by Stephen Frey
“The Dominion executives, their outside auditors, and probably the senior partners at Everest have committed fraud. They should have told us that the loans were bad, that the people who owed Dominion money weren’t paying. But they didn’t. In fact, they provided false documents that tried to show that everything was fine, that people were repaying the loans.” Allen held up a manila folder for effect. “That’s how Everest did the IPO. With smoke and mirrors. Sound familiar?” he asked rhetorically.
“The bitterest pill to swallow here is that Everest made billions of dollars,” Allen said tersely. “They still own a small piece of Dominion, which I suspect will lose a significant amount of its value today because of my announcement. But that loss will be tiny compared to the huge amount of money Everest got in the IPO: about $2 billion.
“So who really loses?” Allen asked the television cameras. “Not the partners at Everest Capital. Not the investment bankers who took Dominion public. Not the lawyers who made millions in fees documenting the IPO. None of them lose a dime. The people who lose are the ones who bought the shares from Everest Capital. The little guys. The IPO price was forty dollars a share, but, as we speak, Dominion shares are trading at,” Allen hesitated, glancing at his aide off camera for the sign, “three dollars a share. That’s almost $4 billion of shareholder value erased.
“This afternoon, I’ll officially inform the Securities and Exchange Commission that I want them to begin a full investigation of the Dominion Savings & Loan IPO. Banking regulators will also be moving on Dominion headquarters to determine the extent of the fraud. In addition, I’ll be contacting the chairman of Everest Capital, a man named Christian Gillette, to demand that he and his partners refund all the money they made in the IPO. I’ll also be seeking a very large fine. It’s clear to me that Everest insiders knew what was going on behind the scenes at Dominion. An Everest partner was chairman of the board before Dominion went public, and Everest owned a hundred percent of the firm before the IPO. Make no mistake: Everest knew what was going on.
“Finally, I’ll be demanding that regulators initiate a full-scale investigation into Everest Capital on behalf of my committee. Everest owns a hundred percent of nearly thirty companies around this country. Big ones, too. We need to know what’s going on at Everest so we can avoid situations like Dominion in the future, so we don’t have innocent people being bilked out of billions.”
Allen looked around, satisfied with his delivery. “Any questions?”
Strazzi slammed his hand down on the desk, then picked up the remote and muted the television as Peter Allen answered the first question from the press. Allen had mentioned Everest Capital several times. Mentioned Christian Gillette by name. Even described how he was going to have regulators open an investigation into Everest. Just as Stockman had promised. But Allen hadn’t mentioned the specific portfolio companies Strazzi had told Stockman to give to Allen. Clearly because there hadn’t been any documentation. Because Troy Mason hadn’t forked over the files.
“Damn it!” Stockman might be right, Strazzi realized. Without those specific names mentioned during the press conference, the widow might not sell him her stake in Everest, might not be convinced that she should let go of that stake for the 50 percent haircut he was going to offer her.
“Paul.” Vicky’s voice blared through the intercom.
“What?”
“Senator Stockman is on 122.”
Strazzi picked up the receiver and punched the extension. “What the hell happened, George?” he growled.
“Without the files, Peter wouldn’t go along,” Stockman explained, his voice barely audible.
“Why are you talking so low?”
“I’m about to make my own announcement. There’s a lot of people around. Aides, reporters.”
“I’m pissed, George,” Strazzi hissed. “You told me this yokel from Idaho would play ball.”
“And you told me you’d have the proof.”
“If the widow backs off because of this, you can kiss my support good-bye,” Strazzi warned.
“What? That’s ridiculous. I’ve done everything I told you I’d do.”
“Get Allen to call another press conference later this afternoon,” Strazzi snapped. “Before four thirty. I’m meeting with the widow at five to close the deal. Just get Allen to say he’ll be focusing on those companies when he investigates Everest. That’s all you have to do. Just get him to mention the names. Nothing specific about why he’ll be targeting those companies. I’ll do the rest.”
“I don’t know if Allen will play ball.”
“Make him!” Strazzi yelled, slamming the phone down.
“Jesus Christ,” Faraday whispered as Allen’s press conference ended. He had joined Gillette and Cohen in Gillette’s office. “Is it possible what Allen said about Dominion is true?”
“Anything’s possible, Nigel,” Gillette answered calmly.
“Could they really make us give back the fucking money? All two billion?”
“Not before the investigation is finished. That’ll take a while.”
“But it could happen?”
“Sure. And we might be liable for that big fine Allen mentioned, too.”
“Would we have to give what we got back, too?” Faraday asked anxiously. “Personally.”
“Of course.”
“Fuck me. All two million?”
“Yes.”
“I paid taxes on that. I only netted a little over one.”
“The SEC won’t care. They’ll want two. They’ll tell you to deal with the IRS.”
“Shit!” Faraday eyed Gillette. “How can you be so fucking calm?”
“Having a heart attack won’t do any good,” Gillette snapped, checking the Dominion ticker. The price had sunk to just more than a dollar.
Faraday snorted. “Two million might not be much to you, Christian. Thanks to Mommy and Daddy.” Like many people, Faraday thought Gillette had a large personal net worth because of his family. “But for Cohen and me, it’s huge. Our piece of Everest might be worth sixty million, but it isn’t liquid. It’s tied up in our portfolio companies. I can’t use it to pay my debts.”
“I understand.”
“Well, what the fuck are you going to do about it, Mr. Chairman?”
Gillette glanced over at Cohen. He was typing out an e-mail on his Blackberry. His face was pale. “Ben.”
“Yes, Christian?”
“I want you to call Walter Price immediately.” Price was CEO of Dominion. “Tell him I’ll be in his Washington office at ten o’clock tomorrow morning. Tell him I’ll want a full report.”
“Tomorrow’s Saturday.”
Gillette hesitated. He’d forgotten. He rarely paid attention to what day of the week it was anymore. “I don’t care. Call him and tell him I’ll be there at ten. Tell him to be ready.”
“Okay.”
“And tell Marcie Reed I want to see her at three o’clock here in my office.”
Cohen stood up and nodded. “Starting your own investigation?”
“Yes,” Gillette answered sharply, reading the words rolling across the bottom of the television screen. Smiling slightly to himself, despite everything that had just happened.
Stockman moved behind the lectern. It had been set up in a room in the bowels of the Senate side of the Capitol, an American flag on either side. His staff was lined up behind him.
“Thank you for coming today,” he began. He was extremely satisfied with the turnout. Every major newspaper and television network was here. They’d all been briefed about the press conference this morning, and it made him proud to see that everyone had shown up. Obviously, they believed he was a serious contender. He cleared his throat. “I’ll make this short and sweet. I’m here this afternoon to announce that I’m running for the Oval Office. I’m offering my leadership to the entire country now, not just to the great state of New York. And, as I’ve done in New York, I’ll stand up for regular people. The man on the assembly line. S
ingle moms trying to make it.” He paused, making eye contact with several reporters. “Make no mistake, I will be the next president of the United States.” He stared straight into the television camera, a steely expression on his face. “Questions?”
Several reporters thrust their arms in the air and shouted.
Stockman pointed at a young woman from CBS. “Yes?”
“Can you give us a specific example of how you’ll stand up for regular people?”
Stockman thought for a second, then nodded. “Certainly. A little while ago, my colleague from the House, Peter Allen, laid out another example of corporate boardroom abuse. Everest Capital, an investment firm, defrauded thousands of public investors when it took one of its portfolio companies public. It’s a savings and loan called Dominion, and, in a very short time, as a result of the fraud, the stock has cratered from a price in the forties to a dollar a share. Lots of regular people have lost money and probably will lose their jobs. It’s a damn mess, but it didn’t have to happen. I’ll make investment companies like Everest Capital accountable. I’ll make certain men like Christian Gillette aren’t around to crush regular people again.”
Gillette watched Stockman’s press conference, his eyes narrowing as Stockman mentioned Everest and him by name. Thanks to Quentin Stiles, the campaign wasn’t going to last very long. Unless Stockman cooperated.
“Christian.”
Gillette looked up from the television. Marcie Reed stood at his office door. “Come in.” He gestured toward one of the chairs as he turned off the television. “Have a seat.”
“I’m busy, Christian,” she said, sitting down across from him, her short skirt riding up her thighs. “Let’s make this quick.”
“We’ll take as long as we need to,” he said flatly.
Her eyes flashed to his, picking up on his tone. “What’s going on?” she asked, her voice softening.
“Did you hear about Congressman Allen’s news conference?”
She nodded deliberately. “Yes.”
“And?”
“And what?”
“Marcie, Allen accused us of fraud in the Dominion IPO. You and Donovan ran that process for us. Bill’s dead. That leaves you.”
“Allen’s wrong,” she answered matter-of-factly. “As far as I know, there were no problems at Dominion when it went public. The auditors were all over it. I don’t know where the congressman could be getting that kind of information. We’ll be cleared.”
She was good, Gillette thought. He’d seen her in action before, convincing a CEO she had sensitive information about his company when she didn’t. Enabling her to manipulate him even though she was bluffing. “I’m going to ask you straight up, Marcie. Are you working for Paul Strazzi?”
“What!”
“Are you working for Paul Strazzi?” Gillette repeated.
“No. How could you possibly think that?”
“Like I said, you and Donovan did the IPO. The rest of us didn’t hear much about it.”
“What does that have to do with Paul Strazzi?”
“I think he’s trying to take over Everest. I also think he’s working with someone inside this firm.”
“That’s ridiculous,” she said, shaking her head.
“Is it?”
“Yes.”
“You and Bill didn’t tell us much about what was going on with Dominion. Why was everything so hush-hush?”
“This is ridiculous,” she said, standing up and heading for the door. “I’m not going to sit here and take it.”
“Senator Stockman is about to get some bad news,” Gillette called as she reached the door. “Information that would probably end his run for president if it were released to the public.”
Marcie slowly turned back around.
“Information I will release.” Gillette studied Marcie’s expression, certain he saw fear, an emotion that he’d never seen her show before. “Unless he works with me. Unless he tells me what’s really going on with Congressman Allen and who his contact is inside Everest.”
“Why would Stockman know anything?”
“He’s working with Strazzi.”
“How do you know that?”
“I just do.” He pointed at her. “Now, do you want to tell me anything, Marcie? Believe me, it’ll go a lot better for you later if you cooperate with me now.”
She stared at him for a few moments. “There’s nothing to tell,” she finally said.
Gillette saw indecision. “Why did you tell Lefors that Troy Mason was in the basement with a woman at Donovan’s funeral reception?” he asked, hitting her with everything. “Why didn’t you just come to me?”
Marcie shook her head. “That’s absurd,” she said, turning to go. “Absolutely absurd. I never told anyone that. I didn’t know Troy was down there with a woman.”
Gillette gazed at the empty doorway when she was gone. He’d detected hesitation in her reaction to questions about Dominion but not to the question about Mason.
21
A Price. Everyone has one; you just have to find it. Then be willing to pay it.
STRAZZI USHERED THE WIDOW INTO his office, holding the chair for her as she sat down. “Would you care for something to drink, Ann?” he asked politely, moving behind his desk. It made him want to puke to be so pleasant, but he had no choice. He needed her to relax, needed her to feel comfortable while they discussed her selling her Everest stake, so he made the effort, made those insincere gestures he hadn’t made in so long, the kind of gestures others made toward him. “Water? Coffee?” he asked, sitting down, too.
“Hot tea,” she answered.
Almost defiantly, Strazzi noticed. She was tense; the stress was obvious in her voice. And she was clutching that black purse in her lap with both hands like there was a million bucks inside and someone was eyeing it. Still, she seemed calm. “Of course, Ann.” He picked up the telephone slowly, like he had all the time in the world. “Vicky.”
“Yes?”
“Could you bring Mrs. Donovan some hot tea?”
“Right away, sir.”
“Thank you.” He smiled as he put down the receiver. “Vicky’s wonderful,” he murmured, trying to act as if this was just another day. “Always a joy to be around, always a smile on her face.”
The widow didn’t respond.
“Well, how are you, Ann?” Strazzi asked, forcing sadness into his tone and concern into his expression. “I’m sure this has been a difficult time.”
“Don’t put the act on for me, Paul. I know what you want. Let’s not waste time.”
Strazzi’s expression hardened. “All right,” he agreed, leaning forward.
“Do you have something you want me to consider?” she wanted to know.
“Yes.”
“What?”
“Did you see Congressman Allen’s press conference earlier this afternoon?” Strazzi asked, trying to dial up the heat before he got into the details of his offer.
“I did.” The widow sniffed. As if she found the fact that he’d ignored her question annoying. “One of Stockman’s aides called me beforehand so I was sure to see it.”
“Then you understand how difficult the Dominion situation is. That savings and loan is going down. You might as well use your shares to start your fire on Christmas morning.” Strazzi stared at the widow. “How much have you lost?”
“Fifty million,” she answered indifferently. As if it had been fifty cents.
Strazzi leaned back in his chair, trying to figure out if she really didn’t care, or if she was that good a poker player. “Dominion’s the tip of the iceberg, Ann. You heard Congressman Allen. He’s going to send in the storm troopers to do a full-blown investigation at Everest. If they find anything, Christian Gillette and his people will have a hell of a mess on their hands.” Strazzi hesitated. “And, like I told you before, my information is that they will find things. Bad things.” He paused again. “And they’re going to have to pay a big fine related to Dominion. That alone could ta
ke them down.”
“You told me you had proof there were problems with the portfolio companies,” she reminded him.
“Uh-huh.”
“Well, let me see it.”
There was a light tap on the door and Vicky came into the office, buying Strazzi time.
“Here you are, Mrs. Donovan,” she said, placing a cup of hot water, a bowl of tea bags, a spoon, and a small pitcher of cream down on a table beside the older woman’s chair.
“Thank you.”
Vicky smiled. “Do you need anything, Mr. Strazzi?”
“No.”
Vicky turned and moved quickly out of the office.
“I don’t have that documentation yet,” Strazzi said frankly when Vicky was gone. And Allen hadn’t called another press conference to mention the company names at Everest.
“Why not?” she demanded.
“I just don’t,” he said deliberately, trying not to let his irritation filter into his tone. Letting her see it would probably scare her. Maybe make her back off completely.
The widow slipped a tea bag into the hot water and began to stir. The spoon clinked off the sides of the cup. “I didn’t hear anything specific in terms of portfolio company names from Congressman Allen during the press conference, either. I thought you said he was going to mention the Everest companies that were in trouble, not just Dominion.”
Strazzi shrugged. “He didn’t get around to it.” This wasn’t going well, he thought to himself. Not well at all. In fact, he half expected her to stand up and leave. Troy Mason was going to pay dearly.
They were both silent for a few moments.
“So, what’s your offer, Paul?”
Strazzi’s eyes flashed to the widow’s. He’d been picking at a scab on the back of his hand, thinking about what he was going to do to Mason. He studied the widow’s expression. She had tried hard to seem unconcerned about Allen’s press conference, and nonchalant about her $50 million loss on Dominion. But now he saw how brittle her defiance was. She wasn’t that good a poker player after all. There was panic seeping into the crow’s feet at the corners of her eyes. He’d been around a long time and he could spot panic the moment it appeared. In addition, she was holding on to her purse so tightly now that her fingers were ghost white.
