Due Diligence: A Thriller

by Jonathan Rush

  But that wasn’t the only reason for the hostility between Rubinstein and Golansky. Until recently, Bruce Rubinstein had been head of capital markets himself. His greatest success was handling a bond placement for a pharmaceutical company called Alesco, a $3.2 billion placement that was completed under intense pressure of a deal that was in danger of collapse, and he never stopped reminding people about it. But the Alesco placement, and just about everything else that succeeded in capital markets, had in reality been managed by Rubinstein’s deputy, a fast-talking Nebraskan called Joe Allen. The Captain had been planning to move Allen into Rubinstein’s job when Allen suddenly announced that he was going to Morgan Stanley. The Captain would have kicked Rubinstein out and put Allen behind his desk the same day if he could have persuaded the Nebraskan to stay. Instead, Allen walked—together with half the capital markets team—and the Captain was left with Rubinstein running the operation, minus Joe Allen, just when the Alesco deal had finally gotten Dyson some credibility in the corporate debt market. As fast as he could, the Captain sidelined Rubinstein into credit risk and recruited John Golansky from Deutsche Bank, giving him double Rubinstein’s salary and a huge incentive package to build the debt business.

  “Are you saying you know something about this client?” said Golansky

  “No,” said Rubinstein. He looked Golansky in the eye. “I’m saying I’d like to.”

  Rubinstein and Golansky squared up to each other across the table. Golansky was a big, powerful guy who had played college football and looked like he still had the physique under his shirt to throw a tackle. Rubinstein was a small, balding, dapper man with a large pinky ring on his right hand. Golanksy looked as if he should have been running a gym; Rubinstein looked as if he should have been running an antiques shop.

  Golansky turned to the Captain. “Are we seriously saying we’re going to refuse this mandate? Are we saying we’re even considering that?”

  “Delay it,” said Rubinstein, “until we can do a little research.”

  “Yeah, which the client’s likely to accept. That’s going to make him real happy.” Golansky shook his head in disbelief. “Let’s just stop to think what we’re talking about here. This would be the biggest deal Dyson Whitney has handled since … I’m relatively new, so I may not know all the history, but would that be the Transcom deal back in 2003, Frank?”

  “This is bigger,” muttered Nardini.

  “Bigger? Really?” said John, as if he hadn’t realized. “And it’s not as if deals are exactly falling out of the sky. And if we’re talking about selling two-point-eight billion dollars of debt, well, I have handled bigger debt placements than that—”

  “The Alesco loan was bigger,” said Bruce Rubinstein sniffily. “Three-point-two billion, and we placed it in four days.”

  “As I was about to say,” continued Golanksy pointedly, “I have handled bigger debt placements, but not since I came to Dyson Whitney.”

  “Precisely my point,” said Rubinstein smugly.

  “Like hell it is!” retorted Golansky. “Excuse me, but I seem to be hearing that we’re thinking about refusing a mandate because some client signs the letter and gives us the fee and the indemnities we want. Like that’s some kind of crime! So let’s be clear. Is that what this comes down to? Is that the bottom line? Because if it is, I honestly don’t know what we’re doing here. And to be frank, Bob, I certainly don’t know what I’m doing here.”

  Golansky looked directly at the Captain. Bob Browning was perfectly well aware of his meaning.

  There was a troubled silence at the table.

  “Lou?” said the Captain eventually. “What do you think?”

  Lou Caplan frowned. “I think we ought to get Pete Stanzy up here.”

  * * *

  Stanzy was ready. He was expecting the call. He went down to the boardroom, and when he saw they were looking at his letter of engagement, he gave them a grin. “That’s some letter, huh?”

  The Captain nodded. “Pete, we just want to clarify a couple of things.”

  “Shoot.”

  “There are a number of things about this letter that are unusual.”

  “You like the fee, Bob?”

  “Yes,” said the Captain, “I like the fee. How did you get it?”

  “Negotiation,” replied Pete smoothly.

  “Tough negotiation?”

  “Not unreasonably. The client’s looking for us to be extremely fast and responsive on this.”

  “Did you ever see a client who isn’t?” said Rubinstein. “Doesn’t mean they pay forty bips.”

  “He likes what we offer and he’s prepared to pay for it.”

  “And no quibbles over the indemnity clauses?” asked Lou Caplan.

  “Not really. My client’s very focused on the things that really matter.”

  “And these don’t?”

  Stanzy didn’t reply. He allowed himself a tiny smile. That was for the Captain. Browning, he knew, would have allowed himself a smile at that question as well—or a belly laugh, more likely—if he hadn’t been sitting there as CEO.

  “Okay.” The Captain frowned. “That’s a little unusual, isn’t it? Wouldn’t you say that?”

  “I’d say it’s very unusual,” said Pete, as if there were nothing more agreeable to him than to admit it. “Mike Wilson wants this done very quickly and very quietly.”

  “Show me a client who doesn’t,” said Nardini.

  “No, this is for real, Frank. This wasn’t a competitive pitch.”

  “I was going to ask you about that,” said the Captain.

  “It wasn’t,” said Stanzy. “That’s what I mean, Bob. Wilson wants this done quick and quiet. I’ve told him we can do it exactly the way he wants it done and he’s prepared to pay for that.”

  “I understand the client has a relationship with Merrill,” said Bruce Rubinstein.

  “Who told you that? John Deeming? Well, Bruce, they do have a relationship with Merrill. And you know what they say, places like Merrill leak like a sieve. I told you Mike Wilson wants this done with the absolute most confidentiality. That’s why he’s gone away from Merrill and Morgan and Goldman and anyone else you’d expect him to go to with for a deal this size. He’s very strategic. He wants to blindside the competition. He wants this coming from a direction no one’s going to expect.”

  “Why us?” asked the Captain.

  “He knows me. I pitched a few things to him at the start of the year. It’s not for me to say … I guess maybe he was impressed.”

  “Did you pitch him this one?” asked Nardini. “BritEnergy?”

  “Absolutely,” said Stanzy without hesitation. “You should see the fit. If you know anything about the industry and if you’ve got a global perspective, you’d have to be blind not to see it.”

  “Why didn’t he do it then?” asked Tom Dixon.

  “When I pitched it? That, Tom, I don’t know. You’d have to ask him.”

  “Why did he decide to do it now?”

  “Ditto. Maybe he saw the light.”

  “Do you think it’s a good deal for the client?” asked the Captain.

  “That’s a good question, Bob. Yes. Unreservedly. I think this is a very good deal for the client. The strategy’s rock solid.”

  “Would you recommend this to a shareholder?”

  “Yes, Bob, I would. Again, unreservedly. There’s an extremely compelling rationale for this deal. Like I said to Mike Wilson when I pitched it to him, put the assets of these two companies together and you’ve got a map of the known world.”

  The room was silent. Pete Stanzy emanated certainty, confidence, control.

  “I’d like to add,” said Golanksy, “that I think this is a very good deal for the bank. Personally, Pete, I think you ought to be congratulated. It’s not just the fees, it’s what it’ll do for Dyson Whitney’s reputation. We can all build on this. We’ve needed something like this for a long time.”

  “Thank you, John,” said Stanzy. “I think it’
s a good deal for Dyson, too. I have a first-class team on the engagement. I met the client yesterday with the initial outputs and he was very impressed with what we’d achieved. That’s why he signed.”

  There was silence again.

  “Do you think this deal will succeed?” asked Nardini.

  “I think it has a very good chance, Frank.”

  “I notice we have no retainer,” said Tom Dixon. “We get no fee at all if they don’t complete the acquisition?”

  “That’s correct.”

  “And what’s the threshold they need to achieve?”

  “In the UK, it’s ninety percent of the shares, I believe.”

  “Ninety percent? And we get nothing if they don’t reach that?”

  “Like I said,” said Pete, “I think this deal has a very good chance. The logic is extremely strong. Most important, Mike Wilson is determined to make it happen. He’s a strong leader and he’s absolutely committed to it.”

  Pete Stanzy waited.

  There was silence. Everyone at the table knew there was something questionable in the story they were hearing. The size of the fee made no sense, nor did Pete Stanzy’s explanation of it. Yet they also knew how badly the bank needed a deal that was big enough to remind people that Dyson Whitney existed, to make them sit up and take notice. This was the one.

  They looked at the Captain.

  “How fast does he want to do this deal?” asked the Captain eventually.

  “Fast,” said Stanzy. “As fast as it can be done. The parties are already talking. I’ll be frank with you, Bob. If we don’t drive this as hard as we can, we may as well stop now. If Wilson gets the faintest sniff that we’re not two hundred percent commited, he’ll go somewhere else. He’s not going to wait around for us. And with this deal on the table, he won’t have trouble finding someone to do it for him.”

  “He’ll have trouble fighting them off,” murmured Golansky.

  Frank Nardini nodded.

  There was silence again.

  The Captain cleared his throat. “Pete, I just want you to be able to tell me there isn’t something wrong here, there isn’t some kind of Enron sitting under this company. That’s all I’m asking. Just tell me there isn’t some kind of dirty stuff going on and they’re not paying us a big forty-bip fee so we don’t look too closely at anything they’ve been doing.”

  Pete Stanzy smiled. “I’m no auditor, Bob. The auditors say she’s clean.”

  “They said that about Enron,” muttered Rubinstein.

  “Can you tell me that?” said the Captain. “Can you tell me there’s nothing that’s going to come out when this deal goes public? Pete, no matter how big this deal is, Dyson Whitney can’t afford to be involved in anything like that. If we get into litigation … Look, we’re not that strong. We’re just keeping it together. You know that. If we get into litigation, the deal flow will dry up completely and it’ll be the end of us. I’m not exaggerating.”

  “Bob,” said Stanzy seriously, “this is a great, robust American company that’s taken its business model and exported it to a dozen countries around the world. Let’s get this straight. Louisiana Light is a success story. It’s a growth story. And Mike Wilson is a great leader. A visionary leader. Now he’s about to make this company even bigger and stronger by making an acquisition that creates an awesome growth platform and may well change the dynamics of the entire industry on a global level. That sounds like a pretty good story to me.”

  “And me,” said John Golansky.

  “Exactly,” said Stanzy. “This is the kind of deal Dyson Whitney should want to be involved in. In fact, I’d say more than that. Given where we are today, from our own perspective, it’s the kind of deal Dyson Whitney can’t afford not to be involved in.”

  Stanzy stopped himself from saying anything else. First rule of making a pitch, he knew, was never to oversell. And this was as much of a naked pitch as anything he had ever said at an investor roadshow.

  The Captain frowned. At heart, he was a deal maker. A play like this got him tingling down to the end of every last fiber. And there was no way the bank could turn away a fee like this. It was inconceivable.

  He looked around the table, giving the others a last chance to speak up. No one did. Bruce Rubinstein hesitated for a moment, then looked away. He was on thin ice with the Captain. There were only so many times he could challenge him.

  “All right,” said the Captain. “Looks like we’re agreed.” The frown disappeared and he broke into a grin. “Well done, Pete. Go out there and make it happen.”

  * * *

  At about the time that the mandate committee was breaking up in the Dyson Whitney boardroom, a limousine delivered a slim, dark-haired man in his late thirties to the American Airlines terminal at JFK. He had one small carry-on bag and a briefcase. He checked in at a business-class counter and went to the executive lounge to wait for his flight to be called.

  From time to time, as he waited, he looked around with a slightly furtive air, as if to see whether anyone had noticed him.

  At last he heard his flight number and got up to board.

  Seven hours later, eight A.M. local time in London, he disembarked at Heathrow Airport. A driver was waiting with a sign saying MR TOM BROWN. The driver took him through the morning traffic to a hotel in Kensington, overlooking Hyde Park, where a room was booked for him under the same name.

  His name wasn’t Tom Brown. It was Lyall Gelb, chief financial officer of Louisiana Light.

  10

  Donato’s was an old-style neighborhood Italian place with red-and-white–checkered cloths and wax-encrusted Chianti bottles on the tables. Real wax-encrusted Chianti bottles, from years of candles burning down, not the kind someone’s made by purposely melting candles to give the place a homely look. Ercole, who was about sixty, took the orders, opened the wines, and generally ran the place. His wife, Teresa, did the cooking, with help from a Mexican guy called Esteban, who did the chopping, the cleaning, and the washing. Teresa wouldn’t let him near the pots. They had a waiter called Ricky. He was an old guy, silver-haired, but everyone called him Ricky, as if he were a kid. And that was it. Ercole and Teresa closed in August, and everyone took a month’s vacation. First of September, the doors opened again.

  Rob and Greg discovered the place when they were at law school together at Columbia. They hadn’t been friends at first. Greg’s background was well-to-do with family money on both sides. His father was a partner with a big advertising firm, they had an apartment in Manhattan and a house on Long Island, and Greg had gone to a fancy private school and then through Princeton. Rob, on the other hand, was working nights at a deli on Ninth to supplement his scholarship. But in their second year they shared a seminar course in torts and found themselves hanging out. Two more years of shared all-nighters studying for law exams cemented the friendship. After law school, Greg had joined the DA’s office. Wall Street didn’t interest him. Greg would tease Rob a little, asking him how a job at Roller Waite was going to help fulfill his great urge for social justice. Rob teased him back, saying it was easy to go work at the DA’s office when your salary was only the icing on the cake of your trust fund. Besides, Rob didn’t know that prosecuting a succession of pimps, thieves, and drug pushers had much to do with social justice. It seemed to him it had more to do with the opposite.

  Greg had been with his girlfriend, Louise, for about a year and a half. Louise was a thin woman with a large head, wide-boned face, and black hair cut straight across the forehead. She had a strange, striking beauty. Or maybe it was just unusualness. She did some kind of art thing in the Village with textiles and rubber that she never deigned to explain very clearly, obviously believing that people like Rob and Emmy would never be able to appreciate its true cosmic significance. Neither of them much liked Miss Snookums, as they called her between themselves. But Greg was besotted with her. He still was, unfortunately, because it had been clear for a while to anyone else that Louise was cooling toward him. Whatever
had initially attracted her to Greg was gone. She had never exuded a lot of warmth, but her brusqueness toward him was worse each time Rob and Emmy met up with them. It was getting embarrassing to see it.

  Emmy had rescheduled the dinner for Wednesday night. Rob picked her up in a cab on the way uptown to the restaurant. Work was still going on in the war room, but Rob told Sammy he needed a couple of hours and that he’d be back, then he’d stay until whatever time it took. Cynthia had done the same thing the previous evening, so Rob figured he could as well.

  The cab ride was the first time they’d had together in days. Emmy told him about a manuscript she wanted to bid for. It was a story about a woman’s struggle to cope with her son’s mental illness, and Emmy thought it was beautifully written—honest, moving, without sentimentality—and would hit a spot with a female readership, maybe even turn out to be a bestseller. More important, she loved it. She desperately wanted to be its editor, but there was interest from other parties. The bidding had turned into an auction and she didn’t know if Fay Pride, the editorial director at Lascelle Press, was going to let her put in a high enough offer.

  “Doesn’t she like it?” asked Rob.

  “She likes it, but I don’t think she sees the potential like I do. And this woman can write, Rob. She can really write. There’s going to be more. Personally, I wouldn’t be bidding for just the one book. I’d be offering her a two-book deal.”

  “And you don’t think you’ll get it?”

  “I don’t know. We could have had it all to ourselves, that’s what’s so frustrating. The agent came to us first, thinking we’d be the perfect home for it, which we are, but Fay took so long deciding that the agent took it out to the market and now she says she’s got four publishers interested. When that happens, the price gets crazy. And you know us at Lascelle—we don’t do crazy prices.”

  They arrived first. Ercole came out from the back, beaming. He seated them and went to get a bottle of wine. Verdicchio, the wine of his home region in Italy.