by John Gubert
And the corruption was the seed from which the extortion rackets grew. They monitored the bribes. The corrupt were then blackmailed. And then they had to take more bribes to pay the blackmailers. The money was paid out with one hand and then part of it was paid back with the other. It was a classical case of recycling, a typical Di Maglio ploy.
The next week marked another milestone. The auditors gave them their initial findings. Not surprisingly, they had failed to spot any problem. They complacently noted the large trading position without realising it was outrageously risky. They commented on the US profits growth without challenging how a bank can turn round its performance at the drop of a hat, simply because there is new management in place. They noted the loan book had soared. Yet, they still saw no warning signs.
And they congratulated the new management repeatedly on their performance, despite all the signs of over trading or excessive risk taking. Charles realised that there might be another group to lose out on the scam. The lack of attention of the auditors was going to cause them problems. They had not questioned the valuation of the open trading positions or the quality of the loans made. They had taken the lazy route and they had taken management’s word for it. They were also on the wrong side of the law.
And, as they explained to them the profit outcome for the year, it was clear that they had fallen for trick after trick. It became clear that they were unable to understand the bank’s books. They believed them. Charles placed the gentry on the board in front of the auditors, they were totally duped by them.
The landed gentry must be sound, the old school had to be trusted. Old money ran the firm even if new money owned it. The old school could be believed. Or, at least, that was the view of the establishment. It was a case of ‘my word is my bond’; and it may have been in the old days but, in the modern world, it was more often a mere ruse to avoid the right level of scrutiny.
The end of February saw them declare their results. Fund sales had gone from strength to strength, although they were no longer loading the funds with fake stocks. The genuine business had boomed. The combined profit beat their forecast and they used every single accounting trick to claw in every penny of possible gain. The new enlarged Group had made one point five billion. They forecast, and the Honourable James stressed to all, on a very conservative basis, that they would make at least one point eight the next year.
And they announced their planned sale to the public. The papers for the offer for sale would be published in March. The sale would take place in April. That was earlier than foreseen. But there was no sense in delaying. And the sooner they closed out the scam, the less they risked. The quicker they came to the market, the lower the risk of a genuine market fall making life difficult for them all.
The press were wild with enthusiasm. The tabloids talked of Jacqui and Charles as a dream power couple. They were the golden couple. All they touched turned to gold. The press looked for better than forecast results. The City elite were wild about the shares and said profits would be far better than expected; they talked of two billion for the next year and even more. The great and the good did nothing to dent their enthusiasm; they even fuelled it as they were feted in their clubs. But Charles and Jacqui refused to comment in public or private, so nobody could say then that they had encouraged speculation.
But their very silence drove the speculation as society’s elite continued to whisper the news to their friends in their clubs. Those friends in turn told their friends, who then talked to anyone who would listen. The roller coaster had started. The buyers were waiting for the offer to the public. Greed was all powerful, logic was disregarded and prudence was thrown to the wind. Everyone wanted a share of the action for the hottest deal in town.
The press and brokers conspired to create wave after wave of enthusiasm for the shares. In the US and UK, the support did not waver. It was good for the bank and good for them. The publicity generated some genuine business and the support would help them float at an even better price.
They announced the details of the sale at a joint press conference in London and New York. Charles made sure he and Jacqui kept in the background. The Honourable James made the announcement in London as Chairman of the bank. And Lord Dunkillin, whom they appointed as Deputy Chairman ahead of the sale, made the simultaneous announcement in New York. There he was accompanied by a voluble and enthusiastic McGarth, as the US chief executive, while Charles sat quietly next to the equally garrulous and over optimistic Honourable James in London.
Charles could see no point in being high profile, especially after all the publicity they had been given when they announced the sale. Now was the time for him to become a backroom boy. He wanted cash and not glory. Cash would buy them freedom, glory would bring disaster to the rest.
CHAPTER TWENTY
March was frenetic. The whole show roared forward in great style. The Empire was running well. Jacqui had to slow down as she approached her seventh month. Maria was fit again and kept a close eye on Charles’ fellow directors, both in and out of the office.
Di Maglio called occasionally but it was always with ill grace. Jacqui and he had become all the more estranged since he had suggested he was not her father. It was as if the only link between them had been broken. Charles’ relationship with him appeared better. Di Maglio was duly impressed by Maddy Brown who ran the Empire with the necessary iron fist.
Charles and Jack Ryder carefully monitored the complex web of transactions that would bring down IBE and make them the first part of their fortune. They had now completed the large part of the fund heist.
They had created and sold their phoney investments, shell companies backed by skilfully structured mirages of smoke and mirrors that blinded the experts and bamboozled the rest. And all that profit was already in their accounts. They had it in cash, well away from IBE and its associated banks.
But even more profit had come though the genuine shares they had sold to the US funds. The prices of these shares, though, were highly inflated. They were incredibly overvalued. They had kept the market in those shares short of supply and the prices soared all the time that the funds bought them from them. It had all been so simple, and it was much less risky than dealing solely in investments of their own creation.
The stock markets boomed. The fund prices soared to reflect their holdings. Investors poured more money in and the funds used that money to buy even more shares. And so it had continued with the funds fuelling the rise in the shares they owned as they bought more of them and pushed the price higher and higher. Demand was slowing down now and Jack Ryder was simply manipulating the market to stop the share prices from falling; at least until they wanted them to.
They had guessed that it would take the bank and their auditors some time to figure out something had gone seriously wrong in the trading room and with their lending. And they had the comfort of Lord Dunkillin and Sir Brian signing off on everything in the meantime. But time was their enemy. Sooner or later the hole would be found. It was just too big not to be noticed. They would act fast. The longer they waited, the greater the risk of discovery.
The loans would go into loss as their borrowers defaulted. They had ensured that the companies were able to meet financing costs through to the end of June. That was the date when the defaults would really start.
They still, of course, had the final billion-dollar loan scam to do, but that deal was being negotiated. Nobody could tell that they were behind it. Like any good fraud, they had kept it all so simple, using a Di Maglio shell company without his full knowledge. The money would just flow through it to allow, yet again, the finger of suspicion to point at Di Maglio. But where it flowed to, nobody would be able to trace. At least, it would not be traceable after the first payment into an account of one Di Maglio in Panama. But it stayed there for just one minute and then was routed away to secret accounts that could never be traced by taxman, government or just the inquisitive.
The bank was being built up
to allow it to fall. And with the bank went Di Maglio, thanks to the generosity of the warranty in the elusive page thirty three of their agreement. Few would believe, when the claims were made, that the authorities had found all his money. But Charles was certain he could ensure that most of it was traceable, at least the parts he wanted to have traced.
And the losses of the bank and their investors would largely to be covered by the warranty from Di Maglio in that extra page thirty-three of the sale agreement they had signed the previous year. The page that stated that, for a period of twelve months after the sale of PAF to IBE, Di Maglio personally guaranteed the bank and its clients from any losses due to fraud, malpractice or wilful neglect by the previous or then current management And who was going to believe that Di Maglio hadn’t removed it from his copy, especially as it went straight from page thirty two to thirty four. Innocence and Di Maglio would be deemed strange bedfellows. While many would applaud the foresight of Charles and the negotiating team in getting such protection, just as many would question why Di Maglio had signed his financial death warrant in that way. And they would ask how he had allowed his hidden wealth to be traced and seized. How had he allowed himself to be destroyed?
The sale of the bank to the public was helped by a continuation of the speculation on the likely level of the next year’s profits. McGarth played his full part when he appeared on prime time TV. He enthused about the numbers of new accounts the US bank was opening. He marvelled at the outstanding investment performance of the bank’s funds. He even did them a great favour by insisting that he and his local management, and not the bank owners, were the driving force behind the amazing performance. He boasted that it was due to the expertise of ‘his boys in Wall Street’ as he called them. He claimed so much credit for himself that he helped exonerate all others from blame. The man was certainly earning his keep.
Charles toyed with the idea of getting the Honourable James to do the same thing, but he felt even he was too bright for that job. So they managed to get Sir Brian on one of the money programmes and he excelled. Charles told him to play down his and Jacqui’s role and play up that of himself, the Honourable James and Lord Dunkillin. He said that investors needed to believe in the solid state of the bank and that could only be achieved if Charles had a lower profile and the distinguished, well-known directors a higher one. Indeed, gullible Sir Brian lapped Charles’ suggestion up with joy on a roller coaster of an ego trip and needed no further brief.
When interviewed, he proudly stressed his role as the wise man overseeing the key areas of credit and treasury. He stressed the role of the old guard. There was, according to him, a belief in experience on the board. He implied that Charles had the occasional good idea but suggested he focused on his outside interests rather than the bank. He failed to mention Jacqui’s role at all and made her choke with laughter, and perhaps fury, when he said that, quite rightly, she was a mother and a mother first rather than an active director. The bank’s success was all about himself, the Honourable James and Dunkillin.
He actually took it a bit far and they started to challenge him. He countered all by saying that Charles’ role was to think strategically. He pointed out that Charles had engineered the PAF deal. But he stressed that did not mean he ran it. McGarth was credited with that, reporting to the board and not to Charles. It was outstanding. The media were manipulated. And that happened on both sides of the Atlantic.
April saw Charles again heading all over the world as they put together the prospectus and ran the interminable road shows that are meant to impress the big investors and give them the sight and feel of management. Or, at least, the sight and feel that they wished them to have.
They had little more to do inside the bank but wait for its losses and their profits to crystallise. So, always in the background, Charles kept busy on the sale of the bank to the public. He marvelled at the expressions of interest. And he laughed at all the hyperbole in the press.
They were getting enquiries from the Far East and the Middle East, as well as the US and Europe. They were desired by pension funds, sovereign wealth funds, insurance funds, mutual funds, the wealthy and the not so wealthy. The advisors agreed they would try to hit the high end of the range in price. In the end, they issued the prospectus.
They stuck to the one point eight billion-dollar forecast made at the time of results, despite the belief in the market that this was too low and the opportunity of raising the price if they raised the forecast profit. But Charles was concerned that any changes would have to be re-audited and could see no value in encouraging any added scrutiny of their books. There was always the outside chance that such an exercise could lead to someone sharp stumbling over one of their phoney or phantom deals.
So they revealed the price. They said that they would float at just over sixteen dollars a share. They announced that, to ensure that there was no dominant control of the company, they would sell seventy five per cent of the shares. The company would be valued at an incredible eighteen billion dollars and the sale would raise over thirteen billion dollars for them.
The markets boomed and the shares were in heavy demand. As the final day for applications arrived, the flood of requests rose. The banks had to take on extra staff to handle the flow of paper. In London, New York, Paris, Frankfurt, Hong Kong and the Gulf they clamoured for shares. Then the offer closed with television coverage showing near pandemonium as investors rushed to meet the last minute deadline for getting their applications in to the advisors. The next day, they announced that they had been oversubscribed a massive six times. The issue was a major success. The forecast was that the price would go to twenty dollars a share and that helped them keep on the front pages for the rest of the month.
The atmosphere in the bank was electric as everybody became a capitalist. The employees had privileged access to the pot of shares for sale. The bank lent them money to buy them. They were hungry to make their fortune. Charles knew many of them would sell at the first opportunity and, therefore, not lose money. Otherwise he would have felt awkward about it.
They didn’t care what happened once the scams hit the world of big business. But they didn’t want to have to face popular approbation. And they had engineered the famous page thirty-three of the agreement with the unlimited warranties from Di Maglio to ensure that the small depositors were protected. Some would lose, they couldn’t afford to be purists. Not if they wanted to succeed. There would always be casualties.
The deal finally closed and the money was paid over. After all expenses, the shares had been sold for thirteen point four billion. The advisors and others had made two hundred million dollars from the deal. But that was not of concern to them. Top advisors were expensive. But they would also be hit by the eventual demise of the bank. Were they lax in their scrutiny? Did they give the company the benefit of the doubt? Were they swayed by the temptation of super millions for their fees? If there were losses, they could even be sued. And the more people in the dock, the less the spotlight fell on Charles and Jacqui.
For Charles and his family, the money joined the cash already banked from the frauds. Their expected cash kitty totalled well over twenty billion dollars. It was conservatively invested well away from IBE and in structures that only the very rich can afford. As one could guess, they were not paying much tax on those gains.
June approached its end and they put the final three phases of the scam into play. Jack Ryder and Charles worked night and day. They started calling in the trades through their different companies and structures, always using trusted intermediaries. And a trusted intermediary was one who was paid well, anonymously, and understood the meaning of discretion.
There was pandemonium the first day in the IBE trading room as they claimed their profits, lodged their claims and exercised their options. Charles sensed it as he passed the room and heard snatches of anguished conversation.
“What the fuck’s happening. We owe them and the computer says we’ve made a bund
le?”
“Who wrote this agreement? What’s clause seven? What’s meant by a fucking alternative algorithm?”
“What shit-head wrote a trade and guaranteed the price of the Zimbabwe dollar. It’s worth just one percent of what it was last month!”
“What asshole did something called a reverse default swap? What is it and why’s it costing us a hundred when the computer says we are making twenty on it…..of course I’m talking frigging millions. What did you think? I wasn’t talking… oh, shit another bloody claim. We never shorted the euro at the bottom, did we? This company wants to close the deal out. Here it is; the buggers right. Who agreed this? Bloody hell, it was Dunkillin and nephew and it’s one of their family companies. The auditors are really going to like that one.”
“I’ve a loss here on a swap deal. It’s madness and this sod of a computer still says we are making money on it. Something’s wrong with the programme. We must have been legged over by that arsehole, Stephens. When I next see him, I’ll kill the mother fucker.”
“Of course we have to pay the claim. They’ll put us in default if we don’t.”
“Shut up about your fucking bonus; if it carries on like this there won’t be money for the bloody latte this afternoon.”
Charles saw the worried faces of Sir Brian and Dunkillin. But he pretended not to and kept well away. He failed to see the Honourable James on the first day. But he knew, through Maria, that he spent a long time with McGarth. Apparently the US Chief Executive was hyperventilating on the phone.
They set the stage for the billion-dollar loan. The Honourable James’ son grabbed all the credit as originator of the deal. That was just as well as the billion was going to be easy to trace as it went to a Di Maglio account, before passing into an account in New York in the name of the Honourable James’ son himself and then onto a very secret account he appeared to hold in the Cayman Islands. That account was so secret that even he did not know about it. Unfortunately, there the trail ended and nobody could trace what had happened to the money. Charles was the master money-launderer.