Like a general planning an invasion, Lake was a master at setting an objective and then designing a vast, convoluted, sweeping series of trades to accomplish his ultimate objective--what he called the "perpetual motion machine." Create a series of deals, contracts, and companies whose income and assets always exceeded the expenses and liabilities. Create a network, an empire, that was totally self-sufficient, that made contracts with itself, earned money off itself, paid expenses to itself, owed money to itself. It was a true "money tree," the modern day answer to Midas's touch of gold.
Lake was a master at this kind of deal-making.
After getting an undergraduate degree from Rutgers and an MBA from Harvard, Lake had spent his early career in middle management with a variety of companies and brokerage firms specializing in "creative" financing, long-term corporate debt (junk bonds), and market speculation. In 1980 all the real estate acquisitions. Then, in 1985, Lake engineered an insider trading scheme in which the price was artificially jacked up in a bidding war between Universal Equity and a company secretly funded by Lake. Lake was fired, but his illegal activities were never confirmed by Universal.
Since leaving Universal, Lake worked in a variety of financial and stock trading positions before finally striking out on his own.
"We're still in business, and we've got plenty to keep us afloat for months," Fell said finally, standing up to Lake's glare. "Let's maintain the proper perspective here. Who the hell knew some nutcase in San Francisco was going to wipe out half of an international airport terminal and kill five hundred people? Plenty of investors lost big on this one, boss, including Mcsorley. It's a glitch in the market, that's all. Everyone in that investment consortium that bailed out on you this morning will be back in a few weeks, looking for fresh meat.
They'll know they looked bad when they punched, but they'll come back because you made it happen. We can soak them when they come back, too, because they lost face by bailing out on you." Ted Fell was one of the few people, in fact the only one, who could really talk to Lake like this. Blunt, no bullshit. But that was because Fell was the best addition to the organization that Lake had made. He complemented Lake's own strengths and made up for Lake's weaknesses in other areas. A graduate of Dartmouth College and Harvard Law School, Fell had held several positions with large law firms in Albany, Wilmington, and New York City, most in the areas of finance, insurance, and corporations. Admitted to the bar in sixteen states, he was considered a leading authority on corporation organization--i.e dummy corporations and offshore shells. He had worked for Lake since his days at Universal Equity, helping him on his real estate deals and then unwittingly, and then knowingly, participated as an engineer in the stock manipulation scheme that had gotten them both fired.
Lake wasn't totally listening to his attorney, but what little that did register in his head made sense. The terrorist bombing of San Francisco International last night was an aberration, a total fluke-damn it, it had to be, or Lake was really sunk. Several hundred persons dead, thousands injured, hundreds of millions in damage to aircraft and property, and perhaps billions in lost revenues due to the closing of the airport for perhaps as long as a year.
A one-in-a-million occurrence.
But the damage to Lake's portfolio was just as devastating, and simply because it was caused by a random event would not mitigate the damage.
Because he rarely used his own money for most deals, Lake liked trading on the edge, leaving himself uncovered for short periods of time. One of Lake's favorite options trading tactics was writing uncovered put and call options, or "naked options," in which he agreed--for a price of course-- to buy stocks at a certain price that he didn't have the money to buy, or sell stocks that he did not yet own.
In ordinary circumstances, the premiums received for writing such contracts made the risk well worth it. But if the market takes a nose dive and the contract is assigned, as it was during the night by some astute overseas investor, Lake was obligated to sell his stocks at low prices or obligated to buy stocks with cash he did not have. In both cases, he needed cash in a hurry to cover all his contracts.
Normally, in case of impending bad financial news, Harold Lake's overseas brokers usually executed closing purchase transactions that canceled the more risky uncovered options before they were assigned, but the sheer speed of the terrorist attack and the rapid reaction by overseas traders made it impossible.
Lake was stuck holding all the IOU'S, and they were all due and payable by close of business, or he was out of business. The huge drop in price of Lake's stocks in overseas trading alone was enough to queer several other deals in which he was involved. The New York Stock Exchange was not due to open for another three hours, the Chicago Board of Options Exchange not for four hours, and already Lake had lost 40 percent of his portfolio's value, much of which had to be covered with cash. Dozens of nervous overseas investors bailed out on him through the night, withdrawing money that had been earmarked for scores of other projects--it was a huge maze of dominoes collapsing as quickly as the sunrise moved across the planet.
Investors heard of the awful terrorist bombing, took defensive cash-saving positions, and left speculators like Lake sucking wind.
Borrowing the money to make up for the losses and to continue his current obligations only prolonged the inevitable. Eighteen million dollars wouldn't last Lake two months, even at zero-percent interest, let alone at an exorbitant 10 percent. Foreclosures and bankruptcy were inevitable.
But even more devastating than just losing your possessions or property was the loss of prestige, the loss of face. Normally talking about losing face was a japanese notion, but it is very true on Wall Street as well. You are only as good as your last bad trade, the Street version of the old saying goes. No one likes a loser, and the stigma stays with a trader for a long, long time.
Technically, he was out of business right now, because no one would ever do deals with him again, but now it was a matter of survival.
Bankruptcy was out of the question--it would save him from a few, but not the ones that mattered. A lot of the people he dealt with did not allow anyone to hide behind lawyers and bankruptcy courts.
Lake took a deep breath, then got to his feet, straightened his shoulders, and tightened his stomach and chest muscles until they tingled. When faced with adversity, he was always taught, get the blood running and the brain working. Start thinking and feeling like a warrior and you'll start acting like a warrior. It was time to get on the offensive: "I'm going to need a face-to-face with George Jacox and get a report," Lake said. Jacox was the outside tax attorney and accountant, leading a staff of two attorneys and six CPAS who managed Lake's affairs. "I need to restructure that debt with Mcsorley first thing." "George is in Alaska on that hunting trip," Fell reminded him.
"Completely incommunicado until Saturday. I can get in contact with his partner." "Scherber's an asshole," Lake said.
"Besides, George knows where all the bodies are buried. Get the jet and go pick him up.
Better yet, pack all his records on a portable computer, grab a satellite transceiver, and take it all to him. Then let's put in a call to--" "Boss, I think our first move should be to sign those papers and get the loan moving," Fell interjected. He wasn't about to tell Lake, at least not this minute, that they could hardly afford to reserve a court at the YMCA right now, let alone fly the company's private jet from New York to Alaska and back. "We've only got two hours before the last wire transfer from Europe. In an hour and a half the phone's going to be ringing off the hook, and we'd better have a wire receipt to show the institutions that we're covered or we'll really be in trouble." "I am not going to spend all day on the phone with a bunch of nervous bean-counters," Lake said. "They wanted to play, and this is part of the game--let them sweat for a few hours while we get our shit together here. Next time, Jacox doesn't leave the fucking city without a cellular phone or I'm finding a new legal team." "We don't needjacox to read a spreadsheet or make a pitch to the ventur
e capital types," Fell said. "I can handle the legal side of the opening negotiations. But let's get solvent first before we start bending anyone's ear." "You don't get it, do you, Ted?" Lake snapped, turning angrily toward his longtime associate. Lake was a bit shorter than Fell and physically smaller, with tight, wiry muscles and a lean physique-physically, he was no match for the huskier, more solidly built attorney. But the air of desperation that hovered around Harold Lake made him seem all the more fearsome. The veneer of cunning control was gone--as much as he tried, Lake was not going to get it back.
He ranted, "I am not going to go into eighteen-million-plus dollars in debt, get bombarded by jerkoffs who think they can push me around because the market takes a header suddenly one morning, and then try to pretend everything is going to be okay.
This is a glitch in the market, nothing more. We're in the middle of a sustained bull market, for God's sake! The market hits new record-high territory every three months! Is it my damned fault that a fucking terrorist drops a bomb on San Francisco International?" "Take it easy, boss..." Fell tried.
The phone on Lake's desk rang--the onslaught of inquiries that Fell was expecting was now beginning. "Tell whoever it is to fuck off," Lake hissed, returning to his desk and resuming staring blankly out the window. Fell answered the phone, leaving instructions that Lake not be disturbed and that he would handle all calls himself.
"Get out, Ted," he told his assistant from behind his chair. Fell was going to stay despite his boss's obvious anger, but when Lake appeared to be looking over the loan papers and getting back to work, he relaxed a bit and departed.
The bombing of San Francisco International by some crazed lunatic gunrunner may have been a random, completely unforeseen event, even an accident. But one thing Harold Lake knew for sure was that it could very easily happen again. Yes, a lunatic was behind it.
... and Lake, like the rest of the world, knew who he was.
Options trading was not the only kind of trading Harold Lake did.
Some of the "institutions" he worked with were not listed on Standard and Poor's or Dun and Bradstreet, and some of the CEOS and investors who paid him generous commissions and maintained fat accounts with him were not in any issue of Who's Who unless that publication had a version on underworld figures. His biggest secret client was none other than Henri Cazaux, the one responsible for the financial mess Lake was in right now. Lake had never planned on getting involved with men of this caliber. He was far too vain and far too much of a self-preservationist to risk dying at their displeasure.
But back in 1987, after being fired from Universal Equity and trying to strike out on his own, Lake kept getting approached by smugglers, hoods, and eventually bigger fish like New York-area mob bosses.
They could smell a hungry, smart manipulator of cash, but Lake did all he could to resist their overtures. Until the market crash of 1987.
It was then that Harold Lake, fully exposed in all his investments, took a nose dive and lost millions overnight. After that, needing quick cash in a hurry, Lake began to see the appeal of laundering money. He made a few contacts, and before he knew it, drug money was reinforcing his investments.
Lake stayed solvent and slowly began to get completely immersed in the science of laundering money.
In 1991 Henry Cazaux stepped in and demanded Lake handle all of his accounts.
It was an offer, as the saying goes, that Lake couldn't refuse.
Unless, of course, he wanted a bullet in the head.
Cazaux was different from your typical sociopath. He was power hungry, and a megalomaniac, and definitely psychotic, and very smart. Each of his various identities all over the world lived in completely legal surroundings, with proper books, properly filed tax returns, and proper documentation. True, only a small percentage of his total net worth was ever reported, but the funds and the persons that existed aboveground were squeaky clean, thanks to Harold Lake and others like him in other countries. He had to track down the sonofabitch and tell him to crawl back into his Mexico hideout, right fucking now, or his source of legitimate, laundered money was going to dry up.
The first thing Harold Lake did was pick up the phone and dial a tollfree number that connected him to a private voice-mail system that was untraceable either to himself or to his calling party. In case someone tried to trace the call, they'd reach a computer with two thousand names and addresses, and if investigators showed up to try to track down the names, they could be erased from computer memory in seconds. In turn, the voice-mail system connected him to a private paging service, again untraceable. Lake entered just three numbers on the pager--911--then hung up.
He then looked over the loan paperwork. Fell had placed Post-It Notes on several important or critical areas of the contract that he had changed or that required special consideration, but his final recommendation was to sign. Reluctantly, Lake did so, adding the words "I hope you choke on it" under the signature line. He then punched his intercom button to Fell's office: "The loan papers are ready, Ted.
Come get the fuckers." Just then he heard a faint beep coming from a desk drawer. He opened the drawer and retrieved his Apple Newton P.d.a (personal digital assistant), a handheld computer about the size of a paperback book.
The P.d.a had a built-in wireless network system that allowed him to receive packet digital messages anywhere in the world, communicate directly with other computers, or send or receive fares.
He activated the P.d.a and called up the messaging system, entering a password to access the secret message area. The message read simply, OWL S NEST. RIGHT NOW.
Stunned, he all but leaped to his feet, then put on a jacket, slipped the P.d.a computer into his jacket pocket, and left the office via the back door as fast as he could.
Beale Air Force Base, Yuba City, California That Same Time Colonel Charles Gaspar, operations group commander of the 144th Fighter Wing (california Air National Guard), asked, "You're standing there telling me that you're sticking with this cockamamie story, Vincenti?" The tall, slightly balding officer got to his feet, circled his desk, and stood face to face with Lieutenant Colonel Also Vincenti.
The veteran Vincenti defiantly followed Gaspar's movements with his head and eyes while remaining at attention, which angered Gaspar even more.
The men were of equal height, but Gaspar was several years younger rank, he couldn't intimidate the older veteran fighter pilot.
Gaspar had less than half of Vincenti's flying hours, and the adage that Vincenti had forgotten more than Gaspar had ever known held true-and everyone there knew it.
"Call me on it, Chuck," Vincenti replied hotly. "Try to refute any of it. You'll lose." "Don't challenge me, Also," Gaspar said angrily. "Don't even bother trying. They don't need me to help throw you to the dogs-you've done that all by yourself. The FBI has taken over this case, and the first head they want is yours. So you better straighten out your attitude." Gaspar took a deep breath. It was important for Vincenti to stick to his story--if he couldn't make Gaspar, his longtime friend and wingman, believe his story, no one else was going to believe it either.
"You maintain that your last order was to pursue Cazaux, that you believed that the order to land at Beale meant land only when your fuel condition warranted or if you could not reestablish contact with Cazaux. Is that correct, Also?" "That's what I wrote in my report." "The controller's tape says otherwise." "My gun camera tape shows that I acknowledge the order to pursue." "Played side by side, the tapes don't jive, Also," Gaspar said.
Although military aircraft did not have cockpit voice recorders, the F's heads-up display system used a color videotape system to record gun camera video. The system, which also recorded radio and intercom conversations and copied flight and aircraft performance data like an airliner's inflight data recorder "black box," was often used by the pilots to record significant events inflight as well.
"We hear you acknowledging orders that we never hear on the radio.
It looks like the tape's been
doctored, or that you simply fake receiving orders to pursue." "So now I'm being accused of falsifying orders?" Vincenti asked.
"Looks like I'm being set up to take the fall for this entire incident.
Henri Cazaux blows up two airports and kills hundreds of persons, and I'm to blame.
Wonder how the media would react to this?" "You're prohibited from talking with the media." "If the Air Force tries to court-martial me for what happened last night, Chuck, I'm spilling my guts," Vincenti said angrily.
"I'm not bullshitting you. I've got a copy of the H.u.d tape, and I'll give it to every TV and radio station I can think of." "What the hell's with you, Also?" Gaspar exclaimed, his voice serious now, searching his friend's face with a definite edge of concern--Vincenti usually was not evasive or secretive at all.
Claiming he had an engine malfunction, Vincenti had landed all the way back at Fresno Air Terminal instead of at Beale Air Force Base, as he had been directed to do. Although Fresno was closer and was his home station, he had plenty of gas to make it to Beale as he was ordered.
As the F-16 pilots do every mission, Vincenti pulled his own mission videotapes, and he had it in his possession when he was met by a representative of Fourth Air Force's Judge Advocate General's office about two hours later. The jag officer confiscated the videotape, supervised a blood-and-urine test, and escorted Vincenti here to Beale Air Force Base, where the accident investigation board was going to be held.
Dale Brown - Storming Heaven Page 13
