Free to Trade (18 page)

Claire laughed. 'Oh Paul! How exciting! A secret! Don't worry, I won't tell a soul.'

'It's about Cash.'

All trace of laughter disappeared from her face. 'Oh, Cash. That bastard!'

'Why do you call him that? What has he done?' I asked.

'Perhaps I shall tell you a secret first.' She looked down at the table, picked up a knife and began to fiddle with it. 'As you know, I worked for Bloomfield Weiss for two years before I moved to BLG,' she began. 'Well, after a year or so I built up a good group of clients. I was doing lots of business. I was happy, the clients were happy, Bloomfield Weiss was happy. Then Cash Callaghan arrived from New York. He had a big reputation and a big salary to live up to, and he didn't have any existing clients in Europe. So he stole them.'

'How did he manage that?' I asked.

'Subtly at first. He would work out which of the big accounts salesmen did not have enough time to cover properly. He would "help them out". Eventually, the client would end up wanting to talk to Cash rather than his original salesman. I suppose in a way that was not too bad, the client got better coverage and the firm did more business. But then Cash began to use more drastic methods.

'In my case he had his eye on my two or three largest customers. If ever I was out of the office, he would call them. But they were loyal, they wanted to stay with me. So then he began a rumour about myself and a client. I am afraid I cannot tell you his name.'

'What was the rumour?'

'He said that I was sleeping with this client, and that the client was giving me all his business because of it,' she said, her voice burning with anger. 'It was ridiculous. Completely untrue. The reason my client did most of his business with me was that I gave him good ideas and he made money out of them. I would never have an affair with a client. Never. It would be completely unprofessional.'

She looked up at me, her eyes alight with fury. Then she laughed. 'Oh Paul, don't look so disappointed.'

I could feel my face redden with embarrassment. Her declaration of professional conduct with clients had shattered some half-hope at the back of my mind. I had no idea that my disappointment had shown.

She went back to her story. 'I didn't know anything about this. Nor did my client. But everyone else was talking about it, or so I am told. It became one of those stories that circles around and around, so that after a month or two you have heard it from several different sources and it has to be true. I am sure my boss must have heard about it, but probably only whispers. Of course I could not deny it. I didn't know there was anything to deny.

'One day Cash went to my boss. He said that my "affair" was making Bloomfield Weiss the laughing stock of the City. He had some numbers, which he claimed came from a source inside my client's company, that showed that my client was doing 95 per cent of his business through me. Cash must have fabricated those numbers. I know my client did a lot of business with other brokers.

'So I was called into my boss's office and told I could either resign, or my boss would have to suspend me pending the launch of a formal investigation. He said this would probably damage my client as much as or more than me. I was shocked. Then I am afraid I lost my temper. I shouted and screamed at him, called him every foul name I could think of, and told him what he could do with my job. BLG had being trying to hire me for months, so I started a new job with them within a week.'

'But wouldn't it have been better to be a bit calmer? You could have cleared your name. Cash wouldn't have been able to prove anything.'

'The damage was already done. I wasn't prepared to have my integrity questioned in public, and my personal life examined under a microscope, just for the privilege of continuing to work with scum like that.'

'I see,' I said, feeling anger rise myself. 'You're right. What a bastard. This business is rotten. So many people running around making so much money. They think they are geniuses, but half the time they might just as well have stolen it. If they all just got on with doing their job in a straightforward, principled way, there would still be plenty for all of us.' I could not keep the anger from my voice, and I could feel the words coming faster and louder.

Claire laughed. 'Oh Paul! You are so sweet. So concerned. So idealistic. But the world doesn't work the way you want it to. You have to be tough to do well. The biggest bastards earn the biggest bucks. I'm OK. I am doing the same job for better people at a higher salary.' Her big, liquid eyes smiled at me beneath long lashes. 'But you were going to tell me your secret.'

I calmed myself down. 'I'm afraid I can't tell you the exact details yet, partly because I don't know them myself. It is important, though, that nobody finds out what I have been asking about.' I lowered my voice. 'Last year De Jong bought a private placement from Bloomfield Weiss, issued by Tremont Capital. It was Cash who sold it to us. Do you know anything about it?'

'Tremont. Tremont Capital,' Claire murmured, her forehead knitted in concentration. 'The name sounds familiar but I don't... One moment! I know! Wasn't the deal guaranteed by the Industrial Bank of Japan?'

'Not quite, it was Honshu Bank. But you are close enough,' I replied.

'Yes, I do remember it vaguely. It was only a small deal, wasn't it?'

'Forty million dollars,' I nodded. 'Did you sell any?'

'No. It was one of Cash's "special deals". I think he cooked it up himself. None of the rest of us got a look in at selling it. All the commission went to him.'

Special deals. Special customers. Cash did a lot of special business. 'Do you know anything at all about the company?'

'Tremont Capital? Nothing at all. I have never heard of it before or since.'

'Would anyone else?'

'No. When Cash put together deals, he kept them to himself until they were finished and he could proclaim them from the mountain-tops.'

'He must have had some help from someone in the firm, to do the documentation, or structure the deal,' I suggested. 'Was there anyone in Corporate Finance he used to deal with?'

'Not in London, I don't think. But he did talk to someone in New York on some of his special deals. I met him once when he was over in London. A short fat guy. Waigel. Dick Waigel, I think his name was.'

'Can you remember who bought the rest of the issue?'

'Yes, I think I can. I remember hearing Cash selling it to De Jong. It didn't take him very long. And then he just made one other call and sold the deal straight away. I remember thinking how amazing it was to be able to sell a whole deal in just two phone calls. I detest Cash. But I have to admit he is a good salesman.'

'Who was the other buyer?'

'I knew you would ask me that,' she said. 'Let me think... I know! It was Harzweiger Bank.'

'Harzweiger Bank? That's a small Swiss bank, isn't it?'

'Not necessarily small. Certainly low profile. But they manage a great deal of money very confidentially. Cash deals with them a lot.'

'Who did he talk to there?' I asked.

'A man named Hans Dietweiler. Not a very nice man. I spoke to him a couple of times.'

I had found out all I was going to find out from Claire. At least about Tremont Capital.

'One more question,' I said.

'Yes?'

'Who is Gaston?'

'Gaston? I don't know any Gaston.' Then she chuckled. 'Oh, you mean Gaston my boyfriend in Paris? I am afraid that was just a story for Rob.'

'That was cruel. He was very upset.'

'He was very persistent. I had to put him out of his misery somehow. This seemed like the best way. And he is strange that one.'

'Strange?'

'Yes. There is something about him. He is so intense, he seems unstable. You don't know what he will do next.'

'Oh, that's just Rob,' I said. 'He's harmless.'

'I don't know about that,' said Claire. 'I am glad I got rid of him.' She shuddered. 'Besides, I told you. I never sleep with my clients.'

As she said this she sipped her wine and looked over the rim of the glass at me. She seemed to smoulder, her lips very red, her eyes very dark. My throat was dry.

'Never?' I said.

She held my eyes for several seconds, sending messages whose precise meaning I could not decode. 'Almost never,' she said.

After that lunch it was difficult to focus on work. With an effort I managed to put to one side thoughts of what sex with Claire would be like, although they kept on trying to re-emerge. I had to make a phone call to Herr Dietweiler.

I looked up Harzweiger Bank in the
Association of International Bond Dealers Handbook,
and found the number. It had a Zurich code.

A woman answered.

'Can I speak to Herr Dietweiler?' I asked.

'I am sorry, he is not in now. Can I help you?' The reply was in excellent English.

'Yes, perhaps you can,' I said. 'My name is Paul Murray, and I work for De Jong & Co. in London. We hold a private placement which I believe you also bought. Tremont Capital eights of 2001. We would like to buy some more, and wondered whether you were interested in selling.'

'Oh, Tremont Capital! Finally we find someone who will trade in it. I don't know why we bought it. The Honshu Bank guarantee is very good, and the yield was nice, but nobody trades it. We are supposed to have a liquid portfolio here, not this garbage. What is your bid?'

This was tricky. The last thing I wanted to do was end up buying more of the bloody bond. This woman sounded as though she would sell it at any price!

'It's not for me, it's for one of our clients,' I lied. 'He was interested in buying our bonds, but they are not for sale. Before I can go to him to see at what price he would buy them, I need to be sure that you are a seller.'

'I see. Well, we had better wait for Herr Dietweiler. He bought the bonds originally. He should be back in an hour or so. Why don't you call back then?'

'That sounds like a good idea. Tell him to expect my call.'

Good. It was Dietweiler I wanted to speak to.

Exactly an hour later I rang the Zurich number again.

A gruff voice answered the phone, 'Dietweiler.'

'Good-afternoon, Herr Dietweiler. It's Paul Murray from De Jong & Co. here. I rang your colleague earlier about a bid for the Tremont Capital eights of 2001 that you own. I wonder if you would be interested in selling?'

'I am afraid you are mistaken, Mr Murray.' The heavy Swiss accent sounded less than friendly. 'I do not know where you obtained your information. We do not own that bond, nor have we ever done so.'

'But I spoke to your colleague about that very bond,' I said. 'She said you had it in your portfolio.'

'She must have been mistaken. She probably confused it with another Tremont Capital bond. In any event, we view the contents of our portfolio as highly confidential information which we never disclose. I have just reminded my colleague of that. Now goodbye, Mr Murray.'

As I put down the phone I felt sorry for the friendly Swiss girl. I was sure she had not enjoyed being reminded of her duties by Herr Dietweiler. A nasty piece of work. And not a good liar. There were no other Tremont Capital bonds. Harzweiger Bank owned the same bonds we did.

But why didn't they admit it?

This was serious. There was a good chance that De Jong had lost $20 million. Unless we found the money, it could cripple the firm. I supposed that we would not be legally bound to recompense our clients whose money we had lost, but I was sure they would not remain our clients for much longer. I had to tell Hamilton what I had discovered. He wasn't at his desk. Karen said he was out all afternoon and wouldn't be in until late the next morning.

He came into work at lunchtime the next day. I watched him go over to his desk, take off his jacket and turn on his screens. He sat down in front of them and stared.

I strode over to his desk. 'Excuse me, Hamilton,' I said, 'have you got a minute?'

'It's now one twenty-seven. The unemployment figures come out at one thirty. I have three minutes. Will that be enough?' he asked.

I hesitated. What I had to tell him was important. But I didn't want to rush it. If Hamilton said he only had three minutes, he only had three minutes. 'No, I'm afraid it will take a little longer,' I said.

'In that case, sit down. You might learn something.'

Stifling my impatience, I did as he said.

'Now tell me what's been happening to the treasury market.' Hamilton meant the market for US government bonds, the biggest, most liquid bond market in the world, and the one that most investors use to express a view on long-term interest rates.

'It's been going down for the last month,' I said, 'people are looking for yields to go higher.' As treasury prices fall, their yields go up, reflecting an expectation of higher interest rates in the future.

'Why has it been going down?'

'Everyone is frightened that the US may have reached full employment. Last month's unemployment figures were 5.2 per cent. Most economists think that it will be impossible for unemployment to get much below 5 per cent and that once it gets down to that level inflationary pressures will build up in the system. It will get more difficult for businesses to find workers, and so they will have to pay higher wages. Higher wages mean higher inflation, which means higher interest rates. So treasury prices go down.'

'So what's going to happen after the figure?' Hamilton asked.

'Well, the market expects that the unemployment number will be down to 5 per cent. If that happens, lower unemployment will mean higher inflation. The market will sell off yet again.'

It always seemed to me ironic that what was good for jobs was bad for the bond market. I could remember the day I had been on the trading floor of one of the big brokers. On the announcement that a few thousand more people had lost their jobs than expected, a huge cheer had risen round the room, and the treasury market had roared ahead. Talk about an ivory tower!

'You are right that nearly everyone thinks that the number will be 5 per cent and that the market should sell off. So what should I do about it?' Hamilton asked.