Geneva Connection, The (8 page)

“Good evening, Mr. Vargas. I have you in this quiet corner,” said the hostess. Vargas always sat away from the window. He ordered cocktails and tried to make conversation, but Safuentes was hard work and offered little in return. He lightened up as the meal came and the red wine began to flow.

“Jivaro has noticed you, Arturo. I’ve kept him informed of your good work at Corolla. He has plans for you,” said Safuentes.

“I’m, of course, happy to help in any way I can. I still have much to do here, but if Jivaro would like me to take on other responsibilities, then I’m certain I wouldn’t disappoint him.”

“He wants you to join my team at head office.”

“I don’t know what to say.”

“There’s an increasing workload as our organization expands. You’ve seen the growth in deposits for yourself.”

“The growth has been impressive. We had only two hundred branches when I joined two years back. Now look at us.”

“Believe me, depositing the cash is just the start of our work. We need intelligent and loyal people like you to help us preserve the money we’ve worked so hard to make.”

“What would my new work involve?”

“You’ll be helping me transfer funds to our various investment managers around the world. But more importantly, we must monitor their investment performance, and you will be part of that process.”

“Vital work.”

“There’s nothing more important than this. It’s the final stage of converting our cash into legitimate assets. Jivaro himself takes an active interest in this area of our work. You will have many opportunities to impress him.”

“It would be an honor to work at head office.” Vargas began to absorb the consequences of his unexpected promotion. He’d be joining the inner circle. Not yet one of the fifteen lieutenants reporting directly to Jivaro, but just one step below. If his old police colleagues could see him now.

“Then it is settled. I’ll make the arrangements.”

“What will happen to my position at Corolla?”

“You’ll be a hard man to replace.”

“I have a few suggestions.”

“We can discuss that later.”

Chapter 11

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in his life, Kent did not know what to say. He felt the weight of his partners’ hopes that he’d come up with a plan. He’d always been the one to work out a clever way through difficult situations facing the firm. It was one of the things his partners valued in his leadership. No matter what the problem, Kent would always find a solution. But, this one time, he struggled to see a way out; he hadn’t been here before. He felt like a champion boxer having just received his first knockout punch and now he was on the ropes.

“Doug Wright is going to go ballistic when he hears the news,” said Kirkland, breaking the silence in the conference room. “He terminated his discussions with the other firm the moment he signed our offer letter today. He’s bound to sue.”

Kent stood up to leave. “At the moment, I don’t give a shit about that clown. We’ll deal with Henderson Wright tomorrow. First, we need to assess what this means for us and how we’re going to move on from here. Let’s all sleep on it and meet up at eight tomorrow morning. Cancel any appointments you have.”

He needed time to think this through on his own. There had to be a way forward. Maybe, there could be something rescued out of the bankruptcy process. He wanted to sleep on things before making any snap decisions. The other partners stayed seated, staring at the images on the silent TV like blinded rabbits.

“There’ll be a way through this,” Kent said as he left the boardroom.

On the drive home, he was quiet as he contemplated the reality of losing his firm. A decade’s work down the drain, and a lifetime’s reputation torn to shreds. He might just have accepted this if CBC’s investment performance had been poor, but it was one of the best in the industry. He couldn’t accept the injustice of it all. What made it worse was losing CBC’s investment firepower just when the recession was throwing off great buying opportunities. That morning, he had a large checkbook and an increasing choice of attractive investment deals in the middle of a recession—a buyer’s paradise. He’d never be able to create these ideal conditions again. Grampian had ruined a once-in-a-lifetime situation. Had he been wrong to rely so heavily on them for investment capital? Should he have spent more time on the fundraising road for the third fund and spread the commitments across a wider group of institutional investors? It was too late now, anyway. He couldn’t change that.

“How serious is this, John?” Sarah asked, breaking into his thoughts.

“It doesn’t get any worse. The recession means the chances of replacing Grampian’s commitment with other investors today are virtually zero.”

“But CBC has a great track record.”

“It doesn’t matter. Most institutional investors are already overcommitted to private equity at the moment. They’re looking to reduce those commitments, not add to them.”

“I see.”

“We’re in trouble. This couldn’t have happened at a worse time for us.”

Kent bought all the main newspapers the next day. They were full of stories covering the failure of Grampian, the once-prestigious Wall Street financial institution. The company had collapsed without any prior warning. There was no hint of any disproportionate losses accumulating in its insurance division in its last quarterly SEC filing, and the share price had been stable in recent months. Press speculation ran wild with theories, ranging from fraud through to massive mismanagement. The commentators were unanimous in praising the Fed for not bailing out another risk-taking institution. Taxpayers would not accept any more. The fact that the whole market was taken by surprise didn’t make Kent feel any better. He was still facing the almost certain failure of CBC.

The partners spent most of the morning discussing what options they had to rescue the firm. While they knew the market for fundraising was awful, Kent insisted they had to try to generate some new investor interest. He was not going to give up without a fight. He assigned the task to Johnson and Prentis as they had the most relationships in the institutional investor community. They’d know which institutions, if any, had an appetite to make new fund commitments. Although the thought turned his stomach, Kent decided they also had to investigate whether there was any merit in selling CBC to a competing private equity firm. He knew that was likely to be a waste of time; it would always be much cheaper for any competitor to hire those members of the CBC team they wanted rather than buy the whole firm. That’s what he would do if he was in their shoes, but he owed it to all the staff to see if another firm would acquire CBC, even for pennies. He asked Henning to lead the search for possible buyers. If, through some miracle, he managed to hook any interest, Kent would take over the negotiations with the prospective buyer as it would be a messy fistfight.

The only live deal in the pipeline likely to be difficult to unwind was the Henderson Wright transaction being led by Kirkland. They could not continue with the deal now they had no investment funds available. Kent asked Kirkland to meet with Wright to see if there was an elegant exit from the transaction. Maybe they could suggest another private equity firm to replace CBC. Whatever help they offered Wright, Kent expected trouble. He’d just pushed him into accepting a hard deal for his management team, after all.

Kent spent the rest of the day fielding calls from the financial press and from existing investors. They all wanted to know the same thing: Did the failure of Grampian Capital mean CBC’s future was in jeopardy? He did what he could to put out a strong, positive message, but he knew the failure of the firm was a real prospect, and the press sensed blood. CBC was losing its reputation as each hour passed. It was killing him, and there was little he could do besides stand back and watch it happen.

The following day, Kent picked up his
Financial Daily
. Right in the center of the front page of the Companies and Markets section was the headline “Grampian likely to bring down CBC.” There followed a well-researched and intelligently written article on the massive reliance on Grampian Capital by CBC for its investment funds. It went on to address the difficulty of raising new funds in this recessionary climate, even with CBC’s excellent investment track record. The article concluded, in the absence of a new cornerstone investor, CBC would fail in a matter of months.
Not far off the mark. A complete disaster.
The firm’s demise was about to be played out in public, and he’d become a laughing stock in the industry.

“Is there anything I can do to help?” asked Tara, stepping into Kent’s office. She brought in his usual coffee and then sat on the arm of his sofa. She was dressed down for the somber occasion, but Kent couldn’t help notice how her red lipstick stood out against the dark suit, making her lips fuller than usual.

“Thanks, Tara,” he said. “There really isn’t much you can do to help at the moment.”

“I don’t understand all the technical issues, but it looks pretty bad.”

“It’s bad, all right. Without Grampian, we have no money to invest. If we don’t find a replacement investor quickly, we’ll have to start winding down the firm soon.”

Kent’s phone rang. He picked it up.

“John, it’s Joanna.”

“How’s it going?” he asked. She’d been down at Henderson Wright all morning and he had been waiting for her call. “I bet Wright didn’t say, ‘thanks for letting me know, maybe next time.’”

“Not quite. Let’s just say, it’s not going well at all.”

“So we’re off his Christmas card list?” Kent didn’t care. His firm was going over the cliff. If Wright’s firm went with them, so be it.

“I’m sorry to pile on more pressure, but he said he’s coming up from London this afternoon to sort this mess out with you face to face. He was livid when I told him we were unable to complete his deal.”

“Just what I need.”

“I know. I’ve just left Henderson Wright’s offices and I’m on my way back to the office now. I thought I ought to give you as much advance notice as possible.”

“Thanks. I’ll alert Chapman to load up his machine gun on the security desk. See you here later.”

Kent was used to being in control, but for the first time in his life, he sensed events were in control of him. He couldn’t just stand by and watch this slow car crash. He needed to do something. There had to be a way out of this mess. He gazed out of his window toward Cambridge.

His phone rang again. “Mr. Kent, this is Chapman. I’m sorry to trouble you, but we have a camera crew here at the front desk. They say they’re from the BBC and are asking for an interview. I’ve refused to let them in. Is that okay?”

“Don’t worry. I’ll come down.” Kent stood up and made his way downstairs.

He showed the camera crew and the BBC’s business editor into a meeting room on the ground floor and prepared for a mauling. He gave convincing answers to most of their questions, which were mainly about CBC’s ability to survive and what would happen to CBC’s existing portfolio of companies should the firm not make it. For a man with few real answers to these questions, Kent performed well. He gave the impression there were many alternative investors lining up to take the place of Grampian Capital; he wasn’t worried by this inconvenient setback. He knew if he looked as though he’d given up, there’d be no hope of attracting new investors.

After an hour, he was saved by Tara. “Mr. Wright is in one of the top-floor meeting rooms, waiting to see you,” she said, interrupting the interview. Kent made his apologies and returned to his office.

“Is Joanna back yet?” he asked.

“Yes. Shall I ask her to join you in your office?”

“Please.”

Moments later, Kirkland walked into his office. “I have to tell you Wright is manic. It’s clear he’s a man who likes to get his own way. From what I’ve seen, all of his senior staff members are afraid to stand up to him. I’d say he’s a classic bully.”

“I’m not surprised to hear that. I already knew he wasn’t liked much within his own firm as I know a number of his partners. They’ve told me the same thing.”

“How are we going to deal with him?”

“Leave most of the talking to me,” said Kent, taking off his tie. “I’ll handle him.”