The Insiders (4 page)

Wilson read and reread the letter, his disbelief and anguish growing more acute with each pass. At one point he found himself speaking his father’s words out loud in an effort to understand. Preparing to leave the den and confront Daniel, he rubbed his face to gather his wits. Only then did he notice the tears.

“Did you know what was in this envelope?” Wilson questioned as he strode into family room.

Daniel was listening to voice messages on his BlackBerry. “Yes. Your father’s instructions were for me to review the contents of the envelope before giving it to you.”

“Would you like to tell me what it means,” Wilson said, his head still churning with his own interpretations, replaying conversations from years earlier. His father had told him that Fielder & Company was considering a radical approach to humanizing capitalism, but that he would need a decade or so to see if it actually worked. But that’s as far as his father went, even when Wilson had probed for more details.

After a few moments of watching Wilson stare past him toward the chalet’s arched windows, Daniel responded. “Are you aware that your father’s estate is worth over seventy billion dollars—after taxes?”

“What?” Wilson blurted out. The number astonished him. He knew his father was very wealthy, but he had no idea his financial worth had reached such levels.

His mind raced back to his youth. By the time Wilson graduated from Milton Academy at seventeen, he’d already traveled around the world a dozen times. Then he spent four years at Princeton and two years at Harvard, graduating from both universities with highest honors. All of it should have made him hopelessly full of himself. But surprisingly, his abiding empathy for those who were less advantaged gave him an unusual charm and a curious sort of wise innocence, just like his father. But how, he worried, had my father accumulated this much wealth?

“It’s easier to hide wealth than you might think,” Daniel said. “Your great-grandfather started by hiding millions during the Great Depression. He was convinced that J. P. Morgan and a group of international bankers had orchestrated the stock market crash of ’29 and then severely constricted the money supply in order to buy up depressed assets at a fraction of their value. The result was a massive transfer of wealth to Europe and the megarich, along with the humbling of America. All agendas served the world’s money interests. Your father decided to continue his grandfather’s wealth concealment practices. The family’s seventy billion dollars is distributed across a wide range of stock positions, investment partnerships, and offshore accounts—a result of brilliant money handling for many years. KaneWeller has offered five billion dollars for Fielder & Company. They called me yesterday as soon as they heard the news about your father, wanting to make sure the deal was still on. As I mentioned, they want to close by the end of the week.”

Still feeling off-kilter, Wilson gawked at Daniel and then at the white tape on the floor. He motioned for Daniel to follow him to the den. He felt more comfortable there. They both sat down next to the fireplace, Wilson in his father’s chair and Daniel on an adjacent sofa.

“What’s motivating KaneWeller?”

“Fielder & Company is better at preparing clients for Initial Public Offerings than anyone in the industry. Even in bad markets, the firm stays fully booked with spin-outs, roll-ups, PIPEs …”

Wilson cut him off.

“What I don’t understand is what makes Fielder & Company’s approach to IPOs, spin-outs, roll-ups or PIPEs worth five billion dollars.”

Daniel looked around the den hesitantly, as if seeking Charles’ approval to proceed.

“What few people appreciate or understand about Fielder & Company is its ability to structure public offerings so that CEOs maximize their own personal wealth,” Daniel said, pausing. “Everything on Wall Street is plagiarized, almost immediately—so Fielder & Company is relentless at keeping secrets and devising new strategies for restructuring businesses without raising red flags with shareholders or the SEC.”

“And how do you manage that?”

“Don’t misunderstand me, Wilson. Maximizing shareholder wealth has always been a priority at Fielder & Company. We simply accomplish it while maximizing the wealth of the chief executive and select senior executives. It’s my job to make sure that everything Fielder & Company does is legally defensible, ethically acceptable, and fiduciarily accountable to shareholders. Fortunately or unfortunately, depending on your point of view, what they say about the rich is true. As long as they stay out of court, their moneymaking activities remain incomprehensible, beyond scrutiny and criticism. Keeping Fielder & Company’s clients out of the courtroom, especially their CEOs and CFOs, is what my firm does to earn its fees.”

Wilson sat back to contemplate what Daniel had said. When it came to matters of economic logic and business strategy, Wilson was uncommonly astute. But his real reason for becoming a management consultant had been to take on the pompous tyrants who resided at the top of most corporate hierarchies. It was his moxie for standing up to corporate bullies that explained his early business success and charismatic appeal. A mere three years out of Harvard Business School, Wilson had already been identified as a rising star at Kresge & Company. He was a natural at challenging and redressing business leaders who’d become overly dogmatic, in fact he did it better than seasoned partners twice his age. What Daniel said hadn’t really surprised him. Some CEOs were magnanimous and empowering, but most were avaricious and domineering.

“Is my father’s estate at risk?” he asked.

“Not currently,” Daniel said. “However, if an investigation into your father’s death uncovers the full scope of his financial dealings, it could tie up assets for a long time. Maybe permanently, if you know what I mean.” He shot Wilson a look of caution.

“What
aren’t
you telling me?”

“Your father charged me with protecting his estate. It’s my first and foremost obligation to him, to you, and to your family. And I will do everything in my power to execute his will. Doing it his way will give you unlimited financial resources,” Daniel said, pausing. “When you finally uncover the full story of what happened here, you can do something about it.”

Wilson quickly saw the wisdom in Daniel’s words, but that didn’t keep him from feeling manipulated.

“You told me his methods were legally defensible. Why are you so concerned about an investigation into his business activities?”

“The law is only an interpretation of circumstances, associations, and motives. There are always clients ready to abuse what they learn from Fielder & Company. If such abuses are identified and investigated, they could point to your father as the source. Guilt by association and circumstance. The only motive imputed to him would be greed. We might eventually beat it in the courts, but it could take years, tying up the family estate and crippling Fielder & Company.”

Wilson looked suspiciously at Daniel Redd.

“What sort of abuses?”

“Remember Richard Beckstrom?” Daniel asked as he leaned forward again.

“The IPO guru who died in prison?”

Daniel nodded. “He was a client who started inflating earnings before taking companies public to jack up the opening stock price. It took the SEC a few years to nail him, but they finally did.”

“Why wasn’t Fielder & Company implicated?”

“Fielder & Company terminated its relationship after two years of working with Beckstrom, but he’d already learned enough to become obsessive and dangerous. That’s when he began launching his now infamous string of IPOs. There are dozens of examples like Beckstrom, employing all sorts of financial devices—LBOs, real estate investment trusts, derivatives, credit default swaps, high yield bonds, IPO mutual funds, E-trading schemes, inflated Net stocks, and the list goes on. Your father had enormous influence but avoided the limelight,” Daniel said, suddenly looking more intense. “Your father is a financial genius, like his grandfather Harry and J. P. Morgan and John D. Rockefeller, only better. He manipulated capital markets with ease, even though his real desire was to eliminate the possibility of such abuses. He was determined to transform how financial markets worked, for the benefit of everyone, not just the inside elite. Unfortunately, a federal judge might not interpret his intent that way.”

Wilson studied Daniel.

“Who were the others, besides Beckstrom?”

“Your father compiled detailed files on the clients he suspected were abusing his methods. I have the files with me. Charles told me to give you access, if you requested it.”

“I’m requesting access.”

Brow furrowed and eyes penetrating, Daniel removed a stack of files and a thumb drive from his briefcase and handed them to Wilson.

“There are fifty-two files in total. Each one represents a different client.”

Wilson nodded as he opened the file on top.

“I’m going to the hospital to make sure the Sun Valley police don’t try any last minute stalling tactics,” Daniel said as he rose and walked to the double doors. “I’ll answer your questions on the flight back to Boston.”

Wilson looked up at Daniel. “Call me if there are any issues. Otherwise, I’ll be there in a little while,” he said before returning to the files.

4

Inflight – Air Ambulance MD-90

A few minutes past eight o’clock, the Air Ambulance MD-90 jet lifted off from the Sun Valley airport. The neurosurgeon, two nurses, and three medical technicians hovered around Charles Fielder in his in-flight ICU while Wilson, his mother, sister, Daniel Redd, and a few staff sat in the passenger cabin, where the seat configuration looked like a typical first class cabin.

Wilson and Daniel sat next to each other at the back of the cabin, an empty row separating them from the others so they could discuss the client files without being overheard. It hadn’t taken Wilson long to discover that each file was a history of seemingly legitimate management practices—senior executive hirings and firings, company reorganizations, high profile strategy consulting engagements, new product introductions, competitor intelligence reports, IPOs, divestitures, acquisitions, marketing campaigns, internal crises, product failures, press releases, and leaked corporate memos—all carefully designed and executed to manipulate the company’s stock price. However, the main focus of the summary briefs was on the abuses each client had resorted to when legitimate activities failed to produce the desired effect on company stock prices.

In one case, a pharmaceutical company, unable to create the desired volatility in the market, purposely tainted its own leading cold decongestant with mild bacteria before ordering a massive recall to send its stock price plummeting. The press was quick to herald the action as one of taking responsibility, while the company arranged to purchase millions of shares of its own stock at rock bottom prices behind a veil of affiliate companies. Within six months, the company’s stock price was soaring well above previous highs, making the CEO a billionaire.

In another case, a major software developer fabricated and then leaked a highly negative and false report about a competitor’s new product to stimulate its own sagging sales. Within thirty days, sales shot upward and the stock price doubled. Then, there was the CEO of a retailing giant who secretly owned several Asian sweatshops. He surreptitiously manufactured merchandise for his competitors. Whenever he wanted to control a supplier or burn a competitor to enhance his own company’s position and stock price, he’d blow the whistle on one of his own operations.

“Your father’s methods were always legally defensible,” Daniel said, his eyes fixed on Wilson. “He showed clients how to establish patterns of volatility through carefully planned and timed management actions—completely legitimate business practice. Believe me, he knew exactly how to avoid attracting undue attention from the SEC. He also stayed off the radar screens of aggressive plaintiff’s lawyers eager to file shareholder lawsuits.”

“If it worked so well, why were there abuses?”

“Clients like Michael Garvey, Chairman and CEO of AikoChem. You read the file. He didn’t have the patience to keep the cycle going through legitimate business practices …”

Wilson interrupted, “So he resorted to leaking insider information shortly after his brokers and trading buddies had already acted on it.”

“That’s the way it is with all of these clients. They pushed things a little too far. Even with Fielder & Company’s thorough screening methods, your father couldn’t stop them.”

Before he could ask about Fielder & Company’s screening methods, Wilson noticed his mother and Rachel getting up from their seats.

“I’ll be right back,” he said to Daniel, who was sitting in the window seat. Wilson stood up, joining his mother and Rachel as they walked through two sets of doors into the ICU cabin.

By the time Wilson returned to his seat after having checked on his father, the lights along the southern shore of Lake Ontario were becoming more visible. The MD-90 was an hour and a half out of Boston. Wilson picked up where he and Daniel had left off.

“What were my father’s methods for screening out potential abusers?”

“Extensive background checks, comprehensive interviews, occasional surveillance, the usual. Except for a handful of abusers, his system worked for many years. It was only recently that more clients began crossing the line.”

“Why?”

“The appetites and hubris of some clients became excessive over time. That’s usually when they started crossing the line. Of course, Fielder & Company had already shown them how to skirt the system by managing market regulators, preempting lawsuits or getting cases dismissed, and a few other tricks of the securities and exchange trade,” Daniel said, dryly.

“How do you manipulate market regulators or preempt lawsuits?”

“You hire the best white-collar criminal defense attorneys in the country—most of whom are former directors or branch chiefs from the Enforcement Division of the Securities and Exchange Commission. They know how to get an investigation sidetracked and killed. Preempting lawsuits can be accomplished in a number of ways, but the simplest way is to pay a plaintiff’s lawyer to file early, become lead counsel, and then drop the case. Problems arise when clients begin using such measures as a rule, not an exception.”