Chapter 16, Part 1

By Frank Tursi, Susan E. White and Steve McQuilkin
JOURNAL REPORTERS
© Winston-Salem Journal

No matter which way Charlie Wade tried it, the key wouldn't turn the lock. Wade had been wrestling with the stubborn locker door for some time, rattling it, shaking it, and generally making a racket. He started to draw a crowd as the fossils ensconced in the hallowed halls and marbled rooms of the august University Club in Manhattan came to life.

Charlie Wade and two others were thrown off the RJR board, demoted and had their pay cut. (Journal File Photo)

Wade glanced nervously over his shoulder at the knot of members who had gathered near the locker. A club manager soon appeared, offering his help. Wade at first refused, but not wanting to raise suspicions he reluctantly handed over the key. After a few more failed attempts, the manager announced that a locksmith would be called.

Wade winced. He was a senior vice president at R.J. Reynolds Tobacco Co., and his boss, Chairman Bowman Gray Jr., had sent him to New York on that Monday a week before Christmas in 1967 to meet a foreign businessman, who had given Wade $25,000 with instructions to turn the money over to Gray or Alex Galloway, RJR's CEO. The money, Wade knew, would eventually end up in Washington where it would be illegally doled out to politicians. He had put the big envelope stuffed with $100 bills in the locker for safekeeping while he interviewed job applicants at the club.

Most of the onlookers went back to their martinis and newspapers as Wade anxiously awaited the locksmith, who arrived and made quick work of the jammed lock. Wade retrieved the bulging envelope and stuffed it into his suit pocket before quickly leaving the club. He went immediately to his hotel room to count the money and was relieved to find that it was all there.

The R.J. Reynolds Tobacco Co. was once the largest cigarette company in the United States with a powerhouse of best-selling brands: Winston, Salem and Camel. But times changed, and as the case against smoking became more pronounced in the 1960s, RJR failed to adapt to the marketplace. Its rivals would eventually rush past it, and RJR's efforts to catch up would have a profound impact on the company and the cigarette industry.

Charles B. Wade Jr. liked a good joke and enjoyed poking fun at himself. He, for instance, delighted in telling people that he was the ugliest baby ever born in Morehead City. But it's doubtful that he ever saw the humor in his wrestling match with the University Club locker. The incident marked the beginning of a painful period for Wade and for the company to which he was devoted. RJR executives were soon to buy shipping lines and oil companies, stepping into a world where doing business sometimes meant bribing foreign officials, ignoring shipping rules and devising Rube Goldberg-like schemes to skirt federal laws in order to ensure that the right palms were greased in Washington.

That everybody did it didn't lessen the embarrassment when RJR got caught in 1976. Company lawyers threatened federal investigators with lawsuits to prevent all of the sordid details from being made public, and even today few people outside of an inner core of high-ranking executives knew that the scandals reached to the very top of the company's leadership.

Enough of the details became public, though, to mortify RJR's top executives. Someone had to take the fall. Charlie Wade and two other longtime executives were thrown off the RJR board and had their official duties reduced and their pay cut.

The public flogging cut deeply into a man who took pride in his civic accomplishments. ''I can't talk about it alone and I'm not going to implicate anyone else,'' Wade, who would take his loyalty to company and co-workers to his grave, said four years later. ''It's all over, it's a bad chapter, and it's an unpleasant thing for me, extremely unpleasant.'' (Winston-Salem Journal footnote; Wade quote.)

For J. Paul Sticht, though, the unpleasantness would provide an opening. Sticht, the president of RJR Industries at the time, replaced the disgraced board members with three of his choosing. With the board in his pocket, Sticht pushed aside the old order and firmly took control of a company that he intended to mold in his image.

A Man About Town

Wade was a founding member of that Old Guard. He joined RJR in 1938 fresh from Duke University, where he had gotten degrees in labor relations and personnel management. While at Duke, Wade sang in the school choir and played clarinet in two bands to help pay expenses. Both -- Johnny Long and his Orchestra and Les Brown and His Band of Renown -- went on to national acclaim after Wade left them. It probably wasn't a coincidence, he liked to say.

His first job at Reynolds was setting up milk routes for the company dairies, but soon he was helping hire people in the manufacturing department and came under the watchful eye of John C. Whitaker, who started the company's personnel department. Under Whitaker's guidance, Wade learned to work behind the scenes to mend fences.

His role as conciliator began in 1947 when unionized black RJR workers went on strike. After the strike, Wade pushed for more opportunities for blacks, which often put him at odds with white businessmen. ''I believe they felt like I was pushing too hard,'' he said later.

''It was hard, but I knew in the long run that we were never going to have a satisfactory industrial situation until we began to give some opportunities to Negroes. And it was the right thing to do. More than anything, it was the right thing to do.''

Wade, by then a vice president, overcame resistance within the company when he persuaded other RJR executives to make Whitaker Park, which opened in 1961, the company's first integrated factory. At Wade's insistence, the barriers between the races gradually began to disappear in all RJR factories. He persuaded the company board of directors in 1962 to remove the partition between the black and white cafeterias in factories No. 12 and No. 8. Also that year, he had new water coolers installed in all the factories and took down the ''Colored'' and ''White'' signs.

He brought that social conscience to the Duke University board of trustees. When Duke students staged a sit-down vigil in support of underpaid cafeteria workers, Wade, a longtime trustee and devout Methodist, told a group of Methodist bishops that the kids were right. ''The preachers were pretty hostile about the situation,'' Wade remembered.

''But I told them that if you're going to preach in the chapel and tell people to feed my flock and talk about the Christian ethic, you couldn't separate that from what the students were doing.''

The bishops gave Wade a standing ovation.

Most people were similarly taken with this warm man whose smooth voice and drooping eyelids made him engaging and easy to talk to. His willingness to head charity drives or lead civic groups as varied as the Urban Development Commission, the YMCA and the Chamber of Commerce made him one of the best-known and best-liked of RJR's executives.

As manager of the company's public and governmental relations, Wade often visited politicians to cajole and twist arms when necessary. ''He was outstanding with people,'' said Ron Sustana, who worked for Wade. ''He could talk to them. He could bargain and negotiate. And he kept very close counsel. Charlie wasn't one to sit around with subordinates and shoot the breeze about what he was doing.''

Charlie's Locker

So he certainly didn't tell his underlings about the schemes hatched by RJR's top executives to skirt federal laws on donations to political campaigns. Outright use of corporate money for political donations had been illegal since 1907, but a handful of high-level Reynolds executives started making personal political contributions in 1964. Gray, Galloway and Wade consulted with Earle Clements, the tobacco industry's Washington lobbyist, and decided how much the company should raise in campaign donations each year. The amount then was shared equally among those executives, who were also board members. As long as the executives weren't reimbursed with company money, the donations -- no more than $2,000 apiece in those early years -- were perfectly legal.

Lax campaign-financing laws allowed a shrewd operator such as Clements, who had served in Congress as a representative and senator from Kentucky, to freely troll the halls of the Capitol, doling out cash to tobacco-friendly politicians while keeping the scantiest of records. He put the money he received from tobacco executives in a safe-deposit box in the basement of the Bank of Commerce on K Street in Washington. Clements withdrew what he needed and jotted down the initials of the politicians who received donations and the amounts in a little black book that he kept in his suit pocket. When he filled a book, Clements threw it away and started another. Neither did he keep records of each executive's contribution.

''They didn't ask for a record at any time, and we didn't give them a receipt -- they didn't want a receipt, or at least they didn't ask for a receipt, and they never complained they didn't get one,'' Clements later explained.

Reynolds executives grumbled among themselves, though, when Clements told them in 1967 that they would have to raise almost $175,000 for the presidential election the following year. Such a sizable chunk of change couldn't be painlessly spread among a handful of executives, and Gray, Galloway and Henry Ramm, RJR's general counsel, discussed ways to use company money to reimburse the executives. Giving the executives raises to match their contributions would have been too obvious and was vetoed by Ramm.

Instead, Reynolds' top executives devised convoluted schemes to launder corporate money through foreign companies before using it to reimburse executives.

The foreign businessman whom Wade met in New York, for example, was a ''principal'' in a company that had been a longtime RJR supplier and ''was indebted to RJR's top management for personal favors over the years,'' according to a U.S. Securities and Exchange Commission report in 1976. Reynolds paid the company $25,000 on Dec. 14, 1967, for ''promotional expenses.''

Wade and the foreign businessman, identified only as ''Mr. A'' in the SEC report, went to Manufacturers Hanover Trust Bank where Mr. A cashed a $25,000 company check and gave the cash to Wade.

Back in Winston-Salem, Wade put the money in a locker in the treasurer's department on the eighth floor of the Reynolds Building. He and Galloway had the only keys. Wade later bought a small lock box and affixed a sign to it that said ''to be opened only by Galloway or Wade.'' The lock box remained in the treasury locker for some time until Wade moved it to a locked closet in his office after he found the box opened one day. It would become the company kitty where laundered money was kept before being given to executives who contributed to political campaigns.

A similar scheme in 1968 involved another European company and Hermann Haerri, who worked for RJR's international subsidiary, acting as the courier. He collected $121,751.23 from the foreign company that had a licensing agreement with RJR and deposited it in his bank account in Geneva in July 1968. Haerri withdrew $120,000.35 in the form of a cashier's check in September and flew to Winston-Salem to meet David Peoples, a RJR executive vice president. Haerri suggested that they cash the check at a local bank, but Peoples feared that would raise too many eyebrows. He, instead, put Haerri on a company plane with G. Dee Smith, at the time a company accountant, and flew them to New York. Haerri and Smith went to Chase Manhattan Bank, where Smith introduced Haerri to a bank officer. After calling Peoples to confirm Haerri's identity, the bank official cashed the check. Haerri and Smith flew back to Winston-Salem, where Haerri gave the money to Peoples.

Smith had no idea at the time that he was aiding lawbreakers. Neither did Haerri, apparently. ''Well, now that I know I probably wouldn't have been as happy with it, but at the particular time I did not feel that I was doing anything wrong,'' Smith said. ''I was just following up on what he (Peoples) asked me to do, was to go up, arrange the company plane, go with him to New York, get the necessary limousine, sort of implementing the process. I didn't feel what I was doing was wrong.''

Clements again pressed the tobacco companies to increase their political donations for crucial congressional elections in 1972. He told Reynolds executives that they would have to come up with $45,000.

Galloway, by then chairman of the board of RJR Industries, met with Wade and with Peoples, then president of Reynolds Industries, Colin Stokes, the chairman of the tobacco company, and Bill Smith, the tobacco company's president.

''They told us to write the checks for ''x'' dollars -- I don't remember how much -- or asked us to and we would be repaid out of funds that would be brought from overseas,'' Bill Smith remembered. ''Overseas funds were never on the books.''

All agreed to the illegal scheme, except for Stokes, who contributed his share but refused to take company money as compensation. Smith, Galloway and Peoples, according to Federal Election Commission records, donated $5,000. Wade gave $4,925, and Stokes contributed $1,700.

Peoples assured the group that money was on the way. He was directing another diversion of RJR money through another foreign company that had a licensing agreement with Reynolds. The company submitted an invoice to RJR's international subsidiary for $102,000 for ''promotional expenses.'' Executives with the subsidiary made four trips to Winston-Salem in 1972 to deliver the money. On each trip, someone would ask Galloway to leave his office. When he returned, an envelope with money was on his desk.

Wade would later reckon that for six years starting in 1967 such schemes illegally diverted almost $200,000 of company money to political campaigns.