Crude Deception

by Gordon Zuckerman

  “I have a different problem,” Chairman Malone said. “I believe I must introduce an additional stipulation. To prevent the diluting of the plan below acceptable levels, the Fed will require all fifteen billion dollars be raised in the form of enforceable letters of credit. Mike, to me, that sounds like a very big order.”

  Senator Lucas spoke up. “While I am reasonably certain that what I want to talk about is implicit in your plan, I just want to make sure. Am I correct in assuming the terms and conditions of the offering will permit the funds to be used by all qualified applicants, be they major or independent oil companies? Unfortunately, it means you will have to raise all the funds required to support the total development costs for the next three to five years, not just what is needed by the independents. While banks, insurance companies, and investment bankers can be as discriminating as they wish, the federal government does not enjoy the same privilege.”

  “Senator, let me assure you that is the case,” Mike replied. “As much as we would have preferred to construct our plan to help only the non-major oil companies and limit the amount of money we would be required to raise, we realized early on that our plan had to be nondiscriminatory if we were to ask for the cooperation of the federal government.”

  Senator Lucas pushed Mike further. “Your deal, as you describe it, is technical and complicated. Why should we go to all this trouble and accept all these risks when the oil companies are prepared to provide the needed capital?”

  Looking the senator directly in the eye, Mike said, “Because that is the cost of preventing seven oil companies from controlling an unacceptable amount of the world’s oil production.”

  Chapter 34

  THE PRESIDENT

  Cecelia sat quietly in the sun-filled dining room of her apartment, opening her mail and enjoying her first cup of coffee. Mike had left the day before for his meeting in Washington. Her attention was immediately drawn to an envelope with the engraved emblem of the United States President. Why would the President be sending me a letter? Is this a fundraiser?

  Almost afraid to open the letter, she poured herself a second cup of coffee and adjusted her position to take full advantage of the light shining through the nearby window. When she opened it, she saw that the content was clearly not campaign-type correspondence. My God, it’s a handwritten letter from the President.

  Straining her eyes to read the President’s difficult-to-decipher handwriting, she carefully studied his invitation. Having a hard time believing the President would invite her to the White House to discuss matters in Indonesia, she reread the note three times.

  Traveling to Washington, Cecelia wished she had received the letter earlier; she could have simply come to the capital with Mike. Making her way to the White House and presenting her credentials at the gate was a new experience for the mighty warrior from Hong Kong. How can it be that I can travel around the world, talk to heads of state, powerful bankers, and prominent investors, and not experience any particular discomfort, yet here I am, headed to the Oval Office, feeling like a little girl attending her first day of school!

  As she was escorted to the President’s office, she felt her sense of intimidation intensify. Standing and waiting to greet her were the Secretary of State, the Chairman of the Federal Reserve, the Chairman of the Joint Chiefs of Staff, the President, and his Chief of Staff.

  Flashing his legendary smile, the President said, “Welcome to the Oval Office, Miss Chang. I’m familiar with your many accomplishments, and I’ve been looking forward to meeting you for a long time.”

  Not certain how to respond, Cecelia gave a half-curtsy, half-bow, said thank you, and waited for the great man to continue.

  Motioning toward an open seat, the President said, “Why don’t you sit down, Miss Chang? Roger has been filling us in on your recent tour of the Orient, and he believes that you can help us better understand the situation out there. He has also been telling me you have some very interesting ideas of what can be done to solve our dilemma in Indonesia.”

  Sensing the President’s sincere interest, Cecelia immediately revised the speech she’d planned on giving. Surprising even herself, she went right to the heart of the matter.

  “Mr. President, at first glance, the United States may be faced with a difficult problem. The Dutch and the British, now that the war is over, believe they are entitled to their historical petroleum interests. In that matter, I am not aware of any material disagreement. What is in dispute is the issue as to whether they are entitled to reimpose their colonial rule over the island nation. From what I have been able to learn, they are basing their claim on the need to control the government as a necessary prerequisite to protecting their oil interests.”

  Pausing to allow her words to sink in, she listened as the President said, “Well, that pretty well sums up what we have been led to believe. I understand you believe there may be an alternative course of action that won’t require us to deny the emergence of Indonesia’s newly formed national government?”

  “Yes, sir,” said Cecelia, “I believe it’s important that we question the British and Dutch assumptions. First, I am assured that the new Indonesian government is prepared to recognize the British and Dutch claims over their existing developed oil interests. About that, there is no debate. It is the issue of developing suspected but unproven reserves that is causing the larger problem.”

  Pausing to catch her breath, Cecelia continued. “As long as it is believed that the development of those new reserves can only be accomplished by a coalition of the major British and American oil companies, there isn’t much that can be done. If you change that assumption, then the picture becomes quite different.”

  “Miss Chang, I’m not certain I understand what you mean by ‘changing the assumption,’” said the President. “What are you implying? Who else can develop those quantities of oil?”

  “Before I answer your question, I would like to say that the issue your government is facing in Indonesia is symptomatic of a larger problem that is about to emerge in Southeast Asia, the Middle East, and North Africa, where new large reserves of oil are believed to exist. Unless America is prepared to deny its recognition of emerging self-determined governments, it needs to pay very careful attention to the developing situation in Indonesia. It would appear that the United States and the rest of the free world are faced with a simple choice. We must learn how to separate local resource issues from local governance issues or face the possibility that we will be forced to support local military dictatorships and foreign colonial rule, heavily influenced by the dictates of the seven major oil companies. If we don’t get it straight in Indonesia, what are we going to do when the same problem emerges in all these other places?”

  “Miss Chang, I couldn’t agree more with your assessment,” said the President, impressed. “I wait with great anticipation to hear your solution!”

  “Mr. President, my friends and I are convinced these oil-rich nations need to have some other choice than to submit to the demands of the major oil companies. Let us suppose, for the sake of conversation, that Indonesia had other interested and qualified parties willing to bid competitively for the right to develop its untapped petroleum reserves. Should that become the case, the independent Indonesian government would no longer be dependent on the British and the Dutch.”

  Having made her point, Cecelia sat back in her chair and waited for the response.

  Each of the men in the room was thinking to himself. The protracted silence that permeated the room only added to the tension. Finally, the President focused his attention on his Secretary of State and asked, “Is she right?”

  “What she says makes sense,” the secretary replied. “It’s just that we have never been able to give any consideration to the existence of a competitive petroleum development source. Perhaps Miss Chang would like to explain why she believes her suggestion represents a realistic alternative.”

  “Mr. President, my friends and I have been developing a plan that wil
l encourage qualified independent oil companies to become competitive bidders for all these new oil concessions. As we speak, my friends and I are engaged in the process of creating a billion-dollar prototype of what we hope will become a fifteen-billion-dollar international oil development fund. Once that fund is in place, sovereign oil nations or consortiums of independent oil companies will have access to the magnitude of capital they require to develop new oil fields.”

  “Now I understand what Roger has been telling me,” said the President. “Do the rest of you agree with Miss Chang’s suggestion that by helping her to create this fund, we will be, among other things, providing the United States with a new set of options for dealing with this problem of self-determination she has so eloquently described?”

  The Secretary of State said, “I’m impressed enough by Miss Chang’s suggestion that I would like to recommend that we not only delay any consideration of Britain’s and Holland’s requests for support but also consider sending the British Prime Minister a letter clearly stating our opposition to any attempt on their part or the part of the Dutch to superimpose their colonial governmental rule over Indonesia.”

  Finally the Chief of Staff spoke up. “Mr. President, we have reliable information reporting that the Dutch have moved a hundred and ten thousand of their own troops into Indonesia. It’s important that we remove any possibility that the Dutch and the British will move unilaterally. I respectfully suggest you consider allowing me to move some of our ships into the area and schedule some naval training exercises.”

  After nodding his assent, the President said, “Miss Chang, as we used to say in the army, ‘One hand washes the other.’ Now, with regard to this oil fund of yours, Roger tells me that you want our government to form a new agency and issue fifteen billion dollars of U.S.-guaranteed bonds. Am I to surmise it is the presence of this new fund that will provide the financing needed by independent oil developers to bid competitively against the big British and Dutch oil companies?”

  “Yes,” said Cecelia. “That’s correct.”

  Glancing at his advisors, the President interpreted their smiles as encouragement to proceed. “Roger, it might be a good idea if you would keep me fully informed about the progress of the oil development fund,” he said. “This is something that needs to happen. And, while you’re at it, I suggest you and Henry begin to investigate different options we might use should Miss Chang require our assistance.”

  He turned to Cecelia. “Miss Chang, I think it would be appropriate for you to tell your friends that your request for new legislation will have the full support of the White House. Good luck—you’re going to need it!”

  Chapter 35

  FINAL PLANNING

  At last the time arrived for the Sentinels’ final planning meeting. Although he hadn’t been actively involved in any of the Sentinels’ activities since he retired to manage the Sentinels’ winery, Tony Garibaldi, one of the original six, had kept in close contact. The five-thousand-acre premium wine operation represented one of the investments the Sentinels had made to prevent the proceeds of their German bond sales from being detected. It was Mike who suggested they kill two birds with the same stone, as he and Cecelia flew back to San Francisco from Washington. “If we ask Tony to host our next meeting at his ranch in California,” he said, “we could receive his winery status report and at the same time figure out how we are going to raise all the money.”

  “Let’s make certain we select a time when Ian Meyer can be there,” Cecelia added. “Not only do we need him to take notes, but it will be difficult enough to meet without Jacques. Despite the fact that he has been forced to reduce his involvement to that of our scrivener, I still consider Ian as one of the original six. With his presence, at least five of us will be there.”

  “My dear,” said Mike, “at last count I think we will be more than five. I’m assuming we will want to invite Juan Pablo and Sir David …”

  Mike’s phone conversation with Tony was much more than a talk between two old friends. “Of course, Mike,” said Tony. “I would be pleased to invite all six of you to the ranch. It just won’t be the same without Jacques, though.”

  “Speaking of Jacques,” said Mike, “his absence is something I need to discuss with you. I’m going to need your help. You and I understand, better than the others, how Jacques would want us to proceed. Claudine is a trouper, but she is going to need to rely on us for support. While I am certain we can count on her to complete the European part of the equation, I think she would be relieved to know we are going to lead the charge.”

  Mike’s next call was to the Secret Service. The agent in charge said, “You don’t have to tell me about the ranch; I was there last time, when those Samson operatives shot up the place and almost killed Tony Garibaldi. Give us a few days to prepare, and this time we’ll make certain nobody who shouldn’t be there will even get close!”

  During the day preceding their meeting, the Sentinels and their guests began arriving in ones and twos. Always the proud vintner and consummate host, Tony was present to greet his old friends, colleagues, fellow investors, and new guests.

  He made certain each arrival was properly situated in the guest quarters and told each person that he would conduct a tour of the ranch and the surrounding vineyards as soon as everyone was assembled. Two years had passed since the Sentinels had last visited, and five years had passed since they had put together the five thousand acres required to support an emerging national market for premium wine.

  “First we will tour the vineyards,” Tony explained to each guest. “After three years, we have planted more than fifteen hundred acres. I think you will be impressed by the different microclimates, the diversity of the grapes, and the vigorous growth of the vineyards. Plan to be ready by eight o’clock in the morning. The tour will take most of the day, and it will work its way up the Napa Valley, cross through the Alexander Valley, and drive south through Sonoma’s Russian River Valley. Then we’ll pass through the Carneros region on our way back to ranch headquarters. Hopefully, we’ll return in time to tour our winery, the bottling operations, and the warehouse where we store and age our bottled wine inventory.”

  To complete the tour, Tony’s staff had organized a dinner that would take place in the limestone caves where the wines were stored and aged. Each course had been selected to complement the wines that would be served.

  As impressive as Tony’s progress was, Jacques’s absence was never far from anyone’s mind.

  The next night, after a long day of touring the sprawling vineyards, the Sentinels and their guests were all seated around a wide table placed inside the mouth of the limestone caves, allowing guests a magnificent view of the vineyards of the Napa Valley and, in the background, the rolling green hills spotted by the majestic oak trees that populated the region.

  Mike tapped his glass and waited until he had everyone’s attention. “Before we start, Tony has something he would like to say.”

  A teary-eyed Claudine stood up, champagne flute in hand, and said, “It’s time to break the silence about our dear friend. Jacques, I lift this glass in a toast to you. Each of us misses you very much in our own way and is concerned about embarking on our new mission without your guidance and assistance. Wherever you are, we hope you are safe. Please hurry back to us. We know if you were here you would be telling us to proceed. Jacques, we hear you, and we know what we have to do!”

  The next morning, after Tony’s staff had cleared away the breakfast dishes, the group was enjoying a second round of coffee. Addressing Tony and Ian, Mike said, “How nice it is to have you join us. Given Jacques’s absence, having all the remaining Sentinels and our new guests gathered here makes things seem a little less forbidding.

  “Now that we have finished organizing the prototype fund,” Mike continued, “the time has come for us to focus on raising the balance of the money. For the last few weeks, each of us has been busy studying the problems we must solve if we are to raise the fifteen billion dol
lars required to meet the Federal Reserve’s minimum stipulation. I think this would be an appropriate time for each of you to give a brief report of your activities toward achieving this objective.”

  One by one, each of the Sentinels and their guests described their progress. Following their analysis of what they had learned, they provided Mike with their best guess regarding their estimated range of funds raised. Mike scratched figures on the blackboard as they spoke:

  Cecelia Asia 1.5 – 2 billion

  Mike USA 6.0 – 8.0

  Jacques/Claudine W. Europe 1.5 – 2.5

  David Great Britain 0.5 – 1.5

  Juan Pablo Latin America 0.5 – 1.0

  Total $10.0 – 15.0 billion

  After reviewing his work, Mike continued, “If my math is right, it appears that we only expect to raise between ten and fifteen billion dollars. Even if we achieve our most optimistic forecasts, we’ll barely achieve our minimum stipulation. At the low end of the range, five billion dollars is a lot to make up. In other words, we’d have to have a lot of luck on our side to achieve our goal. It also means we have to raise the maximum limits. Should any of us fail, the shortfall could place us well beyond the get-lucky range.”

  Tired and frustrated by the result of their presentations, the Sentinels looked to Mike for encouragement. It was Claudine who asked, “What are we going to do if all we can raise is ten billion dollars?”

  “I think we need to be careful about putting too much credence in these numbers,” Tony responded. “Perhaps we should look at our problem from a different angle. So far, all we have talked about are the quantitative issues. What about the qualitative issues? Do we know how motivated these investors may become once they focus on the potential threat of the seven oil companies? Although I regret not being able to actively join you in the raising of the money, I would like to volunteer our communications system, here at the ranch. I don’t see any reason why each of you can’t utilize the same private network we use to communicate with all our brokers and institutional customers.”