“At his place. It’s private.”
“I’ll pick you up at seven.”
“No. I’ll have a car bring me out. I know where it is now. This time I won’t come alone.”
“Albert coming too?”
“Yes. And somebody else.”
“No monkey business, Doc.”
“Don’t worry. But you might tell Mr. Cook something beforehand.”
“That is?”
“He might need a partner, even if it is for the first time in his life. I think we might have what they term a complete mutuality of interest.”
“I’ll tell him.”
Albert and Doc stayed on for a while at the Metal Exchange. By the late session they had already managed to accumulate an extremely large number of forward silver contracts. All on the short side. The price had dropped well below $2.50.
Their paper profit by late afternoon was over a million dollars. At least that’s what Albert said back in the hotel after spending ten minutes with his calculator.
The hall porter at the Carlton Tower managed to arrange for a Silver Cloud to take them out to Buckinghamshire. They left a little late since the third man needed time to change, following his arrival from the airport.
The trip to the Cook estate took an hour. Nick Topping met them at the car and took them directly to the drawing room. Frank Cook did not keep them waiting. Everyone was still standing when the door to his library opened, and he made his entrance. He immediately addressed Doc.
“Mr. Smythe,” he said, “perhaps you could make the introductions.”
“Certainly. That is Albert Fiore. I believe you know his father.”
“Pleased to meet you, Albert.”
“And this is Agha Firdausi. He was our partner in Iran.”
The Iranian took Frank Cook’s hand firmly.
“Please be seated, Mr. Firdausi.”
So everyone sat. No drinks were offered.
“Well, Mr. Smythe, first I must confess that I made a mistake. I should have accepted your original offer on that silver mine. I believe Mr. Topping has told you what has ensued in the meantime.”
“He has. But you hardly made a mistake.”
“No? But now I can only acquire that mine for an outrageous sum. Yet if I do not acquire it, and all that silver is produced and floods the market, we stand to lose a great deal of money. The price may well collapse. So I am damned if I do, and damned if I don’t.”
“Not necessarily.”
“That’s most interesting. Perhaps you could amplify as to your reasons.”
“I shall. And I do hope you have a sense of humor.”
“I’m not noted for it. But proceed anyway.”
“You see, Mr. Cook, we have all been subjected to an enormous hoax.”
“Hoax?”
“Yes. Because there is no silver mine in Persia. Is not, and never has been.”
“My God,” exclaimed Cook, his scowl demonstrating that, indeed, he did not find it funny, “I was within a hair of being defrauded of a hundred million dollars! Are you sure?” He actually got out a white silk handkerchief and wiped his forehead.
“Quite sure,” replied Doc.
“No silver at all?” Frank Cook was upset. No doubt about it. But there was suddenly a new gleam in his eye. Maybe he would, as usual, luck it out all the way.
“I did not say that, Mr. Cook. All I said was that there is no silver mine.”
“Once more, please.” The gleam went.
“It is quite simple. Our friend Firdausi has pulled off a highly remarkable feat. He was faced with a situation that required a silver mine. So he created one, so to say. And then let us in on the action.
Perhaps you should explain, Agha.” As he turned toward Firdausi, Doc’s expression indicated both fondness and respect.
Agha Firdausi cleared his throat.
“You see,” he began, as his eyes moved around his audience, “I am really nothing more than a smuggler. I smuggle gold into India and silver out. I try to sell the gold expensive and buy the silver cheap. At first it was a small business. But then, as the silver price began to rise around the world, more and more Indians wanted to sell. For gold. It is said that as a result of three centuries of hoarding, Indians now possess three billion ounces of silver. That is more than the entire world, even today, can use in twenty or thirty years. If I could not handle the trade, my clients would turn to someone else. And, alas, I was not a rich man. To handle all the new business, I had to have capital. A great deal of capital. You see, first I must purchase the gold. For cash. Then I must pay the men who sail the djerbas between Dubai and India. With cash. Then I must warehouse the silver, against cash in advance. I must constantly pay off the customs people in India. With . . .”
At this point Frank Cook interrupted: “Yes, we get the point. Go on.”
“No bank likes to finance a smuggling operation, even though it can be highly profitable. So I had to invent something that was, as you say, bankable. Therefore I invented the silver mine. It was not illogical. There definitely should be a mine near Susa. Archeologists, the Bible, even geologists agree on that. But what should have been was not. So I corrected that situation, you might say. But I did not cheat. I did produce all of the silver I promised to my partners. In fact, much more. Only it has come from India, not Persia, and it does not come from the earth, but from the bottoms of djerbas. You understand?”
“I understand,” replied Frank Cook, “at least I understand you, Mr. Firdausi. But,” and now he turned to Nick Topping, “I certainly do not understand how you could possibly have fallen for this?”
Nick Topping replied firmly: “It’s like the man just said, Mr. Cook, it was logical. Not only that. I actually saw the silver coming into Dubai. So did that fellow from the California bank—Luckman. How the hell was I to know it wasn’t coming from Iran like it was supposed to? You saw those reports I brought from Switzerland—the assays, the geologist reports, the estimates of ore reserves, the weekly refining throughput figures, the . . .”
“You’ve made your point, Topping.”
“Well, you believed them, didn’t you?”
“I did. By the way, who did those reports, Mr. Firdausi?”
“A man by the name of Ron Howard. He’s a mining engineer from Rhodesia.”
“Where is he now?”
“Oh, he went back to Africa.” Which obviously closed that subject where Firdausi was concerned.
“It’s still unbelievable,” continued Cook, shaking his head, and looking around the room. “Didn’t anyone actually try to go down into that mine?”
No one, of course, had.
“How long have you known about this, Smythe?”
“Since last Friday morning, Mr. Cook.”
“That phone call in my office?”
“Yes.”
“From Mr. Firdausi?”
“No. From Albert.”
“How did he find out?”
“It’s complicated. A former colleague of ours telephoned from Dubai.”
“My cousin,” added Firdausi. “He’s from Sicily.”
“Why?”
“Why is he from Sicily?”
“No. Why did he tell Albert.”
“Because he felt bad. And also because he said that he was afraid of what Doc might do.”
Frank Cook nodded: “Doc almost did. I am indebted to your cousin in more than one way, Mr. Firdausi. But we are straying from the subject at hand. Tell me, how much silver are you ‘producing’ at the moment down there in Dubai?”
“I bring in about five million ounces each month. I hope to double the volume this summer. Of course, this requires even more working capital. But my sister and I now have my cousin as our new partner. And my cousin has arranged that these gentlemen,” his hand pointed toward Doc, then Albert, “will help us out in that regard if necessary. Albert has proposed a very fine program for future cooperation.” Firdausi smiled.
“Yes,” said Frank Cook, “I�
��m sure Albert has. Because obviously Albert plans on wrecking the silver price that I have been building up so carefully during the past months.”
“That is not correct, Mr. Cook,” replied Albert. “Otherwise we would not be here talking to you this evening.”
“Touché. Why are you here?”
“To insure that our plans in the silver market will be successful.”
“And what are your plans?”
“We plan to go short in the futures market. Very short: 250 million ounces. That will involve a cash investment of around $60 million in margin.”
“You plan to sell short now at $2.50 an ounce, and cover sometime next year, or later on, at half that price.”
“We are not quite that optimistic. We think our profit should average around one dollar an ounce. Which will be quite sufficient.”
“But you still have not answered my question. Logically the last person on earth you should want to tell all this to is me. As you know full well, it is I, and my organization, that have been major buyers of silver. As you know, commodities futures are a zero-sum type game. For every winner there’s a loser. You should have been happy to have a potential loser like myself around for as long as possible.”
“Of course. But we knew that you would not stay on the losing side for long. It must inevitably come out—soon—that that silver mine never existed. In fact, you would probably have been the first to hear anyway.”
“My God,” interrupted Cook, “this means that the First National Bank of California is stuck . . .”
Now Albert interrupted, “Yes, Mr. Cook. But let us discuss that aspect later. Now, we calculated that when this news came to you, it would take only a very short time before your people came up with the truth. About Firdausi’s operation on the Gulf. And you would immediately realize that if it appears that a vast new silver source has opened up in India, that the price would collapse. Then you would have also gone massively short in the market, trying to cut your losses.”
“Your line of reasoning is correct.”
“That is exactly why we are here. To prevent such a thing from happening. Because if two groups like ourselves go short at the same time, we would wreck the price. We could never build up a position anywhere resembling 250 million ounces. Nor could you. It must be done gradually, over months, hopefully even years. Because as you correctly pointed out, commodities are a zero-sum game. We must insure that we have enough losers. And that will require that we—our group, which controls the silver from Dubai—and your group, Mr. Cook, which is the most powerful organization in the silver industry, work together.”
“How?”
“We must play on the psychology of silver investors like a violin. Right now, we must start selling some of that silver from the warehouses in Dubai. But without revealing the source. A small panic will ensue. All of a sudden investors will start to believe that perhaps the world is not running out of that metal. That somewhere somebody has immense amounts of the stuff. Then we must stop. You must stop. We must again create the impression of a growing scarcity. That will bring the investors back, trying to recoup their losses of the prior weeks or months. Buying even more silver futures—on the long side. We—your group and ours, Mr. Cook—will match every one of their purchases with one of our short sales. Then we panic them again. Et cetera. Et cetera.”
Albert continued.
“But it is utterly imperative for our mutual success that we completely coordinate two things: how much physical silver we allow to come to the market in any given week, and how heavily we engage in short selling in the futures market. We can succeed. Because almost no investor in any commodity market ever even sees the physical material he is dealing in. We not only see it, we can control a large part of physical silver. We can create one of the most massive and longest bear markets of the century, Mr. Cook. And we both can make a quarter of a billion dollars in the process.”
“It is beautiful, Albert. But not perfect. What if we fail? What if the silver you throw on the market from Dubai does not depress the price for long? What if I try to help along, and sell equal amounts from my warehouses, and even that does not work? Then we may not make, but could lose, a dollar on every ounce of silver we promise to deliver in the future. We could create a classic bear trap for ourselves and get wiped out.”
“That is a possibility, Mr. Cook. No plan is perfect. But we are willing to take that risk if you are. Doc has assured me that you are the type of man to whom a thing like this would appeal.”
For at least two minutes the room fell into silence. All eyes were on Frank Cook. Finally he spoke.
“Doc was right. It does appeal to me. And every silver user on earth will—unwittingly—cooperate. Every industrial firm on earth that employs silver wants lower prices. They want much lower prices. And if—at the right time—all of us psych the crazy small investor that is behind this bull market, create the illusion that the world is about to become awash in silver, then by God it will work and for sure. At least for a couple of years. I will talk to every man I know in the industry about this. And I know most of them. That, my friends, will guarantee success.”
“Do you now understand why we came to you, Mr. Cook?” asked Albert. Without waiting for an answer he went on. “It’s really because of what Doc figured out during the past few weeks. He said that we and big business were really meant to be part of one large happy family. Our objectives are the same. Our methods essentially the same. We think alike. There is no sense that we fight each other. Because—well, you can finish, Doc.”
Doc did. “Mr. Cook. We would be honored if you could consider us as your first partners.”
Without the slightest hesitation Frank Cook rose, went to Doc, and grasped his hand.
“Doc, the honor will be all mine.”
Which clinched the fate of all those dentists, airline pilots, insurance salesmen, and greedy widows who thought they were going to make a fortune in silver futures.
But there were other fates at stake that evening also: those of the Chairman of the Board of the First National Bank of California, George Foreman, and of the newly appointed head of their Lugano branch, Donald Luckman. The phone call that Foreman received from Frank Cook later that evening left him puzzled as he had never been in his life. And as worried. After he hung up, his wife looked at him in shock.
“George,” she said, “for God’s sake, sit down. What’s wrong?”
“That deal I’ve been negotiating with Frank Cook. It’s off.”
“Maybe he’s just . . .”
“Marjory, shut up. And stay that way.”
He picked up the phone and dialed Room 1217.
“Debbie?”
“Yes.”
“Where’s your husband staying in Lugano?”
She told him. Then she asked, “Is there something wrong?”
“No, no. I just want to talk to him,” was George Foreman’s reply, and he hung up.
He had her husband on the phone within two minutes.
“I’m glad you called,” were Donald Luckman’s first words. “Everything is going on schedule. All the resignations have been made effective. I’ve informed the bank authorities here of our ownership of the bank, and the name change is . . .”
“Luckman, shut up and listen. I want you to get your ass over to that place in Iran. There’s something wrong there.”
“What do you mean?”
“I mean I think we’ve been had. In a monumental fashion. I want you to get down there and find out if that silver mine really exists. Immediately!”
“You must be joking!”
“I’ve never been more serious.”
“But I’ve never been there.”
“Exactly. But I assume you at least know where it is.”
“Of course.”
“Then go.”
“There’s bound to be a language problem.”
“I’ll arrange for someone to help you out. Just cable me the flight number and your arrival
time at Abadan. I’ll take care of the rest. And listen, Luckman, I want to hear from you the minute you find out what’s going on down there. You hear?”
Another phone call followed. To the residence of the United States Ambassador in London. He took it immediately. George Foreman regularly ranked among the top fifty contributors to the party. Yes, they had a consul in Khuzistan. Stationed in Khurramshahr. Of course he’d help out. Just let him know. His man would be met at the airport in Abadan. No trouble, George. That’s what we’re here for.
A third call went to San Francisco. To the home of the top legal man of the First National Bank of California, who, fortunately, was also a member of the bank’s International Committee and thus also on the hook. It was very brief.
“Sid,” said Foreman, “we’ve got trouble over here.”
“What kind?”
“I don’t want to discuss it on the phone. I want you to come over to London right away.”
“All right. Where are you?”
“At the Hilton. I’ll fix up rooms.”
“Rooms?”
“Yes. I want you to bring some other people along. An S.E.C. specialist. A tax specialist. Some man from your department who’s fully acquainted with our bonding of employees. And I want you to line up legal counsel here in London, as well as in Switzerland.”
“Jeezus, George. What have you gotten yourself into?”
“I told you, Sid. I don’t want to discuss it on the phone. Just do what I say.”
“O.K., George.”
Two days later the worst had been confirmed from Iran. The Firdausi property had tomatoes, strawberries, alfalfa, you name it. But no silver. Worse: No one, anywhere, knew of any mining operation. What now? Donald Luckman was instructed to return to Lugano. He would hear further.
By this time the London Hilton had more lawyers in it than bellhops: two from San Francisco, one from New York, one from Washington, two from London, one from Paris, two from Geneva.
They barely all fitted into George Foreman’s suite. Foreman summarized the situation, as all sat in total silence, something that is not easy for one lawyer to do for long, much less nine lawyers.
The Silver Bears Page 22
