Mortal Bonds

by Michael Sears

  “First time. Quite handsome. It’s certainly well hidden.”

  “The club claims its roots are in Renaissance Florence. A bit of comic fiction, with a hint of truth. You see, the Church forbade lending at interest in those times, and it was only the Jews and other outcasts who were allowed to profit from what we think of as modern banking. They were the merchant bankers. The word ‘bank’ itself comes from the Old Italian word for ‘bench.’ The moneylenders would place a bench in the piazza and sit there conducting their business.”

  “And the traders?”

  “Bankers need liquidity. If they become overextended, they may need to sell, or find partners to share the risk. The traders were the risk takers and the intermediaries, as necessary to the system as the letters of credit and futures contracts they traded. But they too were looked down upon. They were gamblers, living by their wits. Not fit company.”

  Seven hundred years and not much had changed.

  “So the club dates to the 1400s?” I let a touch of incredulity show.

  “No,” he said and laughed politely, “1901. The first members were all the outcasts who were not allowed to join the clubs with the Vanderbilts, Carnegies, and Morgans. Jews and other olive-skinned men. Speculators, private lenders, merchant bankers.”

  I looked back up at the portraits on the nearby wall. I had missed it at first because the men were all dressed in period suits, no different in style or form from any group of early-twentieth-century men of business. But looking again, I could see the faces, the skin, the eyes, the hair. There wasn’t a single Anglo-Saxon present.

  “But times have changed, Mr. Castillo.” I was enjoying myself. He was a bit in love with himself, and did like to hear himself talk, but he was interesting. Intelligent, cultured, and engaging.

  “Maybe.” He tilted his head to one side. “Maybe not so much.”

  “And so what are you? A merchant or a trader?”

  Eamon reappeared at that moment and placed a silver tray on the end table. A bottle of Evian, a glass of ice, and a linen napkin for me. Then he poured the coffee.

  “Will there be anything else, Mr. Castillo?” he murmured.

  “Possibly some privacy, Eamon. Can you help us?”

  “No one will bother you gentlemen.” He backed out of the little alcove and took up position just out of earshot.

  Castillo and I watched him take up his sentry role.

  “Is this all part of the service here?”

  “Many deals have been struck in this room. Many secrets shared. If anyone strays inadvertently to this end of the library, Eamon will gently encourage them to sit somewhere else. They will understand.”

  “So, is this a good time to ask . . . why the invitation?”

  “You are impatient?”

  “Eager.”

  “Touché.” He smiled. “Then I begin. All this week I hear your name. Friends, business acquaintances, even some of my employees. They all think I should know about this Jason Stafford. I hear you are looking for something. Our interests there may coincide.”

  “I’m no longer making any secret of it—everyone I talk to seems to know my business. I’ve been hired to see if I can locate some of the missing assets from the Von Becker mess. So far, all I’ve got is a list of angry people.”

  “Yet you keep looking. You are here. You do not give up. You are persistent. That is an admirable trait.”

  I sipped the Evian. It tasted like water.

  “Tulio Botero Castillo,” I said. “Born January 8, 1975, in Bogotá, Colombia. Named for an archbishop. You’re the second son. They shipped you off to the States when you were still in grade school. Dalton. Princeton. You started the MBA program at Harvard, but switched to economics. Finished a doctorate in three years. Your dissertation was on the effects of black markets on productivity as a drag on the multiplier effect.”

  “I prefer ‘underground economy.’ ‘Black markets’ has more negative connotations.”

  I continued. “The family was very big in coffee production and export. Now banking and politics. They’ve been investigated a dozen times or more for ties to the cocaine and heroin trade—in both Colombia and Honduras—and cleared, but the smell never seems to go away.”

  “Congratulations. You can Google.”

  I’d hoped to shake him just a little. Let him think I knew things. He wasn’t even mildly annoyed.

  He leaned forward and spoke in a low voice. I leaned in. We were close enough to kiss.

  “I have read quite a bit of your history as well. I have done my research. I would not wish to hire you without a full background check.”

  I sat back. “I’m already employed.”

  “Your employer is unreliable.”

  I had to smile. Everybody was telling me that.

  “I’m here. I’m listening.”

  “Good. Then we may begin. My family are bankers—facilitators. We do not produce commodities, though we often act as agent in their distribution. It is a simple business model. But some of these products have unique problems in distribution and payment.”

  “We’re not talking about coffee now, are we?”

  “You are offended?”

  “I want nothing to do with the drug trade, Mr. Castillo. I’m surprised that your research led you to think I would.”

  “Mr. Stafford, do not take too much comfort from what you see as the moral high ground. For almost one hundred years, your government has tried to limit the amount of drugs entering this country. They have spent trillions of dollars. And the end result is that more drugs pass through your borders than ever before. Yet your politicians still expect a solution from the supply side. Stop the Afghani or Peruvian farmer from producing! Arrest the importer. The distributor. When will your countrymen accept that the problem is one of demand? Reduce demand and the market goes away. But somehow such a voice in your debate is considered to be ‘soft’ on drugs. What is ‘soft’ is the rigor of intellectual honesty.”

  “People aren’t murdering each other over coffee.”

  “Do you mean the Mexicans? My Honduran clients? My own countrymen not that long ago? Who sells them their weapons, Mr. Stafford? Or do you mean your own Bloods and Crips? Why do you expect desperately poor men with no other hope of even a marginal existence to behave more ethically than your average American politician? That feeling of moral superiority is nothing more than arrogance and ignorance.”

  “Sounds like I’ve struck a nerve.”

  He stopped, took a deep breath, and forced a smile. “Perhaps so.”

  “I’m not equipped to debate these big issues. I just don’t want anything to do with drugs. If that’s what you want to talk to me about, then we’re done.”

  “Give me a few minutes more of your time. What I have to say may yet intrigue you.”

  I nodded and forced myself to sit back.

  “I mentioned unique problems. Obviously, delivery is a problem. It is what gets all the press. But an even more vexing issue is simple cash management. It is a cash business at the retail level—which is appropriate for such an ephemeral product. But when you move up the supply chain, the dollar amounts become quite problematic. Do you know how much space ten million dollars takes up? How heavy it is? It can be burned, marked, stolen, or counterfeited. Any cash transaction as small as five thousand dollars must be reported to your government. If you attempted to deposit a million dollars in cash into your bank account, you would find yourself and every aspect of your life under a very unpleasant microscope. You see the problem?”

  I nodded again.

  He took a sip of his coffee and grimaced. “The richest country in the world, and yet you insist upon drinking hot brown water instead of coffee.” He put the cup down and shifted position. “Tell me, are you familiar with bearer bonds, Mr. Stafford?”

  Everyone on Wall Street is a speci
alist to some degree—the world of modern finance is too complex to survive otherwise. My expertise was in foreign exchange. But some knowledge of certain basics of other markets is necessary, if for no other reason than to pass the licensing exams. I knew what a bond was, and in my first investigative job out of prison, I had quickly relearned the basics when I was hired to investigate the book of a recently deceased young trader.

  A bond is essentially a contract between the issuer—which could be a government or a government agency, or a corporation looking to borrow money through the sale of securities—and the buyer or investor, who might represent a mutual or pension fund, an insurance company, or even an individual. Bonds represent debt, as opposed to a stock, where ownership passes hands. The contract usually states that the issuer agrees to pay some rate of interest to the investor for a certain number of years, and then to return the principal. It gets more complicated quickly—with collateralized bonds, senior and subordinated debt, insured bonds, variable rates of interest or maturity, and so on. I did not pretend to understand much of that. It wasn’t the math that gave me trouble, it was the overwhelming details of each particular bond. U.S. Treasury bonds are near commodities, but most of the millions of different bonds that are out there are closer to unique packages of cash flows. Each one has its own story.

  Bearer bonds comprise a whole other subset, which lives by its own rules. The sum total of my knowledge of them had been learned in a single terminally boring lecture in B-school many years ago, by a professor so consumed with jealousy that in a few years we would all be earning in a year what it took him a decade to earn, that he managed not to notice that half the class was asleep.

  Unlike other bonds, and most stocks these days, which are all registered and exist only as micro-bytes in a computer, bearer bonds exist only on paper, in physical form. They are printed on heavy paper in some official-appearing font like the document you get with a set of commemorative coins. Only, the document itself is worth a lot more than a bunch of silver coins from the 1980 Moscow Olympics. And they come in large denominations. Very large.

  Once upon a time, in the ancient days of finance—the first half of the twentieth century—all bonds were bearer bonds. When it was time for an interim interest payment to be redeemed, the owner of the bearer bond clipped off a dated coupon and presented it at a bank for payment, similar to a check. The bank made sure that the coupon was legitimate—not a forgery, nor the obligation of some defunct entity, like the Confederate States of America—and paid out in cash. The wrinkle was that the bank had no obligation to determine that the holder of the coupon was the legitimate owner. Whoever had possession of the bond could redeem it for cash. This anonymity makes them particularly valuable for anyone who needs to move large amounts of money without leaving a trail for regulators, the IRS, or the police. Bearer bonds are not so much investments as they are a proxy for cash. The U.S. government stopped issuing them in the early 1980s and the IRS penalized U.S. corporations that issued them. They issued them anyway. The savings in interest payments were worth paying the penalty.

  “Didn’t the Treasury do away with bearer bonds? Thirty years ago?” I said.

  “It is true that the U.S. Treasury no longer issues bearer bonds, but it is still possible to redeem one. It is legal to own them. But the paperwork involved removes the cloak of anonymity. Anyone who presents a bearer bond for payment in a United States bank must provide identification. The transaction is reported to various government bodies which are on the lookout for tax evasion, money laundering, organized crime, terrorism.”

  “But outside the U.S.?” I said.

  “Exactly.” He smiled at the good pupil. I was being schooled again. “In certain money centers around the world, bearer bonds are used for transactions daily wherever anonymity is of concern.”

  “The drug trade again,” I said. “Not interested.”

  “And would it surprise you,” he continued, ignoring my comment entirely, “to learn that many of the issuers of these bearer bonds are the foreign subsidiaries of A-rated American corporations?”

  I wasn’t surprised.

  “They are also users of bearer bonds,” he went right on. “How else could they pay for Iranian oil? Any other transaction would be traceable. It is not just the arms and drug trades that benefit. How better to convince a reluctant bureaucrat in a third-world country that your company’s proposal is superior to any other? Cash is bulky and awkward.”

  I held up my hands. “Please. I am convinced. There is corruption in the world. What I would like to know is, where did Von Becker hide his billions? Bearer bonds? Is that what you’re saying?”

  Castillo made a steeple of his fingers and pursed his lips in thought. “I don’t know,” he finally said. “But I have an idea. I am being quite honest with you, Mr. Stafford, because I think our interests coincide. Von Becker was more than a little familiar with the product.”

  If Castillo was going to resort to telling the truth, I was sure he had something to hide.

  “My family did a considerable amount of business with William Von Becker—business that benefited mutual clients.”

  Money laundering.

  “From time to time, a client would need to purchase or divest of some bearer bonds. Mr. Von Becker was most helpful. Money would be wired into one of the Von Becker banks and a meeting would be arranged. Lawyers—or couriers—for both parties would meet in Zurich and make the exchange.”

  “Always in Zurich?”

  “Mr. Von Becker insisted. The clients did not mind. They used couriers if they wanted the bonds moved elsewhere.”

  “Where did they meet? At a bank? I assume the certificates were kept in a safe-deposit box or a vault.”

  Castillo grinned. “A meeting in a bank would defeat the purpose of using bearer bonds. The meeting would no longer be anonymous. If both parties had to enter the vault, they would have to sign in, show identification. There would be a paper trail. Impossible. Therefore, the meeting would always take place at a café. Across the street from the bank. Away from the surveillance cameras.”

  In a world of computers, cell phones, and instant access to money, information, or communication, Von Becker had relied on the anonymity of the sidewalk café to conduct his business.

  “So only the lawyer would go into the bank vault,” I said. “No one could ever connect him to the other courier.”

  “Exactly. There must be no trail—no connections. And the system worked well right up until last fall. On the day that William Von Becker surrendered to the Feds, one of my clients had initiated a purchase of one hundred million dollars of these bonds. The money was deposited and wired, but the authorization for the physical transfer was never made. No doubt, Mr. Von Becker was preoccupied that day with the details of his arrest and he never made the call to Switzerland.”

  “No one else could handle this?”

  “Mr. Von Becker did not normally trust anyone else to make the arrangements.”

  That fit with what everyone else had told me about him.

  “My clients,” he went on, “tell me that they made some early attempts to contact other family members, but failed. They did not share the details with me.”

  “So your client was out a hundred million dollars? Was that a normal-sized trade? How bad was he going to miss it? Enough to have Von Becker executed in jail?”

  “It was far from normal. But killing him would have been counterproductive. As long as he was alive, he would, at some point, be able to make the necessary arrangements. He was being held at the MCC downtown. It was easy to get messages in or out. It was only a matter of time.”

  “So you believe he killed himself.”

  “Out of shame? That’s what the family is trying to spin. No. I think one of the sons had him killed.”

  “Why?”

  “Because they found out what he was doing and wanted to keep th
e bonds for themselves.”

  Which meant I could be working for a murderer.

  “That’s an interesting theory. What about contacting the lawyer directly? They must have had some contingency plan.”

  “Approaches were made—and rejected. The lawyer—Herr Serge Biondi of the firm Kuhn Lauber Biondi in Zurich—was an old man and somewhat rigid in his ways. He insisted we wait until word came from his client.”

  “But Von Becker died.”

  “Well, actually, the old man died first.”

  “That is a very ugly coincidence.”

  “The newspapers said it was a heart attack.” Castillo removed an invisible speck of dust from his sleeve and flicked it to the floor. “He was eighty and lived a sedentary life.”

  “And since then? It’s been more than six months.”

  “The chain is broken. My clients grow impatient. So do yours, I imagine. That’s why you were hired. Somewhere there is a key or a code. Somewhere those bonds are waiting to be found. Approaches to the bank have been made, but without that code—or key—there is little hope of recovery.”

  “And if I find them?”

  “My clients want only what is rightfully theirs. And they will be generous in rewarding the person who returns their goods.”

  “And if I don’t find them? What then?”

  “They are already impatient. They will find other means.”

  There was no doubt in my mind that Castillo knew much more than he had told me—but whether the information would have helped me or not, I had no idea. There were still people I had not yet interviewed and there was no guarantee that finding Castillo’s money would lead me to Von Becker’s, but he was right, our interests might yet coincide. His confidential manner suggested that he assumed that I was as big a crook as he. I didn’t like that, but I was used to it. I thought I could handle it.