by Clif Miller
Chapter 10
Peter and Angelique followed almost the same routine travel path that Jim and Peg had with the Air Alaska flight disembarking them by early afternoon at the San Francisco domestic terminal. They had plenty of time to pick up their car and drive to George Kuidel’s office where they were greeted as old friends.
While George set about making them comfortable and ensuring the computer was functioning he indicated to Peter that he had the previously mentioned wealthy clients coming in for an early meeting tomorrow when he knew the Australian markets were closed anyway so that Peter should be free to join them.
Later that day, Peter was able to place his first batch of sell orders on GLI and watch progress as the stock was taken up by the market back home. The stock price was fluctuating and he placed the sell orders towards the upper end of the usual swings and saw with pleasure that his ‘shares’ were readily absorbed into the daily flux. He was able to sell a second batch late on his first afternoon and then George looked in and said that his guests were planning to be in at 9 the next morning.
There were three gentlemen, a Mr George Rosenthahl, a Mr Isaac Eiesenhower and a Mr Joseph Mather. All three placed gold embossed business cards on the table in front of Peter and he reciprocated by handing a somewhat less decorated card to each of them. Angelique had had no need, to date, to have a business card and she felt a little out of place, but Peter happily explained that they were only recently married and that Angelique was new to the business. There was good-natured smiling all around. George Kuidel also sat in on the meeting.
George Rosenthahl led the meeting. He placed some professional looking documents on the table and flipped open his laptop to display on the wall a diagram of the proposal he was going to outline. In essence, he and his partners, now except for one all present, were merchant bankers who invested their own funds but also other people’s funds into structured investment vehicles known in the market as hedge funds. They were, he said currently growing the assets under their management and their present combined asset value was in the order of 6 billion US dollars.
Peter wrote a brief note indicating the value at 7.3 billion dollars Australian and passed it to Angelique.
“What proportion of these funds is investor’s money?” asked Peter.
“In other words what is the shareholder’s equity?” said Rosenthahl.
“Yes” replied Peter.
“The company is held by 15 shareholders and their combined equity represents approximately 25 percent of the net worth of the company’s funds” he replied.
“So you are holding about 4.5 billion dollars worth of independent investor funds?” reflected Peter, suddenly realizing that he had added the unnecessary. “Just thinking aloud ” he said.
“Yes and we pride ourselves on the fact that we have been able to produce investor returns according to this table” Rosenthahl said, flashing the table onto the wall.
Peter saw he was looking at a table that showed returns over five years, the lowest being 48 percent annual return on funds, and the best being 79 percent.
“These are astonishing figures, George” Peter said.
“These figures are the Hedge Fund returns only. The partners are in the position of receiving substantial fees prior to the shareholder receipts which of course the partners also receive” said Rosenthahl.
“Perhaps you can tell us more about how you have achieved such results?” asked Peter.
“I’ll ask Joseph to explain it briefly for you Mr Milner” said Rosenthahl, nodding towards Joseph Mather.
Joseph took a prepared file from his briefcase and opened it as if the question had been fully anticipated. He placed six individual sheets in front of Peter and Angelique and Peter saw that each was headed according to sectors of the market: cash and cash derivatives; mortgages and property; banking and insurance; oil; gold and general commodities. Under their respective headings were five columns corresponding to the past five years, and in each column was listed the total investment return for that particular year.
Peter and Angelique spent some minutes studying the tables of data and the group awaited their response.
“I’m very impressed with these performance tables” said Peter. “In fact I’m certain they’re well ahead of our performance in the same period.” Angelique assented to this by a nod of the head and indicated a level of awareness of the discussion that even surprised Peter. She said to Peg later that her participation was mainly bluff as she didn’t really understand much of the detail at all.
“What I’m having difficulty with” said Peter “is why you would want to have us on your team, if that’s what I take it this meeting is all about? From what I can estimate, your 15 shareholders have an average of 100 million dollars each in invested funds and yet you seem interested in our little group that probably would struggle to put twenty million dollars together at any one time.”
George Rosenthahl coughed lightly to clear his throat, then said disarmingly:
“It’s becoming more difficult for us to operate effectively in the United States with increasing regulatory scrutiny. As well, the shareholding structure in Australian companies is much more oriented to the retail end of the market where we can induce...” George then corrected himself “anticipate greater volatility that works to our advantage. Also, we see Australia’s much more open investment regulations as quite attractive to us but we do not have any members who could establish the firm there and give us a capacity to have feet on the ground in that market. George Kuidel has kindly drawn our attention to your partnership with Mr. Archer and to the very disciplined way in which you have been operating periodically between Australia and the United States and effectively deriving substantial profits at each point.”
Peter looked towards George Kuidel who got there first: “I want to emphasize that prior to this meeting there were no names mentioned, Mr Milner, and if you are not interested in this project than the matter will die at that point” said Kuidel, sensing that he may have breached the client confidentiality rules.
“I appreciate the response, George” said Peter. “So, getting back to the details, what exactly are you seeking from myself and my partner Mr Archer, or actually Mr and Mrs Archer? And my wife is also part of the arrangements” he added.
George Rosenthahl responded:
“We would like you to think about making a small investment in the firm, say five to ten million US dollars, and then committing your investment skills to the joint venture on an equity participation basis whereby the remaining members would agree to double the actual earnings rate of the group by way of additional equity for you and your partner year-on-year whilst you are part of the firm. There would also be a minimum retainer of 4 million dollars per annum for each of the principal partners, and all travel expenses and accommodation would be separately paid for by the group.”
Peter had never been offered anything remotely like this and was immediately inclined to accept the offer. He then realized that until he spoke with Jim he could not do so.
“Can I have the offer in writing to take back to my partner, Mr Archer? We’ll obviously need time to think it through” he said, still trying to digest the details.
“Yes of course” said Rosenthahl. “I’ll have Mr Kuidel draft the agreement for signature and when you are able to get together with Mr Archer we’d like very much to be able to welcome you aboard our new joint venture.”
“Oh” said Peter, “I will need a week or two to complete the task I came over for.”
“Yes, selling down your insurance company ” said George Rosenthahl, without a flicker while he watched for reaction from Peter.
“Did Mr. Kuidel tell you about that?” Peter responded, puzzled all the same.
“We know many things about what is going on in the market Mr Milner. Remember that is an essential component of our business model” Rosenthahl explained.
Peter did not know what to think about the last point but he thanked the grou
p for the meeting and the opportunity that had been offered, and said that he would be in communication with them as soon as possible.
On that and subsequent days, by working late in the day Peter was able to watch his sell orders on GLI, code for Jim being HNL, going regularly through on the Sydney exchange. By changing the sell price a little either way he was able to pick up on the competition between buyers for substantial quantities of the shares. Nevertheless it still took another three selling days before the holding guarantee was exhausted.
Again, the week-end intervened and he and Angelique decided to wait until Tuesday in Australia before starting the phone calls to the press and to some of the broking firms. He commenced the process on Monday evening San Francisco time and found that it was just as easy from California by mobile as from Australia itself, although he sometimes wondered if his contacts would pick up on the satellite delays or occasional echoes on the line. It did not seem to cause any serious problems however, and the Factsfair journalist was first to thank him and say that he had had the same thoughts of late.
By the end of the week the adverse press had commenced and the company had no time to shore up market confidence. By the following week the share price in question was dropping and again by the Tuesday afternoon in San Francisco Peter was able to start buying on a falling market. The company’s reassurance to the market had little immediate impact but before Peter could complete the task the shares had begun to climb and he had to compete to retrieve the last few thousand at prices not much below his sell point. Nevertheless, the whole operation had netted a tidy return and George Kuidel was left with the task of putting the accounts back into order. Peter told him that they would repatriate some funds to Australia when the money was available and asked him to deduct the Federal tax component and arrange for its payment in the usual manner.
Peter and Angelique arrived back in Sydney to a typical summer’s day with cumulous clouds in the sky and sudden thunder storms erupting upon the deck and pool areas to bring relief from the humidity. The winds accompanying the storms would buffet the high-rise that had its large picture windows exposed to the prevailing northeast gales. They had both managed reasonable sleep on the plane however, and as soon as he had showered and freshened up he was on the phone to Jim and inviting his brother and Peg to come for an afternoon debrief.
The short selling and buying back of GLI having gone quite well, and funds to be in the bank within days, the order of business turned to the proposal from the hedge fund equity partners.
“They’ve put the offer in writing mate” said Peter, anticipating a positive response from Jim.
Peg was first to reply however:
“Jim’s just had a bit of a shock at the doctor’s Pete. He’s been diagnosed with high blood pressure and a prostate problem. The doctor asked him if he has been doing anything unusual of late and of course we said that there had been quite a bit going on in the investment scene. Also, we’ve just got the house sold and we’ll be looking for somewhere to live as we need to move out in four week’s time. So, I don’t think we should take on anything as demanding as this now, do you?”
Peter was clearly concerned for his older brother and dropped the whole matter.
“No, we should rest on things now, especially since we’ve already made enough to live on comfortably for years” he said.
“That’s been my feeling for a while” confessed Jim. “I couldn’t put my finger on it but it was just that I was becoming a bit jaded, if you know what I mean?” he continued.
“Yes I do” said Peter.
“So what are you looking for as far as a pad to enjoy your loot goes, mate?”
“We want a view of the Harbour and it’s got to have some outdoor space at least for some flowers or shrubs as well as a pool that does not have to be shared with anyone else” Peg said.
“Okay, I’ll call a mate in the business and let’s see what he can find for you” said Peter solicitously.
“Alright, thanks” said Jim, glad to have one less thing to think about immediately.
“So as for this little proposal from George Kuidel’s friends in the States, we’ll just forget it then” said Peter. “Shame though” he continued, “four million in salary plus expenses and travel, plus double the equity earnings was a pretty handsome deal, mate” and he knew he had pressed too hard.
A long silence followed. Angelique refilled their coffee mugs and commented that she thought it would have been quite exciting. In the finish, however, Jim and Peg prevailed.
“I just don’t think I’ve got the stamina for it any more Pete. It’s been a lot of fun to this point but really we have heaps of money now and you never know how long you have to live. Why don’t we just live for now and forget all this high powered stuff, eh mate?” said Jim.
“You’re right,” said Peter “just like old times eh?”
It was too late that day to call the San Francisco office of George Kuidel but by nine o’clock the following morning Peter had made the call, thanked George for his efforts and declined the offer on behalf of all the members of their group, feeling no obligation to mention the reason for not joining the group.
The following day was Friday, and at about 4 pm Peter’s apartment phone rang.
“Harry Goldsmid here” the voice on the other said and Angelique said she’d get Mr. Milner.
“Yes Mr Goldsmid” responded Peter, wondering why a public servant would be so active late on a Friday.
“I would like to come around to your apartment a little later in the day Mr Milner. There’s a few questions I’d like to ask you about your recent trip to the United States.”
“Of course, Mr Goldsmid” replied Peter. “What time would be suitable?”
“Shall we say about 6 pm Mr Milner?”
“Yes that would be fine Mr Goldsmid” he replied.
Peter did not know why, but he had some sort of premonition that things might not be ‘fine’. He was right.
Harry Goldsmid arrived at the apartment punctually at 6 pm and Peter noted that he had his private motor vehicle this time; there was no government licence plate. He had also parked some little distance up the street when there was actually a good parking space right in front of the apartment block, Peter noted.
Harry entered, carrying a briefcase and Peter decided to invite him into the main living area.
“A very nice view of the Harbour you have, Mr Milner” he said by way of pleasantry.
“Yes, the fruits of a long working life” said Peter, and then felt foolish for so saying.
“I’m a little surprised to see you on your own” said Peter. “Is Mr Jenkins not working this evening?”
“No, I sometimes work alone” said Goldsmid, sensing that Peter also smelled something a little out of the ordinary. “As a matter of fact I have a number of things to tell you that might be best for your ears alone, Mr Milner” he continued.
“Like what, exactly” said Peter.
“Well like this. We know a great deal more about your enterprise in the last few years than you might care to tell us about” said Harry.
Peter felt the floor just about give way beneath his feet. He had never contemplated being caught. All the perfidious deeds he had done to cause companies to implode crossed his mind, not in any particular order but just because they were all likely to be brought out for an airing. It also crossed his mind that spending the rest of his days in prison was now more than a remote possibility.
Angelique had been listening from the adjacent kitchen. She moved through the room as though a ghost and was already contemplating going outside to telephone and warn Jim that they were onto them.
“There’s no point telephoning Mr Archer ” said Goldsmid. “We know about his role as well” he said, at which point Angelique returned to sit in the armchair opposite Peter.
“So what exactly do you know?” said Peter, for want of something to settle his nerves.
“Well we know about your first effort in
the UK regarding the foot and mouth virus outbreak that cost billions of pounds” said Goldsmid and sat watching Peter for reaction.
“How did you know about that?” said Peter, as good as admitting his role.
“We have informers in many places” said Goldsmid, but in this case we were able to trace something you left behind when you visited the experimental laboratory in Leeds. It took us more than two years but we did eventually get a link to yourself and then some further confirmation that I will not go into here.”
“So why haven’t I been arrested yet?” said Peter.
“All in good time” said his interrogator, but there was a chink of light that Peter was astute enough to see.
“Would you like also to know what else we know about you?” said Goldsmid, to which Peter’s response was a resigned nod of the head.
“Well, we know about the mad cow thing in California or should I say in Washington State which you have never visited?” stated Goldsmid evenly.
Peter now feared not only for himself but for Jim and Peg.
“Yes, unfortunately your friend over there, Wally, was shot by an armed robber but before he died he confessed to a Priest that he had had a role in a certain nefarious activity and was seeking forgiveness. Of course the matter was important enough for the priest to have the good sense to break the confessional oath of silence and tell the authorities so that the damage could be limited” Goldsmid continued.
“So I expect we’ll be charged with bio-terrorism” said Peter, feeling far more unsettled than he hoped he appeared.
“Not necessarily, Mr Milner” said Goldsmid. “I have been kept very well informed of the last few visits you and your bother have made to the United States. I know, for example, that you were made a very generous offer to work with a group of investors there.”
“How did you know who my brother was?” said Peter.
“Whenever people are questioned we look up their taxation details and trace them back as far as we can. In your case and that of your brother, albeit a man with a surname that differs from yours, it was easy to put the puzzle together. So you should introduce Mr Archer as your brother next time you meet officials, it will be so much easier for you all.”
Peter had never been in a situation remotely like this before. Even when he had had to argue his way out of speeding or parking infringements it had been just a matter of skill. Now, he was truly in trouble and he knew it. He could see the long years of prison cells, prison meals, prison bunks, prison and more prison ending his life. Near to dead panic he looked at Angelique whose head was down with her face white as a sheet.
“So what happens now?” said Peter.
“Well now, it all depends upon yourself and upon Mr Archer. My contacts in the United States inform me that you and your brother are very skilled at making things happen on the share market. I understand that you have been made a very generous offer to become jointly involved with some people in a partnership that could only be of benefit to all parties, yet you have declined this offer” replied Goldsmid.
“Yes, we did this for personal reasons” volunteered Peter, sensing the direction of the discussion. “You see, Mr Archer, my brother, is ill. He is not able to keep going back and forth to America and doing the share trading that we have been doing. His doctor says he must slow down and take life easy. He is 67 years old you know.”
“Well, yes we know how old he is but we did not know about his state of health” said Goldsmid. “You’ll have to let me have a talk with my associates about this. Unfortunately it is now a religious holiday in America and it will not be possible for a few days. I am going to ask you all to surrender your passports to me so that you cannot leave the country before a decision is made regarding the next step. I will also call on Mr and Mrs Archer and ask for their passports this evening.”
Peter provided his passport then Mr Goldsmid also asked him for his wife’s passport. Both having been handed over, Harry said that he would call Mr Archer’s number and ask him to remain at home until he visited to collect the passports later in the evening.
As soon as Goldsmid had departed Peter rang Jim’s number and the phone was picked up by Peg.
“Bad news I’m afraid. Goldsmid from the Prudential office is coming around to collect your passports. They seem to know a great deal about what little contretemps we’ve been up to. Don’t admit to anything. Just say you want a lawyer or some such, but give him the passports, okay Peg?” said Peter.
Jim came on the extension phone and said:
“What’s up mate?”
“It’s as bad as it can get mate” said Peter, “they know all about the mad cow thing, all about my little go at foot and mouth in the UK, and I guess pretty well everything else we’ve done.”
“You never told me about the foot and mouth thing” said Jim, and Peter was only too aware of how his brother’s blood pressure was even now on the rise.
“No mate, best left unsaid” responded Peter.
“What else do they know?” asked Jim, despair not far away.
“I don’t know for certain but I reckon they know how we sunk the share price of To Your Health as well. They seem to have been keeping pretty good tabs on me for a long time. Damn sorry to have to break it to you like this, mate” said Peter.
“I got a phone call from Goldsmid. He’ll be around in about an hour. I thought he was just fishing again” said Jim.
“No mate. If he asks you something tell him the answer. Best way. But don’t volunteer anything. What little he doesn’t know we might just keep to ourselves” advised Peter.
“I’ll let you go. Chin up. Might not be so bad” said Peter.
“But it probably will. Bye” said Jim, the world around him beginning to crumble.
Goldsmid called at the front door, explained to Jim that Jim already knew why the passports were being confiscated, suggested Jim might want to keep them advised of any change of address given that there was a ‘sold’ sign on the realty notice in the front garden, and left as quickly as he arrived.
Jim and Peg tried to comfort each other but the tears came all too readily.
“I knew I should not have listened when Peter first asked me to get involved” said Jim, “now you’re involved and all.”
Peg remained stoical but she was furious as much with herself as with Peter, and especially that all now stood to be lost.
“I wonder what prison really will be like?” she said.
“I’ll tell them you had nothing to do with it” said Jim.
“I don’t think they’ll really believe you” Peg replied.
The week-end was spent in multiple bouts of self recrimination for Peter and Angelique as well, Peter assuring Angelique that he would plead innocence on her behalf. Peter called a legal friend but when he told him the general area of alleged criminal conduct he said he’d get a more specialized acquaintance to give Peter a call. The new legal man said he did not want to know any details, and certainly whether Peter had actually committed any offences or not. He just wanted details of what Peter had been told, and in the finish that did not amount to very much.
“Right, well wait until you are charged with some specific offence, then give me a call and we’ll take it from there. Admit to nothing. Just advise them that they’ll need to have me present if they are going to question you further.” With that, he was gone.
The wait was agony. On Monday, nothing untoward occurred but Peter felt strangely naked without his passport. Jim and Peg came over for a chat but in the absence of any more developments they headed home late in the day in a cheerless and anticipatory mood.
After 8 pm on the Tuesday the doorbell to the apartment rang and it was Goldsmid, dressed in casual attire and looking anything but official. Peter asked him in and then remembered the legal advice.
“I’m not supposed to talk to you without my legal representative present” he said.
“In view of what I have to say it might be a good idea not to have your l
egal representative present ” said Goldsmid.
Making himself comfortable in the living room, Goldsmid said that he had visited Mr Archer and taken possession of his passport. He then said:
“I’ve had a discussion with my colleagues in the United States regarding Mr Archer’s disinclination to become a part of the hedge fund consortium as proposed to you on your last visit and they have said that providing you are willing to cooperate with the scheme that Mr Archer’s role is not essential.”
Peter was astonished.
“Just whom are you working for Mr Goldsmid?” he said.
“I’ve told you that previously. I work for the Prudential Regulation Authority in Canberra, although my office is in Sydney. What I have not told you is that one of the party you met in America, Mr Rosenthahl, is my first cousin and we have always worked closely together” Goldsmid replied.
“So you’re part of the hedge fund consortium itself?” said Peter, incredulously.
“Yes, I hold one of the substantive partnerships” said Goldsmid. “You would have found my name there had you studied the list of names that was shown you when you were in George Kuidel’s meeting room.”
“Isn’t what you are doing illegal, or a conflict of interest?” said Peter.
“Both” replied Goldsmid “so now we have something on each other, so to speak.”
“Why tell me all this?” said Peter.
“Because my hands are not as dirty as yours Mr Milner. All I’ve done is put my job in Sydney at risk, and I can drop that any time I wish. As for you, I’d expect the jail terms for each offence would keep you locked up for most of the rest of your life” said Goldsmid in a somewhat rehearsed fashion.
“So why this meeting and what do you want from me?” asked Peter.
“As I said during the last visit, my colleagues have been impressed by your skills, shall we say ‘in the field’ and they would like very much to avail themselves of those skills. They are also disappointed that Mr Archer will not be joining you but they will need his assurance that ‘silence is golden’ if you understand my meaning.”
“Are your friends likely to harm my older brother?” asked Peter.
“Not while they have your co-operation” replied Goldsmid.
“I assume the Prudential Regulation people have files on myself and my brother?” asked Peter.
“Yes” said Harry, but they’re under the control of my Department. At present they’re marked ‘inactive’ and ‘redundant’ and housed where they will not be disturbed unless something were to happen to me.”
“That’s very clever of you Harry” said Peter, relief continuing to flood his mind. “So if we get along together in this little venture we both have nothing to fear from each other. Is that the picture?”
“Yes, it is, but don’t forget the whole syndicate is aware of your history as well Peter. I would not want you to run afoul of any one of the group if you understand my meaning” this latter said emphatically and without any sign of emotion.
“So they will want me to work on the same terms as they outlined when I was in America?” said Peter.
“They might wish to renegotiate the terms a little” said Goldsmid.
“Will I be working mainly in America or here in Australia?” said Peter, sensing the noose tighten ever so slightly around his neck.
“The consortium was serious about opening an Australian arm, Mr Milner. I think much of your time might well be spent in Australia but not necessarily in Sydney ” Goldsmid replied.
“Would you like to tell Mr Rosenthahl that I’ll accept in principle subject to confirming the written agreement between us?” Peter said, hoping he didn’t sound as unsure as he felt.
“I will do so tomorrow Mr Milner, Peter, if I may be so bold ” said Goldsmid. He then followed with:
“I would very much like to toast our new working relationship, perhaps you have some whisky?” he said.
Angelique was the first to move. Stunned at the turn of events, her hands were still shaking when she poured three half glasses.
“To our new joint venture, Peter” said Goldsmid, raising the glass. Peter raised his but was too stunned to make a toast of his own.
When Goldsmid had gone Peter smiled weakly at Angelique and then reached for the telephone.
“Jim’s not well, Peter” said Peg. “He’s asleep as far as I know.”
“No I’m not” came the voice on the extension phone. “What’s up, mate?” Jim asked.
“You won’t believe it. Goldsmid is one of them. He’s a partner in the consortium. He still works for the Prudential Authority as well, and they know damn well what we’ve been up to. But Goldsmid is a two-timer and he makes his money out of bent people like you and me” Peter replied.
“It never ceases to amaze me how many crooks there are in this world” said Jim, before reflecting a moment and then laughing with relief.
“They have agreed that you don’t need to contribute mate. They accept that you’ve been pensioned off” said Peter, feeling considerable affection for his older brother. “You and Peg just go ahead and buy yourself a nice pad somewhere and we’ll keep in touch along he way. They have my assurance that you are no threat to them.”
“Your real estate guy has already been in touch Pete and he’s taking us around a few places tomorrow. You never know, we might end up neighbours after all” said Jim.
“I should say I hope all this doesn’t come back to bite us, mate. Anyway, I’ll be in touch soon” said Peter.
When he rang off, Peter realized just how much he had come to depend on his older brother, and truly wished he did not have to face the next phase of his working life under the threat of exposure for his dubious undertakings in the past. He felt about as trapped as it was humanly possible to feel and was filled with dread at thoughts of what lay ahead for both himself and for Angelique.
The double agent Harry Goldsnmid reminded Jim of some individuals with whom he had worked in the university system; quite ruthless and incapable of distinguishing right from wrong under the best of circumstances. He decided to make his own arrangements to keep abreast of what was going on between his brother and Goldsmid. Within a few days he had made another social visit to Peter’s apartment and during the erstwhile relatively relaxed discussion of events current and past managed to place two very small and unobtrusive listening devices within the apartment. These were attuned to a high frequency receiver that he stowed through an air vent in the main bathroom and this was capable of sending a signal to his high frequency receiver so that he had a listening capability at least where the main business discussions in his brother’s apartment were concerned.
