Paper chase

"So I said, 'Tell you what,'" Morgan recalls. "'I'll consider it on three conditions. Number one, if and when I get the money. Number two, if it's fully tax-deductible. And number three, I want a letter from a top-ranking member of the IRS, saying we've analyzed it, it's OK, and it's forever unauditable.'

"He told me he was going to meet with Clinton that night, and said, 'I want your permission to open discussions.' So I said OK."

Within the next eight days, one of the president's top advisors would fax documents that could be construed as advising Morgan and Meddoff on how to circumvent tax laws--and then, recognizing the slip-up, allegedly ask Meddoff and Morgan to shred the documents.

The trade in antique bonds is based on a simple premise: Someone, somewhere will eventually make good on paper orphaned by forgotten, bankrupt enterprises and overthrown governments.

Just who will pay up isn't clear, though Morgan isn't shy about offering suggestions.

"This is a trillion-dollar conspiracy, is what it is," says Morgan, spreading his wares on the Dallas Observer's conference table. "What we're dealing with are deadbeats. Deadbeat countries. Including our own."

On the table, carefully encased in plastic, are exact color duplicates of the two Saginaws that were to produce a historic contribution to the DNC. (According to the Center for Responsive Politics, a D.C.-based watchdog group, even Big Tobacco, the largest lump-sum donator to the '96 campaign, never contributed more than $3.8 million at a time.) Appropriately enough, they are a dark bottle-green--the color of money.

"I want you to see that I'm not holding anything back," says Morgan. He's upset about the way he's been portrayed in congressional hearings and the media. Senators have described Morgan publicly as "a bizarre, questionable individual [who] needs checking out." Even Vanity Fair, which interviewed him briefly for an article that ran in its September issue, described him as "a mysterious character whose stories don't always add up."

"That hurt me," says Morgan. Personable and seemingly sincere, Morgan is a familiar mix of shrewd operator, folksy aphorist, and naif. A near-genius at working people through offering friendship and trust, Morgan wants to make sure he's not caricatured here as a rich, crude ignoramus. "See? I don't have dollar bills coming out of my pockets," Morgan says.

From the living room of his rented, single-story Richardson home, Morgan runs Vaduz Limited Partnership, the business through which he peddles these old instruments. Dishonored bonds. Disavowed bonds. Defaulted, fit-for-use-as-wallpaper bonds.

Vaduz is named for the capital city of Liechtenstein, a tiny European nation renowned for its stamp museum and its banking secrecy laws. Judging from a list of his wares, though, Morgan's business might more accurately be dubbed Four Horsemen Trading. For Morgan's inventory reads like a catalog of the world's unnatural disasters from the past 150 years, the screw-you-I'm-not-paying paper left over from 19th-century railroad bankruptcies, Chinese revolutions, and German National Socialism, to name but a few of the calamities that have made Morgan's trade possible.

The Saginaws are typical. Organized in 1872 pursuant to an act of the Michigan Legislature, the Chicago, Saginaw & Canada Railroad was supposed to provide rail service from St. Clair, in eastern Michigan, to Grand Haven on Lake Michigan. In the grand tradition of 19th-century railroad robber barons, its organizers used their legislative fiat as a license to loot. Laughably undercapitalized, the railroad survived just four years before folding in 1876. Along the way the CS&C issued bonds, secured by a mortgage on the railroad's land. (Most went to insiders or were sold at steep discounts.) In 1882, a court-appointed receiver sold the land, and a special master appointed by a federal court determined the priority of the railroad's creditors. The bondholders were wiped out.

The leftover bonds are beautiful. They feature two intricate vignettes, artists' renderings of Bunyonesque railroad workers standing amid logs and of work-shirted, muscled men building a railroad depot. Behind them, also encased in plastic, is a "Certification of Authentication" issued by Fidelity Secured Deposit Corp., a Huntington Beach, California-based company that caters to this strange world.

Yet none of this explains why they might be worth $300 million. Asked why anyone would pay such sums for pretty but hardly unique financial instruments issued by a defunct railroad, Morgan smiles knowingly. "To some, they're just beautiful documents," says Morgan. "To some, they're live instruments."

At times, he is careful to cloak his beliefs. "It's like I told that prosecutor in D.C.," Morgan says, referring to his testimony last spring before a Washington grand jury looking into alleged campaign finance violations, "I'm not wealthy. I own a lot of instruments, and I don't know what they're worth."

At other times, though, he clearly suggests that the documents have more than just aesthetic value. Morgan shows the "Certification of Authentication" accompanying the Saginaws. It contains a bunch of half-literate hocus-pocus about how the documents were "authenticated," replete with grammatical errors, misspellings, and mysterious capitalization. After that comes a history of the CS&C that seems to track the line through a litany of railroad mergers and receiverships that culminates with the nation's largest railroad, CSX.