The latter thought had just occurred to the good doctor. If he got the notes at 10 percent under par, it would provide an additional cushion of a couple of million dollars. You never knew. That old bastard Robert had undoubtedly been overdoing things regarding his problem anyway.
“If you are willing to accept my word, gentlemen, I do not think that there will be any need for additional talks or documentation regarding either of these subjects.”
The response was most positive. Nothing could possibly be more acceptable than the word of Dr. Walter Hofer. Thanks were duly exchanged, but no handshakes. Sir Robert had a strong dislike for this foreign habit. The conversation returned to golf and then to interest rates.
As noon approached, Sir Robert suggested that they proceed to lunch. The dining room was exquisite. David Mason, and many of his colleagues in New York, Chicago, and San Francisco, had tried to duplicate the facilities which every respectable bank in London had. In almost every case the result had been disastrous, at least to the slightly discerning eye. The less polite called it phony. After hundreds of years, the Americans still could not quite make it when it came to natural elegance.
Sir Robert offered sherry. He apologized for not inviting any of the other executives of his bank to lunch. He had not known that they would finish their business so quickly and had anticipated that their talks would continue well beyond lunch. Neither Dr. Hofer nor David Mason appeared especially offended.
The lamb chops were excellent and the wine which accompanied it superb. It was always astounding to Walter Hofer to realize that it was often easier to get a good bottle of French wine in London than in Zurich. After coffee had been served, Dr. Hofer very carefully broached the subject over which he had been mulling during the entire meal.
“David, do you by any chance know what your secretary of the treasury is doing in London this week?”
Mason replied, “No, in fact I’m fairly sure he’s not here, but in Washington.”
“No, I saw him at the Savoy last night.”
“Peculiar.”
“Yes, I thought so also.”
Hofer turned to Sir Robert Winthrop. “Another odd thing. I also saw Bollinger of the Bank for International Settlements here last night. Would you know, Robert, is there some meeting going on right now in London that would demand his presence?”
“None whatsoever that I know of,” replied Winthrop.
Both Sir Robert and David Mason were extremely alert now. It was totally out of character for Dr. Walter Hofer to gossip. Hofer did not leave them in suspense. He repeated every detail of the scene he had witnessed in the grill room the previous evening, placing particular emphasis on the document with the red cover which apparently had entered the restaurant in American hands and left in the custody of the man from Basel.
“Damn peculiar,” concluded Sir Robert. “If you would like, I could perhaps ask around and—”
He was interrupted by Hofer, something he rarely did. “No. I would prefer that we keep this entire matter completely, and I mean completely, to ourselves. I trust I have your word on this.”
He then very succinctly outlined his opinion concerning the possible purpose of the get-together at the Savoy.
They agreed to keep in touch on the subject.
Sir Robert accompanied both of them back to their hotels, first dropping Walter Hofer at the Savoy and then proceeding on to Claridge’s with David Mason. “Robert,” said Mason as they arrived, “why don’t you come in and join me for a quick scotch?”
“Don’t mind if I do. After all, it has been quite a day.”
The driver was instructed to wait, and the two men entered the hotel through the revolving doors. The concierge handed David Mason a whole stack of telephone messages with his key. Mason did not even bother to glance at them. He had his suite on the third floor, and after a tortuously slow elevator ride and a long walk during which they seemed to have turned at least five right-angled corners in the corridors, they finally made it.
“A bit of a rabbit warren, this place,” commented Sir Robert.
“Yes, but the appointments of the rooms cannot find their like in Europe,” replied Mason.
Sir Robert carefully hung up his coat and hat, and within minutes once again had a glass in his hand—a very stiff scotch, with too much ice, of course.
“Well, here’s to our friend Walter Hofer,” said Sir Robert.
Mason raised his glass all of two centimetres and stated, “Pompous bastard, isn’t he?”
“Yes, but he knows his business. Hard as they come, of course. You can never really trust any of those continental chaps, you know.”
“Robert,” laughed Mason. “You’ve been telling me that for the last twenty years. Say, I have not had a chance to tell you the latest one going around New York—after your Zambian Nickel Mine stroke of genius.”
Winthrop winced. Here we go again, he thought.
“It seems that this merchant banker was on a cruise in the South Seas and accidentally fell overboard. His friends watched in horror as a shark swam swiftly toward him. They expected to see him eaten alive. But at five metres the shark turned and disappeared as swiftly as he had appeared. The merchant banker clambered back aboard and his friends cried, ‘Miracle!’ ‘Nonsense,’ was the reply, ‘professional etiquette.’”
Sir Robert Winthrop joined Mason in his booming laughter. With all the money that had been at stake this day, Sir Robert would have turned cartwheels if necessary.
But every dog has his day, he thought. His wife turned livid when she caught Robert in his “be buddies with Americans” act. Women were seldom able to accept small tactical defeats. They lacked talent for overall strategy. But there was no use explaining. Times had, after all, changed. They would change again.
Mason made his way toward the discreet bar across the room. “Care for a refill?” he asked. The first one had taken all of two minutes.
“Why not,” replied Sir Robert and then continued: “Tell me, what do you really think of that little story Hofer told us after lunch?”
“I’m sure it’s true. Hofer would hardly dare make up a tale like that.”
“That’s not what I mean. I was referring to his conclusions.”
“Obviously he did not draw his conclusions based strictly upon that little incident at the Savoy.”
“So you think he knows more than he’s admitting?”
“Of course.”
“But then why tell us?”
“That also puzzles me a bit.”
“This could be very serious. Would it mean a whole new round of devaluation and revaluation?”
“I’m really not so sure of that. How did you make out in 1971?”
“Badly. Very badly.”
“So did we. But I heard that Hofer did very well.”
“I heard the same.”
“But I’ve also heard that he’s run into a pack of difficulties lately on some of his foreign loans—Yugoslavia, Argentina, Greece. All very bad news for the Swiss, and Hofer is in deepest of all. There’s also some talk about rather heavy commodity commitments—silver, or some such thing.”
“Frankly, I wouldn’t take such talk too seriously,” commented Winthrop. “Do you think Hofer is really going to keep in touch?”
“I’m sure. Otherwise he would never have brought the whole matter up in the first place in such a cozy fashion.”
“But why?”
“I really can’t say, Robert. I would just suggest that you keep your shirt on and hope that nobody upsets any applecarts on the Canadian and Western takeover. A bit more ice?”
It was almost six before Sir Robert left the hotel. By this time Dr. Walter Hofer was already airborne. He had gone immediately into action upon his return to the hotel. He had instructed the hall porter to book him on the four o’clock BEA flight to Paris. Three phone calls had followed from his room—one to his bank, one to his wife, and one to Paris. He had decided to extend his trip for just one more evening.
4
IGOR Melekov was travelling alone. This, in itself, was unusual for any Soviet citizen outside Eastern Europe.
But Melekov was an exception not only to this rule but also to many others in the Soviet Union. For he was Number Two in what was beyond any doubt the most unabashedly capitalistic enterprise in modern Russia. As such he enjoyed a type of idiot’s freedom. His seven-room apartment in the Moscow Hills area was as plush an establishment as could be found in what was, at least by Moscow standards, an already very plush neighbourhood. It was furnished in the most expensive Knoll style, had bathroom and kitchen fixtures right out of California suburbia. It was stocked with everything from frozen Texas steaks to at least eight different varieties of the finest Scotch whiskies. Melekov drove a Thunderbird, much to the regret of his nearest friendly Ford dealer in Helsinki who went frantic trying to meet Melekov’s regular telegraphic demands not only for spare parts, but the very latest stereo tapes. The machine was, of course, air-conditioned. There was also the dacha—small, but still a dacha—in Uspenskoje; membership in three different Moscow clubs; a pass to the Dom Kino.
Despite all this, Melekov was not that much of an exception as one might think. He was a producer, and like such in any country or any type of society, he demanded and received privileges. A country which developed H-bombs, Sputniks, and a gross national product of half a trillion dollars obviously had to have a good number of producers among the drab millions. Each of these was as jealous of his “rights” as any IBM vice president or Madison Avenue genius in the somewhat more reward-oriented environment of Manhattan. Naturally, both groups of executives also had to learn to live with the knowledge that every minute of the working day, the axe hung over their heads. In Russia, of course, by tradition this axe sometimes took on more than literary form.
To be sure, Melekov was not exactly the Horatio Alger type. He had inherited privilege and also the self-assurance that goes with it. As the son of a great Russian agronomist, he had not only been able to study at the Moscow University—not more than a mile away from where he now lived—but also had attended the London School of Economics in 1937 and 1938. His field had been money and banking.
Papa, who had made all this possible, had not survived beyond 1937. He made the mistake of zigging for corn instead of zagging for soy beans.
Igor, fortunately, was out of sight and mind in England at the time, and after completing his studies slipped quietly into a glorified clerical position in the London branch of the Moscow Narodny bank. He hung low, inching up the ladder for almost a decade. Then in 1949 he hit the jackpot. Scoffers among you may doubt this, but Igor invented the Eurodollar! Not all by himself, of course, but it was his staff paper, dated July 17, 1948, and duly initialled I.M./o.l., that provided the conceptual basis for a money and capital market which went from nothing to $65 billion within twenty years. The o.l. was the inevitable secretary, whose uncalled-for ambitions died with the birth of the Eurodollar. In fact, they died somewhat earlier, but Olga Ludidovna, today back in Smolensk, still must believe otherwise.
It happened like this. The Soviet Union, since the 1920s, had always conducted the majority of its foreign trade in U.S. dollars. Even in the darkest days of the cold war this did not change. As a result, the Soviet Union’s banking system—and especially the Foreign Trade Bank as well as its affiliates in London and Paris—were forced to maintain high quantities of dollars as lubrication for the system. As our young Igor noted, those dollar balances simply lay idle, as sinful a procedure as is imaginable in banking circles. There were, however, good reasons for this. For, under what everyone had assumed to be the immutable law of nature, dollars were only lent and borrowed in the United States, just as financial transactions in sterling were restricted to the United Kingdom, rubles to Russia, and so forth. For the Russians to lend dollars in the United States at that time would have been something less than prudent. In fact, this is probably no less true today. For according to the books, Russia is in hock to the States for umpteen billion dollars, for everything ranging from defaulted czarist railroad bonds to lend-lease debts from World War II. Sequestration, expropriation, outright theft loomed over every Russian dollar which might seek to make a capitalistic buck on Wall Street.
Cunning Igor’s solution was quite simple. Lend the dollars in Europe! The audacity of this thought—stated just that bluntly on page 64 of the July 17, 1948, memo—was not recognized for a full year.
After that, Igor Josef Melekov’s career was made. His father’s corn was forgotten; his years among the fleshpots of London were forgotten; and of course Olga was forgotten. In 1959 Melekov was recalled to Moscow and appointed deputy assistant manager of the Foreign Trade Bank of the Soviet Union. By 1968 the Eurodollar market had become the most dynamic money and capital market in the world. The Soviet Union had earned hundreds of millions of dollars in this market in the meantime. In that same year Igor became deputy chairman of the bank.
As deputy chairman of the Foreign Trade Bank of the Union of Soviet Socialist Republics, Melekov was a powerful man. He literally controlled all payments between Russia and the rest of the world. Either his signature or that of his boss (we’ll come to him later) appeared on all hard-currency borrowings or loans exceeding one million dollars entered into by Russia. In terms of sheer numbers, he made our friends Dr. Hofer, Sir Robert Winthrop, and even David Mason, look like managers of branches of a Montana savings and loan association. But, and there always seems to be a but, he was still only Number Two, and by the early 1970s it slowly became apparent to Melekov that he had squeezed the absolutely very last ounce of impetus out of his 1948 coup. Even highly original and immensely successful ideas have their inevitable life cycle. This truth was slowly facing Igor.
Of course in London, where Melekov had just completed his periodic check of the bank’s affairs in that money centre, this was not felt. There, the older the ideas, the better. What irked Melekov no end was that this was apparently becoming true at home—in so-called revolutionary Russia. Most of his colleagues were fully prepared to accept the Brezhnev rule of collective mediocrity. But by no means all of them. The latter wanted new action. Not a la Khrushchev, however. His clowning, primitiveness, inconsistency had almost nauseated Melekov at times. But still, the man had shown dash and initiative. He had been willing to experiment. He had shown guts; demonstrated willingness to take enormous risks in Cuba, in Cairo, and even at home in 1956. But he had lacked cool logic. Which brought to mind Melekov’s Number One at the Foreign Trade Bank. To list everything that that Georgian hack lacked would have exhausted even the Biblical (Old Testament) capacity for articulating human flaws.
“Good evening, sir. May I see your boarding pass please?”
Melekov duly ceased dwelling on any radical political thoughts as he entered the neutral territory of Swissair and handed his card to the rather dumpy, though well-scrubbed, stewardess. She showed him to the last row in the first-class section and pointed to the window seat on the left. He removed his topcoat and handed it to the girl. He pulled his copy of the Financial Times out of his briefcase, and settled back to wait for takeoff. The flight to Zurich would take one hour. Just about right. Melekov enjoyed flying but hated the boredom of long trips. Sixty minutes in the front end of a DC-9, mostly spent coping with a couple of cocktails and a decent meal, represented in his mind just about the optimum way of moving across Europe.
The Lombard column in the paper had Melekov’s full attention when the final person to board the plane, som
ewhat out of breath, took his seat directly in front of Melekov. Well, it almost had his full attention. Melekov had lived all his life in an atmosphere where constant surveillance of the people in his vicinity was a necessity for survival. To be sure, due to his age and geographical location, he had missed the very worst of the Stalinist purges. But things had been touch and go twice—in the mid-50s and again in 1964. He knew that he had reached a level of power where he was by definition vulnerable—to everything and everyone.
The last man in was Bollinger.
Should I? thought Melekov. No. Not yet, you never know.
The two men knew each other well. Both had attended the London School of Economics in 1937. Melekov went back to his newspaper, once again fleetingly wondering why in hell they insisted on printing on paper of that colour. There must be a reason. There must also have been a reason for Bollinger being in London and nobody talking about it.
Bollinger appeared fidgety. He adjusted the back of his seat for the third time. He looked a bit worn, too, when he came in. Well, not exactly worn. Burdened. No, that wasn’t the right word either. Melekov’s thoughts kept switching back and forth from his paper to the man now more or less settled in front of him.
The door of the plane was closed, and gradually they started working their way toward the end of the runway for takeoff. In spite of a huge volume of traffic, by far the greatest in Europe, for some reason one never had those ridiculous lineups like in New York. Within five minutes they were airborne.
The Billion Dollar Sure Thing Page 4