oil fields; take that away, Hodgson, Raw, and Page reckoned, and the company made “virtually nothing” in the big breakout year of 1969. A somewhat more sober reckoning came courtesy of the one honest accountant on the scene, Mel Lechner, who announced a still-optimistic $17.9 million profit in 1969 — and losses of between $7 million and $13 million in the first half of 1970 alone.

Once those unforgiving numbers surfaced, the stock tanked, and board members voted Cornfeld out of his leadership post. They also approved a takeover bid from King, but SEC rules barred him from the position. So in 1970, control of IOS passed to the takeover magnate Robert Vesco, who would later gain no small renown as the bankroller of some of Richard Nixon’s shadier extramural initiatives. Vesco would eventually be accused of embezzling more than $200 million from IOS funds, and then launched his own expat career to avoid SEC prosecution. He is now serving a long sentence in a Cuban prison.

All of which makes a fitting epitaph for an investment empire founded originally on the giddy bohemian quest for the global main chance. It’s also a critical reminder — one among many in this absorbing, sprawling saga of delusional chicanery on a worldwide scale — that the follies of the past link up directly to the crimes of successive ages. We do well to ponder such matters as we await the Enron verdict, and its attendant official assurances that the slate is wiped clean, that American markets need never fear the accession of another Ken Lay. With Do You Sincerely Want to Be Rich? finally back in print, we should have less reason than ever to buy into that speculative forecast.

To read the articles in the May/June 2006 issue, click here.

Has America ever needed a media defender more than now? Help us by joining CJR today.