Mike Offit: Nothing Personal: A Novel of Wall Street

Warner had been audited twice by the Federal Home Loan Bank Board, and nothing had come of it, except that the bank was clearly in trouble, like all the S&Ls that had overleveraged in the mortgage markets once the effects of the new tax laws passed by Reagan hit home on real estate. Warren could see that all the “missing” money had properly been accounted for as write-offs that were balanced by other profits on their new investments and income each year, and the last thing the regulators wanted, it seemed, was to find any kind of scandal. Of course, if those profits proved ephemeral over time, the focus would be on those bad investments, not on what had happened years before. Warren could only wonder how many other schemes to milk money out of the savings-and-loan industry there were. It looked as if Mike Milken at Drexel was in some serious trouble for many such schemes on a much grander scale. The one at Warner had clearly been good for at least a half a billion or more and was essentially untraceable.

Meanwhile, Reagan’s second term was producing big gains in the markets, and the Street was prospering. If anyone looked, the couple’s side trip to Liechtenstein looked like just a shortcut to Geneva, where they were going to visit Warren’s brother, who was doing a research fellowship, and spend a day with Frank and Karen, who were engaged and to be married in June. Warren and Sam spent a day reviewing the procedures that they had gone over with the lawyers Schiff had referred them to. Warren had told him the funds were part of an inheritance from Sam’s family in Germany and England. She did have extremely wealthy distant cousins in Frankfurt, so it seemed plausible if anyone questioned it, and the paper trail would lead nowhere. They had spent hours agonizing over the money. It hadn’t really been stolen, they rationalized. Warner had written down loans and sold them and bought high-income products to cover the losses. It had been possible it would all work out, until the tax law change clobbered real estate values, and interest rates dropped. If Warner failed, the main losers would be the Mexican family that owned 90 percent of the stock, but the run-up in its value had largely been based on false earnings anyway. Warren chose to believe the rumors that the Sanchez family was laundering money for Mexican drug cartels—it made what they had done seem almost victimless.

Sam had handled the transfer transactions perfectly. About half of the money was repatriated through the Caymans, necessary taxes were paid, and the other half had been transferred into the Faaringsbank account of a new firm, Flickflack AG, named after a horse she had owned as a kid, that was listed on the Luxembourg stock exchange with ownership through an anonymous Liechtenstein trust. Sam became the chairwoman and owned all the shares.

The company also endowed an academy in Jupiter, Florida, where Warren’s father offered scholarships for full room, board, schooling, and tennis and athletic training to two hundred underprivileged children from all over the United States. The operating budget consumed only a fraction of the income that the company was earning through the decisions being made by its chief investment adviser, David Schiff. Through a combination of good luck and Schiff’s excellent timing, he had moved the Trust into bonds as they rose, and then into stocks. Lately, Schiff had been enamored with discount retailing and computer-software companies for the long-term. They looked like good growth areas for the late eighties and early nineties, he’d explained, because they offered real products that everyone would need. By mid-1989 the Flickflack trust had assets of almost $300 million, even after paying some $50 million in federal taxes.

“Look,” Sam had told Schiff, “take all the risk you want. We want to be aggressive. We won’t cry if we lose money. Warren says you have a nose for underappreciated assets. We’ll trust it. You get five percent of everything you make, and you can still run your company.” Schiff agreed, but insisted he simply match all the investments he made for Emerson so there would be no conflict. He saw trouble coming, in 1990, and believed the early nineties would be a buying opportunity for depressed assets. The riskier purchases would be handled separately. He also donated most of his share to the environmental causes he favored and used some of the balance to fund activist shareholder lawsuits against abusive corporate practices, particularly in the insurance business.

The board of directors, of which Sam was the sole member, decided that the operating company needed to own residences in the areas where its likely clientele resided—Islesboro, Hobe Sound, Malibu, and Paris. With the exception of Whales End, they were comparably modest, charming, and likely excellent investments, all bought during the lows of the 1990/91 recession.

Just over 50 percent of all income in the trust and corporation was paid out to various charitable organizations, which Sam spent a lot of time interviewing and choosing. The balance of the trust income was available to Sam to spend or invest as she chose, as the trust did not seek nonprofit status and paid taxes in the United States.

With the pressure off, Warren didn’t mind the work at Weldon so much anymore. His rich wife gave him the liberty not to take any guff from Conover or anyone else, and he had a growing reputation as an honest salesman who wouldn’t recommend trades to clients just to earn a big commission or enjoy the adrenaline rush. As a result, his business grew quickly, and he became the top producer at Weldon. After long discussions with Schiff and some of his analysts, Warren diligently guided his accounts to areas of the bond markets where the returns more than balanced the risks. He advised them away from the exotic, structured products that the finance guys kept devising. As Goering put it, “If you’re playing Hide the Salami and you don’t know where the salami is, you shouldn’t bend over!” Some of Warren’s clients didn’t care—they were after big returns—and he soon released them to other salesmen. He took a lot of vacations, but he was allowed the latitude. He planned to stay at Weldon until he and Sam had kids, then find something that would allow him to spend as much time with them as his dad had with him. He had been hitting again regularly with his pal Neal, and his game was sharp again.

In the meantime, Sam had spent her free time refreshing her college major in art history, after dropping the pre-med idea despite getting nothing but As, and Warren had brought his mom in to work with them, making the operating company, called Gordian Fine Arts, a viable enterprise. She and Sam became advisers to several corporations in managing their art collections, and consultants to a growing group of collectors who were knocked out by the two women’s combination of looks, brains, scholarly knowledge, and nose for a deal. Chas Harper had married a beautiful private banker at the Bessemer Trust who had helped him manage his family’s money, and Nicole had been thrilled to refer dozens of their clients to Gordian rather than the usual art dealers and brokers, who could hardly be trusted.

One such assignment had taken Sam to Chicago, where she helped a major client acquire a $15 million Winslow Homer oil painting, then convinced him to bequeath it in his will to the National Gallery in Washington from his estate. She waived her commission in favor of a deductible donation paid directly to the Florida Academy and caught a flight to LaGuardia, and from there, a commuter plane to Camden, Maine.

The air had been smooth, and the Whaler met her at the dock for the cruise across the harbor to the house, where Warren was waiting. She took the pair of sunglasses Jimmy offered her when she climbed on board. It had been a long trip, but a good one. The boat powered out into the channel, the sun low on the horizon and the lights coming on in the waterfront shops and the large houses, reflected in the almost-black water, across the bay. The breeze was soft in her hair, and she settled deep into a cushion, looking forward to a warm, comfortable ride home.