The Hedge Fund

by Burton Hersh

  Dad was never easy to back into a corner. I was getting nervous.

  “Especially now. With – you know – Iraq and the rest.”

  Dad didn’t say anything.

  “In many ways,” the aide attempted, “your war and, and—“

  “Rick,” Dad said.

  “Yes, right, Rick’s war and the liberation of Iraq – they’re all very much the same. Wouldn’t you say?”

  “Very much,” Dad said. “They made no sense and they cost a lot of money and we wind up with the wretched of the earth handing our bloody nuts to us. Did you ever serve?”

  “I haven’t had the privilege.” Frowning, the aide took a step back. “I’m sure you’re disillusioned,” he said after a moment. “Sometimes veterans get that way.”

  “I’m speaking as an economist. What’s good for Kellogg, Brown and Root isn’t necessarily a good idea for the federal budget, long term. Let alone the poor bastards who wind up splashing their brains all over some clay wall because the perimeter guard didn’t spot a suicide vest in time.”

  “But that was always true.”

  “Maybe. It’s just that these days our rulers are mopping up the empire with other people’s children.”

  The aide forced a smile. “You are a very hard sell,” he told Dad. “We’ll keep trying.”

  “I’m confident of that,” Dad said.

  * * *

  “What a shmegeggy!” Dad said once the governor’s party was gone.

  “I don’t know that word.”

  “It’s really a shame Yiddish is such a dying language. Sometimes it’s very efficient. That means something between a sap and a professional suck-butt.” Dad fanned himself with his hat. “That’s my mission in life, Michael. Teaching you Yiddish. So you can express yourself with sufficient precision.”

  * * *

  We all gathered on the margin of the parking lot to watch the bride and groom climb into Rick’s Jeep Cherokee and set off for their honeymoon in Key West. Balloons bounced

  along the pavement behind them. Wendy had looked radiant, Amazonian. A late afternoon letdown was telling on Mother. In the open sunlight her skin looked scalier than usual. Fatigue was enriching the dark circles beneath her eyes.

  “Glad it’s over?” Dad said to her.

  “I suppose so. He’s really a very worthwhile boy, don’t you think? And such a hunk!”

  “I think he’s a project under development. Smart, though. We got into a discussion of derivatives last night at the bridal party. That whole subject is a financial snake pit, but he seemed to have the handle. Which I’m sure I don’t, quite. He’s working part time for Ramon while he finishes up. I gather they’re turning into some sort of feeder outlet for one of the big Manhattan underwriters. Speaking of which—“

  Ramon Perez y Cruz sidled up. He was a fine-boned man but fairly tall, with a solid, professional smile and a head of very black crinkly hair. He may have been the only man in the Western Hemisphere who still used Brilliantine. A much younger Latin woman with her hair up in combs seemed to be bouncing in place at his side.

  “It is really a pleasure for me to become acquainted with someone like you,” Ramon said. He spoke very carefully. “I like how we cooperate to plan this very beautiful festival together. No problems. Still, I hope maybe we would have the good fortune and meet before this wedding. But they are young people. In a hurry.”

  “They are that.”

  “I read your book.” Ramon said. “About Adam Smith. Which I of course admired. Adam Smith becomes like a hero to a lot of us at the university in Havana after Batista was no longer present. ‘An Inquiry into the Nature and Causes of the Wealth of Nations,’ correct? We admired the invisible hand. We have the hope the invisible hand would pinch off Castro.”

  “It certainly hasn’t so far.”

  “That is coming. Castro is becoming viejo, pretty old.”

  “Who isn’t?” Dad said. “I don’t think you’ve met Wendy’s mother. Louise Landau?”

  Ramon took mother’s hand and obviously fought the impulse to kiss it. “And my wife? Annilita?”

  Annilita inclined her head, solemnly, and produced a childlike smirk.

  “Ricky really is a lovely person,” Mother said. “Sylvan tells me he’s actually very precocious in certain ways. On the economic side.”

  “He does some work for me, so maybe that helps a little bit,” Ramon said. “He has the opportunity every six months to obtain a visa and visit his mother in Cuba, so when he goes down for a few days he is able to discharge obligations for us.” Ramon was studying Dad. He went on. “I think Raul Castro is a little different, maybe a little more advance than his brother. Fidel has step back a little now, you see. Digestive disorders. “

  “I think I see where you’re going.”

  Ramon was getting intense, his English was slipping. “We have establish what is call on Wall Street a little hedge fund. We go short sometimes, long sometimes. We try an’ accumulate assets. Like Warren Buffet, only not so grand. There is a Canadian partner, and he is entitle to option properties in Cuba. Beachfront properties. Mineral rights. So Enrique goes down there, and everybody signs the papers, and reimbursement goes out from here to numbered accounts in the Cayman Islands for individuals in the regime. Everything perfectly legal.”

  “Unless somebody gets caught,” Dad said. That seemed to go right by Ramon. “Then, when we recognize Cuba?” Dad prompted.

  “On that day? Madre! Everybody adds a zero. Two zeros.” Ramon’s smile had turned itself up, high-voltage. “Right now the problem is naturally to generate enough cash. They will accept only cash. If it should happen you have some interest….”

  “I can appreciate that,” Dad said. “Our problem is, we’re not particularly liquid.”

  “You have a great deal of real estate as I understand it, correct?”

  “Jesus. And I thought the governor was well briefed. All that war hero bullshit.”

  “Information is extremely important.” Ramon shrugged. “But – you know what is best for your case.”

  Dad’s eyes rolled up, obliquely, toward the fronds of the surrounding palms. “I don’t see how the real estate—“

  “Real estate can be an asset. Something which you trade. You put together his falling-apart apartment house, and her vacation condominium, and produce a big bundle-type security. And that you sell. To us, maybe, for the hedge fund. We guarantee ten percent.”

  “A subprime mortgage package, don’t they call that?” I finally put in.

  “They call it a lot of things,” Ramon said. “The rating agencies love those sonabitches. Buildings, something they can foreclose on.”

  Dad looked half convinced. “Mike here and I will talk this over,” he said. “He runs that kind of stuff for us.” There was a pause. “I like the Cuban possibilities, though.”

  “You let us know, OK? Maybe you be our guests at dinner?”

  “Love to. But we’ve got to get on the road. We’ve got another wedding to start planning. Did you meet Carol and Buckley?”

  * * *

  My parents and I were about to settle into Dad’s Lexus when the rabbi appeared with her partner. They were parked in the next space.

  “Rabbi Ginsburg,” Dad hailed her, “You did an inspired job.” He pulled a hundred-dollar-bill out of his wallet. “Something extra for the collection box. Kind of a mixed congregation today.”

  The rabbi was a small, plump woman who looked as if she had dressed quickly in the back room of a thrift shop. She was still wearing her elaborate, gold-embroidered yamulkah. She accepted the money and pushed her perspired face up to confront his. “I think I earned my pittance today. I tell you something, it isn’t that easy to upstage a Monsignor. Now, tell me something Mr. Landau. Except for you and me, were there any Jews present this morning?”

  “Three. Not including my wife. Weezee is extraordinarily devout.”

  “She hides it well. Why did I think she fell asleep when I was attemptin
g my remarks? And I wasn’t speaking very long.”

  “Rapture. That’s how Weezee expresses herself when she is genuinely moved.”

  “If you say so,” the rabbi said. She gave Dad an amused look. “I haven’t met a b.s. artist like you since I left Queens. “ Her face darkened. “One remark in passing, something I left out of my sermon. The father-in-law there, Raymond was that?”

  “Ramon.”

  “Right. Look, for what it’s worth, I don’t know how well you are acquainted around these parts, but he isn’t just another local businessman. They tell me he is…connected. Or whatever they say down here. My mother is retired to Boca, so I am down here a lot. Friends of mine tell me they saw Ramon at one point palling around with Orlando Bosch, who supposedly took out a lot of rolling stock all over the Caribbean. With dynamite. The mishugina Bushes supposedly got Bosch out of jail and even snagged him a post in the government. Ramon is no greenhorn. So—“

  “What are you trying to tell me.”

  “You haven’t figured it out? Watch your ass! I’ve got to run, I’ve got a bris in Seminole at seven. I’m still stuffed, but my partner Angela called to say she’s hungry. It’s past her feeding time.” The rabbi winked, a fat wink. “You know how ravenous these old mackerel-snappers get.”

  5

  The nuptials joining Carol and Buckley were a whole lot quieter. They both preferred a nonsectarian ceremony. A blubbery, humorless Justice of the Peace trudged out to Dad’s palazzo and tied the knot in front of a couple of dozen well-wishers. Buckley’s widowed mother came down from Greenwich and one of the Cincinnati Glickmans, a cousin, showed up and stayed loaded for two days. Enrique represented the Cuban side of the family. I was the best man.

  Carol seemed a little bit more glassy than usual and even a touch squeamish. “Her psychologist suggested tranquilizers,” Mother confided to me while Carol was cutting the cake. “So apprehensive, this morning in particular. Such a sensitive, caring girl!” Buckley was visibly manic, jumping from guest to guest and talking up a client he had acquired the previous week who was going to spot him points in a movie under production outside Longboat Key.

  “All three kids married already,” I observed to Dad. He was nursing a tulip of champagne and contemplating the water. The tide was rising.

  “At least for the moment,” Dad said. My divorce was pending. He gave me a sharp look. “I liked the last wedding better. That fruitcake of a rabbi, Wow! She pounded my gong all afternoon. Traditional. Foul-mouthed. Zaftig. How could anybody improve on that? On the long road to spiritual awakening?”

  I picked a crabmeat canapé off a tray by the window. Dad had returned to contemplating the horizon. “Nobody seems to want to leave you guys in peace,” I said. “Did Ricky tell you that he and Wendy are both signing up for graduate courses in Tampa next semester?”

  “I heard that. I have a feeling he’s up here beating the bushes for that hedge fund Ramon was pitching at the lunch. Hide your wallet.”

  “You better hide yours. He wasn’t making love to me.”

  “It’s my distinguished hairline,” Dad said. He rolled the champagne glass in his fingertips. “The truth is, Mike, that might not be too bad an idea. With real estate around here exploding the way it’s doing, can you imagine what beachfront properties in Cuba will go for once el Bardito is out of the picture?”

  “Wouldn’t that be the time to buy?”

  “If you could get any. You’d need an inside track. Ramon is obviously….”

  “Connected? Wasn’t that Rabbi Ginsburg’s euphemism?”

  “He knows people, OK?” Dad moistened his upper lip. “We probably ought to take a bite. A nibble.”

  Everything started with that. Ramon’s subsidiary, Sunrise Capital Partners, had come into existence two years earlier. After weeks of negotiations on several levels – my accountant will be calling your accountant -- Dad’s people -- me, mostly, breathing down our trust attorney Prescott Wallaye’s neck -- and Ramon’s people came up with a strategy. Sunrise Capital Partners was structured as a hedge fund, a hot financial instrument at the moment because it permitted its managers to invest in just about anything – stocks, distressed debt, overseas currencies, pork bellies, gambling casinos in Macao – and go long, or short, or both at the same time if there was any percentage in arbitrage. There was little if any serious governmental supervision.

  Outside investors would pay substantial management costs and give up a sizeable chunk of the trading profits to an insider “performance fee,” sometimes as high as 30%. But in a good year the remaining 70% could turn into a lot of money. We would get a substantial allocation of shares in the partnership. What made the deal look irresistible to Dad was that Ramon wasn’t asking for an out-of-pocket investment. The up-market condominiums and Tierra Verde palacios Dad had been picking up since the later eighties with the accumulated capital from Mother’s 1987 stock market killing -- the scattered real estate Dad had brought me down to Florida to supervise -- would be repackaged into a unified mortgage bond.

  Afterwards we became aware that Ramon and his braintrust presented themselves to their outside investors as sole owners of the bond itself. But in fact we – Dad and I – reserved the right for the first five years to take these assets back on thirty days’ written notice if – in our judgment -- circumstances in the marketplace deteriorated enough or the monthly payments on the bond flagged. By 2005 the appraised value of the real-estate package topped out at perhaps $30-40 million.

  With our little cluster of very choice properties to anchor his expanding partnership, Ramon had already lined up a Miami banking syndicate, his mysterious if – we picked up on this little by little as the months unfolded – decidedly ominous counterparties. It would develop that a semi-retired consigliere from the Trafficante wing of the mob was the principal cash investor. When the whole deal went down Ramon’s backers seemed to be absolutely clawing the earth to advance Sunrise Capital Partners assets they had been laundering, something north of thirty million dollars, against our very tangible properties. This charge of capital amounted to feed stock, seed money, for Ramon and his backroom plungers.

  We found out later that all those voracious “counterparties” were kept in the dark by Ramon when it came to the encumbering provisos I had slipped into the documents. Ramon was focused entirely on this opportunity to capitalize himself, and on a major scale, and to hell with the fine print. Buckley and Rick took it on themselves to keep us pumped up by passing back word as Ramon’s agents continued to acquire title, through a holding company in Toronto, to a wide range of beachside properties in Cuba.

  We certainly didn’t know it at then, but at the time almost all the fresh capital in Sunrise Capital Partners seemed to originate with us. Along with our annual 9% remuneration as stakeholders in the embargoed real estate and whatever we picked up in dividends from the overall fund, we – Dad – could look forward to 20% of the proceeds post-Castro when that bonanza hit. Billions, potentially.

  Heady stuff for a lifelong academic. Meanwhile, in backwater St. Petersburg, I continued to collect the rents and pass them along to the syndicate in Miami. We wanted to keep our hand in. Dad made very sure that he, as well as his trust attorney, had tucked away copies of the original deeds and mortgages.

  For me, at least, the day-to-day hedge fund maneuvering could get maddening to follow. Ramon and his wizards were indulging in a lot of trades, overnight strategies to double up against the box and heavily margined placements on algorhythm-based computer programs that could rocket if the numbers lined up or permit us to bail out on some prearranged uptick or downtick.… I fought down skepticism at every stage. This seemed too easy.

  By then I was beginning to generate a modest legal practice to supplement my hit-and-run property management for Dad. Buckley had a lot of unbilled time, and certainly a better preparation than I did when it came to tracking the gyrations of Ramon’s high-powered hedge fund managers. That first year Buckley took the financial scud-wor
k over, day to day. It seemed to fire his imagination – big numbers, exorbitant reported profits, a lot of action every minute. A couple of times a week he and Rick met in Tampa at one of the steak houses and strategized prospects for the exploding market.

  * * *

  I’d put it off since summer, but toward the middle of January in 2008 I reserved an afternoon to pop in on my short list of iffy tenants – iffy meant people who weren’t bothering to pay their rents. Normally we sent a reminder note, then something stiffer on our legal letterhead. If that didn’t produce at least a partial payment I’d hitch up my guts and drop by personally.

  One of St. Petersburg’s most respected slumlords had stroked out six months previously. Like the rest of the market, housing was starting to head down. We picked up several of the recently deceased’s rather ramshackle multifamily tenancies just south of Central, adjacent to the giant hummock on Third Street called Thrill Hill because it cost so many drivers their mufflers. These odds and ends were definitely not the sort of acquisitions the Miami bankers were after, but they were cash-flow generators and no doubt good for a pop when we broke them up and turned them over down the road.

  We understood well enough that our underpriced acquisitions bordered what white folks around town dismissed as the St. Petersburg Ghetto. The term remained applicable, God knows, although up-market black families had long since moved on to Lakewood Estates, or Clearwater, or even Pinellas Point. There they lived sedately, maintaining beautiful lawns and slipping in and out toward evening without a lot of fanfare.

  I got to the last address on my list, #5 Muldavey Court, around five. It was still hot, close. The little efficiency apartment I wanted was three flights up and accessible from the back, off the parking area that adjoined a cul-de-sac. A railing of gray old pressure-treated two-by-four ascended to a tiny rear landing. A badly dented anodized aluminum door seemed to be the only entrance. The inside looked dark, vespertine.