He went back into the bedroom and sat on the edge of the bed. Sarah Havercoombe seemed completely indifferent to him and, besides, she was engaged to be married. Coburg’s was beginning to bore him and he wasn’t close to his million pounds. He didn’t even know how he was going to make it. Meanwhile, Matthew was on Wall Street learning to trade, and George was god-knows-where doing god-knows-what. Maybe Josie was right, maybe they were all a pack of fools. Still, there didn’t seem to be much else to do except try. Go on trying until they’d reached their sell-by date.
Why was that phrase in his head so much? Sell-by date. The numbers had gone, but the phrase stayed. Probably something to do with that blasted Aberdeen Drilling data room. All those piles of contracts and accounts. Random phrases stuck around just like the numbers. Zack got into bed again and turned off the light. The yogurt sat in his stomach feeling funny. It probably had been off. He tried to sleep.
Sell-by date. Sell-by date.
Five minutes later, he threw off the covers and turned the light back on. Frowning with concentration, he began to bring a page from the data room into his mind’s eye. The page came, blurry at first, then in sharp focus: ‘Standard Warranties for Consultancy-type Agreements’. Zack read the words below the title. It was drafted in legal language so dense you could saw it into blocks and build with it, but to Zack the meaning was clear. He brought another page to mind. It appeared, then cleared, like the one before: ‘Insurance Arrangements: Provisions and Exclusions’. Zack gazed at the remembered page. Things were becoming clear. No wonder he couldn’t sleep. Just one more check to make: ‘Schedule of Principal Consultancy Projects, 1988-98’. The page began to clear, but Zack hardly needed to look at it to know what it said.
He turned off the light and slept like a baby.
10
Through the slatted blinds behind the students, the Hudson River emptied into the Atlantic Ocean. The waters were crowded with traffic and in the late summer sun, the Statue of Liberty waved her torch, calling order to the congested skies. The gateway to the free world isn’t too keen on the weary and dispossessed these days, but it sure has time for anything which can be packaged, shipped and sold. Away to the south west, too far to be seen in the haze, the port authority’s cranes kept the flood of goods moving swiftly on.
None of the students had their eyes on the scene. You could stack up all the cargo passing through the air and sea ports of New Jersey and New York in a year and you’d have a mountain big enough to boast a skiing industry. But the whole enormous pile wouldn’t be worth a thousandth part of the invisible cargo which passes noiselessly down the electronic thoroughfares of Wall Street.
The market for US government bonds is worth over six trillion dollars. The foreign exchange market turns over a trillion dollars each and every working day. The US stockmarkets are capitalised at fourteen trillion bucks. The market for corporate bonds and bills, and certificates of deposit, and a hundred other varieties of security add trillions more to the total. And each of these bits of paper belongs to investors, skilled and unskilled, wise and foolish, twisting and turning to dodge losses and snuffle out profit.
Wall Street does various things, some good for the world, others not so good. But its main function is simple: it’s a bureau de change where investors can sell one bit of paper and buy another. And every time a bit of paper changes hands, leaving an investor happy and excited about the future, there is another person even happier. That person is the Wall Street trader who did the trade. For every dollar that changes hands, a tiny amount of change stays in the hands of the trader. In some markets, the amount of change is almost microscopic. In the foreign exchange markets, the Wall Streeter might keep just a few hundredths of a cent. In the stockmarket it might be half a cent, sometimes as much as two or three.
But traders don’t care that their take is small. If you multiply by a million dollars, one tenth of a cent is worth a thousand bucks. Multiply by a billion, and that tenth of a cent is worth a million dollars. And if you’re sharp enough and smart enough to squeeze out two tenths of a cent, then the investor still hardly cares - what’s two tenths of a cent to him? - but you’ve doubled your take to two million bucks. Keep at it and before long you’ll have your nice house in Long Island, your German sports car and your decent sized yacht. Your kids will go to the right schools, your wife will be invited to the right parties, and you will no longer keep in touch with your pals from college who got better grades than you but who made the life-destroying error of opting for a career in engineering or civic service.
Life as a Wall Street trader can be very sweet. And that, of course, is why the students were there.
Matthew looked around. Sophie was sitting diagonally in front of him. He caught her eye and smiled at her. She smiled back. It hadn’t been his imagination. She was still gorgeous, with her perfect figure and a complexion so nice you wanted to sing to it. Matthew definitely wanted to get to know her.
A tall blond Californian barged along the row of seats and sat down next to Matthew.
‘Mind if I sit here? My name’s Scott Petersen. Nice to meet you.’
Scott Petersen was an inch or two taller than Matthew, an inch or two broader and maybe an inch or two better looking. Matthew disliked him at once.
‘Hi. Matthew Gradley.’
They shook hands.
‘From England, right?’
‘Right.’
‘At least that’s easy,’ said Petersen, looking round the room. ‘We’ve got twenty-two North Americans, same number of Europeans, then maybe fifteen or twenty from everywhere else. Mostly Pacific Rim, I guess, but I bumped into a couple of South Americans earlier and I know there’s a Russian and some kind of Middle Eastern oil princess.’
Matthew nudged his neighbour. Down the row to Matthew’s right came a plump dark-skinned girl, her hair piled up and fastened with a couple of heavy gold clips. Gold glittered and clunked at her fingers, wrist and neck. She walked looking straight ahead, her heavy-set face impassive.
‘That’s her,’ whispered Petersen. ‘I’ve heard she only just managed to graduate from college and her English is none too good either. But her family controls oil reserves worth tens of billions of dollars and -’
Petersen shrugged. He understood it, but he didn’t like it. At Madison merit is the only way to get ahead, but merit comes in different shapes, and the podgy figure of the oil princess was one of them. Matthew turned to her.
‘How do you do,’ he said. ‘Matthew Gradley.’
‘Yes. How do you do,’ replied the girl in a heavy accent. ‘Fareshti Al Shahrani -’
Anything further she had intended to say was interrupted as the entrance door opened and a man strode across to the podium. The students fell silent. The man was Dan Kramer, the Lion of Wall Street.
The old-fashioned walnut podium concealed a battery of switches controlling the sound system, lights, blinds, screens, projectors-everything. But Kramer stood away from the podium. He hadn’t any slides, and his voice needed no amplification. He was not a large man, but with a mane of dusty blond hair bristling round a granite face, he didn’t need to be large to be awe-inspiring. When Time magazine had done a cover story on Kramer entitled ‘The Lion of Wall Street’, the nickname became permanent. When he was calm, he looked fierce. When he was angry, he was terrifying. Today Kramer was not angry, but he was emphatic.
‘My name is Daniel Kramer. I am the Chairman and Chief Executive of Madison. I would like to welcome you all to this training programme today.’
He grinned, but his smile cheered no one. It showed too many teeth and lasted a few seconds too long.
‘You succeeded in obtaining a job here because the people who interviewed you believed that you have what it takes. We try hard to be right because it’s a waste of our time being wrong. But we do get it wrong, about one time in three. When we screw up, we say sorry and ask you to leave. We don’t want you to have a nasty life, but we want you to lead it outside of this organisation
.
‘Those of you who remain with us will sometimes wonder if you made the right choice. The work is hard, the pressure is relentless. Each time you think you’ve mastered a task, we will increase your responsibilities, demand more from you. You will meet every challenge or you will leave the firm. If you continue to succeed, you will earn sums of money that are unimaginable to all but a tiny fraction of the population. You will also have the satisfaction of knowing that you’ve made it in one of the world’s most demanding workplaces. So much for your rewards.
‘More important to me are the rewards for the firm. I am sometimes asked to define our strategy. That’s easy. In every country where we operate, we recruit the best. Once we’ve recruited them, we retain them. Then we just get on with our jobs, as best we can. That’s it. The rewards for the firm will follow.’
Kramer continued to prowl to and fro across the floor of the amphitheatre.
‘Are there any questions?’
Coming from him, this wasn’t a question. It was a joke. Nobody asked a question, nobody ever had since Kramer started giving these speeches. He smiled once more. Too many teeth again and the smile lasted long after the light had vanished. Without another word, the Lion of Wall Street stalked from the room.
Matthew knew beforehand that Kramer wasn’t exactly a touchy-feely kind of guy. And Matthew didn’t just cope with competition; he thrived on it. All the same, Kramer was genuinely menacing, and Matthew’s mouth felt dry. He glanced downwards and across to where Sophie was sitting. She looked completely composed. She wasn’t licking her lips, or shifting in her seat, or fiddling with her pencils, or doing any of the other things that the other students were doing. She just looked beautiful and desirable. Matthew forgot Kramer.
He opened his folder and took out a card which he’d bought that morning. He scrawled something inside, scribbled Sophie’s name on the envelope, and tossed it accurately on to her desk.
She looked round to see where it had come from and sent Matthew a polite smile. She opened the envelope and read the card. She smiled, not politely this time, and sent Matthew a look, which meant ‘Yes’. With a bit of luck it even meant, ‘Yes, please, I’d be delighted’.
The inscription inside the card was brief. It ran: ‘Dear Mrs Gradley, as today is the first day of our honeymoon, perhaps you would care to dine with me this evening? Eight at The Riverside. Your loving husband, Mr Gradley.’
11
Hank Daggert, the Chief Executive of Tominto Oil, didn’t care too much for the mother country. He liked some things, of course. He liked Maggie Thatcher, the flexible labour market and North Sea Oil. But the list of things he didn’t like was much longer. He disliked the Queen, trade unions, New Labour, John Lennon, unarmed policemen, the BBC, hot tea, warm beer, and cold rooms. He didn’t like the bunch of old Etonians who were helping him buy Aberdeen Drilling but he hadn’t much choice. He was buying a British company and he figured that picking Coburg’s, the biggest independent British bank, was the best way to succeed. All the same, Daggert listened to Piers St George Hanbury with growing irritation.
‘You’re telling me there was a time bomb in that data room all along?’
‘Yes. We believe you should reduce your bid by ten million pounds or insist that the seller insures you against any liability you might be taking on.’
‘Jesus. We’re only a fortnight away from making our final offer. Couldn’t you have told me this sooner?’
‘Yes, I understand. The problem was very carefully hidden, and it took us some time to spot it. But we thought you would sooner know late than not at all.’
‘You’re telling me,’ growled Daggert. Tominto Oil was worth about a billion dollars and Daggert owned about five percent of it. Hank Daggert wasn’t exactly a sweet old man, but if you were a shareholder in Tominto Oil you loved him just the same. ‘Just take me through the problem one more time. I want to be sure I understand.’
Piers Hanbury was too important to care much about details. He was one of the biggest deal-makers in the City of London and he wasn’t unduly fussed over a hundred million pound deal with a miserable little million pound fee. He was there to look distinguished and make the client feel happy.
‘Zack, why don’t you walk us through this?’ said
Hanbury smoothly. ‘It’s your discovery, after all.’
Hanbury was polite in front of a client, but he’d been absolutely furious with Zack the day before. ‘Why the hell didn’t you bring this up sooner? We don’t stand a chance of doing the deal now.’ Hanbury was sore.
One thing about buying companies is different from buying a car. With a car, when you call out the AA to inspect it, you pay the AA a flat fee irrespective of whether you end up buying the car. That way you can be sure of getting impartial advice. If you agreed to pay only if the inspection was clean, you’d find yourself with clean reports for cars only a tow-ride away from the breakers’ yard.
For some reason, which no one on earth can explain, it doesn’t work like that when it comes to buying companies. Corporate financiers only get paid if they win the deal, if their client beats the other bidders. The temptation to encourage the client to bid too much is almost overwhelming - and every now and then, there are those who don’t try so hard to resist. Piers St George Hanbury was one of them. If Zack had found the problem when they were in the data room a couple of weeks back, Hanbury would have found other reasons for getting Tominto Oil to pay up for Aberdeen. But now they’d debated the price and fixed it, when bloody Zack Gradley comes along with a ten million pound hole. The deal was running into the sand.
‘OK,’ said Zack. ‘The seller had a problem. They were all ready to sell Aberdeen Drilling, when along comes a major headache. A Norwegian consultancy project they’d worked on returned to haunt them. They’d advised on the construction of a North Sea pipeline into Bergen. They did their work, got paid, and forgot about it. But to win the contract, they had offered a guarantee. Either the work’s OK or they’d pay to put it right. That was the deal.
‘Now, just as they were getting ready to invite you guys into the data room, the Norwegians come along. It turns out there was a major foul-up which the Norwegians say is the fault of Aberdeen Drilling. Well, maybe, maybe not. It hasn’t been tested in a court of law, but let’s just suppose the Norwegians are right and Aberdeen did screw up.
‘Normally, that wouldn’t be too bad. They’ve got insurance. If they have to pay out to the Norwegians, they just get the cash back from the insurers. But here’s the problem. When they signed the Norway contract, they weren’t insured. There was a cock-up in accounts and they were a week late in making a premium payment, something to do with staff sickness, I think. Anyway, the week the contract was signed, they weren’t insured. The sellers are desperate to sell before the liability hits, plus they want to make sure the buyers don’t see what’s coming.’
‘But you said all this was in the data room? Why would they go and tell us if they wanted to keep it quiet?’
Zack smiled.
‘They had to put it in the data room or else you could claim the money back on the warranty. So what they did was smart. They dismantled their time bomb. They broke it into four little pieces and hid three of them in the data room and one in the press. Any of those bits on their own is harmless. But the four of them together stand to make a very loud bang.’
‘Go on.’
‘The first part of the bomb was concealed in some standardised consultancy agreements. That’s where they told us that all their consultancy work was guaranteed. Any problems down the line would need to be paid for. The second part of the bomb was buried in a footnote way down in a mountain of stuff to do with insurance contracts. The footnote pointed out that there was a period of a few days where these insurance arrangements didn’t apply. The third part of the bomb was a note mentioning when the Norwegian contract had been signed, which was - surprise, surprise - bang in the middle of the time when the insurance was on the blink. If you like, the
deal was signed after the insurance had passed its sell-by date.
‘And here’s the clever bit. The most dangerous part of the bomb - the bit which would have aroused our suspicions instantly and sent us hunting down all the other parts - they didn’t even put inside the data room.’
‘But I thought -’ began Daggert.
Zack cut him off. ‘Yes. You thought that if they didn’t put something in the data room, then we were covered by the warranty. That’s true - unless that thing was already public knowledge, defined as something already being in the press. So what they do is, they take their bomb’s most dangerous part to a Norwegian journalist. A journalist who works for a Norwegian oil industry magazine with a circulation of about five thousand. They say what they have to say. The journalist writes a couple of paragraphs, in Norwegian of course, and bungs it in the magazine. Hey presto. It’s public knowledge. The story’s not big enough to be picked up elsewhere, and if it is, it’ll probably hit the English-language journals too late for the deal. After all, there aren’t all that many people with fluent Norwegian and an avid interest in the offshore oil business.’
Daggert shook his head. ‘So how the hell did you guys find this bomb? You read Norwegian oil industry magazines for fun?’
Zack shook his head. ‘Thinking about the data room afterwards, I realised that they’d concealed the first three pieces very carefully. They were a long way apart. Each one was buried in documents almost too boring to read. I realised that they had a perfect bomb, all they needed was some explosive. So then I started looking for the explosive. We used our databases to search the English-language press, then the press worldwide. Up pops this Norwegian article which mentions a sum of ten million pounds. And there we had it: a bomb, primed and ticking.’
The Money Makers Page 9
