Russell Andrews - Hades

"Ready," he said.

"Okay," Roger said, and Justin could hear him trying to rein in his excitement. "I can't say for absolute certain without a lot more studying and possibly even further access to their records, but there's something very, very strange going on."

"Is there a simple version?"

"I've tried to organize this as simply as possible," Roger said, "but if it was simple, they wouldn't be able to pull this off."

"What is it they're pulling off?" Jonathan asked.

Roger spoke to Justin now. "The way a hedge fund works is exactly the way the name implies. It's one large fund and if you put your money in, you're investing in that fund as a whole entity. The fund is split up so it can invest in as many different stocks and companies and commodities as it wants to. But it's one fund. That's key."

"Okay," Justin said. "I grasp the meaning of the word 'fund.' You going to define 'hedge,' too?"

"I am, as a matter of fact. I know you've got a business background, but I do remember that that part of your brain is a little, shall we say, rusty?"

"Sure," Justin agreed. "Let's say that."

"So 'hedge' is also exactly what it means when attached to a fund. It means that at any time you can hedge your bet. You think a stock is going to tank, you can short it." Roger beamed. He loved talking about his business and nothing puffed him up quite so much as explaining to other people how that business worked. Justin decided this had to be one of the greatest days of Roger Mallone's life. He got to snoop through another company's records and he got to explain it all to Justin. "When you short something you're betting that the price is going to go down. Let's say you want to short a thousand shares of Company X, which is selling for ten dollars a share. You think it's going to be selling for half price before too long. So you make a contract that lets you buy it at a later date when it drops to five and sell it back to someone for the ten-dollar price. The beauty of it-and the danger-is that you don't put up any money. Your broker borrows a thousand shares from someone else's portfolio. That person usually doesn't even know they're being borrowed. The broker just transfers those shares into your portfolio and then automatically sells them back to someone else at ten-and you've made your profit."

"And if it goes up instead of down…"

"Same thing, only in reverse. You short at five and it goes up to twenty. You gotta buy all thousand shares at twenty-you've lost your bet. I know people who've lost tens and tens of millions of dollars sinking money into stocks they know will come down. Only they don't."

"How does this apply to Ascension?"

"Well, if I'm reading this right, and I'm pretty sure I am, they're violating all the tenets of hedge fund management."

Now Jonathan leaned forward. "How so?" he asked.

"Again, I can't say this with one hundred percent certainty because I don't have access to all their accounting records, but it looks as if they're making separate trades for certain companies that are outside the main fund."

"Trading shares to and from the main fund?" Jonathan asked.

"Exactly."

"That illegal?" Justin asked.

Roger shrugged. "It's difficult to say what's legal or not when it comes to hedge funds. It's not honest. But it's for the SEC to decide if it's legal."

"It's not something that would make Ascension investors happy, however," Jonathan said. "It means they can pick and choose who makes money from their fund."

"And here's where it gets trickier," Roger said, tapping one stack of papers. "It looks as if they made some of the trades themselves-just transferring funds back and forth between different investors, in and out from one fund to another. And it looks as if some of the trades were made using an outside broker."

"Rockworth and Williams," Justin said.

Roger nodded. "That's right."

"Is there more?" Justin asked.

"There's a lot more. One is that what they're shorting isn't consistent at all with a lot of the other trades they're making."

"What are they shorting?"

"Platinum," Roger said.

"Are you sure?!"

"You want to see my MBA?"

"No, of course not, sorry. It's just… go on."

"Well," Roger said, "you're not wrong to be so confused by that. Considering their connections, especially. And their timing is very curious considering what's going on in the platinum market. And then I have to say, their luck is extraordinarily bad."

"What about the timing?"

"Well, I don't think there are too many people shorting platinum heavily these days. Not with what's happening in China."

"What's happening in…?" Justin started to say, then stopped himself. "Cars. Cars are happening, right?"

"Very good," Roger said. "Very good."

"China's going into the car business in a big way," Justin said slowly. He could hear Daniel French saying to him, up at Rockworth and Williams: The wave of the future. Chinese cars… Chinese everything.

"And you can't go into it in a big way without platinum," Roger said. "Not if you want to crack the international market."

"Right," Justin said quietly. "Platinum for-what the hell is it-platinum for substrates. Substrates for exhaust devices. It's all about emission controls."

"You have definitely been paying attention," Roger said. "I'm extremely impressed."

"What was the first thing you were questioning, the connections? No, never mind," Justin said. "I understand that, too. They're tied to China because of H. R. Harmon."

"I know that Rockworth does an incredible amount of business with the Chinese. They're the envy of everyone on the Street because of their connections. They advise them, they trade for them, they've got access to business opportunities no one else can ever get close to…"

"And I'll bet they've put Chinese money into the Ascension hedge fund. Daddy taking care of his kid."

"I'd guess that they did. There are a couple of companies on your list that can probably be linked to China. But that's what doesn't make sense."

"What?"

"Again, I can't say for sure, but I think several of these companies are shells. I haven't heard of them and I haven't been able to trace them, which makes me think they're set up as part of a scam. Why would Ascension or Rockworth want to scam the Chinese government when it's such a big source of income for them? Or, on the other hand-" He stopped.

"On the other hand what?" Justin asked.

"If they're not being scammed, why would the Chinese government want to be part of a scam?"

None of them had an answer. So finally, Justin said, "All right. That's the timing and the connections. What about the bad luck?"

"Well, the platinum market shot sky-high recently. Because of the shortage."

"A shortage of platinum? Why would that be?"

"Because of the cargo ship."

"Roger, you've got to be a little more forthcoming. Miraculously enough, I might know about Chinese cars, but I don't know shit about platinum cargo ships."

"One of them sank. About three weeks ago."

"Where?"

"Coming up from South Africa. Off the coast of Sicily, I think."

"How much of a shortage was there?"

Roger blew out a breath. Meaning: a big shortage. "I don't remember exactly how much," he said, "but enough to alter the market. Maybe fifty, sixty million dollars' worth disappeared. Maybe more."

"And they can't recover it?"

"Yeah, they'll get it back eventually. But it'll take time. And in the meantime, there's a serious shortage."

"And when that happens?"

"Come on, Jay, it's like everything else. Supply and demand. There's a short supply, the price goes up. In this case, it went up a lot."

"Has it come back down?"

"Not yet."

"This is unbelievable," Justin said.

"It's totally believable," Roger told him. "It doesn't make any sense, but it's very believable. Especially when you look at the travel documents you gave me."