by Ben Coes
The KKB-Anson merger was the lead story on every network that evening. Badenhausen’s positioning worked, and so did Marks’s answer. The emphasis on the KKB-Anson deal wasn’t about the financial terms of the transaction. The proposed merger wasn’t discussed in terms of cost synergies, putting two companies together in order to find duplicative cost centers, like employees, who would then be terminated. The deal had a larger logic to it, a marriage of complementary energy sources, and of supply and demand. But most of all, it was about American energy independence. Several members of Congress, and even the president of the United States, hailed the deal. Marks was celebrated as an American hero.
But in another office high in the Manhattan skyline, the mood was neither patriotic nor happy. In the penthouse floor of a sterile-looking steel and black glass skyscraper at Fifty-first Street and Madison Avenue, the announcement of the KKB-Anson merger was not only expected, it was long overdue.
A young man not more than thirty-six years old sat behind his desk staring at the flat-screen television in front of him.
Alexander Fortuna was handsome, disarmingly so. He looked Mediterranean, with a tan glow to his skin, a perfect nose. His eyes were dark black pools. Their depth had a sinister quality, a dangerous aspect that, when framed against the beauty of the man’s face, became somehow disarming. His clothing was impeccable, expensive, custom. A dark blue button-down was tucked into white corduroy pants, formal looking yet casual. He wore his black hair slightly long, down to the top of his shoulders.
Alexander Fortuna had been waiting for this moment. Like a hand on a light switch, the merger announcement caused him to flip on. It was time. The years of careful planning were over. It was his turn to act.
“America’s energy company,” Fortuna said aloud, to no one in particular, as he watched replays of Marks’s press conference on the screen, over and over.
Standing up, he walked to the window and looked to the north. He could see Central Park in the distance, his favorite view.
“America’s energy company,” he whispered to himself.
9
PASSWOOD-REGENT L.P.
CANARY WHARF
LONDON, ENGLAND
On the eighty-eighth floor of a skyscraper in the Canary Wharf section of London, a young man sat at a desk of polished steel. It spread out in front of the big window and was at least eight feet long. Four flat screens shone with spreadsheets and colored, fine-print numbers and figures.
Derek Langley was a thirty-two-year-old trader for a hedge fund called Passwood-Regent. One of the two phones on the desk rang.
“Langley,” he said as he picked up the phone.
“Hi, Derek. It’s me.”
“Alexander,” said Langley. “Hi.”
“How are you?” asked Fortuna.
“Super, thank you, sir.”
“Are you ready?”
“I am.”
“As we’ve discussed, I want us to begin aggregating within U.S. energy equities. I want us to buy KKB and Anson, but not a lot, perhaps one hundred and fifty to two hundred million dollars’ worth. The rest I want in direct competitors; electricity suppliers, distributors, especially in the eastern part of the U.S. Put at least half and up to two-thirds of Passwood-Regent assets into KKB and Anson Energy competitors.”
“Yes, sir. Understood. Southern Company. Duke Power. ConEdison. Entergy.”
“Exactly. Start buying oil stocks, too. Use whatever long instruments you feel most appropriate; calls, options, swaps, swaptions, whatever. Nothing that will be too hard to get out of. Lever it up. Press your margin. I trust your judgment. I assume it’ll be predominantly straight block trades.”
“Yes. I think we can accomplish this without having to do anything overly fancy.”
“I want you to make some commodity bets. Allocate at least a quarter billion to oil futures. Currency too. I want us to short the hell out of the Colombian peso. At least two hundred and fifty million.”
“Got it.”
“Finally, most importantly, I don’t need to tell you this, but—”
“Don’t aggregate more than five percent of any single company.”
“Precisely. We don’t want to file a Thirteen D. Don’t go anywhere near it.”
“Passwood will not own more than five percent of any single company. We won’t need to.”
“Good. The announcement was a few minutes ago. Did you see it?”
“I did, sir.”
“How much do we have in the different Passwood-Regent accounts? I’m including any current long positions, which you’ll have to get liquid.”
“That’s already taken care of. As of last night, we have approximately three point six billion dollars liquid, sitting in cash.”
“Invest across the Passwood-Regent entities. Use them all. Spread this around. Don’t place too much in any one trade. Self-impose at twenty-five or thirty million dollars per trade. Ideal trade size would be twenty million dollars.”
“Got it. How much time do I have?”
“Twenty-four hours.”
Langley’s receiver went dead. He smiled and took a sip from his coffee cup.
_____
The morning after the announcement of the proposed merger between KKB and Anson Energy, Langley went on a $3.6 billion buying spree. Working feverishly, camped out at his office, he quickly established a series of positions in companies that were direct competitors to KKB and Anson, in oil futures, and in shorts against the Colombian peso. By the end of the trading day, Langley had executed more than 150 trades across fourteen separate Passwood-Regent entities, none of them U.S.-based. About a quarter billion dollars went toward the purchase of KKB and Anson stock.
Fortuna repeated his phone call to Langley twice that same day, once to a young female trader named Orieshe Yang in Hong Kong, at a hedge fund called PBX Fund; the other call to a Wall Street fund called Kallivar, and a trader named Sheldon Karl.
By evening, on three different continents, across three different hedge funds, more than $8 billion had been invested in companies that were direct competitors to KKB and Anson Energy. More than a billion and a half dollars had purchased a smorgasbord of oil contracts. At least half a billion dollars lay in a variety of trades betting the Colombian peso would drop in value.
To make it appear they weren’t excluding anyone, half a billion dollars sat in either KKB or Anson Energy stock.
One man controlled Passwood-Regent, PBX Fund, and Kallivar: Alexander Fortuna.
When his three hedge fund managers informed him, in three separate phone calls on the morning after the announcement, that their funds were fully invested as instructed, Fortuna left his office, walked briskly up Madison Avenue for sixteen blocks, then took a left into Central Park. Near the Sixty-fourth Street entrance, he came to the Central Park Zoo. There, he bought a ticket and proceeded straight to the popular polar bear exhibit, where he picked up a pay phone and dialed a number.
“Yes,” said the voice.
“It’s done. Go ahead as planned.”
10
SAVAGE ISLAND PROJECT
Terry Savoy looked out the window of the silver Gulfstream G500. He hadn’t been to Savage Island in more than a year. Normally, a death wouldn’t be reason enough to make the trip. After all, many men died at Savage Island. But this was different. This was Jake White.
The flight to Savage Island Project was a ballbuster. Windy, with an approach to the landing strip that required a steep drop from 10,000 feet in order to avoid wind shear off the Hudson Strait. At least the Gulfstream was comfortable, and fast, one of four KKB company jets.
Savoy had received the call from Ted Marks’s assistant, Ashley, the night before.
“Ted wants you to go up there,” Ashley said after telling him about Jake’s death. “He said Jake called him last week. He was worried about something. Ted wants you to go see what happened.”
“Did he say what he was worried about?”
“No. Ted didn’t speak
with him. He just left him a voice mail. Nothing specific.”
So, Teddy Marks gets a phone call, Jake White dies, and Terry Savoy has to interrupt his vacation to fly to the Labrador Sea in the middle of winter.
“Don’t put it down yet!” Savoy said to George Kimball, the pilot-in-command, after getting up from the big leather seat in the cabin and entering the cockpit. “Circle a few times over the dam, as close as you can get.”
“It’s dark out. We’re not going to see much.”
“Radio ahead and tell them to turn the lights on, anything they have. Light it up.”
Savoy was KKB’s security chief. He had oversight of all security at the company’s facilities. Investigating White’s death fell into a category of responsibility he claimed to dislike, but in reality it was what kept him interested in his job. Most of Savoy’s work was numbingly routine: setting up security protocols for each facility, managing people at those facilities according to those protocols, creating screening processes for hiring employees, and establishing facility-perimeter controls. In other words, the job was boring. After a career in the U.S. Army Rangers, the private sector represented easy street, a way finally to make some money and play a lot of golf. But he paid for it, in effect, in boredom. For this reason he welcomed the chance to see and do something more challenging.
“We’re coming up on the dam,” Kimball said.
Savoy stood behind the young second-in-command and put on a set of Bose headset. The plane flew a few hundred feet above the pines, which formed a carpet of green in every direction. Soon, in the distance, the lights of Savage Island Project came into view.
From the air, the engineering challenge that the company had overcome was evident. The dam stood like a shield, a trapezoid-shaped wall of cement, stone, and steel more than half a mile high, an engineering marvel in the middle of nowhere. It cast its gargantuan height down upon the man-made lake beneath and the workers’ village. It was an intimidating sight.
The halogen lights of the dam climbed vertically like a ladder and emblazoned the back wall in yellow light. The lights ran out across the top of the structure horizontally and lit up the observation platform. The plane closed in on the massive wall then screamed over the granite precipice. Suddenly, they were out over the waters of the Labrador Sea.
Savoy shook his head. “Shit,” he whispered.
A few minutes later and a couple of more passes over the facility, the jet landed at the airstrip. A white Chevy Suburban was waiting for Savoy.
“Evening, Arnie,” Savoy said to Mijailovic as he climbed in.
The facility’s security director shook his hand. “How was the flight?”
“Not bad. How’s everyone doing up here?”
“Oh, you know, a little shocked.”
“I can imagine.”
“I’ve got you at the guesthouse. You want to go there now?”
“No,” said Savoy. “I want to see the body.”
They passed through two sets of gates and entered the outer perimeter of Savage Island Project. Mijailovic and Savoy showed their IDs at both entrances, despite the fact that the guards worked for them, and despite the fact that Mijailovic had exited through the same gates less than ten minutes before.
Savoy liked the fact they made him take out his badge.
The SUV pulled into a small concrete building next to the dam the size of a convenience store, the hospital.
Savoy found White’s corpse laid out on a metal shelf in the hospital’s morgue. The room was chilled to near freezing, but it didn’t compete with the frigid air outdoors. He walked around the perimeter of the metal table, staring at the corpse. He’d seen plenty of dead men before; this was by far the grisliest.
White was overweight and that was accentuated by the water his body had retained during the drowning. His right leg was gone, ripped off midthigh, a rough and uneven cut, presumably sliced off by one of the big rotors through which he’d been pulled. Half of White’s skull was sliced off at the top, exposing brain tissue. White’s left arm was also torn off, at the shoulder, a cleaner cut with puffy yellow hunks of fat showing under the skin.
“Have we notified his family?” Savoy asked.
“Not yet. We’ll do that today. Not that he really had a family, as such. Wife left him, sons wouldn’t speak to him.”
“They should know anyway. Unless they object, we should probably bury him somewhere out here, in the woods someplace. I think he would’ve wanted that. It’s your call. You knew him better than anyone.”
Savoy walked out of the hospital. Although he didn’t show it, he was shaken by sight of White’s corpse.
He went to the guesthouse and took a shower then walked to the administration building, a two-story concrete box at the base of the dam. Savoy spent several hours poring through White’s office. It turned out to be an interesting expedition, not because he found anything, but because it reminded him why White was able to do all that he did. He was an unbelievably well-organized manager. Every piece of paper was filed, on a yearly basis, by subject, alphabetically, going back five years. Whatever wasn’t filed was in one of three neat stacks on his desk. In the middle of the desk was an old IBM computer.
Savoy spent some time on the computer, though it was clear the old machine hadn’t been used in a while.
“Box this up and ship it to New York City,” he said to Mijailovic. “Send it to a guy named Pillsbury in IT.”
“Will do.”
“Also, send down the filing cabinets for the last five years. Send them to my office.”
“Got it.”
The bottom drawer of the desk contained pens, paper clips, tape. The middle drawer had several cartons of Marlboro cigarettes and a few ashtrays, plus some matches. In the top drawer were photographs. Many of the dam in different phases of construction. One photo showed White with Marks, taken at the ribbon-cutting ceremony for the dam. There were three photographs of his sons standing next to White on a fishing trip somewhere.
Another showed his ex-wife, a plain-looking woman with short brown hair, smiling shyly at the camera.
Savoy wasn’t a detective. He was a security expert. But he didn’t see any signs of desperation here.
As dawn approached, he asked Vida, Jake’s assistant, for some Advil.
“Did you see anything funny going on with Jake in the past month or so?” he asked when she brought Advil and a bottle of water.
“Nothing out of the ordinary,” she said.
Savoy looked across the room at Mijailovic.
“He called Ted Marks last week,” said Savoy. “Were you aware of that?”
“No. But it wouldn’t surprise me. They were close. They used to be close.”
“Can you run the HR files for me?” Savoy asked Vida. “Go back a year. See if there were any disciplinary cases.”
“I’d be aware of them,” said Mijailovic.
“I still want it done,” said Savoy. Then he softened his tone. “Look, in all likelihood this was an accident. Jake fell off the dam and drowned. Got pulled through one of the turbines and thrown out the other side. Tragic and innocent. But that doesn’t mean I’m not going to look at everything, including the files.”
“I’ll run those right now,” said Vida.
“I also want to take a walk through the dam,” said Savoy.
Savoy and Mijailovic stepped out of the small administration building. It felt even more bitterly cold outside now. The wind howled from the east and came off the Labrador Sea with a vengeance.
“Goddamn, it’s cold up here!” Savoy yelled.
“Won’t get above zero today. Wind chill makes it feel a lot worse than it is.”
Savoy looked to his left at the hundreds of neat, drab gray concrete houses where workers and their families lived.
He looked up at the dam. It stood above the small village visibly from every vantage point, water cascading through its powerful turbines. Even standing at the facility’s base, the sound of the turbines was in
credibly loud. Though the big river of water shot out less than two hundred feet from where they stood, one could hardly hear the sound of the rushing water over the turbine roar.
Savoy and Mijailovic walked to the dam entrance. They displayed their security badges to the guard and placed their thumbs on a small black screen.
“Take these,” Mijailovic said. He handed him a set of headphones. “You’ll be deaf in an hour without them.”
They climbed onto the steel cage elevator. Mijailovic moved a yellow latch to send it to the top of the structure. They looked out the side as they moved up past floor upon floor of turbine rows. The dam had exactly fifty floors, and each floor was exactly sixty feet high. Each floor was a dim, cavernous pocket that housed four massive turbines.
As the elevator climbed, Savoy stared in disbelief through the grate. He’d seen the turbines before, but his memory didn’t do it justice. Caged in polymer steel behind a thick shelf of transparent carbonate plastic, each turbine stood twenty feet high, a massive churning drum of six rotor blades. These churned like jet propellers in speeds directly proportional to the amount of water running through.
Each turbine had at least one man monitoring it at all times, standing at the side of the polymer casing and inspecting the individual rotors for problems. One broken rotor, they knew, if not discovered immediately, could destroy the entire piece of hardware. Each custom-built turbine cost nearly $50 million to replace, not to mention lost revenue from electricity that couldn’t be generated.
At full capacity, the blades hummed loudly and were invisible, a whirring rush of metal cranking around as millions of gallons of water pulsated through. The sight of one of these machines was amazing. The sight of four in a row was spectacular. The thought of two hundred of them was hard to contemplate.