by David Lender
“Whattaya suggest?” Milner asked.
“Maybe some colorful metaphors in your press releases and some pithy quotes in the Wall Street Journal. I’d avoid words like bashing and bludgeon, but maybe use words like heartwood or home run. How about: ‘a sufficiently solid company at the heartwood to avoid the decay of mismanagement’?”
Milner laughed and slapped Richard’s arm. “Not quite there, but a worthy try. Good bullshit, Richard. Glad you’re on the team.”
Milner was still smiling when he pressed their hands before they left. And nobody looked at Richard like he was an asshole in the elevator on the way downstairs.
CHAPTER 4
WASHINGTON, D.C. CROONQUIST RECOGNIZED Charlie Green’s cell phone number on his desk phone’s caller ID. Here we go. He picked up the handset.
“Roman, it’s Charlie. You called?” he said, impatient.
“Yeah. I need some air cover.”
“I’m up to my eyeballs with these bastards on the Hill again. Can it wait?”
“Not really. I’ve got something brewing…”
“About time. What you got?” Sounding interested now.
“I’ve got a potential bust working, and I think it’s big. I’ve got reams of trading statistics in MarketWatch and emails ordering trades from Walker New York, then emails from Groupe Credit Generale to all over Europe.”
“Emails? How the hell’d you get them?”
“A friend at NSA.”
“You dog, you.”
“Yeah, but I’m not sure I can use them all. Stone in Litigation is a real Boy Scout. He might say they’re illegal.”
“Of course he will. Because they are.”
“That’s why I need you to talk to him.”
“And say what?”
“Tell him NSA uncovered them by mistake in some national security monitoring or something. You’ll figure it out. You’re the boss, I’m just a humble lawyer.”
“Don’t be a smart-ass.” He paused for a moment. “Shit, Roman, you’re stretching it here. Is this worth it?”
“It’s had me semierect for a month.”
“Okay. Anything else?”
“Authority for wiretaps. On phones and emails.”
“It’ll take probable cause to get it past Judge Weinstein.”
“The trading statistics show a clear pattern of insider activity prior to the Southwest Homes IPO. Unrestrained trading. Somebody got a hold of inside information that a filing was coming and front-ran it with a very complex and risky trading strategy. I’ve had a real pro confirm that nobody’s got balls to take a multi-billion-dollar position like that without knowing inside information. And our MarketWatch algorithms say an 86% correlation with previous illegal insider trading activity.”
“Sounds like you’re getting there, but I don’t think it’s enough to give Weinstein a boner yet. How big is this?”
“Walker & Company, GCG in Paris, some other European institutions and…” he paused for effect, “maybe Harold Milner.”
Green was silent for a moment, then whispered, “Holy shit.”
“I was counting on you to say that.”
“Have your guys draft me a brief. I’ll get on Weinstein’s calendar. You drop everything else and fast-track this thing. And Roman…” Green paused.
“Yeah?”
“Don’t fuck this up.”
New York City. Richard and Kathy didn’t miss a beat when they saw each other the morning after she’d brushed him off in her apartment. Richard’s family called it “doing the South American,” when you pretended a blowup or embarrassment never happened, going on with things as usual. They bantered, Kathy called him farm boy and Richard wondered why South Americans were so screwed up. Kathy left for Paris a week later.
Kathy phoned two days after she arrived.
“Ça va,” she said.
“Up yours, too.”
“It means ‘how’s everything?’”
“Oh, sorry. I’m fine, how’s Paris?”
“Gorgeous. I’m trying to drink it all in.”
Drink it all in? “How’s your French coming?”
“Quite well, quite well. And I picked up a tutor today.”
“What?”
“I met a Frenchman at the market this morning. Says he’s from the south of France, here for a modeling career. Gorgeous. And he’s fluent in French, of course.” She laughed.
Richard felt his face starting to color as Kathy said it. Was she breaking his balls, or just reinforcing the message they were only friends?
“Sounds like you’re settling in.”
“Yes. Hey, our mole has been pretty active, no?”
“Haven’t checked up on him lately.”
“You should. These guys are trading a lot of options. Representing maybe one to two billion dollars in stock, I can’t quite tell. And another thing. I found emails to London as well, signed by [email protected] over here at GCG.”
“Did you crack his password? I’ll load that account onto my computer.”
“No, couldn’t break it.” Kathy paused. “What do you think’s going on?”
“Looks to me as if it’s just plain old-fashioned larceny: insider trading. Somebody knows the takeover targets and he’s passing their names along to a couple of others who are trading on it as well.”
Kathy didn’t respond. Richard could tell she was still connected because he could hear the transatlantic line crackling. Finally, Kathy said, “This is probably just some intercontinental arbitrage strategy the trading guys are doing.”
“Sending code-named emails to do trades?”
“I think this is all something you’re dreaming up in your head. I mean, stumbling by mistake onto an insider trading ring by just uncovering one suspicious email.”
“That’s how it happens sometimes. Remember the whole Dennis Levine insider trading scandal in the 1980s? Half the major firms on Wall Street were involved. Guys from Drexel to Kidder to Goldman were indicted. Marty Siegel, an M&A banking star, ex-Kidder then at Drexel, turned out to be dirty. Ivan Boesky, the biggest arbitrageur of his day, paid a hundred million dollar fine and went to jail. Mike Milken, the junk bond kingpin, paid $600 million before they put him away. And it all started with a back office compliance clerk someplace thinking some trades looked fishy, reporting them. And not even Levine’s trades. It was some dope who was piggybacking off Levine’s trades when he saw how much money Levine was making.”
“I think you watch too many movies, farm boy.”
“I think you’ve got your head in the sand.”
“Yeah, well.” She used the impatient tone she reserved for when she wanted to dismiss a subject.
Richard said, “I’m gonna keep an eye on this and figure out what’s going on and who’s doing it.”
Kathy didn’t respond.
“What are you doing?” Chuck White, Milner’s CFO, asked. He’d just knocked on the glass door to Milner’s office, Milner motioning him in to sit down. Milner was reviewing the pitch book on Tentron again, for about the fifth time in a week.
“Whattaya mean?” Milner said, playing a little, acting innocent, seeing Chuck look at the pitch book from Walker & Company on his desk.
“You thinking about doing that deal?”
“A pitch. What, I can’t get a pitch?” He put his elbow on the table, letting Chuck see him smile.
“Why?”
“It’s what these Walker guys do. Never hurts to listen.” Still playing dumb.
“Why are you screwing around?” Chuck said. Tilting his head to the side.
“I’m not.”
Chuck not saying anything, giving him his “oh, come on” look, then saying, “You said you were through with these guys. What happened to pulling yourself out of the sewer they dragged you into? Holding your head high again?”
“Look, all I did was listen to a pitch.”
“Sounds like you need another lecture from Sandy. How did he put it? ‘The clear bright line between right an
d wrong’?”
Sanford “Sandy” Sharts, Milner’s lawyer, a founding partner of Wilson, Sharts and Devane. The man was tough as a skunk on your side in a fight, but he could be downright pedantic. “Gonna tell on me to Uncle Sandy, old friend?” He looked up at Chuck, who was now looking ashamed, like he’d stepped over the line. That made Milner feel ashamed himself. How could Chuck step over the line? He was one of the only guys he confided in. Aside from Sandy, but he was paying Sandy by the hour. He smiled. “It’s a really interesting deal.” He put his one-page spreadsheet in front of Chuck. “I’d like to get your opinion.”
“You’re serious, aren’t you?”
“How often does something really interesting come along these days? All the hedge funds out there crawling all over every stock. Information available on the Internet, CNN, CNBC, MSNBC. Cramer doing his mad money thing. Today somebody farts and you see it on Bloomberg before you smell it. There’s no information advantage anymore.”
“So?” Chuck said.
“So, every once in a while you stumble on something.”
“You really are serious.”
“Take a look yourself.” He nodded to the spreadsheet he placed in front of Chuck, pushed it toward him further.
Chuck shook his head.
“C’mon, call it a swan song with the Walker guys.”
Chuck pulled the spreadsheet toward him.
Milner felt that familiar deal-junkie rush as Chuck picked it up. This Tentron deal had him hooked already.
After a minute Chuck looked up from the spreadsheet. “You’re right, it’s an interesting deal. But, sorry to be a boor, what happened to breaking away from these Walker guys?”
Milner shrugged.
Chuck kept looking at him.
“I’d use the billion I just took out of Southwest.”
Chuck was looking down at Milner’s spreadsheet again, studying it harder now. After a moment he scrunched his nose.
“What’s wrong?” Milner said.
“Is a billion enough?” Chuck looked back up. “This thing will take close to $6 billion to get done. How you gonna finance all the rest in this environment? Hell, Bear Stearns went bust two days ago.”
“And rumors of Lehman not far behind.”
“The markets were already bad; now they’re totally spooked. Bankers are too scared to lend to their own mothers.”
“I don’t know where I’ll borrow the money. Let’s see what Jack and Mickey come up with.”
“You better hope they’ve got dirty pictures of some bank president.”
LeClaire called Richard into his office. He motioned for Richard to sit at the side of his desk, pulled out a clean yellow legal pad and started drawing little boxes and diagrams with his fountain pen. He wasn’t smiling.
“I have just heard from Harold Milner that he would like to see more on Tentron. You will need two Analysts for a week or so,” he said, “because this will get complicated.” He turned back to his boxes and diagrams. “Now, this is the deal.” He drew the name Tentron Corporation in the top box. He wrote “Project Mary Claire” over it. “Use the code names at all times, and of course, the usual Need to Know rules apply. We cannot have any leaks, particularly with one of Milner’s deals.”
“Uh-huh,” Richard said. He was thinking about his first two minutes in the department with Cynthia. No nonsense. Then he thought about LeClaire’s reputation. More than no nonsense.
“Now, as you know, Mary Claire has four major divisions.” He drew four boxes below the top box. He penned in code names for each—Alpha, Beta, Sigma and Gamma. “‘Alpha’ is consumer products, including your favorite, Northern Ash Bats. ‘Beta’ is the heavy industrial equipment, turbine-driven generators. ‘Sigma’ is specialty carbon and stainless steel. ‘Gamma’ is mail order.” LeClaire paused and looked at Richard to see if he understood, waiting. Richard not moving. LeClaire still waiting. Richard nodded back.
“Now, Milner has done his own division-by-division breakup valuation analysis of the company. Call it a sum-of-the-parts. He thinks the parts are worth about two billion more than the whole company is trading for in the market. We need to tell him if his valuation thinking is correct, figure out who we can sell the divisions to that he does not want—he wants specialty steel and turbines—accumulate a position for him, plan strategy and structure and execute the financing.”
Richard was suppressing a smile. He’d see a breakup deal—pulling a company apart and putting it back together, or not—from cradle to grave, if Milner went forward. But he was also seeing his next few weekends evaporating into visions of the M&A conference room strewn with 10-Ks, annual reports, brown lettuce and stale sandwich crusts. And a smell like dirty socks.
“You will do a divisional black book on the company—with a separate section for each division.” LeClaire looked at Richard to see if he understood.
Richard froze, trying not to betray any emotion. What the hell is a black book? He wondered if he was supposed to know what it was.
LeClaire must’ve seen a glassy look in Richard’s eyes. “Relax; we will take this one step at a time. Get your Analysts started and we will revisit this with a first pass at the public comparables in the morning.” He smiled. “Okay? Here, take these two black books as guides,” he said and handed him two thick, tabbed presentation books from his desk.
Back in his office, Richard thought, Starting over: new desk, new analytics, new boss. But he felt certain LeClaire wasn’t gonna cut him off at the knees. Dissect him with that scalpel-like mind, yes. But slash him, he didn’t think so. And yet, he’d need to look sharp.
Richard was in the next morning at 8:00 a.m., earlier than his usual hour. As he unlocked the door to the M&A department he ran into LeClaire coming out of the War Room. It gave him a start, sent a rush of adrenaline through him.
“Shall we get started in about fifteen minutes?” LeClaire said.
“I’ll be there in ten.” Shit, not much time for coffee. Or to review his notes.
Sitting in LeClaire’s office, Richard started squirming almost immediately. LeClaire’s face assumed those angular lines he’d seen before. “Richard, before we get started I need to make a point.” He had his arms on the desk and his hands clasped. He perched forward at the edge of his chair. “Even in proceeding with something that may seem relatively innocuous, such as the selecting of appropriate public comparables for valuation analysis, we must always keep in mind that our clients are relying on us. And they are paying us very, very well to work very hard and to give them our best possible input.” He leaned farther forward now. That syncopated accent. “As investment bankers, we are supposed to be among the brightest minds, the most energetic and most dedicated professionals in the business community. We are to bring both inspiration as well as sheer analytical force to performing for our clients.”
Damn. Had he shown he was that much of a novice? Richard had to lick his lips before he spoke, they were so dry. “I understand that, and I do take it seriously.”
“Let me continue. Now, specifically, in this case, Harold Milner will be risking hundreds of millions of his money and exposing himself publicly if he decides to pursue this deal. That to a very great extent is based upon our advice and analysis.” He looked Richard directly in the eyes. “Harold Milner does not like to lose money. Harold Milner does not like to lose.”
Richard now felt his ears starting to burn red. He was clenching his fists.
“And so when we advise him, we must evaluate our analysis as if we are risking our own money and not just Harold Milner’s. We must evaluate the situation as if we will not earn our fees if we do not perform our job properly, and that therefore we will lose our jobs, and that therefore we will be unable to put bread on the table for our children.”
Richard now thought LeClaire was laying it on a little thick, but he still wasn’t moving.
“One little number that goes into one piece of analysis that is summarized on one little page which is in turn r
eflected in other numbers, each into another page, is equally serious and equally important.” He glanced at his watch. “And we must not only be precise, we must be fast. So let’s get to it.”
Forty-five minutes later, LeClaire said, “Very good outline for your first pass.” Richard felt his shoulders relax, realized his biceps were sore from being tensed the whole time. “I must turn to this now,” he said, looking at a pile of materials on the corner of his desk. He smiled at Richard. Richard left. One step at a time. He had a long way to go. A day and a half to pick some comps and draft an outline. He couldn’t become Harold Milner overnight. Back at his desk he thought of Kathy. No Kathy Cella to cut up and laugh with, but a Milner M&A deal, and a big one. Five, maybe six billion. Above the fold in the Journal, if it got that far.
Eleven p.m. on a Friday night, and everyone in the M&A department had cleared out. Richard had been pretending to be busy for the last hour until Peter Blumenthal finally left. He waited a few more minutes, then went into the War Room. He’d already checked four of the six computers in the center row of desks in the room. He sat down in front of the fifth, starting to wish he’d never gotten into this. He went into Outlook, clicked on “Tools” and checked “Email Accounts.” No mole.
He moved over in front of the sixth, which always seemed to be turned off. He switched it on and waited while it finished booting up, logged into it using the generic M&A login. He opened Outlook, went to “Tools,” then “Email Accounts.” He sat up straight like someone had stabbed him with a fork, felt a rush of adrenaline. There it was: [email protected], one of half a dozen email accounts on the computer. He clicked out of “Tools” and checked the Inbox for emails, alphabetizing them. He saw that all the mole’s activity, as far back as he’d seen it in the Comm Room and downloaded onto his own laptop, was on this computer as well. He glanced over his shoulder, making sure nobody was watching.
He closed Outlook and shut down the computer. He went back to his desk, shut down his laptop and unhooked it from its docking station. He packed it in his briefcase, put on his jacket and headed for the door.
