by Adam Mitzner
“I know I’ve put you in a spot,” Ross says, “but I’ve got government regulators so far up my ass that, I swear, I tickle their noses when I take a shit. They do periodic inventories of our positions, and they told me that your capital structure is out of whack. Four to one? C’mon, Jonathan, that’s too much leverage, even for your fund.”
“It’s not four to one, Michael. It’s . . . it’s the same leverage it was last year.” This is a lie. The fund is actually carrying twice the leverage of a year ago, and even though Jonathan thinks he’s sold it well enough, he decides to gild the lily a bit. “Besides, it’s the leverage that allows us to deliver such outsize returns. And correct me if I’m wrong, but last year we provided you with a thirty-five-percent ROI, which I believe contributed to that hefty payday you received from your board of directors.”
“And it was very much appreciated, Jonathan. But last year was last year, and this is now. And now my regulators are telling me that we need to raise capital because our investment in your fund puts us on the wrong side of some regulation. I’m not willing to dilute my stock by taking on fifty billion dollars in debt, so I’m going to exercise my contractual right to unwind my position with you. No tears. We can do business again—just not right now.”
Jonathan’s mind is racing. He ping-pongs back and forth between sucking up and playing hardball. He decides to try the carrot one last time, largely because he has only one stick and that’s a last resort.
“How about if we offer you a kicker to stay in? Favored nation status with Harper Sawyer? Name your price.”
“Sorry, Jonathan. No can do. I’m out.”
The fact that Ross didn’t even make a counteroffer means there’s no give there. This isn’t a negotiation, and never has been. Ross wants his money, end of story.
Which means that Jonathan has to go with Plan B. Delay.
“Okay, Michael. You win. We’ll cash you out. But we simply can’t do it in the time frame you want. I’m going to need at least ninety days to make the first payment.”
Jonathan manages to say this with a straight face. He’s hoping that Ross at least meets him somewhere in the middle. Even if Ross demands the first payment in thirty days rather than the seven called for in the redemption notice, it would be a godsend.
“Ninety days? Oh, no, I’m sorry, Jonathan. You’re going to have to honor the timetable in the offering docs.”
Jonathan can no longer hold it together. “I’m not going to crater the fund,” he says sternly. “No way. That’ll cost a lot of people a lot of money. And for what? So you can satisfy some bureaucrats? Michael, let’s be real here.”
Whatever civility existed between them has now ended. Ross shakes his head, as if to say that Jonathan clearly has no idea who he’s dealing with.
“How’s this for real, Jonathan? Seven days from now, I’m expecting two hundred and fifty million dollars to be wired from your shop to mine. If that doesn’t happen, my lawyers are in federal district court within twenty-four hours.”
Jonathan has only one play now, and it’s the nuclear option. He’s never pressed that button before, but then again, no one had ever threatened the survival of the fund before.
“Michael, all it takes is a single phone call from me to the Journal to say that the fund is insolvent, and thirty seconds after it’s online, every single one of my investors will want out, too. You won’t get your money because there won’t be enough to go around. Like you said, we’re at a four-to-one leverage here. And I swear to God, that’s exactly what I’ll do. I’d rather go out in a blaze of glory and have all my investors share the pain than fucking redeem you and then still go under two or three months from now.”
Michael Ross at first seems like he’s considering Jonathan’s ultimatum. But then he lets out a deep-down guffaw that leaves no doubt that Jonathan has overplayed his hand.
“Jonathan, you need to think through what you say sometimes. You really think I give a flying shit about losing what I got with you? We’re paying seven billion in fines next week to settle some oil disaster fuck-up. Even if we lost every nickel in your little pissant fund, it doesn’t rise to the level of our disclosure requirement. So please, don’t delude yourself. This isn’t a situation where we both have guns to each other’s head. If I pull the trigger, your fucking head explodes. You pull it? At most, it’s like a mosquito bite.” Ross clicks the lock on the car door. “Now, why don’t you run along. Get the fuck out of here.”
* * *
Jonathan literally runs the five minutes back to the office. The rain is now coming down even harder than before, so by the time he reaches the trading floor, Jonathan has no misapprehension that he’s a sorry sight, sweat drenching him as much as the rain.
He makes a beeline to Haresh Venagopul’s cubicle.
“Jesus. What the hell, Jonathan? You look like . . . crap, actually.”
“Come with me.”
Jonathan doesn’t wait for an answer and strides purposefully toward the men’s room. Nor does he turn around to confirm Haresh is following him.
Once inside, Jonathan bends down to check under the four stalls.After verifying he and Haresh are alone, he walks over to the sinks and turns on all three faucets. Then he positions himself up against the door, blocking anyone else’s entry.
“Whoa, okay, Jonathan, now really, what the hell is going on?”
Jonathan replies just loud enough to be heard over the running water. “Michael Ross wants to redeem. The whole fucking position.”
Haresh’s eyes widen. “Seriously? What’s the timetable?”
“He’s not giving us any break on the terms. Bottom line, we need to raise two hundred and fifty million dollars by this time next week, and that much again in thirty days, with the balance of his investment due in full at sixty.”
Haresh noticeably slackens, as if he’s just taken a body blow.
“Options,” Jonathan snaps. “What happens if we unwind the position?”
“That’s not possible,” Haresh answers. “Actually, let me be more specific. Possible . . . but the position is about as bad as it could be right now. The ruble is trending down, and a redemption of this size will trigger the banks’ rights to demand a pay-down of the credit line, which means we’ll need to liquidate even more of the fund. Redeeming Ross means a loss of at least . . .” Haresh’s eyes go back in his head, as if he’s calculating. “Could be ten billion.”
Ten billion dollars. Might as well be ten trillion. Either way, it means the end of Jonathan’s career.
Jonathan nods. He already knew this, but hearing it from Haresh makes it certain. “Okay, how about raising the cash,” he says.
“Seven hundred million? From where?” Haresh quickly answers.
“Baby steps. Right now, two hundred and fifty million buys us a month. We’ll worry about the rest later. What’s our borrowing power?”
“Uh, nothing. When we increased the leverage the last time, we exhausted the credit line. If anything, we’re already overextended.”
“Really nothing? Or not two hundred and fifty million nothing?”
Haresh shrugs, now leaning against the sink. “I don’t know, Jonathan. It depends on where you mark the position . . . I mean, with some creativity . . . maybe thirty million. Maybe.”
Jonathan allows himself a small smile. Progress. “Okay, so we’re two hundred shy, give or take.”
“No, more like two twenty-five. Besides, what difference does it make if we owe Ross two hundred million or two twenty-five?”
“Don’t worry. I’m going to raise the difference and pay him off,” Jonathan says matter-of-factly.
Haresh looks over at the running faucets half filling the basins, Jonathan’s crude effort to avoid being recorded. “You need to be careful,” Haresh says. “You’re entering Madoff territory here.”
* * *
Five minutes later, Jonathan is back in the rain, although at least this time he’s brought an umbrella. He moves away from the assistan
ts taking a smoke break, and although he’s not quite alone, he assumes he’s put enough distance between them that he’s not going to be overheard.
His first call is his best shot—Isaac Goldenberg.
It’s eight forty-five in Las Vegas. The phone rings five times, and for a moment Jonathan worries that no one is in yet, but finally Goldenberg’s assistant answers.
“Hi, Marilyn, it’s Jonathan Caine. Is Mr. Goldenberg in?”
“Oh, hi, Jonathan. No, I’m afraid not. He’s in Macau.”
Damn. “What’s the time difference there?”
“Fifteen hours ahead,” she says quickly. “So it’s . . . eleven forty-five at night.”
Now Jonathan worries that Goldenberg is asleep. The guy’s eighty-three, after all.
“Okay, I’ll try him on his cell. Thanks.”
Surprisingly, Goldenberg picks up on the second ring. The man always sounds like he’s got a mouth full of marbles, so Jonathan can’t tell whether he’s woken him. Not that Jonathan cares. He’s thanking his lucky stars that this call won’t have to wait until morning in China.
“Isaac! Jonathan Caine here in New York. I’m so sorry to bother you this late on the other side of the world, but I have this really tremendous opportunity and I’m calling my investors in order of magnitude, and I wanted to make sure that you had the first swing.”
Goldenberg chuckles, which causes Jonathan’s heart to sink. He’s pressing too hard. Dial it back, he tells himself.
Jonathan says more deliberately, “There’s been a market uptick and we want to quickly capture all the profit we can on the position, and that requires additional capital. Harper Sawyer is putting up two hundred and fifty million, with a one-billion target commitment. I’m calling to test your appetite for some or all of that last seven hundred and fifty mil.”
Jonathan now waits. The next words out of Isaac Goldenberg’s mouth will seal his fate.
What he hears is another laugh, and then Goldenberg says, “Well, let me check my coat pocket and see if I got that kind of change rattling around.”
“I got to be honest with you here, Isaac. You’re going to hate yourself if you pass on this.”
This earns a much louder laugh from Goldenberg. One that Jonathan knows has nothing to do with Goldenberg actually being amused.
“Jonathan . . . first of all, we both know that you’re definitely not being honest with me. I may be in China, but I hear that desperation in your voice loud and clear. I really don’t want to know why, because, frankly, I figure you’ll lie to me anyway . . . but I know that you wouldn’t be asking unless you were pretty deep in it.”
Shit. It’s all over.
“But here’s the good news. I like you. I really do. And I say that even though all you Wall Street pricks think you’re a helluva lot smarter than some guy like me who doesn’t have a fancy MBA but just built a business from nothing. So here’s what I’m going to do for you. The moment I get a guarantee, in writing, that you’re going to double my investment in one year, I’m going to wire you one hundred million dollars. What do you say to that?”
Jonathan wants to scream YES! but he’s got to play hard to get, or Goldenberg will know that Jonathan’s troubles are twice as bad as he surmises.
“I’m sorry, but I just can’t do that, Isaac. You know the bureaucracy here. It’ll take me three months to get that kind of request through . . . and even then, I don’t know if it’ll get approved. Hell, I don’t even know if what you’re suggesting is legal.”
“Ah, I can see you’re not getting it, Jonathan. I’m not negotiating. Either I get a written confirmation from you in the next sixty minutes that you’re guaranteeing me a two-hundred-million-dollar payout next year, or I go with my gut, which is telling me to get out of the fund while the getting’s good. And I bet that makes your problems ten times worse.”
The phone goes dead.
Jonathan’s all smiles, however. He’s now a hundred million dollars closer to averting disaster.
His next call is to Norm Solomon.
“To what do I owe the pleasure, Mr. Caine?” Solomon says.
“Why don’t you just call me Mr. Opportunity, because I’m a-knockin’, Norm. I have the inside track on a position, and we’re offering it only to our biggest investors. Between us—and I’ll deny it if you tell anyone—Goldenberg and Ross are both in big, as is Harper Sawyer. I’ve got a sliver left, and thought you might want it.”
“So, I’m third, huh?”
“I don’t think it’s so bad to be behind the guy who’s number five on the Forbes list and the head of Capital Investments at Maeve Grant. And not to burst your bubble, but I gotta tell you, you’re nowhere near being our third-biggest investor. But there’s a window that’s about to shut, and I know you can move money fast and without a lot of commotion. I don’t want my other investors’ panties in a twist about why I didn’t come to them first. So discretion matters here. A lot.”
“I see. And how much is this opportunity going to make me?”
“Two hundred million now, and you’ll see at least three hundred in six months.”
Jonathan knows that Solomon can’t raise two hundred million dollars. At most, he’s good for half of that. Jonathan’s only asked for more because he wants Norm Solomon to be the beggar here.
Sure enough, Solomon bites. Jonathan knew he would—the guy’s greedy as hell.
“You putting that in writing?”
Jonathan decides to play along. In for a penny, in for a pound, and he’s got to fabricate something official-looking for Goldenberg anyway, so what’s another fraudulent document in the big scheme of things?
“Already drafted. I just need to know what name to put on the signature line.”
“That’s Solomon, like the king. Only thing is that I’m afraid you’re going to need to put me down for a hundred only. That’s all I can do.”
Jonathan now has him on the hook. It was time to reel Solomon in.
“I wish I could, Norm, but I’m really looking at doing this in just a few big tranches, so my inclination is just to say no and go down my list. If I have to break up the opportunity, it’ll cost me more. That last piece always does. God knows what I’m going to have to offer just for the tail.”
“Oh, c’mon,” Solomon pleads. “Do me a solid on this one, I really need a win.”
“You’re breaking my heart, Norm.” Jonathan pauses for dramatic effect. “Here’s the best I can do for you. If you wire a hundred mil by COB, you’re in, but I’m not papering it. For that little, it’s not worth the legal fees. But you have my word on the upside. Guaranteed.”
“You’re a prince,” Solomon says.
“Damn right I am,” Jonathan replies.
Then he hangs up without saying good-bye. Goddammit, he’s almost there.
* * *
Jonathan calls three more investors, but none of them are as gullible as Norm Solomon or as rich as Isaac Goldenberg. There are still others Jonathan could ask to put up the last fifty million, but he assumes that he’ll get the same excuses—timing issues, liquidity problems, taxes, blah-blah-blah. Besides, the more people who know he’s trying to raise cash fast, the greater the risk.
At twelve thirty, he and Haresh Venagopul are once again in the men’s room. Like before, Jonathan checks the stalls and turns on the water before he says a word.
“You know, people are going to start talking about us if we keep meeting like this,” Haresh says.
Jonathan ignores the quip. “I’ve got two hundred million. Now I just need you to look the other way so I can get the last fifty.”
Haresh is obviously pained by the suggestion. He should be. Jonathan is asking him to aid and abet in securities fraud. A felony punishable by prison time.
“What’s the long-term strategy here?” Haresh asks. “I mean, why put your head—I should say our heads—on the chopping block to get this first round over and done with when our heads are definitely going to get lopped off when you miss
the second payment in thirty days?”
“You know as well as I do that thirty days is an eternity in this business. If the market moves in our direction, all my problems are solved.”
“That sounds more like a prayer than a plan, Jonathan.”
“I have no other option, Haresh.”
Haresh nods. He’s too much of a gentleman to remind Jonathan that there is another option. The correct one: admit defeat and face the consequences.
“Okay,” Haresh says. “If you mark the position to show steady profit, and do it slowly so as not to raise any flags, and if you can get the fund’s NAV up fifty or sixty million by next Monday, then I can loosen up fifty million in borrowing power, and I’ll pretend I didn’t notice that our net asset value is inflated.”
Jonathan puts his hand on Haresh’s shoulder. “Thanks, Haresh. I really owe you.”
Haresh looks at him askew. “Don’t thank me yet. Compliance might still see it on their own.”
This is a risk Jonathan is willing to take. The folks in Compliance don’t understand the first thing about his trading, and even if they did know enough to ask a question, he could talk circles around them. It was Haresh’s support he needed, and now he had it.
“No, really. I owe you, big-time, for this,” Jonathan says.
“Uh-huh. Just understand that I don’t want you repaying me with cigarettes when we have adjoining cells in prison.”
8
Six Months Later/December
East Carlisle, New Jersey, is not known for its fine dining. Its neighbor to the west, which for some reason is called New Carlisle rather than West Carlisle, is a college town, so what passes as good food in this area of the state is located there. The best of a mediocre lot is the Château, or at least it was back when Jonathan called East Carlisle home. The kind of place reserved for anniversaries and Valentine’s Day, or when you are trying to impress the prettiest girl from your high school after twenty-five years.
In recognition of the season, a large Christmas tree is beside the door, a smaller menorah beside it, and a framed poster advertising the restaurant’s New Year’s Eve extravaganza—a hundred dollars for seven courses and all the champagne you can drink. In Manhattan, the same prix fixe would be a grand, maybe more. The poster also proudly proclaims that the musical accompaniment will be provided by Lou Cross and Cathedral. Jonathan tries to recall whether that was the band that ginker Pauley DiGiacomo referenced at the reunion, but he can’t remember.
