COVER

FORGING A REALLY BIG DEAL

A TYCOON’S SON MAKES HIS MARK

JOHN DeMONT November 13 1989
COVER

FORGING A REALLY BIG DEAL

A TYCOON’S SON MAKES HIS MARK

JOHN DeMONT November 13 1989

FORGING A REALLY BIG DEAL

A TYCOON’S SON MAKES HIS MARK

He has spent 71 years largely overshadowed by the exploits of his famous father. Even today, Cyrus Eaton Jr. cannot escape being compared with the colorful, controversial, Canadian-born tycoon whose name he bears. Small wonder: the elder Eaton was a millionaire at 27, went broke during the Great Depression, rebuilt a second fortune and died in 1979 as one of the the world’s most powerful industrialists and most famous humanitarians. His son has also had a checkered business career—at one point even being forced into personal bankruptcy over business debts. But, as the point man on the $1-billion Leningrad redevelopment project being proposed by an elite group of Toronto businessmen, including Edwin (Eddy) Cogan, Ephraim Diamond and Trevor Eyton, he is on the verge of achieving the biggest deal of his life—one that would have made his legendary father proud.

The Eaton name carries immense weight in the Soviet Union. Throughout his lifetime, Cyrus Sr. fought a tireless battle to promote

peace, understanding and trade between the United States and the Communist world. His son proved to be perhaps his keenest pupil. During the past 35 years, the younger Eaton has used his family connections and expertise to launch more than 200 business deals in Eastern Europe, the Soviet Union and China. And, when officials from the city of Leningrad in the late 1970s called for proposals to put together a giant tourism development for the city’s downtown, they eventually turned to the polite, unassuming Cleveland-based financier. As Eaton told Maclean’s, “Your reputation is everything when it comes to doing business with the Soviets.”

Genial: With his wire-rimmed glasses, dark, conservative suits and deferential manner, Eaton cuts an unlikely figure as a globe-trotting super-salesman. But he has always understood the value of the Eaton name. It helped him strike his first deal with the Soviets in 1954trading sheet steel, produced in his hometown of Cleveland, for chrome ore. Unable to ship the steel directly to the Soviet Union from the

United States because of strong anticommunist sentiment, he set up a company in Montreal called Tower International, which purchased the steel from the United States and then shipped it to the Soviet Union.

Since then, his development firm’s joint undertakings with the Soviet government have included a wide range of activities and products. Usually, his company, now known as Cyrus Eaton World Trade Ltd., acts as a principal, entering into an agreement, with a Communist government, in which he puts together the designers, contractors or suppliers for the job and raises the financing. In payment, Eaton usually takes a percentage of the products, selling them in the West for hard currency.

But the genial financier’s plans have sometimes backfired. Over the years, Eaton has been embroiled in several lawsuits with business partners. And sometimes he has been unable to raise the necessary financing—a fact about which the group of Toronto business-

But the genial financier’s plans have sometimes backfired. Over the years, Eaton has been embroiled in several lawsuits with business partners. And sometimes he has been unable to raise £ the necessary financing—a fact about s which the group of Toronto businessmen who are lending their expertise to the new Leningrad project expressed concern.

Among his most widely publicized problems was a 1979 joint venture to build the 1,000room Great Wall Hotel in Beijing and a second hotel in Shanghai. Eaton eventually sold his interest in the project, but he was subsequently sued for $98 million by his Shanghai-born partner, C. B. Sung. But Eaton said that he later settled with Sung out of court without having to pay any damages.

Vodka: In 1985, in fact, Eaton was forced into involuntary bankruptcy after a U.S. court ruled that he owed $1.8 million to Richard Daus & Co., a West German bank, for fees for work done on the newly built $80-million Pulkovaskaya Hotel in Leningrad, which Eaton developed. But Eaton said last week, “My father bounced back from financial troubles, and I am doing the same thing.”

Despite his past troubles, Soviet authorities clearly value Eaton’s family connections and reputation as a deal-maker. In February, 1988, Clara Reece, Eaton’s 65-year-old, Hungarianborn, multilingual chief negotiator, received a mysterious Telex asking her to fly to Leningrad to discuss a new project. And a month later, Eaton’s firm beat out developers from West Germany and Scandinavia to win the competition to build a new $5-billion tourism development for Leningrad. Leningrad city officials joined Reece and Eaton to celebrate the deal in true Russian fashion—a vodkafuelled dinner that ran into the early hours of the morning—ending at 2 a.m. But that project has subsequently been scaled down into the more modest, but still huge, undertaking with the Toronto businessmen.

His celebrated father, however, would certainly have relished the scope of the deal. Bom in 1883 in the tiny Nova Scotia fishing village of Pugwash, 140 km north of Halifax, Cyrus Eaton Sr. was the son of parents who owned a

farm and a village store. While still in his teens, he left home to study to become a Baptist minister at what was then McMaster College in Toronto. But at 17, he travelled to Cleveland to spend the summer with his uncle, who was the pastor of the city’s main Baptist church. It was there that he came under the sway of oil tycoon John D. Rockefeller Sr., then a parishioner at his uncle’s church.

Lenin: Imbued with Rockefeller’s capitalistic gospel, Eaton shrewdly, and sometimes ruthlessly, built a billion-dollar empire in Canada and the United States. It spanned coal, steel,

iron ore, lumber and transportation—and even prize cattle, which he raised on farms near Cleveland and in Nova Scotia.

But money was only part of the amazing Cyrus Eaton story; A friend and confidant of such diverse personalities as philosopher Bertrand Russell, U.S. labor leader John L. Lewis and biologist Julian Huxley, Eaton was also a humanitarian who, in his later years, used his vast wealth and energy to aid the search for world peace.

To this day, the conference he established in Pugwash, N.S. in 1957 brings together revered figures from East and West to study ways of reducing world tensions. As his biographer, Cleveland journalist Marcus Gleisser, told Maclean’s, “He was, foremost of all, a

businessman—but one who enjoyed playing on the foreign stage.”

In 1960, Eaton won the Lenin Peace Prize— the Soviet Union’s highest honor of its kind— for his relentless efforts to promote better relations with the Communist world. But his views were unpopular in the United States, where critics branded him a “commie-lover” and traitor, and he was summoned in 1958 to testify before the U.S. House Un-American Activities Committee, although the subpoena was never served.

Following in his father’s illustrious footsteps

has not been easy for Cyrus Jr. He attended the Kent School, a boarding school in Kent, Conn., and then spent nearly four years at respected Colgate University in Hamilton, N.Y., before dropping out to enlist in the U.S. air force when the United States entered the Second World War in 1941. In 1943, he was shot down over the Netherlands and spent nearly two years in a German prisoner-of-war camp before escaping just months ahead of the Allied liberation.

New: Returning to Cleveland, he joined his father’s industrial empire until 1960, gaining experience in a variety of operations. After a 1954 visit to the Soviet Union, he saw new opportunities to do business with the Communist bloc. As Eaton recalled, “While Dad was preaching the gospel of co-operation with the

Soviets, I was quietly following his advice.”

Destitute: Still, the younger Eaton was on his own. Despite the clan’s vast wealth, Cyrus Sr. believed children should be independent. And when he died in 1979 at the age of 95, he bequeathed almost all of his wealth, estimated to be more than $1 billion, to philanthrophic organizations and universities. Said Cyrus Jr.: “Anybody who thought I inherited a lot of money was wrong. I have been on my own for more than 40 years.”

Despite his well-publicized financial troubles, Eaton is hardly destitute. He and his wife,

Mary, live in a well-appointed house in Cleveland’s exclusive Shaker Heights suburb. Like his father, he is an avid outdoorsman who skis, canoes, rides horses and sails. And Eaton, along with his two sons, Cyrus in, 44, and John, 42, and daughters Catherine, 40, and Elizabeth, 37, were frequent visitors to the family farm on Nova Scotia’s Mahone Bay, where Cyrus Sr. raised prized cattle and entertained everyone from Western billionaires to Soviet leaders until his death. Says Eaton: “The Soviets may think that I am rich as Rockefeller, but I am not. The main thing I still have is the Eaton name and reputation.” And in the end, that may be his most precious posession of all.

JOHN DeMONT