I remembered to zip up before stepping back into the bar. The place had become packed with the Friday-night happy-hour crowd. A young man with short, spiky, heavily gelled hair jostled me. Was he the one who had broken into my apartment? Unlikely. He was too well dressed. I pushed him back. He fell.
One of his friends stepped in between us and pushed me back. I swung. He dodged it easily, but tripped over his buddy’s leg and went down. I heard myself giggle.
People started making a lot of noise—girls screaming, guys yelling—none of which was helping to restore order. The first guy was back up and in my face, managing to land punches on my bruised ribs that hurt like fire. It felt like there were two or even three people hammering on me and maybe there were. I was past caring. Other hands reached in and pulled at me. Stretched out to protect me. I saw Vinny and Roger. Roger’s too old for this shit, I thought. So was I.
Then I was outside and Vinny and Roger were yelling at me and Tommy was laughing—which pissed off Skeli. She took a swipe at him and called him an asshole before walking off alone into the night. God, I wanted her to stay. But I was caught in a timeless eddy, circling endlessly between pain and limbo, and I could no longer speak. Or cry.
—
THE FRONT DOOR slammed. I hoped it wasn’t someone who wanted to hurt me, because I couldn’t move.
Early-morning sun was streaming in the front windows. I tried turning my head to get the light away from my eyes. Pain forced me back to immobility.
But it was only hangover pain. Righteous. Earned. My ribs hurt, but the rest of my physical wounds were healing. My soul was another matter. The previous day’s events came back to me in ugly little vignettes.
The intruder had not yet come over and stabbed me in my bed. In fact, judging by the sounds and smells, he was laying out breakfast in the kitchen. I smelled coffee.
“Hello,” I croaked.
“Good morning, Sunshine.”
It was Roger. I remembered. I had seen him curled on the couch when I got up to piss in the middle of the night.
I swung myself into a sitting position and waited for the pain to localize. Not much more than a headache. A gargantuan headache. I was still wearing my suit pants and shirt, though someone had kindly removed my jacket and shoes.
“Thanks for getting me home.”
“Yeah, not a problem. I brought coffee. You ready for it?”
He had also brought an egg sandwich—on a roll, with ham, cheese, and home fries. Salt, pepper, and hot sauce. Washed down with sixteen ounces of hot black coffee and about a quart of water out of the tap, the sandwich swelled up in my stomach into a lump the size of a melon—but I felt better for it.
I looked around. The floors were clean, the CDs swept up into a box, drawers back in their proper places, shelves realigned, my books stacked neatly again.
“Shit. Did you do this?”
“Ah-huh. Place looked like it got tossed.” His sipped his coffee and nibbled on a minuscule morsel of the corn muffin he had brought for himself.
“It was. Thank you for cleaning up. I don’t know if I could face it just yet.”
We drank coffee in silence for a minute.
“So. You gonna tell me about this shit, or what?”
I told him. He didn’t interrupt, but he did let out with a “Holy shit” when I got to the part about finding Hochstadt dead. And when I finished with Brady’s call about the Kid and the results of the hearing in Virginia, he summed it up in one word. “Fuck.”
“Amen.”
“What can you do?”
“Right now, not much. If I chase after Angie, she can have me back in jail with one call. I need to find a way to get my parole officer on board.”
“I meant what can you do now. Today. This morning.”
“I’ve got a few calls to make first. Apologies.”
“Ah-huh. That’s how drunks start the day.”
“I can’t imagine you starting the day that way.”
“Yeah, well. I’m not a drunk. I’m an alcoholic. There’s a difference.”
The distinction escaped me and my head was starting to hurt again. “Enlighten me.”
“I may down most of a bottle of cognac every day—I been doing it for forty years—but I don’t ever get drunk. I don’t like the feeling of being out of control.”
“I see.”
“I don’t think you got it in you. Drunks, especially mean ones like you, give alcoholics a bad name.”
Some remaining element of self-respect floated to the surface. “I don’t normally do that kind of thing.”
He laughed. “Or you’d be dead.”
“I’ve had some . . . setbacks.”
Roger laughed again. “Okay. So you got a one-day pass to act like an asshole. Day’s over, sport. Whaddya goin’ do now?”
“I don’t know.”
“Screw that! You wasted one day feeling sorry for yourself. Hiding. Pulling a liquid blanket over your head. One day. That’s all ya get. Do you know what set you off? Why you had to do that to yourself?”
“Yes.”
“Good. Then you’re in better shape than ninety percent of the drunks in this world. So, go take care of your shit.”
“Roger, I can’t—”
“Right. Right. You can’t fly off to Louisiana, like the fucking cavalry in the last reel. I got that. But you can fix some shit, right? Start with something easy. How about a shower? Shave? There’s a start. Then pick one of those things you can do something about and just fuckin’ do it. Just one. You get that under your belt and you’ll be on your way back to the human race. Then—if you really need to—you can make some apologies.”
“Like to Wanda.”
“Well, yeah. That’d be top of my list. But if you go grovelin’, she will disrespect you forever. You have to go strong. And whatever you do . . .”
“I know. No flowers.”
Monday I could start to deal with the parole officer. He would have to let me go to find my son. I could get Brady to help if I had something to trade. At some point, he and Maloney were going to come back to the Arrowhead investigation, and I had what they needed.
“Just a sec,” I said. I grabbed my jacket off the closet door and went through the pockets. The flash drives from Hochstadt’s apartment were all there, including the one with the silver duct tape.
“Roger, you are a friend. Thank you. Right here I have something that I can finish. If this has the information I think it does, I can nail these guys.”
“There you go. Now you got somethin’ to look forward to. All you need in life. Something to do. Someone to love. And something to look forward to. You’re good to go.” He pulled himself up, tossed the barely touched muffin in the trash, and headed for the door. “My work here is done. Now I gotta meet Wanda and go entertain a bunch of five-year-olds. I got nothin’ to look forward to.”
“Thanks again. Hey, and tell Skeli . . . I mean Wanda . . .” There were too many things I needed to say to her. “You know what? Don’t tell her anything.”
“Yeah, I think that’s best.” He was halfway out the door when he turned. “Fuck me and my white horse. I forgot. There’s two city cops making nuisances of themselves out by the elevator. One downstairs and the other right here on the floor.”
“That’s comforting.”
“Yeah, but how long are your neighbors going to put up with that shit? Best of luck with that, sport.”
I was a New Yorker, I barely knew my neighbors to nod to in the lobby. “Thanks, but that problem is not top of my list.”
I locked up after him and headed for the shower.
WHEN THE MARKET is doing its best to teach a hard and painful lesson, when every brain cell is shrieking for safety, comfort, security, and when every well-thought-out strategy b
ased on value, historical relationships, and statistical analysis has become a dog’s breakfast of toxic securities floating in a stinking pond of hedged derivatives, there is one trading skill that cannot be taught: the ability to act coldly, rationally, in the midst of chaos. A trader looks for the next opportunity. If he cannot do that, he may still have a career on Wall Street—in sales or research—but he will not be a trader.
I had allowed chaos—personal and professional—to rule me for too long. It was time to put away my pain, fears, and anxieties and go to work.
Once again I searched for patterns. Every trader leaves a trail, a mark upon the market, sometimes unique, more often banal. As prices ebb and flow in a random dance, accelerated by electronics to an impossible pace, traders take various approaches to managing their risk.
Position traders are all about guts and muscle; they take the long view. They will hold a position for hours, days, or even weeks. They set parameters for themselves and review the facts, trends, or rumors that influenced their decisions, but they tend to trade rarely, looking for the great sea changes, rather than trying to catch a single wave. When they are right, they hit home runs. They are often wrong. They make money by following the adage “Take your losses early, and let your profits run.”
Then there are the spread traders. They rely on brains, agility, and computational skills. They rarely care whether the general market is heading up or down, they look for anomalies between markets and pounce, buying one security while simultaneously selling a different one. Profit on any one trade tends to be relatively small, but more predictable. A good spread trader is nimble and quick, hitting singles and stealing second, rather than smoking homers over the fence.
Day traders play the game by scalping. They tend to rely on a combination of luck and an ability to read the psychology of the market moment to moment. When is fear exhausted and it is time to buy? When is greed overdone and it is time to sell? They dash in and out, taking their profits and moving on. They may ride a trend, but only for a heartbeat. If they are disciplined, they almost never make a killing on one trade, but they can eke out small gains on hundreds of others. They hope for a streak, where they’re hot and can do no wrong, and when they’re cold they sit on their hands.
The Arrowhead trades fit none of these patterns—or all of them. Geoffrey Hochstadt never had a losing trade. He hit singles and doubles every time. Unless one were to accept the proposition that a trader with no research, little capital, and no access to extraordinary information could consistently outsmart scores of traders from all the top shops, then the only other possible interpretation of the facts was that a widespread scam was being perpetuated, with Hochstadt pulling the strings.
I loaded the duct-taped flash drive—the one that seemed to be in code—and imported the data into the same spreadsheet. The rows immediately rearranged themselves. A new pattern emerged. I had found the money trail. I just couldn’t read it.
The first column that revealed its secrets to me was an embarrassment. It was a list of dates, written in European format with the day of the month first and the year truncated. I should have recognized what it was right away; instead I had wasted half an hour comparing the figures to the other columns.
My next success was a bit more satisfying. The column showing the profit per trade matched up quite clearly with one of the newer columns. Identically. And after an hour or so of playing with a calculator, I was able to see that the next column was always a percentage of that profit, though the share differed from one trader to another. Some of the smaller, less active traders were getting a 60 percent cut, others got 70 or even 80 percent. The bigger the fish, the larger the share.
The other columns were still a mystery of seemingly random letters and numbers.
Some days, our good deeds, hard work, and good intentions do come back to reward us. Often enough to keep me believing in luck. My phone rang.
“Hey! Mr. Stafford.” It was young Spud.
“Mr. Krebs. It is very good to hear from you. How are you? I tried to reach you the other day, and heard that you had left the firm.”
He laughed easily. “They jettisoned me out the airlock. One of the first. Barilla had me on my way before I had a chance to order lunch. I didn’t know he even knew who I was.”
“I gather Gwendolyn got a message through to you.”
“Yeah. I’m up visiting my folks in Vermont. I took off the day after the debacle. I really appreciate you getting in touch, though.”
“Any ideas on what’s next? Anything I can do? I could make some calls for you—not everyone takes my calls these days, but I do still have some friends.”
“Wow. Thank you. Let me think on it, okay? I don’t mean to be coy, I’m just rethinking things, know what I mean? I don’t know if Wall Street is the best place for me.”
If he was thinking along those lines, then it probably wasn’t.
“You’ll let me know. Meantime, I was wondering if you had any time to help me finish up our investigation. I’d make it worth your while.”
“Sure. I’m planning on being back in the city sometime this week. How’s Wednesday?”
“How’s today?”
“Dude! I’m in Vermont!”
“I’ll have a car pick you up. You can be here for a late dinner. We’ll work straight through.”
“No, really. I’m at my folks’.”
“Sure, sure. I’ll pay you two hundred an hour. Minimum a thousand dollars. It’s a puzzle. You’ll love it.”
He took a minute to think about it. “I like the money. What do you need me to do?”
I described the files, what I had been able to come up with, and the problem.
“I don’t need to come to New York. E-mail me the files. We can work it over the phone.”
Simplicity itself. I zipped the files and sent them. Then I made a pot of coffee while Spud looked them over.
“What do you think?” I said.
“Does the minimum still hold?” he said.
“Is it that easy?”
“Yes and no. I see what you were saying about the dates and the dollar amounts. I agree, all that makes sense.”
“And?”
“Okay, the next column over? Letters and numbers? Those are SWIFT numbers. International bank ID codes for wire transfers. If they were domestic, they’d all be ABA numbers.”
A clerk would have caught it—not a trader.
“Show me.”
He did. Within a week of any trade, a wire transfer went out. The banks were all in countries that had a greater reverence for client privacy than the U.S.—and lax or nonexistent tax regulations. The Cayman Islands and the Bahamas led the pack, though some of the accounts were held in the old standbys of Switzerland, Luxembourg, Liechtenstein, and others. One enterprising soul was using a facility in the Cook Islands in the South Pacific.
“I’m thinking that the numbers in the last column are individual accounts at those banks. And, just a guess, but the second column, right after the date? That’s gotta be Arrowhead’s internal code for each trader.”
It made sense.
Spud continued. “He used the last three digits of the bank’s code in his own coding, you see? That way he couldn’t really screw up and transfer money to the wrong account.”
“It still doesn’t tell me who the traders are.”
“I don’t get it. Look at row twelve. Whoever that guy is moved twenty-four million over in three years. His firm didn’t miss it? Is that possible?”
“A guy like that might make thirty or forty a year for his firm. How much are they going to question him if he only makes twenty or thirty? They may cut his bonus, have a sit-down, and so on. But unless he screws up, no one is going to start investigating him. He’s still a big earner.”
“This could have gone on forever, th
en?” Spud sounded half disgusted, and half in awe.
“Hiding in plain sight.”
“So, do I get the thousand dollars?”
“Absolutely. Ready for the bonus question? See if you can find me a key somewhere for the account names,” I said.
“I think you’ve already got it. But the files came over as read-only. You need to connect the flash again.”
I plugged it in and opened the file in a new window.
“Now click on one of the bank account numbers. Any one,” he said.
A drop-down window appeared. FBO Mrs. Karen Nunn and family. I knew Karen Nunn. I had been there when she married Gerald Nunn, who had been trading Yankee bonds at Case when I was starting out. We had lost touch when he moved to London.
“Anything there?” Spud said.
“Just a second,” I said. I clicked on the other column. Gerald Nunn, Finsbury & Wallace, Ltd. “Holy shit.”
“It worked?”
“Mr. Krebs, you just earned the bonus.”
I clicked on the next row. Another ex–Case employee, now trading for another large American bank here in New York.
“This is the goddamn Death Star. I could smash planets with this file.”
No wonder someone had searched my apartment. They must have known this file was out there somewhere. Anyone on the list had a very big incentive to find the file and destroy it. And destroy anyone who might have seen it.
“Listen, Spud, if anyone contacts you—anyone at all—and wants to know if we talked, I want you to deny everything. We never spoke.”
“You’re scaring me, Mr. Stafford.”
“Good. And call me Jason. There are at least two people who died because of this—maybe others. Stay up in Vermont until you hear from me. And stay around people you know.”
—
I CHECKED THE LOCKS on the door—again. I kept working.
I saw why Diane Hochstadt had referred to the “old crowd.” Case Securities was well represented. But like a virus, the scam had leaped oceans and raced over continents, spreading its infection through almost every major investment bank.
Black Fridays Page 28
