by Emma Lathen
George turned to the Security Man and said, “I want to go up.”
“I am not authorized to permit that, sir. Anyway they have turned off the floor for the elevator so that won’t work; the stairs doors work by code on the outside and I don’t even have it; inside they open smoothly as tested by your fire department so they pass code.”
George looked at him, “Your fire department?” Who was this guy?
George followed on with, “Do you have some ID?
“You don’t have reasonable cause, sir.”
What got George is neither one had made any snarky comments. They were totally trained, almost military trained. Well, perhaps they had been; nothing would surprise him now.
As a parting shot he said, “We will be back.”
The Security Man didn’t even nod.
As they left, George was mumbling curses. Joyce said, “Let’s hit that pub again. You need it,” and smiled, and her smile lit up the world, especially after all those dark clouds today.
He nodded as they moved off. “We have to walk a bit first, Joyce. I have some thinking to do.”
“I don’t have a punching bag for you so the walk, beer, and burger are the best we can do for you,” as she gave him a friendly nudge.
“Well what do you think Joyce? You got to see it, live and in color.”
Joyce said quietly: “My bets have been good so far. Our next step is to come back after lunch. I’ll lay you odds neither guy will be there. It is like we put our finger in a glass of water, pull it out, and there is no trace. These guys are good, check that. They are great. There are great brains behind all this. It must be Chuck since Jack is dead. He is dead for sure isn’t he?”
He almost rose to the bait but saw her grin and just broke into convulsive laughter with her. They needed that. They had been making the bumbling 1969 Mets look like a winning team.
Chapter 12
John Putnam Thatcher
He has a 41” reach so I’ll stay at 42
Back at the Pub the owner came over and said, “You guys look like you had a hard day.”
“Tell me about it,” and they shared some Irish stories, gossip, and generally had a good time. Joyce kept nodding at the owner to fill George’s glass. George wasn’t against the idea. When 2 hours passed, they went back. Yep, 2 new guys.
George said, “Let’s call it a day. I’ll see you at the Devonshire tomorrow at 5 PM to meet with Thatcher. Take the rest of today and tomorrow off until then. Clear the pipes; get ready for a truly informative experience after all this oppositional nonsense, but rather I should say, expertise.
Joyce raised an eyebrow, “But you know how important it is to get things fast; a few days and everything evaporates.”
“Yes, and they know that,” as she nodded. “They have outfoxed and outgunned us. Best information so far is from The Journal, as you call it familiarly. We will see what it brings tomorrow.”
The next day’s headline was instructive:
everything.com announced an LBO
Elizabeth Thatcher, SVP of the Sloan, announced Chuck Newberg, CEO of everything.com, succeeded in getting 91% of its stock for cash in an LBO, using cash from the sale to IBM and its own funds to do so. “The investors benefited from liquefying their position before the stock dropped further and the company benefits from being able to transform itself from a high growth to steady EPS firm at a lower marketcap.” She concluded by saying, “The speed of the sale to IBM and LBO speaks to the value the outsiders got.”
So their number one suspect now owned effectively the whole company. Yes, his 26% before was worth more; but minority stakes in companies weren’t as valuable as majority ownership, even at lower prices he knew. Further, the Sloan itself had done a similar thing to escape US taxes and control, plus do an LBO to escape SEC and public scrutiny as well. Chuck couldn’t have used a more seasoned group than the largest bank in the world, the Sloan.
Proof was another thing. George was getting a feel for Chuck. Chuck knew how to give up space for time, rather like Stalin did with Hitler in World War II. That took longer than this. Chuck had aced the test. Chuck wasted no time or effort to indicate it wasn’t him; none at all. He just covered his tracks and vamoosed somewhere. They didn’t even know where or if they were ever going to be able to talk to him again.
The fast evacuations meant Chuck was taking no chances on physical evidence, interrogations, and the like. Selling and moving the company helped achieve that purpose. And it wasn’t just a move down the road to White Plains like Pepsi did when moving out of the City.
George went to wsj.com to see if there were other announcements relating to this. There were:
SEC announced everything.com was delisted on NASDAQ
The SEC announced today that the company did not have sufficient float or number of stockholders to be on NASDAQ any longer. The shares would sell on pink sheets until the final percentages were bought in their LBO.
Everything.com announces 98% of the stock has been acquired.
The Sloan announced 98% had now been acquired. The rest would be acquired by routine, their spokesperson reported
George kept puzzling over Joyce’s term, a mobile force. Yes they were. Cyber companies were no longer tied down to a physical place pounding out widgets or selling food. Now they could move and escape from government and agency oversight that relied on physical locations to inspect factories, offices, stores, and the like, and frankly nail them. In other words, to enforce their edicts. No more.
What was there to inspect at the old everything.com office or even at the owners’ condos? They were clearly transitory and easily left behind. Even disposing of them was much simpler as the rich had far more cash, as did companies, compared to his youth when big companies had tons of debt and moved at a lumbering pace. The people of course. In the old days, the people couldn’t escape questions they did not want to answer, whether guilty or innocent. Now they were able to escape oversight and investigation more easily since their assets weren’t as predominantly physical, tied to physical locations.
Now the everything.com people didn’t have to worry so much about interrogation because they had crossed state lines and were not subject to questioning by federal agencies since it was a local crime in New York, 2000 miles from Arizona where most now were.
Now these successful modern companies also had tons of cash. Debt used to tie them down somewhat too; but these companies don’t have much or any debt anymore since equity fueled companies these days with an abundance of cash available in the investment world. It was something indeed, that George was now experiencing first hand. Well, John Putnam Thatcher, he thought, was his last best chance. He would be right about that.
At 5 PM he arrived at the Devonshire where Joyce was waiting for him. She had gotten dressed up in an outfit similar to those George had seen on society women, subtle, elegant, and appropriate. This would help since George always looked like what he was, an Inspector, despite the best of suits, one of which he had on at the moment.
They were announced in and went up the elevator to John’s. He greeted them at the door in casual elegant clothes that reminded George of pictures of gentlemen on Nantucket. Well, John was a gentleman and would fit right in on that elegant island northeast of them where the nobs hung out during the summers. Well George thought, Thatcher was a nob after all.
A somewhat elderly but handsome servant guided the 3 of them into John’s living room which had a full bar and Hors d’oeuvres out. They looked good. Even if they were there on grim business it would be a lovely evening George was sure. He would be right.
John opened up the conversation. “Nice to see you, George, and your young lady too,” nodding towards her in a grandfatherly way. He continued, “Why don’t I tell you what I know and see if that works for you. My daughter, Elizabeth, can tell you more. As if on cue, and probably was, a 35 to 40 year old woman appeared who was evidently the SVP of the Sloan now headquartered in Dublin.
She
had clearly downplayed her appearance in order to fit in and not appear too attractive, aggressive or uncordial. It was a good effort but she was too attractive and intelligent looking to pull it off. No, it wasn’t quite that George surmised. She was too shrewd and agile, like her father, to quite pull that off.
She was in street talk, a sharp cookie, and that was that. He noticed that she had let Joyce and him appraise her without pressure. She had not pushed the conversation. She was there to support it; but, he suspected, it was the Sloan first as with him it was the New York City Police first. The sides were established. They could now move forward he thought.
“Yes, sir, John. Why don’t you proceed and see where it takes us.”
John nodded and launched in as Albert Nelson started serving the drinks. “First, I thought you would like to know more about our cast of characters,. Albert Nelson, who is serving the drinks, started with me at the Sloan 20 years or so ago.”
“Miss Corsa, my secretary who you have met, used Albert for a number of tasks on my behalf as well as the Sloan in general. It was a few years before I learned how helpful he was, how he had tuned into me, and how things worked out when Albert was involved,” as the two of them exchanged glances and smiled at each other.
“Then I moved up to Chairman, which meant overseeing not running around as I used to do. Unlike Lancer, I had no interest in writing for Foreign Affairs, or traveling hither yither and yon like Withers, so I have stayed more personally involved in our business.”
“Albert essentially runs the personal condos for the Sloan here on the 6th and 7th floors. He lives in my mother-in-law apartment because there is only me here now. Elizabeth has her own place on the floor above. Jack has his elsewhere. My daughter Laura, her husband and family, are happily located in the suburbs. And my other son is well situated elsewhere and stays with Elizabeth when visiting New York.”
“Why is this important? It provides a glimpse into a 2 man relationship at work and play, as Jack and Chuck had. Ours is clearer: I have the boss role and Albert the subordinate one. We have become closer over the years but nothing has fundamentally changed.”
“My relationship with my college roommate, Tom Robichaux, has lasted 50 years despite all the goings on in our lives. My son Jack joined his firm and is now a partner and, like Elizabeth at the Sloan, set to take over when Tom and Devane decide to retire. Neither has any children so that makes it peaceful.”
“I have never had a balanced 2 man relationship as Chuck and Jack had. Those are hard from what I know of them. When we invest we want tandems like that to decide who is in charge. That often wrecks the deal, but anything else has been proven not to work. So Jack was the nominal CEO and Chuck the COO, technically reporting to him despite them owning equal amounts of stock and having a buy sell agreement between them.”
“In the Wall Street world status comes from your pile of cash and position; Jack had both; Chuck had the former but not the latter. There are those who would snicker at that situation Chuck was put in. And that is never pleasant. So I think you should start there.”
“Now let’s have another drink, dinner, and we can talk some more. I think it best if Elizabeth carry the ball now about the recent goings on.”
And that was that until later.
Chapter 13
Elizabeth Thatcher
You drive for show but putt for dough
They had had a nice dinner as Joyce and Elizabeth got to know each other and John, Albert, and George shared stories and wine together. Albert set a good table and everyone pitched in to help with the serving. It was a pleasant time for Elizabeth and John, but a uniquely nice one for Joyce and George. Albert loved presiding over such events so was beaming through the meal.
Elizabeth started out. “The Sloan was involved with the Company pretty much from hello. The boys as I always call them, roomed together at Harvard and HBS, and seemed to be as close as people get. They liked the same things, but had complementing talents so did not interfere with each other. Rather like a baseball team. We like companies that have spread out the infield, with not everyone at first or third, like just engineers on one corner or sales people on the other.
“Jack was the rainmaker; Chuck carried the water, as he used to say. It was a dot.com hype sales company so Jack was the front man and thus CEO to make deals. Chuck got things done, kept expenses down, and was immensely practical.”
“They had no issues in their early struggles. As John says, as I call him in business, entrepreneurs remember the hard days when they struggle to pay their bills. When they can pay them, they often get bored, nervous, and worse. Bankers like us, of course, are the opposite. We invest to get them over that hump so paying the bills, including our loans, is merely routine.”
“About 3 years ago they got over the hump. They had an IPO with a $2 billion market cap, big for those days. Jack did all kinds of things to boost their market cap to $16 billion, but then the partners started to have some issues, which I noticed.”
“We had provided their first $2 million in equity capital quite a while before their IPO. We got repaid in about 24 months which meant our equity kicker was knocked back to 5% from 10%. If they had taken 5 years to repay it would have been 20% and up from there. Chuck promised we would get paid quickly and he delivered. As far as we were concerned, better 5% of a going cash flowing concern than 20% or more of a problem one.”
“Frankly, we never liked the business and didn’t really trust Jack, the rainmaker. So we dealt with Chuck. We had a board seat until the loan was repaid. Once repaid we went off the board which was just as well for us, cutting down our fiduciary duties, and therefore our risk being on a soon to be public board.”
“We received another 3% of the stock for arranging the IPO plus our fees. In any event, we quickly placed about $1.5 billion with a few major funds. $250 million with smaller funds. And the remaining $250 million with our best individual customers and trusts that wanted in. At the IPO we sold our 5% kicker from the initial loan and received $100 million for that alone.”
“I set a hard ceiling of $10 billion at which point all individual customers and our 3% would be sold off. I sold 1% at $5 billion and we got $50 million on that. And then the other 2% at $10 billion so got $200 million for that tranche, quite a nice little profit with no fuss or muss.”
“The trust department was supposed to sell off the remainder for its clients. We had made them pledge to do so if we allocated stock to them. We encouraged the early funds to do likewise. As the Swiss say, you can’t get hurt taking a profit. But this was more than a little. At $10 billion it was a 5 to 1 return and they reached it in just 24 months.”
“Most sold; some of our individual customers refused to do so. We had made them sign hold harmless releases if they wanted to break their written agreement with us to sell at $10 billion market cap. Yes, George?”
“Wasn’t that tough, Elizabeth? I mean tough terms?”
“Yes and no, as with most things,” as she smiled at him. “Yes it was tough because we were enforcing an agreement we had forced upon them to receive their allocation of shares; no because Wall Street is full of litigation about you should have told me, you should have forced me to get out, etc. and so on.”
“And what do we do? Settle. So we lose. It is only a question of how much we lose. So no, it was not tough to enforce that written provision. We still got some mad people when the stock crashed to $6 billion the other day, and then went lower on the buyout news. Darn mad people because remember, just a few days earlier it was at $20 billion and they believed they did it themselves by disregarding our agreement. When it crashed it became our fault for not enforcing the agreements. It never is money until you sell, but most people overlook that fact.”
“So how big is the collective investment of your accounts in the Company?” Joyce asked.
“In their minds about $1 billion based on the $20 billion valuation; $500 million on the $10 billion cap; and $250 million on the LBO at $5 bi
llion, which is a fairly private number and I hope you will try to keep it that way.”
George and Joyce nodded. They were aware Elizabeth had been forthright and used subtle nudge words and phrases such as “fairly” private and “I hope you will try to keep it that way.” George thought people he interrogated could learn from that. Well, who couldn’t learn from a Thatcher, he thought? About no one was the answer.
She was definitely a chip off the old block and clearly positioned well in the cyberworld where you can be anywhere in the world, even a bank which most of us think of as a bunch of buildings, he reflected. But they weren’t and that was the point; the buildings were like a Hollywood set as where their vaults were for show, not where the money was or ever had been.
Of course, the importance of anywhere in the world was they could move easily and seamlessly, just like everything.com did, at the first hint of trouble, to sidestep litigation, government inquiry, or any other troubling local matters. At the first beating of the tom toms as he thought of it. Clearly businesses had seized control from governments. For example, even Heinz was selling more American ketchup worldwide than in the US as stated in their last SEC report. And CEOs talk to each other; the tipping point had or would be reached shortly. Companies of all types were becoming the mobile forces Joyce described.
Elizabeth would be tuned into the issue. Possibly even hardwired into it. But, as with all good investigators, he did not interrupt forthcoming witnesses so let her go on with her story rather than interrupt it with his new questions. They could wait and, possibly, many would be answered in her narrative without asking at all. He would be right.
“As Uncle Everett says, few people can read a balance sheet and it takes that to understand this.” George couldn’t believe anyone could call Everett Gabbler, that frosty hardcore pessimist, Uncle, and do so with warmth. This girl, ah woman he corrected himself, had possibilities. He could call men boys, as long as they were white he corrected himself, but never women girls, no matter the race, creed, or color. It was tough living up to these modern PC standards he mused, as Elizabeth continued.
