“After three years with Ernst and Young, I moved over to Krebs-Mueller,” Wendy said.
“Pharmaceuticals?”
“Then McCormack Labs acquired Krebs four years ago.”
“So now you’re with McCormack.”
She nodded.
“Big outfit,” I said.
“Yes. Krebs isn’t the only firm it’s acquired. Four years ago, it was just starting on its buying binge. Here. I want you to look at this.” She held out her hand, palm downward, only partially concealing a CD in a plastic case.
I took it, then turned my hand over to examine what she had given me.
“Put it away, will you?” she said in a low, fierce voice.
I glanced over my shoulder as I palmed the CD, but the two old geezers having coffee a couple of tables away just didn’t look threatening, at least not to me.
“Taylor Swift?” I said conspiratorially.
“Don’t be an idiot,” she said. “It isn’t Taylor Swift.”
“Sorry. I was fooled by the mass of blonde hair.” I slipped the CD into my purse and lowered the purse to the floor between my feet. “Maybe you ought to tell me what this is about.”
“I’m getting to that.”
“Okay.”
“There are accounting irregularities at McCormack,” she said.
I nodded encouragingly, but she had frozen, her lips parted, her gaze fixed on something behind me. Before I could turn, a voice in my ear said, “Hello, ladies.”
I exhaled. “Hello, John,” I said.
He hooked the leg of a chair with one foot and pulled it out. His eyes were on Wendy as he sat down. “I don’t believe we’ve met,” he said. “I’m John Parker.”
Wendy’s eyes cut to me.
I said, “Her name’s Wendy. She and I went to college together.”
“Wendy…” His eyes left her face for the instant required to check out her cleavage. I myself had given up deep-V or even scoop necklines, thinking it more professional to deal with other lawyers eye-to-eye rather than boob-to-eye.
Wendy said, “If I give you my last name, are you going to look me up?”
“He’d better not,” I said.
She looked at me. “You two are dating?”
“Hard to believe, isn’t it?”
John said, “Oozing charm from every pore, he oiled his way across the floor. I’m sorry, I’m intruding.” He stood. “Pleased to meet you, Wendy. Robin.” He gave me a whimsical smile, then nodded and strode off across the food court. Wendy and I looked after him.
“He’d be unbearably smarmy if he weren’t such a fox,” she said. “Sorry, I shouldn’t insult your boyfriend.”
“He’s not usually like that. It’s the sight of a nice rack and a tight bod that does it to him.”
“A nice rack and a tight bod?”
“Guy talk,” I said. “I work in a law office that’s ninety percent male.”
“You’d think that would be a good thing,” she said.
“You would, wouldn’t you?”
Wendy took a sip of her drink and stood. “I can’t talk here. Let’s take a walk.”
I took a breath and released it in capitulation. “Okay,” I said, and I squelched the throb of protest from my toes.
When we were out on the street, I said, “You were going to tell me about accounting irregularities at McCormack.”
She didn’t answer. A fifty-year-old man in a blue blazer went past us, walking purposefully. He was sporting a graying flattop and a grayer goatee.
“Well?” I said.
Wendy glanced back, but the sidewalk was clear for a block behind us. “I guess I’d better start with a little background.”
“Okay.”
“McCormack Labs has contractual relationships with a bunch of little R&D outfits — joint ventures, partnerships, all kinds of things.”
I nodded. Any pharmaceutical company would need a lot of research and development.
“A lot of them involve people who used to work for McCormack, who left to develop ideas of their own. McCormack’s got fifty or sixty attorneys in its legal department. Once upon a time, when engineers and research scientists tried to leave the company with ideas they’d come up with, McCormack would sue them for running off with its intellectual property. Now McCormack’s lawyers structure deals with them and draw up contracts. McCormack settles for a piece of the action.”
“Uh huh,” I said.
She waited for a gaggle of women to pass us, all of them honking merrily. “Many of the transactions haven’t been arms-length,” Wendy said when the laughter had faded behind us. “The companies are related to McCormack in some way, to McCormack or to one or more of its officers.”
“That’s pretty common, isn’t it? You just said a lot of them used to work for McCormack.”
“The deals can be too cozy. Having control of multiple entities allows McCormack to apportion profits and losses to suit itself. It opens the door for some really aggressive earnings management.”
“As opposed to some really passive earnings management,” I said.
She didn’t see the humor in my remark, and maybe there wasn’t any. She said, “A little earnings management used to be considered legitimate. A company that could avoid big swings in reported earnings would have a stock price that was less volatile. The SEC used to give them a little leeway.”
“Before Enron,” I said.
“Enron and WorldCom and Sunbeam and all the rest of them — a whole host of companies doing everything they could to hide losses and debt and to exaggerate earnings, hoping that a booming market would bail them out in a year or two. In the meantime, investors were making their decisions based on phony financials.”
“McCormack Labs has been able to do all this despite Sarbanes-Oxley?” Sarbanes-Oxley was the federal legislation designed to put an end to such accounting shenanigans.
“Sarb-Ox raised the stakes. It didn’t change human nature.”
“Touché.”
A man and a much younger woman were coming up behind us, talking animatedly. Wendy stopped, and I stopped with her. We stood against a building with a men’s clothing store on the first floor until the couple had passed.
“She’s his mistress,” I said.
“You know them?”
“If they were married they wouldn’t have anywhere near that much to say to each other. Sorry — you were just getting to securities fraud.”
Wendy took a step and tossed her smoothie into the trashcan by the curb. “McCormack has always pushed the envelope,” she said. “As of a year or so ago, its stock price had doubled every couple of years over a ten year period. McCormack used the inflated stock as security to finance many of its deals. Of course, lately its stock price has been under pressure.”
“Everybody’s stock price has been under pressure.” Despite continuing contributions, my own 401(k) was no higher than it had been two years ago.
“Yes, but some companies are especially vulnerable, McCormack among them. It’s down maybe twenty-five percent over the past year, and it can’t take much more. If the price of its stock fails to stabilize, many of its deals are going to collapse. A big drop in its stock price could destroy the company. I guess you see where this is taking us.”
I didn’t, not clearly, so I said, “You’re saying McCormack has to keep manipulating earnings to keep its stock price up.”
“Yes, and it can’t afford even the breath of a scandal.”
I started moving again, and, as Wendy followed, I said, “Have you talked to anyone about it? What do the other people in accounting say?”
Wendy’s mouth twisted. “The first time I questioned the way we were reporting something, the controller gave me the Loyalty Speech.”
“Yours is not to reason why…”
“Exactly. The next time, I put my concerns more forcefully, and he gave me the Chicken Little speech. The company is doing well because of the deals it’s put together, and it has top people stru
cturing those deals. Don’t go around talking about the sky falling.”
“But you think it may be.”
“The controller does too. He has to. Of course, in the meantime he’s getting rich off it.”
“So what’s on the CD you gave me?”
Wendy stepped against me to avoid the mailbox at the corner, and I felt the gooseflesh on her arm when it brushed against mine. It was August, and, though we were not yet in the heat of the day, I myself was beginning to sweat. Wendy stopped. “Excel files. I think I’ve discovered a second set of books,” she said softly.
I inclined my head toward her. “A what?”
“I think the company’s keeping two sets of accounting records, which means that McCormack’s reported earnings aren’t just exaggerated. They’re completely fictional.”
“So it’s not a matter of distorted judgment here and there…”
“No. It’s systematic fraud.”
“And somebody’s going to jail.”
“Some rich, powerful somebodies.”
“Who have you told?”
“I don’t know who to tell. If what I’ve uncovered really are two sets of books, then the fraud goes all the way to the top. The outside auditors may be implicated.”
Chapter 3
Wendy had to get back to work before she was missed, she said. We headed back toward my office, but Wendy stopped us while we were still a couple of blocks away.
“It would be better if we split up here,” she said.
“If you say so.”
The paranoid touches seemed overwrought, but even paranoids have enemies. Wendy was in a position to have a better understanding of the situation than I did.
“Do you think you could circle around and approach your building from another direction?”
“Not in these shoes,” I said.
She looked down at them. “They’re cute,” she said. “Give you kind of a feminine look.”
“Careful.”
She laughed, for the moment more normal than she’d been since appearing in my office. “I’m sorry. Can you wait five minutes? I’m parked right up the street. I can get away, and no one who might be hanging around will know we’re together.”
I took a breath, released it. “Okay,” I said.
She walked along the sidewalk, uphill and then down and out of sight. Obeying instructions has never been one of my strong suits. I counted to ten and then followed. When I caught sight of her, she was a block-and-a-half away. The headlights of a cherry red convertible beeped as she approached it. Her pace quickened as a man started getting out of an Audi two cars behind her. He had a day’s growth of beard and black, close-cropped hair.
I quickened my pace, too, but the man dropped back into his car even as Wendy was opening the door and swinging down into hers. My next thought was that he was going to follow her, but her car pulled away from the curb, drawing a honk from a minivan that had to slow down abruptly to keep from hitting her, and the Audi continued to sit there. As I got closer, I could see that the man was talking on his cell phone.
I turned my head, but Wendy had already turned the corner. She was gone.
That was fine. I had her files to look at. Unfortunately, as I had learned from the moment I entered legal practice, associate attorneys don’t always have control over their own time. When I got to my office, the phone’s message light was on. The message was, “Yo! Starling! My office pronto.” The voice didn’t identify itself, but it belonged to Eric Beezer, one of the firm’s junior partners. I had forgotten I was supposed to help him on a brief he was writing. I sighed, slung my purse into the kneehole of my desk, then headed out for Beezer’s office.
Eric Beezer had an office with walls, but the door was open, showing Beezer sprawled on his back across his desk, one foot touching the floor, the other trailing about six inches above it. The floor to ceiling window beyond him looked out over the city of Richmond.
“Eric?” I said tentatively.
“Come in, Starling.” He didn’t turn his head as I entered the office, or even open his eyes. “It’s there on the computer. You can take the chair.”
Several inches of one leg were visible above the sock, and his shirt had pulled out of the waistband of his slacks. As I went around the desk, I glanced at his soft, milky belly thatched with dark hair. About fifty pounds overweight, he looked like the tide had gone out and left him beached atop his desk.
The desk chair squeaked as I took a seat in front of the computer on the credenza.
“Okay, read me what I’ve got so far.” His face was turned upward toward the ceiling.
I looked at the screen. “Starting with the first point of error?”
“Sure. Start with that.”
I read it to him. The writing was rough, evidently transcribed from dictation and not yet proofread. After a sentence or two, I said, “Hold on. Subject-verb agreement.” I corrected it, went on. On the second page was something that should have been part of the first paragraph. I stopped talking while I moved it. “None of these citations is formatted correctly.”
“So fix them,” he said.
“Do you need to be here?” I asked. “Am I keeping you from something?”
“Good point.” He heaved himself into sitting position and looked blearily at me. “You’re a fox, you know that, Starling? A cold, stone fox.”
“Yes, thank you. Does Mrs. Beezer think so, too?”
“Another good point. You’re full of them today.” He surged to his feet. “So I should check on your progress in, what, a couple hours?”
“It’s about lunch time.”
“Okay, fine. Let’s say midafternoon.”
“Three o’clock?”
“Sure, if that works for you. You know why I cut you so much slack, Starling?”
“I’m afraid I do.”
“Yes, you’re a smart girl.” He gestured at my feet. “I like the shoes,” he said.
“I understand they make me look feminine.”
“No one would ever mistake you for a boy, that’s for sure.” He shook his head as he lumbered out of the office. “That’s for sure.” When he had disappeared from sight, I turned back to his computer.
Well, crap, I thought. I didn’t see any reason to sit in his office and do this, so I fished out the flash drive that hung on a lanyard beneath my blouse. After I’d saved his document to it, I headed back to my own office, stopping on the way to make myself an almond butter sandwich from the materials I kept in the break room refrigerator.
I ate the sandwich at my desk while I tried to flesh out the half-baked ideas and sort out the tangled legal references in Beezer’s brief. I emailed it to Beezer at a quarter to three and padded down to the break room in my bare feet to get a bottle of water.
Cynthia followed me in.
“Did you get a chance to…”
I shook my head at her. “I’m sorry. I haven’t.”
“I appreciate you taking me seriously,” she said.
I nodded wearily, reaching into the refrigerator. I took my water bottle to the leather sofa and plopped down on it. “You know, this isn’t really the best work environment for a woman,” I said. “Here you’re a fixed unit of labor who should be keeping the coffee pot full. You get suggestive comments; they look you up and down… They haven’t pawed at you, have they?”
She shook her head. “I found a dirty limerick written on my desk blotter one morning last week. I don’t know who wrote it. ‘There once was a man from Kent…’”
I waved her silent. “I know it,” I said.
Pete Larsen, the managing partner, came in. Cynthia gave him a quick nod and skedaddled. As he opened the refrigerator and peered into it, I sat up straighter on the couch. I got a frown from him anyway as he turned away from the fridge. I thought it was the bare feet, but he said, “We don’t encourage the staff to use this lounge, you know, Ms. Starling.”
The coffee pot began to sputter, just finishing its brewing cycle. Evidently, som
eone had set it before Cynthia and I came in. I looked at it, then back at Larsen.
“I’m sorry,” I said. “I’d just asked her to make a pot of coffee.”
His face cleared. “Oh. That’s all right then.” His mouth stretched in what might have been a smile.
He left, and I sat sipping my water for maybe thirty minutes, needing a break, though I couldn’t imagine who I was going to bill the time to. When I got back to my office, Eric Beezer was waiting for me. I stopped and let my head roll back.
“You’ve done some good work here, Starling.”
I sighed and looked at him.
“Without you around, I’d have to devote a lot more care to this sort of thing.” He smiled, but his smile made him look as if he were passing a kidney stone. “That’s what I think of as the doomsday scenario.”
“Glad I could help.” I started toward my desk.
“Still, there’re a few things that require a bit more work.” He riffled the printout at me as I passed him, and I could see what was surely, given the time he had had the brief, an excessive number of corrections scrawled in green ink.
“Okay.” I dropped into my chair, took the papers from him.
“You’re an asset to the firm,” he said. “I hear people say it all the time.”
I waited.
“What?” he said. “Oh, asset. You’re expecting some sort of pun. No, the word just came out. I didn’t have anything in mind.” He paused in the doorway, opened his mouth to say something.
“Don’t,” I said. “You’re doing so well.”
He closed his mouth again, gave me a shrug and a sheepish grin. Then he was gone.
It was nearly six when I finished with his brief again, and I was beat. I emailed the file to Beezer, got my briefcase, and went to find John Parker.
John was gone, though, and his office was dark behind the glass walls. I frowned. He hadn’t even looked in on me before he left, which wasn’t like him.
Several other lawyers got on the elevator with me, one of them Steve Kelley, the man who saw secretaries as fixed units of labor. He had an office near John’s so I asked him what time John had left.
One of Steve’s eyebrows went up, but he shook his head. “I haven’t seen John since midafternoon sometime.”
Trial by Ambush (A Robin Starling Courtroom Mystery) Page 2