The Chairman - A Novel Part 35

Gillette gritted his teeth. The first rule of negotiation was never never to open the bidding as a seller. Cohen was terrible at this. "Why are you willing to pay us what U.S. Petroleum offered? Is it because of the option properties?" to open the bidding as a seller. Cohen was terrible at this. "Why are you willing to pay us what U.S. Petroleum offered? Is it because of the option properties?"

Hansen shook his head. "No. Mr. Cohen told us the seismic tests you did showed there wasn't much to those properties. Some reserves, but no mother lode."

"Why a billion then?" No sense beating around the bush when both sides had perfect information. Thanks to Cohen singing like a canary, everybody knew everything. "The level of reserves at Laurel may not justify that kind of price."

Hansen smiled widely at Cohen and Lefors. "d.a.m.n. For a savvy negotiator that's one h.e.l.l of a strategy your partner has. Negotiating against himself when I-"

"All the same," Gillette cut in. "Why?"

"Okay, okay," Hansen said, his head bobbing. Appreciating where Gillette was coming from. "Let me explain something. We're backed by a group who's trying to buy up reserves very quickly, specifically those in Canada."

"I know I'm repeating myself, Don, but why why?"

Hansen's eyes flashed around the room and his head settled down into his shoulders, as if he wasn't sure he wanted to talk. "The confidentiality agreement we signed goes both ways, right?"

Before agreeing to meet with the Coyote executives, Gillette had instructed Lefors to make them sign a nondisclosure agreement that made Coyote liable for monetary damages if they disclosed any confidential information about Laurel Energy to the outside world.

"Yes," Gillette agreed. "Under the terms of the agreement Kyle had you sign, we have to stay quiet about anything you tell us concerning Coyote Oil."

"All right," Hansen said, his voice dropping. "Based on good inside information, we think there are still some huge undiscovered fields up in Canada. So, we need a base of operations there. We need critical ma.s.s."

The explanation seemed thin to Gillette. "Our information is that the experts think Canada is played."

Hansen began rocking slowly back and forth in his chair. "Mr. Gillette, I've been in this business forty years. Started out at seventeen on a rig in the Gulf of Mexico as a grease monkey. Now I'm a CEO. Been just about everything in this industry you can be and been almost every place in the world where there's reserves. You know what I've learned?"

Gillette knew what was coming. Guys like Hansen in every industry said it: When everybody else is getting out, you should be getting in. The contrarian play. Gillette could have given the speech word for word himself, he'd heard it so many times. But, in the unlikely event Hanson was serious about doing a deal, he wasn't going to steal the man's thunder in front of two subordinates and p.i.s.s him off. "What's that, Don?"

"When everybody goes left, you go right, and when everybody goes right, you go left. If you do the opposite of what others are doing, as long as you have good information and conviction, then then you make you make big big money." He stopped rocking. "Unfortunately, your option properties are pretty dry. But, like I said, we think there are still some huge undiscovered fields in Canada. In the same general area as your properties. My experience is you don't find those gems unless you got feet on the ground so you can hear things you wouldn't from a thousand miles away. Laurel's an excellent company. We think a lot of the senior executives and believe they can help us make progress quickly. A couple of our guys know a couple of your guys from way back, so we're willing to pay a little more to get access and experience." money." He stopped rocking. "Unfortunately, your option properties are pretty dry. But, like I said, we think there are still some huge undiscovered fields in Canada. In the same general area as your properties. My experience is you don't find those gems unless you got feet on the ground so you can hear things you wouldn't from a thousand miles away. Laurel's an excellent company. We think a lot of the senior executives and believe they can help us make progress quickly. A couple of our guys know a couple of your guys from way back, so we're willing to pay a little more to get access and experience."

A decent speech, Gillette thought to himself. Probably practiced a dozen times on the flight from Casper to New York to make it sound natural, but there was still something forced about it. "Who's your backer, Don?"

"A European group."

"You've got to be more specific. If we're going to start negotiating, I have to understand that you have money, that you can come up with a billion dollars and convince Citibank to stay with Laurel after you take control. I'm sure you understand."

"Of course, of course," Hansen replied quickly. "How about if I get a name to Mr. Cohen and you two call them together. Or go visit with them if you feel like it. They're based in Switzerland."

Criminal liability. That was bulls.h.i.t and Mason knew it. "d.a.m.n it!" Strazzi cursed loudly. Stockman was right. Without Mason's files, Donovan's widow might not agree to sell her stake in Everest. He'd told her he had proof. Not being able to produce the files might blow the whole thing. That was bulls.h.i.t and Mason knew it. "d.a.m.n it!" Strazzi cursed loudly. Stockman was right. Without Mason's files, Donovan's widow might not agree to sell her stake in Everest. He'd told her he had proof. Not being able to produce the files might blow the whole thing.

Strazzi picked up the TV remote and turned the set on. He was scheduled to meet with her later, after the announcement had been made. He checked his watch: 12:55. He'd only have to wait another five minutes.

20.

The Attack. Most times you can't predict exactly where or when it will come. All you can do is prepare and try to antic.i.p.ate what the enemy will do, then counter with everything you have when the guns go off. Most times you can't predict exactly where or when it will come. All you can do is prepare and try to antic.i.p.ate what the enemy will do, then counter with everything you have when the guns go off.

"THANKS FOR YOUR TIME TODAY." Hansen pumped Gillette's hand energetically. "I really hope we can get a deal done. This thing makes a lot of sense for everybody."

During the rest of the meeting, Gillette had quizzed Hansen hard about his experience in the energy industry, trying to make certain he was who he said he was. Toward the end of the meeting, Stiles had come into the conference room and placed a full background report on Hansen down in front of Gillette, which Gillette had read right in front of Hansen as Hansen described how he'd made a lot of other people a lot of money for a lot of years. How it was his turn to get rich. Admitting his Swiss backers had cut him a very good deal, but only because he deserved it.

"We'll get back to you next week," said Gillette. He and Hansen stood facing each other at the entrance to the Everest lobby. The other two Coyote executives were already headed toward the elevators. "Cohen and Lefors will follow up with your people by phone tomorrow morning. I doubt we'll actually go to Switzerland, but I appreciate your making that option available to us."

"Sure, sure. Anything to help move the deal forward quickly." Hansen paused and looked around the ornate setting.

Gillette noticed something wistful in Hansen's expression, which made him certain the Coyote Oil headquarters were barren compared to this.

"I look forward to hearing from you," Hansen finally said.

When Gillette turned back toward his office, he spotted Cohen walking quickly toward him. Cohen's face was pale. "What's the matter, Ben?"

"Come with me," Cohen urged, his voice low. "Right now."

When they were inside Gillette's office with the door closed, Cohen turned on the television and flipped the channel to CNN. "I just got word," Cohen said breathlessly. "From one of our contacts down in D.C."

"Word about what what?"

Cohen pointed at the screen as the picture switched from a pretty blond anchorwoman to a wooden lectern. "This is it."

An alarm went off inside Gillette's head as he gazed at the screen. He moved quickly to his desk and clicked into Bloomberg, glancing back and forth between the television screen and the computer monitor. He'd checked the Dominion S&L stock price several hours ago, a few minutes after the 9:30 open. It had drifted down twenty-five cents in the first few minutes of trading, but there had been no major move at that point.

Gillette clicked the mouse one last time and the price flashed onto the screen. Off fifteen dollars fifteen dollars to ten dollars a share. Dominion's stock had dropped 60 percent in the last three hours. Three billion dollars of shareholder value gone in less time than it took to play a pro football game. Three hundred million of that was Everest's. Fifty million the widow's. to ten dollars a share. Dominion's stock had dropped 60 percent in the last three hours. Three billion dollars of shareholder value gone in less time than it took to play a pro football game. Three hundred million of that was Everest's. Fifty million the widow's.

Gillette glanced back to the television screen, his head pounding. Cameras were clicking madly.

Congressman Peter Allen moved behind the lectern and acknowledged the press corps a.s.sembled in front of him, smiling confidently at no one in particular. He was a tall man with gray hair and stark features who had a reputation in Washington for straight talk.

An aide nodded.

Allen took the cue. b.u.t.toning his chalk-stripe suit jacket and putting on a dour expression, then turning his head slightly to one side for effect. "Thank you for coming today," he began in a low voice. "As most of you know, I'm Peter Allen, congressman from Idaho and vice chairman of the House Select Committee on Corporate Abuse. I'm here today to talk about another example of insatiable greed in the corporate boardroom, of insiders preying on unsuspecting small public investors, on individuals, to make themselves rich. In the terrible tradition of Enron, Worldcom, and Tyco." Allen paused to check his notes. "This time the guilty party is a well-known investment firm in New York." He looked up. "Everest Capital."

Allen took a moment to stare out at America without speaking, allowing the cameras to doc.u.ment his stern expression.

"The partners at Everest Capital recently sold one of their companies to the public," Allen continued. "A savings and loan business called Dominion. Many of us here in the Washington, D.C., area are familiar with Dominion," he added. "It has branches all around the District and across the Potomac River in Virginia.

"With a fast-growing loan portfolio, Dominion had been a highflier for Everest, so Everest decided to do an IPO. They decided to sell most of their ownership in Dominion to people like you and me. To dump it on us while it looked like Dominion was doing well. Trying to make us believe Dominion would do even better in the future." Allen paused. "Unfortunately, Dominion wasn't doing as well as the partners at Everest Capital led us to believe. The loan portfolio, mostly residential mortgages, was actually in terrible shape. Dominion bought a significant number of large, prepackaged portfolios from mortgage bankers, and, apparently, didn't do its diligence. Didn't review those portfolios as well as it should have before buying them." He took a deep breath to let everyone know this was a crucial point in the press conference. "I have information indicating that billions of dollars of those loans will never be repaid, that many of the loans are already nonperforming. In other words, the people who owe money on the loans haven't sent in their monthly mortgage checks in a long, long time.

"The Dominion executives, their outside auditors, and probably the senior partners at Everest have committed fraud. They should have told us that the loans were bad, that the people who owed Dominion money weren't paying. But they didn't. In fact, they provided false doc.u.ments that tried to show that everything was fine, that people were were repaying the loans." Allen held up a manila folder for effect. "That's how Everest did the IPO. With smoke and mirrors. Sound familiar?" he asked rhetorically. repaying the loans." Allen held up a manila folder for effect. "That's how Everest did the IPO. With smoke and mirrors. Sound familiar?" he asked rhetorically.

"The bitterest pill to swallow here is that Everest made billions of dollars," Allen said tersely. "They still own a small piece of Dominion, which I suspect will lose a significant amount of its value today because of my announcement. But that loss will be tiny compared to the huge amount of money Everest got in the IPO: about $2 billion.

"So who really loses?" Allen asked the television cameras. "Not the partners at Everest Capital. Not the investment bankers who took Dominion public. Not the lawyers who made millions in fees doc.u.menting the IPO. None of them lose a dime. The people who lose are the ones who bought the shares from Everest Capital. The little guys. The IPO price was forty dollars a share, but, as we speak, Dominion shares are trading at," Allen hesitated, glancing at his aide off camera for the sign, "three dollars a share. That's almost $4 billion of shareholder value erased. a share. That's almost $4 billion of shareholder value erased.

"This afternoon, I'll officially inform the Securities and Exchange Commission that I want them to begin a full investigation of the Dominion Savings & Loan IPO. Banking regulators will also be moving on Dominion headquarters to determine the extent of the fraud. In addition, I'll be contacting the chairman of Everest Capital, a man named Christian Gillette, to demand that he and his partners refund all the money they made in the IPO. I'll also be seeking a very large fine. It's clear to me that Everest insiders knew what was going on behind the scenes at Dominion. An Everest partner was chairman of the board before Dominion went public, and Everest owned a hundred percent of the firm before the IPO. Make no mistake: Everest knew what was going on.

"Finally, I'll be demanding that regulators initiate a full-scale investigation into Everest Capital on behalf of my committee. Everest owns a hundred percent of nearly thirty companies around this country. Big ones, too. We need to know what's going on at Everest so we can avoid situations like Dominion in the future, so we don't have innocent people being bilked out of billions."

Allen looked around, satisfied with his delivery. "Any questions?"

Strazzi slammed his hand down on the desk, then picked up the remote and muted the television as Peter Allen answered the first question from the press. Allen had mentioned Everest Capital several times. Mentioned Christian Gillette by name. Even described how he was going to have regulators open an investigation into Everest. Just as Stockman had promised. But Allen hadn't mentioned the specific portfolio companies Strazzi had told Stockman to give to Allen. Clearly because there hadn't been any doc.u.mentation. Because Troy Mason hadn't forked over the files.

"d.a.m.n it!" Stockman might be right, Strazzi realized. Without those specific names mentioned during the press conference, the widow might not sell him her stake in Everest, might not be convinced that she should let go of that stake for the 50 percent haircut he was going to offer her.

"Paul." Vicky's voice blared through the intercom.

"What?"

"Senator Stockman is on 122."

Strazzi picked up the receiver and punched the extension. "What the h.e.l.l happened, George?" he growled.

"Without the files, Peter wouldn't go along," Stockman explained, his voice barely audible.

"Why are you talking so low?"

"I'm about to make my own announcement. There's a lot of people around. Aides, reporters."

"I'm p.i.s.sed, George," Strazzi hissed. "You told me this yokel from Idaho would play ball."

"And you told me you'd have the proof."

"If the widow backs off because of this, you can kiss my support good-bye," Strazzi warned.

"What? That's ridiculous. I've done everything I told you I'd do."

"Get Allen to call another press conference later this afternoon," Strazzi snapped. "Before four thirty. I'm meeting with the widow at five to close the deal. Just get Allen to say he'll be focusing on those companies when he investigates Everest. That's all you have to do. Just get him to mention the names. Nothing specific about why he'll be targeting those companies. I'll do the rest."

"I don't know if Allen will play ball."

"Make him!" Strazzi yelled, slamming the phone down. him!" Strazzi yelled, slamming the phone down.

"Jesus Christ," Faraday whispered as Allen's press conference ended. He had joined Gillette and Cohen in Gillette's office. "Is it possible what Allen said about Dominion is true?"

"Anything's possible, Nigel," Gillette answered calmly.

"Could they really make us give back the f.u.c.king money? All two billion?"

"Not before the investigation is finished. That'll take a while."

"But it could happen?"

"Sure. And we might be liable for that big fine Allen mentioned, too."

"Would we have to give what we we got back, too?" Faraday asked anxiously. "Personally." got back, too?" Faraday asked anxiously. "Personally."

"Of course."

"f.u.c.k me. All two million?"

"Yes."

"I paid taxes on that. I only netted a little over one."

"The SEC won't care. They'll want two. They'll tell you you to deal with the IRS." to deal with the IRS."

"s.h.i.t!" Faraday eyed Gillette. "How can you be so f.u.c.king calm?"

"Having a heart attack won't do any good," Gillette snapped, checking the Dominion ticker. The price had sunk to just more than a dollar.

Faraday snorted. "Two million might not be much to you, Christian. Thanks to Mommy and Daddy." Like many people, Faraday thought Gillette had a large personal net worth because of his family. "But for Cohen and me, it's huge. Our piece of Everest might be worth sixty million, but it isn't liquid. It's tied up in our portfolio companies. I can't use it to pay my debts."

"I understand."

"Well, what the f.u.c.k are you going to do about it, Mr. Chairman?"

Gillette glanced over at Cohen. He was typing out an e-mail on his Blackberry. His face was pale. "Ben."

"Yes, Christian?"

"I want you to call Walter Price immediately." Price was CEO of Dominion. "Tell him I'll be in his Washington office at ten o'clock tomorrow morning. Tell him I'll want a full report."

"Tomorrow's Sat.u.r.day."

Gillette hesitated. He'd forgotten. He rarely paid attention to what day of the week it was anymore. "I don't care. Call him and tell him I'll be there at ten. Tell him to be ready."

"Okay."

"And tell Marcie Reed I want to see her at three o'clock here in my office."

Cohen stood up and nodded. "Starting your own investigation?"

"Yes," Gillette answered sharply, reading the words rolling across the bottom of the television screen. Smiling slightly to himself, despite everything that had just happened.

Stockman moved behind the lectern. It had been set up in a room in the bowels of the Senate side of the Capitol, an American flag on either side. His staff was lined up behind him.

"Thank you for coming today," he began. He was extremely satisfied with the turnout. Every major newspaper and television network was here. They'd all been briefed about the press conference this morning, and it made him proud to see that everyone had shown up. Obviously, they believed he was a serious contender. He cleared his throat. "I'll make this short and sweet. I'm here this afternoon to announce that I'm running for the Oval Office. I'm offering my leadership to the entire country now, not just to the great state of New York. And, as I've done in New York, I'll stand up for regular people. The man on the a.s.sembly line. Single moms trying to make it." He paused, making eye contact with several reporters. "Make no mistake, I will be will be the next president of the United States." He stared straight into the television camera, a steely expression on his face. "Questions?" the next president of the United States." He stared straight into the television camera, a steely expression on his face. "Questions?"

Several reporters thrust their arms in the air and shouted.

Stockman pointed at a young woman from CBS. "Yes?"

"Can you give us a specific example of how you'll stand up for regular people?"

Stockman thought for a second, then nodded. "Certainly. A little while ago, my colleague from the House, Peter Allen, laid out another example of corporate boardroom abuse. Everest Capital, an investment firm, defrauded thousands of public investors when it took one of its portfolio companies public. It's a savings and loan called Dominion, and, in a very short time, as a result of the fraud, the stock has cratered from a price in the forties to a dollar a share. Lots of regular people have lost money and probably will lose their jobs. It's a d.a.m.n mess, but it didn't have to happen. I'll make investment companies like Everest Capital accountable. I'll make certain men like Christian Gillette aren't around to crush regular people again."