The Washington Post has received the following two communications concerning the IRIS series: International Research & Information Systems, Inc., a Fairfax, Va., company that presently provides word processing and marketing services, has used the acronym IRIS as a trademark for several years. This IRIS is not connected with the now bankrupt International Reporting and Information Systems (IRIS), which is the subject of this series. The World Bank, whose computers were pictured behind IRIS founder Anthony Stout in a front-page photo in Sunday's editions, wishes to make clear that there is no connection between Stout or his organization and the bank. CAPTION: Picture, IRIS founder Stout, posing with World Bank computers as background, indicates golbal reach of firm soon after launching. By Robert Sherbow/PEOPLE WEEKLY/Copyright (c) 1982, Time Inc..
It sounded as if one of Walter Mitty's loftier flights of fancy had come true.
You, a government official, banker or corporate chieftain, walk into your office, sit down at your video terminal and punch a few buttons. The screen lights up and the last 24 hours' "take" of significant political and economic information affecting your interests flashes in front of you.
It already is carefully sorted and professionally analyzed. No more complicated searching of data base; no more extraneous material, for this is information in an area you have specifically selected, and it reaches you automatically. There is a keyboard for you to talk back and a printer to print out.
Behind the dream, across the Potomac in Crystal City and Fullerton, Va., lies the substance. Humming, state-of-the art computers, rooms bathed in soft green light where optical scanners digest huge volumes of printed information, systems and software experts, translators and top-flight analysts, journalists and former senior government officials stand ready to serve you. World statesmen, such as Edward Heath and Robert S. McNamara, are part of the operation, ensuring impeccable quality control.
Beyond them, reaching into the far corners of the globe, scores of consultants and correspondents respond to your questions, giving you precisely what you need to know, when you need to know it. Shazaam! Your competitors might as well toss their Rolodexes into their briefcases and take early retirement.
Thus dreamed the men who created IRIS, which stands for International Reporting Information Systems, but also suggests the all-seeing eye and the fleet-footed Greek goddess of messengers.
IRIS was officially launched in November 1981. Fifteen months later it collapsed. During its short life it became more than a dream but something less than a reality; IRIS existed but it never went anywhere.
When the bottom line was examined in the Alexandria bankruptcy court, it was found that $15 million had drained away, $400 in revenue had come in (from an old-fashioned business consultation over lunch) and not a single client had been signed.
IRIS is the story of an enormously ambitious business venture put together by people on both sides of the Atlantic who thought they could cross new frontiers in the information world by using the latest communications technology.
The players were a diverse group, including the predominantly European investors whose "punting" money financed the venture, a former British prime minister and a former U.S. secretary of defense whose stature helped bolster its credibility, as well as senior officials recruited from the State Department and the CIA.
They helped make IRIS also a story of Washington, of the capital's growing magnetism in the world of information and communications technology, of the fascination the city holds for foreign governments, corporations and individuals alike, and of its bulging bureaucracies and its overachievers who, as they move into the fast lane, keep one eye on their peers and the other on greener fields to conquer.
The basic concept of IRIS was to gather, sort and analyze the vast amount of information floating around the world--thereby greatly increasing its value--and deliver it electronically to subscribers. The individual components of the service--news reporting and analysis, business consultancy and electronic publishing--were not new. Successfully combining them, and delivering the service to customers according to their prescribed needs, would have been a breakthrough.
IRIS computers, though they were large, were not unusual. What was special was the software, particularly the "syntactical algorithms," the brain of the software that enables the computer to "read" material and make key distinctions, say, between oil (petroleum) and cooking oil, or between Venetian blinds and blind Venetians. The software would sort the mass of information flowing hourly into the computer and direct it to IRIS clients on the basis of their specific needs built into the computer's programming. The key to the IRIS system was that, instead of you searching for the information, the information would be searching for you.
Thus a company interested in copper or oil would only receive information related to that subject. Similarly, a government, worried by the behavior of its neighbors, could profile itself to receive reports on those countries and nothing else. IRIS thus showed that it was conscious of the complaint that there was already too much information around.
IRIS began when David D'Ambrumenil, a London insurance broker, walked into Anthony Stout's downtown Washington office in the fall of 1979. Stout, a youthful, athletic-looking 43-year-old, is the founder and chairman of the National Journal, a much-praised Washington insiders' weekly focusing on government policy, and the Government Research Corp. (GRC), a business consultancy. Both operations were running reasonably well under the guidance of two efficient deputies, and Stout was bored.
D'Ambrumenil's proposition was simple and exciting. There was, he said, a large, unexploited market in the political risk insurance business. Underwriters lacked an independent and objective international information service on which to base premiums for corporations prepared to do business in many places, if they were properly insured against expropriation resulting from instability and political change. The unexpected collapse of the shah in Iran was still on many people's minds.
D'Ambrumenil's plan was to use a Lloyds of London insurance underwriter to lead the business. His calculation was that premiums based on the new information service would have a significant competitive edge. Commissions would be split between D'Ambrumenil, the underwriter and the information system. D'Ambrumenil estimated that IRIS share would amount to $200,000 monthly.
Stout, stressing that he could only discuss the historical aspects of the story because of continuing contractual obligations to IRIS, said after the crash that he agreed to invest in the venture. However, he felt it was a risky enterprise and made his investment conditional on being paid a management fee and on his own company, GRC, setting up the computer and analytical parts of the system. He and D'Ambrumenil estimated that $10 million would be needed.
By mid-1980, Stout was working full-time on the IRIS project, jumping on and off the Concorde jetliner, staying at Claridges, London's premier hotel, using his broad range of business contacts and his considerable charm to promote a venture that had become something of an obsession. With characteristic panache, he called the new venture "Project Grand Slam." A National Journal reporter, reflecting some of the skepticism among the magazine's staff, dubbed it "Project Titanic."
Stout and D'Ambrumenil had their greatest success in Europe with bankers, who were attracted by the information and high technology aspects, and with insurance companies that also were interested in the political risk business. These investors included the Henry Ansbacher group, a British investment and insurance firm; Seascope, a London insurance company; Skandia, Sweden's largest insurance firm; The Bank in Liechtenstein, owned by the prince of Liechtenstein; Banco de Bilbao in Spain and Fred Olsen, the Norwegian shipping magnate who also owns Timex watches and other high technology companies.
Stout had a personal stake, as did a wealthy Swede, Gustaf Douglas, who was to play a critical role later. S. G. Warburg, the prestigious British investment bank, brought in a final investor whose identity was never revealed to the others. He was known simply as "Mr. X," another investor said.
The investors were not a cohesive group but they all had some risk capital--their "punting" money, as one London businessman put it--available and a number of them were excited by the lucrative insurance business that Stout and D'Ambrumenil expected. Stout's vision of the new computer-driven information world was also tantalizing.
The investors, anticipating large profits, set up an elaborate network of holding companies in tax havens. One holding company was registered in the Netherlands, another in Curacao in the Dutch Antilles. Later, an investment company was opened in the British Channel Islands. The investors saw no point in paying unnecessary taxes for an international company.
The group only managed to raise $5 million, half of the total estimated necessary for the project, but they decided to go ahead and attract new investment as they went along. A contract with Stout's GRC to develop and manage the enterprise was signed. Stout was to receive $2 million of the projected $10 million spent over the next two years.
Back in Washington in the summer of 1981, Stout began recruiting his management team. He turned to the government, partly on the assumption that information processing systems that had been perfected by government personnel could be put in the marketplace by the same hands. Never having been in government himself, yet living in the government town, Stout, like his potential clients, seemed impressed by the people in the great state bureaucracies and the reputations they carried.
"Tony liked the idea of top CIA men and ambassadors working for him," said someone who knows him well. Their stature was regarded as important for IRIS credibility with clients.
Through contacts, friends and headhunters he selected his four senior managers. The first key figure to sign on was Lee Feldman, a 27-year-old with an IQ that went off the clock and a reputation for having performed marvels with computer software in the Defense Department. His task was to build and run the computer operation.
The communications technology that IRIS planned to use had been developed in the CIA and the Pentagon. There had never been an attempt to adapt it for commercial use before, and therein lay the challenge and the excitement of the enterprise.
Next came Barry Kelly, 50, who had spent most of his life in the CIA and had once been Moscow station chief. Kelly, a quiet-spoken, mild man was on the "up" escalator at the agency, but he took early retirement and was given the job of selling the IRIS service to governments.
Hired at the same time was Paul Boeker, 43, one of the State Department's bright young men. He had worked with former secretary of state Henry Kissinger (he kept a signed testimonial on his office wall) and had been ambassador to Bolivia. He took a leave of absence and was put in charge of the news and analysis operation.
The final member of the senior management to come on board--nautical analogies were popular at IRIS--was John Kulp, 38, who had worked with Citibank in Hong Kong and the Netherlands. Confident and ambitious, his task was to sell the service to corporate and financial customers.
The salaries were excellent. Boeker topped the bill with $112,500 a year; Kelly and Kulp received $100,000 each; Feldman was paid $65,000.
Stout deliberately went for people who had already shown promise, were relatively young and who were still moving up. They responded to his call because he showed them a glimpse of the new information frontier, offered them considerably more money than they had ever earned before, and freed them from the frustrations and servitude of giant organizations. It was a classic pitch: follow me along the primrose path to a new world of affluence and influence. It worked like a charm.
Stout rented large offices in Crystal City with a panoramic view of Washington. The original intention was to put the computers and analytical operation there together, but after the contract was signed, it was found that the ceilings were too low and the electric power too feeble for such an operation. Alternative accommodation for the computer was found 15 miles away in Fullerton, near Springfield. An office designer was hired and the premises lavishly fitted out.
IRIS products were to include a daily flow of news--from wire services, newspapers, journals, specialist newsletters and its own correspondents--and sophisticated analysis on political and economic developments in all the major countries of the world. The boast was that the computer would absorb 15,000 messages a day in eight different languages.
Naturally, the price tag would reflect the cost of such an ambitious operation. The annual subscription for corporations was $100,000 and for governments between $250,000 and $500,000.
Stout hit on the idea of a distinguished panel of international statesmen who would monitor and guarantee the quality of IRIS analytical products. IRIS needed, he told an acquaintance, some "silver hairs" to give it credibility. Charles Longbottom, a former Conservative member of parliament and Seascope's representative on the IRIS board, contacted Edward Heath, an old political ally and friend. Heath agreed to become chairman of the "International Advisory Council" (IAC), which had been hurriedly changed from its original title, "Council of International Advisers" (CIA).
Enticing a former British prime minister to lead this group was quite a coup for Stout, especially since Heath was instrumental in bringing in other big names, including McNamara, former head of the World Bank; Jean-Francois Deniau, a former French trade minister; Rodrigo Botero, an ex-finance minister of Colombia and Saburo Okita, former foreign minister of Japan. A leading Arab and African were sought to complete the international symmetry of the group but were never found.
Heath and McNamara made clear from the outset they were interested in the effect that a far-reaching and objective information service would have on the expansion of trade and investment in the Third World. The group's duties were to meet every three months and review IRIS analytical products. However, as with the rest of the IRIS operation, there was a heavy price tag. Heath was to be paid 50,000 pounds annually ($75,000 at current exchange rates) and other members were to receive $3,000, plus expenses, for each meeting they attended.
Back in London in the fall of 1981, Stout was preparing for the launch. He hired David Kingsley, an experienced London public relations consultant, who devised the title, International Reporting Information Systems (IRIS)--the staid investors balked at "Grand Slam"--and a geometric logo of a square of white dots with one red one below indicating the vital piece of information, among the morass, that IRIS clients would want. (The message did not always get through. Once when a Jordanian official was given an IRIS business card during a sales meeting, he glanced down at it, assumed the red dot was a splash of ink or dried blood, and spent the next half hour surreptitiously trying to scrape it off with his fingernail.)
In November 1981, IRIS was officially launched in London and Washington. A glossy brochure presented an appetizing menu for the "world's decision-makers." The "heart of IRIS" was a huge computer, its "soul" a staff of expert analysts in Washington backed by a worldwide network of IRIS correspondents and bureaus. Shortly after this, there was a picture of Stout in People magazine standing in front of a computer (it belonged to the World Bank), two terminals at his side and his hands wrapped around a globe.
The press reaction reflected confusion over exactly what IRIS was trying to do, skepticism over whether it could do it and a fixation with the alleged clandestine nature of the organization. The last seemed to have arisen from Stout's early assertion that what computer technology had done for the U.S. government and its agencies would now be available to the private sector and foreign governments on a strictly commercial basis.
The press on both sides of the Atlantic pounced on the "private CIA . . . spy firm" label and never let go despite countless protestations by Edward Heath--who was deeply embarrassed by this and the disclosure of his fee--that IRIS was a bona fide information service, open to all, that would encourage trade and investment throughout the world by disseminating accurate and timely news and analysis.
Within two months of its launching, the new ship was in trouble. Fuel was running out, there was a sense of drift and below decks there was a whiff of mutiny. The first blow was the collapse of the political risk insurance scheme that was supposed to net IRIS $200,000 a month. IRIS sources said that D'Ambrumenil failed to deliver what he had promised. D'Ambrumenil replied that Stout had failed to produce the information on which he was to base the business.
Amid mutual recriminations, the two men fell out, and D'Ambrumenil went back to insurance brokerage. The Lloyds underwriter, the third man in the triangle who was supposed to do the actual underwriting, sold his business and dropped off the scene. His name subsequently came up in connection with investigations of the scandals that have recently rocked Lloyds in London. When I spoke to him by telephone at his Geneva home last week, he said he was in "semiretirement and improving my golf."
On March 15 last year, I reported to Crystal City for my first day's work as IRIS Africa director. Having originally turned down the job, I had changed my mind, lured by the concept, the money ($75,000 a year) and the reassuring presence of other professional journalists. My task was to hire an editor, three analysts and a secretary to work with me in Washington, and then go out to Africa and sign up a large number of correspondents. A budget, I was told, would be worked out later.
There was a curious atmosphere, at once calm and disconcerting, in those comfortable offices. Three glamorous receptionists sat in the entrance lobby, which was decorated with flowering plants and some fine political posters, old maps and famous cartoons. A small group of analysts sat around talking. Interior partitioning work in the "newsroom" had stopped, half-finished, and a number of telephones sat on the floor waiting, it seemed, for cubicles to be built around them. Stout's office was empty, but the faint aroma of good cigars suggested a recent presence.
Boeker, my boss, was apologetic. There had been some problems, he said. There was a need for refinancing, a new business plan, some managerial changes. There would be a freeze on hiring. Meanwhile, I could go through the mountain of resumes on my desk, mainly from out-of-work Ph.D.s, including an audacious bid for a job from Dr. Eschel Rhoodie, the former secretary of South Africa's Ministry of Information who resigned in 1978 following a scandal of Watergate dimensions, who claimed he had always been anti-apartheid.
Washington's weather became unseasonably chilly during the next few days. So did the climate at IRIS. First, the three receptionists disappeared, then the office manager, finally an analyst. One morning, in the reception area, an IRIS veteran of three months standing grabbed my arm and pointed at the plants.
"Keep an eye on those," he said. "If they go, we're really in trouble. They're rented." NEXT: The coup against Stout