by David Lender
Dazed. Richard felt guilty. If he hadn’t started monkeying around with this mole stuff, he never would have dragged Kathy into it. It sucked, doing that to her, seeing her like this.
Jack and Steinberg showed up half an hour later. They had Ken Stern and Karen Summers, Walker’s General Counsel and Assistant General Counsel, in tow. Richard tried to feel out Jack and Steinberg; they seemed okay, the same as yesterday. He’d keep an eye on Jack, nonetheless. The room filled up after that, Toto and team bringing in multiple copies of neatly bound transcripts of all the mole’s emails.
“Let me tell you where we are,” Toto said. “I’ve been through the transcripts of all the emails. You each have a copy. It’s attorney-client privileged. Essentially, Richard’s and Kathy’s descriptions seem to be accurate.”
Richard sat up straight; he hadn’t suspected their account of things was ever in doubt. Oh, man.
Toto went on, “Someone is obviously sending trading instructions from Walker in New York to GCG in Paris. The pattern of activities is identical for Southwest and Tentron.”
“Any evidence of trades emanating from anywhere else?” Ken Stern asked.
“No,” Toto said. “It’s all outbound from New York.”
“When did the Tentron trading activity start?” Steinberg asked.
Toto flipped open a copy of the transcripts. “Sometime in early September. Here it is, September 2nd,” Toto said.
“That’s weeks before we opened our numbered trading account on behalf of Milner,” Karen Summers said.
“All these emails went from the same email address?” Jack asked.
“Apparently, yes,” Toto said. “They could be from anybody at Walker. Richard tells us that the SEC and the U.S. Attorney’s Office have traced back similar trading activity to three of Milner’s previous deals—Ernest-United, Tungsten Steel and Val-Tech Industries.
Richard watched Steinberg’s gaze move to Jack’s like they were communicating in some unspoken way, then back to Toto.
“And evidently someone inside GCG Paris is a critical link as well,” Steinberg said. “Okay, what next?”
“My recommendation is that you immediately convene an internal task force to investigate this situation,” Toto said. “You can use these transcripts and the tapes of my interviews of Richard and Kathy as a starting point. Next, I should call up Charlie Holden at the U.S. Attorney’s Office and tell him that Walker & Company has undertaken an internal investigation of the matter. I can offer copies of these transcripts and anything else we might uncover as assistance to the SEC and the U.S. Attorney’s Office in their investigation, in exchange for full immunity for Richard and Kathy and, of course, for Walker & Company itself.”
“You’re dreaming if you think they’ll buy into immunity,” Steinberg said.
“Maybe so,” Toto said. “But it might get a dialog going. And I’d at least like to get in Holden’s face about this scare tactic they pulled on Richard yesterday. That was a cheap trick and I’m going to let them know what I think of it. And I’ll tell Holden that if he tries anything like that again, we’ll haul him in front of a judge with a motion to suppress and a potential lawsuit for harassment.” She spoke matter-of-factly, but her mouth made biting motions at the air. Richard thought of Holden; he’d love to hear Toto laying into him. “I’m also going to see if I can get him off of Richard’s back. I’d like his word he won’t try any more theatrics. On you, either, Kathy,” she said, looking at Kathy. Kathy shifted in her seat and looked at the floor.
Richard looked at Steinberg, then Jack. These guys were like stone; he couldn’t read them. He was starting to wonder: Can I trust them?
Kathy and Richard took three successive cabs, looking out the back window all the way, before having one drop them at the Carlyle. Richard was beginning to worry about Kathy. She still hadn’t gotten the glassy look out of her eyes.
In the limo on the way downtown, Jack said to Mickey, “You thinking what I’m thinking?”
“Probably not.”
“I’m thinking we might be able to contain this thing if we get immunity for the firm.”
“Dream on. And even if we did, that’s not a total shield,” Mickey said. “The firm might be okay, but we’d get microwaved.”
“Yeah, but it’s a start. And we’re totally fried if we don’t get it.”
Mickey just looked out the window.
Jack was thinking, Stay inside yourself, hold it together. He said, “First off, we gotta kibosh this internal task force.”
Mickey looked at Jack like he was his dumb little brother. “No. We set it up so it does its job and comes up with nothing.”
“Ken Stern is no dummy.”
“I know. Dealing with that falls into your department.”
Jack thought about it for a moment. He nodded, then said, “If we keep our poise, we just might pull this off.”
Mickey said, “Like managing to step on all the stones walking across a stream. Like we always do.” Mickey said it looking out the window past Jack, that dreamy look he got in his eyes when he was thinking, eyes blinking.
Richard and Kathy ate a room-service dinner in Richard’s room at the Carlyle Hotel. They didn’t talk much. “So who do you think our mole is?” Richard asked afterward.
“Not me,” Kathy said.
Richard said, “I guess that eliminates at least two Walker employees.” She was sitting cross-legged on the bed, looking sleek and sexy. Richard was looking forward to getting his hands on her later. She must have guessed: she smirked at him. Richard went on, “Should we start eliminating others one by one or try to guess who he is?”
“Not Mickey or Jack,” Kathy said.
“You’re hallucinating,” Richard said. “I don’t see how we can rule out them yet.”
“Are you serious?” Kathy asked.
“Jack and Mickey are the firm’s biggest management shareholders.”
“That’s kinda cynical, babe,” Kathy said. “As the firm’s two most senior guys, they’d be concerned whether or not their pocketbooks were involved.”
“Don’t be a dope. This is Wall Street. And you already said you think they’re sleazebags.”
“Yes, but running an insider trading ring when you’re worth hundreds of millions?”
“A bunch of back-office clerks didn’t set this up.”
It stopped her. She thought a moment. “Do Toto’s email transcripts tell you anything new?” she asked.
“It’s just a bunch of trades. I got more out of the Excel spreadsheet I set up; at least you can sort that multiple ways.”
Kathy jumped up, pulled Richard’s memory stick with the Excel file on it out of her purse. She went over to the desk, plugged it into her laptop, and loaded the Excel file.
“What are you doing?” Richard said.
“Trying to figure out if there’s any sequence to the trades. I’m copying the data and breaking the original file into two. I’ll sort one by name of the institutions that GCG Paris passed trades out to. The other chronologically, listing side by side all the trades in each of the deals to see if there’s any common sequence.”
Richard took out his laptop and turned it on.
“Did we have all the confirmations coming back from the other institutions around the world to GCG Paris in the batch you FedExed me from Paris?” he asked. He had an idea.
Kathy said, “I think. But what will they show?”
Richard said, “I’m gonna check to see if we have confirmations coming back from any institutions that we don’t have any outbound emails to. That should tell us whether GCG Paris is fanning them all out, or whether there’s some other intermediate staging point.”
After about an hour they had three completed lists. They kept looking back and forth between them.
Kathy said, “Two of the Swiss banks, Credit Genéve and Stahl Fils & Cie, never showed up in outbound emails from GCG Paris. The same thing’s true of Peniche Industrial, a Chilean brokerage firm, and Siu Yan and
Sai Ltd., the Hong Kong bank that seems to be executing trades from the Far East.”
“So there must be another link someplace,” Richard said. “The emails ordering and confirming trades are about a million shares off on each deal.”
“It’s just noise,” Kathy said.
“Each deal? That’s significant,” Richard said.
Kathy said, “So let’s assume your theory is right, that Walker New York is the start of the circle, the origination point and the final confirmation point, with GCG Paris as the primary relay point. So where’s the secondary staging point?”
Richard said, “We’ll need to juggle the trades again to see if we can find a mismatch on the outbound and inbound to each address. If we have a much higher amount of outbound to some place than inbound, it means it could be the staging point.” He sorted the data again. “It’s London,” Richard said.
Kathy said, “Another thing: these four institutions I mentioned earlier,” pointing to the screen, “two in Switzerland, one in Chile and one in Hong Kong sent some of their confirmations of trades directly back to New York.”
“So?”
“It has to be London,” Kathy said. “The total number of shares confirmed directly to New York from those four sources almost exactly matches the imbalance in confirmations from London itself versus the outbound orders sent to London.”
“I knew there was a reason I’m crazy about you.”
Kathy said, “So we have New York as the center of the ring, Paris as the main staging point and London as the secondary staging point. And we have banks in Switzerland, Chile and Hong Kong that seem to be getting accessed only through London.”
“You think that whoever’s staging things out from Paris doesn’t know about these four institutions being staged through London?” Richard asked.
“There’s so much data it would be almost impossible to keep track of it, unless they sorted it like we’ve done and figured the totals don’t match,” Kathy said. “Maybe it’s just to conceal the orders better.”
“Yeah, maybe, but I still think something’s fishy.”
Kathy laughed. “The whole thing’s fishy. And another thing strikes me. London, Paris, New York. You don’t need to be a genius to guess we’ve got crooks at Schoenfeld, GCG and Walker. A whole kettle of rotten fish.”
Richard knew it, too, but hearing it said aloud made it stink even more: no place was safe, everybody suspect.
Kathy stopped laughing. She said, “My God, I can’t believe you went to Jack and Mickey with this.”
“I went to LeClaire. He brought me to Jack and Mickey.”
“So? How can we trust anybody?”
“We’re switching hotels,” he said. “I don’t want anybody to know where we are. Not Jack, not Mickey, not anybody.”
CHAPTER 8
NEW YORK CITY. IT WAS 9:30 p.m. and the guy, Stern, still hadn’t come out to the South Street pier parking lot for his car. Preston waited underneath the FDR Drive onramp across South Street, behind the 55 Water Street building where Stern worked. Preston was used to waiting. He had all night. And if tonight wasn’t the night—just like the last two nights, when too many people were around—maybe it would be tomorrow night.
There he was. Preston hit his beeper, then watched as Stern crossed South Street. He saw the others get out of the van and follow him. Preston wore a suit and tie, so as not to put the guy off. He picked up his briefcase and walked out of the shadows as Stern approached.
“Hey, buddy, got a light?” Preston said, smiling and holding up a cigarette. He stepped into Stern’s path.
“No, sorry, I don’t smoke.”
Preston dropped his briefcase. “Damn,” he said and bent over as if to pick it up. When he saw the others were only a few steps behind Stern, Preston jumped up and shoved him in the chest, knocked him over backward into the others’ arms.
“Hey!” was all the guy had time to say before one of the others clamped a hand over his mouth.
Preston hit his beeper again, then heard the truck’s engine revving, then coming down South Street, shifting gears, faster. Preston stepped back into the shadows beneath the onramp. He watched as the others dragged Stern to the street and threw him in front of the truck, only doing maybe fifty, but fast enough. The other guys scattered and Preston got the hell out of there.
Jack sat in front of Mickey’s desk, waiting for him to get off the phone. Jack could hardly believe how bad things had gotten, and how fast. “Challenging times,” was all Mickey said about it before he took his call.
More like shoveling into a gale force wind. In the last few months, Washington Mutual goes bust and the Fed brokers a sale to J.P. Morgan. Wachovia goes bust and the Fed brokers a sale to Wells Fargo. Bear Stearns goes bust and the Fed brokers a sale to J.P. Morgan. Fannie Mae and Freddie Mac go bust and the Feds take them over. Lehman just goes bust. Next, the Fed sticks over 100 billion into AIG to keep it from going bust. Then, Merrill Lynch, afraid of going bust, sells itself to BofA and the Dow is now 40% off its peak.
The way the last months had gone, Jack wasn’t sure he wanted to see how the next few days would go. Then, after all that, Milner finally gets off his ass to get Tentron done, and it looks like that will keep Walker afloat. But now this mole trading thing hits the fan. Jeez. Talk about bad timing. Mickey and him would have to do some fancy ham-and-egging to claw their way out of this one. Problem was, you had to have something to start with. Right now, if only they had some ham they could have some ham and eggs if only they had some eggs.
When Mickey got off the phone, Jack said, “The police are calling Ken Stern’s death suspicious. They’re doing forensics.”
Mickey looked at Jack like he was retarded. “Did you expect anything else?”
Jack shifted in his chair, said, “Toto made any progress on immunity?”
Mickey shook his head. “Holden isn’t budging. In fact, now he’s saying he’s going to charge Blum—when he finds him.”
Jack said, “I’ve thought about how we firewall this thing.”
Mickey looked up. “It’s like any deal. We need some negotiating leverage with the Feds. And a sweetener. Then we trade for our immunity.”
“Right. What if they had the mole, or thought they did?”
“The only way that works is if we hand them their case in a way that they’ve got everybody involved, neatly packaged. Or at least looks like it. Enough to get their headlines.”
“So we make it look like the mole is the only one at Walker.”
“Charlie Holden will never buy that,” Mickey said, staring at Jack, eyes blinking.
“Alright, so the mole and a few more who helped him out, and it stops there. They think they’ve got the mole now—Blum.”
“You’re not serious.”
Jack said, “Let’s just say they’ve got so much on Blum he can’t talk his way out of it, and so he has to cut a deal, or we make it worth his while to cut one.”
Mickey gave Jack one of his impatient looks, glanced over at one of his screens, then back at Jack. “Blum’s clean. And he’s a straight arrow. Do you want to be the one to offer him money to pretend he’s dirty so he can save all our asses? Even if Blum agreed, he doesn’t know enough to make it work. And even if the Feds stretch what they’ve got on Blum, it won’t stick once he’s got a good defense lawyer.”
“So what’re you thinking?”
“That we need to serve up the Feds a little something they wouldn’t be able to get any other way.”
Jack didn’t say anything, just watched Mickey.
“Something that will make it stick,” Mickey said.
That Mickey, always figuring things out. Jack sat back while Mickey started explaining.
Richard was sitting in their hotel room at the Waldorf Astoria, switching the TV from Bloomberg to CNN to CNBC. Kathy had gone for a newspaper. The Dow was now down 5% for the day, the financial stocks had fallen off a cliff, and the newswires were talking about another federal bailout for Ci
tigroup. The credit markets had ground to a halt and 20% layoffs were happening all over the Street. Two years of B-school, made it to the Street by a hair, work my ass off, finally making it and this happens. What a mess. And even worse, this mole thing had him hiding out from the Feds and now even his own firm. His cell phone rang, gave him a start. He looked at the number on the caller ID: Jack. The mole? Or just Jack.
“Hi, Jack.”
“Hey,” Jack said, sounding like nothing had happened. “You okay?”
“Yeah. Bored.” Richard now feeling uncomfortable.
“Then I’m about to make your day. Jim Baldwin called Mickey at home last night and asked for a meeting. Sounds like maybe Nick Williams is ready to do a deal with Milner on Tentron. You interested in coming?”
“Of course. You heard anything from Toto?” Richard listening for any inflection in Jack’s voice.
“Yeah, but it’s not resolved. Holden won’t agree to a deal without the SEC being involved. He also says we aren’t offering them anything they don’t already have. Might take a few days. You may need those Groucho Marx glasses after all.”
“I’ll figure something out.”
“Be at Milner’s at noon for a strategy session. Williams and his advisers show up at one. See you there, tiger.”
Richard sensed a flutter in his stomach, a tingle in his fingers. He had some things he wanted to discuss with Milner, alone, and this meeting gave him a perfect reason to be there.
But Jack was acting too casual. Walker’s General Counsel gets killed by a truck after Toto insists he set up an internal task force to investigate the mole thing. And Jack never mentions it. This was getting scarier by the minute.
“Who was that?” Kathy asked from the doorway.
“Jack.”
Kathy clenched her jaw. “Does he know we’re here?”
“No. At least I don’t see how he could. He called about a meeting at Milner’s office on Tentron.”