“I’m fine,” I said. And then, “I assumed we were meeting here to be discreet.”
“Impossible,” said Sam. “The dragonflies who run this place see everything.” He lowered his voice. “That one three tables away, her husband works for Goldman. If they didn’t chop off your hand for using a cell phone here she’d be calling him right now. See, she’s going to the office to use the house phone. The point of my embarrassing display was to let her see that you have no concern about being seen with a partner of Psmith and Graves. Goldman will have to work for Mercury – if they work for anyone – and they’ll know it will be a fight.”
“You think complicated,” I said.
“Twenty-three times thirty-seven is eight hundred fifty-one,” said Sam. “Actually, what I think is fast. You should too.”
Inside of ten minutes, I received my first lessons in predatory finance. I came to understand that the increase in the price of Pearl River’s shares was probably not a vote of confidence but an indication that, with Henry missing, people thought the bank could be taken over.
“It traded up the day of the run,” said Sam. “Volume has been above average. What started the run, by the way?”
“Some of the older depositors had heard that Henry was missing.”
“He’s still missing, am I right?”
“Yes.”
“Any idea where he is?”
“No. Amanda thinks the Julia sank. I disagreed with her at first, but after four days, I’m not so sure.”
“Who knew, last Monday, that the boat was overdue?”
“Mercury Chao for one. He said something to me at the Hong Kong Club at lunch.”
“Bingo.”
“Anyone who belongs to the Yacht Club could have known by that point in time.”
“And Mercury is chairman of the Foundling Hospital so all his thoughts must be charitable.”
I sat back in my chair. The girl with the sun visor had been replaced by a woman in her fifties. “How much should I be telling you, Sam?”
“Not a thing, unless you plan to hire me.”
Before I could respond, the Goldman wife was standing at our table. “I was wondering why you are here, Mr. Lee?” I didn’t immediately answer, so she went on: “You see, your wife stopped paying our bills about a year ago, and we eventually had to expel her. Unpleasant words were spoken.”
“So you are telling me I am no longer a member either.”
“That would appear to be the case. I’ve just been to the office to check.”
“He’s my guest,” said Sam.
“No, he is not,” said the dragonfly. “He was here reading the newspapers before you arrived.”
“You know,” said Sam, “I was getting tired of this place anyway.”
We walked out onto Old Peak Road before either of us spoke. Poor Amanda. Stupid Amanda.
“Let’s go to my office,” said Sam.
After some preliminaries about fees and expenses, which Sam handled as neatly as a sushi chef, we got down to business. My initial reaction was that having an investment banker was about as much fun as having an oncologist – but yes, I did need one.
“So you can account for only about thirty-five percent of the shares,” said Sam.
“More like forty-five percent: twenty-four point nine percent owned by Henry outright, nine point nine percent on which he holds a proxy, and about ten percent held by quote ‘friends’ unquote – meaning people he knows who have told him they are shareholders, that sort of thing.”
“I thought the proxies were from the friends.”
“Well, one friend, I suppose. Zhang Hai Ming.”
“Holy shit.”
“Henry doesn’t advertise it,” I said.
“I suppose they went to the same workers’ kindergarten or something,” said Sam.
“Evidently.”
“How did he get his proxy?”
“Interesting story. Henry told me about it several years ago. Zhang showed up one day and said he’d bought a stake in the bank. Accumulated it in the market. Out of loyalty to Henry, he said. ‘And you’ve come to give me your proxy,’ says Henry without even blinking. Zhang shifts in his chair and doesn’t say anything, so Henry goes on: ‘Because if you don’t, I will resign. And I will explain to the Hong Kong Monetary Authority that I will not be chairman of a bank in which you have significant influence. Zhang tells him nine point nine percent isn’t significant,” – ten percent being the threshold at which you need Hong Kong Monetary Authority approval – “Henry tells him nine point nine is way above the level at which you need Henry’s approval, and by the way, if he resigns Zhang will get a margin call since he assumes Zhang has borrowed most of the money to buy the shares. Zhang shrugs and says he has plenty of cash but if that’s the way Henry feels, he’ll give him the proxy, and in a couple of days he does.”
“Revocable?”
“Not unless Henry dies.”
“So we care a lot what has become of Henry.”
“We cared anyway,” I said.
“The certificates are in the bank’s vault, I trust?”
“Yes. I’ve checked.”
“Any limitations on Zhang’s ability to sell?”
“He needs Henry’s permission so long as the proxy is valid. Henry didn’t want Zhang to be able to force him to do things by threatening to deliver the block to someone.”
“Henry’s smart,” said Sam. “I wouldn’t want Zhang Hai Ming to have a handle on me either.” He paused as if contemplating the idea.
I too called up the image of Henry’s friend. What I found myself remembering was Zhang talking to Song at the door of the kitchen, Song leaning back and surveying him as if in amusement, and then making him take off his jacket so she could wash off a stain. There was more to him, somehow, in his shirt sleeves. Physical strength? Yes, and also the self-confidence not to care about the stains. I hadn’t seen that at the time – but as I’ve said, I was in a trance in the years before Henry disappeared.
“So he can’t vote for a merger and he can’t tender into a bid?” said Sam.
“Right.”
“But he’s supposed to be a friend?”
“Yes – sort of.”
“And the other friends are just that? No formal arrangements with them?”
“No.”
“Good. That would put us over the thirty-five percent threshold. Henry is grandfathered at thirty-five percent, even though the trigger point has been reduced to thirty percent.”
I looked puzzled, so Sam explained. In Hong Kong, as in many other jurisdictions, it is considered unfair for someone to buy a controlling interest in a public company by creeping up to the necessary level of ownership. The shareholders who haven’t sold lose control, and the ability to deliver control in the future, without receiving the premium that a change of control normally requires. So if you go over the ownership threshold that gives you control, whether through direct ownership or by holding proxies, you have to make a bid for the rest of the shares at a price no lower than the highest price you have paid in the recent past. A person can effectively control a company by owning less than a majority, because many shareholders never bother to vote. Hong Kong used to set the “control” level at 35 percent, but experience indicated the threshold should be reduced, so it dropped to 30 percent. Since many Hong Kong companies had shareholders in the 30 to 35 percent zone, the change would have triggered a requirement for scores of whole-of-company bids, which would have been disruptive, so existing owners of 30 to 35 percent stakes were exempted.
“He’s been at thirty-four point eight percent for decades,” I said.
“Aside from what Henry controls, how many shares vote at the annual meeting?”
“Only about twenty-five percent.”
“And they mostly vote with Henry?”
“Chinese vote for whoever they think will win,” I said. “Read Lee Kwan Yew on the topic.”
“Singapore Lee Kwan Yew?”
“First volume of his autobiography.”
“You have more free time than I do,” said Sam. “I assume you don’t actually know who owns the rest of the shares.”
“All held in nominee names. The ‘friends’ aren’t even actually on our register.”
“That’s normal in Hong Kong,” said Sam. “And I assume you know that the vast majority of those shares would come onto the market if there were a cash offer at a substantial premium. Including the shares held by ‘quote’ friends.”
“That’s why I’m here, I guess,” I said.
Sam paused for a moment. “Listen, am I supposed to call you ‘Wendy’?”
“Everyone does.”
“I made up my name, so if you want a different one…”
I shook my head.
“Look, Wendy, suppose Henry doesn’t come back. At some point Zhang gets to vote his own shares. But what happens to Henry’s shares? Does your proxy expire? Who inherits?”
“When Henry dies the shares go into a trust for the benefit of Amanda and the twins. I still vote them. But Amanda can decide to sell – assuming of course that she is adjudged competent and not a felon and all that rigmarole.”
“She can instruct you, as trustee, to sell the shares?”
“I’m not the trustee. Henry’s lawyers are. But that’s unimportant.”
“Trustees are never important until they become hopelessly inconvenient,” said Sam.
“Oh, good,” I said. “Anyway, the idea seems to be that, so long as Amanda is happy owning a quarter of the bank, I get to control it. She can sell but she can’t put someone else in charge. Oh, and if the family’s block is sold, Zhang’s proxy lapses.”
“What if Amanda wants to diversify by selling some of her shares?”
“There’s some language in the trust to the effect that Henry thinks she should be either in or out, but I guess she could sell part of the stake.”
“Selling part of the holding wouldn’t make that much sense,” Sam said, “because a twenty-four point nine percent stake gets you a big step toward control. Selling the whole block would bring at least some premium. But suppose she did sell half, you still get to vote the remaining shares?”
“I do.”
“The board of directors could fire you, of course.”
“What board in Hong Kong has ever done that?”
“So true,” said Sam with a sigh. “What I take from this is that Henry thinks you’d do a good job.”
“Evidently.”
“I hope he’s right,” said Sam.
When I got back to the Castle, there was a copy of Mosquito on the table in the library. “The buzz in your ear,” read the tag line under its masthead. Amanda typically kept the paper in her own room, so she must have wanted me to see it. Written in a form of English, but mostly consisting of photographs, it went to press at dawn, so as to cover all the charity balls and give the women who organized them something to talk about at lunch. Amanda pretended not to read it by not subscribing. The ever-patient Song had to go out and buy it each day.
As a leading tai-tai – meaning a married woman of standing – Amanda was required to behave like a teenager: rising late, dressing beautifully, eating expensively but staying thin, and knowing all the gossip. She was too intelligent to find this a completely fulfilling lifestyle, but it is probably fair to say she lacked the self-confidence to change. And of course I was no help whatsoever.
Her friend Orchid had her incorrigible husband to keep her interested in life. Paul Tang pursued actual teenagers – or just about – with an enthusiasm that helped Mosquito fill its pages. Everyone said she was a fool not to have known that would happen – “he’s just like his father, you know” – but she was wickedly funny about him. So if you were lunching with Orchid you needed to know what Mosquito had had to say when it hit the newsstands at ten.
Orchid’s husband manufactured something across the border, which was where he recruited his mistresses. Girls would come from interior provinces to work in Guangzhou or Foshan, living in dormitories and sending most of their pay home to their families. Paul would go up to inspect his factories, and if he saw a girl he fancied, he’d have her transferred to “marketing,” where she’d get taught how to dress. If she showed promise, Paul would give her a try-out on a golfing trip to Kunming or somewhere. And every couple of years, one would make the big time, and get an apartment in Hong Kong.
Orchid wanted Amanda to be prepared. She delivered her advice as a story that made everyone at her table laugh. “First years of marriage, perfect happiness. Young wife believe she has found only faithful husband in Chinese history. Then one day, husband out late. Husband have important meetings out of town. Husband forget birthday. Young wife heartbroken. If young wife also stupid, she pout, she pick fights with husband. But if she smart, she do nothing for six months. Hold the hurt inside. Eat lunch with her friends and talk about how handsome her husband is. Friends not fooled, but friends understand. Then one day, she introduce husband to pretty young girl. Husband interested. Soon husband have two mistresses. Neither one important! Wife happy. Husband happy. Much jewelry.” And it was true that Orchid had fabulous emeralds.
I assumed the redoubtable Tang tai-tai was the reason I had such an unappealing secretary. Amanda had come up with Phyllis – some friend had recommended her – but the concept was pure Orchid. “Pretty secretary,” I could imagine her saying, “friends giggle. Ugly secretary way to show respect to wife, even if husband unfaithful.”
I found the item Amanda wanted me to see on the next-to-last page, in the so-called “Commerce” column: “Henry Wong missing five days. Businessmen worry. Big Wendy not banker, not Chinese.”
About the crying, by the way, I do that sometimes. Pay no attention. It’s just a weakness I’ve had since childhood. A nice thing about Exeter was that you could have a single room, with a lock on the door, where you could go and do that if you had to. From time to time I’ve tried anger as a substitute – stamping on ants when I was little, playing sports when I got my growth – I had a terrifying fastball before I gave up the game – but it rarely worked. Tears are anger you can’t release any other way. Anyway, I apologize for the intrusion. You probably found it tiresome. My mother always did.
5
Sam summoned me to his office the next morning to go over what he called “strategic background.” The receptionist showed me into a conference room with the compulsory view of the harbor. I’d barely heard of Psmith & Graves before meeting Sam, but it had to be successful to afford its offices. It occurred to me that hiring a bank I didn’t know was probably not the recommended approach, but when Sam came in, I forgot about it.
Sam overflowed with energy and questions that morning. Why would Mercury want to take over Pearl River Bank – aside from ego gratification, that is?
“This transaction is generating a lot more interest than I would expect,” he told me, “especially since there isn’t a transaction yet. No offense, Wendy, but compared to Hongkong Bank, Standard Chartered and Bank of China, both of you are tiny. But everyone is talking about the prospect of a bid. Why is that?”
“We’re less bureaucratic than the big three,” I told him. “Some of the most interesting entrepreneurs in the region come to our doors, making us more important than size would suggest.” I felt awkward, talking about the Hong Kong banking scene as if I were an authority. I half expected Sam to make fun of me but he didn’t. Investment banking, as I subsequently discovered, is a mixture of bullying and flattery, and Sam was a skilled practitioner.
“I would have assumed Mercury was too good for grubby entrepreneurs,” said Sam.
“You’re right about that,” I said. “Mercury barely acknowledges being a banker. Anyone looking for credit from Chao Yinhang has to call on one of the two Ngs. ‘Ng’ is a common Cantonese family name.”
“I think I knew that,” said Sam, reminding me as gently as possible that he’d lived in Hong Kong as long as I had.
“The foundation of credit is character,” I continued, quoting from a book I’d discovered in Henry’s library. “Lao Ng, the ‘old’ one, knows which billionaires pay their gambling debts, or so Cedric Fung tells me. Xiao Ng, the ‘little’ one, was supposedly discovered by Mercury in 1993 in Shenzhen.”
That was only a year after Deng made his symbolic journey to the more commercial southern coast and kicked off the boom in the “special economic zone” across the border from Hong Kong. Sam had lived in Hong Kong then. I remembered not to lecture him about things he would already know.
“Hard to imagine Mercury in Shenzhen,” I added, echoing Cedric’s remark that it was “not Mercury’s kind of place.” I thought Sam might react to my mentioning Cedric, but he didn’t.
“Tell me more about Mercury,” said Sam.
“He was born in 1963. He went to Harrow and then spent three years at a firm of chartered accountants in London before coming home to live the life of an eligible bachelor. I know this in bits and scraps from Amanda. He’s ten years older than she is. They dated for a couple of months.”
“Before you came on the scene,” said Sam with a smile. He was testing my competitive instincts, I could see, but I refused to take the bait.
“After I married Amanda, Mercury got serious. He proposed to Lillian and started showing up at the bank. She’s from one of those Shanghainese shipping families. I hear she makes him go to mass at the cathedral in Caine Road.”
“The Roman Catholic cathedral,” said Sam.
“Correct. Mercury’s father died in 1996, having hung on until his son had spent enough time as executive vice president to plausibly succeed him. Mercury adopted the Chinese name for a bank soon after that.”
“Why do I think his father founded the bank?”
“Because he did, sort of. He came to Hong Kong in 1948, the year before the Communists won. He was transferring the business Mercury’s grandfather had established in Shanghai after the First World War.”
“No doubt with White Russian money,” Sam interjected. “Simon Graves is Russian,” he explained. “Russian forebears, that is.”
The Daughters of Henry Wong Page 4
