The Vulture Fund

by Stephen W. Frey

“That city could have been incinerated, but it wasn’t. Because of that fighting force, because of its capabilities.” Whitman’s face became grim. “Do you remember a little problem in Waco and that other one up in Idaho? Remember how well our domestic law enforcement officials reacted in those situations?”

  Andrews grimaced, remembering the fiascos.

  Whitman moved closer to Andrews until their faces were just inches apart. “Can you imagine the FBI or the ATF going into that L.A. facility against terrorists armed with high-tech weapons when they couldn’t even take a facility that was occupied mostly by shotgun-toting civilians without blowing everyone inside up?” The president shook his head, then set his jaw. “I said I was going to give Becker and his people at the CIA a chance. I gave them that chance, and they have performed extremely well. The world is a different place now, Preston. We need Becker and his experience. Even if he is a Republican.” Whitman paused to draw in a long breath. “I know some of my fellow Democrats will be appalled by this decision. They’ll say I’m not being faithful to the party in an election year. That I’m giving the other side’s best hope a shot in the arm. That I’m giving Becker free publicity, a forum from which to launch his campaign. The whole nine yards. But I don’t care. I have to make the best decision possible in this situation, one that isn’t polluted by politics. A decision that is in the best interest of the people’s safety.” Whitman touched the vice president’s arm.

  Andrews glanced up from the floor into the president’s eyes.

  Whitman smiled at the vice president. “Don’t worry, Preston. You are going to be the Democratic nominee, and you are going to defeat Malcolm Becker this November in the general election. You are going to succeed me in the White House.”

  Andrews hesitated. “But the investigation,” he whispered. “Does this announcement mean you are going to give up your investigation into misappropriation of funds at the CIA? I—”

  Whitman held up his hands to interrupt. “When I get back from Camp David, we will revisit the issue. I promise. Everything will be all right.” He glanced around at his entourage. “Ready?”

  The aides nodded back uncomfortably. The president was now four minutes late to the briefing. They hoped the press wouldn’t read anything into that.

  “Let’s go.” Whitman brushed past Andrews and moved confidently into the glare of the press room lights.

  The vice president turned to watch Whitman move to the podium. “I wish I had as much confidence as you do,” he said softly to himself.

  Whitman climbed the platform at the front of the room and was met by Malcolm Becker, director of the Central Intelligence Agency. Cameras popped and flashed as the two men shook hands before the podium bearing the presidential seal. Preston Andrews gazed at Becker as the man smiled for the press. He detested Becker more than any other human being in the world.

  * * *

  —

  The long table stood beneath the arched ceiling of the Partners’ Room on the thirty-eighth and top floor of Two Wall Street, the headquarters of Walker Pryce & Company, one of the Street’s oldest investment banks. The powerful firm traced its origin to the Civil War and the underwriting of bonds for the Union to support its effort in winning the conflict. The table was surrounded by comfortable leather chairs, in which the partners of the esteemed firm had sat at the end of each fiscal quarter since 1912 to review their good fortune, 1912 being the year Walker Pryce had purchased what was then considered a skyscraper on the northeast corner of Wall Street and Broadway across from Trinity Church. A thick Persian rug covered the floor of the large room, and oil portraits of prosperous-looking stern-faced men hung from the dark green walls. Small alcoves lined the walls of the rooms. They were furnished with handsome upholstered chairs and provided the partners—and only the partners, because no other members of the firm were allowed in the Partners’ Room upon pain of employment termination—with a haven from the constant barrage of telephone calls from clients and other people at the firm.

  At the end of the year when the rankings of the top securities underwriters were published, Walker Pryce was consistently among the top five in the league tables. It also boasted a highly respected Mergers and Acquisitions Advisory Department and several trading groups that moved with lightning speed when they identified an opportunity—or, better, still, an arbitrage. As a result of its financial prowess, the firm had netted more than a billion dollars in profits before employee bonuses in each of the last three years.

  Most of the high-profile investment banking firms that had begun the twentieth century as partnerships were now publicly held or had been swallowed up by larger financial entities. Morgan Stanley, Salomon Brothers, First Boston, Kidder Peabody, and Lehman Brothers all had forfeited their partnership status in favor of the larger pools of capital available to a public firm. Even Goldman Sachs had sold a large piece of its equity to the Japanese. While being public enabled them to access more diverse funding sources, which improved their competitive positions, forfeiting partnership status also had one very steep downside: profits had to be shared with the public stockholders.

  Walker Pryce had managed to remain independent, and as a result, its partners were wealthy beyond most Americans’ dreams. Of the firm’s seven thousand employees, only one hundred were partners. It might take fifteen years to achieve this position—at a minimum, ten—but once this status had been achieved, the partner’s financial security was assured, as was his family’s for generations to come. Depending upon his tenure with the firm, a Walker Pryce partner might be worth between fifteen and three hundred million dollars, the figure Lewis Webster was rumored to have amassed.

  But remaining independent was becoming increasingly difficult, even for Walker Pryce. The demand for more and more capital to fund growth was ever-present. Investment bankers in all areas of the firm constantly pounded the table for more money to fund transactions, and as older partners began to retire, draining funds from the firm’s reserves, giving in to the allure of the public market seemed inevitable.

  Lewis Webster sat at the head of the table, the seat traditionally reserved for the senior partner of the firm. He was the nineteenth senior partner in Walker Pryce history, and when he stared back over his shoulder at the portrait of Harley Walker, the firm’s founder, hanging above the room’s mammoth hearth, he dared convince himself that no senior partner in the history of Walker Pryce had ever faced as difficult a situation as the one that loomed before him now. The partnership was totally divided on whether or not to forgo 152 years of independence, while an individual bent on ultimate power was wielding his authority to force Webster and Walker Pryce into a terrible risk. But true to his nature, Webster would turn this situation into a win—at least for him. He was a survivor, and he would sacrifice anyone to achieve his objective.

  Polk and Marston entered the Partners’ Room through the doorway at the far end of the room. Together Polk, Marston, and Webster made up Walker Pryce’s executive committee. They alone were responsible for major decisions involving the firm. They were few in number for such an important committee, but it was the number specified in the original charter and bylaws, and the men of the partnership were unwilling to alter those time-honored documents. Besides, the small number of executive committee members was in keeping with the entrepreneurial culture of the firm. Important decisions could be made efficiently and without fanfare.

  Webster heard the hinges of the ancient door creak as it closed. He turned away from Harley Walker’s portrait and watched the other two approach. Graham Polk was head of Sales and Trading, responsible for client trading, distribution, and principal positions Walker Pryce took in specific securities. Walter Marston was the top investment banker, responsible for originating debt and equity issues as well as for all of the firm’s advisory activities. Polk was short, fiery, overweight, and suffering from stomach ulcers. He rarely wore his suit jacket, and when he did, it usually did not match h
is pants. Marston wore perfectly pressed, expensive suits and looked ten years younger than his fifty-two years. The two men detested each other, rarely agreeing on anything simply as a matter of principle. Each believed himself responsible for Walker Pryce’s huge profits, believed the other’s activities to be a drag on earnings, and constantly accused the other of attempting to encroach on his turf. This discord was acceptable to Webster because it caused both men to push their people very hard to prove that their areas were the most valuable to the firm’s earnings and because by default he could always count on one of them as his ally. The bylaws clearly stated that the executive committee needed only a simple majority to adopt a measure. Webster watched them carefully as they approached. He needed at least one of them very badly tonight.

  “Good evening, Lewis,” Marston said as he sank into the chair to Webster’s right. He glanced around the huge space. It was dark except for the soft glow emanating from two green-shaded lamps in the middle of the table. The feeble light cast strange shadows into the far corners of the large room.

  Polk grunted something unintelligible as he took the seat to Webster’s left. He placed a large glass of milk on the antique tabletop and began to roll up his shirtsleeves.

  Marston snorted and shook his head at Polk’s lack of social grace.

  Polk stopped rolling up his sleeves momentarily. “You got a problem, Marston?” He spoke like a platoon sergeant on maneuvers, quickly and with a sense of purpose.

  Marston leaned forward. “Yeah, I’ve got lots of—”

  “Gentlemen, that is enough.” Webster’s whispery voice cut through their differences immediately. Some called it the death whisper because the eerie quality in the low tone killed other people’s sentences in mid-word. Ten years ago Webster had battled throat cancer and won; however, it had left him unable to speak normally. But true to his nature, Webster had turned this disadvantage into an advantage. “Mr. Polk, please use a coaster.” Webster nodded at the glass of milk.

  Polk retrieved a coaster from the middle of the table immediately, straining as he leaned across the wood. He placed the glass on the coaster, reseated himself, then turned respectfully toward Webster, as did Marston. They both feared him intensely, just as the rest of the partnership did.

  Webster did not have a physically commanding presence. He was thin and of average height His slim face made him appear almost malnourished, the skin drawn tightly into deep crevices beneath protruding cheekbones. His head was bald except for a halo of gray hair above his ears and at the nape. Unlike any other partner, he wore a closely clipped beard, the color of which matched his gray hair. His eyes were dark brown, almost black, and they seemed half hidden below dark eyebrows. He was not imposing, yet he intimidated people immediately.

  Webster ran Walker Pryce with an iron fist. In the early days of his nine-year rule as senior partner there had been attempts at insurrections when people took exception to some of his unilateral operating decisions. Then they had been called to his office for one-on-one meetings, and suddenly their criticisms had ceased. Rumors began circulating that Webster maintained files on each partner, files filled with incriminating evidence he had somehow obtained and used to influence those threatening insubordination. But no one who had been called to a one-on-one meeting with Lewis Webster had ever revealed what had taken place there.

  “I appreciate your coming here at such a late hour this evening.” It was well after eleven o’clock. “I have something of extreme importance to discuss with you.” Webster spoke slowly, enunciating each word carefully. “It will have an immense impact on the firm.” He paused and looked at each man in turn.

  They looked down into their laps, away from Webster’s glare.

  “As you are aware, our capital requirements seem to grow each day.” Webster continued. “Both of you want more money all the time for your departments. Let me assure you, I don’t have a problem with these capital requirements. You both have performed admirably over the last three years, and the firm has achieved outstanding success as a result.”

  Polk and Marston nodded but did not look up. Webster rarely meted out compliments, and their personalities did not allow them to receive accolades easily.

  “But at the end of this year another seven men will retire, and our total annual payment to retired partners under our payout schedule will reach almost two hundred million dollars. We are generating very little new cash at all from our one billion dollars in profits after accounting for three hundred fifty million dollars of employee bonuses, provisions for the partners’ taxes, and the two-hundred-million-dollar payout. It would seem that our only alternative would be to end a century and a half of the partnership and take the firm public.” Webster’s low whisper had become almost inaudible.

  Polk’s and Marston’s eyes remained transfixed on their laps. They were aware that Webster wanted Walker Pryce to stay independent at all costs. But it would not matter. Polk, Marston, and a slim majority of the other partners wanted to go public, and they would ultimately be victorious. The opportunity was too appetizing. They would be able to cash in some of their stock immediately in the initial public offering, and the third-party investors would probably pay a whopping premium just to be able to buy the shares, just to be able to say they were Walker Pryce shareholders. Even Lewis Webster would not be able to stem this tide.

  “So you both agree on this matter?”

  Polk and Marston glanced across the table at each other, and their eyes quickly narrowed, their disdain for each other obvious. But they nodded silently. Despite their desire to disagree, their greed eclipsed their pride. The equity markets were performing well. If Walker Pryce was able to go through the registration process quickly, the partners might be able to cash out at a truly remarkable multiple, given the firm’s outstanding performance over the last three years.

  “Yes, Lewis,” Marston said quietly.

  Polk grunted his assent softly.

  Webster brought a hand to his face and stroked his beard. He had been afraid of this. Normally Polk and Marston would have disagreed just to disagree. He would have had an ally, and Walker Pryce could have remained independent. But greed was too strong a unifying factor in this case. “You both know that I want very much for this firm to stay out of public hands?” he whispered.

  “We do know that,” Polk replied. His tone was subdued but firm. “However, we think in the long run it will be best for Walker Pryce to go public. It’s what the majority of the partners want.”

  “But it’s not what I want!” Webster pounded his bony hand on the table as he stood.

  Polk and Marston jumped in their chairs as though they had suddenly touched an electrically charged cable. Webster was not prone to violent outbursts, and they looked up at him in shock.

  Webster pointed a gnarled finger at Polk, who swallowed hard. “This firm has produced record profits each of the last three years”—his whisper filled the vast room—“because of decisions I have made, because of risks I have taken.”

  “But, Lewis”—Marston’s voice was soft—“it’s the best thing for the—”

  “Don’t interrupt me, Walter!” Webster snarled, turning toward the firm’s top investment banker.

  Polk wiped his forehead. He was thankful that Marston had distracted Webster’s attention away from him. He retrieved the glass of milk and finished it in several huge gulps.

  “I want a chance to speak, an opportunity to put forth a plan, an alternative to going public. I deserve that chance.”

  Polk and Marston glanced across the table at each other. Both had limousines waiting for them on Wall Street in front of the building. But Webster was the senior partner, so they would accommodate him.

  “All right, Lewis,” Marston said.

  Slowly Webster sat back down in his chair. “Thank you so much, gentlemen,” he said sarcastically. “As I said, I have an alternative to going public. I wan
t to raise a large fund, a billion dollars in size. Maybe two. Walker Pryce will seed the fund with fifty million and manage it day to day, generating some nice operating fees on an ongoing basis. But more important, we will receive a substantial share of the profits, much greater than our relative share of the investment.”

  “Like the funds put together by the leveraged buyout firms in the late eighties,” Polk said, staring at his empty glass. He said the words halfheartedly. He wasn’t interested; that was obvious.

  Webster nodded. “Exactly.”

  “What would this fund invest in?” Marston picked at his fingernails. He too was not interested in the discussion but was simply playing out the string, allowing Webster to enjoy a last fantasy before he and Polk slammed the door shut.

  Marston eyed the old man. Perhaps as part of going public, the partnership should take the opportunity to ease Lewis Webster out of an active management role and into the beginning of retirement. Webster was almost sixty-three and clearly showing the signs of his age. Marston shot a glance at Polk. One of them would succeed Webster, and the struggle would be titanic. He would begin lining up support tomorrow.

  “The fund will invest in Manhattan real estate and common stocks. I firmly believe that Manhattan real estate as a whole is grossly overvalued and that the Dow Jones and the S & P 500 averages are much too high as well. I strongly believe that in the near term both the Manhattan real estate market and the shares traded on the Exchange are going to suffer significant devaluations. I want to be ready to take advantage of the devaluations when they occur. Once the corrections take place and the prices have bottomed out, we will buy heavily with money from the fund.” Webster paused. “I therefore propose that we raise nine hundred and fifty million from third-party investors immediately, in addition to the fifty Walker Pryce will commit, and leverage the fund’s equity by borrowing another one billion dollars on top of the equity so that we have a total of two billion to play with. Then we sit back and wait for the corrections to occur before we dive in. We should make several billion in excess of our investment in a very short time. That would be plenty of money for us to fund growth into the twenty-first century. And we wouldn’t have to go public.” Webster’s gaze moved slowly in turn to each man. His head was angled forward, and his dark eyes burned.