Deltec, the roots of the Tether house bank lie in the history of Wall Street

If anyone takes a look today at what Deltec Bank in the Bahamas is, they see only a tiny and almost anonymous offshore financial institution whose only point of interest seems being the custodian bank of the reserves guaranteeing the so-called “stablecoin” Tether. Tether and Bitfinex have been the focus of the recent New York State Attorney General (NYAG) investigations, as well as of some class actions, and are connected to the US Department of Justice investigations into Crypto Capital Corp (Panama).

But in its distant past, what is now Deltec Bank and Trust and its group of companies were part of one of the most powerful Wall Street financial entities in terms of relationship capitalism, true “éminences grises” of the business community. The current Deltec Bank and Trust is just the spin-off of a group of companies led by a handful of financiers, businessmen, entrepreneurs and bankers who, since the 1930s and then from the second half of the last century, have literally written the history of Wall Street and finance. A powerhouse whose business relations extended from the United States to Canada, Italy, France, the United Kingdom, Greece and Switzerland in Europe, passing through Lebanon, Syria, Israel and the Arab Emirates in the Middle East, in China, to also include Brazil, Venezuela, Colombia in Latin America and Panama, the Cayman Islands and the Bahamas in the Caribbean.

Deltec Asset Management, NYC investment adviser founded in Brazil

Albert H. Gordon was Kidder Peabody boss since 1931 until selling it to General Electric in 1986, just before the wave of insider trading scandals that rocked the company and Wall Street. From 1986 to 2001, A. H. Gordon managed Deltec in NY City. He died in 2009 aged 107. Other Deltec major shareholders in 2000 were Julio Mario Santo Domingo, the Colombian billionaire and ambassador in China, the Venezuelan industrialist Gustavo J. Vollmer, the Lebanese-Swiss private banker Maurice Dwek, founder of Swiss Soditic group, Peter T. Kikis, a Hellenic-American businessman and a liberator of Dachau concentration camp, and Penelope Dauphinot, widow of Clarence J. Dauphinot Jr, Deltec founder and Latin America finance developer.

According to DAM LLC, in 1946 Deltec Asset Management was founded in Brazil by Clarence J. Dauphinot Jr., a former Kidder Peabody & Co. top executive, and funded by Kidder Peabody & Co. itself. In the ’50s, DAM expanded with merchant activities throughout Latin America. In 1959, Deltec Banking Corporation Limited was incorporated in the Bahamas. In the ’60s, DAM LLC was instrumental in creating the securities industry in Brazil. In 1971, Arthur Byrnes joined Deltec. In 1987, the company was registered as an investment advisor with the SEC. In 1988, Albert H. Gordon’s son John joined the company. In 2000, DAM LLC purchased the investment management business from the founder’s family. As of December 31, 2020, DAM LLC was a “100% employee-owned investment manager based in NY City”, with a “stable investment team averaging 28 years experience” and a “$ 917 million in assets under management”.

Deltec Asset Management history

In December 2000, according to SEC forms DISA Liquidating Co., a Cayman Islands company which was formed to receive and hold the remaining assets and liabilities of Deltec International S.A. (DISA) in connection with the plan of complete liquidation and dissolution of Deltec, owned all of the stock of The Deltec Banking Corporation Limited (DBC) incorporated in the Bahamas, a holding company that held most of the assets formerly owned by Deltec. The address of the principal business and offices of DISA Liquidating Co. and DBC was Deltec House, Lyford Cay, Nassau, Bahamas. In that way, Deltec Asset Management Llc and Deltec Banking Corporation separated their fates.

Jean Chalopin, Chairman, Deltec International Group

At that time, Jean Chalopin was already a Deltec Bank director, since almost 1997.

Clarence J. Dauphinot Jr., Deltec founder
and LatAm finance developer

According to his New York Times January 17, 1995 obituary, Mr Clarence J. Dauphinot Jr. was “an asset manager who helped develop Latin America’s financial markets after World War II” who died aged 81. “His principal residence was in Nassau, the Bahamas”. “At his death, Mr Dauphinot was chairman and chief executive of Deltec International S.A., with headquarters in Nassau. He started Deltec with two associates in Brazil in 1946, when capital markets barely existed in South America. Mr Deltec began the company on a shoestring, selling securities door to door. From a rocky start, Deltec became a prime force in the fledgeling securities markets throughout Latin America. Over the years, its holdings included mutual funds and companies dealing in food products, sugar production, printing, ranching, real estate, development and underwriting. It became an investment merchant banking group with subsidiaries in Latin America, Europe, Canada and the United States. Today [1995], Deltec International focuses on investment management services conducted through the parent company in Nassau, the Deltec Asset Management Corporation of Manhattan, a London office and an affiliate in Sao Paulo, where it all began. Altogether, Deltec claims $1 billion in investments managed, with shareholders equity of $140 million.

Mr Dauphinot was born in Forest Hills, Queens, the son of a Wall Street investment banker. He graduated from Princeton in 1935 and, during the Depression, was a runner at Kidder, Peabody & Company on Wall Street. Later, as a foreign-securities trader, he went on trips to Brazil that convinced him of the region’s great potential. He persuaded Kidder to open a small securities house in Brazil, but he initially got by with odds-and-ends transactions. Deltec was just breaking even when the New York partners cut off his subsidy. The first real break came in 1949 with capital issues floated for large electric-power projects in the state of Sao Paulo. Soon after, the company began to prosper”.

Albert H. Gordon, Kidder Peabody & Co. boss
and Wall Street éminence grise for six decades

Albert H. Gordon, Wall Street éminence grise

Albert H. Gordon, according to James B. Stewart’s “Den Of Thieves” bestseller and Pulitzer Prize winner, “was the son of a wealthy Boston leather merchant, and graduate of Harvard College and Business School. In 1929, when the firm was devastated by the market crash, Gordon, a young bond salesman at Goldman, Sachs, stepped in with $100,000 of his own capital. Along with two partners, he acquired the firm in 1931. The indefatigable Gordon, a physical-fitness fanatic with limitless energy and impeccable Brahmin bearing, moved the firm’s headquarters to Wall Street from Boston and set about building a roster of clients. He had an advantage: Kidder, Peabody’s reputation, in sharp contrast to many of its rivals, had remained remarkably unsullied in the aftermath of the [1929] crash. Under Gordon’s guidance, Kidder, Peabody concentrated on its underwriting function. The firm was a pioneer at opening branch offices in U.S. cities. The idea was, as Gordon liked to put it, to “sell your way to success.” Through most of its history, Kidder, Peabody was a tightly controlled partnership, with Gordon personally owning most of the firm and its profits. When the firm incorporated in the 1960s, the ownership changed little; Gordon simply became the firm’s largest shareholder. He was parsimonious about bestowing ownership stakes on the firm’s executives. Kidder, Peabody prospered, if not spectacularly, under Gordon’s conservative leadership. Determined to avoid another capital crisis, Gordon insisted that Kidder’s executives plough their earnings back into the firm. This gave the firm the capital to survive the sudden drop in trading volume and profits that struck Wall Street in 1969".

“Kidder Peabody was among the first Wall Street firms to start and dedicate an entire department to financial research and development. In the late 1970s, it hired Yale Professor John Geanakoplos to start an R&D department to research and analyse the connection between finance and mathematics. Gradually the department grew to contain 75 prominent academics and continued to function till Kidder Peabody’s closure”.

“Gordon served as Kidder’s chairman until selling it to General Electric in 1986. GE believed that Kidder would be a good fit for its financial services division, GE Capital. GE executives had felt chagrin at putting up money to finance leveraged buyouts, only to have to pay large fees to other investment banks. GE believed that it made sense to find a way to keep these fees for itself after taking such expensive risks. Thus, when Gordon concluded that Kidder could not stay independent, he found a receptive ear in GE chairman Jack Welch.

Jack Welch, former General Electric CEO

GE initially left the firm in the hands of Gordon’s longtime heir apparent, Ralph DeNunzio. According to James B. Stewart’s “Den Of Thieves” bestseller, “In late April [1986], (Ceo Ralph) DeNunzio convened Kidder, Peabody’s directors and announced, with tears in his eyes, that the firm would be sold to General Electric. GE paid $600 million for an 80% stake, leaving 20% in the hands of Kidder, Peabody officials who stayed at the firm, and promised to add an additional $130 million in capital. Al Gordon retired a rich man, selling his entire 6% stake for over $40 million. The Kidder, Peabody he had known was gone”.

“Soon after the GE purchase, a skein of insider trading scandals, which came to define the Street of the 1980s and were depicted by Stewart’s bestseller “Den of Thieves”, swept Wall Street. The firm was implicated when former Kidder Peabody executive and merger specialist Martin Siegel — who had since become head of mergers and acquisitions at Drexel Burnham Lambert — admitted to trading on inside information with super-arbitrageurs Ivan Boesky and Robert Freeman. Siegel also implicated Richard Wigton, Kidder’s chief arbitrageur. Wigton was the only executive handcuffed in his office as part of the trading scandal, an act that was later depicted in the movie Wall Street. With Rudy Giuliani, then the United States Attorney for the Southern District of New York, threatening to indict the firm, Kidder was initially poised to fight the government. However, GE officials were somewhat less inclined to fight, given that Siegel had admitted wrongdoing. A GE internal review concluded that DeNunzio and other executives had not done enough to prevent the improper sharing of information and also revealed glaring weaknesses in the firm’s internal controls. Notably, Siegel was able to move about the trading floor as he pleased, and Wigton and Tabor did Siegel-requested trades with almost no questions asked. In response, GE fired DeNunzio and two other senior executives, stopped trading for its own account, and agreed to a $25.3 million settlement with the SEC. In his autobiography “Jack: Straight from the Gut”, Welch said that the aftermath of the insider-trading scandal led him to conclude that buying Kidder had been a mistake. He was appalled by the firm’s outsize bonus pool, which was $40 million greater than the GE corporate pool at the time, even though Kidder accounted for only 0.05 per cent of GE’s income. He also didn’t understand how “mediocre people” were garnering such high bonuses. Soon after Black Monday, Welch and other GE executives resolved to sell off Kidder at the first opportunity that they could do so “without losing our shirt.”

On July 21, 2001, Albert H. Gordon (MBA ’25) celebrated his 100th birthday with a group of about thirty family members and friends at Fishers Island, New York. In honour of the day and as a tribute to Gordon, a lifelong athlete who ran his first marathon at the age of 81, the Gordon family organized a 100-mile relay race that began at 4:30 a.m. and finished at 8:30 p.m. Twenty family and community members participated, each running four to eight miles. Gordon… was in fine spirits and excellent health. He still kept an office at Deltec Asset Management in New York, a Kidder spin-off run by his son, John R. Gordon.

According to the NYT May 1, 2009 obituary, “Albert Hamilton Gordon was born in the community of North Scituate, Mass., on July 21, 1901. His father, after working as a sheepherder in Wyoming, had moved east to become a successful leather merchant, supplying the British Army in World War I”. Albert H. Gordon “built the firm into what Forbes magazine called “a minor powerhouse on Wall Street”… Mr Gordon lived to become an éminence grise of the investment community, began running marathons in his 80s and at his death was the oldest graduate of both Harvard College and Harvard Business School, according to Harvard Magazine. In 1960, Fortune magazine listed Mr Gordon as one of the 10 most powerful men on Wall Street and as the financial community’s most successful underwriter and salesman. Mr Gordon used his charm, powerful friends like Armand Hammer of Occidental Petroleum and legendary energy to chase deals. John C. Whitehead, former chairman of Goldman Sachs, called Mr Gordon “a famous business-getter.”

In ruling that the investment industry did not violate federal antitrust laws in 1953, Judge Harold R. Medina noted the industriousness of Kidder. He said Mr Gordon’s firm had “forged its way strictly on the merits from a minor position in 1931 to that of one of the country’s leading underwriters.” “The Times reported in 1989 that Mr Gordon had imbued Kidder with “an air of positive gentility, giving employees a free hand to pursue deals.” He also gradually sold back ownership of the firm to its workers, to signal that he would not challenge the new management he had recruited. He did not want anyone to think of him as “that greedy old bastard,” he told Business Month in 1989. Mr Gordon became something of a legend for his dedication to physical fitness, which he believed explained his longevity. He took one puff of a cigarette in his life, he said, didn’t salt his food and limited his alcohol intake to a glass of Champagne a year. He was twice the oldest participant in the London marathon and sometimes walked from airports to his hotel. He made cold calls to prospective clients well into his 90s. At 105, he was still working four days a week at Deltec Asset Management”.

John R. Gordon, a career in finance and energy

John R. Gordon, senior managing director of Deltec Asset Management LLC

Mr John R. Gordon, 71, is senior managing director of Deltec Asset Management LLC, a registered investment firm located in New York, New York. He was President of Deltec Securities Corporation from 1988 until it was converted into Deltec Asset Management LLC. Prior to joining Deltec Asset Management LLC, Mr Gordon was a managing director of Kidder, Peabody & Co., where he spent 12 years in the firm’s corporate finance department. Mr Gordon has been an independent director of Anadarko Petroleum Corporation from April 1988 to August 2019, when Anadarko Petroleum Corporation was acquired by Occidental Petroleum Corporation.

Julio Mario Santo Domingo, the Colombian magnate and ambassador in China

Julio Mario Santo Domingo was a “Colombian magnate”

According to his NYT October 9, 2011 obituary, Julio Mario Santo Domingo was a “Colombian magnate whose $8.5 billion fortune made him one of Latin America’s richest and most influential men”, who died in New York aged 87. “His death was announced in Colombia by Caracol, the television network he controlled. While Mr Santo Domingo had lived since the 1980s in the famous apartment building at 740 Park Avenue in Manhattan that has also been home to Rockefellers, Guggenheims and Vanderbilts, his fortunes were always intertwined with those of Colombia. He assembled a web of enterprises in industries including energy, the media, brewing, tourism, shrimping and real estate. “There are few countries in the world in which an individual came to have so many tentacles,” Semana, a Colombian newsmagazine, said. Mr Santo Domingo, who consolidated his holdings as Colombia was afflicted by some of Latin America’s worst violence, sold big stakes in some of his companies in recent years as the waning of Colombia’s long internal war lured foreign investors back”.

“He sold a controlling interest in the airline Avianca in 2004 to the Brazilian entrepreneur Germán Efromovich, and the next year SABMiller, the South African brewing company, took control of Bavaria, a brewery acquired by Mr Santo Domingo and his father, Mario, in the 1960s. The 2005 deal made the Santo Domingo family one of SABMiller’s largest shareholders. This year (2011), Forbes magazine estimated Mr Santo Domingo’s wealth to be $8.5 billion, ranking him 108th on its list of the world’s billionaires. He ceded his place as Colombia’s richest man this year to the banker Luis Carlos Sarmiento, whose fortune Forbes estimates to be $10.5 billion”.

Julio Mario Santo Domingo Pumarejo was born on Oct. 1, 1924, in Panama City, where some in the upper-class of Barranquilla, the trading city on Colombia’s Caribbean coast where his parents lived, travelled for the birth of their children. His father was a banker, described as austere and disciplined, who made a fortune buying companies weakened during the Great Depression. Mr Santo Domingo was cut from a different cloth. He was a playboy in his youth, said to date countesses and to resemble the American film actor Tyrone Power. He met his first wife, the Brazilian socialite Edyala Braga, in Paris. They had a turbulent union that ended in divorce.

By the time his father died in 1973, Mr Santo Domingo, the eldest of four children, had become a fixture of Colombia’s business and political establishment. He was Colombia’s ambassador to China when Julio César Turbay, president from 1978 to 1982, wanted diplomatic ties with Beijing. Still, he attained prominence in Colombian culture and politics through his friendship with figures like the writer Gabriel García Márquez, philanthropic donations, and his control of Caracol, the magazine Cromos and the newspaper El Espectador, which Mr Santo Domingo saved from financial ruin in the 1990s”.

Gustavo J. Vollmer Herrera, Venezuelan tycoon,
philanthropist and Scout chief

Gustavo J. Vollmer Herrera, Venezuelan industrialist and prominent philanthropist

Dr Gustavo J. Vollmer Herrera (5 January 1923–2 November 2014) was a Venezuelan industrialist and prominent philanthropist. Alongside his brother Alberto J. Vollmer Herrera, he was the patriarch of the Vollmer clan in Venezuela, the country’s oldest business dynasty. Although extremely low profile, the Vollmer family maintained an active ownership and management role in a wide variety of business operations across the agricultural, consumer goods and financial services sectors. The family lead and controlled Mercantil Servicios Financieros, the country’s leading financial services institution in banking and insurance, with Vollmer’s eldest son currently serving as Chairman and CEO. They also owned and operated Venezuela’s largest rum company and one of the worldwide leaders in premium rums, Santa Teresa Rum, located in El Consejo, Aragua, as well as Central El Palmar, a vast sugarcane refinery, mill and plantation the family owns in neighbouring San Mateo, Aragua.

The Vollmer family are also renowned for backing the funding and development of numerous education initiatives across Venezuela. Among the most prominent was their 1963 donation to the Jesuit order of an 80-acre portion of their Hacienda Montalban, in central Caracas, to build what is today the Universidad Católica Andrés Bello, one of the top universities in Venezuela and Latin America. The family was also active in promoting photography, art and culture through the Vollmer Foundation and ran several award-winning initiatives in social development and inclusion through the Santa Teresa Foundation.

Vollmer graduated with a degree in Civil Engineering from Cornell University in Ithaca, New York, USA. Vollmer also served as President of the National Council of the Asociación de Scouts de Venezuela, President of the Interamerican Regional Scout Council, and as a member of the World Scout Committee of the World Organization of the Scout Movement from 1963 to 1969 and again from 1973 to 1979. In 1969, Vollmer was awarded the Bronze Wolf, the only distinction of the World Organization of the Scout Movement, awarded by the World Scout Committee for exceptional services to world Scouting, at the 22nd World Scout Conference. He also received the Silver Buffalo in 1965 and the highest distinction of the Scout Association of Japan, the Golden Pheasant Award, in 1968.

Maurice Dwek, the Lebanese born financier
who broke the Swiss bank cartel

Maurice Dwek, Syrian-Lebanese and Swiss banker

According to his Financial Times August 18, 2013 obituary, Maurice Dwek, “who has died aged 81,” was the man who “dragged Switzerland into Europe’s open capital markets. He toppled the cartel of domestic banks that had held sway over Swiss franc corporate bond issuance until well into the 1980s. Born in Beirut on May 1, 1932, Dwek left Lebanon with his family as a teenager and studied mathematics and economics in Paris and Grenoble. He worked for Goldman Sachs, among others, before setting up Soditic in 1971. It was a period in which London was establishing itself as central to the growing trade in cross-border debt paper in Europe”.

“Maurice’s father, Murad, was one of seven siblings who all played a role in operating their father’s thriving textile business in Aleppo, Syria, in the early 1900s. When sea trade routes opened up, enabling faster and more effective shipping than land routes, Murad, a brother, and a sister relocated to Beirut. Four other brothers moved to port cities in the Middle East and Asia in an old-world version of corporate globalization. Murad married Adele de Picciotto; Solo was born in 1929 and Maurice in 1932”.

“As the founder of Soditic, a modestly-sized Geneva investment bank that at its peak had fewer than 200 staff, Dwek took on the entrenched underwriting triumvirate of Credit Suisse, Swiss Bank Corporation and Union Bank of Switzerland. “Foreign demand for paper denominated in Swiss francs was soaring, so we created it. But the big Swiss banks took offence that we were trespassing on their territory and blackballed us,” he told the Financial Times in 1995.

Dwek made initial headway both by offering products such as dual-currency bonds that were innovative for their time and by seeking business from smaller and lower-rated issuers. The Swiss financial establishment criticised the potential dilution of the Alpine state’s reputation for low default rates. Indeed, Soditic led a number of issues for ill-fated companies, among them Polly Peck, Heron, Bond Corporation and Mountleigh. But its client list also came to include triple-A names such as General Electric of the US. In this way, “Soditic was able to steal a march on the less nimble big three and, against all odds, had succeeded by 1985 in breaking the cartel”, said one Dwek colleague. “The big three, which had boycotted all issues managed by Soditic since 1977, continued to do so but to little effect.”

Yet, it was this very success that put paid to Soditic as a force in the markets. Two core shareholders — Italy’s Banca Commerciale Italiana and Banque Paribas of France — had already sold their combined 50 per cent stake to SG Warburg, which went on to take full control in 1990, installing Dwek as vice-chairman of the London merchant bank. But when Warburg was, in turn, swallowed up by SBC (which itself subsequently merged with UBS), Soditic’s activities were absorbed into the greater whole. Dwek was able to reclaim just the name as a vehicle for his own interests, also re-employing a number of his former staff. According to his son Edward, his tastes were always simple; one main pleasure was a “small fishing boat in the south of France, of the type that local fisherman use”. As for Soditic, its credo, as described by Dwek to Institutional Investor magazine in 1986, was similarly straightforward — “to be imaginative and do deals that are other than the ordinary”.

Peter T. Kikis, the Hellenic-American businessman
who liberated Dachau

Peter Kikis, Hellenic-American businessman

According to his obituary, Mr Peter T. Kikis passed away on February 28, 2013. He was 90 years old. He was an entrepreneur, philanthropist, and distinguished member of the Hellenic-American and Greek Orthodox communities. The son of Greek immigrants from Arcadia, Mr Kikis was born and raised in New Rochelle, New York. He lost his father when he was eleven years old and thereafter started working to help support his mother and sisters. Peter received his Bachelors’ Degree summa cum laude from Princeton University, where he majored in Mathematics and studied under Albert Einstein. He graduated a year early, and immediately, he went to serve as a Captain in the US Army in Europe during World War II. As part of his military service, he participated in the Battle of the Bulge under General George Patton and also liberated Dachau concentration camp in Germany, earning four Battle Stars for his service in the war.

Until the time of his passing, Peter was the president and a principal of Spencer Management Company, a real estate development and management company in New York, where he kept daily office hours since 1950. Until 1985, Peter was also involved in the shipping-maritime business. Peter served as a principal and co-Chairman on McRoberts Protective Agency, a New York-based provider of security guard services, from 1972 to 1992. He was Chairman of the board of Command Security Corporation, a public security corporation, since September 2006. He also served as director of Deltec International S.A. and Atlas Capital Group Holdings S.A.
When not at his office at 720 Fifth Avenue, one could usually find Peter at the Regency Whist Club, playing bridge. He was also a past chairman of the Lyford Cay Club of Nassau, the Bahamas, from 1992–1996, where he had a residence.

Contacted, Deltec Asset Management didn’t comment.

In the next episode of this story, the most recent events of Deltec Bank in the Bahamas and Panama.

(1 — to be continued)

Investigative journalist and whistleblower who proved criminal offenses committed by the ousted Chair, Ceo and editor in chief of his former media company