Crude Deception

by Gordon Zuckerman

  “Interestingly enough, securing the President’s cooperation was the easiest part of the process. It seems he was more than willing to assist Cecelia and her colleagues in completing her mission, provided we maintain some semblance of control over the Germans by limiting the exchange to half of their gold bearer bonds, or one billion dollars.

  “Once we were able to arm Jacques with the necessary authority, there wasn’t much time remaining for him to travel to South Africa, obtain Schmidt and his other investors’ consent, and return in time for this meeting.”

  “Wait a minute, Morgan,” said Claudine. “You knew about this and didn’t inform the rest of us?”

  “Until we knew that he would make it back in time, Jacques, Roger, and I all agreed it was best for us to remain silent. In fact, his plane didn’t land until eleven o’clock this morning. I had a team waiting for him, and apparently they have been busy completing the documentation required to produce that letter of credit.”

  Mike, who had been patiently listening to the conversation, finally said, “I don’t know why we’re getting so excited! With Jacques’s contribution, our total commitment’s only total thirteen billion dollars—we’re still two billion short!”

  At four o’clock, the meeting was reconvened. With Jacques seated at his designated place at the table, only two chairs remained unoccupied.

  The Treasury Secretary noted his presence. “Good afternoon, Mr. Roth. Glad you were able to join us. Do you bring any new information?”

  “Yes, sir,” said Jacques. “I would like to add another billion dollars to the pot. Here is a letter of credit; I think you will find everything in order.”

  “Wait a minute,” learned counsel said. “Do you expect us to believe you can come breezing in here and calmly introduce another billion-dollar letter of credit? How can we be convinced this isn’t some sort of internal Stone City Bank trick that can be unraveled once the deal has been closed?”

  The brazen nature of the lawyer’s charge not only surprised Morgan and his friends but also embarrassed the Oil Club members sitting at the table.

  Attempting to mediate, Malone asked, “Do I interpret your comment to mean you would like to review the underlying documentation before we accept this offer?”

  A prepared Jacques laid out each of the supporting documents required to trace the note conversion, the Treasury Department agreement, and Stone City Bank’s step-by-step documentation, executed contracts, and notary public stamps and signatures.

  As they waited for the lawyers to complete their examination, Morgan Stone’s executive assistant entered the room. “Excuse me, Mr. Stone, but Mr. Chang and a Mr. Lee are in the lobby asking to see you.”

  Before anyone else could react, Cecelia pushed back her chair and disappeared through the door. A few minutes later she returned.

  “Gentlemen, I would like to introduce my father, Ivan Chang, the honorable Tai-Pan of the House of Chang. Accompanying him is Mr. Ted Lee, president of the Bank of Hong Kong. They have something to say that I think you will find of interest.”

  “Mr. Secretary,” Tai-Pan began, “please forgive our disheveled appearance. We have traveled a long way, and we didn’t have time to change. I have in my possession a one-half-billion-dollar letter of credit drawn on the Bank of Hong Kong. Mr. Lee, president of the bank, has accompanied me in the event that any of you have questions regarding the authenticity of this document.”

  The time required for learned counsel and the rest of the attorneys to examine Ted Lee’s documents gave Cecelia an opportunity to consult with her father in hushed tones. “Father, you and Ted nearly scared us to death. Mike and I read an article in the San Francisco Chronicle about a military-escorted gold train that had been organized to transport people and their possessions from Nanking to Shanghai. Then, a few days later, another article described a flotilla of a thousand junks that unexpectedly sailed into the Shanghai harbor. That’s when I developed the suspicion that you two might have taken your ‘special’ junk and sailed for Shanghai to help rescue the Nationalist Chinese gold bullion.”

  “Cecelia, my dear daughter,” Tai-Pan replied, “we were nowhere near Shanghai. When it appeared that the Communists might move on Nanking, we had to move quickly. It’s true; a thousand junks sailed to Shanghai. The trains arrived, with their heavy crates. Once they were placed in the junks, the diversionary plan was in place. The Communist navy must have opened the crates on the first forty junks before they convinced themselves that the crates contained rocks, not gold. By that time, the Nationalist gold was already being transported from Nanking to Hong Kong and Taipei.”

  “If the crates were just full of rocks, how were you able to smuggle all that gold out of China?” asked Cecelia.

  “Immediately following Chairman Wang’s decision to invest in your bonds, we were approached by Chiang’s personal pilot, George Liao. He suggested that we consider moving the gold by air. He convinced us there were still thousands of old DC-3s left over from the war that were still floating around China. People in the United States are not generally aware of the massive airlift that was organized to supply American, British, Indian, and Chinese troops, intent upon preserving Burma’s back door into India. Tens of thousands of DC-3s were organized to fly what was called ‘the Hump.’ It’s a little known fact that more planes were lost in the Burma operation than were lost in the entire European campaign.

  “Well,” continued Tai-Pan, “Liao, working under a shroud of secrecy, managed to organize ninety-seven of these old DC-3s still in private charter service to move the gold. Have you ever calculated how much one billion dollars of gold weighs? At thirty-two dollars per ounce, one ton of gold is equivalent to thirty-two thousand ounces, or one million dollars. That means a half billion dollars of gold weighs 488 tons. A DC-3 was designed to carry approximately five tons of payload. Ninety-seven planes, making one trip, were required to carry the half billion dollars of gold from Nanking to either Hong Kong or Taipei.

  “To minimize their risk, each plane departed Nanking at random times. The flights were equally divided between Hong Kong and Taipei. The first plane to land in Hong Kong was Chiang’s personal DC-3, flown by Liao. We watched as he made his final approach and our trucks went out to meet him. You should have seen the look on his face when he climbed down from that plane. You talk about pride; he knew his plan had helped to preserve the future of their country.

  “As soon as the gold was safely deposited in the Bank of Hong Kong vaults, Ted and I were on our way to New York with letters of credit in hand. Our biggest concern was whether we would get here in time.”

  This time it was Jack Hardy who was on his feet. “Mr. Chairman, Mr. Secretary, it’s four thirty and all of the seats have been filled. By the official count, Mr. Stone’s group is still two billion dollars short of meeting its minimum stipulation. Unless there are any more offers, I respectfully request you rule that the stipulations of the bill have not been satisfied.”

  Chapter 55

  NOT SO FAST, MR. HARDY

  Rising out of his chair to directly face Jack Hardy, Roger Malone said, “In my capacity as chairman of the Federal Reserve, I have been asked to submit two additional bids. The first offer, in the amount of half a billion dollars, comes from the sovereign government of Indonesia.”

  Interrupting the chairman before he could finish, the lead counsel for the oil companies asked, “Where is a pissant of a country like Indonesia going to find that kind of money? Before inspecting the documentation, I think we are owed an explanation.”

  Up to this point Cecelia had been sitting quietly, absorbing the progress of the meeting. She wasn’t certain whether the arrogant attitude of counsel or his derogatory reference to Indonesia upset her more.

  Everybody in the room was startled when this petite, seemingly quiet scholar burst out of her chair. “Now, Mr. Know-It-All attorney, have you ever considered there might be a few things in the world you don’t understand? For example, how would you react if you
learned that the Dutch and British oil companies operating in Indonesia have authorized the Fed to submit an offer in the amount of half a billion dollars on behalf of the world’s newest populace government? This ‘pissant’ country to which you refer is about to became the world’s newest hundred-and-fifty-million-person democracy, where the Oil Club’s historical oil interests will no longer have the protection of a foreign colonial government!”

  Hardy could no longer restrain himself. “Wait a minute, why would sister companies help fund a program they are committed to defeating?”

  Smiling, Cecelia responded, “The Dutch loans represent their effort to build and preserve a more constructive working relationship in the event that new oil development concessions are put up for competitive bidding.”

  “I still don’t get it,” Hardy said. “Since the Dutch have stationed more than a hundred thousand troops in Indonesia, why would the oil companies and the colonial government agree to such a proposal when they could simply take over the country and have it all?”

  “Because the President of the United States has said they can’t,” exclaimed Cecelia.

  As everyone sat in their seats, stunned, Secretary Ainsworth said, “Well, if we have resolved that issue, maybe it’s best we permit Chairman Malone to submit his second offer.”

  Reaching for a file that had been lying prominently on the conference table, the chairman continued. “Member banks of this country’s Federal Reserve system have authorized me to submit an additional bid of one billion dollars, which when added to all the other offers raises the total commitment to fourteen and a half billion dollars. Mr. Hardy, if you would be so kind as to have learned counsel inspect these documents, I believe he will opine they are all in order.”

  “What member banks?” demanded Hardy. “Where does it say you are authorized to make an offer on behalf of your member banks? What about the terms of our master agreement? I protest! They were deceived! Who informed them, despite all we have heard, that the Sentinels were way short of achieving the stipulated minimum?”

  “Mr. Hardy, I’ve been waiting for a long time to answer your questions,” Malone said as he rose to his feet. “I did. When Mike Stone correctly decided to limit his remarks regarding the opportunity for banks to increase their bids, the chairmen of certain money-center banks began to call me and the regional Fed governors. Complaining about the restrictive nature of your master agreement they had been encouraged to execute, they were inquiring as to whether they had any alternative means by which to make complementary offers.

  “We explained we didn’t know of any reason they couldn’t submit their offers through their supervising regulatory agency. Once we gave them a more complete progress report, the banks seemed less concerned about the Sentinels completing their task and more concerned about their fellow money-center banks’ desire to independently buy up the unsubscribed shares for their own investors. They were more afraid of being left on the proverbial dock than incurring your wrath. Contingent upon our agreeing to not disclose their identity, their offers began to flow in. By the time we finished receiving their orders, they totaled another one billion dollars.”

  Hardy was livid. “How can you do this? It violates our master agreement! Under what authority can you represent your member banks?”

  “Mr. Chairman, if I may be allowed to respond?” said Mike.

  Malone nodded.

  “Mr. Hardy,” Mike began, “if memory serves, it wasn’t very long ago that many of us met in the executive conference room of Stone City Bank. At that meeting, you and your colleagues tried to impose your tactics of intimidation on the ABA. I watched while my father attempted to counter your threats and intimidation with factual information. This time I would like the privilege of responding.

  “Do you really believe that those of us who are relied on by so many people to exercise good judgment were going to be stampeded into a decision? Do you believe a world threatened by the proposed concentration of ninety percent of its oil production in the hands of seven companies could be manipulated by slick legal tactics and financial intimidation?

  “You keep bringing up this master agreement, but rather than rely on its enforceability, I would suggest you start worrying about defending yourself against restraint of trade, complicit violations of laws involved in your employment of Samson, investigation for further existence of fraudulent pricing and transportation practices, and dozens more crimes you have most likely committed. You are all going to be very busy defending yourselves.

  “In case you still don’t get it,” Mike continued, “let me further explain. There are those of us who look forward to the day when large concentrations of wealth and influence are no longer allowed to pursue agendas of self-interest at the expense of the public interest. It’s not the companies themselves we object to. I’m certain they are composed of many fine men and women. It’s your leadership that is in question. When you and your fellow managers deliberately attempt to subvert prudent limits required to preserve and enhance your companies’ capacity to best serve the public, you step over the line.

  “You and other management leaders like you should be regarded as arrogant dinosaurs. Your presence tarnishes all of the other fine companies who, every day, responsibly strive to better fulfill the public’s needs. Mr. Hardy, you are an embarrassment to our system of democratic free enterprise!”

  Wanting to prevent any further altercation, Secretary Ainsworth interrupted. “It’s now 4:45 p.m. Since we have already agreed to the five o’clock adjournment of this meeting, and according to my calculations, you are still one-half billion dollars short, I would like ask if there are any more bids.”

  “Point of clarity?” Morgan asked. “Does the additional Chinese commitment of one-half billion dollars replace the Stone City, America West backup position or add to it? Do I infer, from your statement, we are one-half billion short and that you have assumed our offer has been replaced? Should that be the case, I would like to resubmit our half-billion-dollar pledge.”

  “Accepted. Unless anybody else has anything to say, I declare the minimum stipulation has been satisfied and this meeting is adjourned,” announced Secretary Ainsworth emphatically.

  Chapter 56

  VICTORY

  P.J. Clarke’s, the same bar where Walt and Jacques had previously met, had been selected for the Sentinels’ victory celebration. By the time the celebrants began to filter in, the bar leading from the entrance to the back room was already filled with its normal array of neighborhood patrons and members of the working press.

  Henri and Pierre had flown in from Paris unannounced. Pete Ferrari had arrived earlier in the day from San Francisco. They were waiting in the back room when Morgan Stone and Roger Malone arrived. This was the first time the five original ABA bankers had gathered together since they had convened to pay homage to the Sentinels for their work involving the transfer of the German industrialist funds.

  “I have to admit,” said Roger, “when Jacques and Mike first approached us and explained their concern over the consequences of seven oil companies controlling the world’s oil supply, we listened to them out of respect for their former achievements. We never believed this small group of admittedly talented people could successfully challenge the Oil Club.

  “They’ve been able to do something the American government was never able to accomplish. When we discovered, during wartime, that Titus Oil was selling oil to the Germans, the American government was forced to withdraw its lawsuit or risk Titus reducing oil shipments needed to support our own war effort. Do you have any idea how humiliated we were to learn one company could be so powerful that it could blackmail the federal government? If one company can exert so much power and influence, can you imagine what seven companies controlling that much of the world’s oil production could do?”

  “I’ll tell what has fascinated me the most,” said Pete Ferrari. “How can it be that a small group of friends, independent of the government, without the benefit of corpor
ate resources, can solve such an important problem? Maybe there is more than one lesson to be learned here.”

  “What amazed me the most was their ability to develop so many relationships in five totally diverse investment cultures,” Henri said. “Even the Swiss banks have never succeeded in tying so many markets together. Do you realize how broad their base of support really is? Imagine what they are capable of doing should another problem arise that requires their attention?”

  “You have no idea of the number of calls I’ve received from the community bankers Mike called upon,” said Pete. “If there was any doubt, we can be sure the wide chasm that has historically separated money-center and community banks has been bridged. Morgan, I hope you appreciate that Mike accomplished much more than the raising of money; he has succeeded in organizing an informal network of local banks that have expressed their interest in forming longer-term relationships with our banks. If we allow him to complete what he has started, he could very well develop a cooperative system of interstate banking.”

  “Pierre, Henri,” said Roger, “I think the turning point of their entire mission must have hinged on the meeting in your office. The combination of the money the Sentinels had raised on their own and the added support and further endorsement of your half-billion-dollar investment created the spark that was needed to encourage the extra cooperation.”

  The older generation of bankers was so intent on discussing the Sentinels that they failed to notice the arrival of Sir David Marcus and Natalie Cummins. The patrons sitting at the bar noted the man with the striking red hair, but none of them recognized the celebrated star of the New York and London musical stage, adorned in her Yankees baseball hat and big dark glasses.