Bull Street (12 page)

Larry Nivens, a Managing Director in M&A, lounged on the sofa in LeClaire’s office when they entered. “How’re Elaine and the kids?” Nivens asked.

LeClaire’s face softened. He cooed. “Wonderful,” he said. His round face beamed the words. His eyes were wide and his mouth open like a child’s. “Absolutely wonderful. At least that’s how Chloe would say it.” His thick accent strained Richard’s ears.

“How old now?”

“Nineteen months.”

“Well, I can see you’re busy,” Nivens said, getting up. “Welcome to the department, Richard,” he said as he left.

LeClaire sat down behind his desk, motioning for Richard to sit in the chair in front. Richard’s stomach tightened, watching as the softness in LeClaire’s face disappeared, angular lines showing as he set his jaw.
Here it comes.

Then LeClaire smiled. “I have good news, young man.”

Young man.
Funny. He remembered that from their interview. LeClaire couldn’t have been more than six or seven years older than Richard.

LeClaire went on, “We are heading uptown to meet with Harold Milner at two o’clock.” He looked at a pile of documents lined up perfectly on the left side of his desk, then another on the right. All was exacting order. Richard could see a pad in the uncluttered center of his desk with neatly scrolled words and figures on it, like mathematical equations. And a few structural drawings with arrows and boxes, like physicists’ renderings. LeClaire reached to the pile on his right, grabbed a document from about halfway down, then lined up the pile again. He handed the document to Richard. “Read the Tentron
Corporation Annual Report later. Now swing your chair around here and I will show you what we are up to. This should be a fun day.” The corners of LeClaire’s eyes turned up as he smiled. His face softened again like it had when he mimicked his daughter. He waved Richard in close to his elbow as he slid the pad to the corner of his desk. He pulled a pencil from the holder containing a bunch of sharpened #2s.

Not a bad start, at the elbow of the firm’s rocket scientist.
It was a helluva contrast to his first days getting slapped around by Jeannie Peters and George Cole. LeClaire was actually
showing
him something, and enjoying it.

Richard and LeClaire got out of a taxi on 45
^th
Street in front of the Helmsley Building. Richard could see the expanse of Park Avenue and the core business district of Manhattan running north through the building’s gilded lobby, and through the arches of the eastern and western pedestrian walkways on either side. He looked up above them at the elevated highways that channeled traffic around Grand Central and into and out of the arches through the Helmsley building, then spilled cars out onto Park Avenue. He took in the sound of horns honking, the smell of diesel exhaust, the feeling of the rumble of Grand Central trains beneath the pavement.

Standing between the yin and yang of New York power. Richard looked up at the stone gargoyles surrounding the spire of the Helmsley Building. And Harold Milner up there, on top of them both.

When they arrived at the penthouse floor, Richard saw from the open lobby that the entire floor belonged to Milner.
Smoked-glass-walled offices covered three sides. Northern Manhattan up Park Avenue streamed in through clear glass on the northern quadrant. Milner’s office and conference room were on a mezzanine level, taking up the whole northern wall of the penthouse. The penthouse had double-floor-height ceilings, like Richard had read the earliest New York skyscrapers featured; this was originally the New York Central building, built by the railroad barons, the Vanderbilts.
For the owner’s throne room.

LeClaire led Richard past Milner’s receptionist, who nodded with an air of recognition at LeClaire. Milner and Jack Grass reclined in living room furniture that occupied the initial few thousand square feet of the floor. Steinberg stood to the side, eyes blinking. That ever-present lazy way he had. Milner lounging with his geniuses, and Richard in the midst of them.

“I have to say, Mickey,” Milner was saying, “I really admire the Russians’ tube technology. I believe it’s now the best in the world. Their 6C33 power triode output tube used in the guidance system of the MIG 25 fighter plane is something you just have to hear in a really high-quality stereo amplifier.”

“Transistors trump tubes,” Steinberg said. “Tubes just don’t give you the precise resolution, soundstaging and deep bass of solid-state.”

“Maybe if you’re into technical perfection. Give me tubes’ palpable reality anytime.”

“An overly warm and colored reality.”

“If you ever heard the 6C33 in my old Macintosh monoblock amps over there, the question would be resolved forever. I have just that much respect for your listening sensitivity.” Milner winked at Steinberg. “But the things are just damned hard to come by, and one of my last matched pair just blew out.”

“So get yourself a pair of Krell amps and find out what real music sounds like.”

LeClaire and Richard waited until Steinberg finished his sentence, then walked up. Butterflies now in Richard’s stomach like before a high school track meet. He felt his shoulder tug like the pitch books in his briefcase were an atom bomb.

“Characteristically punctual,” Milner said, turning to look at LeClaire.

“I do not wish to keep our most important client waiting,” LeClaire said, shaking hands with Milner. That syncopated French accent. “Hello, my friend,” LeClaire said warmly.

“Hello, Francois,” Milner said. “Always great to see you. And you, Richard,” he said, shaking hands with him, “good to see you again. Still enjoying the music I gave you?” That big, warm paw of Milner’s enveloping Richard’s hand, now familiar.

“Yes, I’m a convert to lossless encoding.”

“Jeez, another one,” Jack said under his breath. He stood up. “Let’s get to work,” he said and motioned toward Milner’s mezzanine office.

Milner led them upstairs. Milner had half a dozen wellthumbed manila folders and a few 10-Ks on his conference table. He seemed to have done most of his own research on a handwritten spreadsheet with penciled notations. Richard took a seat at the far end of the table, thinking to keep a low profile, but Milner sat at the end next to him. LeClaire took them all through his pitch book, Richard following along as he went. Richard kept his head down early on, like in class when you didn’t want to risk getting called on because you hadn’t read the assignment. Most of it was standard stuff he’d seen before: valuation numbers and ratios he’d crunched for Jeannie Peters and George Cole. He figured he could get up to speed quickly.
He knew he’d be doing lots of them. The guts of the meeting only took about 20 minutes. Jack threw out some crude concepts after LeClaire finished going through the book, Milner threw them back, and then Steinberg and LeClaire exchanged some stuff that Richard found incomprehensible. Richard did his best to take notes.

At one point Milner saw Richard looking sideways at his onepage spreadsheet. Jack, LeClaire and Steinberg were engrossed in some penned manipulations LeClaire was creating in front of him on his pad.

“This is all I need. My map of reality,” Milner said. “If I can’t get it on one page, it’s not worth doing, because I can’t keep it framed in my head.”

When it was over, Milner pushed back his chair and said, “So, Richard, what do you think?” He leaned on the table and cupped a hand over his mouth.

Not like he was trying to put Richard on the spot, at least Richard didn’t think so. Richard smiled.

“I’m new at this, Harold. It’s my first day in the M&A department. I’ve only read the Tentron annual report, carried the pitch books and sat in here.”

“So, you must have some impressions.”

Richard was afraid if he looked down the table at the others he might get a twitch of nerves. He didn’t want to embarrass himself. But he felt comfortable with Milner, always had since the beginning. He said, “I don’t know much about turbinedriven generators, but I do think that Nick Williams’s CEO letter to shareholders in this year’s annual report was a little cocky on their developments in that area this year, especially since they’ve got a number-three market share. I think the guy’s got a big ego, and he’ll likely put up a fight.”

“Not a bad insight,” Milner said. “And?” Milner was smiling with his eyes, his hand cupped over his mouth again.

“You could probably take the same approach you did with Berkshire United. Borrow against the hard-asset businesses with asset-backed financing and sell the divisions you don’t want. That way maybe you get most of your investment back right away. As I recall on BU, you got more than your investment back after the sale of the unwanted businesses, so the whole deal was playing with other people’s money.”

Milner smiled, then looked down the table at Jack. Richard hoped Jack wasn’t rolling his eyes. “Any other observations?” Milner said to Richard.

Richard still resisted the urge to see what Jack’s reaction was, said, “Northern Ash baseball bats in the consumer subsidiary. They’re an American icon. Every kid in my, and probably your, generation grew up using them. They’re the second most popular bats in Major League Baseball. So from a PR standpoint it might be like attacking our national pastime, or worse, mom and apple pie, if you try a hostile takeover.”

Richard now glanced to the other end of the table. Jack was looking at him like he was from Mars, it seemed with some admiration. Steinberg was placid. LeClaire, sitting erect, was listening as if Richard were discoursing on a new physical property of argon gas.

“Whattaya suggest?” Milner asked.

“Maybe some colorful metaphors in your press releases and some pithy quotes in the
Wall Street Journal.
I’d avoid words like
bashing
and
bludgeon,
but maybe use words like
heartwood
or
home run.
How about: ‘a sufficiently solid company at the heartwood to avoid the decay of mismanagement’?”

Milner laughed and slapped Richard’s arm. “Not quite there, but a worthy try. Good bullshit, Richard. Glad you’re on the team.”

Milner was still smiling when he pressed their hands before they left. And nobody looked at Richard like he was an asshole in the elevator on the way downstairs.

W
ASHINGTON
, D.C.
C
ROONQUIST RECOGNIZED
Charlie Green’s cell phone number on his desk phone’s caller ID.
Here we go.
He picked up the handset.

“Roman, it’s Charlie. You called?” he said, impatient.

“Yeah. I need some air cover.”

“I’m up to my eyeballs with these bastards on the Hill again. Can it wait?”

“Not really. I’ve got something brewing…”

“About time. What you got?” Sounding interested now.

“I’ve got a potential bust working, and I think it’s big. I’ve got reams of trading statistics in MarketWatch and emails ordering trades from Walker New York, then emails from Groupe Credit Generale to all over Europe.”

“Emails? How the hell’d you get them?”

“A friend at NSA.”

“You dog, you.”

“Yeah, but I’m not sure I can use them all. Stone in Litigation is a real Boy Scout. He might say they’re illegal.”

“Of course he will. Because they are.”

“That’s why I need you to talk to him.”

“And say what?”

“Tell him NSA uncovered them by mistake in some national security monitoring or something. You’ll figure it out. You’re the boss, I’m just a humble lawyer.”

“Don’t be a smart-ass.” He paused for a moment. “Shit, Roman, you’re stretching it here. Is this worth it?”

“It’s had me semierect for a month.”

“Okay. Anything else?”

“Authority for wiretaps. On phones and emails.”

“It’ll take probable cause to get it past Judge Weinstein.”

“The trading statistics show a clear pattern of insider activity prior to the Southwest Homes IPO. Unrestrained trading. Somebody got a hold of inside information that a filing was coming and front-ran it with a very complex and risky trading strategy. I’ve had a real pro confirm that nobody’s got balls to take a multi-billion-dollar position like that without knowing inside information. And our MarketWatch algorithms say an 86% correlation with previous illegal insider trading activity.”

“Sounds like you’re getting there, but I don’t think it’s enough to give Weinstein a boner yet. How big is this?”

“Walker & Company, GCG in Paris, some other European institutions and…” he paused for effect, “maybe Harold Milner.”

Green was silent for a moment, then whispered, “Holy shit.”

“I was counting on you to say that.”

“Have your guys draft me a brief. I’ll get on Weinstein’s calendar. You drop everything else and fast-track this thing. And Roman…” Green paused.

“Yeah?”

“Don’t fuck this up.”

New York City.
Richard and Kathy didn’t miss a beat when they saw each other the morning after she’d brushed him off in her apartment. Richard’s family called it “doing the South American,” when you pretended a blowup or embarrassment never happened, going on with things as usual. They bantered, Kathy called him farm boy and Richard wondered why South Americans were so screwed up. Kathy left for Paris a week later.

Kathy phoned two days after she arrived.

“
Ça va,
” she said.

“Up yours, too.”

“It means ‘how’s everything?’”

“Oh, sorry. I’m fine, how’s Paris?”

“Gorgeous. I’m trying to drink at all in.”

Drink it all in?
“How’s your French coming?”

“Quite well, quite well. And I picked up a tutor today.”

“What?”

“I met a Frenchman at the market this morning. Says he’s from the south of France, here for a modeling career. Gorgeous. And he’s fluent in French, of course.” She laughed.

Richard felt his face starting to color as Kathy said it. Was she breaking his balls, or just reinforcing the message they were only friends?

“Sounds like you’re settling in.”

“Yes. Hey, our mole has been pretty active, no?”

“Haven’t checked up on him lately.”

“You should. These guys are trading a lot of options. Representing maybe one to two billion dollars in stock, I can’t quite tell. And another thing. I found emails to London as well, signed by [email protected] over here at GCG.”

“Did you crack his password? I’ll load that account onto my computer.”

“No, couldn’t break it.” Kathy paused. “What do you think’s going on?”

“Looks to me as if it’s just plain old-fashioned larceny: insider trading. Somebody knows the takeover targets and he’s passing their names along to a couple of others who are trading on it as well.”

Kathy didn’t respond. Richard could tell she was still connected because he could hear the transatlantic line crackling. Finally, Kathy said, “This is probably just some intercontinental arbitrage strategy the trading guys are doing.”

“Sending code-named emails to do trades?”

“I think this is all something you’re dreaming up in your head. I mean, stumbling by mistake onto an insider trading ring by just uncovering one suspicious email.”

“That’s how it happens sometimes. Remember the whole Dennis Levine insider trading scandal in the 1980s? Half the major firms on Wall Street were involved. Guys from Drexel to Kidder to Goldman were indicted. Marty Siegel, an M&A banking star, ex-Kidder then at Drexel, turned out to be dirty. Ivan Boesky, the biggest arbitrageur of his day, paid a hundred million dollar fine and went to jail. Mike Milken, the junk bond kingpin, paid $600 million before they put him away. And it all started with a back office compliance clerk someplace thinking some trades looked fishy, reporting them. And not even Levine’s trades. It was some dope who was piggybacking off Levine’s trades when he saw how much money Levine was making.”

“I think you watch too many movies, farm boy.”

“I think you’ve got your head in the sand.”

“Yeah, well.” She used the impatient tone she reserved for when she wanted to dismiss a subject.

Richard said, “I’m gonna keep an eye on this and figure out what’s going on and who’s doing it.”

Kathy didn’t respond.

“What are you doing?” Chuck White, Milner’s CFO, asked. He’d just knocked on the glass door to Milner’s office, Milner motioning him in to sit down. Milner was reviewing the pitch book on Tentron again, for about the fifth time in a week.

“Whattaya mean?” Milner said, playing a little, acting innocent, seeing Chuck look at the pitch book from Walker & Company on his desk.

“You thinking about doing that deal?”

“A pitch. What, I can’t get a pitch?” He put his elbow on the table, letting Chuck see him smile.

“Why?”

“It’s what these Walker guys do. Never hurts to listen.” Still playing dumb.

“Why are you screwing around?” Chuck said. Tilting his head to the side.

“I’m not.”

Chuck not saying anything, giving him his “oh, come on” look, then saying, “You said you were through with these guys. What happened to pulling yourself out of the sewer they dragged you into? Holding your head high again?”

“Look, all I did was listen to a pitch.”

“Sounds like you need another lecture from Sandy. How did he put it? ‘The clear bright line between right and wrong’?”

Sanford “Sandy” Sharts, Milner’s lawyer, a founding partner of Wilson, Sharts and Devane. The man was tough as a
skunk on your side in a fight, but he could be downright pedantic. “Gonna tell on me to Uncle Sandy, old friend?” He looked up at Chuck, who was now looking ashamed, like he’d stepped over the line. That made Milner feel ashamed himself. How could Chuck step over the line? He was one of the only guys he confided in. Aside from Sandy, but he was paying Sandy by the hour. He smiled. “It’s a really interesting deal.” He put his one-page spreadsheet in front of Chuck. “I’d like to get your opinion.”

“You’re serious, aren’t you?”

“How often does something really interesting come along these days? All the hedge funds out there crawling all over every stock. Information available on the Internet, CNN, CNBC, MSNBC. Cramer doing his mad money thing. Today somebody farts and you see it on Bloomberg before you smell it. There’s no information advantage anymore.”

“So?” Chuck said.

“So, every once in a while you stumble on something.”

“You really are serious.”

“Take a look yourself.” He nodded to the spreadsheet he placed in front of Chuck, pushed it toward him further.

Chuck shook his head.

“C’mon, call it a swan song with the Walker guys.”

Chuck pulled the spreadsheet toward him.

Milner felt that familiar deal-junkie rush as Chuck picked it up. This Tentron deal had him hooked already.

After a minute Chuck looked up from the spreadsheet. “You’re right, it’s an interesting deal. But, sorry to be a boor, what happened to breaking away from these Walker guys?”

Milner shrugged.

Chuck kept looking at him.

“I’d use the billion I just took out of Southwest.”

Chuck was looking down at Milner’s spreadsheet again, studying it harder now. After a moment he scrunched his nose.

“What’s wrong?” Milner said.

“Is a billion enough?” Chuck looked back up. “This thing will take close to $6 billion to get done. How you gonna finance all the rest in this environment? Hell, Bear Stearns went bust two days ago.”

“And rumors of Lehman not far behind.”

“The markets were already bad; now they’re totally spooked. Bankers are too scared to lend to their own mothers.”

“I don’t know where I’ll borrow the money. Let’s see what Jack and Mickey come up with.”

“You better hope they’ve got dirty pictures of some bank president.”

LeClaire called Richard into his office. He motioned for Richard to sit at the side of his desk, pulled out a clean yellow legal pad and started drawing little boxes and diagrams with his fountain pen. He wasn’t smiling.

“I have just heard from Harold Milner that he would like to see more on Tentron. You will need two Analysts for a week or so,” he said, “because this will get complicated.” He turned back to his boxes and diagrams. “Now, this is the deal.” He drew the name Tentron Corporation in the top box. He wrote “Project Mary Claire” over it. “Use the code names at all times, and of course, the usual Need to Know rules apply. We cannot have any leaks, particularly with one of Milner’s deals.”

“Uh-huh,” Richard said. He was thinking about his first two minutes in the department with Cynthia.
No nonsense.
Then he thought about LeClaire’s reputation.
More than no nonsense.

“Now, as you know, Mary Claire has four major divisions.” He drew four boxes below the top box. He penned in code names for each—Alpha, Beta, Sigma and Gamma. “‘Alpha’ is consumer products, including your favorite, Northern Ash Bats. ‘Beta’ is the heavy industrial equipment, turbine-driven generators. ‘Sigma’ is specialty carbon and stainless steel. ‘Gamma’ is mail order.” LeClaire paused and looked at Richard to see if he understood, waiting. Richard not moving. LeClaire still waiting. Richard nodded back.

“Now, Milner has done his own division-by-division breakup valuation analysis of the company. Call it a sum-of-theparts. He thinks the parts are worth about two billion more than the whole company is trading for in the market. We need to tell him if his valuation thinking is correct, figure out who we can sell the divisions to that he does not want—he wants specialty steel and turbines—accumulate a position for him, plan strategy and structure and execute the financing.”