Mike’s requests to meet with the bank presidents in the principal cities in the west and southwest parts of the United States were immediately accepted, and meetings were promptly scheduled.
The first few seemed to go well. The questions were direct and on point. The Oil Club issue was rarely raised. It was only after he kept hearing, “Of course, our staff needs to review your proposal before I can submit it to my loan committee for formal approval,” that he began to question what was really happening. Am I winning the battle and losing the war? he asked himself. Since when does participation in a U.S. government–guaranteed loan program require anything more than a rubber-stamp approval by a board of directors?
After two strenuous weeks traveling from town to town, Mike was becoming very concerned. He hadn’t heard back from any of the banks. He was tired, he was depressed, and he was lonely. He was worried about Cecelia and he couldn’t stop thinking about why he wasn’t getting any response from the banks. Finally, his curiosity compelled him to call his father.
Morgan Stone was glad he called. “If I had known how to reach you, Mike, I would have called you. You’ve been moving so fast, no one seems to know where you are. We’re running into a problem. It isn’t your presentations or even the quality of the investments that is causing the delay in response. It’s the pressure the Oil Club is exerting on their banks. If I hadn’t seen for myself what they are doing, I wouldn’t have believed it. The banks are all talking among themselves and they will be providing you with one aggregated answer, one that protects them from acting on an independent basis.
“Based on what I’ve been hearing, I think you and your friends may have to further adjust your success ratio downward. At this point, even the potential for two billion dollars seems unlikely.”
“Dad, what do you suggest I do?”
“First of all,” said Morgan, “don’t take any of this personally. Second, switch your focus to community banks and plan to cover as much local ground as you can. I think you might be pleasantly surprised by the reception you receive. Don’t underestimate the importance of grassroots America; they control an enormous amount of our country’s capital. The aggregate amount of their commitments could add up to a lot of money.”
Chapter 39
RETURN TO ASIA
The closer her plane got to Hong Kong, the more excited Cecelia became. I’m doing exactly what I was asked to do—returning with a proposal that is responsive to most of the issues we discussed on my previous trip. If there’s any doubt, I will be able to refer to our prototype. What an advantage—there’s nothing more convincing than to be able to talk about an actual working model.
Tai-Pan had been following the progress of his daughter’s work ever since she left Hong Kong. No matter how hard he tried to picture her as an acclaimed international banker trying to solve some very big problems, he could only see her as the little girl, sitting on his lap, asking one question after another. As complicated as her mission might appear, he knew the escalation of the Communist revolution was going to make her job much more difficult. How am I going to tell my daughter that all her work could rapidly become one big academic exercise? No matter what, I have to warn her. I just hope my comments will not have a detrimental effect on her physical and mental well-being.
The three bankers—Ted Lee, Bob Arnold, and Ray Tolles—rose to meet Cecelia and Tai-Pan when they arrived at Mai Li’s teahouse. Once their greetings were complete and the tea was served, Ted came right to the point. “The progress of the Communist revolution is accelerating much more quickly than we imagined. There are many who believe it is only a matter of months before Communist forces drive Chiang Kai-shek’s army off the mainland to the island of Taiwan. Unfortunately, the Chinese Nationalist government still has an appreciable amount of its funds trapped in Nanking. They could have a very serious problem.”
“Thank you for the warning,” said Cecelia. “I hope I have come sufficiently prepared. Hopefully, we’ll be able to alleviate at least part of their problem. As you recall, when I was last here I took very careful notes. Your comments were well received by our people, and most of your concerns should be reflected in the proposal I have brought with me.”
After pausing to reach into her briefcase, she withdrew a copy of her brief. “In anticipation of our meeting, I prepared a synopsis of our plan. Perhaps we could save time if I summarized its principal features and then answered any preliminary questions you may have. As soon as I have the opportunity, I will ask my father’s secretarial staff to produce more copies.”
After listening to Cecelia’s brief synopsis, Ray Tolles spoke. “Well, Miss Chang, it appears you have come well prepared. When we suggested that you find a way to obtain American guarantees and remove the fractious nature of oil development from consideration, we never really believed you’d be able to devise and deliver such an effective instrument. Given the dire nature of our circumstances, we had braced ourselves to consider an alternate solution, not nearly as attractive as the one you have presented.”
“Indeed, you are to be congratulated,” chimed in Bob Arnold. “You had no way of knowing, though, that recent developments in our civil war have materially reduced our time frame. Pending our review of the documentation, how quickly could you complete a transaction?”
“I have all the necessary documentation I need to complete the transaction while we are here. Once the gold has been deposited in your banks in Hong Kong or Taipei and you have issued letters of credit, we are prepared to proceed with our end of the documentation.”
“Why don’t you tell us how you were able to complete the organization of the prototype fund in what appeared a very short period of time?” asked Arnold.
Cecelia explained that after ten independent oil companies and ten private equity firms committed ten million dollars apiece toward the equity side of the fund, the remaining 800 million was invested in 200-million-dollar increments by banking consortiums led by the America West, Stone City, Roth, and Demaureux banks.
“Not that I am questioning their judgment,” said Ray, “but would you mind telling me how they were able to make such fast, early-on decisions?”
“Well, I don’t know how fast they made their decisions,” said Cecelia. “Informally, each of the companies involved had a substantial amount of time to become familiar with what we were attempting. The bottom line is, they wanted to be in on the ground floor of a financing program that in their opinion has significant long-term potential.”
Bob asked the next question. “If all that is true, then why haven’t many of the other money-center banks asked to be included?”
“Maybe I should answer that question,” suggested Ted. “Today, in the United States, it appears there are two separate coalitions of banks developing. The group led by Morgan Stone is committed to the idea of expanding and diversifying the oil industry. The opposing group of money-center banks appears intent on restricting oil development financing to the seven major oil companies that compose what we call the Oil Club.”
“Are you serious?” Ray asked. “You’re telling us all those fine and reputable banks are committed to the idea of perpetuating the control of ninety percent of the oil supply? Don’t they realize what a dangerous strategy that could become?”
Chapter 40
RECUPERATION
Within twenty-four hours of being admitted to the private hospital in Paris, Jacques underwent surgery to relieve the pressure on his brain. What was supposed to have been a two-hour surgery ended up requiring more than four hours. The damage was much more extensive than originally anticipated.
For his recovery period he was moved into a corner room where he was greeted each morning by the blossoming green trees and colorful flowers in the garden that was visible through the open windows. The gentle breeze circulating through his room brought with it the delicate scents of the roses blooming just below his window. A second bed had been moved into the room for Claudine. She breakfasted with him, read him the morni
ng paper, and talked to him about previous experiences that he might remember. Every day, more than once, she would say encouragingly to him, “Your recovery is like so many other challenges we have had to face—as long as we are together, my love, that is all that counts.”
In the afternoons they would take a walk in one of the city’s verdant parks, which often included stopping at one of the many restaurants Jacques had frequented in the past. The maître d’ always seemed to recognize him and engage him in friendly small talk. Claudine would carefully watch for any signs of recognition in Jacques’s eyes or facial expressions.
Jacques was beginning to talk. At first his comments were limited to what he remembered about his life in Spain and his work on the fishing boat, frequently retelling Claudine many of the same stories. Then one day as they passed by a large pond that was filled by water gushing from a cliff high above it, he asked her if she had ever dived off high rocks into water. Instantly, Claudine knew Jacques had made a connection with their past.
Later that night, having closed the door to the hospital room and propped a chair up against the doorknob, she slowly took off her clothes, watching Jacques watch her. As she climbed into his bed, she felt his arms reach out to embrace her. They were communicating again, at last, as husband and wife.
For the next few days, watching the growing frequency of his lucidity excited the doctors, the nurses, and the staff.
One afternoon they were walking in the Bois when he said, “Isn’t that the Pavilion d’Armenonville? Didn’t I hear that Queenie and George sold their gelato shop in Nice and bought this place? Why don’t we go in and see if they are there? Maybe we can say hello.”
Claudine was encouraged. Jacques had remembered their old friends. “That’s a wonderful idea!” she said.
Entering the restaurant, Jacques walked up to the maître d’ and said, “Good afternoon, George! How is Queenie? It’s been a long time since I last saw you. Weren’t we all in Nice?”
Fascinated, Claudine said to herself, Why don’t I relax and see how far this goes before his mind shuts down?
Excited about seeing their old friends, George called Queenie in from the kitchen. Unaware of Jacques’s situation, George insisted that they all sit at his private table, order a good bottle of wine, and have a late lunch. When the waiter suggested a Pouilly-Fuissé, Jacques said, “No thank you, I would prefer the Bordeaux; it goes best with the steak tartare I’m planning to order.”
Fascinated by what she was seeing, Claudine watched as Jacques handed the waiter the menu before turning to resume his conversation with Queenie. Almost immediately, she could see the change in Jacques’s eyes; one minute it appeared as if he were collecting his thoughts, and the next minute his mind went blank.
Noticing the shift, George and Queenie immediately looked to Claudine for an explanation.
During the course of the next week, Jacques continued to experience intermittent flashes of memory. Claudine, after reporting these events to Jacques’s doctors, was assured his behavior was normal. The doctors advised her, “Mrs. Roth, when he tries too hard, he may be overloading his circuits, causing everything to go blank. We think this is a good thing. The more he remembers, the stronger his nerves will become. Now that we have removed the physical pressure, we think the increased activity is helping to stimulate and restore his memory.
“The time for you to take him home is rapidly approaching. We think if you can keep him in a tranquil environment and expose him to as many things he will recognize as possible, his recovery could proceed more rapidly. The positive stimulus of recognizing something or someone will exercise his brain and benefit him immensely.”
Chapter 41
NATALIE THE BRAIN
Sir David Marcus’s flight into Heathrow from the United States landed long behind schedule. Despite the lateness of the hour and his fatigue, the first call he placed was to the backstage area of the St. James Theatre. He was hoping to catch Natalie before she left. He couldn’t wait to share the results of the Sentinels’ meeting with her.
“Wait a minute,” said the stagehand who answered the phone. “I think she’s just leaving, but maybe I can catch her.”
Entering Claridge’s, all David could see of Natalie through the crowd was her New York Yankees baseball cap. I don’t know what pleases me more: the sight of her sitting over there at our regular table or knowing how excited she seemed about accepting my last-minute invitation.
It was all he could do to keep from wrapping his arms around her and kissing her as soon as he got to the table. Instead, he sedately put a hand on each of her shoulders, bent over, and gave her a long, gentle kiss on her right cheek. “I’m so excited to see you, Natalie. I have so many things I want to share with you!”
“Then why don’t you sit down and buy a girl a drink?”
He watched as she reached down and pulled out a copy of the evening newspaper from her purse. “Listen to what the London Times has to say about you and Prince Habib.”
OIL INDUSTRY TO DIVERSIFY
Geneva, Switzerland
In a press conference held today at the Hotel Beau Rivage, Prince Habib of the House of Saud announced that with the assistance of his personal oil consultant, Sir David Marcus, he has completed the arrangements for the development of a new oil field which is expected, upon completion, to produce approximately one million barrels per day, or about 20 percent of the world’s oil production.
According to the prince, the plans call for the development of several of the high-quality, shallow oil reserves that are known to exist in previously untapped areas in the oil-rich countries bordering the Persian Gulf. The project calls for the construction of state-of-the-art refining facilities and the installation of the pipelines and port facilities required to transport the finished product to markets in Europe and the United States.
When asked to identify the operating oil company, the prince stated, “The concessionaire will be determined by a competitive bidding process which will include both major and independent oil companies. Arrangements are being made to fund the estimated billion-dollar cost from private sources of independent capital.”
When reached for comment, Jack Hardy, president of Titus Oil, responded, “Developing a million barrels of daily capacity is one thing; developing the other fourteen million barrels of additional oil required to supply the world’s growing demand is quite another issue.”
“Well, hot shot, how does it feel to be identified as an acknowledged opponent of the Oil Club? Congratulations, my friend! It sounds as if you are becoming recognized as a real troublemaker!”
“Thanks, I think!” said David. “I must admit that in this situation, we are talking about a far more complicated transaction than anything I have ever attempted before. This is the first time I’ve been involved in a multiple-party transaction, scattered all over the globe, that involves so much money. I can’t even imagine what the consequences might be if anything goes wrong.”
Reaching forward and placing her hand over his, she said, “David, I have learned from my experiences in organizing a new play that when you look at all the separate elements at the same time, it’s very easy to fall into the trap of worrying about everything bad that can happen. It’s a lot easier if you concentrate on one element at a time. When you solve it, you move on to the next element, and before long, you realize you are able to see light at the end of the tunnel.”
“What happens when you include up to as many as five independent oil companies in developing a new oil lease, versus working with just one?” David asked. “Haven’t we just raised the risk by a factor of five?”
“Well, that’s one way to look at the problem,” said Natalie, “but I think you might consider a different approach. I’ve just finished reading a book where the author talks about evaluating risk in the context of economic diversification. He describes what you should do to analyze the risk of being linearly dependent on only one alternative. He then suggests that you compare that situatio
n with being exposed to a small, diversified, and more manageable set of linked operators. He concluded that it’s important to compare the two situations before determining which represents the greater risk.
“I was particularly impressed with his conclusion: he suggested that before reaching a final solution, you try to determine how difficult it would be to replace a major failed link in the chain or one of the smaller ones. He also suggested considering whether the performing parties have the capacity to replace the failed party.”
David was surprised by Natalie’s grasp of the issues at hand and her ability to apply what she was reading. Could she be an asset to the Sentinels in general—and himself in particular?
“I’m impressed!” said David. “It’s been a long time since I’ve heard anyone reply in such an intelligent way.”
“There you go again. Don’t you think it’s possible for me to use the same aptitude I rely on to memorize the script, music, and choreography of a new play to learn about business and the oil industry? Don’t forget, your old friend still wants to be appreciated for her wit and intelligence as much as for her beauty and talent!”
Without realizing it, David and Natalie had become good friends, and they now relied on each other for companionship and support. David would relate the news to Natalie and she would comment.
Occasionally she would ask when he was going to have a free night or Sunday afternoon. “We’ve been introducing some new twists into our play, and I’m anxious to have the benefit of your input,” she would say.
Sometimes they would meet on Tuesdays for a long lunch, and if he was in town, they never missed a late Thursday-night dinner. This particular Thursday night, they were sitting at the far end of the bar in Shanty Malone’s, an old Irish pub, enjoying their second cognac, when David started talking about the changes in the play, which he’d made time to see the previous week. “Natalie, I was naturally more focused on your performance than the rest of the play. I made a few notes. If you’re interested, I would enjoy discussing them with you.”
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