Octopus

by Guy Lawson

  An hour had passed. It seemed that things couldn’t possibly get stranger—until Nichols handed Ellis a sheaf of photographs. These were the images of the Federal Reserve bonds Nichols had shown Sam—the Federal Reserve boxes, the Oriental men gathered around a table, the canister of nerve gas booby-trapping the bonds. Ellis $icked through the pictures. “Despite repeated attempts by the US and other governments to ‘mythify’ the People’s Republic of China assets in the form of Federal Reserve obligations, they do exist,” Nichols’s memo stated. “The parties I am associated with have a direct personal relationship with the sole duly authorized signatory of approximately $700 billion Federal Reserve obligations, and they are willing to cooperate over time in overseeing the return of these assets to the American government.”

  Nichols said that the Fed had undertaken a campaign to “mythify” the bonds. Nichols assured Ellis he was going to get the “real” Fed bonds. The Fed bonds were being held in a “security zone” on the island of Mindanao in the Philippines. Nichols was going to form a group to retrieve the bonds—a kind of real-life A-Team. Before they could depart, however, Nichols needed assurances from the president that he’d be supported.

  Nichols wanted Ellis to act as a back channel to the president. The president would understand the signi!cance, Nichols was sure. Nichols’s memorandum speci!ed two requirements:

  1. “COMPLETE ANONYMITY AT ALL TIMES.”

  2. “Irrevocable nonexpiring FULL AND COMPLETE diplomatic immunity by Executive Order, which shall be issued in duplicate and in perpetuity.”

  Nichols said the immunity had to be accompanied by a “black” passport, which could be created only by presidential decree. The passport wasn’t diplomatic, in the ordinary sense. It was far more powerful. Nichols and the others would be free to cross all national boundaries without being stopped, searched, or asked any questions.

  Ellis was $abbergasted. Was Nichols really expecting the president to endorse a harebrained caper involving treasure hidden in caves in the Philippines? Nichols was poker-faced, toking on another cigarette. Ellis was crucial to saving the presidency of George W. Bush, Nichols said. The solvency of the United States was at stake, as was the fate of the War on Terror.

  Over the years, Ellis had dealt with many eccentric hedge fund traders. A shockingly large number were given to wild mood swings and nutty investment theories. But Nichols’s plan and Sam’s belief in it were totally irrational. Israel was obviously under Nichols’s spell—so completely and utterly convinced that he appeared to have lost his mind. If Nichols was a con man—as appeared extremely likely—word of Sam’s dealings with him would mean the ruination of Bayou. Inevitably, Sam’s reputation would be destroyed. Ellis was concerned for his friend. He needed to !gure a way to get Nichols away from Sam. How on earth was he going to get Sam interested in venture capital deals—real deals—with the freakish death figure of Robert Booth Nichols around?

  Sam walked Ellis to the front door. Alone with Israel for the !rst time, Ellis expressed his concerns. Did Sam know what he was getting himself into? What the hell was going on? They stepped outside. A thunderstorm was rolling across Westchester, bringing howling wind and sheets of rain.

  “Are you serious?” Ellis implored his friend.

  “I know how it looks,” Sam said. “But I’m telling you, this stu" is 100 percent real.

  Bob Nichols is real—as real as rain.”

  ELLIS DECIDED TO MAKE his own inquiries about Nichols. Through family connections, Ellis had been appointed a fellow in the Counter Terrorism Center at West Point, studying biological warfare. He’d come to know a number of senior military o#cers who could tell him about Nichols’s alleged special ops history. It turned out Nichols was known to some of the soldiers as a kind of mythical !gure in the world of black ops. “All hat and no cattle” was one reply. “Crazy,” said another. Brigadier General Russ Howard, former head of the Special Forces “A-Team” (the real one), told Ellis that he had heard the legend of the Fed bonds in the Philippines. But actually going after them sounded like a wild goose chase.

  Ellis contacted Fred Fielding, White House counsel for both Presidents Reagan and George W. Bush. Fielding was one of the premier Republican attorneys and deal makers in Washington. Fielding agreed to ask around. Within days, he reported that the word he’d received on Nichols was simple: Stay away—far, far away. The projects Nichols was discussing might be illegal, Fielding said. He told Ellis not to discuss them with anyone and not to get involved in any way. It was the response Ellis expected, though in$ected with a degree of intrigue he hadn’t anticipated. Nichols apparently did have special ops experience and connections inside the White House. But the nature of his relationships wasn’t clear. Nichols appeared to be two things at the same time: a former intelligence operative of some kind and a scammer peddling !nancial frauds. He was a spy and a con artist. Or he was a spook who’d become a con!dence man. During the cold war, the lines between real intelligence operatives and frauds had blurred badly.

  The U.S. government had hired countless “contractors” to carry out its dirty work.

  Nichols had apparently been one of those men.

  But it didn’t really matter. Sam was entranced. Ellis was stuck. There was no chance Ellis was going to talk to the president about Yamashita’s gold. Nor could he turn his back on Sam. Ellis sat down to write Sam a letter on June 23. “As I told you on the phone I cannot help you on the project we discussed,” Ellis wrote. “Legal counsel has informed me that the project may violate federal law and thus I am duty bound not to discuss it with my cousin or anyone in his employ. I am very concerned that by your association with Robert Booth Nichols you are putting yourself and your family in signi!cant risk. I urge you, as a friend and someone who cares about you and your family, to break o" your relationship with Mr. Nichols and return to your normal business activities.”

  Sam ignored Ellis. By the end of June, the attempts to trade in the shadow market had come to a standstill. Citibank refused to wire Bayou’s money to Germany.

  Then Citibank demanded that Bayou immediately transfer its funds to another American bank. The order applied to Sam’s personal accounts as well. It appeared the bank wanted nothing more to do with Israel and his schemes. Marino gladly arranged for Bayou’s millions to be transferred to another American bank. So the money had !nally been sprung. The game was back on. But Nichols could see that Sam needed to be persuaded to transfer the funds to Germany. Sam needed the “convincer,” as it was known in the long con—the act that would move him to actually wire the money to Europe. It was time to raise the stakes.

  CHAPTER FOURTEEN

  Exploding Heads

  At the instruction of Bob Nichols, on July 7, 2004, Sam !ew Lufthansa to Germany.

  Nichols would follow the next day. Nichols and Israel were now going to cut out the middlemen and go directly to Postbank, a real entity, not another joker broker.

  Postbank had a real o"ce in Hamburg. The Postbank o"cial organizing the trade had real business cards with the title of Gebietsdirektor. His name was Golo Barthe. He was going to provide the “paper,” enabling Sam’s entrée to the elite market. At long last, Sam would be interacting with a legitimate businessman. Or at least that was what he was going to determine for himself, before he wired 100 million euros to Germany.

  Nichols had told Sam to go to the airport Marriott when he arrived in Hamburg. Sam had been directed to contact Nichols’s arms dealer connection—the cousin of President Musharraf who worked in the Pakistani embassy in London. Kumar was his name. Sam had met Kumar once in the Royal Club at the Grosvenor Hotel in London. It was easy to recognize Kumar in the lobby of the Marriott, though he had the uncanny ability to blend into his environment. Kumar was small, thin, dressed in drab business attire. As they greeted each other in the lobby, it seemed to Sam that Kumar carried himself in the manner of a spy: He was watchful, graceful, like a passing shadow. Kumar had a small shoulder bag for Sam, which he silently handed
over. Sam asked Kumar if he wanted to have a drink, but he politely declined and departed.

  Sam went to the center of the city and checked into the Intercontinental, taking a suite with a view of Alster Lake. Alone in his room, Sam opened the shoulder bag.

  There was a heavy package wrapped in plain brown paper. Inside, a towel was wrapped around two 9 mm Beretta handguns. Each weapon was equipped with a silencer. Sam inspected the pistols lovingly—the polymer handle, the chrome barrel, the satisfying feel in the hand. In the weeks since Nichols insisted he be armed, Sam had developed a fascination with guns. Nichols had supplied Sam with a variety of pistols, always accompanied by a silencer for the close urban combat he anticipated.

  Nichols arrived the next morning. The CIA operative was in full operational mode: Comprehensive surveillance countermeasures had to be taken at all times.

  Conversations had to be whispered or conducted in code language. Hundreds of enemy intelligence operatives had descended on Hamburg to try to stop them from making the trade, Nichols told Sam; the city was teeming with killers from rival factions. Sam had to be hypervigilant. Nichols inspected the weapons Sam had collected from Kumar.

  Nichols had brought ammunition. He loaded the Berettas and attached the silencers. He told Sam to place the gun in the small of his back. They were now armed and ready for their encounter with Golo Barthe of Postbank.

  “Bob was one bad dude,” Israel recalled. “He was so cool. He said we were #nally in the right place at Postbank. He was going to tell Barthe about the Federal Reserve bonds in the Philippines. He said we would cut him in on that deal, too, once the trading programs were rolling. Everything was ready for the trades to begin. It was all set.”

  The meeting was scheduled for Saturday morning. Barthe’s o"ce was located on Valentinskamp, a short walk from the hotel. As Sam and Nichols cautiously made their way to the meeting, the streets of Hamburg’s central business district were eerily empty.

  Turning into a back alley, as they’d been directed by Barthe, Israel and Nichols greeted the German banker at the rear entrance to a nondescript brown brick building. Barthe was dressed crisply, in a dark suit. He was in his early thirties, tall, handsome, the epitome of a young Euro sophisticate fluent in English.

  Barthe ushered Israel and Nichols through the back door and into the lobby, which was completely deserted. As they walked to the elevator, Barthe told them that he didn’t trust George Katcharian anymore. It was Katcharian who’d cut out Barthe and Postbank earlier when he directed Sam down another dead end. Barthe said that Postbank was a highly reputable institution that only conducted business with high-integrity traders, particularly in the high-yield market with its many impostors and frauds. Sam nodded in silent agreement.

  Barthe had a modest o"ce, the kind a midlevel functionary would occupy. Two cleaners were vacuuming in the hall, but otherwise the Postbank premises were deserted. Barthe explained that the transaction involved $2 billion in medium-term note prime bank debenture instruments. The instruments were “seasoned,” meaning they’d been traded already. There was a stack of documents on Barthe’s desk, ready to be executed by Israel.

  To perform a #nal step of due diligence, Nichols borrowed Barthe’s phone to call Phil Severt, the former Reagan o"cial. Severt was in Florida. He was responsible for the charitable component of the trade. Part of the proceeds would be used to build the water treatment facility outside Karachi in Pakistan that Severt was promoting. For months, Sam had asked Nichols to let him meet the mysterious Severt. Nichols had told Sam it was impossible. Severt didn’t take personal meetings. Not even a future Wall Street titan like Sam Israel ranked high enough. But Sam had been permitted to speak to the all-powerful Severt once before the Hamburg trip. The conversation had made a strong impression on Sam—in particular one strange phrase Severt had used.

  “When we spoke, Severt repeatedly told me he had what he called a stupid face,”

  Sam recalled. “It was weird. I asked him what it meant. He said he had the kind of face that was instantly forgettable. He could vanish into crowds. Severt said no one noticed him when he was in public because he was so bland looking. He said he was invisible because his face was so average—so stupid.”

  On the call from Postbank’s o"ce, Severt assured Barthe that the correct protocols had been followed for the Karachi initiative. As Sam #lled in the documents to open a “nondepletion account,” Nichols told Barthe that the initial trades were only part of a much bigger plan. Nichols represented the covert #nancing of American intelligence agencies in a variety of ways. Everything was set. Once Sam wired the money the trades would commence. Sam was careful to maintain a serious demeanor given the gravity of what they were doing. He said he’d transfer enough American dollars to equal 100 million euros on Monday morning—at the current exchange rate it would be just over $138 million.

  “After the meeting I left the building ahead of Bob,” Sam said. “He was going to follow a minute behind me as a security precaution. I walked out the back door and into the alley. Then I took a right and started walking along the street. The area was like a ghost town. Across the street there was a man standing next to a telephone pole.

  He was short, maybe #ve-#ve, wearing a turban. He appeared to be Pakistani. Maybe Middle Eastern. One of his eyes drooped down. He had this weird expression on his face —like he was staring at me. Then he started to walk towards me. As I got near him, he passed by and he said—I swear to God—he said, ‘You have a really smart face.’ I stopped dead. I knew it was Severt telling me he’d sent people to watch us in Hamburg.

  Severt was tailing us—and he was letting us know it. So I threw the guy against the wall and asked what the fuck was going on. He wouldn’t talk to me, not in English. All of a sudden he could only speak Urdu. He kept saying the same thing—‘No sahib, no sahib.’

  “I let him go. I walked a couple more steps, and then I turned around to see if Bob was behind me. As I turned, I saw the guy reach into his jacket and pull out a gun. Now Bob was coming out of the building. The guy was taking aim to shoot Bob. So I pulled my Beretta out and I shot at the guy. I hit him in the left hip. Everything was moving in slow motion. It was terrible—it was terrifying. By that time Bob had pulled out his gun, and he plugged the guy in the right shoulder. The guy dropped the gun and fell to the ground. I was furious. I felt like my life was in danger. So I walked over and stood over him and shot him in the head. Point blank. Killing him. His head exploded all over the sidewalk. Blood and brains were everywhere.

  “There were no cars. No witnesses. Nobody was there. The silencers worked, so the shots didn’t make any sound. No one had seen what happened. Bob grabbed me. He took the gun from my hand and we ran for our lives. When we got back to the hotel, I didn’t know what to do. We went to Bob’s room. I was crying. I was devastated. I threw up. Bob said I was the craziest person he’d ever met. But I’d saved his life. He told me he’d take care of it. Bob started to make calls. He got rid of the body. He had cleaners to take care of that kind of thing—to make a body disappear before the police were alerted. He got rid of the guns, too. He made it so there were no traces of the crime. It was clear that Severt had sent people after us. The question was why. Clearly Bob wasn’t telling me everything. But this incident pulled us together. Bob and I were developing a symbiotic relationship. We needed each other.”

  HAD SAM REALLY KILLED a man? Had Sam invented the scene for this book as a perverse form of self-aggrandizement? Or had Robert Booth Nichols staged the encounter? As the inside man, Nichols had the responsibility to get the Babbitt’s bankroll back in play. Sam’s money was still sitting in an account in New York. Nichols had apparently concluded that he needed to eliminate any lingering doubts Israel might have and demonstrate beyond doubt that there were evil factions trying to keep them from trading. Sam needed to see that the shadow market was real. So was the Octopus.

  Terrifyingly real.

  Staging a murder was one of the oldest ruses of the
grift. It was the ploy that had provided the #nale for The Sting—a movie inspired by the book The Big Con. Blood, guts, guns, the frisson of extreme danger, and the need to !ee before the police arrived —the elements were eternal. Cackle-bladder was the term of art for the bladder #lled with chicken blood concealed in the performer’s mouth in the traditional fake homicide. By biting on the cackle-bladder when he was “shot,” the “victim” made it appear that his own blood was running out of his mouth.

  Had Nichols taken the classic structure of the long con and improvised ingeniously?

  Was the entire scene part of a remarkable piece of theater directed by Nichols? Instead of placing the cackle-bladder in the faux victim’s mouth, he could’ve rigged the man’s turban. Brains had indeed exploded on the sidewalks of Hamburg. Only they were animal brains. If Sam was indeed telling the truth about the murder, it seemed likely that Nichols had staged the stunt with incredible cunning. Kumar had supplied Sam with the weapon, at Nichols’s direction. Nichols had arrived with the ammunition and loaded the Beretta with blanks. The silencer had worked perfectly, mu$ing the gunshot. The turban had been triggered to the split second. Turbans had been used by suicide bombers in Afghanistan. But the notion of using the same ruse to deceive Sam was inventiveness on a scale Sam couldn’t imagine—literally. Sam was completely convinced he’d killed a man. As a teenager Sam had once walked into a deli in Manhattan immediately after an armed robbery, and he’d witnessed the shop owner lying on the !oor after being shot in the head. The scene in Hamburg was just as real—and just as vivid.