Kane & Abel (1979) (67 page)

It came as no surprise to William when Thaddeus Cohen rang to confirm that the company that had dumped the three million dollars’ worth of Interstate shares was one of those fronting for Abel Rosnovski. On Thursday morning a spokesman for Guaranty Investment Corporation issued a press release explaining their reasons for selling: they had been very concerned about Inter-state’s future after the Mexican government’s ‘detailed and considered’ statement about its inadequate servicing facilities and procedures.

‘ “Detailed and considered”,’ said William, outraged. ‘The Mexican government hasn’t made a less responsible statement since it claimed Speedy Gonzales would win the one hundred metres at the Helsinki Olympics.’

The media made the most of Guaranty Investment’s press release, and on Friday the Federal Aviation Administration grounded all Interstate flights until it had conducted a thorough investigation into the airline’s servicing facilities and procedures.

William was confident Interstate had nothing to fear from such an inspection, but being grounded was disastrous for its short-term bookings. No aviation company can afford to leave its aircraft on the ground; they can only make money when they’re in the air. To compound William’s problems, other major companies represented by the bank were considering their positions. The press had been quick to remind it’s readers that Lester’s was Interstate Airways’ underwriter.

To William’s surprise, Interstate’s shares began to pick up late on Friday afternoon. It didn’t take him long to guess why - a guess that was later confirmed by Thaddeus Cohen. The buyer was Abel Rosnovski. He had sold his Interstate shares at the top of the market, and was now buying them back in small amounts while they were on the floor. William shook his head in grudging admiration. Rosnovski was making a small fortune for himself while bankrupting William both financially and in terms of his reputation on Wall Street. William worked out that although the Baron Group must have risked over $3 million, it could well end up making a huge profit.

When the board met on Monday, William explained the entire history behind his clash with Rosnovski, and offered his resignation. The board did not accept it, nor was a vote taken. However, there were murmurings from some of the younger board members, and William knew that if Rosnovski attacked again, his colleagues might not take the same tolerant attitude a second time.

The board went on to consider whether the bank should continue to support Interstate Airways. Tony Simmons convinced them that the FAA’s findings would come out in Interstate’s favour, and that in time the bank would recover all its money. He had to admit to William after the meeting that this could only help Rosnovski in the long run, but the bank had no choice if it wished to protect its reputation.

Simmons was proved right on both counts. When the SEC published its findings, it declared Lester’s ‘beyond reproach’, although it had some stern words for Guaranty Investment Corporation. When the market started trading the following day, William was not surprised to find Interstate’s stock rising steadily. Within weeks the shares were back to four and a half dollars.

Thaddeus Cohen informed William that the principal purchaser was once again Abel Rosnovski.

‘That’s all I need at the moment,’ said William. ‘Not only does he make a large profit on the whole transaction, but now he can repeat the exercise whenever it suits him.’

‘In fact,’ said Thaddeus Cohen, ‘that is exactly what you do need.’

‘What do you mean, Thaddeus? I’ve never known you to speak in riddles.’

‘Rosnovski’s made his first error of judgement. He’s broken the law, so now it’s your turn to go after him. He probably doesn’t even realize that what he’s been involved in is illegal, because he’s doing it for all the wrong reasons.’

‘I still have no idea what you are talking about?’

‘Simple,’ said Cohen. ‘Because of your obsession with Rosnovski - and his with you - it seems that both of you have overlooked the obvious: if you sell shares with the intention of causing the market to drop, in order to pick up those same shares at the bottom and make a profit, you’re breaking Rule 10b-5 of the Securities and Exchange Commission, and you’re guilty of fraud. There’s no doubt in my mind that making a quick profit wasn’t Rosnovski’s original intention; in fact, we know very well he only wanted to embarrass you. But who’s going to believe him if he says he dumped the stock because he thought Interstate was unreliable, then bought it back when it touched rock bottom? Answer, nobody - and certainly not the SEC. I’ll have a full written report sent around for your consideration by tomorrow, explaining the legal implications.’

‘Thank you,’ said William, feeling relieved for the first time in months.

Thaddeus Cohen’s report was on his desk at nine the next morning, and once William had considered its implications, he called an emergency board meeting. The directors agreed the course of action that should be taken, and Thaddeus Cohen was instructed to send a copy of his report to the Fraud Department of the SEC.

‘Should we send a copy to the
Wall Street Journal?’
suggested Simmons.

‘That won’t be necessary,’ the company secretary assured the board. Within moments of the report landing on the SEC desk you can be sure it will be leaked to the
Journal.
They are not known as the securities and exchange colander without reason.’ The board members laughed for the first time that day.

Alfred Rodgers’s judgement turned out to be correct, because the
Wall Street Journal
ran a front page article on the Wednesday morning which couldn’t have been more helpful if it had been dictated by Thaddeus Cohen.

The story went on to give SEC Rule 10b-5 in full, and a leader commented that this was exactly the sort of test case that President Truman had been looking for. A cartoon below the article showed Truman catching a businessman with his hand in the cookie jar.

William smiled as he read through the item, confident that he had heard the last of Abel Rosnovski.

Abel frowned and tapped his fingers on his desk as Henry Osborne read the article a second time.

‘The boys in Washington,’ said Osborne, ‘won’t be able to resist setting up a full inquiry, especially if there’s some political capital to be made of it.’

‘But, Henry, you know very well I didn’t sell Interstate to make a quick killing on the market,’ said Abel. ‘I had absolutely no interest in making a profit.’

‘I know that,’ said Osborne, ‘but you try and convince the Senate Finance Committee that the Chicago Baron wasn’t interested in financial gain, that all he really wanted to do was settle a personal grudge against William Kane, and they’ll laugh you right out of court - or out of the Senate, to be more exact.’

‘Damn,’ said Abel. What the hell do I do now?’

Well, first you’ll have to lie low until this has had time to blow over. Start praying that some bigger scandal comes along for Truman to get himself worked up about, or that Washington becomes so preoccupied with the election that it doesn’t have time to press for an inquiry. With luck, a new administration may even drop the whole thing. Whatever you do, Abel, don’t buy any stocks that are in any way connected with Lester’s Bank, or the least you’re going to end up with is a very large fine. Let me see what I can swing with the Democrats in Washington.’

‘Remind Truman’s office that I gave fifty thousand dollars to his campaign fund during the last election, and that I will be doing the same for Stevenson.’

‘I’ve already done that,’ said Henry. ‘In fact, I’d advise you to give fifty thousand to the Republicans as well.’

‘They’re making a mountain out of a molehill,’ said Abel.

‘A molehill that Kane will turn into a mountain if we give him half a chance,’ replied Osborne.

Abel’s fingers continued to tap on his desk.

T
HADDEUS
C
OHEN’S
next quarterly report revealed that Abel Rosnovski had stopped buying or selling stock in any of Lester’s affiliated companies. It seemed he was now concentrating all his energies on building new hotels in Europe. Cohen’s opinion was that Rosnovski was lying low until a decision had been made by the SEC following its Interstate inquiry.

Representatives of the SEC had visited William at the bank on several occasions. He had spoken to them with complete frankness, but they never revealed how their inquiries were progressing, or suggested who was responsible for the share collapse. The SEC finally concluded its investigation and thanked William for his cooperation. He assumed he would have to wait a few months before they published their conclusions.

As the election grew nearer and Truman began to look more and more like a ‘lame duck’ president, William began to fear that Rosnovski might have got away with it. He couldn’t help feeling that Henry Osborne must have been able to pull a few strings in Congress, and remembered that Cohen had once underlined a note about a $50,000 donation from the Baron Group to Truman’s campaign fund. He was not surprised to read in Cohen’s latest report that Rosnovski had donated a further $50,000 to Adlai Stevenson, the Democrats’ candidate for President. But he was shocked when he discovered that he’d also given $50,000 to the Eisenhower campaign fund. Cohen had underlined the second figure.

William had never considered supporting anyone for public office who didn’t run on a Republican ticket. He wanted Eisenhower, the compromise candidate who had emerged on the first ballot at the convention in Chicago, to defeat Stevenson, even though a Republican administration was less likely to press for a share-manipulation inquiry.

When General Dwight D. Eisenhower was elected the 34th President of the United States on November 4, 1952 (it appeared that the nation did ‘like Ike’), William assumed that Rosnovski had escaped any charge. He only hoped that the experience would persuade him to leave Lester’s affairs well alone in the future.

The one small compensation to come out of the election for William was that Henry Osborne lost his congressional seat to a Republican. The Eisenhower jacket had turned out to have long coattails, and Osborne’s rival had clung to them. Thaddeus Cohen was inclined to think that Osborne would no longer exert quite the same influence over Abel Rosnovski now he was no longer in office. The rumour in Chicago was that since Osborne’s wealthy second wife had divorced him, he’d started gambling again, and was running up debts all over town. William was feeling more relaxed than he had for some time, and looked forward to the prosperous and peaceful era that Eisenhower promised in his Inauguration speech.

During the first months of the new President’s administration, William put Rosnovski’s threats to the back of his mind, assuming he’d learned his lesson. He told Thaddeus Cohen that he believed they’d heard the last of Abel Rosnovski. Cohen didn’t comment, but then he hadn’t been asked to.

William put all his efforts into building Lester’s, both in size and reputation, increasingly aware that he was now doing it as much for his son as for himself. Some of the younger board members at the bank had already started referring to him as the ‘old man’.

‘It had to happen,’ said Kate.

‘Then why hasn’t it happened to you?’ he asked gallantly.

Kate smiled. ‘Now I know how you’ve closed so many deals with vain men.’

William laughed. ‘And one beautiful woman.’

With Richard’s twenty-first birthday only a few months away, William revised the provision of his will. He set aside $5 million for Kate, $2 million for each of the girls, and left the rest of the family fortune to Richard, ruefully noting the bite that would be extracted for inheritance taxes, despite a Republican majority in both houses. He also left $1 million to Harvard.