by Alan Hruska
“On the Bible.”
“Fucking right,” Braddock said.
Now Alec’s own associates are rapt. It’s a good team. To Alec’s left, his second chair, Trevor Joffrey from Harvard: dark, sleek, soothingly smart; next to him, Stanley Woolscraft from Yale: an oh-golly-gee giant who’s brilliant; and then Rick Smollet from Columbia: a mop-haired quirk who can be made to focus just often enough. They know the drill. They watch the oath. And when it’s over, Alec moves in.
“Please state your full name and position for the record.”
“Donald Ulysses Strand,” says the witness in a reedy voice, curiously at odds with his rank. “I’m president, chairman of the board, and chief executive officer of the Mid-Atlantic Power & Light Company.”
“Isn’t there a conflict in those positions?” Alec asks.
“A what?” says Strand, mouth open in an expression less of wonder than contempt.
“As president and CEO, you’re head of management. The function of the board is to keep a check on management activities. As chairman, it’s like you’re keeping an eye on yourself.”
“Perhaps, Mr. Brno, you’re unaware of the fact that, in many companies throughout the world—mature companies—such trust is reposed in a single leader.”
“So basically you run the company?”
“Yes.” Strand straightens up, with a jerk to his head. “That’s what I do.”
“And what exactly does that job consist of?”
“I beg your pardon?” Strand says, as if Alec had now lost his mind.
“You don’t understand,” Alec says sympathetically, as if indulging an uninformed man. “Let me put it this way. What are your duties?”
Strand looks with disgust, first at Alec, then at his own lawyer. Musselman, hunched over, gives dark looks to his pad, but none back to his client. “To serve the stockholders,” Strand says.
“And, of course, the ratepayers.”
“And how do you do that?”
“Is this a joke?” Strand looks around, expecting to find an audience laughing.
Musselman smacks the table, but then controls his voice. “It is. A very bad one. To which I object. Mr. Strand is not here, Mr. Brno, to give lessons on corporate management.”
“I’m sure that would be worth listening to,” Alec says, “but not in response to this question. I’m interested in specifics, and to achieve that, I’m happy to break it down. So, let’s start with the pricing of your product, Mr. Strand. In a broad sense your most important product is electrical power, is that right?”
“Yes.”
“And since your company is a public utility, the pricing of that product is done by public utility commissions, right?”
“Correct.”
“So you don’t even have the job of setting your own prices, correct?”
“You think the PUCs pick these prices out of the air?” Strand says, his voice mocking and shrill.
“Of course not. Your company makes presentations, argues for specific price increases. But you, as CEO, don’t personally get involved in that sort of nitty-gritty, do you?”
Musselman, visibly constrained: “I object to the form of the question. Also, to its relevancy.”
Alec adopts the posture of a man relaxing in his own home. “Are you directing the witness not to answer?”
“Up to now, counsel, you’ve been given a very long leash. You’ve just about reached the end of it.”
“So, Mr. Strand, your attorney is allowing you to answer the question. Please do.”
“There is nothing ‘nitty,’ Mr. Brno, about the rate increases of a public utility—either to us or to our ratepayers.”
“So you’re involved?”
“As is true of any major part of our operation, it is done under my direction and control.”
“As is, therefore, the buying of products?”
“Significant purchases, yes.”
“Such as the purchase of a turbine generator?”
“That would be a significant purchase, yes.”
Alec pulls a sheet of paper from the stack before him on the table and hands it to Manny. “I ask the reporter to mark this one-page document as Allis-Benoit’s Exhibit 1 for identification.”
Manny, after entering the request, sticks a label on the document, prestamped “A-BX1 for id.”
Alec says, “Can you identify this document, Mr. Strand?”
The witness studies the paper for several minutes. “Looks like a list of the acquisitions we’ve made during my tenure as CEO.”
“Acquisitions you’ve made of other utility companies.”
“Correct.”
“Is it an accurate list?”
“As far as it goes, yes.”
“There may be additional acquisitions you’ve made not included on the list?”
“I’d have to study it further against my own records.”
“You’ve made so many acquisitions, you can’t remember them off the top of your head?”
Musselman erupts. “Stop it, Alec.”
“We’ll let that pass,” Alec says with a smile and returns his attention to the witness, “A-BX1 lists fourteen acquisitions made by your company since 1951. Is the number at least that large?”
“It is at least fourteen. I wouldn’t characterize the number further.”
“You object to the word large?” Alec asks.
“Are we here to debate semantics, counsel?”
“Well, you are aware of the fact, aren’t you, that it is more than triple the number of acquisitions made by any other public utility in the United States during the same period?”
“If you say so.”
“You’re indifferent to the fact?” Alec pulls another document from the top of his stack and reads it to himself.
“What do you have there?” Strand asks. “Show me the document.”
“Just answer the question, please.”
“I may have asked someone to compile this information.”
“And you know it to be the fact? Three times the number?”
“Yes,” Strand says belligerently.
“So, in 1951, you took over a relatively small public utility in Virginia, and set upon an acquisition program that’s broadened your reach into five states and transformed your company into the largest public utility in the United States, correct?”
“To shorten this,” Strand says, altering his tone to smooth insincerity, “let me simply say we have consolidated with a sufficient number of like-minded companies to expand our ability to serve the ratepayers of five states, and yes, I believe we are the largest domestic public utility.”
“In terms of what?”
“Well, ratepayers served.”
“And gross revenues?
“Yes.”
“But not net profits?”
After a pause, “Not yet.”
“Inefficiencies drag you down, do they?”
“Certainly not. We’re extremely efficient. We’re still paying for the acquisitions, but as soon as we complete that program—”
“You mean pay off your debts?”
“Yes,” Strand says. “Then we should see a large improvement in net revenues as well.”
“Since you can’t raise your prices without PUC approval, how will you achieve that? The PUCs won’t allow you to raise prices just because you’ve paid off your acquisition debts.”
“Of course not.”
“Nor will they allow you to raise rates because you’ve gotten bigger by swallowing up fourteen other utilities, true?”
Apparently riled once more, Strand laughs to cover it. “We don’t swallow companies, Mr. Brno, but otherwise the answer is yes.”
“You’ve gone to a lot of trouble and expense to enlarge the size of your company. If it’s not going to help you raise your rates, what was it for? Personal power?”
Musselman slams the table with both hands. “That’s enough. Don’t answer that.”
“You’re directing the witness not to answer
?”
“I am. The question is irrelevant and insulting.”
“It’s pretty obvious that being CEO of the largest American public utility is a more powerful and prestigious position than managing the relatively tiny firm Mr. Strand started with.”
“You’d better go on, counsel,” Musselman says, “to something having a bearing on this case. Or we’re simply going to ask the court for an order ending this deposition.”
“So, Mr. Strand, if you didn’t buy fourteen companies simply to enhance your personal standing, and you didn’t expect those acquisitions to enable you to increase your rates, why did you go to the trouble and expense?”
“Asked and answered,” Musselman says.
Alec, ignoring the professor, says to the witness, “There’s no direction. You may answer.”
“As he said, I already have.”
“You said, ‘to serve the ratepayers.’ I doubt that answer was complete. Surely you wished to serve your shareholders as well.”
“That’s obvious.”
“How did you expect the fourteen acquisitions to do that?”
“In the time-honored way. By increasing share values and dividends.”
“You increase dividends by increasing net profits, right?”
“Obviously.”
“But how do you make more money if you can’t increase your prices?”
“Economics 101, Mr. Brno. You reduce your costs. I’ve already told you, when we pay off our loans, we will eliminate the interest costs of the money we borrowed to make our acquisitions.”
“Is that your only way of reducing costs?”
“There are many ways of reducing costs, Mr. Brno.”
“And being the size of fourteen companies rather than one helps you do that?”
“You’ve never heard of buying power?”
“I have, yes,” Alec says, as if reminded of a forgotten concept. “So when you’re buying, say, ten turbine generators, you expect to get a lower price per machine than if you were buying one?”
“That would normally follow.” Strand’s mouth sets in smug repose.
“And the more you buy, the lower should be the price?”
“Up to a point.”
“The point being the manufacturer’s ability to sell at those prices and still stay in business?”
“Yes.”
“Economics 101,” Alec says.
“Quite.”
Alec sees Musselman scowl. “In your purchases of heavy electrical equipment,” Alec says, “have you been able to get prices that low, down to the manufacturers’ subsistence level?”
“Of course not. That’s why we brought this lawsuit.”
“I see. So if you win, you’ll expect to achieve that, subsistence pricing?”
“I didn’t say that.”
“You’d need some more acquisitions?” Alec says, as if stating a self-evident proposition.
“I’d need,” Strand says, hackles again rising, “manufacturers who are willing to compete with each other for my business. Not price-fixers, which is what I’m confronted with now.”
“Really?” Alec says. “Let’s focus, then, on your purchases of other types of equipment—things not made by the defendants in this action. Has your increased buying power helped you reduce the prices at which you buy any of those products?”
“No doubt.”
“As far as those prices can go and still let those manufacturers stay in business?”
“I think not.”
“So you have a ways to go?”
“No doubt we can do better.”
“Which is your aim.”
“To do better? Naturally.”
“In that respect?”
“In all respects.”
“Including that one. Reducing your costs by reducing the prices at which you buy?”
“As I said.”
“A simple yes will do nicely.”
Strand looks at his lawyer, who registers the usual objection, “Asked and answered.”
“You may answer,” Alec says.
“Yes,” Strand says, as if now bored with the whole affair.
“And you have the same objective with regard to your purchases of turbine generators?”
“Of course.”
“To use the increased buying power gained by your acquisitions to lower prices on turbine generators?”
“Yes.”
“As low as those prices can be driven?”
“Yes.”
“Right down to the lowest price at which they can sell, and still stay in business?”
Strand looks at his lawyer, who shrugs. “Yes,” he says uncertainly.
“Are you considering further acquisitions?”
Musselman says, “That’s confidential.”
“Okay,” Alec says. “So we’ll mark this portion of the deposition confidential and place it in camera, until we can obtain a ruling as to whether your claim of confidentiality can be upheld. Mr. Strand, there’s a question pending.”
The witness looks at his lawyer, who reluctantly nods. “Are we considering?” Strand says, repeating the question. “We’re always considering.”
“Specific companies?” Alec asks. “As acquisition targets?”
“Yes.”
“Public utilities?”
“Yes.”
“So as better to serve your ratepayers and stockholders?”
“Of course.”
“By lowering your costs?”
“Yes.”
“By lowering the prices at which you buy as far as your bargaining power will let you?”
“Yes.”
“To the subsistence level of your suppliers?”
“Yes!” It’s both an explosion of annoyance and a war cry of pride.
“And are you close to achieving that?”
Strand’s face hardens with anger. “Only your client’s conspiracy stands in the way.”
For the first time during the deposition, Alec glances at Caddy Breen, who simply lowers his eyes. Alec says, “I have no further questions of this witness at this time.”
“I think you got it,” Caddy Breen says in Alec’s office, after Strand & Co. have left. “As we said, monopoly is power over price, meaning, on the supply side, the ability to drive your suppliers down to their subsistence. Strand clearly admitted that’s his end game. That he’s ramped to do it, not by moves that are honestly industrial, but by acquisitions. And that he’s gotten ‘dangerously close,’ to use Learned Hand’s test. You’ve practically proven the case.”
“Maybe,” Alec says. “At least we’ve got enough to file.” He’s seated at his desk, sorting out the documents he bought into the deposition, mostly for show.
Breen is pacing excitedly. “Exactly,” he says. “To get the rest is why we need discovery. Lots of discovery. Even more than they’ve asked from us!”
“Actually,” Alec says, switching the tone, “for us to win on the counterclaim, they’d have to make some more acquisitions.”
Breen considers that. “Which Strand won’t do,” he says, reality now dawning, “so long as the counterclaim hangs over his head.”
Alec smiles.
“You knew this going in,” Breen says. “The very filing of a counterclaim will make it impossible for us to win it.”
“Is that your objective?” Alec says.
Breen plunks down on the sofa. “Your other point,” he says.
“The important one,” Alec says. “We’re talking about Donald Strand. A man unmatched in rapacity for buying public utilities. He’s already laid out a program for doing a lot more of that. However, there’s suddenly an obstacle. The case he himself brought. Getting to trial in a case this large, with a huge claim and now an even bigger counterclaim—then actually trying both claims, taking the case up on appeal—could last ten, maybe fifteen years.”
“He won’t like that,” says Breen excitedly. “Being shut out of acquisitions for that long.”
“He�
��s got a quick way to change it,” Alec says.
“That’s our end game.”
“I’ve been saying it from the outset, Caddy. This is not a case that ought to be tried.”
FOURTEEN
In the twin-towered condominium on Central Park West, it’s the southern tower that’s preferred—for obvious reasons. The downtown view of Manhattan is spectacular. And the southern tower, by having that view, blocks the northern side from enjoying it. Sal Angiapello, who deprives many people of many things, appropriately lives on the top floor of the southern tower. It’s one of three apartments he uses in the city. In the others, he lodges his two mistresses. They are luxuriously provided for, but not welcome in the CPW establishment. There he once lived with his wife, who died at an early age. Possibly of grief over Sal’s succession of other women, although the diagnosis was cancer. His living alone on CPW might be out of respect for their marriage or avoidance of warfare between two other women. No one would have the temerity to ask. But it is the place where he most often sleeps, and the sanctuary he fortifies for his convenience and safety. In New York City, at least.
In general, he prefers his own island off the east coast of Sicily. To travel there easily, Sal maintains two Lear jets at the Westchester Airport. And to reach that location at maximum speed, he has established a heliport on the roof of his tower, accommodating a brand-new Sikorsky chopper. The tower is, in fact, his, since he has recently completed a buying program to acquire all the apartments in it and many throughout the rest of the building. As a result, he controls the board and hires the building staff, who are quite willing to serve his interests. All in all, he feels better protected than he would in a townhouse, and comfortable in surroundings of splendor. So it is also the place where he meets or dines with favored associates.
Such as his nephew, Tino, with whom he is now having dinner, being served by an excellent staff in a room offering that spectacular view. For the young man, this apartment is the exemplar of good taste. Sal knew better than to apply his own. He hired a famous decorator. After all, it was meant to impress. Sal himself is indifferent to furnishings and has no time to spend on them. Actually, since it isn’t his kind of talent, he rather deprecates the skill and those who possess it.
“So you’ve met her,” Sal says, “and you’ve become friends.”
“She invited me to her birthday party.”
