Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer Part 18

Every step of the way, Long had been with August; they'd grown up in the company together. August had gone out of his way to credit him with winning the great beer war, publicly presenting him with a bronzed sculpture of a soccer shoe delivering a crus.h.i.+ng soccer-style kick to a Miller High Life can. August and Long weren't actually friends; Long knew that. Even though they'd talked practically every day and spent thousands of hours together on company planes, August always maintained a boss-employee distance. August didn't seem to make friends; he didn't have time. He'd only had two or three that Long knew of, and the closest of them, John Krey, the scion of a St. Louis meatpacking family and, thanks to August, the owner of an A-B distributors.h.i.+p in St. Charles, Missouri, had died of cancer recently. In the last few months of Krey's life, August had ordered one of the company planes retrofitted with a hospital bed and flown Krey and his wife to Europe. Long suspected that now, after Ginny and the kids, he was one of August's closest relations.h.i.+ps. He was confident that whatever happened, August had his back.

Which is why he didn't see it coming.

A few months earlier, in December 1986, the A-B legal department had been contacted by a lawyer acting as the court-appointed trustee in the bankruptcy of a St. Louisbased advertising and promotions firm that had done a lot of work for the brewery. The lawyer said he had come across doc.u.ments indicating that the firm's princ.i.p.als, one of them a convicted embezzler, may have engaged in a kickback scheme with several A-B executives. It appeared that the executives-Michael Orloff, the vice president of wholesale operations, and Joseph Martino, the vice president of sales-might have traded A-B business for cash and gifts. Since the bankruptcy was part of a court proceeding, the doc.u.ments would become public at some point, and barring the discovery of some convincing mitigating evidence, the court would turn the matter over to the appropriate law enforcement agency for investigation.

August III was immediately briefed, and an internal investigation was quietly launched. Long was told about the investigation, but August decided to keep it out of his purview because Orloff and Martino worked for him; Martino was considered Long's protege. The decision to exclude him didn't sit well with Long. He thought it created the appearance that August didn't trust him.

The next few weeks were difficult; as auditors brought in by the board of directors began going through thousands of invoices from outside suppliers, Long was not kept posted. Every now and then August would drop a little bombsh.e.l.l on him, telling him, for instance, that a no-name New York rock band managed by an old friend of Joe Martino's had been paid more than $200,000 by the company but had performed no services. Long was shocked that Martino could have been involved in something so sleazy. It didn't sound like the guy he knew. Martino had grown up working-cla.s.s poor in the Bronx and went on to earn an MBA from the Wharton School of Business. At age thirty-four, he was a rising star in the company, regarded among his peers as a street-smart straight arrow. Which is why August's suspicions about Martino and drugs didn't ring true either.

Ever since his son's trouble in Tucson, August had been on a tear about drugs, especially cocaine, which he blamed for all manner of society's ills. Now he was convinced that Martino and maybe a few others were involved in cocaine, possibly to the point of distributing it throughout the company. "Did you know that 65 percent of the employees in the Bevo [bottling] plant are on drugs?" he said to Long one day. "How do you know that?" Long replied.

August responded vaguely that the investigators had said that to A-B's chief of security, Gary Prindiville.

Like August, Long was an old-school beer guy who knew next to nothing about drugs, but he was fairly certain you couldn't come up with a number like that unless you conducted extensive testing among the plant employees, which he knew had not been done. He thought the 65 percent was a wild exaggeration, and the idea that Martino was behind the distribution was completely out of line. Of course, it didn't matter what he thought. What mattered was that August believed it. The conversation left him unsettled, wondering if perhaps August's opening question-"Did you know that ..."-wasn't entirely rhetorical, and what he really meant was, "How could you have let this happen?"

On February 28, August ordered Long to inform Martino about the existence of the internal investigation. Long and Martino were both in Chicago for a wholesaler presentation, so Long took the young vice president for a ride in the company-provided town car and, as August had instructed, gave him the bare bones of what he knew, mentioning the alleged band scam and the drug suspicions. Martino, apoplectic, said none of it was true.

Back in the office the following week, an A-B security detail searched the closet outside Martino's office where he kept promotional items-golf b.a.l.l.s, T-s.h.i.+rts, and ball caps emblazoned with the Budweiser name or the company logo-that were routinely handed out by the marketing executives. Every marketing executive had such a closet, and the higher-ranking the exec, the better the goodies. Mike Roarty's closet was like Ali Baba's cave, crammed with treasure ranging from golf bags to high-end electronic equipment that he'd received as gifts from wholesalers and suppliers and in turn gave away to VIPs and favored employees in the great circle of corporate swag. Lavish gift giving and receiving was part of the A-B corporate culture dating back to the beginning, when Adolphus Busch established the practice of giving away sterling silver pocket knives engraved with the company logo. His son, August A., handed out guns, and his son, Gussie, awarded yacht cruises with booze and broads. Making friends was their business, after all. In more recent years, sales executives motivated sales reps and cemented business relations.h.i.+ps with Rolex watches, which were purchased in quant.i.ty through the company. One newly appointed vice president once found boxes of Rolexes stashed in the back of a cabinet in his new office, apparently long forgotten by a previous occupant.

The "raid" on Martino's closet yielded nothing incriminating, but it blew the cover off the internal investigation and set people whispering in the hallways. Word quickly got around that security men were asking about drugs and Martino's possible involvement. One person who worked for Martino at the time said recently, "Joe wouldn't have known what cocaine was if it had walked up and bit him on the a.s.s."

The subject of drugs was not brought up when A-B lawyers questioned Martino and Orloff later in the week. Both men vehemently denied receiving any improper gifts or payments, but on March 9, they were fired for "wrongful conduct." News of their dismissal played at the top of the local TV newscasts and on page one of the newspapers, but thanks to some skillful media management by Fleishman-Hillard reps-always quoted as "a spokesman for the company"-it appeared to be a one-day story, the gist of which was that several bad apples had been discovered in A-B middle management and tossed out. There was no mention of drugs.

A week went by with no new reports, and Denny Long was hoping the crisis had pa.s.sed and he could get back to running the beer company without all the distraction. Then, on March 16-the day before St. Patrick's Day, he would always remember-August called him from the plane on the way home from Europe, agitated. "This Martino thing is heating up again," he said, rattling off a litany of developments-the internal investigation was expanding, the auditors were cooperating with the U.S. attorney's office, there was talk of presenting a case against the two former executives to a federal grand jury.

"Do you want me to resign?" Long asked, reflexively. "I'm willing to do that if it will take some of the pressure off you." He didn't really mean it, of course. He was trying to be a good soldier, demonstrating loyalty to his commander. He was relieved when August barked, "No, G.o.ddammit, I'm not asking you to resign." Another executive who was on the plane told Long later that night that August had "erupted" over something-he didn't know what-and he quoted August as saying, ominously, "The s.h.i.+t is about to hit the fan."

The next day, August walked into Long's office and said flatly, "I need to talk to you." Long followed him into the adjoining conference room, where August took a seat an uncomfortable distance away from him. The s.p.a.ce spoke volumes, as did the file folder, legal pad, and pen that August placed on the table: Long felt the ground moving under his feet. He was expecting questions about Martino, but instead August immediately pressed him about his two sons-in-law who worked for the company, one in branch sales and the other in marketing statistics. "How did that come about?" August wanted to know.

Nonplussed, Long replied that he had helped them obtain interviews for the clerk-level positions, which were posted, and he had vouched for their character when asked, but he insisted they had been hired on their own merit, not because of any directive from him.

"So you brought a bricklayer into the company?" August sneered, referring to the job one of the young men had held while working his way through college.

"Yes," Long replied, "a bricklayer with a master's degree. And what's wrong with bricklayers, anyway?"

His impertinence infuriated August, who instantly reverted to his worst self, slamming his hand on the table, spitting out questions, and glaring at Long as he answered. Long had seen it many times before, so he knew not to argue back but rather to keep his cool and respond calmly until the storm pa.s.sed.

Reading from doc.u.ments in the file folder, August asked about Long's brother, who was the local broker for Waterford crystal, another gift favorite among A-B executives, who sent out hundreds of A & Eagleengraved items at Christmas. August said he'd "heard" that Long steered all the company business to his brother and may have even profited from it. Not true, said Long. He didn't direct the gift giving among the staff; the corporate promotions department handled that. He couldn't help it that his brother was the only Waterford broker in the area, and the arrangement had been reviewed and approved by the conflict-of-interest committee of the board of directors.

August said he'd also "been told" that Long's uncle had flown with him aboard a company plane on a company-paid trip to Ireland. True, said Long, explaining that his uncle was an A-B wholesaler in Joliet, Illinois, who, along with several other wholesalers, had won the trip as a prize in a company-sponsored sales contest. He added that August and the board had approved making his brother a wholesaler.

As August scowled and scribbled notes in his legal pad, Long asked, incredulous, "Am I being accused of nepotism?" The idea was absurd, considering that nepotism was almost a founding principle of the company. Busch cousins sat on the board and owned distributors.h.i.+ps. August's half brother Peter was now working at the brewery, as were August's oldest daughter, Susie, and August IV, whose recent automotive adventures had not prevented him from landing a job as a.s.sistant to the brew master. Everyone knew that one of Long's daughters and his twenty-one-year-old son worked for the company, as did his cousin in Chicago. Nepotism had never been considered a breach of ethics at Anheuser-Busch; it was an honored tradition.

August railed on for more than half an hour, hurling accusations seemingly based on office gossip that ranged from exaggerated to fanciful. At one point, he asked if Long or any member of his family owned a storefront shop on a.r.s.enal Street that sold A-B paraphernalia that had been pilfered from the warehouse. All Long could do was shake his head sadly and say, "No."

August's rage gradually subsided to the point where he sought to explain why he was subjecting Long to such an inquisition. "Because if you've done something wrong and we don't know about it or didn't ask you about it, then it puts me and the board in a bad position," he said. Again, Long offered to resign, but this time he felt more like he meant it. Again, August waved off the idea, but this time Long suspected he didn't mean it. The session ended with August tearing the pages of notes from the legal pad, folding them neatly, and slipping them into the inside pocket of his suit jacket. "I'm going to keep these in the safe," he said as he got up to go.

If August was trying to intimidate him, he succeeded. Long was traumatized and bewildered. Why were they investigating him? What did they think he had done? It was as if someone were shooting at him in the dark, and he couldn't see where the shots were coming from. This was not the August he knew, the one who always had his back. This was someone who was out to get him. But why?

August came back to Long's office later that day, closed the door quietly, and said in a soft voice, "I'm afraid the board of directors will now accept your resignation. I probably feel worse about this than you do." Long doubted that, but he said nothing as August walked to the window and stood staring down at the parking lot. Long was reminded of the day years before when August had done the same thing after his father asked for his resignation. After a full minute, August turned away from the window and, without looking at Long, left the room.

August came back later with a press release Fleishman-Hillard intended to put out, announcing his resignation. It quoted Long as saying, "As president of Anheuser-Busch Inc., I take full responsibility for the actions of its officers and employees and have chosen to resign in the best interest of the company." It was boilerplate bulls.h.i.+t. Long didn't think his resignation was in the best interest of the company. He was leaving only because August gave him no other viable choice. August had made it clear to him that if he stayed on, he would be held personally accountable for any future wrongdoing by any A-B employee. "You mean if some guy in the bottling plant kills somebody with his car while he is on drugs, then that would be on me?" Long had asked. "That's right," August replied. Long interpreted that to mean he could resign now or be fired later. He okayed the wording of the press release.

The next day, they flew to Tampa on separate corporate jets, August on his Da.s.sault Falcon 50 and Long on the smaller Lear that was always at his disposal as president. Long could have begged off attending the meeting, but he didn't want it to seem as if he were slinking off with his tail between his legs. He wanted to tender his resignation directly to the board while looking them in the eyes. Given the circ.u.mstances, he didn't intend to deliver the sales performance report as he always did. He figured August would handle it. But five minutes before the meeting was to begin, August came to him and said, "You know I don't know how to do these things. Will you please do it?"

So he did, one last time. Fortunately, the numbers were all good: gross sales up 9.6 percent; net income up 18.6 percent; barrels up 7.7 percent; market share at 40.6 percent. When he finished, the board gave him a standing ovation, and every director came over to shake his hand. On the flight back to St. Louis, he felt nothing but numb.

The announcement of Long's resignation hit the city like a midwestern thunderclap. He was a well-known figure, enormously popular among A-B employees, and something of a folk hero in the Irish-American community, where he was celebrated as the sc.r.a.ppy South Side kid who'd sung tenor in the choir at St. Columbkille's and rose to head the brewery that loomed over their lives. Local soccer moms and dads knew him as the former parish grade-school coach who'd spearheaded the drive to raise nearly $1.5 million to develop the thirty-four-acre St. Louis Soccer Park for the Youth Soccer a.s.sociation, and then persuaded his brewery to buy the park and turn it into the finest soccer facility in the nation. You couldn't get much more St. Louis than Dennis Patrick Long. That he would abruptly resign from Anheuser-Busch in connection with an alleged kickback investigation was unthinkable. "Scandal Cracks Anheuser-Busch," declared one headline in the Post-Dispatch. "Long's Quitting Is Sign of Split in His Friends.h.i.+p with Busch," said another, which was followed by "Further Upheaval Feared at Busch."

Coverage of the story quickly spread to the New York Times, the Wall Street Journal, and even the Irish Times in Dublin. Reporters swarmed Long's house, standing at the iron gate across his driveway and calling out, "Can you give us a comment, Mr. Long? Tell your side of the story."

Long didn't want to talk to anyone. He was in a deep funk, demoralized and dealing with lawyers in trying to work out some sort of severance package that would protect his family. He was fifty-one, with two kids in college and a wife with an incurable, debilitating illness. He was scared. A-B was offering him a contract as an "outside consultant" for five years at $375,000 a year, a good amount of money even if it was less than half his compensation as president. As part of the deal, he was told he could continue to oversee A-B's operations in Ireland, and the company would provide him with an office near his home and a secretary.

Long was torn. August had plucked him from working-cla.s.s poverty and taken him on an amazing ride that carried him to places he might not have seen otherwise. He would always be grateful for that, and he didn't want to do anything that would hurt the company. August was now saying nice things about him to the media, calling him "my closest business a.s.sociate and friend for the past 25 years ... one of the finest business executives I know."

At the same time, August had made him the scapegoat in the scandal, issuing a statement saying, "The individuals involved were under Mr. Long's direct supervision and he has a.s.sumed full responsibility for their actions." It was a subtle twisting of the wording in the press release. And it wasn't true. He had not a.s.sumed responsibility for whatever Martino and Orloff had done, and to say they were under his direct supervision was an exaggeration that made it sound as if the scheme had been hatched right under his nose. Neither man reported directly to him. They were among dozens of executives who were technically under his supervision. He couldn't possibly have known what they all were doing in the field. The president of the corporation did not pore over billing statements from suppliers to make sure the company got the individual services it paid for.

Long believed that August had taken advantage of his loyalty, as evidenced by the fact that, shortly after he officially tendered his resignation at August's insistence, A-B lawyers coolly informed him that by resigning he had forfeited his options on 100,000 shares of stock, which would have been worth millions.

Long's family urged him to fight back, tell his story to the newspapers, sue if necessary, do something, anything, to counter the impression August was creating that he had done something wrong.

"To what end?" he responded. "They are not going to give me my job back. They are not going to pay me any more money. You don't know these people the way I do. I've seen the Busches when they get mad. I know what they are capable of. August knows no boundaries."

He'd seen August fire one executive because he stammered when he got nervous, another because he hated the way the man p.r.o.nounced French words with a French accent, and still another because he showed up at a meeting with a beard after August had told him to shave it off. For that matter, he'd seen August fire his own father, who was perhaps the most powerful man in the city at the time. "What chance do you think a Long would have in a fight with a Busch?" he said to his son. "Why would I put our family through that?"

In a meeting with shareholders, August called the kickback allegations "a distasteful chapter in our company's proud history" and sought to rea.s.sure them that the worst was over and the company itself was not the subject of an FBI, U.S. attorney, or grand jury investigation. "Our pride has been hurt," he said. "Our performance has not been hurt. Your company behaved in an honorable and exemplary fas.h.i.+on in resolving this matter, in keeping with its reputation as one of the most admired companies in America."

Amid widespread speculation about who would be named to succeed Long, August issued a statement saying, "I have a.s.sumed Mr. Long's responsibilities as president of Anheuser-Busch Inc. and will remain in that position for at least two years."

To Long, that finally explained everything-the nepotism investigation, the table-slamming interrogation, the a.s.signment of blame, and the insistence on their version of his resignation for the questionable conduct of a couple VPs. August's diversification initiative had proved an utter failure, costing the company hundreds of millions of dollars. The way Long saw it, August wanted to be back on the beer side of the company, and now the internal investigation into the kickback scheme provided him with the perfect pretext for riding in on a white horse to save the day. All he had to do was sacrifice his closest a.s.sociate, who was, in the end, just an employee, not blood. He was his father's son, after all.

In the months that followed, Martino and Orloff were indicted on twelve counts of mail fraud and one count of filing a false tax return. Martino was also indicted for fraud in the alleged rock band scam, but the government eventually dismissed that indictment. Drugs never came up.

At the trial, Martino mounted a spirited defense that portrayed him and Orloff as having been singled out for doing what was common practice at the company. He admitted that an executive of the outside advertising firm had provided him with clothes, club members.h.i.+ps, airline tickets, and gifts for his parents, but he insisted they were gestures of friends.h.i.+p, not bribes. He testified that every year at Christmas so many gifts for executives arrived at A-B headquarters that they spilled out of the offices into the hallways. One Christmas, he said, Fleishman-Hillard sent A-B executives, himself included, beer-pouring robots that were valued at more than $600. Martino's lawyer called Denny Long as a defense witness. Long testified that he "frequently" gave gifts to motivate and reward wholesalers, employees, and "virtually anyone involved with Anheuser-Busch." Gifts were "part of the Anheuser-Busch style," Long said.

In the end, Martino and Orloff were convicted on only one of the original twelve counts of mail fraud, one count of conspiring to defraud the IRS, and one count of filing a false tax return (for failing to report the gifts they'd received). They were sentenced to three years in prison, a punishment that shot fear through the hearts of dozens of A-B executives whose homes and offices contained thousands of dollars' worth of similarly undeclared gifts.

Throughout the remainder of 1987, August and Fleishman-Hillard worked hard to spin the story of August's triumphant return to the brewery. Naturally, they turned to the always Busch-friendly Fortune magazine, inviting one of its reporters out to Waldmeister Farm for a rare and intimate sit-down with America's once-again-reigning king of beer. The result was a long and unabashedly celebratory article that contained only two sentences about the recent unpleasantness while describing August as "fanatical about the reputation of his company" and reporting that he was "personally" taking over the beer business for at least two years "lest anything impede its fearsome progress."

At the same time, Fortune and the rest of the financial media took little or no notice as August's various diversification ventures-bread, wine, water, and cruise line-toppled like dominos over the next eighteen months.

Denny Long signed his consultancy agreement and settled into his new office in Sunset Hills, not far from Grant's Farm. It took him a few months to realize that the company wasn't going to give him anything to do. He was being paid to be, as he put it, "a silent consultant." August finally called about a year later and invited him to the farm for breakfast on a Sat.u.r.day. Long resented being asked to drive the thirty miles to Waldmeister on a weekend after he'd been let go, but he went because he thought maybe August was going to offer him something.

The two men sat in August's kitchen while Ginny prepared breakfast. They talked casually about brewery business for a while before August got down to the reason for the meeting. "I have been wanting to thank you for your loyalty in not talking publicly about everything that happened," he said. "I know that wasn't easy for you."

"It sure wasn't," Long replied, "especially when all the reporters were at my gate, and-"

Flas.h.i.+ng an irritated look, August cut him off. "I'm telling you that you did a good job, okay?" he said, as if that was all that needed to be said on the subject forever. Ginny said breakfast was ready, so they ate, engaged in more brewery small talk, shook hands, and never spoke to one another again.