by David Lender
“The same trading pattern shows up in Tentron’s stock.” Croonquist clicked through four slides showing the link between Walker & Company’s New York office and GCG Paris, then to London, Tokyo, Santiago and Hong Kong. Croonquist was now thinking it was too much information, too many slides.
Green shook his head. “Roman, we talked about these emails a while back. Can we use any of them?”
“Not the homebuilders stuff,” Stone said, “but we got wiretaps before we collected most of the Tentron stuff. That’s all usable.”
Green nodded. “Go on,” he said.
“What we have here,” Croonquist said, clicking to another slide, “is data produced by our new MarketWatch system and our Cray. It shows documentation of virtually all of the trades in Tentron listed in the preceding emails.” He turned back to look at Green, waved his hand in a circle. “Close to 25% of Tentron’s stock has been acquired in activities that appear to be part of a coordinated group.”
“Let’s cut to the punch line,” Green said.
“Okay,” Croonquist said, seeing he was getting to the end of Green’s attention span, “the Tentron trading appears to be the same group as the homebuilders. Harold Milner launched an unsolicited tender offer for Tentron earlier this week. We think Milner and Walker & Company formed an illegal group operating in concert to acquire Tentron without disclosing their mutual intent and acquired close to 25% of Tentron’s shares without filing a 13D.” He paused and waited to see Green’s reaction. Green understood.
“What’s the relationship to the homebuilders?” Green asked.
Croonquist turned back to look at the screen. “Maybe this will help. The telephone conversations listed here are between the M&A Department in Walker & Company’s New York office and GCG Paris. I’m going to play you a tape from one of those conversations,” he said and clicked the tape machine on. The sound wasn’t great, but he hoped Green could follow.
“Are they on the way?” the first kid’s voice said.
“You should have them by 6:00 tomorrow evening your time,” the second kid’s voice said.
First kid: “Anything unusual?”
Second kid: “Yes. Prolific today. Lots of instructions—trading like crazy.”
First kid: “Are you sure it was all from him?”
Second kid: “No, as you know, on any given day he accounts for about 90% of the volume of the trades.”
First kid: “So if today was a heavy day, chances are he had a heavy day.”
Second kid: “Right. I was very tempted tonight to review them all at my end to see what they said.”
First kid: “Too risky.”
Second kid: “Yeah, you’re right. No sense in pressing our luck.”
Croonquist turned the tape machine off. He turned back to look at Green. He couldn’t read him.
“One of the voices you heard and one of the telephone numbers you see on the screen was Richard Blum, an Associate in the M&A Department at Walker & Company. We think he and one of his colleagues in Paris are part of this group dating back from the Southwest transaction. We have a number of other similar calls between Blum and his colleague, Kathy Cella, who’s assigned to GCG in Paris. We don’t know if they’re couriers or they’re privy to the identity of all the other group members.”
“So we’re recommending we bring in Blum first, sweat him and then see where it leads us,” Stone said.
Green said, “You have my blessing. But how do you know that this kid Blum won’t tip off the rest of the network?”
“We scare the shit out of him and convince him he can plea bargain for turning everybody else in. That’s not a big concern,” Stone said.
“Sounds good to me, just keep me posted,” Green said. He looked at his watch, nodded at Croonquist, said, “Good job,” and left. Croonquist turned the projector off and felt the rush he always did before a big case. This one was on the way, and it had him tingling all the way down to his toes.
New York City. Kathy got out of the taxi at 62nd and Broadway. She knew Richard would be home at his apartment, because she’d seen him getting into the car service Town Car in front of the office. She heard him decline a drink with Tim Bolton, saying he was heading straight home. She wanted this over with.
Her emotions had been twisting in her stomach for two days, since he kissed her on the sidewalk outside Teavana and asked her what she felt. What was it with this guy? Guys didn’t ask her what she felt, they just hit on her. But Richard just kept coming at her. Smiling, gentle, confident, he didn’t give up. But he’d said things on Fire Island she had to square with him.
When she got off the elevator, she could see he was waiting for her at the door. His suit jacket was off, tie loosened, hair a little tousled, but still just so. “Hi,” he said.
Kathy walked past him without saying anything, got a few steps inside and turned. When he closed the door, he said, “Before you say anything, I need to talk about the mole. I know what I said on Fire Island was ridiculous.”
“That can wait. You hurt me on the island.”
“I’m sorry, but you pissed me off.”
“What was that crap about my family’s South Hampton place?”
“You call me farm boy, razz me for my background all the time. You can’t take a poke in the ribs?”
“You call ‘stuck in your hard-armored shell’ a poke? ‘Glib, tough, and cool’? And don’t ever talk about my father.”
“You pissed me off. What did you call me? Lovelorn?”
“Pissed off or not, I think you meant it. Most times, people don’t really say what they mean until they’re angry.”
He moved toward her. For some reason she started to feel like she was going to cry. She clenched her teeth. She’d be damned if she’d let herself.
He said, “I didn’t say everything I meant. I love you.”
It hit her like a wave of warmth washing over her chest, then down her entire body. She felt like laughing with relief, knowing now it was what she needed to hear, then feeling the tears come. Her eyes were closed when he took her in his arms.
“Oh, God, why are you saying that to me now?”
“What do you mean now? Why’s this any worse or better time than any other?”
He was holding her and she had her hands on his chest, looking up into his face. Why did he have to keep coming at her? “Stop pushing me, please.” He kissed her; she didn’t respond for a moment, then she let herself kiss him back. She pulled her lips from his and looked into his eyes, smiling. She put her hands in his hair, drew his face to hers and kissed him. She felt him moving her toward the sofa. Now she couldn’t wait even that long and pulled him to the floor. “The rug is fine,” she whispered, and scrambled to undo the buttons on his shirt.
Richard passed 60 Centre Street, the Supreme Court building. He pulled the note from his pocket: Roman Croonquist, c/o Charles Holden, U.S. Attorney’s Office, fifth floor 75 Centre Street. At first Richard hadn’t believed Croonquist’s explanation in his call two days earlier, that Richard could shed some light on a “problem” the SEC was investigating. But now he didn’t care what Croonquist wanted; Richard had his own agenda. After Kathy stood him on his head on Fire Island one thing led to another. He was still ashamed of his reflections about Jack’s “skiing” speech. Then, mortified about telling Kathy he’d just forget about the mole, and worse, realizing what Dad would say about both of those. And finally, deciding to call the SEC himself and get all this mole stuff out in the open. So the call from Croonquist was a perfect coincidence.
He hoped.
As he got off the elevator he felt a rumble in his chest. The place was eerie: everything painted gray and brown, a smell like dust. Not a sound. The receptionist showed him to a conference room, left him standing in the open door.
One of three guys in the room—this one tall and lanky—stood up. He said, “Hi, Richard, I’m Roman Croonquist, Director, Division of Enforcement of the SEC.” He walked around the table and shook hands, taking in
Richard through gray-green eyes like a wild animal’s. “Please sit down. This is Charles Holden, Assistant U.S. Attorney, and Charles’s assistant, Jeremy Duncan.” The two nodded. Neither smiled.
Croonquist said, “Don’t be put off by the tape recorder. It’s easier for us than taking notes.”
“No problem.” What is this?
Croonquist said, “As I said on the phone, Richard—can I call you Richard?”
“Sure.” Richard started to think Croonquist was overdoing the Mr. Genteel and Polite routine. And he was talking to Richard like he was a teenager.
“The U.S. Attorney’s Office is heading an investigation jointly with us at the SEC. Your name came up as someone who might be helpful to us. Thank you for coming.”
Richard now wished he could get this over with and leave—fast.
Croonquist said, “This summer, in the two weeks prior to the announcement of the IPO of Southwest Homes, our office detected unusual trading activity in six homebuilders’ stocks and stock options. We have reason to believe you have knowledge of some of those trading activities. Can you elaborate?”
Richard thought about the mole’s emails ordering trades on the code-named companies’ stocks and options. They had to be onto the mole. Perfect; he’d tell them all he knew. But now he saw Croonquist staring at him with his wolf eyes, his jaw set like he was cross-examining him. Richard realized he’d been ambushed. Shit, they must think I’m involved. “I don’t understand,” he said. His stomach gave a nervous flutter.
Croonquist said, “Let me ask the question another way.” Holden scowled and made a display of throwing himself back in his chair, muttering something under his breath. Croonquist shook his head at him. He turned back to Richard. “To your knowledge, was Walker & Company involved in any trading strategies in the homebuilders while it had inside knowledge of Southwest’s proposed IPO?”
“Not to my knowledge.”
Richard saw Holden eyeing him again. His assistant did as well, a faint grin on his face. Smug little dweeb. “I don’t know anyone who traded in the homebuilders’ stocks or options before or after the Southwest IPO. If that’s what this is all about, I’m not going to be very helpful to you.” Richard tried to smile like that was it, but his nervousness made his face stiff, and he felt his upper lip beginning to perspire. He saw Holden shake his head like he was disgusted.
“Call me Roman,” Croonquist said. Now he used that smarmy Mister Nice Guy voice again. “Okay, let’s leave that for a minute and move on to Tentron. We detected a similar trading pattern in the stock and options of Tentron Corporation for the eight weeks prior to Harold Milner’s tender offer.” His gaze was locked on Richard’s eyes again. Man, this guy’s eyes were creepy. “Are you aware of the identity of anyone who traded in the common stock or options of Tentron prior to the announcement of Mr. Milner’s bid?”
Now Richard thought again about the mole’s emails, all his trading in code name MCS. Was MCS Tentron? If they knew about that it might not look good for Richard. Richard said, “Walker & Company is representing Harold Milner on the Tentron transaction. If I knew anything directly about it, I’d be precluded from discussing it with anyone who didn’t have a Need to Know. I’ve signed a confidentiality agreement.” Richard looked at Croonquist, who was doing his best to look approachable and sympathetic. Richard was doing his best to look apologetic, probably overdoing it as much as Croonquist.
“This isn’t getting us anyplace,” Holden said. He pushed his chair back from the table. Croonquist turned and held his hand out as if telling him to calm down. Holden said, “We invited you here today to give you a chance to cooperate. You’re in a lot of trouble right now. And if you don’t cooperate, you’re gonna be in a lot more trouble.”
Richard felt his body tense, sensed the urge to rear back in his chair. It pissed him off, this bad cop leaning on him in an obvious good cop/bad cop routine. It helped Richard compose himself. He stared down Holden for what seemed like a minute.
Croonquist said, “Charlie, let’s not jump to conclusions and let’s not make this into something adversarial.”
“We’re beyond that,” Holden said.
Croonquist looked at Richard, said, “We’re still approaching this from the standpoint that you’re willing to cooperate. We hear your concern about client confidentiality, that you might need to sort that out. But we’re gonna get to the bottom of this one way or another. We also know you haven’t been entirely truthful with us.”
Richard now resisted the urge to wipe perspiration off his upper lip. So maybe they knew he was aware of the mole’s trading. He glanced over to see Holden’s assistant openly smirking. Stick it in your ear, you tool.
“Let’s cut the crap,” Holden said. He motioned to his assistant. The kid reached down into his briefcase and came out with two hefty binders of paper, handed them to Holden. Holden slapped the first down on the table in front of Richard. “Ever hear of a Wells Notice?”
“No.”
“It’s a letter from the SEC outlining the facts supporting an enforcement action against somebody,” and he pointed to the name at the top of the letter on the front page, “in this case you. Normally these things are about fifteen pages.” He rifled the pile of papers. It was as fat as Richard’s thumb. “They came up with a nice chunky one for you.”
Richard tried to stay calm. Somewhere in his head he was hearing, Just get up and leave. He felt his face burn.
Holden slapped the other wad of papers down in front of Richard. “And this is a Complaint. A formal legal action brought by the U.S. Attorney’s Office. Misuse of material nonpublic information, et cetera. We’re ready to go. How do you wanna play this?”
Richard didn’t know what to say. And he was afraid if he tried to speak no sound would come out.
Croonquist said, trying to make his voice all calm and soothing, “We don’t think you’ve masterminded the scheme here, but if you’re someone’s pawn, you may be in much further than you think. We can help you.”
“Oh for Chrissakes, play one of the tapes,” Holden said. Holden’s assistant reached into his briefcase again and pulled out a small tape recorder. He switched it on.
As he heard his and Kathy’s voices on the tape, Richard was aware his legs were feeling numb, that he couldn’t jump up and run out of the room even if he wanted to.
First Kathy’s voice talking about finding a bunch of them, then his, then the two of them back and forth, ending with Kathy saying, “Too risky,” him saying, “No sense pressing our luck.”
Damn, they’ve been tapping my phone. Panic started to muddle his brain for the first time.
“Do you expect us to believe you’re not involved in this?” Holden said. He was staring down Richard.
Richard didn’t say anything, but his mind was working again, in slow motion. What was it they thought he had done? They couldn’t think he was the mole, because Kathy and he referred to him on the tape. They must just think they were part of the mole’s insider trading ring.
“You’re in shit up to your eyeballs, kid,” Holden said. His assistant started taking notes on a yellow legal pad.
“Charlie, maybe you should excuse us for a minute,” Croonquist said. “I’d like some time alone with Richard.”
Holden made another display of slamming his chair against the wall as he pushed it back. He left the room shaking his head, sighing. Holden’s assistant followed him out the door.
Croonquist turned back to Richard and smiled. He was overdoing his good cop, still standing up. “Please excuse Charlie. He’s a very committed and idealistic individual. I won’t let him pressure you into doing anything you don’t want to.” He leaned forward, put his hands on the table. “You heard one of the tapes. We have more of your conversations with your friend, Kathy Cella, about the trading network and your contact you refer to as the mole. Let me tell you what else we have.”
Richard was trying hard not to show any reaction, feeling worn down.
“W
e have detailed stock and options trading records for a series of institutions in Europe, South America and the Far East, as well as a whole series of U.S. firms. We also have detailed email records between Walker New York and GCG Paris, as well as emails between GCG Paris to and from a number of those institutions ordering and confirming trades. These records exist in detail for Tentron, the homebuilders, and we have somewhat more limited data going back to a number of Milner’s previous deals. Ernest-United, Val-Tech Industries and Tungsten Steel. We’ve found confirming data on your desktop computer, among others at Walker. Are you following me?”
“Yes.” They’d hacked into his computer. They had the mole’s emails. Holy shit. They think I’m him?
“Since the transactions prior to Southwest predated your employment at Walker, we have no reason to suspect you were involved. But the rest of this is very incriminating. It would be better for you to cooperate. We’re going to get your entire network—including Milner—with or without your help. You saw the complaint Charlie has drafted. I can’t make you any promises right now, but depending on what you give us, we can offer you a deal.”
“But I haven’t done anything wrong.”
Croonquist gave a long sigh and sank into a chair. Richard wasn’t buying it anymore, now feeling better. “Richard, I’m trying to be nice to you. It isn’t pleasant for me to contemplate ruining a young man’s career, or his entire personal life. What will your mother think when this comes out?”
Bastard. He was trying to push all the buttons. But they didn’t have anything on him. A bunch of emails he didn’t send, some phone conversations with Kathy taken out of context, nothing. But who wanted to screw around with these guys? They could probably mess up his life even if he didn’t do anything. What can I do?
Richard lost track of how long he sat there in silence.
“How about I give you some time to think it over?”
“I don’t need to think it over.”
