The Moneychangers

by Arthur Hailey

  Miles awoke first. His body was uncomfortable and cramped … but there was something else which filled him with excitement.

  Gently he awakened Juanita, guiding her from the sofa to the rug in front of it where he placed cushions for their pillows. Tenderly and lovingly he undressed her, then himself, and after that he kissed, embraced and confidently mounted her, thrusting himself strongly forward, gloriously inward, while Juanita seized and clasped him, and cried aloud with joy.

  “I love you, Miles! Cariño mío, I love you!”

  Then he knew that, through her, he had found his manhood once again.

  9

  “I’ll ask you two questions,” Alex Vandervoort said. He spoke less crisply than usual; his mind was preoccupied and somewhat dazed by what he had just read. “First, how in God’s name did you get all this information? Second, how reliable is it?”

  “If you don’t mind,” Vernon Jax acknowledged, “I’ll answer those in reverse order.”

  They were in Alex’s office suite in FMA Headquarters Tower, in the late afternoon. It was quiet outside. Most of the staff from the 36th floor had already gone home.

  The private investigator whom, a month ago, Alex had retained to make an independent study of Supranational Corporation—an “outside snooping job,” as they agreed—had stayed quietly seated, reading an afternoon newspaper, while Alex studied the seventy-page report, including an appendix of photocopied documents, which Jax had brought in personally.

  Today, Vernon Jax was, if anything, more unimpressive in appearance than the last time. The shiny blue suit he was wearing might have been donated to the Salvation Army—and rejected. His socks drooped around his ankles, above shoes even less cared for than before. What hair remained on his balding head stuck out untidily like well-used Brillo pads. Just the same, it was equally clear that what Jax lacked in sartorial style he made up in espionage skill.

  “About reliability, he said. “If you’re asking me whether the facts I’ve listed could be used, in their present form, as evidence in court, the answer’s no. But I’m satisfied the information’s all authentic, and I haven’t included anything which wasn’t checked with at least two good sources, in some cases three. Another thing, my reputation for getting at the truth is my most important business asset. It’s a good reputation. I intend to keep it that way.

  “Now then, how do I do it? Well, people I work for usually ask me that, and I suppose you’re entitled to an explanation, even though I’ll be holding some things back which come under the heading of ‘trade secrets’ and ‘protecting sources.’

  “I worked for the U. S. Treasury Department for twenty years, most of it as an IRS investigator, and I’ve kept my contacts green, not only there but in a lot of other places. Not many know it, Mr. Vandervoort, but a way investigators work is by trading confidential information, and in my business you never know when you’ll need someone else or they’ll need you. You help another man this week, sooner or later hell come through for you. That way, too, you build up debts and credits, and the payoffs—in tip-offs and intelligence—go both ways. So what I’m selling when you hire me is not just my financial savvy, which I like to think is pretty fair, but a web of contacts. Some of them might surprise you.”

  “I’ve had all the surprises I need today,” Alex said. He touched the report in front of him.

  “Anyway,” Jax said, “that’s how I got a lot of what’s in there. The rest was drudgery, patience, and knowing which rocks to look under.”

  “I see.”

  “There’s one other thing I’d like to clear up, Mr. Vandervoort, and I guess you’d call it personal pride. I’ve watched you look me over both times we’ve met, and you haven’t much cared for what you’ve seen. Well, that’s the way I prefer people to see me because a man who’s nondescript and down at the heel isn’t as likely to be noticed or taken seriously by those he’s trying to investigate. It works another way, too, because people I talk to don’t think I’m important and they aren’t on guard. If I looked anything like you, they would be. So that’s the reason, but I’ll also tell you this: The day you invite me to your daughter’s wedding I’ll be as well turned out as any other guest.”

  “If I should ever have a daughter,” Alex said, “I’ll bear that in mind.”

  When Jax had gone, he studied the shocking report again. It was, he thought, fraught with the gravest implications for First Mercantile American Bank. The mighty edifice of Supranational Corporation—SuNatCo—was crumbling and about to topple.

  Lewis D’Orsey, Alex recalled, had spoken of rumors about “big losses which haven’t been reported … sharp accounting practices among subsidiaries … Big George Quartermain shopping for a Lockheed-type subsidy.” Vernon Jax had confirmed them all and discovered much, much more.

  It was too late to do anything today, Alex decided. He had overnight to consider how the information should be used.

  10

  Jerome Patterton’s normally ruddy face suffused an even deeper red. He protested, “Dammit!—what you’re asking is ridiculous.”

  “I’m not asking.” Alex Vandervoort’s voice was tight with anger which had simmered since last night. “I’m telling you—do it!”

  “Asking, telling—what’s the difference? You want me to take an arbitrary action without substantial reason.”

  “I’ll give you plenty of reasons later. Strong ones. Right now there isn’t time.”

  They were in the FMA president’s suite where Alex had been waiting when Patterton arrived this morning.

  “The New York stock market has already been open fifty minutes,” Alex warned. “We’ve lost that much time, we’re losing more. Because you’re the only one who can give an order to the trust department to sell every share of Supranational we’re holding.”

  “I won’t!” Patterton’s voice rose. “Besides, what the devil is this? Who do you think you are, storming in here, giving orders …”

  Alex glanced over his shoulder. The office door was open. He walked to close it, then returned.

  “I’ll tell you who I am, Jerome. I’m the guy who warned you, and warned the board, against in-depth involvement with SuNatCo. I fought against heavy trust department buying of the shares, but no one—including you—would listen. Now Supranational is caving in.” Alex leaned across the desk and slammed a fist down hard. His face, eyes blazing, was close to Patterton’s. “Don’t you understand? Supranational can bring this bank down with it.”

  Patterton was shaken. He sat down heavily behind the desk. “But is SuNatCo in real trouble? And you sure?”

  “If I weren’t, do you think I’d be here, behaving this way? Don’t you understand I’m giving you a chance to salvage something out of what will be catastrophic anyway?” Alex pointed to his wrist watch. “It’s now an hour since the market opening. Jerome, get on a phone and give that order!”

  Muscles around the bank president’s face twitched nervously. Never strong or decisive, he reacted to situations rather than created them. Strong influence often swayed him, as Alex’s was doing now.

  “For God’s sake, Alex, for your sake, I hope you know what you’re doing.” Patterton reached for one of two telephones beside his desk, hesitated, then picked it up.

  “Get me Mitchell in Trust … No, I’ll wait … Mitch? This is Jerome. Listen carefully. I want you to give a sell order immediately on all the Supranational stock we hold … Yes, sell. Every share.” Patterton listened, then said impatiently, “Yes, I know what it’ll do to the market, and I know the price is down already. I saw yesterday’s quote. We’ll take a loss. But still sell … Yes, I do know it’s irregular.” His eyes sought Alex’s as if for reassurance. The hand holding the telephone trembled as he said, “There’s no time to hold meetings. So do it! Don’t waste …” Patterton grimaced, listening. “Yes, I accept responsibility.”

  When he had hung up the telephone, Patterton poured and drank a glass of water. He told Alex, “You heard what I said. The stock is al
ready down. Our selling will depress it more. We’ll be taking a big beating.”

  “You’re wrong,” Alex corrected him. “Our trust clients—people who trusted us—will take the beating. And it would be bigger still if we’d waited. Even now we’re not out of the woods. A week from now the SEC may disallow those sales.”

  “Disallow? Why?”

  “They may rule we had insider knowledge which we should have reported, and which would have halted trading in the stock.”

  “What kind of knowledge?”

  “That Supranational is about to be bankrupt.”

  “Jesus!” Patterton got up from his desk and took a turn away. He muttered to himself, “SuNatCo! Jesus Christ, SuNatCo!” Swinging back on Alex, he demanded, “What about our loan? Fifty million.”

  “I checked. Almost the full extent of the credit has been drawn.”

  “The compensating balance?”

  “Is down to less than a million.”

  There was a silence in which Patterton sighed deeply. He was suddenly calm. “You said you had strong reasons. You obviously know something. You’d better tell me what.”

  “It might be simpler if you read this.” Alex laid the Jax report on the president’s desk.

  “I’ll read it later,” Patterton said. “Right now, you tell me what it is and what’s in it.”

  Alex explained the rumors about Supranational which Lewis D’Orsey had passed on, and Alex’s decision to employ an investigator—Vernon Jax.

  “What Jax has reported, in total hangs together,” Alex declared. “Last night and this morning I’ve been phoning around, confirming some of his separate statements. All of them check out. The fact is, a good deal of what’s been learned could have been discovered by anyone through patient digging—except that no one did it or, until now, put the pieces together. On top of that, Jax has obtained confidential information, including documents, I presume by …”

  Patterton interrupted peevishly, “Okay, okay. Never mind all that. Tell me what the meat is.”

  “I’ll give you it in five words: Supranational is out of money. For the past three years the corporation has had enormous losses and survived on prestige and credit. There’s been tremendous borrowing to pay off debts; borrowing again to repay those debts; then borrowing still more, and so on. What they’ve lacked is real cash money.”

  Patterton protested, “But SuNatCo has reported excellent earnings, year after year, and never missed a dividend.”

  “It now appears the past few dividends have been paid from borrowings. The rest is fancy accounting. We all know how it can be done. Plenty of the biggest, most reputable companies use the same methods.”

  The bank president weighed the statement, then said gloomily, “There used to be a time when an accountant’s endorsement on a financial statement spelled integrity. Not any more.”

  “In here”—Alex touched the report on the desk between them—”are examples of what we’re talking about. Among the worst is Horizon Land Development. That’s a SuNatCo subsidiary.”

  “I know, I know.”

  “Then you may also know that Horizon has big land holdings in Texas, Arizona, Canada. Most of the land tracts are remote, maybe a generation from development. What Horizon’s been doing is making sales to speculators, accepting small down payments with hedged agreements, and pushing payment of the full price away into the future. On two deals, final payments totaling eighty million dollars are due forty years from now—well into the twenty-first century. Those payments may never be made. Yet on Horizon and Supranational balance sheets, that eighty million is shown as current earnings. Those are just two deals. There are more, only smaller, utilizing the same kind of Chinese accounting. Also, what’s happened in one SuNatCo subsidiary has been repeated in others.”

  Alex paused, then added, “What all of it has done, of course, is make everything look great on paper and push up—unrealistically—the market price of Supranational shares.”

  “Somebody’s made a fortune,” Patterton said sourly. “Unfortunately it wasn’t us. Do we have any idea of the extent of SuNatCo borrowing?”

  “Yes. It seems that Jax managed to get a look at some tax records which show interest deductions. His estimate of short-term indebtedness, including subsidiaries, is a billion dollars. Of that, five hundred million appears to be bank loans. The rest is mainly ninety-day commercial paper, which they’ve rolled over.”

  Commercial paper, as both men knew, were IOUs bearing interest but backed only by a borrower’s reputation. “Rolling over” was issuing still more IOUs to repay the earlier ones, plus interest.

  “But they’re close to the limit of borrowing,” Alex said. “Or so Jax believes. One of the things I confirmed myself is that buyers of commercial paper are beginning to be wary.”

  Patterton mused, “It’s the way Penn Central fell apart. Everybody believed the railroad was blue chip—the safest stock to buy and hold, along with IBM and General Motors. Suddenly, one day, Penn Central was in receivership, wiped out, done.”

  “Add a few more big names since then,” Alex reminded him.

  The same thought was in both their minds: After Supranational, would First Mercantile American Bank be added to the list?

  Patterton’s ruddy face had gone pale. He appealed to Alex, “Where do we stand?” No pretense of leadership now. The bank president was leaning heavily on the younger man.

  “A lot depends on how much longer Supranational stays afloat. If they can hang on for several months, our sales of their stock today might be ignored, and the breach of the Federal Reserve Act with the loan may not be investigated closely. If the breakup happens quickly, we’re in serious trouble—with the SEC for not revealing what we know, with the Comptroller of Currency over abuse of trust, and, over the loan, with the Fed Reserve. Then, I need hardly remind you, we’re facing an outright loss of fifty million dollars, and you know what that will do to this year’s earnings statement, so there’ll be angry shareholders howling for someone’s head. On top of that there could be lawsuits against directors.”

  “Jesus!” Patterton repeated, “Jesus H. Christ!” He took out a handkerchief and mopped his face and egg-like dome.

  Alex went on relentlessly, “There’s something else we’ll have to consider—publicity. If Supranational goes under there will be investigations. But even before that the press will be on to the story and do probing of their own. Some of the financial reporters are pretty good at it. When the questioning starts, it’s unlikely our bank will escape attention, and the extent of our losses will become known and publicized. That kind of news can make depositors uneasy. It could cause heavy withdrawals.”

  “You mean a run on the bank! That’s unthinkable.”

  “No, it isn’t. It’s happened elsewhere—remember Franklin in New York. If you’re a depositor, the only thing you care about is whether your money’s safe. If you think it might not be, you take it out—fast.”

  Patterton drank more water, then slumped into his chair. If possible, he looked even paler than before.

  “What I suggest,” Alex said, “is that you call the money policy committee together immediately and we concentrate, during the next few days, on attaining maximum liquidity. That way, we’ll be prepared if there’s a sudden drain on cash.”

  Patterton nodded. “All right.”

  “Apart from that there’s not much else to do but pray.” For the first time since coming in, Alex smiled. “Maybe we should get Roscoe working on that.”

  “Roscoe!” Patterton said, as if suddenly reminded. “He studied the Supranational figures, recommended the loan, assured us everything was great.”

  “Roscoe wasn’t alone,” Alex pointed out. “You and the board supported him. And plenty of others studied the figures and drew the same conclusion.”

  “You didn’t.”

  “I was uneasy; suspicious, maybe. But I had no idea SuNatCo was in the mess it is.”

  Patterton picked up the telephone he
had used earlier. “Ask Mr. Heyward to come in.” A pause, then Patterton snapped, “I don’t care if God is with him. I need him now.” He slammed down the instrument and mopped his face again.

  The office door opened softly and Heyward came in. He said, “Good morning, Jerome,” and nodded to Alex coolly.

  Patterton growled, “Close the door.”

  Looking surprised, Heyward did. “They said it was urgent. If it isn’t, I’d like to …”

  “Tell him about Supranational, Alex,” Patterton said.

  Heyward’s face froze.

  Quietly, matter-of-factly, Alex repeated the substance of the Jax report. His anger of last night and this morning—anger at shortsighted foolishness and greed which had brought the bank to the edge of disaster—had left him now. He felt only sorrow that so much was about to be lost, and so much effort wasted. He remembered with regret how other worthwhile projects had been cut back so that money could be channeled to the Supranational loan. At least, he thought, Ben Rosselli, by death, had been spared this moment.

  Roscoe Heyward surprised him. Alex had expected antagonism, perhaps bluster. There was none. Instead, Heyward listened quietly, interjecting a question here and there, but made no other comments. Alex suspected that what he was saying amplified other information Heyward had received himself, or guessed at.

  There was a silence when Alex was done.

  Patterton, who had recovered some of his aplomb, said, “We’ll have a meeting of the money policy committee this afternoon to discuss liquidity. Meanwhile, Roscoe, get in touch with Supranational to see what, if anything, we can salvage of our loan.”

  “It’s a demand loan,” Heyward said. “We can call it any time.”

  “Then do it now. Do it verbally today and follow up in writing. There isn’t much hope SuNatCo will have fifty million dollars cash on hand; not even a sound company keeps that kind of money in the till. But they may have something, though I’m not hopeful. Either way, we’ll go through the motions.”