Until it had been too late.
“As you can imagine, the dastards aren’t telling us anything, so for much of this, I’m making guesses and conjectures.” Cordelia looked up. Her face was ashen, save for the bruise-dark hollows beneath her eyes. “Are you all familiar with the term arbitrage?”
Alison and Sheffield looked utterly mystified, but Wrexford’s eyes narrowed. “Hell’s teeth, so that’s what they’re up to.”
Charlotte had done a drawing some time ago on a scandal involving government bonds, so she grasped the basic concept of how such trading worked. But she couldn’t quite imagine....
“It would take hours, if not days, to explain the complexities of arbitrage,” announced the earl. “But for now, let’s just say that arbitrage is the simultaneous purchase and sale of an asset or related assets to profit from differentials in price.”
He frowned. “We’ve already established why the cost of silver in China was so much lower for the conspirators than the price for which they could sell the same silver in European markets. So I assume that as the conspirators acquired the cheap silver in China through their opium operations, at exactly the same time, they sold a similar amount in European markets, making a trade that was both profitable and entirely riskless. Even if the price of silver went up or down, they still made a profit as long as the difference in price prevailed.”
“Yes, exactly!” exclaimed Cordelia. “The miscreants would sell the opium on the fifteenth of every month in China, thus in effect buying the silver at a very low price. As we just discussed, they would pay by issuing a bill of exchange, payable in London in pounds. Meanwhile, on the same day they would sell that same amount of silver in Amsterdam, Hamburg, or Antwerp at the much higher European price, promising future delivery and taking in payment a bill of exchange payable in pounds.”
“But how did they know exactly how the prices compared in Europe and China?” demanded Charlotte.
“A very astute question,” replied Cordelia. “They didn’t know exactly. But there are ships coming into Canton every day. They have the latest information on gold and silver prices, as well as exchange rates. As long as the conspirators could be reasonably certain that some significant price differential remained, they knew that by buying and selling at the same time, they were earning a riskless profit. The calculation of their exact profit would be worked out later.”
“Oh, dear,” murmured Alison. “I fear I don’t follow all this money and bills going around in circles. But I get the sense that the miscreants negotiated an agreement with someone to pay them a large amount of profits in British pounds, which is exactly what they wanted.”
“Precisely,” agreed Cordelia. “The conspirators set up a joint account within the East India Company, one disguised as a legitimate trading account, to keep track of the profits, which they then divided among the conspirators and their partners at the supercargoes, along with the many people they bribed in connection with their scheme. They made the exact calculation of their profits, adjusted for movements in exchange rates through these accounts, and all the conspirators were happy.”
She made a face. “Thievery by double-entry accounting rather than pistols.”
“Interesting,” muttered the earl. “They are unfortunately fiendishly skilled at financing.”
“Indeed. The bills of exchange even minimized the amount of silver which had to be physically transported,” explained Cordelia, now struggling somewhat to control tears. “No need to go into the details here, but it’s much like when I write a cheque on my bank and give it to you to deposit in your bank. The banks don’t ship the actual precious metal for each check back and forth. They merely net out the transactions at regular intervals and move only a small amount of actual currency to balance accounts.”
She paused. “And just the same way, the various agents in the cities receiving or paying the bills of exchange deal regularly with each other and simply net out all the transactions. As a result, very little silver has to be transported in any direction.”
Wrexford grimaced. “Clever. And fascinating that, as the late economist and philosopher Adam Smith wrote, the ‘invisible hand’ of the market is what shapes the nature of all commerce. Even in crime, capital flows to where it can earn the highest return with the least amount of risk.”
“Yes,” agreed Cordelia. “Fiendishly clever.”
The group fell silent, pondering the elaborately sophisticated machinations that Cordelia had just described.
Cordelia fisted her hands together. “It’s taken me some time to piece together all the information I’ve just told you. Please bear with me while I finish explaining how the professor and I were forced to become part of their nefarious scheme.”
Sheffield nodded. “Go on.”
“Jamie had mentioned my mathematical skills and the wonders of the professor’s machine to his friends, including Mather. Apparently, the conspirators got wind of it. Having tricked Jamie into borrowing money for the venture and signing his name to the official company documents, they have threatened to ruin him and make the machination appear to be all his doing unless the professor and I use the Computing Engine—based on principles of arbitrage—to buy and sell silver in different markets to maximum advantage.”
Cordelia drew in a shaky breath. “The best trading strategies depend on the wide range of variables—the price of silver, the interest on money borrowed, the exchange rate for the various currencies involved, the transport costs, to name just a few. The Computing Engine, however, when properly programmed by the mechanical instructions that my mathematical skills allow me to devise, can work the math required in a fraction of the time, and much more accurately than a roomful of accounting clerks.”
“I’ve heard,” the earl mused, “that an understanding of the mathematics of the arbitrage trade has been the subject of considerable study in the past fifty years. Most recently, a Mr. William Tate believes he has worked out a general analysis of the relevant mathematics. Or so my friends at the Exchange tell me.”
“Mr. Tate has done exactly that,” agreed Cordelia. “I’m acquainted with him, and I know that he hopes to publish his writing on the subject soon. But in the meantime, he shared a draft with me. The calculations are laborious and often require prodigious amounts of human labor. Moreover, given all the variables, the most potentially profitable trading arrangements may not be immediately apparent to the human eye. For example, we’ve seen over the past ten years a staggering growth in the ‘forward markets’ as compared with the ‘cash market,’ further complicating the exact calculations . . .”
Her voice trailed off as she realized that the others were reaching the end of their understanding.
And their patience.
“In any event,” she said hurriedly, “now that the professor and I have identified some long-term strategies for profit, I’ve demanded that they let us all withdraw from the wicked scheme. So, Cobra and the ringleaders have promised that if we make enough profit for them in the next arbitrage cycle, they will give Jamie the money he needs to repay the loans taken in his name and will return the corporate documents necessary to allow him to quietly disband Argentum Trading Company. But . . .” Her voice cracked.
“But you don’t believe them,” said Charlotte softly.
“And quite rightly,” growled Wrexford. “This won’t end until we identify the ringleaders and see that they are brought to justice for their crimes.”
Charlotte was of the same opinion. Blackmailers rarely let their victims walk away when there was still money to be squeezed out of them.
“There’s one last thing,” said Cordelia. “In addition to the arbitrage numbers, they’ve also given the professor and me a very complex set of equations to calculate as part of the deal for getting back Jamie’s papers. I don’t know why. I’ve not yet had a chance to examine the required work carefully, so I can’t hazard a guess on what it’s for.”
“I’ve not yet had a look at it, either, but it c
an be nothing good,” muttered Sudler. “Of that you can be sure.”
Cordelia sucked in a breath. “So, now you know all that we know. And while I have no right to ask for your help . . .”
“Of course m’lady will help,” piped up Raven. As the boy turned to her, Charlotte saw the ripple of mute appeal in his eyes. “Won’t you?”
“That goes without saying,” she replied softly.
“Well, then,” said Sheffield quickly, “we need to make a plan.”
“All in good time,” counseled Wrexford. “First, you and Woodbridge should go retrieve the Computing Engine. We need to keep it safe.”
Raven shot to his feet, pulling his brother up with him. “We’ll go with you.”
Harper gave a canine stretch and padded over to join them.
“I’ll go, too,” said Cordelia.
“Leave the crossbow and sword here, Weasels,” said the earl before the boys could slip away with the weapons.
“Speaking of swords . . .” The mention of blades suddenly reminded Charlotte of another mystery within the mystery. “The Runners recovered a silver-handled knife with a lion rampant inset on the hilt at Queen’s Landing. Have you any idea to whom it might belong?”
“Ah, so it has been found.” Woodbridge blew out his cheeks with a wry sigh. “It’s mine. The Cobra told us he had it stolen from my townhouse and hidden there as a warning of how easily the conspirators can make me look guilty of any crime. He said that I won’t be in danger of being arrested, as the authorities wouldn’t accuse an earl of the crime unless there was ironclad proof that I murdered Mr. Peabody.”
“Like an eyewitness,” interjected Cordelia. “Which they could also produce if they so chose.”
“As I said, the East India Company—or those who are cloaked in its aura of power and prestige—is a very dangerous enemy,” responded Wrexford. “We would all do well never to forget that.”
CHAPTER 19
The echo of the words hung heavy over the room as the rescue party took a solemn leave from the room.
“Ye heavens, with all the excitement, I could use another nap,” murmured Alison as she watched the group disappear into the corridor.
“And I,” said Sudler, “could use another brandy.”
Wrexford refilled the professor’s glass and then came to take Charlotte’s arm. “Come, let’s take a stroll outside. Perhaps the sunshine will shed some clarity on how to untangle this coil of vipers,” he muttered. “But I fear we’ll need more than light.” They crossed the corridor and passed through the door leading out to the back terrace. “We’ll need a bloody miracle.”
“We’ve faced daunting situations before,” pointed out Charlotte. “And daunting foes.”
“Yes, but this mystery, I fear, is a web that’s woven far wider than any we’ve faced before.”
The breeze slipped beneath the neckline of her gown and, like an icy finger, stirred a shiver along the length of her spine. “I believe Lady Cordelia is telling us the truth.”
“The truth as she knows it,” agreed the earl. “But if there’s this level of corruption within the East India Company, I have to believe that someone in a very senior position is behind it.”
Charlotte understood enough about the world of power and privilege to know that he was likely right. “As I make my living uncovering the secrets and scandals of Polite Society, I’m aware of how a thin veneer of perfectly polished respectability can hide a core of rot.”
She thought of the murdered Henry Peabody, an ordinary man who believed that the rules should apply to everyone. “But no matter how deeply that rot goes, or whom it touches, I intend to expose it.”
Wrexford heaved a long-suffering sigh. “I was afraid you were going to say that.”
“Don’t pretend that my sentiments surprise you.”
His mouth curled up at the corners.
“And besides,” she added, “you hate hypocrisy as much as I do.”
The smile grew more pronounced. Tucking her hand in the crook of his elbow, Wrexford led her down a set of stairs to a low stone wall that looked out over a distant lake. He sat and patted the spot beside him. “We shall have to plan our next steps very carefully. With all our well-meaning friends running around, trying to help, it’s imperative that we don’t let them stray into trouble.”
“I was thinking much the same thing,” said Charlotte. “We need to be methodical. You have entrée into the world of banking, and into the clubs to which the senior officials of the East India Company belong, so I suggest that is where you begin your investigations.”
“Yes, I’ll certainly need to have a word with Mather. And another chat with Copley.”
“What’s your impression of him?” asked Charlotte. She knew the man only by reputation.
“Smooth and polished as one of the classical marble statues in the British Museum,” said the earl. “But as we keep reminding each other, appearances can be deceiving.” He considered the question for a moment longer. “That said, I’ve not heard a whisper about any flaws. We shall have to ask Lady Peake—”
“Ask me what?” The tap-tap of Alison’s cane quickened over the flagstones. “Forgive me for interrupting, but something came to mind that I thought you ought to know.”
“We were just wondering what you know about Lord Elgin Copley,” replied Charlotte as Wrexford quickly rose and assisted the dowager in taking a seat beside her.
“His reputation is as pristine as virgin snow. Though that in itself might stir suspicions,” came Alison’s tart reply. “For no one is perfect.” A pause. “However, from all that I have heard since he arrived back in England, Copley comes close to deserving a pedestal. Not only is he said to be a brilliant administrator, but he’s also very generous in his support of a variety of worthy charities and champions sensible reforms in Parliament.”
“Yes,” mused the earl after resuming his perch on the wall. “He seems a paragon of progressive thinking.”
“While you’re looking for someone whose past contains some unpleasant little secrets that might relate to our investigation,” responded the dowager. “And that’s why I sought you out. I suddenly remembered some rumors regarding the youngest son of Sir Joseph Alston. He left Oxford abruptly to take a position in the East India Company’s civil service . . . a post in one of the regional headquarters, if memory serves me right. That was perhaps twenty years ago, and he apparently served there without incident until four or five years ago. The details never came out at the time, but the gossip in the drawing rooms implied that he was forced out because of financial improprieties.”
Charlotte tried to recollect any recent scandal involving the name Alston. She caught the earl’s inquiring look and shook her head. “Nothing concerning the family comes to mind. But given the youngest son’s past, we have to consider him a suspect.”
Alison looked pleased.
“Do you perchance know his given name?” Charlotte pressed.
The dowager’s brow furrowed. “Frederick . . . no, Fenwick! Fenwick Alston. However, I’ve heard no mention of him since the incident in India.”
“Sheffield may be able to dig up some information on him and his current whereabouts in the gambling hells of Southwark and Seven Dials,” murmured Wrexford. “Knaves and scoundrels have a sixth sense for knowing all the fiddle-faddles of their fellow sinners.”
“Well, that’s all I have to offer for the moment,” said Alison. “I shall keep digging in the nether regions of my memory for any other buried scandals. And I’ll also make some discreet inquiries about Copley and the other directors.” Waving off any assistance, the dowager rose. “Now, I shall toddle off for my nap and leave you to your plotting—though I must say, sleuthing is an even better tonic for these old bones than sleep.”
* * *
The cane’s tap-tap faded into the twitter of birdsong and the sound of the breeze ruffling through the ivy. Wrexford watched the sunlight skitter over the dark-hued leaves. A glimmer of hope? Or merely
taunting flickers? As of yet, they were still grasping at specters.
“I’ll seek out another meeting with Annie Wright as soon as we return to London.” Charlotte’s voice drew him back from his brooding. “And see what I can learn from my informants around the docks about any suspicious activity within the East India Company wharves.”
He shook off his pessimism. “As I said, it’s time to confront David Mather. And I’ll now need to speak with Sir Joseph Alston, as well as Copley.”
“I was also thinking of Jeremy,” offered Charlotte. “He’s become very involved in Mrs. Ashmun’s mills and has been investing in their expansion, so he knows a good deal about the world of commerce. He may have some ideas on how to find the evidence we need . . .” Her words trailed off. Squinting into the sun, she raised a hand to shade her eyes. “Is that a horse and rider coming up the drive?”
Wrexford shot to his feet for a better look. “It’s Tyler.” He waved his arms.
Spotting the signal, the valet swerved off the road and cantered over to join them. He had been riding hard. Dust coated his clothing, and sweat lathered his horse’s flanks.
“I managed to get what you asked for,” Tyler announced without preamble. “Though I’m not sure whether you’re going to be pleased.” He pulled an oilskin packet from his pocket and handed it to the earl. “By the by, that cost me a very expensive meal. And Griffin will have your guts for garters if he doesn’t get it back by tomorrow.”
As the earl plucked a knife from the folds, a mote of light danced down the steel blade.
“Griffin can’t say for sure that it’s the murder weapon,” began the valet. “What he does know is that it definitely belongs to Woodbridge.”
“Yes, Woodbridge is here and has told us as much,” cut in Wrexford, “along with a good deal more.” He gave a terse explanation of the situation.
“Damnation. Then you’re not going to be happy with the other bit of news I’ve learned,” replied Tyler. “Mather appears to have left Town. Word is, he’s taken a leave of absence from the bank to make a trip to Ireland with some friends.”
Murder at Queen's Landing Page 20