But the first day was just a tremor, the earthquake had yet to come. Exactly why it came will remain a mystery. Perhaps investors were bothered by the evening news footage of disgraced dignitaries being slapped into handcuffs. Maybe it was the thundering speech of denunciation by an opposition leader. But whatever the reason, when the market opened the following day, bond prices began to tumble and the stockmarket followed suit. A slip became a landslide. By the end of the day, the bond market had fallen three percent, the stockmarket fifteen.
European investors saw the chaos in Japan and wondered if they would be affected. Trading was anxious and indecisive. If New York opened strongly, there was nothing to fear. If American investors took fright, there could be catastrophe. It was an edgy morning.
The headline in the Wall Street Journal that day read:
‘Fifteen percent fall in Nikkei index - US investors nervous’. The best-known TV pundit filmed his morning comment from a mock-up of a Wall Street window ledge. He predicted calamity, then jumped. It was only a stunt, but hardly calming.
The market opened quietly. Nobody wanted to make the first move. But then, one by one, investors decided to play safe. Playing safe means selling out, and when everyone sells, there’s no one to buy. Bit by bit, the screens glowed red. Bond market nerves tipped over into the stockmarket, which made up for lost time by falling even faster. By the end of the day, the bond market was down three percent, the stockmarket eighteen.
Soaked in sweat, traders left their desks and stumbled outside for a drink. Eighteen percent. Some traders had cause for celebration. These were the ones who had started the day ‘short’ - owing securities instead of owning them. Their debts had collapsed in value and their profit on the day looked incredible. Many more were as miserable as these traders were happy. Even careful traders were reporting huge losses. These unhappy souls watched their hard-won annual profits blown away in a single day. Their bonuses had certainly gone, their jobs in doubt. They pondered the injustice and avoided the bars where winners drifted on rivers of champagne.
And on an upper floor of a Wall Street skyscraper, a committee sat down to think. This was the Madison Market Risk Committee, chaired by Dan Kramer, Chief Executive and Lion of Wall Street.
The bank had had a bad day. It had chosen to bet on a rally in US markets. It hadn’t bet much, but even a small wrong bet produced a big loss. The bank’s computers indicated that Madison had lost around $80 million, before tax.
Nobody on the committee was too upset. Next to annual profits of way more than a billion, eighty million wasn’t much more than a blip. These things happen. But there were other things to consider. In the wake of a violent upset, business goes quiet for banks like Madison. Firms on the point of issuing bonds or equity pull out of the deal. Investors trade less. Phones fall silent.
Until nine in the evening, the committee deliberated.
Madison was famed for its prompt and decisive management, and it wanted to issue a press release in time for the morning news. In the end the verdict was unanimous. A press release was quickly drafted and approved.
The key paragraphs ran as follows:
Madison reports that today’s correction in the financial markets has resulted in a pre-tax loss of approximately $80 million. The bank is confident that no further losses of any magnitude are expected and the bank continues to believe that the long-term outlook for the financial markets is positive.
Nevertheless, to ensure that costs remain firmly under control during the adjustment period, the bank intends to implement an immediate review of staffing levels throughout the firm. Significant down-sizing is anticipated. A further announcement will be released in due course.
The announcement was covered extensively in the press the next morning. It was taken as a very positive sign that Madison had publicly stated its confidence in the markets. Once again, the bank’s management was held up as a shining example of leadership and decisiveness. One of the popular papers covered the story under the caption ‘Markets breathe easy as Lion roars’. The battered markets nudged upwards once again.
On the training programme, the students were less enthusiastic. Rumour had it they would all be dismissed that very day. The American students left their desks to lobby the people they hoped to work for after the course. The foreign students hung on the phones, trying to find out the mood in Tokyo and Buenos Aires, Paris and London.
Matthew and Sophie, happily and publicly in love, dived downstairs for coffee after coffee. They talked about the news, the rumours, the gossip from home. Matthew had called Luigi Cuneberti, who sounded despondent. Matthew tried to laugh it off as Italian overreaction, but Luigi corrected him.
‘Hey, Matteo. I’m Italian-Swiss you know, and when
we Swiss get depressed we really mean it. This is bad news and especially tough for you new guys. But don’t do anything dumb. If you don’t make it this time, you’ll always get another chance next year.’
Matthew didn’t have a year to spare, but he could hardly tell Luigi, let alone use it to plead with McAllister. Sophie was anxious too. The Paris office had been in the midst of a major expansion, and it looked as though all that would be put on hold. New recruits would be distinctly unwelcome.
Matthew and Sophie held hands across the table, kissed, and worried. At least they had each other.
8
The bagpiper finished playing. A champagne cork popped and there was a round of applause. Hank Daggert, Chief Executive of Tominto Oil, and now Chairman of Aberdeen Drilling too, raised his glass.
‘Here’s to our newest subsidiary and to a long and profitable future as part of Tominto Oil.’
Douglas Mackenzie, Chief Executive of Aberdeen Drilling, beamed, resplendent in his kilt. In place of the dirk traditionally worn on the leg, he wore a miniature drill bit complete with diamond tip. Daggert loved the idea, and Mackenzie had ordered him one from the same silversmith as a present.
‘And here’s to young Gradley,’ added Daggert after everyone had drunk, ‘without whom, none of this would have been possible.’
Everyone lifted their glasses again and drank. There was a sprinkling of applause, which he acknowledged with his usual thin smile.
The evening following his row with Hanbury had been an eventful one. Once Zack had decided not to apologise, he had to move fast. From his mobile phone, he called a few numbers. The first person he reached was the head of the energy group at Weinstein Lukes.
Weinstein Lukes is a big league investment bank, one of a handful of global big-hitters. This group of banks - Goldman Sachs, Madison, Morgan Stanley, Merrill Lynch, maybe a couple of others - dominates the financial world. Whenever and wherever a major corporate upheaval takes place, whenever companies are born, married or die, you may be sure that one of this select band will be hovering at the bedside or altar, sickly smile and can-do attitude firmly in place.
Zack told his contact, a businesslike American called Amy-Lou Mazowiecki, what he wanted and what he had to offer. Mazowiecki listened to Zack and answered briefly.
‘OK. Get over here now.’
Zack leaped into a cab, arriving at eight in the evening. A secretary whisked him up to the tenth floor, which was given over to meeting rooms. She left him in one with a view of the river and a tray of tea and coffee. Mazowiecki came in soon after.
‘OK. Shoot,’ she said.
Zack said his piece. He was currently an employee of Coburg’s. Coburg’s had been advising an oil company on an acquisition. The project leader had failed to identify a major liability and Zack had done so instead. He had also thought of a tax scheme to make good the liability and had been laughed out of the room by his boss at Coburg’s. In his view, however, the client was as keen as ever to complete the deal at the right price. He furthermore believed the client would be happy to work with a bank other than Coburg’s.
‘What are you offering?’
‘I’ll introduce you to the client. I’ll give you the specifics on the tax schem
e. If you play your cards right, you’ll have a new client, a nice deal, and a decent fee.’
‘And what do you want from us?’
‘A job.’
Mazowiecki drummed her fingers on the table. She explored Zack’s intense, angular face. Interesting. He didn’t play the usual interviewee’s game of smiling too much, trying to get you to like them. She made up her mind.
‘OK. We may be able to do a deal, but first a few points. One, we never hire anyone unless we think they’re going to be good long-term hires. That means we insist on a tough interview process and you’re no exception.
‘Second, if we’re to do anything for your client, we need to move quickly. It may already be too late. That means you need to tell us everything you can about this tax scheme, and we’ll get working on it right away. I know you won’t want to give us any confidential information until the client’s given authorisation. But these are special circumstances. I give you my word that we will not misuse any information you give us.
‘Finally, I hope you’re prepared for a long night. Our aim is to spend a couple of hours working on the tax angle, then spend the rest of the night on interviews. We’ll give you our final decision in the morning. OK?’
Zack thought for a moment. This was a different world from Coburg’s, and he longed to be a part of it. But still he hesitated.
‘That’s great,’ he said, ‘but I’m afraid I can’t accept an oral commitment not to misuse the information I give you. I’m still an employee of Coburg’s.’
Zack didn’t give a monkey’s about the ethics, but he wanted to appear trustworthy. He wasn’t sure that he’d made the right choice and stopped short. He needn’t have worried. Mazowiecki smiled.
‘Good. You’ve passed the first test. We don’t hire people who are casual with their clients’ secrets.’ She took a letter from her attaché case, signed and dated. She passed it across to Zack. The letter promised, on behalf of Weinstein Lukes, to make no use of any information given them by Zack Gradley, unless and until he gave them written permission to do so. ‘Here’s one we did earlier. We put it together on your way over, just in case we decided you weren’t a bullshitter.’
Then passed one of the strangest nights of Zack’s life. He spent the next three hours with Mazowiecki and a bleary-eyed Weinstein Lukes tax specialist called Hal Gillingham. Zack explained his idea and outlined the things he thought needed to be done. Gillingham quickly understood the scheme. He spotted a couple of technical problems that Zack hadn’t seen, but also thought of ways round them. He looked like something the cat had dragged in, but his mind was as sharp as a razor. At midnight, he sat back.
‘Let’s call a halt. I’m convinced we have a workable scheme. If we work nonstop we should have it in reasonable shape by Friday. Frankly, I rather like it.’ Then the interviewing began.
Ordinary firms would find it difficult to arrange an unscheduled series of interviews running from midnight to six in the morning. Not so Weinstein Lukes. Across the building, lights burned late as bankers rushed to meet critical deadlines. Mazowiecki collared half a dozen of her colleagues and told them to fit in a full fortyfive minute interview with Zack before reporting back with a detailed appraisal. It was an unusual request, but unusual requests were commonplace. Nobody was put out.
The interviews were searching and rigorous. Any weakness identified by one interviewer was mentioned to the next, who then tested Zack on it as thoroughly as possible. At Coburg’s, Zack felt himself a cut above the rest. Here he was unsure of himself. He felt like a schoolboy trialling for the Olympics. When asked for the fourth time how many languages he spoke and he was forced to say just English, he began to wonder whether he should have apologised to Hanbury after all.
At four in the morning, Zack realised he hadn’t eaten since lunch the day before and asked timidly if there was a vending machine anywhere. His interviewer, a Spaniard who looked every inch like the Castilian aristocrat he was, looked at Zack puzzled.
‘Do you want crisps or do you want food?’ he asked. ‘I will not recommend hiring you if you give the wrong answer.’
Zack laughed and asked for food. The Spaniard dialled four digits on the phone on the desk, and fifteen minutes later a waitress entered with an enormous club sandwich loaded with treats.
‘Some of us pretty much live in this building, so it is important to have the necessary conveniences. In New York, it is all diet Coke and microwave pizza.’ The Spaniard shrugged. A rival firm had recently offered him a guaranteed bonus of $2 million a year for two years to head up their Latin American business based in New York. He hadn’t even spent a minute considering the offer.
Finally, a little after six, Zack’s last interview was over. Out of the window, the River Thames lay like a dark band between the banks of offices and cranes strung with inane Christmas lights. Zack felt battered and exhausted. This had better be worth it. Finally, at six forty-eight, Mazowiecki returned.
‘Congratulations. We’d like to offer you a job. We propose to make you a vice president in corporate finance, reporting to me. Your starting salary will be forty thousand pounds. You will also be entitled to an annual bonus, payable in June, based on your performance over the last year. Since it’s now January, we will not have had sufficient time to appraise your performance in the ordinary way. However, if the deal we are discussing comes off, we will pay you a signing bonus of fifty thousand. What do you say?’
‘Yes. Yes, please. That’s absolutely wonderful. I’m delighted.’ Club sandwich or no, Zack was light-headed.
‘OK. We’ve drawn up your contract, but we can’t formalise it until we get clearance from Dixon Banderman. Dixon is the head of corporate finance in London and insists on seeing every new hire. I’ve never known him overturn a decision, but it’s a hoop we have to jump through.’
‘OK. When do I get to see him?’
‘Right away. He’ll be down in our health club now. We’ll go find him.’
Mazowiecki and Zack took the lift down to the basement. At this time in the morning, the place was mostly empty, but a thrumming sound indicated that some of the cardio-vascular machines were busy. Mazowiecki, more than a few pounds overweight, walked the aisles of the body beautiful, following the sound. Her pace picked up as she saw who she’d come for. Zack followed a couple of steps behind.
An elderly man, his back turned, pounded a treadmill.
Dixon Banderman.
‘Hi, Dixon,’ said Mazowiecki, handing him the draft contract. ‘Can I introduce Zack Gradley?’
‘Amy-Lou. Hi. For you, anything.’
The man’s voice sounded familiar. Mid-Atlantic. An American who had been in London too long. Banderman’s silvery head turned to look at Zack. He looked like a viscount, but Zack knew he didn’t always behave like one. Oh, Jesus. It was the man he’d had a screaming match with on the zebra crossing the evening before. Recognition dawned in Banderman’s face. Zack halfclosed his eyes. If he was going to be executed, he didn’t want to look.
‘Jesus Christ, Amy. Have you lost your marbles? You seriously want to offer this foul-mouthed jerk a fifty grand signing fee?’
Zack’s eyes closed completely. How unlucky could he get? He began to compose the most offensive possible riposte in his mind. If he was going to be sacked by Coburg’s and rejected by Weinstein Lukes, then somebody would feel his tongue. He only dimly heard what Banderman said next.
‘From what you told me before, Amy, this guy’s bringing us a deal worth millions and he’s already proved he’s got a hell of a brain for tax structures. I know from my own experience that he looks after himself in a fight. The bugger deserves a hundred grand if the deal comes good. Go get this thing seen to.’
So saying, he flung the contract at Mazowiecki who caught it, startled. She didn’t often miss a trick, but something had happened here she didn’t understand.
‘Welcome on board,’ said Banderman, extending a sweaty hand.
The rest of the week passed in a
daze. Zack and Mazowiecki called Daggert. Zack said he believed Aberdeen Drilling was still available and that they could find a way to make the price acceptable. The only condition was that Weinstein Lukes was hired immediately. Daggert was surprised by the call but he listened carefully.
‘You’re positive we can utilise our tax losses?’
‘Ninety percent.’
‘And you’re sure Aberdeen Drilling’s still available?’
‘Ninety percent.’
‘And what fees are you guys asking?’
Mazowiecki proposed a fee based on how much Weinstein Lukes saved Tominto Oil. Coburg’s had suggested paying one hundred and twenty-five million for Aberdeen Drilling. For every pound Mazowiecki saved, Weinstein Lukes would keep twenty pence. It was pricey but Daggert was in no mood to haggle.
‘Fine. Fax me a contract and I’ll sign it.’
They hung up and Mazowiecki produced some champagne.
‘Your job and our deal,’ she said.
It was now eight forty. Zack remembered his meeting with personnel at Coburg’s. He couldn’t work for Weinstein Lukes while still an employee at Coburg’s. He assumed he’d be fired, but he took a letter of resignation along just in case. Getting a fat redundancy payment was an unexpected plus, but the best thing had been Hanbury’s face when Zack delivered his parting shot.
For the rest of the week, Zack worked an average of twenty hours a day making sure that the tax scam worked. By Friday night, Hal Gillingham said they were done. Mazowiecki just said, ‘Great. Have a good weekend, guys.’
‘Aren’t we going to call the seller?’ asked Zack. Mazowiecki told him to relax, she had a call to make to ‘a friend of mine, a journalist’.
Zack took her advice, puzzled, but when on Sunday he picked up a newspaper, he discovered that the deal was front-page news in the business section. The article - ‘Black hole in accounts threatens Aberdeen sale’- blew the auction apart. The other buyers vanished. Tominto shuffled its feet. The seller grew desperate and virtually threw the business at Tominto.
The Money Makers Page 14
