Crude Deception

by Gordon Zuckerman

  Regular patrons of Shanty Malone’s, who by now were used to the duke and the famous actress frequenting the bar, watched discreetly from their tables as David shared his observations with Natalie. She listened intently to his words, frequently smiling and nodding.

  After David had finished sharing his notes and had ordered their third cognac, he brought up a sensitive subject he had been waiting all evening to discuss.

  “Natalie, I’ve been given the assignment of calling on the leading bankers and investment houses here in the British Isles and the Commonwealth countries of Canada, Australia, and New Zealand to raise money for the new oil development bonds. To do things properly, I need to personally meet with each prospect. For something as new and different as this is, it’s important that someone with my background and experience identify and discuss other problems and issues they may be trying to solve. The Sentinels and I have all concluded the key to raising so much money from such a varied group of investment managers will depend upon their perception that their help is needed to solve both their problems as well as ours.

  “In all my years of financial engineering, I’ve never been faced with problems of this complexity. Not only will a trip of this kind require several weeks and traveling halfway around the world, but the research and preparation will require as much time as the trip itself. Under normal circumstances, it’s exactly the kind of thing I would look forward to doing.”

  “Would enjoy?” said Natalie. “What’s holding you back?”

  “For the first time in my life, I’m not looking forward to making the trip alone. It’s not just the idea of not seeing you, and it’s not the idea of having to do all the research myself. I’ve thought a lot about it, and my real problem is not being able to discuss my work with you. Life just seems so much more complete when I can share it with you.”

  “Well, have you ever considered inviting your Thursday night dinner companion to join you?”

  “What are you suggesting?”

  “What I am suggesting, David, is that you take me along as your research assistant. Surely, by now, I have convinced you that there are a multitude of subjects that I can help you brush up on in preparation for your meetings. Even you mentioned how impressed you have been with my work and my questions.”

  “Natalie, I’m talking about leaving within the next two weeks and being gone for more than a month. What about your theater contract? I know it doesn’t expire in time for you to accompany me.”

  “Don’t worry about my contract, David. I’m sure with two weeks’ notice the producers will be happy to let me go. Now that the success of the show has been established, just think about all the money they will be saving if they can replace me with a younger, less expensive actress. As a matter of fact, there’s an excellent understudy who has been patiently waiting in the wings. She has tons of talent. All she needs is an opportunity.”

  “Are you sure this is something you want to do?” asked David.

  “My offer stands, providing it’s on a strictly professional basis. I don’t want to risk our friendship by trying to turn it into a romance. If you would like me to come along with that understanding, I’ll talk to the producer tomorrow. My bags will be packed and I can be ready to go in two weeks.”

  The smile written that spread across David’s face testified that his secret wish has just been granted. “Strictly professional?” he asked.

  “Strictly professional, that’s the deal.”

  Chapter 42

  CHAIRMAN WANG

  For security purposes, Cecelia’s meeting with Chairman C.K. Wang of the Chinese National Bank was to be held in Taipei. Accompanied by Ted Lee and her father, Cecelia could feel the tension the minute she entered the great hall where the meeting was scheduled to take place. The chairman and several of his advisors were waiting. You’d better brace yourself, she thought. This is not going to be as relaxed and personal as was your previous meeting.

  For the first thirty minutes, Cecelia was kept busy answering Chairman Wang’s questions about the different parties who would be involved in the Sentinels’ prototype and why they had agreed so quickly to participate in such a complicated and novel concept.

  After carefully listening to Cecelia’s answers, the chairman said, “Someday, China will become one of the world’s biggest consumers of oil. It’s important that we learn to think of China as a sleeping dragon. As our country learns to utilize its vast and inexpensive pool of rural labor, it will become a major global manufacturer-supplier. People will move from the country into the cities. Our cities will grow, and more industrial plants will appear. Mark my words, the availability of a reliable supply of affordable oil will become one of China’s most important concerns.”

  As Chairman Wang continued to speak, Cecelia was impressed by his curious mind, his ability to absorb information, and his willingness to ask questions. She had been concentrating on his remarks when he suddenly said, “Well, Miss Chang, I understand you have brought us an interesting proposal. Would you be so kind as to tell us about it?”

  “Mr. Chairman, much of what I have to say involves technical financing issues, all of which are contained in the synopsis that I have prepared. We believe this new form of interest-bearing bond, supported by proven oil production and the full faith and credit of the United States government, contains most of the important suggestions made by the people I visited on my last trip. I believe investment in these bonds will provide the investor with the ability to transfer its wealth offshore, earn an attractive rate of interest, and continue to service its loyal customers.” She went on to explain the mechanics of the transaction.

  Ted was watching Chairman Wang’s face as Cecelia described her proposal. He showed little if any emotion as he concentrated on her words.

  Cecelia had expected to be questioned by the chairman when she finished her presentation. When he made no effort, she became confused by his silence. Unsure of how to react, she stood quietly, her head slightly bent, focusing her gaze on a small spot on the Oriental rug she had first noticed when she entered the room.

  Finally, after what seemed like an interminable length of time, the chairman looked at his advisors and then turned his gaze toward her. “As you may know, Miss Chang, the families we represent have already placed much of their gold bullion on deposit in banks safely beyond the threat of Mao Tse-tung and his forces. I have been informed that you are about to receive their authorization to convert one billion dollars into your interest-bearing bonds. In addition, the Nationalist government would like to commit one-half billion dollars of its reserves that are safely deposited in Hong Kong and Taipei.

  “Unfortunately, a great deal of our wealth remains in the vaults of our bank in Nanking. Under normal circumstances, I would commit another half billion dollars of our nation’s capital toward the purchase of your bonds. For some time, the Generalissimo has been developing a highly secret plan for the removal of the national treasury. Since we need time to complete the transfer of those funds, it would be helpful if you could grant us an option to purchase the additional half billion dollars of your bonds, subject only to its delivery in Hong Kong.”

  Cecelia couldn’t resist the urge to glance down at her notes. She had written the Asian quota: one and a half to two billion dollars.

  “Chairman Wang,” Ted said, “we understand and appreciate your concern, but under the terms of our agreement, there is no way we can provide you or anyone else with an enforceable commitment until the corresponding amount of funds has been placed on deposit and we are in possession of letters of credit in corresponding amounts.”

  Noticing the chairman’s look of alarm, Ted continued. “Mr. Chairman, it may be possible for the Bank of Hong Kong and two of its American correspondent banks to commit their own reserves toward the purchase of the last half billion. Should that become an option, the bonds would remain the property of our banks until you exercise your option. If that is agreeable, Miss Chang and I need to make a few confirmation pho
ne calls.”

  “Mr. Ferrari, Miss Chang is calling from Taiwan,” said Pete Ferrari’s secretary. “She says there is some urgency to her call.”

  “Good morning, Cecelia!” said Pete when he picked up the phone. “What’s happening?”

  He listened intently as she spoke. Finally, he said, “Half a billion is a lot of money. We need to discuss it with Morgan, who, by the way, is livid over the attitude of the money-center banks. Under pressure from their Oil Club clients, they are limiting their investment to less than two billion dollars, or less than twenty-five percent of what they might normally commit.

  “Morgan is concerned the increased shortfall could prove catastrophic. I’ve never seen him so mad or so determined to complete anything. He said something like, ‘What’s the banking industry thinking about? Have they all lost their minds—letting Big Oil push them around? Do they really believe they can survive on Big Oil’s patronage alone? What about all the other industries they serve? When they wake up, it’ll be too late!’

  “But you know how Morgan is,” Pete continued. “He can be very persuasive. Subsequent to that discussion, he called me to talk about our anticipating some sort of contingency plan that could require our added support. In any event, we have agreed in principle to providing up to a half a billion dollars of our own support. You understand that this kind of commitment requires our banks to invest their own funds, right? While we are comfortable with the investment, we were hoping that those funds would represent the last dollars to be committed, not the first dollars.”

  “I’m not sure how things in China are going to resolve themselves,” said Cecelia, “but whatever the outcome, this gesture will go a long way toward creating goodwill from a country that is really struggling.”

  “Cecelia, give me a few minutes to explain the situation to Morgan. I’m sure he will agree that it warrants our support. But, under the circumstances, I need to obtain his approval before authorizing you to proceed.”

  Morgan picked up the call to his private line on the second ring.

  “Two billion dollars from the Chinese?” he said. “What an incredible demonstration of support. When I think of all the things Cecelia has been able to accomplish, I guess I shouldn’t be surprised.”

  “Morgan, there is a problem with the last half billion,” said Pete.

  When Ferrari finished explaining, Morgan said, “Under the circumstances, I don’t see how we can say no. Why don’t you inform Cecelia that we would be pleased to grant the chairman his option? At the same time, I would remind her that should the Chinese succeed in producing the last half billion dollars, they would free up our capital to cover any other last-minute contingency.”

  “By the way,” said Pete, “I should explain that there are some other extenuating circumstances that make this decision a little less difficult to make. This might be a good time for me to pass along Mike’s most recent progress report. He seems obsessed with the possibility that his inability to produce more than two billion dollars could destroy the Sentinels’ plan. While intellectually he understands it wasn’t his fault, he is taking the reduced raise very personally. So he shifted direction and started calling on community banks.”

  “Glad to hear that!” said Morgan, laughing. “I’m the one who pushed him in that direction.”

  “He’s working his heart out,” said Pete. “Every day he’s in a different city calling on as many as three banks per day. He is learning that community banks are not only anxious to create relationships with American West, Stone City, the Bank of Hong Kong, and Dean Securities but also have surprising amounts of surplus deposits that need to be invested in secure, higher-yielding bonds. The commitments are small, but they’re adding up. Believe me, he’s leaving no stone unturned—no pun intended.”

  Chapter 43

  A SEA OF CAMPFIRES

  Mike Stone was finding that the presidents of the regional banks across the United States were as eager to meet with him as he was to meet them. During the Second World War, their banks had become ever-increasing depositories for the savings of hardworking people, local manufacturers, and retail service companies. Despite the rapid growth of their deposit base, federal bank lending regulations prohibited the community banks from making some of the larger loans to their commercial customers.

  One by one, Mike met the proud owners of these community banks. It didn’t take long before he began to realize how myopic the New York banker’s view of the United States had become. These bank presidents didn’t sit behind some grand mahogany desk on the thirty-fifth floor of a skyscraper. They sat in a more modest office on the first floor, immediately accessible to the public and the loan officers, who needed them to provide quick answers.

  These regional bankers were leaders in their communities, members of the Rotary Club, supporters of the local chamber of commerce, contributors to area art museums, and donors to worthy charities. If there was a college located in their town, they often served on the board of trustees, helped the colleges with fund-raising, and offered summer jobs to some of the more qualified students.

  The bank presidents and their senior officers were always prepared to ask questions in response to the memo Mike sent in advance of their meeting. Mike couldn’t help but think, These decision-makers believe in character lending, and I’ll bet they think their word and their handshake are better than any contract.

  Mike had never seen anything like it. It was not uncommon for the bank president to call in his key vice presidents and, while Mike was sitting there, ask them to start adding up the bank’s surplus cash reserves. He was amazed by the magnitude of the liquidity controlled by these banks, as well as their ability to make decisions. They gave him straight answers and their tentative commitment before he left each meeting.

  Some of these bank presidents even suggested which banker he should visit next, and before he left their bank, they were already busy calling to arrange introductions and the scheduling of his next appointment.

  Returning to his hotel room each evening, no matter the level of his fatigue, Mike would make detailed notes of everything that had happened that day. When he took time to review his notes, he was impressed by how different the community banking system was from the big city money-center banking system he had been raised in. As he traveled, he would often think, Someday, the polarization that separates the two different banking networks will have to collapse. When executive management learns how desirable it will be to match the loan demand of one system with the deposits of the other, my notes could serve as the database for forming a national network of banks.

  Every two or three days, he would call Morgan and Pete to provide them with a progress report and all the other observations he was making. “Dad, when you look at the world of community banks and all the local enterprises they serve, you get an entirely different perspective. From New York, the economy may appear to comprise a huge bonfire of banks and big companies. But from here, it looks like an endless sea of individual campfires.”

  Chapter 44

  NORTH AFRICAN OIL

  Although Jacques had not recovered sufficiently to accompany Claudine, his mental processes were improving. To help him utilize his mind, she would show him her notes and solicit his advice. She would focus their discussion on whatever he remembered about the person she was visiting and ask him for his help in preparing for the meeting.

  The doctors had instructed her to keep notes on his progress and pay particular attention to his degree of comprehension and the length of his attention span. Watching him struggle wasn’t always easy. Deliberately, she would limit her questions to the easy ones, the ones that in the past would not have been sufficiently complicated. Learning to hide her disappointment, she concentrated on complimenting him on the astuteness of his answers.

  Each day, little by little, he would ask more questions and she would watch as the length of his period of interest improved. Some days his progress was imperceptible, but other days he would surprise her.


  Claudine’s first fund-raising meeting was to take place in the offices of Cecil Arnof, chairman of France’s second-largest bank—and the Roth Bank’s principal French competitor. Entering the chairman’s office, Claudine immediately felt at ease when she saw the smile of the dear friend of both her family and Jacques’s. Cecil had been a guest in both their parents’ homes on many an occasion. Monsieur Arnof and his young protégé, Benjamin Dupree, both greeted her in their warmest and most charming manner.

  “Claudine! What a pleasure it is to see you once again,” said Cecil. “You have no idea how valuable that gold bond program you developed during the war has been for the bank and so many of its customers. What an excellent piece of work!”

  “Why, thank you, Monsieur Arnof!” said Claudine. “It’s wonderful to see you as well.”

  “Pierre tells me you two are considering moving back to Europe and are committed to helping us rebuild our economy,” said Cecil. “What good news! Your understanding of the personalities and the sensitive issues on both sides of the Atlantic could prove very valuable. Like the rest of us, you are going to quickly realize there are more problems to solve than there are people to solve them.”

  “Thank you for your kind remarks,” said Claudine. “Jacques and I deliberately scheduled our first meeting with you. Knowing Ben’s penchant for doing his homework and asking the tough questions, we are hoping that you will be able to assist us in developing a greater appreciation for the key issues we will be asked to respond to on the rest of our tour.”