I.O.S. Seeks a Home

When Bernard Cornfeld's mutual-fund empire came tumbling down in a spectacular mid-1970 crash, his main company, Investors Overseas Services, sank so low that moneymen might well have figured it had nowhere to go but up. Not so. Under Cornfeld's successors, I.O.S.'s troubles have been endless. The several mutual funds that it manages have gone on dwindling in value, to about $982 million last week, from $2.3 billion in the late 1960s. Roughly 300,000 investors, mostly Europeans, still have money tied up in I.O.S.--and they are hurting. Anybody who put $1,000 into its vaunted Fund of Funds in 1968 now has assets worth only $338. The Geneva-based company has accumulated 250 lawsuits against itself, affiliated companies and officers past and present. Now the shrinking giant faces its toughest threat: impending homelessness. From Switzerland, TIME European Economic Correspondent Roger Beardwood filed this report:

Alarmed by the scandals that have rocked I.O.S., Switzerland has tightened its securities laws. These now prevent the selling "from a Swiss base" of mutual funds that are not registered with the Swiss Federal Banking Commission. To register them now would rob I.O.S. of one of its few remaining assets--freedom from legal surveillance. The new Swiss laws thus have the effect of giving I.O.S. notice to abandon its Geneva headquarters.

When the laws were passed last year, I.O.S. officers thought that the company could bypass them by moving its sales office to London, administering clients' accounts from Amsterdam and keeping only executive offices in Geneva. That plan was shattered in November, when the Swiss arrested three I.O.S. officers on charges of "dishonest business practices" and held them in jail for one night before releasing them on bail. Among the trio was New Jersey Entrepreneur Robert Vesco, 36-year-old chairman of an electronics firm called International Controls Corp., who wrested control of I.O.S. from Cornfeld's group in 1970, and is now chairman. The charges were dropped recently.

Even so, Swiss hostility has forced Vesco and his executives to maintain only remote control over I.O.S. operations. I.O.S.'s president, Milton Meissner, was arrested with Vesco last November, and since then has been careful to stay in a hotel across the French border. I.O.S.'s day-to-day operations are run by Norman Leblanc, a Canadian accountant, but even he cannot work full time in the Geneva corporate offices because the Swiss have not granted him a labor permit. Leblanc is forced to operate from Ferney-Voltaire, a French village that became a minimetropolis almost overnight in 1967, when Cornfeld erected a complex of buildings to house I.O.S.'s administrative operations.

Nassau Haven? I.O.S. cannot move its sales or executive offices to Ferney-Voltaire, though. Like the Swiss, French authorities are increasingly antagonistic toward the foundering empire. Indeed, I.O.S.'s troubles have stirred such wide suspicion of unregulated mutual funds that the company cannot easily find a suitable haven anywhere in Europe. A move to Nassau in the Bahamas is rumored.

A massive question remains: How much will be left to move? Currently, I.O.S. is running up legal bills estimated at $4,000,000 a year and accounting fees of some $1.5 million annually. For the first nine months of 1971, it reported a loss of more than $9,000,000. Vesco is underwriting some of the losses with loans and loan guarantees from his stateside companies. He is also trying to raise cash by selling surplus subsidiary operations, like a computer-processing company near Geneva, and some of the now unneeded real estate in Geneva and Ferney-Voltaire. Vesco has recently been discussing the possible sale of some of his I.O.S. holdings to Edward Ball and Raymond Mason, Florida financiers. Black as things look for I.O.S., its officers have learned one thing: adversity is never so serious that it cannot get worse.

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