I snorted: 'Let them claim the biggest diamond mine in the world and see what happens.'
He chuckled... 'I see you distrust governments as much as I do. Perhaps it's as well then that my island is in international waters. Free of any jurisdiction except my own.'
I felt punch drunk. 'Mr Pepalasis, I presume you can substantiate all this?'
'Most of it.' His eyes twinkled. 'Of course no geologist can ever guarantee what's in the ground, or the exact extent of a mineral deposit. He can only say when the signs are promising. After that it's a matter of sinking your mine.'
The interview had outstripped my experience. Normal questions, regular investment criteria, all seemed irrelevant. The situation was perfectly unique.
'This island,' I asked. 'Where is it?'
He answered slowly and carefully. 'If you'd left your house unlocked and it contained all your possessions, would you go around telling people?'
'What's that supposed to mean?'
'Only that a large part of the initial investment will be used to develop security systems. We live in a wicked world.'
'My father warned me.'
'The location of the island must remain a secret for the time being.'
'You can't possibly be serious?'
But he was. We argued for the next hour but he was adamant. Under no circumstances would he reveal the location of the island. He produced a map of the place, all lines of latitude and longitude suitably erased. He showed me his notes, and even offered the stones in the leather bag for appraisal by experts. Our exchanges grew increasingly sharp.
'Mr Townsend!' He snapped at one point. 'It strikes me you've led a very sheltered life. Perhaps you made your reputation with shop-keepers. But speculators, prospectors, are a very different breed. Believe me, I know. I've got a good title to this island but if its whereabouts become known before I can protect it, half the scavengers of the world will be crawling all over it. What do I do then? Appeal to the United Nations? Take it to the Human Rights Court in ' Strasbourg? Don't make me laugh!'
There was no danger of either of us laughing. We were both too angry. 'For Christ's sake!' I exploded. 'On that basis even letting people know it's an island makes you vulnerable.'
'Very few know that.' He permitted himself a tight smile. 'And there are millions of islands in the world. More than seven thousand in the Philippines alone - five thousand of them uninhabited.'
'But you said volcanic,' I pounced. 'That would narrow it down a bit.'
He laughed. 'There are volcanic islands off Iceland. Still active, some of them.'
I felt tired and confused. And still a little bit angry. 'So to sum up. You've got an island and all I've got to do is to raise twenty million pounds for you to sink a mine and build a defence system. Without telling anyone where it is.'
'I'm sure you'll find a way. If you're as good as your reputation.'
I tried very hard to keep hold of my temper. 'No-one - just no-one - is going to put up twenty thousand - let alone twenty million - on the word of - on unsubstantiated evidence. Even confirmed it's risk money, and they'll want an arm and a leg for security. And your balls for interest!'
'I'm prepared for it to be expensive.'
'For Christ's sake, you're not listening! It's not on at all. Not without proof. Evidence. Some solid, hard, concrete bloody facts!'
'I didn't think it would be.'
I stared at him.
'I'm prepared to take you to the island.' He smiled as if he was the most reasonable man in the world. 'And one other person. Perhaps a geologist whose authority is acceptable to your money people. Then they'll have your word and his that everything's exactly as I've said it is.'
I squeezed my eyelids together, opened them and shut them. And opened them again. He was still there, and I wasn't dreaming. 'Mr Pepalasis, may I be personal? What nationality are you?'
He didn't even seem surprised. 'My passport says I'm Greek.'
Two
Hallsworth was at the office the next morning. I'd known he was coming and had set the day aside. We made an early start on the monthly review of our affairs and had as good as finished by the time we adjourned to Trader Vic's for lunch. During the meal I told him about my meeting with Aristotle Pepalasis, reciting the details in a flat monotone, anxious to avoid the impression that I'd already reached certain conclusions of my own. He listened without interruption, his dark eyes raking my face as I talked. I'm not a Catholic and I know priest and penitent are hidden from each other, but reporting to Hallsworth always had something of the confessional about it: What irritates me is I'm damned if I know why. I suppose because I imagine a priest to be receptive, uncritical, patient, encouraging; I don't know. Yet Hallsworth was certainly all of those when he chose to be.
When I finished he asked to hear it again. All the way through, as if it was a gramophone record being returned to the start. This time he bombarded me with questions. Describe Pepalasis. How much did the stones weigh? Describe their shape, size and colour. Did I study the map? Did I learn anything from the geology notes?
'An interesting man,' he said, when I finished, and grinned. 'What happened to the draft by the way?'
'He offered it again before I left. I told him to hang on to it for the time being. Said I'd think about it. Talk it over with you and let him know.'
'And what shall we say to him?' His eyes mocked.
'Damned if I know. If it wasn't for the bank draft and the suite at the Dorchester, and the diamonds themselves - I'd say he was a nut. But they make you stop and think, don't they? Even so - ' I shrugged and dismissed it. 'The whole thing's mad. Or exaggerated out of all proportion. Can you imagine - a diamond mine bigger than the African mines?'
'I bet they said that before someone discovered diamonds in Siberia.'
I stared at him. 'You're not suggesting we take this seriously?'
'I don't know. But what you describe doesn't sound like a nut. The reverse in fact. The man sounds as if he knows his subject.'
'But what about the business of not disclosing the whereabouts of the island?'
'What about it? I don't think I'd tell you either. If it's not physically protected, it leaves him vulnerable as hell. Forget all about international law if you can't enforce it.'
I pulled a face, unsure of what to think.
'Mike, I know this though. The world's spending more on exploration than ever before. Take Canada for instance. Just the Hudson Bay Company. Do you know what they've budgeted for exploration this year? A hundred and fifty million dollars! Imagine - one company, one year. A hundred and fifty million - all for exploration.'
'For diamonds?'
'No. For oil and gas. But the principle's the same.'
'You mean you just dig a hole.' There was no reason for my mood to have soured but it had. Perhaps because his reaction was so contrary to mine, I don't know. In a gruff voice I said, 'Perhaps you should have seen Pepalasis yesterday. You'd have made more sense it than I did.'
'We're partners, aren't we?'
'So what do you suggest?'
'Only that you don't turn the man down. Not yet. Not without further examination.' He looked at his watch. 'I wonder if he's in now? Perhaps I'll call round there for a chat.' He grinned at me and said cheerfully, 'It's about time I made some contribution to Townsend and Partner.'
I went back to the office and Hallsworth walked the fifty yards in the opposite direction to the Dorchester, and it was almost six o'clock by the time he returned to Hill Street.
'I take it that you saw him?'
He nodded and helped himself to a drink from the sideboard. We were alone in my office, the faint clicking of a typewriter sounding next door as Jean finished the last letter of the day.
'Mike, do you think you could raise twenty million in the City?'
I was astonished. 'You can't mean it's on? Not this -'
'Listen to what happened, will you? Before jumping off the deep end.' He put a drink on my desk and carried his own t
o the chesterfield.
'First of all I looked at the stones and arranged for a diamond merchant I know in Hatton Garden to call round at five o'clock. Then I looked at the map, and at his notes. Not that I learned much. Except it's a pretty big island. Did you realise that? It's about twenty miles along and ten or twelve wide at some points. Makes it about as big as Manhattan Island.'
'Should be easy to find then,' I said sarcastically.
He ignored the interruption. 'Pepalasis says he bought it a couple of years ago. Wouldn't tell me for how much, or even how he came to buy it, but I got the impression that the sum was quite sizeable. Then he spent time and money prospecting - so he's got a hefty investment in the project already. Seems that the stage of proving diamonds coincided with him running low on funds, hence his visit to London. Anyway, we talked about a deal. I suggested he farm the mineral rights out to one of the big mining houses and take a royalty. He'd still end up as one of the world's richest men if what he says is true. But he wouldn't hear of it. Said he did that once twenty years ago with a tiny claim somewhere and got cheated. This time he's determined to find the money to go it alone - if not in London, then somewhere else. I can't blame him for seeing it that way and there's a chance he might raise it somewhere. So I asked what he'd pay on the money. He started at fifteen per cent and I started at sixty.'
'Sixty per cent?'
'Why not? He's Greek and used to haggling. And if you're going to raise that kind of money for a speculation, you're going to need some strong cards, aren't you? Anyway we spent an hour arguing before closing at forty per cent.'
'Forty per cent! Per annum!'
He shrugged. 'Stop thinking conventional business. X amount of capital invested to generate Y turnover to produce Z profit. Forget it. Mining's not like that. You sink a mine and if you're lucky then whatever you borrowed to begin with is peanuts.'
'And if you don't find anything. What's the security?'
'I covered that. The island gets put up as security. I know we don't know where the place is yet, but two hundred square miles of land anywhere's got to be worth something.'
I reached for my calculator. The worst way - if the loan was never repaid - the investors would have bought land for about three hundred pounds an acre. Compared with English farming land, changing hands at a thousand pounds an acre, it was cheap. But so was the land at the North Pole.
Hallsworth watched me fidget for a while, and then said, 'Oh by the way. As well as a high rate of interest, I knocked him for a commitment fee.'
Commitment fees are not uncommon. Providing all parties to the transaction know they exist. The borrower pays a fee, either to the lender or to whoever acts as broker, as a reward for organising the loan. The fee is generally a percentage of the loan negotiated, very small of course, but even the not unusual one quarter of one per cent can amount to a tidy sum on a large loan.
'Okay,' I said. 'How large a fee?'
'Five and a quarter per cent.'
I was appalled. 'Are you crazy? The investors wouldn't stand for it. That's more than a million pounds! That much of their money - going straight out to us in fees. Christ, you know the rules. Never in a -'
'Townsend and Partner get a quarter of one per cent,' he interrupted. 'That's fifty thousand on a loan of twenty million. Sounds modest enough to me.'
'But you said-'
'That's right. But the five per cent gets paid to us privately. Half each.'
I was too stunned to answer immediately, and even when I'd recovered my breath I didn't know what to say. I know it's making excuses but wait till you're offered half a million tax free and see what you do. I finished my drink at a gulp and watched him pick up the glass and take it to the sideboard for a refill.
'A private transaction, Mike,' he said. 'Who's going to know? You open a numbered Swiss Bank account and collect half a million pounds the very day the deal goes through. Anyway, the investors get forty per cent on their money,' he said lightly, as if their profit made the whole thing legal and above board. 'And not a penny changes hands until everyone is satisfied with the prospects.'
I looked at him for an explanation.
'The offer Pepalasis made. About you and a geologist going to the island. Obviously it's got to be part of the deal, hasn't it?'
'But I don't know one end of a mine from the other!'
'You don't have to. That's the geologist's job. Whether the deal's on or off rests on his report, not yours. You'll just be along as the investor's representative.'
I felt a shade better at that. It lessened my responsibility for actually parting people from their money. Twenty million of it.
'So I organise the cash on a stand-by basis?' I wanted everything straight in my mind. 'Pepalasis takes us to the island and if the geologist likes what he sees, the money goes in. Right?'
'That's it,' Hallsworth smiled happily. 'Anyway, let me finish the story. Once the business of interest rates and fees was out of the way, we waited for my Hatton Garden man to arrive. He looked at the stones and didn't say much in front of Pepalasis, but waited for me in the lobby downstairs. They're the real thing all right. In fact he offered to buy them at a hundred and sixty thousand if I could arrange a sale.'
I turned it all over in my mind, feeling excited and frightened at the same time.
'No one loses, Mike,' Hallsworth said patiently. 'And don't forget the responsibility for loosening the purse strings isn't even yours. That's up to the geologist. You help Pepalasis and he helps you. It's the Greek way of doing business, that's all. The point is, can you raise that kind of bread?'
'Let me think about it. Sleep on it. Give you an answer in the morning.'
But I knew then. Sitting at my desk and drinking my second whisky of the evening. I'd dreamt too long of total financial independence to pass up a chance like that. My expertise lay in making money and I earned a good living at it. But the real money went to the people with money to invest. The sort of people I'd spent years of my life advising. And with half a million in a Swiss Bank account I'd be in the game in my own right.
Three
Raising money isn't easy. Not if you're looking for twenty million pounds to pour down a hole in the ground it isn't. It might have been easier in the sixties, when the City was buoyant and confident. Before it all went wrong.
Having Pepalasis for a client didn't help, either. There were times during April and May when I felt like telling him to stuff the whole deal. Forever imposing fresh conditions until the downright difficult became the damned impossible. Not to approach mining companies. The tour of the island to be limited to one week, one geologist and me. No rock samples to be brought back for fear of Customs enquiries about country of origin. The list seemed endless. At the end of May he and I had a blazing row and only Hallsworth's timely return from the States kept a Townsend and Partner interest in the venture. After that we agreed - as far as possible Hallsworth dealt with Pepalasis, and I dealt with the investors.
I've been in the money business all my working life., so I reckon to know investors. And believe me, they're the same all over. Threadneedle Street, or the Tokyo Bourse. To sell a deal you need five things going for you. First this thing mood, shorthand for a whole lot but mainly people sensing they're backing a winner. If they see someone else making a pile they'll join in, copy him, jump on the bandwagon. A few dozen doing that and you've got a buoyant market, a few more and you've got a boom. It's the herd instinct. In reverse, it causes runs on banks, depressions and people jumping out of skyscraper windows. Next, all moods are capricious, so you need timing. A good looking deal one day can turn sour the next, on a chance, remark or a wife nagging over breakfast. Third, everyone on the borrower's side of the table must look as honest as freshly scrubbed schoolboys. Cards played up, nothing hidden. Fourth, a good proposition. And fifth, lots of luck.
Once Hallsworth got Pepalasis off my back things got easier. The market had been picking up slowly for months. Interest rates fell, the pound measured up agai
nst the dollar, inflation slowed down, and the Chancellor took one hand out of people's pockets. And all because North Sea oil had saved another balance of payments crisis. Oil fever! Five years earlier if you'd said 'gusher' to a City man he'd have thought he was talking too much. Now his eyes lit up like lemons in a slot machine and he dribbled enough to put his cigar out.
Hallsworth was at the office a lot more during those months. He kept clear of our other interests, happy to leave them to me, and concentrated solely on my progress in raising the twenty million. That and keeping Pepalasis happy. The Greek was away for a good deal of the time, but always back in his Dorchester suite in time for his meetings with Hallsworth. I assumed that they made an appointment each time for two or three weeks later, but I didn't pay much attention, just relieved that Hallsworth was keeping Pepalasis under control and had persuaded him to modify the more outrageous of his demands.
People don't realise how quickly money and power change hands. For instance, in the sixties there were many sources of investment capital, amongst them, but far from dominant, the pension and life assurance funds. But by the summer of 1977 the pension boys found themselves controlling assets of sixty thousand million pounds. They had grown big. Very big. And there were a lot of them.
I knew most of the trustees and fund managers, friends from my days at Walpoles. Lunch with one, dinner with another. Slowly I cobbled a deal together. They were a nervous lot that summer. Harold Wilson was sniffing round the City at the head of a Royal Commission. Rumour was he thought the funds were stifling initiative by investing too much in gilt-edged and blue chips, that they should become a shade more adventurous, use just a little of their muscle to help new ventures. I calculated that twenty million was just little enough to qualify, and that's what I meant about timing.
Harry Smithers of the A.W.F fund was the first to commit himself, promising to put up five million for three years, subject to a favourable geologist's report. I leaked the news and within a fortnight couldn't go into a bar in the City without being pointed out as Mike Townsend, the man heading up the new secret mining and minerals consortium. It worked. By the end of June I had pledges for the full twenty million. All conditional on the geologist's report.
The Money Stones Page 6