Robert Tanenbaum - Reversible Error

"How's the war against crime going?" Newbury inquired, continuing his notations. "Not well, by the way you look."

"The usual shit," said Karp. "What're you doing?"

Newbury wrote down some figures and looked up. "Actually, I'm finishing up that thing you asked me to look into."

"What thing?"

"Oh, terrific! I'm ruining my eyes, not to mention having to entertain Horton for the weekend, and he's forgotten all about it."

"What are you talking about, V.T.? Who's Horton?"

"My cousin Horton. In order to get a look at this material, I've had to let him inveigle himself into a weekend at our place in Oyster Bay. A golf ball for a brain, which means I'm going to have to spend a weekend listening to how he birdied the bogey on the fourteenth hole. He married Amelia Preston, for whom at one time I myself had a moderate sneaker. I can't see how she puts up with it, although perhaps we can polish our relationship while he's out bogeying."

"You lost me, V.T. What does…?"

"Fane," said V.T. "The congressman and the dope murders? Hello…?"

"Oh, shit! Yeah. So what, did you get anything?"

"Yes, I did, although I don't know how useful it'll be to you. First of all, do you know what a leveraged buy-out is?"

Karp did not, and V.T. said, "It's simple in principle, complex in operation. Basically, a group of investors buy up enough of the public stock of a company to give them a controlling interest. They do that because they either think the company can be run better than current management is doing, or, more usually, they see a company that's undervalued on the market. They buy it, and then they sell it for a profit, sometimes a huge one. With me so far?

"The leverage part comes from the way they get the money to buy the stock. Essentially, they borrow it against the assets of the firm they're buying, and pay back the loans from the sale of the firm itself. Or, what they're starting to do, is go on the bond market with high-yield unclassified offerings, but-"

"So Fane has been doing this?" Karp interrupted.

"In a way, in a way. You understand that when a deal like this is going down, when the stock is in play, as they say, its price can go ballistic. And of course if the buyers tender for the stock above market value, you can make a fortune. Fane has been into some very good things. As has our friend Judge Nolan. In fact, in recent months three of the very same deals: Revere Semiconductor, Grant Foods, and Adams-Lycoming."

"That's not illegal, though, is it?"

"Who knows? It depends where they got their information, because they must have had it from somewhere. Insider trading: that's when someone who has advance-"

"I know what insider trading is," said Karp, thinking about Reedy and his lecture. But this thought brought another, and he said, "What about Agromont?"

Newbury cocked his head and regarded Karp narrowly. "Agromont. Well, well. You have been doing your homework." He tossed the printout onto the desk. "You don't need old V.T. anymore, if you're that well-connected."

"All I know is the name. I was at a party when Fane told Reedy that Agromont was a done deal."

"That's also very interesting. OK, the story is this. Agromont is a medium-size conglomerate. They're in food, machine tools, cosmetics, and at the time they also owned a good deal of New York real estate, mostly on the West Side. They had the old American Line pier. In any case, someone made a run on the stock last year-bid it up like crazy-but the company fought them off. Sold off some assets at fire-sale prices. A lot of people were left holding the bag."

"How so?" asked Karp.

"Well, if you've tied up a lot of capital in a big block of stock and you fail to get control of the company, then you can't realize your profits. Some people made a bundle by riding the play and getting out before the showdown. But the main people were left holding a big chunk of overvalued stock. Which has sunk since.

"So they can either take their loss or try again. And Cousin Horton is very much convinced that they are going to try again. Someone has been nibbling at their stock. Little bites from a dozen different buyers: not enough to put it in play, but more than it usually moves. That could have been the origin of your cryptic comment from Fane. Telling a friend that the stock was shortly to go into play and that he should get in long on it."

"So is Fane buying?"

"He's starting to, it appears. But most of his purchases will probably be through someone else. Would you like me to look into it?"

"No, what do I care what stocks he buys? I'm not the SEC. But…" Karp rocked and looked out V.T.'s window at the little park behind the courts building and the low tenements of Chinatown beyond it.

"Yes?" asked V.T.

"But what I'd really like to know is, could someone use this kind of stock manipulation to launder money, maybe dirty money?"

V.T. thought for a moment, sounding the tuneless hum he favored when in deep contemplation of chicanery. He said, "Well, what I'd do is, I'd take the dirty money in cash to an offshore bank in the islands, a bank I controlled. Then I'd lend the money to people who were in a position to rig the market, and who needed liquidity to do it, and were willing to trade information on deals at a very early stage. Having got that information, I would use whatever honest dollars I had to make a killing."

"Very neat, V.T.," said Karp, who could barely balance his checkbook, with sincere admiration. "Would it really work?"

"I don't see why not. Our fictive man is insulated from the dirty money entirely. The offshore bank made the loan. It's not required to tell anyone where its capital came from, which is the true charm of the islands. There'd be a dummy holding the passbook for the actual account, which, of course, would never be tapped directly. And the profits on the market are honest gain, the result of sophisticated analysis of trends guided by vast experience-or so my cousin is always telling me. Our man pays taxes on it too-he's no mobster.

"So he's as safe as the Morgan Bank. And, of course, since he's not paying a premium for the money, he can buy a lot more stock than his competitors in a bidding contest. The people he was backing would be murderous traders.

"The only possible hitch is if someone traces a cash deposit back to him-unlikely-or if whoever gives him his info rats him out as an inside trader to the feds or the Stock Exchange-slightly more likely."

"Uh-huh," said Karp. "Does Fane control an offshore bank?"

"Doesn't everyone? But, if so, it's improbable that the connection is direct. Let me check it out, though." He made a note in his diary with a silver pencil. "Anything else?"

"No, thanks a lot, V.T., this is great," said Karp. He stood up and made to leave, then paused. "Oh, yeah-who was it that tried to buy Agromont?" he asked.

"The main player was a slightly greasy and very wealthy little arb named Sergo. He also bought their West Side property and the pier." He saw the change in Karp's expression and asked, "A friend of yours?"

Karp said glumly, "We've met," waved good-bye, and stalked out. The implications of what he had learned from V.T. were still whirling around his brain when he entered his office again, to find Roland Hrcany waiting with an odd smile on his face. He was sitting at Karp's conference table and he had a cassette recorder placed in front of him.

Karp gestured at the recorder and said, "Is it time for our dance lesson? What're you up to, Roland?"

"It's a little surprise," said Hrcany. "See if you can recognize the lyrics." He pressed the play button and the conversation between Amalfi and Fulton on the fire stairs at Roosevelt Hospital filled the room, their speech hollow and echoing, like the voices of ghosts on old radio shows.