The Chairman (21 page)

“But banks and savings and loans are different. There’s federal and state examiners, too. There’s so much scrutiny someone would have figured out what was going on.”

“Not necessarily. As long as people keep putting money in, you can keep playing the shell game. You know, credit one person’s loan payment with someone else’s deposit.”

“Yeah, but—”

“Stockman also claimed there were payments sent out to insiders
after
the IPO. Payments that shouldn’t have been made.”

“Fraudulent payments?”

“Yes.”

Cohen spread his arms wide. “How in the world would Stockman know about all this?”

“From someone inside Dominion,” Gillette answered. “Or someone inside Everest.”

“No way,” Cohen argued.

“Ben, don’t go naÏve on me again.”

“Who then?” Cohen demanded. “Who’s the rat?”

“Obviously, it wouldn’t have been Donovan,” Gillette answered.

“Obviously.” Cohen stared at Gillette for a few moments, then his eyes grew wide.
“Marcie?”

“I didn’t say that.”

“You implied it.”

Gillette pursed his lips. “Yes, I did,” he agreed quietly.

“But she’d be crazy to leak information like that,” Cohen protested. “If Stockman used what she told him, she’d face criminal charges. Why would she implicate herself?”

“Why would she necessarily implicate herself?”

“Because . . .” Cohen’s voice trailed off as he put the pieces together.

“Right,” said Gillette, seeing that Cohen understood. “Donovan’s dead. All the blame can be shoveled into his grave. They can say he was the one responsible for working with the auditors and someone at the company to hide what was going on. It’s perfect.”

“If what you’re saying is true, then Donovan was murdered,” Cohen whispered. “Whoever was responsible would need him out of the picture.”

“Agreed.”

“But why? What’s the endgame?”

Gillette leaned back and ran his hands through his hair. “Who’s our biggest rival?”

“Apex,” Cohen answered right away.

“Right. Paul Strazzi. He doesn’t want us to raise this next fund. He wants me to fail in the worst way. And he hated Bill. He’d want nothing more than to destroy Bill’s legacy.”

“But enough to have him killed?”

“Miles Whitman warned me that Strazzi would do anything to screw us.
Anything.
I think he was right. I think Strazzi was willing to do anything. And he did it.”

A troubled expression clouded Cohen’s face. “I still don’t see the endgame. So we get some bad press on Dominion for a while if what Stockman told you turns out to be true. So what? Raising the new fund goes on hold for a while until we sell a few more portfolio companies at good prices and we continue to show the investment community how we kick ass in private equity. I still don’t think Strazzi would kill someone to
maybe
put our next fund on hold temporarily.”

“Exactly,” Gillette agreed, leaning forward over the desk.

“Exactly
what
?”

“None of it would make sense if Strazzi thought he’d only be able to put us on hold temporarily. But it might if he thought he could take us out of the game permanently. Or take us over.”

“Take us over?”

Cohen’s reaction to this was going to be interesting. “Donovan’s widow dropped by to see me.”

“What did she want?”

“To let me know that her most important asset in the world was her stake in Everest. And to let me know she was worried about it.”

“Why?”

“Someone warned her there were problems with our portfolio companies. With the liquid stuff, too.”

“You mean our leftover IPO shares.”

Gillette nodded.

“Like Dominion.”

“Yes.” Gillette checked Dominion’s stock price again—off another dollar. “Then I have lunch with Stockman. When I wouldn’t let him use Everest as his personal campaign platform, he goes off into the Dominion thing.”

“You think Stockman is the one who spoke to the widow.”

“Or one of his aides.”

“Did you ask the widow who approached her?”

“She wouldn’t say.”

Cohen put his head back against the chair. “Are you worried the widow might sell her Everest stake? I mean, whoever buys it could call a vote, then use the 25 percent voting share that goes with the stake to elect their own chairman.”

“The thought had crossed my mind.”

“But, like I said before, so what? What if there’s some bad stuff going on at Dominion? I don’t think that alone would cause the widow to sell her stake. Dominion having problems wouldn’t decrease the value of her investment that much.”

“What if we had to reverse the entire transaction and pay a couple of billion bucks back to the public investors?”

Cohen cringed.

“And pay a huge fine on top of the two billion if the SEC proved that we conspired to conceal information from the auditors,” Gillette continued. “On top of all those headlines the widow is reading in the newspapers, what if she thought there were problems with some of the Everest portfolio companies, too.”

Cohen squinted. “Problems? Like what?”

Cohen had always been focused internally. On administration. On human resources, accounting issues, and the limited partners. Making certain they were kept constantly updated on events at the portfolio companies.

Every ninety days Cohen was responsible for compiling reports on each of Everest’s companies and sending them out to the limiteds. Reports that included summary financial statements for the first three quarters of the year, and full-blown audited numbers for year-end. The reports described important events that had occurred at the companies during the previous ninety days—an acquisition, a major new product rollout, a strategic partnership. All things that would make the limited partners feel good about the portfolio companies—and, therefore, their investment.

One thing the quarterly reports rarely contained was bad news. Only when bad news was about to be reported by the press was it relayed to the investors.

Cohen had no way of knowing about dirty little secrets at the portfolio companies because dirty little secrets weren’t discussed at the weekly managing partner meeting with Donovan. Donovan didn’t want Cohen or Faraday knowing about them. He thought that the fewer people who knew about the bad stuff, the better. He felt Cohen was too much of a straight arrow and might insist that some of the dirty laundry be communicated to the limited partners, that Cohen might argue it was their fiduciary duty to disclose it. And Donovan knew about Faraday’s drinking. He was worried Faraday might say something to someone who mattered after one too many scotches.

Donovan was keenly aware that much of business was psychological, that markets were fickle and could sway drastically on rumor and conjecture. These days so many conclusions were drawn based on snippets of information, companies could easily be convicted in the court of public opinion without having done anything wrong.

So Donovan had controlled bad information. Portfolio company problems were discussed in separate, off-site meetings. Only Donovan, Gillette, and Mason participated in those meetings because they were the only ones who held chair positions at Everest’s portfolio companies.

Gillette gazed at Cohen, weighing the risk of telling him these things. The guy might have a panic attack and send out letters on his own to the limited partners, alerting them to the issues. Without approval. Which would create massive problems. Cohen might not understand that portfolio companies
always
had problems, some of which could look insurmountable or even sinister to the outside world. But they usually went away as long as everyone kept their cool.

“I’ll give you a for instance,” Gillette finally said. “Right now our waste management company has an environmental problem at one of its landfills.”

Cohen squinted and swallowed hard. “Which one?”

“Easy, Ben.”

“Which one?”
Cohen pressed.

“It doesn’t matter.” The company operated more than thirty landfills, so there’d be no way Cohen could pin the site down. No one at the landfill was going to admit anything if he called around. The few people at the site who knew were under strict orders to say nothing. “I’ll tell you that it’s one of the rural facilities. It’s way away from any major metropolitan area.”

Cohen let out a frustrated breath.

“Ben, I’m the chairman of this company. My job is to determine when we can take care of a problem in-house and when a problem gets to the stage that the outside world has to know. Right now, in my judgment, it isn’t at that stage.”

“But how do you know?”

“You never know for sure.”

“You aren’t an environmental expert.”

“But I’m working with someone who is. That’s all I can do.”

“What’s the environmental problem?” Cohen asked. “Will you tell me that?”

“I will. But you have to keep it quiet. Can you do that?”

Cohen hesitated. “It’s a slippery slope, Christian,” he said, his voice wavering.

“Ben, at the most senior levels, that’s what business comes down to every day. Negotiating slippery slopes. You haven’t had any experience doing that. You’ve lived a protected life at Everest handling administration and looking after the limited partners. Donovan, Mason, and I have dealt with the tough stuff.”

“Tell me what’s going on.”

Gillette eased back in the chair and put his feet up on the desk. “A few weeks ago we found out that a large pond on the property is contaminated. There are very high levels of mercury in the water. Everything in it basically floated to the top, belly up. Apparently, the people who operated the landfill before we bought the company were burying toxic drums in a field beside the pond and they’ve leaked into the groundwater. We found the drums last week, and we think we can contain the spill. I don’t think we’ll have to go to the EPA.”

“Christian, that’s ridiculous. You
have
to tell the EPA.”

“Do you know how much money it would cost us if we did?”

“There must be insurance,” Cohen argued.

“There’s
supposed
to be, but there isn’t. And what the EPA would make us go through would probably bankrupt the company. The CFO has already done that analysis.”

“Jesus.”

“Yeah, Jesus. Now you start to understand what Bill, Troy, and I have had to deal with.”

“What else is hiding out there in our portfolio companies?” Cohen asked quietly.

“That I know about?”

“Don’t be funny, Christian.”

“I’m not being funny; I’m being dead serious. What you have to understand, Ben, is that there are
always
problems at every portfolio company. You just have to learn how to deal with them. And the keys to doing that are figuring out how quickly can you get your hands around the problem, what can you do about it, and, most important, not letting it get to you. Ever. That’s mostly what being chairman of a company is all about. Staying calm no matter what.”

“What else is out there?” Cohen repeated tersely, uninterested in the lesson.

Gillette stared at Cohen for a moment. This was so risky. “We’ve got an issue at the records management company in California. One of our employees sold personal information to a direct marketing company.”

“You got to be shitting me.”

“Nope.”

“What kind of information?”

“Drivers licenses, credit card numbers, home addresses.”

Cohen’s eyes widened. “My God. What steps have we taken?”

“The employee who sold the information was fired, and we’re trying to assess what liability the company has. We’ve also alerted senior executives at the company that bought the information about what happened, that one of their midlevel managers was buying the information. They are cooperating with us fully. They fired their guy as well.”

“Have you notified the individuals whose information was sold without their permission?”

“No.”

“Why not?” Cohen demanded.

“It involved over twenty thousand people.”

“So?”

“I can’t have the California consumer advocacy people in there at this point. They’re worse than the Gestapo. I haven’t told you this, Ben, but we’re no more than six months away from taking this company public, too. At the price the I-bankers are talking, it would be a ten times return for us. It would be one of the best investments we’ve ever made. If this thing leaks, the IPO could be delayed indefinitely.”

“But these individuals have had their private information sold. Who knows what the people at the direct marketing company have done with the stuff.”

“We’re trying to figure that out. Trying to contain the spill. Just like at the landfill. So far there’s no indication anything bad has happened. No indication that there have been illegal charges made on credit cards or anything like that. We think the guy bought the stuff just so he could target a set of consumers for a new product introduction.”

Cohen looked out the window at something in the distance.

Gillette raised one eyebrow. “So, you still want to be chairman of one of our companies, Ben?”

“My God, it can’t be like that at all of them.”

“It isn’t,” Gillette agreed. “And the company I give you might be clean when you take over. The thing is, two weeks after you become chairman, you might get hit between the eyes with something out of left field.” He hesitated, thinking through a scenario. “Let’s say I make you chairman of our grocery store chain. At first, everything’s great. Then one of our tractor trailers plows into a father and his three kids at an intersection. The father and two of the kids are killed instantly. The third one lives, but he’s paralyzed for life. The cops find out that the truck driver was blind drunk and had cocaine in his system, too. They dig further and find out we aren’t administering the required drug tests to our drivers. The mother of the three kids files a $500 million lawsuit, and the insurance company tells you they won’t cover it because a clause in the policy says they aren’t responsible for claims if we aren’t administering drug tests. A $500 million settlement will bankrupt the company. You think the amount is absurd, but your lawyer isn’t so sure. All the jury would hear about at the trial is that Everest Capital manages $20 billion. The woman might actually have a chance of getting her $500 million.” Gillette crossed his arms over his chest. “What do you do, Mr. Chairman?”