by Unknown
A bankruptcy judge usually declares any payments or withdrawals made on the eve of a bankruptcy as improper or even fraudulent transfers. Even if Ramble College had withdrawn its money, a judge could demand that it be returned so it could be divided among all the irate creditors first, with the even more irate investors like Ramble at the end of the line.
“You think it will come to that? Bankruptcy?”
Melvin shrugged. “The drumbeats are sounding.”
Ramble College needed a lawyer to protect its interests. Rog Reimann needed a lawyer to settle Rinda’s estate while fending off whispers that he was responsible for her death. So many end-of-life issues, personal and corporate. I didn’t feel particularly useful. Maybe I should have specialized in something other than the terrifying glamour of trial work.
Melvin turned from his computer screen to face me. “You said you don’t have anything invested with them.”
“No.”
“How about that investor friend of yours? Spencer Munn? Does he know Eliot Easton?”
Melvin sure pays attention to details. “They know each other. I don’t know anything beyond that.”
“Do you know Munn well enough to call him, let him know what’s going on? I believe he has money in Manna. It might be helpful to get a group of investors together early. Once the government gets involved, it can get a little muddled about what its mission is and who it should protect.”
I’d never had reason to contemplate the intersection between creditors and investors outside the sterile confines of a textbook. Securities law tries to give investors the information they need to make investment decisions. Arguably somebody could offer to sell shares in the Cooper River Bridge, as long as he told potential investors he didn’t really own the bridge. With such a material fact available when they made their decision, investors would be free to buy up as many worthless shares as they wished.
Bankruptcy law, on the other hand, spells out debtor and creditor relationships. The goal is to give those who’ve gotten in over their financial heads a way to climb out, dry off, and start fresh. The court apportions what assets are available and pays off the creditors, but only after paying off the lawyers, the accountants, and the IRS.
If any assets remain, they go to those who’d chosen to loan money to the bankrupt person or company, whether to buy a house, start a business, or run up vacations, restaurant bills, or get-rich-quick schemes on a series of credit cards. The lenders supposedly went away having learned to be more careful about those to whom they loaned money in the future. The investors who owned the bankrupt company stood at the end of the line. They usually got nothing.
I knew the law. I just never had reason to contemplate where the two federal legal schematics collided. In a corporation, creditors were the biggest focus since the investors—the owners—presumably knew what they’d gotten into. However, with Manna Advisers, did the investors really know what they were doing with their money?
“The creditors get in line first,” I said. “Who is that likely to be?”
“After your brethren at the legal bar get paid?” Melvin said with mild sarcasm.
“Of course.” I couldn’t see that an investment firm would have a long list of creditors, not like a manufacturing firm, for instance, with suppliers, truckers, employees, and such.
“Manna Advisers had expanded its operations recently, so it has several new long-term office leases, new employees for each office, new furniture, and so forth. From what I’ve been able to pull up, their board members are also well compensated. I don’t know whether the state or federal tax authorities have anything owed to them, though nothing has gone as far as a formal lien.”
“Still, Manna ought to have enough assets to pay the creditors with something left over for the investors, right?”
“Ought to, but these things usually don’t turn out well.”
“What do you mean, these things?”
“Small hometown investment schemes gone bad.”
“You make it sound doomed.” I had a knot in the pit of my stomach as I thought about the carefully patched gentility of Ramble College. In a flash, I remembered Lissie Caper and her tight-faced conversation with Todd David at the parade—Todd, who was secretary of the board of directors at Manna Advisers.
“By the time the government publicly announces an investigation, the investigators have already done plenty of quiet digging. No official wants to panic the public and cause a run on a firm that’s hit a bad patch but still has a chance to pull out. That would be tragic.”
“Like the Enron guys tried to claim: We had it all under control. If you hadn’t scared people off, the market would’ve proven us right.”
“Exactly,” Melvin said. “Sometimes they can pull it out, given a little time. You can’t always tell from the outside when something is simply volatile and when it’s doomed.”
“But if the watchdogs wait too long to start barking, innocent people can lose everything.”
“As you said, Enron.”
“So regulators tend to err on the side of caution and wait too late,” I said. That would explain the tenseness in Melvin’s voice.
“Yes, especially given this attorney general. He’s the cautious type. I did some checking. His office had been getting heads-up calls and e-mails from one investor for several months, so this has percolated awhile.”
“What upset the guy enough that he alerted the attorney general?”
“According to what I heard, an investor in Columbia got suspicious when Eliot Easton first bought Manna. He said Easton started spending more money than a small-town savings and loan ought to have to spend.”
“But it’s not a savings—”
“Exactly. To me, that’s the most damaging part of this situation. Have you seen one of their offices?”
I shook my head. “No. Just driven by the one in Seneca, but I haven’t paid much attention.”
“They look like banks, complete with tellers’ windows and a nice lobby. A lot of investors treat it like a bank or an S&L—and consider it to be as safe as one. Trouble is, Manna Advisers isn’t covered by the same regulations or safeguards.”
“It’s still covered by state and federal securities regulations, though.”
“True,” he said. “And, like any regulation, those rules do a great job keeping in line those who are inclined to follow the rules. But rules don’t keep people honest if they’re bent on being bad.”
“You think Manna Advisers was bent on being bad?”
“No, not on the face of it. They were making intrastate offerings to a limited number of investors, as allowed by law.”
Securities sold within a state don’t have to comply with federal securities reporting requirements as long as the amounts sold and the number of investors stay below certain limits.
“On the face of it,” said Melvin, “investing with people close to home gives an investor a chance to know the company personally, to keep an eye on them. So these intrastate offerings make a lot of sense—in theory, at least.”
“But aren’t intrastate investments usually sold to institutional investors?” I said. “What if the investor isn’t a large, savvy institution, but instead is a small group of not-very-canny good ol’ boys?”
“Ah, therein lies my worry about Manna Advisers. Some of the investors weren’t very savvy. I’m afraid too many of them thought they’d found a bank that paid really good interest rates—except it isn’t insured like a bank, and those rates were bought with high risk.”
“That’s scary.”
“Anybody can be fooled by a good story. Enron had some of the nation’s most sophisticated investors on its shareholder roster. From the time Carlo Ponzi began talking his neighbors into the wonders of trading on international currency fluctuations—and, more important, getting them to convince their neighbors to join in—the more unbelievable the investment scheme, the more attractive it often is.”
“But this isn’t a con or a Ponzi scheme, i
s it?” I asked.
“Not in the technical sense. But face it, all investment is a sales job—a good one, if you make money; a con, if you don’t. That’s how people see it. It’s supposed to be a sure thing.”
I hadn’t thought about the client expectations Melvin dealt with every day. Most of my clients knew why they were sitting in jail or why their wives were leaving them. Sometimes they wanted to blame me, but even they knew that wasn’t going to stick. On the other hand, Melvin took other people’s money and played with it. They would get touchy if something happened to it, no matter how careful Melvin was.
“What was Easton investing in that made the irate investor blow the whistle to the attorney general?”
“Former investor. He got his money out, after a little tug-of-war with Easton.” Melvin shrugged. “Manna was listing a private jet, a yacht, expensive trinkets like ink pens and art as investments.”
I frowned. “Those could be investments, right?”
“I personally wouldn’t put my clients’ money in art or collectibles and call it an investment. Investors expect a return on their money, in case they want to make a mortgage payment, pay their granddaughter’s orthodontist bills, or buy their own private plane. As to a plane or a boat, I haven’t seen any cases where those were anything but money pits. Not what I’d call investments.”
“Lose a little money on a little boat, big money on a big boat.” I quoted my grandfather with a smile.
“Unless you use it to catch fish and supplement the family food budget,” Melvin said with mild irony, quoting his brother’s rationale for his recent bass boat purchase. Melvin enjoyed fishing, but I noticed he didn’t own a boat. He used his brother’s.
“I can call Spence Munn. What do you want me to tell him?”
“Test the waters. See if he’s read about the attorney general’s announcement. Depending on his reaction, you can decide whether to ask if he’d like to attend a meeting to discuss next steps. If he’s intensely loyal and has absolute faith in Manna and Easton, leave it alone. I don’t want to stir up trouble for them and don’t want to start a stampede. That’s in no one’s best interest. That’s why I’m not calling him. It’ll be better coming from a friend, somebody he knows, not somebody out of the blue.”
“Sure.” I agreed with his reasoning but didn’t have a clue what I would say.
Wednesday Afternoon
As I walked into my office to call Spence, Rudy’s voice replayed in my head: Follow the money. Quite a lot of money had been floating around Camden County lately. Where would it land? And when?
I’d planned my voice-mail message, but Spence surprised me by answering his cell phone.
“Are you in your office at the college?” I asked.
“Just leaving. As a matter of fact, I was about to call you, see if you wanted to meet for coffee.”
“Sure,” I said. I was glad not to have our conversation on the phone, where I couldn’t judge from the body cues what he was thinking.
The coffee shop he suggested in downtown Seneca was closer to my office than to his, so when he arrived I was waiting at a circular metal table in the front window. The spindly metal wire chair wasn’t as comfortable as the squishy stuffed chairs in the rear of the shop but, despite its deceptively public location, the little table was farther away from any accidental eavesdroppers.
“Oh, you already have something to drink,” he said when he spotted me. “Anything else? A slice of cake or a cookie?”
I waved away his offer and sipped my ice tea. I really don’t like coffee, but coffee bars are nice creations. Neutral turf, with a contrived sense of homeliness.
“Thought you might be traveling, taking some vacation,” I said when he carried his ceramic mug over and joined me.
“Why?” His face looked as if he was trying to decipher a strange message.
“No reason. Just that it’s a holiday, lots of people leave town.”
“Oh. More reason to stay, I figure.” He balanced himself on the round chair seat and tested the heart-shaped wire back with a tentative lean.
I took a deep breath to focus myself. I tend to splutter when I have more to say than I have words for. “Have you heard about the attorney general’s statement today?”
“No.” His puzzled frown said that wasn’t what he’d expected to chat about. “Why? Should I?”
“He sent out a release this morning, announcing an investigation into Manna Advisers.”
Spence stiffened. The movement was almost imperceptible, as if he was drawing himself up so the chair wouldn’t tip over, but he didn’t say anything.
“Isn’t that your friend Eliot Easton’s firm? The guy from the restaurant?”
“Um—yes.” He was paying more attention to something in his head than to me.
I waited out his silence.
“How did you—find out?”
“Like I said, an announcement. A friend of mine told me about it.” I didn’t mention Melvin by name or remind him he was also an investment advisor.
“It’s just an investigation,” I said, “but I know that can panic investors.”
He nodded. His hands were wrapped around his white mug, but he wasn’t drinking any coffee.
“Would you be interested in joining a meeting of other investors?”
His head snapped up. “What meeting?”
“Just to explore options.”
“Who’s calling this meeting?”
“I don’t know. Just some others who have clients or are invested themselves, to see what they can learn.”
“Are they going to force a regulatory seizure? An involuntary bankruptcy?” His voice had a sharp edge.
“No, that’s the last thing they want to see.”
That seemed to calm him. His shoulders relaxed. “Sure. Tell them to include me.”
I sensed a wary caution. Spence hadn’t denied having money invested with Manna, so had I made the right assumption there? Or was he hoping to report back to Eliot Easton about what was going on? Melvin wasn’t dumb. He would have considered that possibility. Besides, Melvin wouldn’t know anything that Easton didn’t already know.
“That’s sobering news.” Spence played with his coffee mug, turning the handle to first one side, then the other. “So much happening lately. I saw the funeral announcement in the paper this morning. How’s Rog doing? Have you heard?”
“I think he’s still in shock.”
“Who wouldn’t be, especially with the sheriff harassing him.”
“I don’t know that the sheriff is harassing him.” I acknowledged my double-mindedness on that subject only to myself, feeling oddly protective of Rudy and even L.J.
“The idea that he had anything to do with her—with his wife’s death is just absurd,” he said. “To anybody that knows him, it’s inconceivable. He’d just never do anything like that.”
I didn’t point out how often serial killers’ neighbors say, “What a nice young man he was—a little quiet, but nice.”
“I know,” I said. “But look at it from their perspective. They’ve got to do their job. It’s an unusual death. They’re doing Rog a favor by answering the natural suspicions people have, especially since his first wife also died in an accident.”
Spence gave a mild snort. “The sheriff’s more worried about her reelection chances. These things are always political, Avery. I know these people are your friends, but a prolonged investigation has made the insurance company suspicious. Rog told me they’re refusing to pay until the investigation is finished ‘to their satisfaction.’ And I quote. You know insurance companies love an excuse to delay paying a big claim.”
I didn’t point out that Eden Rand had done more to raise suspicions at the insurance company than the sheriff’s investigation had.
“Do they plan to charge him with anything?” Spence asked. “If so, he’ll be in a really tough position. Needing a lawyer without the resources to hire one. Do you guys work on spec, in cases like that?” His tone
wasn’t snide or sarcastic. He seemed genuinely curious.
“What happened to all his money? I understand he got a nice settlement when his first wife died, so why’s he in such a fix?”
Spence didn’t act surprised at my question. “It’s not in liquid investments. He just can’t get his hands on it right now.”
He didn’t volunteer whether he served as Rog’s investment adviser, and it would be unprofessional to ask.
We both sat silent, staring out the storefront window at the occasional car that passed along the side street.
I also didn’t ask if he’d like to go up the mountain for a walk. For one thing, he had a lot on his mind and was probably as anxious as Melvin had been to dig into the Manna Advisers mess. Whether he had his own money invested or that of his clients, or whether he was just worried about Easton, the news I’d brought was not good.
As another impediment to even a casual stroll down a wooded path, he was dressed in sand-colored silk slacks and what was likely yet another expensive silk Hawaiian shirt, this one covered with red poppies. Slipping on a patch of damp red clay would ruin his braided leather thin-soled loafers.
“I’m sure you have things to do,” I said. He seemed content to continue our coffee date, but I granted him a reprieve so he could get to his computer or phone.
“Yes.” He breathed with relief and stood, almost tipping over the wire chair before it righted itself.
“I’ll give you a call,” he said. “Maybe this weekend?”
I nodded, and he bent down and gave me a kiss on the cheek, an unexpected offering. I understood better than he could know the draw of work, of an overwhelming responsibility for other people, for their money or their livelihood or their reputations. I respected that. No need to apologize for ditching a date to take care of business.
As I walked around the corner to my car, I mused on what to do with the rest of my afternoon. A summer blockbuster movie? Naw, not in the mood for all the testosterone in one of those. I really wanted to take the canoe out on the lake, but that would have to wait until October when the Jet Skis hibernated. A walk in the mountains? Home to read a book in the front porch rocker? To Clemson for some ice cream? Would the student-run store be open today? It would only take a ten-minute drive from Seneca to answer that question, during which I could decide what to do next.