Due Diligence: A Thriller

by Jonathan Rush

  “Morgan Stanley may have nothing to lose,” retorted Wilson, “but Andrew Bassett sure does.”

  “What’s that, Mike?”

  “Us!”

  In his office, Pete Stanzy nodded. That was precisely the point, and he was glad Wilson had gotten there himself. “Exactly. Mike, that’s what we’ve got to use. That’s our strength.”

  “What else?” demanded Wilson hungrily. “Come on, Pete. Hell, you’re an investment banker. You know how you bastards think. What else might they be doing?”

  “Well, they might not be shopping themselves around. They might just be trying to get more out of us.”

  Wilson laughed incredulously. “Do they really think…?”

  “We’ve gone in high; they might think we can go higher.”

  “Their board’s approved it!”

  “No, Mike,” said Stanzy, “their board’s approved it conditionally. They might be treating it as a floor.”

  “See, I told you these bastards were screwing us!” muttered Wilson to Lyall Gelb.

  Stanzy gazed at the bullpen. What else did Wilson expect? Buffalo was trying to screw Leopard, but that was only because Leopard was trying to screw Buffalo. That’s what deals were about. That was what made them fun. In addition to the fee. And this was one fee Pete Stanzy wasn’t going to let go of. He was going to hang on to it with his fingernails, if necessary. Or with Mike Wilson’s fingernails, to be more accurate.

  “Again, say they are trying to jack up the price,” said Stanzy. “What do they stand to lose, Mike? Us, right?”

  “Damn right.”

  “Whichever way you look at it, that’s our card. They can shop themselves around, they can try to jack up the price, but there’s a cost. They’ll lose us. And do they really think they’re going to get a better deal? That’s what they’d have to believe, right? That’s what it comes down to. Because they’ll lose us. You gotta call their bluff, Mike. Do they really think they’re gonna get someone to come in and put more than twelve-point-five on the table? Do they really, really believe that?”

  “They couldn’t,” said Wilson. “They’d have to be fucking crazy.”

  “Exactly.”

  “Hold on,” said Lyall. “What if they’re telling the truth?”

  There was silence on the phone. Wilson stared at Lyall as if he’d just landed from Mars.

  Pete Stanzy’s voice came over the speakerphone. “What are you saying, Lyall?”

  Gelb glanced at Wilson. “Let me play devil’s advocate. What if they really are just worried about the stock price? What if Morgan Stanley’s said to them, You know what, this is a great price, but it’s got a whole bunch of stock in it, and right now that stock’s going up and down like a yo-yo, and maybe you’d better just … have another look at it.”

  “Bullshit,” muttered Wilson.

  Pete Stanzy thought about it. That was the soft point in the deal, as it is in any acquisition that isn’t paid for with a hundred percent cash. There’s always going to be room for dispute over the true value of the acquirer’s stock in relation to the stock of the target. Even when the stock price stays steady, a deal can fall apart over that. Stanzy had seen it happen plenty of times.

  He thought about what John Golansky had said to him. Why don’t they wait until they put out their next set of results, reassure the market? That was Bruce Rubinstein talking. Stanzy wouldn’t dare even raise that question with a client. What if the client said yes?

  “We could increase the cash component,” said Wilson.

  “No,” said Stanzy.

  “We could push up the cash some and see if that makes them happier.”

  In his office, Stanzy stared at his phone in horror, as if he could hardly bear to hear what was coming out of it. He was just thankful John Golansky wasn’t there to hear it. Four-point-two billion was enough. More than enough. It was already looking hard to get.

  “Mike,” he said, “hold on. Just … keep it in perspective. You’re the one in the position of strength here. You’ve offered them a price they’re never going to get from anyone else. Right? Never! You’re the one who holds the cards. No more cash. You don’t need it. Same stock-to-cash split, two to one. They procrastinate, they lose you. Let’s stick with that. That’s our line. They delay, you’re out of there.”

  “Yeah, okay,” said Wilson.

  “Did you hear me, Mike?”

  “I heard you!” retorted Wilson in irritation.

  “Okay. All right. Just don’t talk about any more cash.” Pete Stanzy paused, wondering whether he should tell Wilson about the difficulties Golansky was having in getting the bridge loan set up. But Wilson didn’t sound in the mood for that right now. “He’s going to lose you, Mike, that’s what you’ve got to remind him. For Bassett, it’s now or never. That’s how you’ll hook him. Trust me.”

  “Yeah,” said Wilson.

  “Why is it now or never?” asked Lyall.

  Wilson looked at him sharply. Lyall Gelb knew the answer to that better than anyone. But Lyall didn’t return Wilson’s glance.

  “I mean, if I’m Bassett, why?” said Gelb. “Why can’t we wait a few weeks to see what happens with the stock price? In fact, why can’t we wait until the next set of results?”

  Because you never, ever, ever let a client go cold, thought Stanzy. He waited to hear what Mike Wilson was going to say.

  There was silence on the phone.

  Eventually Stanzy spoke. “Look, just remind them how good the price is. Just remind them he’s going to lose it. Keep Bassett thinking about that, Mike. It’s a bird in the hand. A very, very attractive bird.”

  “Yeah,” said Wilson.

  “Don’t talk about raising the cash component. Mike? You hear me? Whatever you do, don’t talk about cash.” Stanzy tried to control the urgency in his own voice. You could only tell a client something so many times. Stanzy knew if he kept saying it, Wilson would get irritated. He might even decide to do the opposite. “He hesitates, he loses you. That’s the line.”

  “Yeah,” said Wilson.

  “Call me after you’ve spoken with him,” said Stanzy.

  “Sure,” said Wilson.

  Stanzy put down the phone. There was no particular God Pete Stanzy believed in, but he closed his eyes and prayed, prayed that Wilson would hold the line and stick to it.

  In Baton Rouge, Wilson turned to Lyall Gelb. “What the fuck was that about, Lyall? ‘What if they’re telling the truth?’”

  Lyall shrugged. “What if they are, Mike?”

  Wilson watched him. Then he nodded. “You’re right,” he said quietly. “He’s going to ask. That’s the kind of guy he is. Bassett’s going to ask exactly what you said. Why can’t we give him a few more weeks?”

  Lyall nodded glumly.

  A thick silence hung between them. They didn’t have a few more weeks to give Bassett. Not even a couple of weeks. At best, without a single delay, they’d get the deal down with only days to spare before the next filing was due.

  Mike Wilson glanced at Lyall. Lyall didn’t meet his eyes. Gelb didn’t dare think what the numbers were going to look like if they had to file for Louisiana Light alone at the next quarter. Yet he couldn’t stop himself. The figures danced through his mind, had done so for weeks, day and night, like a nightmare recurring.

  The silence was heavy. Suffocating.

  “I don’t know, Mike,” said Lyall eventually. “Maybe they are trying to jack the price up or shop themselves around. If they are, Stanzy’s right. We stick to that line and it’ll work. When Bassett calls you at nine, tell him we’ll walk away and they’ll lose everything.”

  “But what if they’re not like you said?”

  Lyall didn’t reply.

  Wilson was silent for a moment. Then he nodded curtly to himself. “I’m gonna get this settled. They are not gonna fuck with us like this.”

  Lyall glanced at his watch.

  “What is it with you?” demanded Wilson angrily. “Go on, get out! G
et the hell out of here!”

  24

  There was a holdup on the corner of North and Twenty-second, where a water main had ruptured. Lyall waited in line, almost bursting with impatience. Eventually he inched past the spot, the car wheels churning through six inches of water. When he finally turned into his street, his heart was pounding. He pulled up in front of the drive just as Margaret’s car started to back out.

  The car stopped. One of the doors opened and Debbie and Josh jumped out yelling. They came racing toward him. Then out came Becky, more gingerly.

  Margaret got out as well. She and Lyall exchanged a glance. She smiled.

  Lyall knelt down. “How’s my Becky?” he said.

  Becky nuzzled up against him. She had been clingy since the operation. Lyall hugged her.

  “I thought you weren’t gonna come, Daddy,” she murmured.

  “Of course I was gonna come,” said Lyall.

  “Then why did Mommy put us in the car?” demanded Josh.

  “Mommy was tricking,” said Lyall. He hugged Becky closer. “Didn’t I say I’d take you to school, honey?”

  “Come on, Josh. Debbie,” said Margaret, “get in Daddy’s car.”

  “Let’s go, huh?” said Lyall to Becky.

  They got to school with about a minute to go.

  “Okay, guys,” he said to Debbie and Josh, and he gave them each a hug and pushed them away gently. “Go on. Don’t wanna be late.” They ran in.

  He crouched down close to Becky.

  “Okay, honey?”

  Becky nodded.

  “You just be a little bit careful, and you’ll be all right.”

  Becky nodded again.

  “Mommy called Ms. Elkins. She knows all about it.”

  Becky didn’t say anything.

  He hugged her. “I love you, Becky.”

  “I love you, too, Daddy.”

  He looked at her. “Now you go on inside. I’ll see you tonight.”

  “Yes, Daddy.”

  “Good girl.”

  She smiled at him, and then she went through the gate.

  The playground was just about empty now. One of the teachers stood at the door and waited for the stragglers to come in.

  Lyall watched Becky walk gingerly across the yard. She stopped just before she went in and gave him a wave. He waved back. His heart was so full of love for her, it was bursting.

  Then Becky was gone. The teacher closed the door behind her.

  One of the parents came past on her way back to her car and smiled at Lyall. Lyall smiled back mechanically. He stood outside the gate a little longer, gazing across the yard at the building where his three children would be sitting down to their lessons.

  He walked back to the car. He began to go over it all, as he had been doing a lot recently. Each step on the path that had brought him to this point, how it had happened. That first little deal in Hungary. “We could use the joint venture,” he had said jokingly when Wilson was fretting about raising more cash. And he outlined it for him, the way you could do it, given Hungarian tax law and the way it lined right up against a loophole in the U.S. accounting requirements. It was like a magic window, like an escape hatch between two different worlds that was perfectly aligned and you could jump right through it. And no one else had realized it, no one but him. But when he said it, it was like an exercise. Like a kind of game. We could use the joint venture. Not that we ever would, but we could. That’s how he meant it. But that wasn’t how Mike Wilson took it. “Explain it to me,” said Wilson, and Lyall Gelb had.

  It wasn’t strictly illegal. It just pushed the envelope. After that, there were other things that weren’t strictly illegal, things that pushed the envelope further. He was so much smarter than the auditors. They weren’t even in the game. That was what he had really enjoyed, slipping though crevices in the rules that the auditors didn’t even know existed, thinking up intricate new structures and balancing them delicately within visible frameworks in such a way that the structures themselves remained completely invisible, knowing they were so subtly designed that no one else would be clever enough to see them even when they were staring them in the face—and then watching as the auditors and analysts looked right past them. And he was careful, of course, to make sure that from the outside everything looked right. Picture perfect. He shunned the obvious little tricks every other CFO used and, consequently, he got a reputation almost for excessive rectitude. He avoided anything that might even give an appearance of malpractice. He insisted on having an external auditor approve every one of the company’s charitable donations, both in the United States and abroad, to avoid the imputation that the company might be using them to curry favor. In one of the early ventures, he wanted to refuse a Catherine Gelb as a director, even though she had been nominated by one of the partners, in case someone mistakenly thought she was a relative. The other party insisted for its own reasons and he had had to accept it. But that was how meticulous he was. Nothing was allowed to give the slightest hint of being dubious.

  Yet under that perfect appearance, what he had done wasn’t just dubious. “Dubious” didn’t come close to describing it. Exactly at what point his creation turned into the monster that it had become, that was difficult to say. It wasn’t possible to pinpoint any one individual step that was clearly illegal, at least not at the start, and yet after enough steps had been taken, something illegal had clearly been created. The financial statements he was putting out bore no relation to the reality of the finances that he was managing. The profits he claimed were no profits. The balance sheet was no balance sheet. It was as if he had stepped not through a magic window, but through the looking glass into a place where nothing meant what it said, nothing said what it meant, into some kind of parallel universe, and to keep the whole thing from imploding around him he had to keep going farther and farther in.

  But all he wanted now was to get out. He was exhausted by it, weary, ravaged, scared by what he had done and how it had grown. And was it possible that there was a way to get out? That’s what Mike Wilson said, and BritEnergy was that way, the door that was going to lead them back into the real world. But Lyall didn’t really believe it. You couldn’t get out that easily. It didn’t work like that. God didn’t let things like that happen.

  Lyall didn’t know if he could bear it if everything was ever revealed. He didn’t know if he could bear the way Becky and Debbie and Josh would look at him. If not now, when they were old enough to understand. That would be the worst of it. And Margaret? Maybe, in a way, Margaret would understand how it could have happened, how one thing had led to another and he had ended up doing the things he’d done. But the kids, how could the kids ever forgive him for what it would do to their lives? How could he expect them to?

  No, Margaret would never forgive him, either. Not for her own sake, but for the kids’.

  If it came to that, it would be better if he wasn’t there. He had thought that for a while now. It would be better for all of them.

  He got back to the car. His cell phone rang. Lyall looked at the number.

  His stomach contracted in pain.

  25

  Rob had spent a week in London with Emmy during the summer before last. He liked the place. Given a day to himself, there were lots of things he would have done in the English capital. Sitting in a hotel and waiting for a call to come through from New York wasn’t one of them.

  The day passed in a series of receding deadlines. First Cynthia said she’d have to wait until eleven, which was six A.M. in New York, before she could start calling people. At a quarter past eleven she called Rob in his room to say she had spoken to Sammy, and Sammy had spoken to Pete Stanzy and Pete was going to sort it out and let them know when they could go in. Rob couldn’t go anywhere in case authorization for them to use the data room came through. By twelve-thirty, Rob hadn’t heard from Cynthia and he called her up and she said she was still waiting, and he should sit tight. Rob ate lunch in the hotel. At two she rang to say that Phi
l Menendez had called and they were going to get the go-ahead any minute. At three Rob rang her back and she said Phil hadn’t called. Then nothing happened, and it was pretty obvious the day was shot. But it was still only the middle of the day in New York, and apparently Menendez was saying they might still get the go-ahead to go in that night. He had told Cynthia to wait around a couple of hours more and get the last flight out of London that night if there was still no news, so Cynthia organized seats. At six, just as they had checked out of the hotel and were about to head for Heathrow, Sammy Weiss rang to tell her to cancel the seats and hang on to see what happened in the morning.

  They checked in again.

  “What do you think’s going on?” Rob asked as they headed back to the elevators with their bags. They had wasted the whole day, and there was no certainty that anything better was going to happen tomorrow.

  “No idea,” said Cynthia. “Could be the deal’s still on. By tomorrow, could be it’s off.”

  “Just like that?”

  “Could be anything. That’s how it is in this game, Rob. If you want to stay sane, don’t try to read the runes. You’ll always get it wrong. Just be ready to move when someone tells you. I’ll give you one piece of advice: Always have your passport, your credit card, and your cell phone in your pocket. That’s all you need, they’ll cover you for anything.” Cynthia shrugged. “Great life.”

  They waited for the elevator. It was taking a while to come.

  Suddenly Cynthia looked at him. “How do you think I’m doing?”

  Rob looked at her in surprise.

  “What do you think?” she asked.

  “On this project?”

  Cynthia nodded.

  “Isn’t that something you should ask Sammy?”

  “You’re a straight guy,” said Cynthia. “You’re honest. That’s more than you can say about most people at Dyson Whitney. Tell me what you think.”

  “I think you’re doing fine. I think Sammy thinks you’re doing a great job.”

  “And Phil? You think Phil likes me?”

  Rob laughed. “Cynthia, Phil doesn’t like anyone.”

  Cynthia watched him for a moment, then she walked quickly away. She sat down at a chair in the lobby, head bowed.