Whipping Boy (19 page)

Once again, Glass obliged.

Sherry’s requests grew incrementally bolder. Could Badische receive its business correspondence at the firm? Doing so would allow the Trust to consolidate business plans and other confidential materials in a single location, a tremendous convenience for the globe-trotting bankers. Additionally, the impeccable reputation of Clifford Chance, Glass was informed, “would discourage people who were
not serious from making idle inquiries.” The Trust wanted to keep scoundrels and swindlers at bay.

Glass conferred with his colleagues and, receiving no objection, approved the request. It was quickly followed by another: Could Badische receive their clients at the law firm? A Waldorf Towers suite, for all its gilded extravagance, lacked the gravitas of an international law firm.

Glass again checked with his colleagues and again gave the okay.

By the end of February, the offices of Clifford Chance, located at the very top of the MetLife Building, the historic landmark straddling Grand Central Terminal, became the de facto boiler room for a band of make-believe bankers. There were some days when Cesar shepherded as many as six groups of Barclay clients in and out of the firm. For major assemblies—gatherings that could include some dozen Badische representatives and prospective borrowers—Glass had his assistant reserve a vast conference room on the fifty-third floor. More intimate meetings of the finance and executive committees were generally conducted in the firm’s mahogany-paneled boardroom, a sumptuous venue more in keeping with the Baron Moncrieffe’s Old World aesthetic. Cesar, present at most of the loan meetings, remained aloof during the negotiations. “He stuck to the sidelines,” Glass later remembered. “He ushered people in and ushered people out, but it was never very clear what role he had.”

When it came to the prep work for the loan meetings, no detail, no matter how minor, escaped Glass’s attention, as the following email exchange suggests:

               
COLONEL SHERRY
: We will be eight on one side (incl. you) and eight on the other (for visiting clients) with one for the acting Chairman. Therefore, we would need 17 chairs. . . . We may also put one of our people at the foot of the table. This would decrease it to 7 on each side and one at each end, being 16 chairs total. Please advise.

               
DAVID GLASS
: I am pleased to inform you that we have a room that should work for our meeting. It is room K on the 53rd floor. It has a long conference table . . .

Glass did more than oversee the seating arrangements. He made introductions. When Badische asked for help developing an anti-money-laundering policy, Glass brought in a partner experienced in “international regulatory matters.” When Badische expressed a desire to issue collateralized bonds tied to its African assets, Glass put the Trust’s in-house lawyer Richard Zeif in touch with a Clifford Chance partner specializing in “securitization transactions.”

All these efforts did not go unrewarded. In mid-July 2000, Badische named David Glass its “Honourary Avocat Generale.” Colonel Sherry reinforced the symbolic appointment by sending the CEO of Clifford Chance an unsolicited reference letter. (“We have found David Glass of your New York office to be honest, sincere, diligent, accurate, respectful, resourceful, knowledgeable, pleasant and helpful in all matters of our business needs.”)

Glass appreciated the framed commendation and the letter of support, but it was an altogether different expression of “confidence” (that’s the word he would later testify Colonel Sherry employed) that left the most lasting impression.

The same week he doled out kudos, the colonel presented Glass with a sealed manila envelope and a one-page “tally” listing the investors bankrolling the House of Badische loan program. He then asked Glass to affirm the dollar values listed on the tally sheet by comparing them to confidential asset letters contained in the envelope.

Glass considered the request unusual but not unreasonable, and whatever qualms he might have had were trumped by his interest in learning the source of the Badische billions.

What the lawyer discovered, upon reviewing the contents of the envelope, shocked him. “The floor opened up from under me,” he later recalled. The nine putative funding commitments included: an offering from a “high yield investment program” promising dividends of 50 percent a month; a generic solicitation letter from Merrill Lynch (“It was basically a sales document that in no way presented a commitment of funds”); an unsubstantiated promise of funds from Duke d’Antin’s Habsburg Foundation; and a $1 billion loan proposal from a company that, a quick web search confirmed, shared space with a “scuzzy” used-car dealer in a California strip mall.

The tally Colonel Sherry provided attorney David Glass.

The most preposterous of the “assets” was this special deed of trust from the Kingdom of Mombessa:

The blatant illegitimacy of the deed devastated Glass. On the stand, he maintained a measured tone when asked to describe how he felt when he reviewed the alleged asset: “My immediate reaction was that this was not by any means a commitment of funds.” (Years later, asked the same question, his response was more vivid: “When I perused those letters, I felt all of a sudden as if I was looking down into my open grave.”)

Glass found himself in a quandary. Refusing to validate the declared value of the assets would undermine months of negotiations between Badische and their loan applicants. Yet endorsing the bogus documents might render his clients susceptible to civil or criminal action. Glass toted up the dollar figures cited in the letters and compared them to the figures on the one-page tally. The sums matched. At least the math was sound. That persuaded him to set aside his legal concerns, if only temporarily, and provide the colonel with the requested attestation. None of which resolved the bigger problem facing David Glass: how to tell a colonel (who he would soon learn wasn’t a colonel), a baron (who wasn’t a baron), and a prince (who wasn’t a prince) that they might be the victims of an international fraud?

David Glass attempted to alert the Trust about the iffy nature of their assets, but each time he tried, something seemed to get in the way. First it was back-to-back loan conferences with Cesar and his clients. Then it was the alleged disappearance of a cherished object belonging to a Badische executive. That loss, spelled out in an email sent to every employee in the New York offices of Clifford Chance, caught my attention:

               
From: David Glass

               
To: #NYC: All Staff

               
Subject: Missing Pen—Reward

               
On Wednesday, July 12, a Montblanc fountain pen belonging to a client of the Firm disappeared from Conference Room 52-J some time between 1 PM and 2:30 PM. The pen has sentimental value to the client, who is offering a reward for its return. Please reply in confidence . . . No questions will be asked and all replies will be kept confidential. Thank you.

No questions asked? That may have been Glass’s position. It wasn’t mine.

I had nothing
but
questions: Was Cesar present at the time and location of the pen’s disappearance? (Yes.) Did Cesar have an appreciation for Montblanc fountain pens stretching back to 1972? (Absolutely.) Was there any proof that the pen in question was Cesar’s? (None at all. In fact, the memo notes the pen belonged “to a client of the Firm”; i.e., a member of the Badische board.) Was it possible that the disappearance was nothing more than a ruse designed to distract Glass from his concerns about the dubious asset letters? (Of course.) And assuming the pen’s alleged disappearance
was
a ploy, could Cesar have masterminded its execution? (Sure, it’s possible.) Was there any proof to justify that speculation? (No, unfortunately not. But that didn’t stop me from connecting the petty crime to my fountain-pen triumph in the hallway of Belvedere.)

Glass eventually managed to express his apprehensions about the funding sources. He later recalled telling the colonel that even if, for argument’s sake, the valuation of the Mombessa deed was “entirely valid, one couldn’t assume [it] could be fully collateralized for the loan program.”

The colonel dismissed his lawyer’s misgivings. Hadn’t a Clifford
Chance attorney already detailed how “nonliquid African assets” might be profitably exploited by means of a “securitization transaction”?

“That doesn’t mean there is $50 billion available today for investment,” Glass remembers countering. He advised the Trust to “proceed with caution.” To that end, he and one of his London-based colleagues redrafted the Badische loan agreements “from scratch.” The new contract, for which Clifford Chance billed Badische £16,000, was radically different from the ones signed by Laurence and Kearns. However, at the insistence of the Trust, two provisions from the original agreement remained: the performance guaranty and the bank letter.

In August of 2000, a month after David Glass reviewed its asset tally, Badische decided to launch a $100 million private equity fund based in Luxembourg, a tax haven known for stringent bank secrecy laws. The offering required local legal representation, so Glass, ever obliging, arranged for the colonel and the baron to meet with attorneys at a highly regarded law firm headquartered in the tiny grand duchy.

The conference did not go well. The self-styled aristocrats put noses out of joint by presenting cartes de visite lacking addresses and phone numbers, a faux pas the colonel compounded when he provided, as a reference, the name of a local criminal.

The visiting card that gave the lawyers from Luxembourg pause.

The Luxembourgian lawyers decided they “did not wish to go forward” with Glass’s clients, a snub that raised alarm bells among his colleagues in New York. They asked Glass to reconfirm the legitimacy of the Trust’s financial representations. With that in mind, he
invited the baron to lunch in a private club at the top of the MetLife building. The baron tried to neutralize the law firm’s concerns by noting that Prince Robert had ties to the largest chemical company in the world. “The
B
in BASF stands for Badische,” he confided.

Glass informed the baron that anecdotal declarations wouldn’t satisfy his bosses. They wanted an
independent
accounting of the bank’s holdings. Reluctantly, Moncrieffe produced a financial statement for a Badische account managed by Robert Gurland in London. It showed a balance of £1 million. Glass speculated, correctly, that the £1 million represented
liquid
assets, the money required to run the day-to-day operations of the lending program. But what about the Trust’s
investment
capital—the billions needed to underwrite the loans promised to Laurence, Kearns, and all the other borrowers? Glass was blunt. He asked the baron: “Is there capital
beyond
that million pounds?”