The Patriots Club

by Christopher Reich

  Bolden felt himself going. Inch by inch. Falling. In desperation, he reached for the sill of the entry. His fingers grasped only air. He dropped in stages, four inches, six, twelve, gathering speed. He pressed his palms to the wall, but his palms bounced off. Suddenly, he was in free fall, his stomach pressed high in his chest. A moment later, his feet hit something soft. He landed in a pile of rancid garbage. Yesterday’s meals. He kicked at all four walls. A door opened and he stepped into the custodian’s chambers.

  Thirty-nine was not officially a floor. No elevator stopped there. It was a floor between floors, a technical work space crammed with over three thousand miles of cable and wire from the trading floor, servers, mainframes, Liebert air conditioners to keep the firm’s IT infrastructure operating at a perfect sixty-four degrees, and most important, an uninterruptible power supply.

  He looked around the cramped foyer, walls on two sides. A service elevator faced him.

  Bolden waited two minutes before pressing the call button.

  Over a thousand people crammed the lobby and the promenade that surrounded the building. Bolden exited the freight elevator and walked into the milling masses. He let the crowd dictate his pace, never hurrying, never pushing, content to keep his head lowered and let the flow carry him. Nearby, there was a commotion. One of the downstairs security guards pushed past him, then abruptly stopped and took a step back.

  “You Thomas Bolden?”

  “No,” said Bolden. “Jack Bradley.”

  The guard stared at him a second longer. Bolden was just another white face. “All right, Mr. Bradley,” he said. “You go ahead, sir.”

  A minute later, Bolden passed through the massive glass doors.

  The temperature had dropped further. The air crackled with cold. The day was gray and frigid.

  19

  His name was Ellington Fiske, and he stood beneath a driving rain in front of the Ronald Reagan Building at the corner of Pennsylvania Avenue and Fourteenth Street. Rain funneled off the hood of his poncho and onto his shoes; it sluiced from his shoulders and dripped from the ends of his sleeves. Though the word “Police” was stenciled in block letters upon his back, he was, in fact, a member of the United States Secret Service. The assistant director for National Special Security Events, he was in charge of all security measures surrounding the inauguration of the forty-fourth President of the United States.

  Fiske strode into the center of the street. He was a small man, standing five feet seven inches in his brogues, and wiry; 141 pounds according to his wife’s digital scale. He looked both ways, careful to avoid being run over by a piece of heavy machinery. Though Pennsylvania Avenue had been closed for nine hours, the four-lane boulevard was a hive of activity. Forklifts rumbled across the sidewalk, removing the more than three hundred concrete casements that lined the street in front of any federal building. Teams of laborers threw up scaffolding to erect bleachers that would line the parade route. The air rang with hammers knocking home bolts and pinions. A few feet from Fiske, a large crane ground to a halt. Chains were attached to a traffic signal positioned in the center island. The crane’s arm lurched skyward. The traffic signal was uprooted and deposited onto the flatbed of a waiting truck. The process was to be repeated twenty times up and down Pennsylvania Avenue by four o’clock that afternoon.

  In the space of twenty-four hours, the length of Pennsylvania Avenue from Fourth Street to the White House would be transformed from one of the busiest thoroughfares in Washington, D.C., to a “sanitized,” or “threat-free,” parade route with seating for fifty thousand spectators and standing room for several hundred thousand more. The rain would dampen the crowds, but not by much.

  Staring east toward the Capitol, Fiske felt a shiver rustle his spine. It was not from the cold. Fiske had dressed for the occasion and wore his best thermal underwear and heated shoes. It was a warning. Be on your guard.

  Senator Megan McCoy was the first woman to be elected to the office of President of the United States. Though she’d won in a landslide, there were all too many people not yet ready to have a woman govern them. They were the same kind of people who didn’t want a black man on the Supreme Court, or Ellington J. Fiske as the third-ranked official in the Secret Service. In the run-up to the event, Fiske and his deputies had questioned and detained three times the usual number of nutcases boasting about their plans to kill the President.

  There was more to it than that. Fiske had a feeling something was up. He’d run over the plans a hundred times. A thousand. Still, he was certain he was missing something. Maybe he always felt that way before a big event. It would go a long way toward explaining how the son of a North Carolina garbageman had risen to so high a position by the age of forty-four.

  A column of trucks drove past, dousing Fiske with a curtain of water. He swore audibly, but restrained himself from raising a fist. The trucks were loaded with scores of waist-high iron barricades to be placed exactly three feet from the sidewalk. Other barricades would be placed one block to the rear of either side of the parade route, thus creating an access-controlled perimeter. Nine “choke points” would regulate entry into the parade area. At each, spectators would pass through a magnetometer and have their belongings searched. An additional six choke points would regulate entrance for those holding tickets to the White House reviewing stands.

  Fiske walked over to a cluster of police officers huddled inside a covered forecourt of the Reagan Building. One by one he checked their credentials. “If you control the credentials, you control the event.” That was Fiske’s working motto. To that end, every law-enforcement agent assigned to the inaugural had been checked and double-checked prior to receiving a color-coded pass that not only indicated his branch of service but also governed access to the varied function areas.

  Though officially the Secret Service acted as agency-in-charge, it was hardly alone in its efforts. The FBI, the Metropolitan Police Department, the U.S. Capitol Police, the United States Park Police, the army, and the Presidential Inaugural Committee all held jurisdiction over some or all parts of the inaugural route, or the Capitol building, where the President was to be sworn in at noon, Thursday.

  It was not, however, the professionals he was worried about.

  An event of this magnitude required bringing in hundreds of temporary employees. Of these, some were retired cops, some event personnel, some volunteers, and some private security companies. If he had less control over this group, he made sure they stayed farthest away from government officials he was paid to protect.

  Just then, a navy blue Suburban, doors emblazoned with the seal of the Secret Service, drove up. Fiske climbed inside.

  “How are things coming, chief?” asked Larry Kennedy, his number two, a beefy redhead from Boston.

  “Colder than a witch’s tit out there,” said Fiske, shaking the rain off him like a wet cat. “What’s this I hear about an electrical malfunction?”

  “A mike on the podium shorted out. We’ve got some techies coming in to take a look at it.”

  “The presidential podium?”

  Kennedy nodded, seeing a storm far worse than the one pounding them at that moment brewing in Fiske’s eyes.

  “Who are they?”

  “Not to worry, chief. They’re all squared away. They’re with Triton.”

  Fiske did not like that answer. “Triton Aerospace? I thought they made missiles. What the hell they doin’ messing with my podium?”

  “Missiles, antiaircraft systems. Hell, sir, they make everything. They made the commo system we got in this car. A Triton Five-Fifty. Guess they make P.A. systems, too.”

  “I don’t like it,” said Fiske, scowling. “Get me over there.”

  “Your party, boss.”

  “Say that again.” He looked at Kennedy. “Tell me you brought me some coffee!”

  20

  It was nine o’clock, and the senior executives of Jefferson Partners had gathered in James Jacklin’s spacious office for the morning meeting.
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  “Morning, Guy,” said Jacklin, Jefferson’s founder and chief executive, as he crossed the office. “Morning, Mike. Everyone here? Good. Let’s get started.”

  “Bob’s in New York,” said Guy de Valmont. “This is it, then.”

  “So he is. Well, I’d say we have a quorum nonetheless.” Jacklin descended a step to the seating area. “Today’s the day,” he said. “Dinner starts at eight. I want all of you there a little early. We don’t want our guests wandering around like lost sheep. And black tie across the board. I don’t want to see any white dinner jackets. We’re not showboats. Spread the word.”

  Jacklin sat down in his lacquered Princeton chair, the only one in the office that didn’t torture his back. “So, then . . . tell me, people, everyone’s clients coming?”

  “Coming? We’re overbooked,” said de Valmont, the firm’s co-founder, a tall, elegant man of fifty. “We’ll be sending half of President McCoy’s cabinet to the inauguration with a hangover. It’s the hottest ticket in town.”

  “Should be,” said Jacklin. “We’re serving enough caviar to gut the Caspian Sea for a decade.”

  Fifty pounds of beluga caviar, to be exact, grumbled Jacklin, followed by mixed summer greens, capellini with shaved white truffles (another mind-numbingly expensive delicacy), dry-aged prime New York steak, and chocolate mousse. When his back had forced him to give up golf, he’d taken up cooking instead. He’d planned the menu himself.

  The dinner was to take place at his estate in McClean, Virginia. Officially, it was a fund-raising affair. For the first time in the private equity industry, a company had raised ten billion dollars in a single fund. (Or at least said they had. The fact was that they were more than a billion short. Jacklin had to do everything in his power to close the gap by the time supper was put on the table.) The press had gotten wind of the proceedings and dubbed it the Ten Billion Dollar Dinner.

  Jacklin smiled inwardly. You couldn’t buy that kind of publicity.

  A short, brown-skinned man in a blue jacket, gold braided epaulets at his shoulders, approached. “Yes, Mr. Jacklin, may I take your order for breakfast?”

  “Thank you, Juan. I’ll have an egg-white omelet, with some smoked salmon, and a rasher of that applewood bacon. Crispy. Very crispy.”

  “Mrs. Jacklin tells me your doctor said ‘no bacon.’ Your blood pressure, sir. Too much salt.”

  Jacklin took his Filipino steward’s arm and patted it gently. “To hell with him, Juan. A man’s got to live a little. Oh, and don’t forget my Bloody. You know how I like it. It’s going to be a busy day.”

  “Yes, Mr. Jacklin. Coffee? Chef has a new blend from Sumatra. Very good.”

  “Fine idea, Juan. There’s a good boy.”

  Jacklin’s office was divided into two functional areas, and ran in an L shape anchored by the northeast corner of the twentieth floor. The working quarters ran up the north side of the building, and comprised his desk, an ornate mahogany monstrosity that had belonged to Georgie Patton when he’d been governor of Bavaria following the second war, chairs for partners or principals, and shelves adorned with the dozens of de rigueur tombstones. “Tombstones” were Lucite trophies commemorating completed deals. Somewhere in there, he’d placed photographs of his family. Sneaking a look, he’d be damned if he could find them.

  His fellow partners had taken up their spots in the “guest quarters,” and sat on the comfortable, low-slung couches that faced one another over a travertine coffee table. There was Joe Regal, who’d spent thirty years at Langley in operations. And Rodney Bridges, who’d done twenty years as a Wall Street lawyer before jumping the fence and playing top cop at the Securities and Exchange Commission, and who had now jumped back. There was Michael Remington, recently retired secretary of state, and aide to three presidents.

  And then there was Jacklin himself. The pictures adorning his wall counted as an illustrated record of his rise to power. There was Jacklin, age twenty-four, fresh from OCS, standing in the middle of a rice paddy in ‘Nam. There he was, at thirty-two, being sworn in as congressman, and ten years later, taking office as secretary of defense. More recent pictures showed him recreating with the last three presidents—playing tennis, fishing for striped bass, and attending an event at the Kennedy Center. The pictures never failed to elicit the requisite oohs and aahs. Yes sir, ole J. J. was connected.

  If there was a class system to every industry, Jefferson belonged to the aristocracy of finance. “Private equity” was just the newest name for an old game. The English called it merchant banking way back when Britannia ruled the seas and the East India Company owned everything worth having. Junius Morgan, J. P.’s father, had perfected the game and brought it back with him from London. Jacklin had helped tweak it, introducing the concept of “leverage” to give the investor more bang for his buck. Twenty-five years earlier, when Jacklin set up shop, Jefferson was called a leveraged buyout firm, or LBO for short. And the tone used was more fitting for freebooters and buccaneers than royalty.

  Time, and an unrivaled track record of success, had tempered any criticism. Since its founding, Jefferson Partners had invested some $185 billion in over three hundred deals, and delivered returns averaging a phenomenal twenty-six percent per year. Ten million dollars invested with Jefferson back at the beginning was worth a billion-two today. By contrast, the same amount invested with the Dow Jones Industrial Average would have brought you barely $200 million. Chump change.

  Pension funds, college endowments, corporate treasurers, and the larger family trusts comprised the backbone of Jefferson’s clientele. For years, they had fairly begged to invest their money with Jefferson. There was a $100 million minimum and the line started at the door.

  The last years, however, had seen a surge in the number of private equity firms. With the market in the doldrums, investors began seeking out “alternative instrument classes” where their dollars could work harder. Foreign markets? Too risky, and who could forget Russia in ’98? Derivatives? One word: “longtermcapital.” Then there was Jefferson, quietly buying and selling companies, not making any waves, and all the while raking in the chips. What had everyone been thinking? The answer had been there all along.

  From the outside, private equity looked like an easy way to make a buck. After all, what did it take? A few smart guys with a little experience and a Palm filled with the names of their nearest and dearest. Drum up some money, find an undervalued company, do a little pruning, and you were off to the races. Best of all, there was no need to have the costly infrastructure of a bank behind you. Ideas were the equity investor’s capital. Brainpower. Savvy.

  It only got better from there. The profit structure was set up to reward those with the ideas. This was no fifty-fifty split. Most funds promised a certain return on the clients’ investments. They called this return the hurdle rate. Usually, it stood at around twenty percent. While the return wasn’t guaranteed, Jefferson could not take a profit itself until it had paid its investors their twenty percent.

  The rule was that once the hurdle rate had been met, and the clients paid out, the rest was divvied up according to an eighty-twenty split, with the equity firm getting the lion’s share. What made this all the more irresistible was that the private equity firm, or financial sponsor, as they were referred to within the industry, put up the least amount of money, usually just five percent of the purchase price.

  Say a company cost one billion dollars. The equity firm would put twenty percent down and use the services of a friendly bank to finance the remaining eighty percent through a debt underwriting. But look closer at the twenty percent, or two hundred million dollars, that the equity firm pledged. Of that amount, $160 million, or eighty percent, was paid out of the fund. The firm itself chipped in just forty million dollars of its partners’ money. Come time to sell that lump of coal turned diamond, it was the firm’s turn to shine.

  If in a year they sold the company for two billion dollars, the profit would be divided up thusly: Investors in the
fund would receive their investment back plus the twenty percent on top of it, a total of approximately $192 million. They would then receive another twenty percent of the remaining $968 million, or $193 million, bringing their grand total to $386 million earned on an investment of $160 million. In one year! A home run, to be sure. But it was nothing compared to what the private equity fund earned.

  The remaining eighty percent of the $968 million profit, some $774 million, less twenty or thirty million dollars for fees to investment banks, lawyers, and accountants, flowed directly into the partners’ pockets. Remember, the equity firm only put up forty million dollars of its own money. One year later, they wrote themselves a check for $774 million, and, of course, another forty million for the money they’d invested originally. These were profits on a biblical scale.

  Jefferson had kept its position as an industry leader by virtue of its record, and its constant drive to close bigger and bigger funds. A few years back, one had topped out at five billion dollars, making it the first to be called a megafund. Tonight, they would gather to toast Jefferson Capital Partners XV, which was set to close with over ten billion dollars committed. No one had thought of a name yet for a fund that big.

  “A word?”

  Guy de Valmont took Jacklin by the elbow and led him to a corner of the office. “See the article in this morning’s Journal?”

  “No,” said Jacklin. “Didn’t get a chance yet.”

  “It’s about Triton. It claims that if the appropriations bill doesn’t pass, Triton will have to declare Chapter Eleven.”

  Jacklin tugged at his chin. Triton Aerospace was a manufacturer of antiaircraft systems that Jefferson had purchased eight years earlier. Eight years was an eternity in private equity. Speed was the name of the game. Buy a company, turn it around, ratchet up the free cash flow, then sell the thing. That was the ticket. Jefferson’s average holding period of four years led the industry.