“I’m going to Francis again,” Cassy said. “Maybe he’ll listen this time.”
She headed over to Masters’s workstation, visions of a repeat of Murphy Tweed strong in her head. Only this time she knew that she was right, and she was going to be heard.
9
“How bad is this?” Masters demanded when she was finished showing him what she and Donni had found. “And how many times are you going to bring me something that’s still a work in progress?”
Norman had found a partner at the foosball table, and they were playing a noisy game.
“Bad,” Cassy said. She wasn’t going to be intimidated by the bastard, who in her estimation was as blind as her boss at Murphy Tweed had been, even though it had been him who’d hired her.
“Okay, I’ll take it.”
“I can handle this Francis.” After the Murphy Tweed debacle, she had pledged that such a thing would never happen again.
“Then what are you doing bothering me?”
“I’m just making you aware that we could have a major problem.”
“There’s some brilliant research that you might not have seen on the eradication of well-protected intrusions that just came out of MIT,” Masters said, once more reminding her that he had graduated from that institution.
“This is what I’m being paid for, remember?”
Masters’s acne scars reddened. “I’m taking over,” he shouted. “Do you understand, Ms. Levin?”
The foosball game stopped and everyone looked up from their workstations. Cassy felt the heat rise up from her neck.
“Has Julia returned from the exchange yet? Maybe we should loop her in on this.”
“Who the hell do you think—?” Masters shouted, but he suddenly cut off in mid-sentence.
“Is there a problem?” Dammerman asked from behind Cassy.
“Nothing important,” Masters said.
“Everything,” Cassy said, turning around.
“From what I’m understanding, you may have uncovered a possible breach in our system.”
“Yes, sir. And it’s one that could really slam us.”
“Like Murphy Tweed?”
“Not exactly, but the end results could be the same.”
“Let’s get a coffee, and you can tell me what you’ve found.”
“I’ll just come along,” Masters said, but Dammerman gestured him off.
“We’ll take care of this,” Dammerman said.
Cassy followed BP’s number two toward the elevators. Like a politician, he shook hands and had a few words with the geeks, mostly young kids who looked up at him in awe. And he made small talk with the people riding up in the elevator, who for the most part could only nod sheepishly.
BP’s building, with a white atrium that soared twenty stories, was one of the newer ones in the Financial District. They got off at the floor for the cafeteria, which this time of the morning was still serving breakfast before switching over to an extensive lunch menu.
Dammerman was one of very few wearing a suit and tie. Everyone else was in business casual, the norm on Wall Street these days to make the millennial talent feel comfortable.
A stocky, broad-shouldered man with an oak-thick neck materialized beside them as they got off the elevator. He was Butch Hardy, a former NYPD cop who was head of BP’s security division.
“We’ll take espressos,” Dammerman said, not breaking stride on the way over to a table, and not bothering to ask Cassy what she wanted.
Hardy scuttled across to the coffee bar, and Cassy had to wonder how Dammerman could get away with treating his top security man like a servant.
“Masters is a dickhead who sometimes thinks he’s a hell of a lot smarter than he is,” Dammerman said.
BP staffers who usually milled around the cafeteria laughing and joking fell silent, some of them getting up from where they were sitting and moving away, giving Dammerman a wide berth. They were mostly traders and wonks, more socially astute than the geeks downstairs who didn’t know to be afraid of him. He had the reputation of sometimes firing people on a whim.
“Now, tell me what you think you’ve found,” Dammerman said as they reached a table and sat down across from each other.
“I think it’s a computer worm in our system,” Cassy said.
“How’s that different from a virus?”
“A virus needs to be attached to a program before it can spread. It can get into a network from a corrupted file, like when you click a free Florida vacation link to what turns out to be a hacker’s site. It can spread only if someone then opens the file. But a worm can get to work right away. It hides better, and it’s much, much harder to detect.”
“Wasn’t it something like that put the screws to Iran’s nuclear program?”
“Yes, sir. It was a worm called Stuxnet, and it went after the centrifuges used to enrich uranium to a bomb-grade level. It caused them to spin out of control and destroy themselves. Thing is, no one detected the worm until it was too late, and even then they couldn’t do anything about it. Rumor is that the Americans and Israelis were behind the intrusion. Knocked the Iranians out of the ballpark.”
“You ran into a worm at Murphy Tweed, right?”
“I did, but management didn’t believe me. The breach let the bad guys suck brokerage accounts dry in a matter of minutes. These were accounts protected by user names and passwords, as well as a two-factor identification routine where the customer had to text a code if they wanted to make a major trade.”
“Like if they wanted to liquidate their account,” Dammerman said.
“Yes. But the worm went right around it.”
”So if you’re right, and we have a worm, it’ll be powerful.”
Cassy nodded. He’d understood. “I think our worm hasn’t been designed to empty accounts. I think its goal is the destruction of our system, or at least to freeze us from doing business.”
“Freeze?” Dammerman barked.
“What’s worse, since all trading floors worldwide, including ours, are connected in one way or the other, is the possibility that the infection could spread from us to other investment firms and banks, and even exchanges.”
He was silent for several long beats, an expression of malevolence, even hate, on his face. “The entire world?” he said quietly.
“This has the look of something the hackers over in Amsterdam are capable of doing,” Cassy said. “The geeks and nerds living like hippies in the slums whose only life is messing with computer systems anywhere in the world. The bigger and tougher the better.”
Hardy appeared with the espressos. Cassy thanked the ex-cop, but Dammerman didn’t dismiss him. He remained standing off to one side.
“How do we stop it from damaging our system? Or is it even possible?”
“I think if I can make a copy of the worm, I can turn it inside out and feed it back into the system, neutralizing the code.”
“Just like that?” Dammerman said, and if Cassy hadn’t known better she would have thought he was being sarcastic instead of relieved.
“It’s what I could have done at Murphy Tweed if they had let me. But I have to go back downstairs to run some diagnostics. And if I’m right, I’ll be able to follow the worm everywhere, even to an infected exchange on the other side of the world, and kill it.”
“You can kill it?” Dammerman said, his voice low and menacing. “Aren’t you the smart one.”
Cassy was taken aback. It was Murphy Tweed all over again, and she was floored. Completely lost. He was acting like this was her fault. “What would you like me to do, sir?” she asked.
“Your job,” Dammerman said.
“Yes, sir.”
“Butch,” Dammerman said without taking his eyes off her, “keep your eye on our computer genius here, would you?”
TWO
MID-MORNING
10
The twelve directors of Burnham Pike clustered around the boardroom table on the top floor of the fifty-four-story headqua
rters building just past 10:30 A.M. Its glass walls offered a magnificent view of New York Harbor. The Statue of Liberty lifted her torch in the distance. The Staten Island Ferry trailed its wake as it churned away from the Battery. Numerous boats, small as toys from this perspective, cut through the calm water. The sky was a heavenly blue.
A perfect day, Treadwell thought as he entered the boardroom.
The board members applauded him, and he held up a hand in welcome and gave them his best Cary Grant smile. Everyone was happy. BP stock had risen 20 percent so far this year, and it was heading higher this morning. All of it due to his genius.
Technically, the board’s job was to be the advocate for the firm’s stockholders, and that included the directors themselves. It was the big leagues, because board members got a lush BP stock grant, worth $1 million per year on top of their $750,000 salaries, which gave them a powerful vested interest in how their shares fared.
The meeting space was nothing like the mahogany-paneled boardrooms of the past. It was bright and airy, with a modern long white conference table that had a calligraphed place card for each director. A briefing book sat at each spot.
Treadwell glad-handed his way among them. Like a seasoned politician whose constituency happened to be the upper 1 percent of the richest people in America, he gave each a personalized greeting, asking after wives, children, grandchildren, and old friends by name, and sprinkling comments about the directors’ wealthy pursuits.
I heard Tommy got accepted to Stanford. Congratulations.
You bought the old Stuyvesant place in Newport, from what I heard. A coup.
We saw Kay Kay at the Schwarzmans’ in East Hampton two weeks ago. She’s as lovely as ever. Sorry you were in Japan, you missed a nice party.
He sat down at the head of the table as he regaled them with the good prospects for Rockingham’s debut stock. “Our record with IPOs so far this year beats everyone on the Street,” he said, and everyone smiled. They were the captains of industry, and Treadell was the commodore.
Given Burnham’s fat profits, the board had already voted Treadwell a 20 percent across-the-board pay raise. Last year he’d made $23 million in total: $3 million in base pay, $7 million in a cash bonus, and $10 million in BP stock. Forbes estimated his net worth at $2.5 billion. That gave left-wing agitators, some of them in Congress, plenty of ammunition. They branded him as the embodiment of Wall Street greed. The real median American household income was $61,000, they said, and household net worth only $11,000. Many Americans were only one paycheck from living on the street.
“What do you hear about the China situation?” Dennis Wilson asked. He was the no-nonsense retired CEO of the nation’s largest freight hauler.
“A few things, Dennis,” Treadwell answered. “I’ll cover them in my remarks.”
“You’ve been recommending that we go to cash,” Sarah Cummings, the head of the largest soft-drink bottler in the world and the lone woman on the board, said. “Are you still recommending that course?”
“I’ll cover that too, in a few minutes, Sarah.”
Dammerman walked in and took at seat to the right of Treadwell. “Sorry I’m late, but business waits for no one.”
As BP’s COO, he was the number-two man in the firm, so he got a few chuckles at his disingenuous remark, but no one on the board liked him. He was too rough around the edges, and had none of Treadwell’s polish and political skills.
But Treadwell trusted him, and that was good enough for the board.
“Everyone, please take your seats,” Treadwell said.
In addition to being CEO, he had from the beginning maneuvered himself into the position as chairman of the board, the body that was supposed to oversee the company’s operations—and the CEO’s decisions. And he had handpicked each member, all of them Treadwell cronies, more than happy to get the benefits that BP doled out to them as long as they went along with the CEO.
And only one of them had any real financial expertise, other than running their own companies, so they couldn’t mount any realistic challenge to Treadwell’s policies even if they wanted to.
That exception was Charles Callaway, who managed the Tobias hedge fund and was married to Treadwell’s sister. But he viewed his major function as acting as his brother-in-law’s cheerleader.
Treadwell took his place at the head of the table, the harbor behind him and the glow of the morning sun bathing him in an almost holy radiance. By design. In his mind, these meetings were mostly theater.
Flanking him, besides Dammerman, was the chief financial officer, Todd Penniman, a thick-necked wonk with thinning, prematurely gray hair and round Charlie Brown eyes, who had climbed up through the ranks mostly because he was a bootlicker. A devoted yes-man, he could be counted on to make the numbers look good no matter what.
A sprinkling of other BP executives sat along the walls, waiting to answer any questions the boss might have for them.
“Fellow board members,” Treadwell began. “We have a problem.”
Smiles around the table faded.
“A crash is coming, and maybe sooner than any of us had expected,” he said, his voice as stern as a righteous preacher’s. “I’m sure that some of you saw the news on the internet earlier this morning. CNN was all over it. Numerous banks in China are about to collapse. This will almost certainly cause a panic, perhaps sending markets around the world into a free fall. It’ll make ’08 seem like a day at the beach.”
“Might cause a panic?” Dennis asked.
“We’ve anticipated what’s going to turn out to be a mess,” Treadwell said. “You may have heard the rumors that we’ve been moving to cash, and it’s true. We’ve kept the news out of the media and denied it when The Wall Street Journal’s Tony Langley asked one of our PR people about it two days ago.”
“Okay, Reid, what’s ‘going to cash’ mean in this context?” Sarah Cummings asked.
“Over the past month we’ve discreetly sold off the majority of the stock and bond holdings in our own account. I have done so for myself as well, and I recommend the rest of you follow suit. But quietly; we don’t want to be the root cause of the coming panic. When it comes—not if, but when—it will send the prices of our securities plummeting. If word were to get out, we would be hard-pressed to make anything on our own trades.”
Treadwell paused a moment for effect. “If we’d unloaded our holdings on the NYSE or any other public exchange, we wouldn’t have been able to mask our sales. We avoided this by using our own dark pool and those of a few trusted allies.”
“Brilliant, Reid,” his brother-in-law said. “Dark pools, good move.”
Everyone around the table nodded in agreement, but Treadwell figured he could count on one hand how many of them actually knew what a dark pool was. They were businesspeople, not traders.
Dark pools were trading platforms that substituted for public exchanges such as the NYSE, and allowed big players like BP to make substantial trades with no one the wiser. BP had its own dark pool, and yet from time to time used other, similar platforms because of the volume of securities they wanted to move.
“At this point we’ve successfully liquidated more than ninety-five percent of the firm’s invested capital, and it’s sitting in a very large number of FDIC-protected banks around the country.”
The Federal Deposit Insurance Corporation covered deposits up to $250,000. No depositor would lose any money up to that amount.
Jack Perkins, CEO of the number-one tire manufacturer in the U.S., raised his hand. “Sorry, Reid, but I just did the math. There are about five thousand banking companies in the U.S. That means we can only shelter just under 1.25 billion dollars of our capital. But BP’s invested capital is around five hundred billion.”
Treadwell now regretted appointing the man, whom he’d thought would be easy, to the board. But in the past six months or so the old bastard had become a pain in the ass. He’d never been a financial whiz, but he was sharp.
“We’ve managed
to do it through thousands of dummy companies we set up. And none of them have any overt links to us.” Again Treadwell paused for effect. The board was with him. “Once the shit hits the fan, and I believe it will sooner than later, we will be covered.”
“Is this even legal?” Perkins pressed the point.
“Our legal beagles have signed off on the strategy. We’re good.”
“Don’t we have to report this to the SEC? What we’re doing is a significant corporate event.”
“Unbuttoning our fly to the Securities and Exchange Commission would defeat the whole purpose of the exercise,” Treadwell said glibly.
By law, changes in a publicly traded company needed to be announced because the value of the company’s stock could be affected. “According to Hank Serling this technically isn’t a corporate event that rises to a mandatory disclosure.” Serling was BP’s chief attorney and another of Treadwell’s handpicked people.
“Hank said that?” Perkins demanded. “Doesn’t sound kosher to me.”
“The board knows that I have never made a move without the ironclad guarantee that it’s in the best interest of Burnham Pike.”
“Why not put our money in U.S. T-bonds, instead of this cockeyed bank scheme? Treasuries were the safe play in ’08. Everything else went to hell then, except T-bonds. Backed by the government, what could be safer?”
“Buying that amount in Treasuries would send up a red flag that trouble was on the wind. You can’t hide something that big.”
“Reid’s never steered us wrong before,” Charlie said, and the rest of the board murmured their agreement.
Sarah spoke up. “Okay, but the bigger question is: Is the situation in China so dire that we need to go this route? Why will there be a crash? How bad will it be? And how do we—you, Reid—know for certain it’s coming?”
Treadwell nodded. “Good questions,” he said. “All of you know Spencer Nast, our former chief economist. We’re honored that he’s now serving as the head of the National Economic Council, and in the White House as President Farmer’s chief economic adviser. Once he’s finished in Washington we hope that he’ll be returning to us. He warned me three months ago that he had reliable intelligence sources that bank collapses in China were imminent. And this morning we met briefly, and he said that he believes the Chinese bank meltdown may occur as soon as today. Overnight, our time.”
Crash Page 4