Saving Jason (29 page)

L
everage is the great equalizer. It can make you or break you. Wall Street can’t function without it, and yet it is behind every crash the market has ever seen.

The margin calls went out the next morning.

When you pay cash for a stock, the most you can lose is the amount you put up. But when you borrow money from your broker—on “margin”—and the stock goes down, you can find yourself in an ever-deepening hole. Of course, if the price goes up, your profit is magnified considerably, but so is the risk. If you lose, the broker will demand that you post more money to cover the drop in value of the stock. And if you don’t come up with the cash in record time, the broker has the right to sell the position—usually right at the bottom.

Virgil met us in Manny’s chat room. He was keeping his ear attuned to any and all rumors about the firm and the stock.

“I’m hearing that a couple of the bigger shops are already calling around, trying to round up buyers.”

“If I had the money, I’d be one of them,” Manny said.

“The market knows there are some big blocks that will have to be sold. We won’t get an uptrade until that’s out of the way.”

“How’s your mother taking it?” I asked. Almost all of her remaining wealth was tied up in Becker Financial Group stock.

“Mother is the proverbial immovable object. She called me last night to talk about Wyatt’s birthday next month. She refused even to discuss the sell-off.”

“The price will be back up by next week,” I said.

“Or next month, or next year. Just as long as I’m at the helm,” Virgil said.

“Is there any chance that Nealis will find some way to come up with the cash?”

“This is where his secretive system of blinds and false owners comes back to bite him on the butt. The margin calls are going out to lawyers and offshore bankers, who then have to scurry around individually to get hold of someone up the line. And they have no contact information. Nealis and his co-conspirators are stuck.”

“I don’t want to have to try and do this twice.”

“No, I would imagine not. How are you holding up, Manny?”

“It’s a shame. No one will ever know what we did. I can see myself years from now at a hackers’ convention, listening to some blowhard tell the story of how he once crashed the market from his laptop. And I will have to keep my mouth shut.”

“I’ll know, and I do not forget favors,” Virgil said.

M
anny and I walked down to the shore and took turns smashing the laptop on the rocks, laughing happily at the devastation. When it had been reduced to a sufficient number of pieces, Manny threw them out into the East River—he had the better arm. There were many secrets resting on the bottom of the East River; ours would be comfortable resting there with them.

“I hope Larry comes up with some good news for you soon,” I said.

“Yeah, well, I miss my girls.”

“I understand. It’s been great working with you.”

“Keep me in mind if you ever want to make another attempt at destroying the capitalist system.”

I laughed. “Is that what we were doing?”

“Think about it. It was you, me, and an HP. Imagine what could be done by someone who put some real effort into it. We’re turning the world over to the machines, my man, and they’re really not up to the task.”

“That’s a scary thought,” I said.

“We weren’t the first, and we won’t be the last. But someday . . .” He didn’t finish the sentence. Neither did I.

“See you,” I said.

“Be in touch.” He turned and walked back through the park and across Poppenhusen Avenue. I stayed there and watched the river flow. I had a lot to think about.

T
he Becker Financial Group Annual Shareholders Meeting was held in a secondary conference room down the hall from the main banquet hall at the New York Hilton on Fifty-third Street. There were not enough of those shareholders to warrant a bigger space. The hotel staff had set up one hundred straight-back chairs in neat rows with a central aisle that led to a solitary microphone stand. Facing the room, on a raised platform, was a dais for the board members, chief counsel, and Nealis. Two video cameras had been set up in the corners to capture the festivities.

BFG was not a widely held stock. Other than the family and the Rose Holding cutouts, the owners were all old creditors of the father’s empire. They had been forced to accept stock in place of their missing cash. Other investors remained shy of supporting a name—Becker—with so much negative history attached to it.

I arrived a few minutes early and checked in with the two smiling interns who were outside the door, handing out badges on purple-and-gold-striped lanyards. My badge read
SHAREHOLDER
, which was accurate. I held one share, which I had purchased the week before, expressly for this purpose. Other badges read
GUEST
,
PRESS
,
STAFF
,
BOARD
, and
EXECUTIVE
, with the exec’s title underneath.

“Might I take a look at your list?” I asked.

The two young women looked at each other and frowned. They were not prepared for the question.

“I won’t steal it,” I said. “I just want to take a quick look.”

They still weren’t sure.

“It’s all public information, you know. I can find it all online. How about if I just look over your shoulder for a minute?”

That closed the deal. They really couldn’t prevent someone from standing behind them and having a quick look, could they?

Rose Holding was not on the list, but all of the false fronts were there. Not one, as far as I knew, was a shareholder, their positions having been sold off by the banks, but the list had not been updated. At that moment, no laws had yet been broken. The list had not been updated in time for the meeting. There would be no securities fraud until those shares were voted. But the moment the results were announced, Nealis would be guilty of stuffing the ballot box. By itself, it was a serious charge, but not a fatal one. But it would be enough. His whole edifice of lies and manipulation would tumble.

I smiled at the two women. “Thank you again, ladies. You have made my day.”

One of them handed me a printed agenda and smiled back. I showed my credentials to the hired security guard at the door and took a seat in the back of the room. I pulled my brand-new Yankees cap lower and slouched down in the chair.

There were a few people there ahead of me. Livy and Wyatt sat with Virgil in the front row. I recognized a grizzled, alcoholic reporter who had interviewed me for the
Wall Street Journal
back when we were both much younger. He had been grizzled even then.

At ten minutes to six, the room began to fill up with print- and digital-media reporters bearing notebooks, shareholders—most of whom were professional money managers who worked for the corporations or funds that were the true owners—and senior staff. Not one of the television channels had sent a team. I wasn’t surprised. Blackmore would have alerted them all that the real news wasn’t happening until after the meeting was over.

I read over the agenda. It was the usual bore. Speeches followed by speeches. The vote was the last item before New Business. It was the only piece of business of interest to anyone but the wonkiest of analysts. The big banks and major corporations made their annual meetings into industrial shows, some with Broadway stars, full orchestras,
movies, laser-light shows, and performances by Bruce Springsteen or Elton John. BFG wasn’t in that league, and I hoped it never would be. I thought shareholders should be scandalized by the waste, rather than bedazzled by the sequins. Maybe I was just becoming cranky.

An earnest young woman with a name tag that read
PRESS: REBECCA FRA
NCIS—BLOOMBERG NEWS
came in, looked around, and approached me. She was young, good-looking in a middle American farmgirl way, and very tall. I tried to repel her with body language and more cranky thoughts, but she put on a smile and kept coming. Good reporters are like guard dogs. They’re relentless and they have an incredible sense of smell.

She introduced herself. “I’m sorry to bother you, but you do look familiar. Are you with the firm?”

“Shareholder,” I said, folding my arms over the credentials hanging on my chest.

For the briefest moment, I was sure she was going to sit down next to me in my dim corner. She thought about it. I could not afford to be recognized by anyone. Not yet.

“What’s your prediction on today’s vote?” she said.

“They’re paving over the wetlands,” I said. “If they pave over all the wetlands, we won’t have any crabs and we’ll have to make our crab cakes with extruded fish paste. It’s un-American.”

There’s one—or more—at every public meeting. The certifiable crank, who may or may not be mad but is certainly angry. Angry about something and who is willing to talk about it at great length, usually in front of a microphone, if they can get near one.

It worked. “Sorry to bother you,” Rebecca said, moving away quickly.

Many of the shareholders made a pass by Virgil to shake his hand and make noises of support and encouragement before going off and finding a seat. And there were also some who avoided Virgil altogether. Tim Boyle, whom I had last seen on Bloomberg TV at the beginning of the week, was in the second row on the aisle. He had visited briefly with Virgil before sitting. The only shareholder that I
knew personally was Ahmad Din. He managed a global equity fund. We had done business together in the past when he had asked for help hedging his foreign exchange risk. We had been friends. I had toasted him at his wedding.

I got up when I saw him come in and headed him off. I needed to be sure he wouldn’t out me if he saw me hiding in the corner. “How are the markets treating you, Ahmad?”

He showed no reaction. He saw me. He heard me. But it was as if I had not spoken. As though I didn’t exist. He walked by me and found a seat in the row behind Boyle. I was used to those snubs, and sympathized. My presence was a reminder of a broken trust. I went to jail and lost my career. He lost faith in a friend he had once valued—me. Maybe his pain was greater.

But I was no longer worried about him greeting me loudly across the room. I tried not to slink as I walked back to my seat.

At one minute to six, the few invited staff members came in and took seats in the farther reaches of the room. They were only there to make the crowd seem larger—and to applaud at the right moments. Senior executives filed in next and filled in the reserved seats in the front row on the opposite side of the room from Virgil and his family. Some of them gave him a wave or a smile as they went by, but none went over to chat or to shake his hand. Finally, the board members arrived and marched straight to the front of the room. Nealis was last. He was so wired, he practically glowed. There was a sudden tension in the room that had not been there a moment earlier. His pose as the reluctant replacement did not dispel the feeling that, in this small world, something momentous was about to happen.

Everyone took their seats and the sounds of murmured conversations and papers being rustled resolved into a taut silence.

Nealis opened the meeting with a joke. Something about golf and markets. It wasn’t a very good joke and he made a dog’s breakfast of it with his delivery. He had read the room all wrong. They weren’t there to laugh.

“I know this meeting is spartan by Wall Street standards. But we’re not here for ostentatious celebration. This is a solemn occasion. There are weighty matters before us. Champagne and rock stars would be inappropriate. All I can say, though, is stick with BFG. We’re going to get there.”

He had recovered. He introduced everyone on the stage before launching into the numbers. It was a formality only. Earnings, past and projected, had already been shared with the public. No one listened. They were all there for the results of the vote, the only information that had not yet been made public.

The shareholders were losing patience. People shifted in their seats, whispered to companions, or texted on their phones. Nealis pushed on, but it was all uphill slogging. It was not fun to watch. He gave himself a break.

“I’d like to introduce George Demarest, who can explain how we fared in fixed income this quarter. George?”

A tall, thin man unfolded himself from his seat in the front row, but voices from behind stopped him.

“Come on, Jim. Cut to the money shot.”

“Yeah, I’ve got three hours on the L.I.E. to look forward to after this.”

That brought out a chuckle from the rest of the crowd, as most of them also had summerhouses to get to. There may have been differences of opinion as to which way the vote should go, but there was unanimous agreement that it was time to just get to it and get it over with.

The fixed-income guy looked back at the shareholders and waited. Nealis could have helped him out but didn’t. He was nervous. It struck me. He knew about the margin calls. He knew he was in trouble. He wanted this over as badly as everyone else in the room, but he had to play out his role or risk exposure. So he did nothing and let Demarest spin in the wind.

Rather than mounting the stage and speaking from the podium,
Demarest went to the microphone stand on the floor. “Nice to see you, boss,” he said to Virgil. “I’ll be brief.” He
was
brief, but the shareholders were impatient. He mentioned low yields on bonds, narrow margins, and that the Federal Reserve was soon going to be forced to raise rates again. No one cared. When he asked if there were any questions, there was only one.

“You want to tell us about the vote?”

“Sorry,” he said. “That’s well above my pay grade.” He retreated to his chair and folded his long frame back into it. I think he would have sat on the floor if he could have made himself less conspicuous.

Nealis was in a bad spot. If he gave in to the crowd and announced the results of the vote, without the full preamble, he risked looking weak at the very moment when he had to look most leader-like. A man with more self-confidence might have been able to get through the ordeal with a bit of self-deprecating humor. Virgil would have handled the situation. Nealis got pissy.

“Gentlemen, may I remind you that we are all speaking publicly. We have the press with us today.” Besides Livy and the reporter, there were two other women shareholders in the room. None of them looked happy about being ignored.

The young woman from Bloomberg held up a hand at chest height and waved to the traders. It was the perfect gesture. It told the shareholders that, though she was merely an observer, she had already chosen her side. She was there to hear the results of the vote, too.

Tim Boyle stood up. “This is your show, Jim. Play it your way. But the only thing that anyone in this room cares about is the result of that vote. You’re doing yourself no favors by stalling.”

“I’m not stalling. I’m trying to keep to the agenda.”

“You’re the boss. Change the agenda.” Boyle sat down.

There was Nealis’s opening. He had the brains to see it. The only way to keep control of the meeting was to give the audience what it wanted. If he had agreed at the first signs of resistance, he might have
been able to carry it off with dignity. But he’d held out, and acquiescence now wasn’t the high road—it was the lifeline.

“All right! All right!” He was the one with the microphone and standing on the stage, but he still felt the need to shout down the opposition. “At least allow me to go over the events that got us to this point.”

The crowd got quieter. They’d won and could afford to be magnanimous. To a point.

“Earlier this year the firm discovered that we had a compliance problem. Virgil Becker, the man who brought the firm back from the brink, was arrested and had to take a leave of absence. I took over and have tried to run things as he would have wished.”

He looked out at the group and waited for the polite applause the line warranted. He didn’t get it—not even from his supporters.

“Sometime later I was approached by two of the board members, who expressed their desire that Virgil be allowed to retire and that I take over on a permanent basis. They wanted my okay before taking the matter to the full board.”

This was ancient history. He was losing them again. But this time they were angry. People were glaring daggers at the stage. The cell phones had all been put away. Nealis had their attention, but it wasn’t the way he wanted it.

“I demurred,” he said.

Nice word,
I thought,
for treason.

“They insisted, and we finally agreed that the matter was too important not to have the full backing of the shareholders. The results were tabulated earlier this week for all shareholders of record as of this date. I will now turn it over to our chief counsel.”

He stepped away from the microphone. He couldn’t help himself. He smiled.

The lawyer felt the crowd’s impatience. He didn’t waste any time. He strode up to the mic and announced, “The matter put before the shareholders is that the board will immediately accept the resignation
of the chairman and CEO, Virgil Becker, and replace him with James Nealis.” He looked down at Virgil sadly. “The resolution is passed by a margin of thirty-two votes with ninety-six percent of shareholders voting either aye or nay, and no abstentions.”

I jumped up. “Question for you, counselor.”

The reaction was muted. I thought that most of the crowd was surprised, but not shocked. A loss for Virgil had always been a possibility.

Nealis saw me for the first time. His eyes bulged.

“Yes? The man in the back with the Yankees cap. Please state your name and give me your question.”

“Jason Stafford. Are you in possession of a list of all beneficial shareholders?”