Brian Garfield: Villiers Touch

Bill Burgess said, “What I still don’t understand is how he managed to beef up Heggins so fast. Two weeks ago it was a dying company floundering on the verge of collapse. Now the price has shot up six points, and you hear nothing but glowing reports-and don’t tell me all of them were planted by Villiers’ people.”

“Part of them,” Hastings said. “The rest of it must have been done by cooking the books. A lot of things. I’ll lay a few examples on you to give you the drift. First, the company deals in a low-down-payment product-airplanes. Say a plane costs fifty thousand and the customer buys it with five thousand down. Ordinarily you report only the five thousand as income. But when Villiers took over, suppose his accountants cooked the books by inflating earnings with the whole thing in the income column-they report the full scale price as income, not just the down payment. Shady, but legal. They can juggle the inventory accounts to make the assets look greater. They can bring in their own team of auditors, who’ve been coached to show how depreciation has been taken inaccurately, and fiddle with earned-surplus figures and net working capital and other vagaries. They can report the company’s subsidiaries at book value instead of original cost. They can choose between accelerated depreciation and straight-line depreciation. They can take research costs immediately instead of amortizing them over a five-year period. They can announce they’re going to grant stock options, which aren’t charged to income, in lieu of cash bonuses. They can credit capital gains to income. They can, and did, declare a cash dividend last week to increase stockholder confidence. Villiers has created a bull market in Heggins stock overnight by operations like that and by putting out sales literature that convinces the readers it’s a good company to invest in. All kinds of happy talk about talented scientists and engineers, capable financial leadership, and a new management that’s balanced in depth so that the loss of a key exec won’t wreck the company. A spirit of innovation. An aggressive intent to exploit existing markets and create new ones. A good record of sales expansion five years ago, and never mind the years in between. Hell, our boy’s been a one-man inflation for Heggins stock. And it’s easy enough to see what he’s doing now. It’s relatively cheap for one company to take over another company by issuing interest-bearing Chinese money like these Heggins debentures in Villiers’ ad. And I’m not even sure the NCI board of directors will put up a fight.”

Quint said sharply, “Why the devil shouldn’t they?”

It was Burgess who answered him. “Because according to our information, at least two of them have got themselves into a trap that Villiers ingeniously set for them. And if two of them fell into the trap, it’s possible one or two others are in it too that we don’t know about. If it makes up a majority of the board, then the rest of the board members can’t act-they’ve got to sit on their hands while Villiers moves right in.”

Quint said, “Explain yourselves. What sort of trap?”

Hastings said, “Villiers bought himself a speculator’s dream when he took over Heggins. God knows where he got the money. Some of it was an exchange for Melbard Chemical stock, but just the same, he had to raise an incredible amount of capital to pull it off. What he did, in the old-fashioned phrase, he cornered the market in Heggins. There weren’t a hell of a lot of outstanding shares drifting around the market anyway. Villiers planted word, just before he bought the company, that Heggins was overvalued and bound for collapse. He planted it in the right places. Amos Singman and Daniel Silverstein and maybe two or three other NCI board members, among others. They expected a dive in price, and so they sold Heggins short, in big bundles.”

“Now, of course, the price is up, and they’ve got to cover their short sales, and they suddenly find out Villiers has bought up all the shares. Put simply, the short sellers owe Villiers half a million shares, and to pay him they’ve got to buy the shares from him and then give them back to him-and he’s got every legal right to name the price. So he’s got them in a bind, and the only way they can squirm out of it is to sit it out while he moves into NCI.”

Quint said, “It can’t be legal. He’s a control stockholder and he didn’t advise us of his movements in Heggins stock. We can nail him for fraud and failure to divulge inside information.”

“Nuts,” Burgess said sourly. “Do you think he’s done all this in his own name? You can be damn sure Villiers personally doesn’t own more than five percent of Heggins’ outstanding stock. It all belongs to Swiss trusts, and you know damn well how far you’d get trying to prove they belong to him. Even if we could hit him with that technicality, the worst he’d suffer would be a slap on the wrist and a meaningless fine.”

Quint made a face. “You can take a man out of the gutter, but Villiers has never washed off the smell, has he?”

Burgess showed his unhappy consternation by letting his hand dangle limply from his wrist and shaking it back and forth as if wearily drying his fingertips. “We can’t lay a finger on him unless we can prove fraud or extortionate coercion, and you can bet your ass none of the jokers involved are going to admit a thing-unless we can crack Steve Wyatt open.”

Quint put his big head down, thinking. Bill Burgess said, “Don’t forget, we’ve only been moving on this thing for a matter of hours and days. Villiers has had years to plan it out. He’s not an impulsive man-he wouldn’t have this ad in the papers if he hadn’t thought it through. He doesn’t blurt things out, and he doesn’t make easy mistakes.” He shook his head apologetically and uttered a dispirited little laugh.

Hastings shot to his feet. It made Quint’s head skew back with dignified astonishment. Hastings strode back and forth impatiently, hair falling over his eye; he said, “It’s not a question of finding some technical loophole to collar him with. There’s got to be a way to nail the bastard to the wall, pin him like a butterfly so he’ll never get loose.”

Quint murmured, “Do I detect a note of personal animosity? He’s been seen with your wife, I understand.”

“My ex-wife, damn it. And what does it matter whether it’s personal? The man’s guilty of a criminal assault, half of Wall Street will know it by Monday morning, nobody can touch him legally, and we sit here trying to decide if we’ve got enough evidence to hang a parking ticket on him! For God’s sake, there is no such thing as a little rape-we’ve got to stop him cold.”

Quint cocked his head to one side. “You’re really quite an emotional being underneath it all, aren’t you?”

Hastings made an exasperated sound.

The fat man said, “How would you handle it, then? Strap on a revolver and shoot it out with him in Wall Street at high noon?”

He was in no frame of mind for Quint’s brand of drollery; he formed his big hands into loose fists. “Just turn me loose on him, Gordon. Ill bring him down.”

“Large talk,” Quint observed, not visibly stirred. “Are you deliberately implying I’m the only thing standing between you and Villiers’ downfall?”

The skin on Hastings’ face tightened. “That’s exactly what I’m saying.”

Bill Burgess said uncomfortably, “Cool it down, hey?”

But Hastings wasn’t through. He put his hands on Quint’s desk. “You gave me a speech about why you always go by the book. But this time we’re not in the kind of game that’s played according to Hoyle. It’s a dirty back-alley crap game and if you want to win it you don’t carry your book of Hoyle along, you carry a knife and a set of brass knuckles instead-otherwise you’re a dead loser.”