Cornfeld, Bernard (“Bernie”)

(b. 17 August 1927 in Istanbul, Turkey; d. 27 February 1995 in London, England), entrepreneur who founded Investors Overseas Services, a financial conglomerate that became a powerful but controversial force in the mutual fund industry before its spectacular collapse in 1970.

Cornfeld—originally named Benno but known to friends and critics alike simply as Bernie—was the son of Leon and Sophie Cornfeld, who met in Vienna and immigrated to the United States in 1930. They eventually settled in Brooklyn, where Cornfeld’s father, a Romanian Jewish actor and film impresario (who had four sons from a previous marriage), died three years later. Sophie Cornfeld, the daughter of a once-prosperous Russian Jewish family, worked in an international freight-forwarding office and as a nurse to support herself and her young son.

Cornfeld, who was built like a fireplug and spoke with a pronounced stutter as a boy, was educated in New York public schools and graduated from Abraham Lincoln High School in the Brighton Beach section of Brooklyn. After serving two years as an assistant purser in the merchant marine, he enrolled in Brooklyn College, where he dabbled in socialist politics before graduating with a major in psychology in 1950. His interest in psychology was sparked in 1947 when Willard Beecher, a New York therapist and a disciple of the Austrian psychologist Alfred Adler, successfully treated his childhood stammer.

In late 1954 after a nine-month stint working as a youth counselor for B’nai B’rith in Philadelphia, Cornfeld signed on to sell mutual funds for Investors Planning Corporation, a small sales organization set up to capitalize on the reviving interest in mutual funds in the United States. While working there he displayed the personal charisma and extravagant living habits that would characterize the rest of his career.

In the fall of 1955 Cornfeld sailed for France to explore mutual fund sales opportunities in Paris. His prospects included military personnel and corporate executives who were in the vanguard of American industry’s postwar invasion of global markets. He soon gathered a motley team of bright but bohemian salespeople, using the recruiting gambit that became his trademark: “Do you sincerely want to be rich?” He spoke in an evangelical manner at sales meetings and whispered intensely in private conversations, making him highly successful in motivating his sales force.

The riches Cornfeld promised were generated by the controversial product he sold: contractual plans in which customers paid for their fund purchases in monthly installments over a long span of time, paying high sales commissions in the early years of fund ownership.

In 1958 Cornfeld moved his sales organization, which he called Investors Overseas Services (IOS), from Paris to Geneva. Two years later he registered IOS in Panama, codifying a financial empire that would ultimately encompass a secretive Swiss bank, an insurance company, scattered real estate interests, and a stable of offshore investment funds, all operating beyond the reach of any single country’s securities laws.

By the early 1960s, with IOS channeling hundreds of millions of dollars into American mutual funds, Cornfeld had enough financial power to attract the attention of the U.S. Securities and Exchange Commission, which soon accused him of violating American mutual fund laws. In 1967 he settled the commission’s complaint out of court by agreeing to shed his American operations and limit the size of his investments in American mutual funds.

By then Cornfeld’s colorful flaunting of the fund industry’s gray-flannel traditions had made him a national celebrity. Photographs from that era show him striding across the lobby of a New York City hotel, leading his pet ocelot on a leash; playing backgammon on his luxurious personal jet; and relaxing at the Château de Pelly, his thirteenth-century castle near Geneva, with a bevy of attractive young women. In March 1968 Fortune magazine reported that Cornfeld had once appeared to address an assembly of dark-suited Swiss bankers wearing a sport jacket and escorting a beautiful woman on his arm. “It was a very good sport jacket … And it was also, as always, a very good blond. But neither helped the image,” the magazine observed.

By the end of the decade IOS was managing roughly $2.5 billion of its customers’ money and Cornfeld’s private fortune was reported to be as much as $100 million. But as Cornfeld paraded his apparent wealth, IOS was succumbing to weak management and careless, if not outright illegal, financial practices. In May 1970, with the company’s affairs in disarray and its stock price plunging, Cornfeld’s board of directors forced him out. Within the year the company was in the hands of the American financier Robert Vesco, who later became a fugitive after being accused of looting what remained of the IOS empire.

In 1973 Cornfeld was accused by Swiss prosecutors of defrauding employees who purchased IOS stock; he spent eleven months in a Swiss jail before being freed on bond. He was acquitted of the charges in 1979. Cornfeld’s remaining years were marked by tax wrangles in the United States, various international business speculations, and an embarrassing conviction in California in 1976 for using an electronic device to make long-distance telephone calls without paying for them.

In 1978 Cornfeld married Lorraine Dillon in California; they were divorced in 1986 but amicably shared the upbringing of their daughter. Cornfeld also supported a second child, a daughter born out of wedlock. Additionally, he adopted a child, the daughter of a close friend.

By the 1990s Cornfeld had moved his base of operations to London. In mid-1994 he suffered a severe stroke while visiting in Tel Aviv; he was later transferred to a London hospital, where he remained until his death from pneumonia nearly eight months later. He is buried at the Edgewarebury Cemetery, outside London.

Cornfeld’s headline-making reputation as a jet-setter as well as his regulatory troubles obscured his genuine talent for financial innovation. He created the first rough prototype of a mutual fund with check-writing privileges, years before American funds offered that service. He developed one of the first “country funds,” an Israel fund that he opened in 1962. But perhaps his best-known innovation was the Fund of Funds, an offshore fund created in 1962, whose sole purpose was to invest in the shares of American mutual funds, a concept that was widely copied in the fund industry.

Cornfeld’s personal papers, according to his former wife, remained in the Chateau de Pelly when it was sold after his death and were disposed of by the new owners. An account of Cornfeld’s business life can be found in The Bernie Cornfeld Story (1970), by Bert Cantor. A less sympathetic but more complete account is provided in Do You Sincerely Want to Be Rich?: The Full Story of Bernard Cornfeld and IOS, an International Swindle (1971), by Charles Raw, Bruce Page, and Godfrey Hodgson. More limited information can be found in The ’70s Crash and How to Survive It (1970), by John F. Lawrence and Paul E. Steiger; The Go-Go Years (1973), by John Brooks; and Fidelity’s World: The Secret Life and Public Power of the Mutual Fund Giant (1995), by Diana B. Henriques. Obituaries are in the (London) Independent (1 Mar. 1995), (London) Daily Telegraph, Guardian (Manchester, England), New York Times, and London Times (all 2 March 1995). A brief commentary by Cornfeld is in The Way It Was: An Oral History of Finance 1967–1987 (1988), by the editors of Institutional Investor.

Diana B. Henriques