Bernard Cornfeld
Bernard Cornfeld was a prominent figure in the investment world, known for founding Investors Overseas Services (IOS), a major mutual fund sales organization. Born in Turkey and raised in Brooklyn, New York, Cornfeld pursued a degree in psychology at Brooklyn College before entering the financial sector. His career began in various roles, including a stint as a youth counselor and later selling mutual funds, which led to his establishment of IOS in 1955. Under his leadership, IOS became the largest mutual fund sales organization outside the United States and was instrumental in popularizing mutual funds as a viable investment option.
Despite his success, Cornfeld's career was marred by controversy. The Securities and Exchange Commission investigated IOS for regulatory violations, leading to a settlement that limited Cornfeld's operations in the U.S. Following IOS's collapse in 1970, he faced legal challenges, including fraud charges in Switzerland, from which he was eventually acquitted. However, issues with the IRS and other legal troubles continued to affect his life until his death in 1995. Cornfeld's legacy remains complex; while he contributed to the growth of mutual funds, his later controversies overshadowed his earlier achievements in the financial industry.
Bernard Cornfeld
- Born: August 17, 1927
- Birthplace: Istanbul, Turkey
- Died: February 27, 1995
- Place of death: London, England
American financier
Cornfeld established Investors Overseas Services (IOS), the largest mutual-fund sales organization outside the United States. However, his improper management of the company and battles with the Internal Revenue Service led to his imprisonment and the loss of much of his wealth.
Sources of wealth: Financial services; investments
Bequeathal of wealth: Children
Early Life
Bernard Cornfeld was born in Turkey, and his parents immigrated to the United States when he was three years old. The family eventually settled in Brooklyn, New York, where Cornfeld attended public schools and graduated from Abraham Lincoln High School. After graduation, Cornfeld served two years in the US Maritime Service. In 1947, he was successfully treated for stuttering, a problem he had had since childhood. He enrolled at Brooklyn College, where he majored in psychology and graduated in 1950.
First Ventures
Afer graduation, Cornfeld took odd jobs. He drove a taxicab for a while, and in 1954 he spent nine months in Philadelphia working as a youth counselor for B’nai B’rith. Cornfeld’s next job was selling mutual funds for Investors Planning Corporation in Philadelphia. He recommended that the company expand overseas, but after company officials declined his advice, Cornfeld left the firm and sailed for France, where he explored opportunities to sell mutual funds abroad. As a result of this trip, Cornfeld created his own mutual-fund sales organization, Investors Overseas Services (IOS), in 1955. Three years later, he moved his company from Paris to Geneva, Switzerland, and in 1960 he registered IOS in Panama. In 1965, Cornfeld purchased Investors Planning Corporation, for which he had once worked. Many of his business operations were beyond the surveillance of any country and outside the reach of many regulators.
Mature Wealth
Cornfeld’s company, IOS, became the largest mutual-fund sales organization outside of the United States and channeled hundreds of millions of dollars into American mutual funds. IOS expanded to include an insurance company, real estate interests, and offshore investment funds.
However, the Securities and Exchange Commission (SEC) investigated IOS and accused Cornfeld of breaking American laws governing mutual funds. He and the commission settled out of court in 1967. Cornfeld agreed to cease his operations in the United States and to limit his investments in American mutual funds.
Before IOS’s implosion in 1970, when its stock dropped from $18 to $2 per share, Cornfeld’s personal wealth was about $100 million, and the company had an estimated value of $2.5 billion. The board of directors of IOS forced Cornfeld from the company. Robert Vesco, the new head of IOS, embezzled $224 million from the company and fled to the Caribbean. Vesco later served thirteen years in a Cuban prison for producing and marketing a “miracle” cancer drug without the government’s knowledge.
In the early 1970s, a group of about three hundred IOS employees informed Swiss authorities that Cornfeld and company cofounders had pocketed part of the proceeds of a stock issue raised by employees in 1969. As a result, Swiss prosecutors in 1973 charged Cornfeld with fraud, and he was arrested while on a visit to Geneva. He served eleven months in a Swiss jail before being freed on a bail surety of $600,000. Cornfeld always maintained he was innocent of the charges, blaming the fraud on other IOS executives. His trial eventually took place in 1979 and lasted three weeks, with the judge finally acquitting him.
Cornfeld spent the rest of his life fighting the US Internal Revenue Service (IRS) after the agency accused him of improprieties regarding his tax payments. In 1976, a California court convicted Cornfeld of employing an illegal device to make long-distance telephone calls without charges. Creditors seized his Beverly Hills estate. In 1990, Forbes magazine reported that Cornfeld still owed the IRS $15 million.
From his Swiss castle, Cornfeld began planning a comeback and continued speculating on various international business operations. In 1994, he suffered a stroke shortly before Christmas and did not recover. His friends helped pay his medical expenses after he died on February 27, 1995.
Legacy
Cornfeld helped popularize mutual funds as an investment option. His mutual-funds sales company, Investors Overseas Services, was worth $2.5 billion before its 1970 collapse. He created the first mutual funds to offer check-writing privileges and the first offshore funds that invested in American mutual funds. His improper business practices, however, eventually eclipsed his accomplishments, destroying both his business and his reputation.
Bibliography
Cantor, Bert. The Bernie Cornfeld Story. New York: L. Stuart, 1970.
Colbert, David. Eyewitness to Wall Street: Four Hundred Years of Dreamers, Schemers, Busts, and Booms. New York: Broadway Books, 2001.
Henriques, Diana B. “Bernard Cornfeld, 67, Dies: Led Flamboyant Mutual Fund.” The New York Times, March 2, 1995, p. 10
Raw, Charles, Bruce Page, and Godfrey Hodgson. Do You Sincerely Want to Be Rich? New York: Broadway Books, 2005.
Solomon, Michael. "Forbes 100th Anniversary: A Century of Fakers, Fraudsters and Rogues." Forbes, 18 Sept. 2017, www.forbes.com/sites/msolomon/2017/09/19/forbes-100th-anniversary-a-century-of-fakers-fraudsters-bernie-madoff-jordan-belfort-martin-shkreli/#22f373542aff. Accessed 28 Aug. 2020.