“David,” she responded at last, “I’m not sure I understand the full implications of what happened last night, and I certainly don’t want to lose you over my concerns about a single event or a possible misunderstanding. On the other hand, before I answer your question, I feel I need to explain to you how I feel.
“In my heart of hearts, I know I love you, I enjoy sharing in your life, and I can’t think there is anything that would please me more than to be part of it. But not if that means that I have to subordinate who I am to please you. If I have to worry every time I get up to sing or enjoy performing with an old friend. Pursuing my personal interests is a lot of what my life is all about. If it is going to result in your getting upset, that is a risk I’m not willing to accept.”
“Natalie, I understand and appreciate everything you have just said. If I were you, I wouldn’t want it any other way. The problem is, I don’t know if I’m capable of changing. All I know is that I love you very much and I’m willing to try, but no guarantees.”
“Living together is a process that takes place one day at a time,” said Natalie. “I don’t know about marriage, but I am willing to try living with you at Berkeley, or any other place of your choosing, as long as we both understand that we’re taking it one day at a time.”
Chapter 52
PATERNAL ADVICE
Claudine and Jacques were on their way to Paris for a meeting with Pierre Roth and Henri Demaureux. The meeting had been scheduled as their last so they could provide Pierre and Henri with an accurate picture of their position.
As much as they needed their fathers’ assistance, the idea of discussing a five-billion shortfall was not a happy thought.
The two experienced bankers were surprised when Claudine and Jacques failed to register excitement as they relayed the news that the Sentinels had been able to raise nine billion dollars.
Pierre was the first to speak. “I don’t understand your reaction. I would have thought you would be elated by what obviously has been one hell of an expression of confidence and support. Have you been so focused on raising the fourteen billion that you’ve overlooked what an incredible accomplishment raising ten billion dollars really represents? You have accomplished much more than anyone ever expected. Had your minimum standard not been arbitrarily set at fourteen billion dollars, everyone involved would have been delighted with what you’ve accomplished.
“Now that we understand the size of the shortfall, it’s time for the rest of us to do what we can to ensure all of your fine work isn’t sacrificed.
“Henri and I have been discussing what we can do to help you,” Pierre continued. “Maybe it’s time to test the long arm of the Oil Club. Unfortunately, four billion represents a bigger shortfall than our two banks and our private clients can handle. We can add an additional half billion dollars and hope we succeed in sending the proper kind of signal of support to all the other people who want to see your plan happen.
“In selling your program, I’m not certain whether you have given yourselves enough credit for the excellent investment opportunity you have created and the endorsement you have received from the world’s investment community. It’s important you realize we aren’t talking about some failed proposal; we’re talking about what happens before the ‘nervous sisters’ have finished studying their hole cards.
“This isn’t the kind of situation where we want to test the strength of our will against the will of the Oil Club. It’s been our experience that when the fog finally lifts and the sun begins to shine, the power of a better idea will trump threats and intimidation. All we have to do is create the proper example and provide the right people with more time to digest what has been happening. Give it some time and you might be surprised by what happens.”
Despite Henri and Pierre’s encouragement, the atmosphere in the Roth plane en route to Geneva was anything but euphoric. Claudine was thinking out loud. “Even if Venezuela does contribute a billion dollars, where in the world are we going to find three billion more at this stage of the game? Surely, by this time, we haven’t overlooked any significant investment source capable of making a material contribution in the remaining time frame. With the meeting scheduled for next Friday in New York, we only have one week left to pull some very big rabbits out of a very small hat.”
Sitting in the back of the plane, Jacques was reviewing the long list of names he had been assembling. “There has to be some source of capital we’ve overlooked,” he said. “This situation is way too tight.”
As the plane taxied toward the terminal, Claudine became suddenly aware of the change in the look on Jacques’s face. “I think I may have come up with an idea that will relieve some of the pressure,” he said. “If you don’t mind, I will leave you in Geneva. I need to catch to first plane to New York. If all goes well, I’ll plan to meet you at the Plaza in New York no later than next Thursday night—the night before our showdown with the Oil Club.”
Chapter 53
SHOWDOWN IN NEW YORK
When he arrived at New York Municipal Airport, Mike placed calls to his office, Cecelia’s office, and the switchboard operator at his old apartment building in the city. Still no messages. While he and Cecelia were checking into the Plaza Hotel, the desk clerk said, “Excuse me, Mr. Stone, we received a message for you this afternoon.”
Mike opened the envelope with excited anticipation. After scanning the note, he handed it to Cecelia.
Dear Mike,
Leaving Caracas, arriving late tonight. See you at breakfast. I bring good news. The Venezuelan government wishes to participate. I will be bringing a certified letter of credit in the amount of one billion dollars.
Juan Pablo Perez
David and Natalie had arrived in New York late the previous evening. They had made a reservation for ten at Le Veau d’Or, a fine French restaurant within easy walking distance of the Plaza Hotel.
Cecelia continued to place calls to San Francisco and Hong Kong. No one had heard anything about her father or Ted Lee. Well aware of Tai-Pan’s penchant for punctuality, she suspected that something might have gone wrong.
Claudine arrived in New York and checked into the Plaza, hoping Jacques would have already arrived. Disappointed to learn that he hadn’t checked in, she asked for messages. There were none. Sad and worried, she went up to their room and began to dress for dinner. She forced herself to think of reasonable excuses. He must have traveled on to some other place and is planning to return to New York. Maybe he’s been delayed; he might be waiting at Le Veau d’Or.
Most of the others were seated at the restaurant when she arrived. Still no Jacques. There were four vacant seats: the one next to Claudine; the two next to Cecelia; and the one at the end of the table, for Señor Perez. The four missing people could only mean bad news. Their realization that they were still three and a half billion dollars short destroyed any effort to make humorous conversation. What had been planned as a joyous affair had turned into a very somber occasion.
The next day at breakfast there were only three vacant seats, and a smiling Juan Pablo Perez was sitting at the end of the table. Everyone in the room could feel his pride as he explained his conversation with the Venezuelan government.
“Juan Pablo,” said Mike, “how did you know it would be safe for you to return to Caracas? What changed? I just assumed you would be public enemy number one down there.”
“Well,” said Juan Pablo, “the whole situation has changed. It appears, as a result of the finalization of the government’s agreement with the oil companies, the balance of power and influence has shifted back to the state. Not only have the companies paid three billion dollars to the Venezuelan government, but new clauses have been inserted into each of the new agreements that control any unusual oil company behavior. There’s a new sheriff in town, to use a phrase I learned at Castle Dome Ranch.”
Beaming, Mike reached over and gave the Venezuelan oil minister an enthusiastic pat on the back.
“The actual conver
sation regarding the one billion contribution was interesting,” said Juan Pablo. “The President told me that, although some might think Venezuela’s participation represents a reciprocal reaction to all the money we helped generate for the oil companies, they know they have a much better reason for investing than simple gratitude. He told me their decision was made on matters of trust, and that they had learned it is no longer a sensible proposition to be linearly dependent on members of the Oil Club. He told me he hopes Venezuela’s participation in the fund will be regarded by the world as an indication of the importance of making the oil industry more diversified and competitive.”
Despite Venezuela’s contribution, the funding gap still remained at three and a half billion dollars. Mike knew they were still in real trouble.
The minute they entered the conference room, the Sentinels could sense the Oil Club executives and their attorneys were somehow aware of their dilemma. They looked ready to attack.
The meeting started promptly at ten o’clock. As previously scheduled, Henry Ainsworth and Roger Malone were present to preside.
A confident Jack Hardy and three other oil company chief executive officers, along with their chief legal counsels, sat along the far side of the wide conference table.
The three chairs reserved for Jacques, Ted Lee, and Tai-Pan were conspicuously empty.
Secretary Ainsworth opened the meeting. “I think we need to establish some ground rules before we start. It is my understanding that the terms of the recently passed bill require proof, satisfactory to the chairman of the Federal Reserve, seated to my left, and myself, that sufficient letters of credit have been issued for a minimum of fifteen billion dollars. It is also my understanding that the terms of the bill include, among other things, clauses that stipulate that the proceeds from the development fund are to be made available to all qualified Big Oil and independent oil company applicants.
“Anyone wishing to make an offer has until today, five o’clock p.m., Eastern Standard Time, December seventh, 1946, to submit any offer they wish to make. If there aren’t any questions, Mr. Stone, I suggest that you proceed. Do you have a bid that you wish to enter at this time?”
Standing up and pausing for what seemed an inordinate length of time, Morgan Stone replied, “No, sir, we do not wish to enter a bid at this time.”
Rising as though he had been shot out of his chair, the lead counsel for the major oil companies announced in his customarily arrogant style, “Mr. Secretary, since there are no competing bids, we respectfully request that bidding be closed.”
Responding in his typically calm and respectful manner, Morgan said, “Mr. Secretary, I’d like to remind counsel that according to the rules just accepted by all parties, we have until five o’clock to complete our submissions.”
Standing once again, the lead counsel said, “We have it on good authority that Mr. Stone is not authorized to bid more than ten and a half billion dollars. At this late stage, a four-billion-dollar shortfall suggests that our esteemed friends are wasting our time. That being the case, we see no reason why this process should be delayed. Why don’t we call it a day and all go home?”
“Mr. Stone, is your current authorization limited to nine billion dollars—or ten billion if you include the one-billion prototype fund?” Secretary Ainsworth asked.
“No, sir, that is not quite accurate; we have recently received two additional offers in the amount of a half billion dollars from the Roth Bank in Paris and the Demaureux Bank of Geneva and one billion dollars from the Venezuelan government. In aggregate, they raise my current authorization to eleven and a half billion dollars.”
The lead counsel rose once again. “We have it on reliable authority that the major money-center banks’ contribution was limited to two billion dollars. Examining the exhibit Mr. Stone has been kind enough to provide us, we find he has listed the total contribution of the U.S. banks as three billion dollars. That represents a one-billion-dollar discrepancy. Aren’t we entitled to some explanation?”
Turning toward his son, Morgan said, “Mike, would you mind enlightening these gentlemen?”
Rising out of his chair, Mike said, “You are quite correct in your assumption. Originally, the national banks were willing to commit only two billion dollars and that amount is reflected by the line item ‘Master Bank Agreement.’ Since then, however, regional and local community banks have committed another billion dollars.”
“Pardon me, Mr. Stone, but you have us confused,” said the lead counsel. “How were you able to convince the smaller banks to participate?”
“Oh, we didn’t. You did.”
“We did? What the hell are you talking about?”
“It has to do with your presumptive use of power. Knowing that the day is coming when they would have to increase their dependency on the big money-center banks, the owner-managers of these local banks have been closely following the Oil Club’s exercising of its influence. When they completed their economic analysis of the bond offering, community banks made inquiries regarding their possible participation. These requests were met with determined denial.
“Do you really believe, when left alone, that these independent banks would choose to be dependent on the same money-center banks that allow them to be controlled by a consortium of large oil companies? From that point on, raising the extra money only required good old-fashioned elbow grease.”
Shifting his stance so he could look directly at Jack Hardy, Mike continued. “You might be interested to know that once the word got out that my colleagues and I were enjoying some success, your money-center banking pals began inquiring if there was any room for them to reconsider their position.
“Since I had no way to determine what was what, I simply told them we had an unresolved position of half a billion dollars in an option agreement with the Chinese government and that we would entertain the idea of accepting backup offers as long as they were unconditional and secured by enforceable letters of credit. Once we received the half billion dollars of commitments, we would cease to accept additional offers.”
“Wait a minute, are you telling us that you deliberately misled our major money-center banks by telling them you were only half a billion short, when in reality, you knew, at that time, that you were more than four billion dollars short? Haven’t you just admitted you have engaged in a material breach of ethics? Are we expected to agree, in light of your behavior, that you haven’t violated the ethical standards of the U.S. Treasury and the Federal Reserve?”
Roger Malone intervened. “Learned counsel raises a good point, Mike. I think we are entitled to an explanation.”
“Mr. Chairman, what I told the major bank representative was and is, to this day, entirely true. There were two questions I wasn’t asked. The first was whether or not the Chinese failure to fund the last half billion dollars of their commitment would have changed the outcome. Whatever conclusion they reached resulted from their perception of the significance of my answer. It is a matter of record that American West and Stone City Bank had issued a callable backup letter of credit that we can exercise in the event that the Chinese fail to exercise their option.”
Turning toward his trusted friend, Roger said, “Morgan, is what Mike has just said true?”
“Not only is it true, I have brought with me the original letter of credit.”
Pausing to extract a document from his briefcase, Mike handed the document to the chairman.
“Mike, what about their claim that you deliberately misled them about the money you had raised? Would you be kind enough to elaborate?”
“Yes, sir. That’s the other question I wasn’t asked. No one at any time asked me to state the magnitude of our enforceable commitments. Frankly, I was surprised. I just assumed they were obtaining their information from some other source. But I will tell you, had they asked, I would have refused to answer.”
Turning toward the Oil Club’s side of the table, Ainsworth asked, “Do any of you have any evidence to refute what
Mike Stone has just said?”
Pausing to provide ample time for response, the secretary then said, “Let the record show that in the opinion of the Secretary of the Treasury and the Chairman of the Federal Reserve, we have found no discernible reason to believe that Mr. Stone has acted in any manner that violates the law or any covenant of professional ethics.”
Chapter 54
THE LATECOMERS
Jacques was sitting in Morgan’s office when Morgan, Mike, and Claudine entered, on break from the meeting. “Where the hell have you been?” asked Claudine. “Why weren’t you in that conference room taking your beating along with the rest of us?”
Reaching into his briefcase, Jacques extracted a letter of credit drawn on the Stone City Bank in the amount of one billion dollars. He passed it to Claudine, who carefully studied it before passing it to the others.
“Jacques, is this the result of the idea you were talking about in Geneva? Perhaps you wouldn’t mind explaining to us where you happened to find a billion dollars?”
Morgan stepped in. “Claudine, maybe I should explain. The idea was Jacques’s. He correctly assumed our old friend Erhart Schmidt and his co-investors would jump at the opportunity to convert part or all of their two-billion-dollar gold bearer bonds into interest-bearing energy bonds.
“The problem he faced was that of determining whether the Fed would agree to the exchange. Resolving the financial issues was not the problem. Determining what legal authority was required to execute the agreement was much more difficult. Finally, we concluded there was no precedent that set this authority. Obtaining Presidential approval was our only remaining option.
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