Due Diligence

by Grant Sutherland

  ‘Find out who’s selling. I’ll be in my office.’

  Passing back through the desks to the door, I nod to the senior dealers in a calm and businesslike way. I am in control. We are taking things in hand. But their manner tells me that they are not wholly convinced. They study me, searching for flaws. I cannot pretend to be one of them: I haven’t earned their respect. It occurs to me that at a time like this, for all his faults, they would really much rather have Daniel.

  7

  * * *

  When Henry comes to the phone he doesn’t sound that bad, so I outline the situation and he agrees to get straight back.

  ‘My office, not the Dealing Room,’ I tell him. I want to see what kind of state he’s in before I turn him loose out there.

  Next I ring Keith Trevalyn, a director of one of the money brokers.

  ‘Social or business?’ he asks.

  When I remind him that it makes no difference in his trade, he laughs.

  Five years ago he worked for Carlton Brothers, but the parting was amicable, he’s stayed in touch, and we’ve done each other favours in the past. The money brokers serve as useful points of connection for scores of Dealing Rooms, but they’re telephonic middle-men in a world that’s going electronic. Whenever we meet these days, Keith offers the broker’s usual cynical observation. ‘Screens,’ he says, ‘don’t buy lunches.’ True, but neither do screens get paid a hundred thousand pounds a year: the days of the brokers are numbered. Keith Trevalyn might be looking for work very soon.

  So now I tell him that I have a small problem. How small? he wants to know. I explain that we’re having our name turned down a little too often.

  ‘Limit problems?’

  ‘Doubtful. Too many full on us all at the same time.’

  ‘Overtrading?’

  A possibility, I admit, that hadn’t occurred to me. But my rush of hope fades when I recall how quickly and widely the market has turned against us: too much of a coincidence.

  ‘I don’t think so. Look Keith, is there any chance you can sniff around a bit? Maybe your boys have heard something.’

  ‘Like what?’

  ‘Anything. A rumour, I don’t know, anything.’

  ‘Rumours? Christ, a quid for every rumour I heard in this place, I could bloody retire.’

  ‘Keith—’

  ‘Yeah, yeah, don’t fret. I’ll call you back later.’ He pauses. ‘Listen, if I get no joy out of my knuckleheads, I’ll ring round.’

  I tell him that I don’t want the other money brokers involved.

  ‘Not those shits? I mean the clients. I'll try a few of the banks.’

  The offer I’ve been waiting for. The banks, at this stage, will tell him more than they want to tell me. With or without my approval, Keith will now call them anyway, so I might as well hear the result. I suggest a couple of names, two of the clearing banks. Before he can question me any further, I say I’ll be expecting his call in half an hour. Then I hang up.

  Henry arrives ten minutes later. Dishevelled, and dripping wet, he has his coat on his arm. He picks at his soaking shirt gingerly, holding it away from his chest. As he comes towards the desk, the stench of beer envelops me.

  ‘What’s up?’ he says.

  Deflated, I suggest he should return to his party. He looks surprised. But then he realizes what’s in my mind, and he shakes his head. ‘One of the dickheads tipped a pint over me.’ He gives another tug at his shirt. ‘What’s this name- problem crap?’

  ‘How much have you had?’

  ‘Not enough.’ He smiles. ‘Sounds like maybe I should’ve got stuck in while I could.’ He nods to the ensuite bathroom. ‘Any towels?’

  He really does seem okay. ‘Use the shower, Henry. You reek. There’s a clean shirt in the cupboard.’

  Then we hold a conversation, voices raised, between office and bathroom. I give him the sobering news. He reappears in the doorway clutching a towel around his waist, his face quite pale now. A sudden thought seems to strike him.

  ‘Hey, this isn’t some stupid birthday wind-up, is it?’

  ‘Uh-uh.’

  ‘Christ all fuckin’ mighty.’

  He steps back out of view. The shower comes on and steam billows into my office.

  ‘When you’re finished in there, get out to the Dealing Room.’ He doesn’t answer, so I step up to the open door and repeat the instruction. Then I head out to find Sir John.

  8

  * * *

  ‘They won’t like it,’ Sir John says. ‘Not at all.’

  My astonishment at this remark strikes me dumb at first. They won’t like it? The sole redeeming feature of Sir John’s 'arrangement' with the clearer was the leverage it gave us; but now that we need it, he comes out with this: they won’t like it?

  ‘Nobody’s asking for their opinion. Call them, tell them they reinstate our trading line, or that parcel of their shares we own goes to the highest bidder.’

  ‘That’s a threat, Raef.’

  ‘If you want to ask them politely, go ahead. Once they’ve turned you down, just tell them.’

  Sir John wavers a moment, his discomfort quite plain. This will not go down well with his friends at the Club. And if that cloistered world closes ranks against him, he'll be out in the cold — a prospect, I see now, that terrifies him.

  'Surely it’s not that bad,’ he protests. ‘Why don’t I just call round, get this straightened out quietly.’

  I raise a hand; don’t even think about it. 'The Dealing Room’s on its knees. You start asking favours now and the market’ll smell blood.’

  ‘But I could just see, Raef. Surely.’

  Between clenched teeth, I name the clearing bank.

  ‘Call them. Right now.’

  ‘Raef—’

  ‘Call them!’

  He starts back, surprised. And hurt. It would be so much easier if I could bring myself to dislike him, but I can’t. As he reaches for the phone I feel a twinge of remorse at my impulsive outburst. But when he looks at me before he dials, I hold firm against his silent plea. I pick up the extension and listen.

  Sir John’s call is put through, and a high reedy voice comes on at the far end.

  ‘John?’

  ‘Matthew. Bearing up? Thought I might just catch you for a word.’

  ‘Can I call you back John? Bit busy here.’

  Sir John seems about to concede. I glare at him, mouthing the word, No.

  ‘Well, no actually,’ Sir John tells him. ‘There’s a situation I was hoping we could discuss.’

  ‘Yes?’

  Sir John rests his forehead in one hand. ‘There’s been a misunderstanding between our bods in Settlements. We’re being told you no longer have any trading line open with us. Just wanted to let you know. Give you a chance to clear it up before it becomes a nuisance.’

  A few seconds’ silence follows; it occurs to me that a whispered conference is taking place.

  ‘No, apparently that’s right,’ the reedy voice says. ‘We’ve filled up our trading line with you temporarily. It should roll off in a few days. I really must fly, John.’

  Sir John looks at me as if to say, What next?

  I whisper, 'Tell him. The arrangement.’ And I make a slicing gesture across my throat.

  This has gone beyond a gentlemanly game. After what I saw in the Dealing Room, and after hearing the clearer’s attempt to drop us, I am certain now that a deliberate punch below the belt is necessary.

  I whisper it again. ‘Tell him. Now.’

  ‘Matthew,’ Sir John says. ‘I wonder if you’ve had any time lately to look at our arrangement.’

  Another silence follow, longer this time. There are definitely others at the far end, listening in. Harris’s tone becomes silky. ‘The telephone’s hardly appropriate. What say the Club at eight?’

  I shake my head. While Sir John declines the invitation, I scribble a few words on a pad and turn it for Sir John to see. He reads, then looks up at me.

  ‘Matthew
,’ he says frowning, ‘there appears to be a chance that the arrangement no longer suits our book. In fact it’s possible the whole position will have to be unwound.’

  ‘Unwound?’ the voice blurts out. But then something, or someone, seems to check him. More silence.

  I scribble another note to Sir John. Committed now, he takes a deep breath.

  ‘If our trading line with you can’t be reopened today,’ he tells Matthew Harris, ‘we really won’t have any choice. We’ll have to clear the decks. The arrangement will have to go. Tonight.’

  Harris, regular churchgoer and respected man in the City, calls Sir John a cunt. Sir John’s look darkens. His eyelids droop in a way I haven’t seen for years. When I signal for him to hang up he raises a finger; one moment.

  ‘Thank you for your cooperation, Matthew,’ he says softly. ‘I look forward to receiving your call before six o’clock. Kindest regards to your wife.’

  Matthew Harris hangs up. Sir John looks at me and smiles. It is a glimpse of the man he once was, and I feel, just for a moment, quite ridiculously proud of him.

  9

  * * *

  Many of our clients, when they run into difficulties, stick their heads deep in the sand. This is known, around our office, as the Ostrich Effect. It is the common factor behind nearly every bankruptcy we see. We had one client, a toymaker, whose line of toys was condemned by the National Safety Council in August. Micawber- like, he omitted to mention this to us and kept on producing the toys until December in the vain hope that something would turn up. By the time he stopped payment on our loan, he had a full inventory of mechanical dinosaurs, a workforce that hadn’t been paid for a month, and an extremely long list of shops that had refused to stock his discounted wares. Vance had one of the purple brontosauruses encased in glass as a memento, and once each quarter he presents it to the member of his department who has made the worst blunder: my first year in Corporate Finance, I won it twice.

  ‘Speak to us.’ This is what we tell our clients. ‘If you get into trouble, let us know.’ Good advice, and some of them take it. And this is the question for me now: do I take this good advice, or do I succumb to the Ostrich Effect? Do I go to see Roger Penfield and tell him what’s happening, or do I cross my fingers and stick my head in the sand?

  It takes me all of ten seconds to decide.

  10

  ‘You’ve just caught me,’ Penfield says, folding some papers and sliding them into his inner jacket pocket. ‘I’m making a speech over at Mansion House in twenty minutes. What’s this about? That note? How’s Morgan getting on?’

  ‘He’ll have something for you by Friday.’

  Penfield hits the intercom and lets his secretary know that he’s on his way out. I tell him I was hoping for ten minutes of his time.

  He comes over to get his coat and scarf. ‘No can do, Raef.’

  ‘It’s important.’

  He makes a placatory gesture. In the constant clamour for his attention, he has heard that line too many times before. He says he’ll try to squeeze in ten minutes tomorrow morning. ‘The City and sodding Europe,’ he mutters, presumably referring to his speech. ‘Déja-vu all over again.’ He takes a quick glance in the mirror by the coat- rack.

  ‘Important enough to cost you your job,’ I say.

  He continues to button his coat. He inspects himself in the mirror again. ‘I trust that’s not a threat.’

  I remind him that with his Investigation Unit about to descend on us, I’m hardly in a position to be threatening him. He presses his rim of grey hair into place.

  ‘Ten minutes, Roger.’

  He gives me a look. Then he touches his pocket as if feeling for his speech, and steps by me to the door. ‘We'll walk,’ he says.

  On Sunday the Bank was empty, but now the men in grey suits are everywhere; they all bob to Penfield as we pass. It feels like I’m accompanying a cardinal down the nave of St Peter’s, and it's not until we’ve crossed the Great Hall and gone into the street that he speaks.

  ‘Better here than inside. Too many ears.’

  Yes, I think, and out here too many eyes; but right now I have to take what I’m given. As we turn and head for the Mansion House, I keep my voice low and tell him my story.

  ‘Not such a problem, surely? A few trading lines full?’

  ‘This isn’t just a few, Roger. It’s damn near the whole market.’

  ‘How many?’

  ‘Ninety, ninety-five per cent. Our Dealing Room’s like a morgue.’

  Before coming to see Penfield, I put my head in there again to find out how Henry was doing. Extremely sober now, he gave me a look of despair, it was visible from right across the room. This is not the birthday he’d' planned.

  ‘There’s a few names still doing us. But not many. And the way it’s looking, they won’t last long either.’

  ‘Since when’s all this happened?’ Penfield asks peevishly.

  ‘This afternoon. I put out some feelers, then came straight to see you.’

  His peeved look lingers; I have ruined his day. He’s no doubt tracing the same line of thought I followed earlier: if our Treasury operations stay frozen out of the market, the bank will be badly destabilized; our credit rating will plummet; in the worst case, Carltons might even fall. And should that awful event happen, Penfield’s job will be right in the firing-line.

  ‘You’ve had no credit downgrade?’

  I shake my head.

  ‘Nothing in the offing?'

  ‘No.' When I explain that we’re closing out as many positions as we can, he purses his lips. A crowd of young men spills from the pub in front of us, jostling and laughing: we step down into the road to skirt round them.

  ‘Bloody hooligans,’ Penfield mutters.

  In fact they’re lawyers — at least one of them is; I recognize his face. He recognizes me too. Me and Penfield both. I am definitely not enjoying this stroll through the City.

  ‘We can twist some arms,’ Penfield says, ‘but if the market’s got a real reason for turning Carltons down, there’s bugger all we can do long term.’ He glances at me. ‘Not carrying any big losses, are you?’

  I assure him that our balance sheet is fine. He doesn’t mention the note, but that’s obviously what’s on his mind.

  ‘If you need to close out any positions tonight,’ he decides, ‘you can do it with us. I’ll call our lot when I get to the Mansion House.’

  A short-term life-line, a few hours’ grace: if we can close out with the Bank of England, we won’t be at the mercy of the markets overnight. I thank him, sincerely.

  We turn into a narrow alley, pedestrians only, and halfway along he stops and looks behind. I stop and glance back too. No-one; we are alone in the alley. He takes my elbow and draws me into a recess between two pillars, where we face one another.

  ‘You have a murdered Treasurer, a possible fraud, and at least one serious complaint lodged against you with the Takeover Panel. And now this business.’ His voice is low, but it quavers. He is, I see, simply furious with me. ‘You wanted some time to sort out that fraud note; I gave it to you. You need to trade out your positions with us tonight; very well, you may. But that’s all one-way traffic, Raef. Now it’s your turn.’ His large frame leans towards me. He enunciates the next words very clearly. ‘Sort. Your. Fucking. Bank. Out.’

  The blood surges into my cheeks, my heart pounds. Whatever happens, I will remember this moment. And I will ensure that Penfield remembers it too. But just now I hold my tongue.

  'And tell Morgan I want to see him this evening. Alone.’

  He pivots, and stalks to the end of the alley, where he rejoins the stream of pedestrians. He looks like one of them now: just another grey man in a coat, a banker with the usual troubles; something in the City.

  11

  * * *

  Returned to Carltons, my first port of call is the Dealing Room. No-one is kicking a football this time. But that’s because almost n- one is here. Each desk is the same: vacan
t chairs, and the few remaining dealers sitting quietly. The rest have gone. More than half our Dealing Room have walked out.

  ‘Where you been?'

  Unbelievably, Henry actually smiles when he asks me this.

  I gesture around the Room, struggling to keep the fear from my voice. ‘What’s this? What's going on?’

  He looks around calmly. ‘No point everyone hangin’ about spreading rumours. When they got their books square, I sent them home.’

  I make a sound: relief. Henry mistakes it for displeasure. I ask how our global position looks now, and he reads me our outstanding positions, the ones we haven’t been able to close out or roll over. Most of our interest rate exposure is covered. ‘Forex, not so good,’ he says.

  One of the few remaining dealers calls across, ‘Henry!’ Henry swivels. The dealer swings his phone like a lasso. ‘They knocked us back for the fifty bucks.’ Fifty million US dollars.

  'Try someone else,’ Henry tells him.

  The dealer watches his handpiece whirling overhead, then catches it. ‘Yeah, right,’ he says despondent.

  Henry gives me a look. He suggests I might want to let the positions run. This would leave Carltons at the market’s mercy, the bank would become little more than a casino chip. I don’t understand Henry’s smile at first. Then I do.

  ‘You think that might be fun?’

  Not fun exactly, he says, but interesting.

  Traders. Vance is right, these people really are not normal.

  Reaching across, I tap the button marked Bank of England. ‘If you can’t raise anyone else in fifteen minutes, call them. They’ll take whatever we’ve got left. Interesting, I really don’t need.’

  ‘They called earlier,’ Henry informs me. When I look blank he adds, ‘The Old Lady. Checkin’ on rumours in the market, what’s happenin’, blah-blah- blah. Sounded jumpy.’

  ‘So what did you tell them?’

  ‘Everything I know. Sweet FA.’