The Magazine

The Duke of Duty-Free

How to spend money without attracting attention.

Feb 11, 2008, Vol. 13, No. 21 • By MARTIN MORSE WOOSTER
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The Billionaire Who Wasn't

How Chuck Feeney Secretly Made and Gave Away a Fortune

by Conor O'Clery

PublicAffairs, 337 pp., $26.95

Anyone who works in the nonprofit world swiftly learns that there is a legion of development officers and fundraisers whose daily task is to persuade donors to give--or to increase their checks next time. If you're a donor who can give seven-figure grants, there's an army of mendicants and courtiers ready to caress you with plaques, trophies, lavish tribute dinners, 50-yard line seats, and meals at five-star restaurants.

But all these prizes and flattery miss the point of charity. We should give our time and labor to help the less fortunate not because of the adulation, but because helping others is the right thing to do and the best way to live. It is the gift that is important, not the praise we receive for our donations.

This is why the story of Chuck Feeney is an inspiring one. Feeney made over a billion dollars through duty-free stores. He created a foundation that would be one of America's 10 largest if it were headquartered in the United States. This foundation, the Atlantic Philanthropies, has given away over $4 billion since its creation. Yet Feeney managed to keep his wealth and his foundation secret for nearly 20 years, until forced to divulge the information in a 1997 court case. No one else in foundation history has managed to stay anonymous for as long as Feeney did.

Conor O'Clery was, for years, a reporter for the Irish Times. He's a good writer and storyteller, and anyone who likes reading business books where heroes engage in savage battles about whether they should receive figures of 10 for chasing out their companies will find The Billionaire Who Wasn't enjoyable. But Feeney's biography--and the reasons why he chose to be an anonymous funder--provides valuable lessons for every donor.

Charles Feeney was born in Bayonne, New Jersey, in 1931. Although he has always been an American, he has also become a dual citizen of Ireland. After serving as a radio operator in Japan during the Korean War, Feeney graduated from Cornell in 1956 with a degree in hotel management. He then went to Europe with not much money and a desire for adventure. He found that there was plenty of opportunity for people interested in the import-export business. When Feeney started his career, American law allowed any tourist to bring back five bottles (totalling one gallon) of liquor duty-free. Moreover, back then, tourists didn't actually have to lug the booze through customs; they could simply declare it and have a third party ship the spirits to a customer's home.

Feeney discovered a second loophole: American servicemen could bring back cars without paying any tariffs, giving GIs Renaults and BMWs at a substantial discount. For nearly a decade, Feeney and his partners vigorously used these loopholes to make money selling cars and liquor to thrifty Americans. But in the mid-1960s Lyndon Johnson cut the liquor exemption from five bottles to one, and the Navy decided to sell cars to sailors rather than passing the profits to outsiders. Feeney and his partners had to find another line of work.

They found it in the duty-free store business. In 1962 Feeney and his three partners spent $78,000 to acquire a five-year duty-free concession at the Honolulu airport. At the time, airlines were converting cramped DC-8s into roomier Boeing 707s, and the duty-free shop made money. But Feeney's wealth was made in Japan. For the 1964 Tokyo Olympics, the Japanese government eased draconian travel restrictions and allowed many Japanese to travel abroad for the first time. Japan has a long tradition of elaborate gift-giving, and that Honolulu duty-free shop had the luxury goods Japanese tourists wanted at low prices.

Feeney's partnership, at first called Duty Free Shoppers, and later DFS, thrived as Japanese travelers became wealthier. Because top-tier producers of luxury goods at first refused to deal with DFS, the company made lucrative distribution deals with Camus cognac and Nina Ricci perfume that provided DFS with a second income stream. As O'Clery shows, DFS became a multi-billion-dollar company not just through its own expertise, but also by ruthlessly crushing any and all rivals.

By the late 1980s, Feeney and his partners were ready to sell what was now a giant multinational. They began a seven-year dance with Louis Vuitton Moet Hennessey, or LVMH, the French luxury goods producer. After eight years of negotiations, in December 1996, LVMH bought out Feeney and one of his partners and assumed control of DFS. For his ownership of 38.7 percent of DFS, Feeney received a check for $1.67 billion--an amount so big that a New Jersey bank stayed open all night to clear it because tens of thousands of dollars would have been lost if clearing had been delayed.