The Darlings

by Cristina Alger

  Paul was quiet. He stared straight ahead at the painting in front of him: a dark brown canvas, punctuated by thick strips of black and blue. At the top was a wispy streak of white, hanging like a lone hopeful cloud in a brooding, storm-filled sky. He could tell Alexa was looking at him, gauging his reaction.

  Then she said, with slight irritation, “It’s not exactly a big secret.”

  “Hey,” he raised his palms. “No judgments.”

  “Anyway, a couple of months ago, David started spending more and more time at the office. He wouldn’t talk about it, but he seemed completely consumed with something. He couldn’t sleep. Then one Saturday he didn’t show up to dinner with some of our friends. No call, nothing. I started to wonder if he was seeing someone. This was, I don’t know, early September? Pre-Lehman? I let it go, but he just kept getting more and more distant.”

  “Mmm,” Paul said noncommittally. He would have said that Alexa was too pragmatic to drag him out of the office for relationship advice, but with women, you never did know.

  Alexa stopped walking. In a low voice she said, “This is all confidential, okay? I know you know that, but I still think I have to say it. I’d get fired for sure if anyone knew we spoke about this.”

  “I got it,” Paul said, not entirely sure that he did.

  “Okay. Thanks.” As they moved together to the next gallery, the sleeve of her coat brushed against his. “So this weekend, David finally sits me down and tells me that something’s up at work. He was freaked out, talking about it with me. Frankly, I’m scared now, too. That’s why I’m here. I need your help.”

  Paul’s pulse had been steadily increasing since they arrived. Alexa was usually so calm, but today she was completely on edge, a little wild-eyed, almost paranoid. Not the girl he knew, and yet the girl he knew almost as well as anyone. He surged with the impulse to put his arm around her, but he stopped himself.

  “Okay,” he said slowly. “Can you talk about it?”

  She nodded nervously. “It started because David got a call from this woman named Claire Schultz; she was a classmate of his at Georgetown. She’s an attorney at Hogan & Hartson. Claire found out that her mom, Harriet, had given over a substantial portion of her retirement money to this no-name accounting firm out in Great Neck. Firm’s called Fogel & Moritz. It’s basically just two guys and a desk—trust me, you’ve never heard of them. Anyway, in addition to doing Harriet’s taxes, Gary Fogel also offered to invest some of Harriet’s savings in an investment vehicle. He said he could guarantee her twelve percent returns. Harriet’s not a rich woman and she’s not a particularly savvy investor. But she trusts Fogel because he’s done her taxes for years. So she hands him eighty grand without asking a lot of questions, and wouldn’t you know it, a year later she gets back just over twelve percent on her investment. When the same thing happens again the next year, she calls her daughter Claire and brags a little about how smart she’s being with her money. Now Claire’s a securities lawyer, and so alarm bells go off when she hears about the ‘guaranteed’ returns that Fogel & Moritz are promising her mom. She asks Harriet to send her the offering documents. In the meantime, Claire does a little digging of her own and discovers that Fogel & Moritz isn’t a registered investment adviser. In fact, its nothing more than a three-man operation in a strip mall off the Sunrise Highway.”

  “Uh-oh.”

  “Right. Not good. So she ends up calling David, the only person she knows personally at the SEC. David goes out to visit Harriet in Great Neck, just on an informal basis. Harriet, of course, is embarrassed at the suggestion that she’s been had. In her defense, she tells David that a number of her friends in the neighborhood have been investing money with Gary for years. That Gary has some ‘in’ with a big-shot hedge fund manager in New York, who happens to be his brother-in-law. Long story short, the brother-in-law is Morty Reis.”

  “No shit.”

  “Harriet shows David some statement that appears to be from RCM. So on its face, it looks as though the money’s being invested in a real investment vehicle and not just some scam. But the returns just seem eerily consistent, so he starts talking to her mother’s friends who are also Fogel’s clients.”

  “At this point, no one’s lost any money with Fogel, right?”

  “No. They’re all getting twelve percent, pretty much year after year. Some of them had been doing it for seven or eight years, in fact. But they all use the same words when they talk about Fogel, ‘guaranteed’ and ‘bullet-proof’—stuff an investment adviser should never be saying to a client.”

  “Harriet and her friends must not have been too thrilled that David was out there suggesting they hop off the gravy train.”

  “No kidding. Most of them were just reinvesting their earnings in the firm or at least letting their initial investment ride. But a few redeemed out and were quite pleased with their net profit.”

  Paul was getting impatient. He had begun rattling his keys in his pocket, a habit that drove Merrill crazy. “So the point is, twelve percent year after year is too good to be true.”

  “That’s what Claire thought. Oh, look at this . . . ” Her words trickled off, and she was lost for a moment in a painting. Her eyes gleamed, transfixed, and her forehead relaxed as if her worries were momentarily washed away.

  Paul looked at the painting, but to him it was just a swirling mass of color and light. “Insider trading.” Paul prompted her. “Is that what you’re thinking? Fogel’s in on it, or at least, he’s capitalizing on it.”

  “Something like that,” she said, looking away from the painting. “Fogel’s too small a fish to run some kind of insider trading ring himself. Not effectively anyway. So David started focusing on RCM. That’s when things got scary.”

  “Scary how? What did he find?”

  “Nothing. That’s the thing. There’s no information on these people. The way David describes it, there is no RCM.”

  Paul frowned. “That doesn’t—that doesn’t make any sense. They’re one of the world’s largest hedge funds. They’re in the news all the time.”

  “Maybe so,” she said. “But there’s no real information. They’ve been operating as one of the biggest hedge funds in the world for over fourteen years, but they aren’t a registered investment adviser, either. We have no file on them. As far as the SEC is concerned, RCM doesn’t exist.”

  Paul felt his heart drop into his feet. The key rattling stopped. “No. That must be some kind of mistake. Someone would have complained. RCM has a lot of very sophisticated investors. Us, for example.”

  “Someone did complain. His name’s Sergei Sidorov; he’s a money manager up in Waltham, Massachusetts. It took David a year to find him. He’s a total recluse now. Sidorov himself was invested with RCM for a while. But he got suspicious about the lack of transparency, so he pulled all of his clients out of the fund. A lot of them weren’t happy about it. But RCM wouldn’t give Sidorov online access to their accounts, so he never felt as though he knew what they were doing. He says RCM’s a black box.”

  Paul shook his head. “I don’t know about that. Alain Duvalier is the head of our investment team. He’s always dealt directly with RCM, so he’s the one monitoring their trading activity. I just assumed he had online access to their accounts. I’m sure he does.”

  “Paul!” Alexa said, loud enough to turn the heads of two mothers with toddlers in tow. Her eyes fell, embarrassed. She lowered her voice to a whisper. “Look, you realize the implications of what we’re talking about here, right? This is a multibillion-dollar fund. And it’s a fund that Delphic’s heavily invested in. You’re their general counsel, for chrissake. If there’s an issue here, you can’t just tell your investors, ‘Sorry, I didn’t know.’”

  They had stopped walking, and stood alone in an empty side gallery. Alexa went to sit on a bench in front of a large triptych. She patted the spot beside her. When he sat, she said, more gently this time, “I’m sorry. But I needed to tell you. With Morty dead, there’s a spotligh
t now on RCM. You know that. The press, the authorities—everyone is going to want to know why a successful hedge fund manager with a beautiful wife and four houses would jump off the Tappan Zee Bridge the day before Thanksgiving. It won’t take them long to figure it out.”

  Paul wasn’t feeling right; his throat was tightening on him, and the air around him felt heavy, like water. He pulled at his collar. The chaotic sounds of a school group in the adjacent gallery reverberated off the ceiling. Paul felt as though he was in a giant fish tank, drowning in their noise. “Killing yourself isn’t an admission of fraud,” he said hoarsely. “There are other reasons he could have done it. Health. Tax issues.”

  “No, Reis knew that David was closing in on him. They spoke two days ago. He must have seen the writing on the wall and panicked.” Her hand had found its way onto his knee. “Are you okay?” She said. “You don’t look okay.”

  He moved away from her. “Why are you telling me this, Alexa? I mean, is this just a friendly heads-up? ‘Hey, my boyfriend’s about to indict you?’ What do I do with that?”

  “Honestly, I don’t know. I know that Reis’s death has accelerated the timetable on David’s investigation. He’s been talking to someone at the NYAG’s office about a case against RCM and it’s three biggest feeder funds: Weiss Partners, Anthem Capital, and you guys. They’ll look to indict senior management, the people who should have known, so to speak. But it’s not my case, and I’m not sure of the particulars. Or the timing.”

  “‘Should have known’? I told you I didn’t know. I’ve been there for two months. I still don’t know, beyond what you’ve just told me.” His voice was reaching a hysterical clip.

  “That’s why I want you to talk to David. Now, before everything comes out in the open. If you work with him, well, maybe you guys can work something out.”

  “Work with him? What does that even mean?”

  “Well, that’s the thing. It’s hard to isolate exactly what was going on over there, without someone from inside. They need e-mails, internal memos. My point is, you could help each other.”

  “You understand what you’re asking, right?”

  “Just talk to him, Paul. He’ll show you the case. If he can’t prove to you that there was fraud at RCM, and that people at Delphic knew about it, then by all means, walk away. But if he does have a case, save yourself. I’m not telling you what to do. I’m telling you that you’re a sitting duck. Also,” she paused. “He told me he talked to you. Just be honest. You lied to him about some things, right?”

  “Why do you say that?” His eyes darted inadvertently to the ground. He knew he should be looking at her, but his body seemed to be responding viscerally to the conversation, all the ticing and key jangling and collar pulling of a nervous man.

  “David said he asked you directly to give him the names of RCM’s counterparties. Don’t you remember? And you said you didn’t typically disclose that information. But the truth was you didn’t know whom RCM was trading with! You couldn’t have, because RCM wasn’t trading with anyone. Their trades were just illusions, made-up transactions that existed only on paper. If you had bothered to call Goldman Sachs or Lehman Brothers or whomever RCM pretended it was buying and selling from, you would have found out that these places weren’t doing any business with RCM. RCM wasn’t doing any business at all.”

  “I have to go.”

  Alexa sighed. “All right.” She stood, gathered up her coat, and then held out a manila envelope for him. “Take this, okay?”

  Paul gave Alexa a short nod and took the envelope. For a moment, he thought about opening it, but instead he folded it in half and tucked it into his pocket. There was too much information already—his mind was thick with it—he wasn’t even sure he could read words on a page. He gave Alexa a quick kiss on the cheek.

  “This isn’t just about work for me.”

  “I know.”

  He gave her a quick nod. “I’ll be in touch,” he said. Then he turned away from her, leaving her alone in the gallery.

  Outside, the sky had grown dark with clouds. He felt bad leaving her there. Alexa had no umbrella, he realized, and her coat was too thin for so late in the season. He wondered where she would go now. Perhaps she would wander MoMA for a while, as lost in thought as he was.

  He had to find Alain. He didn’t need Alexa to tell him that Morty’s death would turn a thousand eyes in RCM’s direction, and eventually in Delphic’s, too. If there were problems with one of Delphic’s outside managers, now was the time for Alain to raise them. Paul went straight from the elevators to Alain’s office, his pulse racing as he walked himself through the best way to open the conversation.

  Alain had the biggest office at Delphic, bigger than Carter’s. He had insisted on that when they had moved into the Seagram Building. Stylistically, it was a major departure from the rest of the floor. For the most part, Carter ensured that the Delphic office was understated, and things only got replaced when necessary. The conference rooms were appointed in muted shades of olive and beige. A tasteful collection of landscape photographs hung above the gleaming tables. Nice enough that the firm appeared successful, but not so nice that a client would balk at how their fees were getting spent. Carter did insist that Alain have a frosted glass door for his office instead of a clear glass one. That way, the opulent interior was at least obscured from view.

  Paul met Alain for the first time at a dinner party at the Darlings’ home, and the impression that Alain left that night was how Paul would always think of him. Alain had arrived late, just as they were being seated for dinner, and immediately all eyes were on him. He introduced the young blonde on his arm as Beate (not his girlfriend, Beate, but simply Beate) and then promptly left her to fend for herself. An irked Ines was forced to cut short a conversation with an art dealer who seemed to be deeply engrossing her so that she could fuss about until an extra seat at the table had been carved out.

  “I’m so sorry we didn’t have a place set for you,” Ines said to Beate, looking not sorry at all, “I had no idea he was bringing a guest.” She cast a slit-eyed glance at Alain, who was busy showing Carter his new watch and either didn’t notice Ines or didn’t care. When he looked up, Alain flashed Ines his signature rakish smile. Then he shrugged his shoulders, adjusting the sleeves of his cashmere blazer just so, and with a flourish pulled out the chair for the woman beside him. She seemed thoroughly charmed. Despite best efforts, even Ines’s frost thawed slightly.

  “Thank you, I’m so glad to be here,” Beate murmured, looking nothing of the sort.

  Ines seated her at the far side of the table, next to Paul. She was beautiful in a placid, glacial way. Paul couldn’t tell if she was bored or simply not entirely fluent in English, but she was nearly impossible to engage in conversation. From what he could gather, Alain had gone home to Geneva for the holidays and returned with Beate in tow. It wasn’t clear how permanent he intended the move to be, but from the way Beate looked at Alain, Paul could tell that she was smitten. The only time she seemed to light up was when Alain was telling a story. When he spoke, he used his hands artfully, reeling in his audience like a fisherman. It was hard not to be taken in by him. Even men seemed captivated by Alain; he could talk about the equity markets, scotch, the World Cup, women, other people’s children, health care policy, race-car driving, commodities pricing, inflation concerns in emerging markets. “He’s like James Bond,” Carter had once said about him. “James Bond meets Gordon Gekko.” Carter always sounded like a stern older brother when talking about Alain. He tried to appear mildly disapproving of Alain’s flamboyance, but anyone could tell he was secretly proud to be associated with him. After all, Alain was the real deal. He was one of the best investors on the Street. For all of his antics, his confidence was entirely founded.

  Paul never saw Beate again. A few weeks later, he saw Alain at a restaurant downtown with another woman. She was voluptuous this time, raven-haired and beautiful in a different way than Beate. “Oh, I don’t know,�
�� Merrill said when Paul asked her about it. Merrill flicked her hand in an easy-come-easy-go manner. “He’s been engaged more than once, I think. Dad’s says he’ll never get married. He’s the consummate bachelor.” Paul wondered for a moment if Beate had stayed in New York, tried to make a go of it on her own. The thought was fleeting. How many Beates were there out in the world? How did Alain have the time to find them, court them, and then dispense of them while managing a multibillion-dollar portfolio? Though he stood for everything that disgusted Paul about New York, he had to hand it to the guy: he did it with incredible style.

  The door to Alain’s office was locked, and inside the lights were off. He was gone. The hazy outlines of paper stacks, like skyscrapers, were visible through the frosted glass.

  Across from his desk, Alain had removed the standard-issue bookshelves so that he could hang three large photographs depicting industrial buildings in Milan. His files were stored in rows of black cabinets in the hallway outside the office. The filing cabinets took up a good amount of space. Alain was old-fashioned; he printed out everything, even e-mails, and kept them neatly organized as hard copy.

  Paul stood in front of the filing cabinets assessing. Five large drawers were labeled “RCM.” He tried the first one and realized that the cabinets were locked. He wasn’t sure that Alain intended the files for public use, but the circumstances seemed extenuating.

  What now? He surveyed the office. Most of the doors were closed. From the analysts’ cubicles, sleeping computer screens glowed with the Delphic lion insignia. A few chairs were pushed back as though the analyst had departed quickly, rushing to make a flight. Paul felt like the last man in Pompeii.