The Insider (30 page)

APRIL 1999

“What the hell do you think you’re doing?”

Bo looked up from behind an array of computer monitors stacked three wide and two high on his immense wooden desk at Warfield Capital. His brother Teddy, oldest of the five Hancock siblings, stood in the office doorway. Tall, blond, and still boyishly handsome despite his forty-seven years, Teddy had a strong physical resemblance to Paul. Teddy’s facial features were rounder and less defined than Paul’s, and he carried a slight paunch and a double chin, but there was no mistaking the fact that he and Paul were brothers. “What are you talking about?” Bo asked, irritated at the intrusion.

Teddy stepped into the office and slammed the door, hard enough that a picture atop the credenza behind Bo’s desk tumbled to the floor. “The damn gold thing,” he snarled. “That’s what I’m talking about.”

“What gold thing?”

Teddy jammed his hands in his pockets and stalked past Bo’s desk to a window overlooking Park Avenue forty floors below. “You know exactly what gold thing,” he said, furious.

Bo leaned down over the arm of his chair and picked up the fallen picture. It was a panoramic shot of the beach in front of the playhouse, taken from the top of a hill across the lake. “I’m involved with billions of dollars’ worth of transactions a day here, Teddy,” he said. “Work with me. I know you only like to deal with the wide-angle view from thirty thousand feet, but for my sake dig into the details for a second.”

“The guys on the commodities trading floor tell me you’re taking a mammoth risk with a ton of our capital in the gold markets.”

As if on cue, an intercom on the front right corner of Bo’s desk buzzed.

“Yeah?”

“It’s Fritz.”

“I know who it is,” Bo said calmly. The console lights on the intercom were marked by name. “What do you want?”

Fritz Peterson was head of commodity trading at Warfield Capital, the primary Hancock family investment vehicle. Fritz was responsible for buying and selling huge amounts of everything from gold and platinum to oil and cattle. Warfield Capital also operated several massive stock portfolios, an equity arbitrage department, a huge foreign exchange desk, a government and a corporate bond desk, and a private equity operation through which the firm purchased large stakes in non-public corporations involved in everything from furniture manufacturing to the latest Internet technology.

All of these groups, including the commodity trading group run by Fritz, reported directly to Bo, the firm’s chief operating officer. Teddy, Warfield’s chief executive officer, was a figurehead, rarely at the firm more than a few hours a week. Warfield was Bo’s life, and despite the massive size and breadth of the firm’s investment portfolio, he knew what was in it like he knew what was in his wallet.

“I got a report from a reliable friend that several French banks are going to be aggressively selling gold at the European open in a few hours,” Fritz shouted through the box, the roar of the trading floor audible in the background. “The latest consumer price index report is out tomorrow morning here in the States. The frogs must have gotten a peek at that report ahead of schedule, and they’ve found out that the CPI is going to be down, so they’re selling ahead of its release. We could get stung big on this thing, Bo.”

Investors bought gold largely as a hedge against inflation, so if the CPI—a widely used gauge of inflation at the retail level—was down, the price of gold would likely fall as investors perceived the threat of inflation to be low. Warfield had a huge gold investment, so even a tiny per-ounce drop would cost the firm millions.

“How reliable is your friend?” Bo asked calmly, checking his watch. It was six-thirty in the evening.

“Very reliable,” Fritz answered. “He’s inside the foreign exchange group at one of the Paris banks. Do you want me to trim our position?”

“No.”

“In the next few hours I can dump a good chunk of it without anyone in the market noticing.”

“No,” Bo replied again, cutting off the connection abruptly.

Teddy moved from the window to the front of Bo’s desk. “We pay Fritz a great deal of money to manage our commodities desk,” he said, his fair skin becoming flushed.

“That we do,” Bo agreed, grinning slightly. He knew Teddy hated that grin.

“Fritz is in constant contact with market insiders, and he knows what’s going on.” Teddy was grinding his teeth, as he always did when he was angry. “Why are you disregarding his recommendation?”

Bo shrugged. “Just a feeling.”

“Sell!” Teddy demanded.

“Pound sand, brother.”

“I mean it!”

“No.”

Teddy slammed the desk with his fist. “Wipe that Goddamned smirk off your face, Bo, before I do it for you.”

Bo rose to his feet.

He was five inches shorter than Teddy, but Teddy still took an instinctive and unsteady step back.

“I’d like you to try,” Bo said quietly. “I really would.”

“Exactly how big a gold position do we have?” Teddy asked, ignoring the invitation. Once provoked, Bo was like a wolverine. He didn’t stop until the other man was down and defenseless. Bo had been a star hockey player at Yale, and from the stands Teddy had watched him single-handedly and simultaneously take out three opposing players in an all-out brawl one night. “How much do we have?” Teddy repeated. But his voice was subdued as he recalled how Bo had been in uniform the next night for another game despite the loss of blood and two bruised ribs. “Or don’t you know?”

Bo stared at the perfect knot in Teddy’s Ferragamo tie, then at his perfect hair, not one strand of which, it seemed, was ever out of place, even when Teddy was zipping around Connecticut in his Porsche with the top down. Chief executive officer of Warfield Capital, Bo thought to himself. A bigger joke he’d like to hear. Teddy wouldn’t know an interest rate collar from a dog collar, yet Jimmy Lee still gave the oldest brother ultimate authority over Warfield Capital.

Their father had formed Warfield twenty years before to hold the lion’s share of the Hancock family fortune. Since then the firm had grown from a billion dollars in assets to a hundred-billion-dollar fund that used the Hancocks’ eleven-billion-dollar net worth—and four billion more from other wealthy families with close ties to the Hancocks—as its deep capital. On top of that fifteen billion dollars of combined family net worth, Warfield Capital borrowed eighty-five billion from insurance companies, pension funds, and other long-term lenders to leverage the deep capital and generate tremendous returns for the Hancocks and their associates.

It was a risky structure. If the aggregate value of the investment portfolio dropped, the families could quickly suffer substantial losses because their money would be used to cover margin calls. However, in the last ten years—since Bo had joined the firm after spending several years at Goldman Sachs—Warfield had enjoyed outstanding results. The financial strategies Bo had employed had worked to perfection and the Hancocks’ net worth had grown exponentially.

As CEO, Teddy received most of the credit in
The Wall Street Journal
and
The New York Times
for Warfield’s success, but Bo was the mastermind, the wizard behind the curtain. Finance came as naturally to Bo as breathing.

“Answer me,” Teddy demanded, regaining his confidence. He was fairly certain Bo would never physically confront anyone here at Warfield. That would get back to Jimmy Lee quickly, and then there would be hell to pay. Not even Bo would dare to cross Jimmy Lee. Now in his midseventies, their father maintained his absolute power. “Or don’t you know how big our gold position is? Maybe that’s the problem, Bo. You’re always so damn certain of exactly what’s in the portfolio. Has that steel-trap mind let you down this once?”

Bo checked one of the computer screens and quickly performed the calculation. “At this moment the market value of our gold position is five hundred forty-two million, seven hundred and nine thousand dollars.”

“How do I know you’re telling me the truth?”

“You don’t,” Bo retorted, “and that’s the problem. You’ve got no idea what’s going on here at Warfield, but you don’t mind taking the credit for its success.”

The intercom buzzed again. “What now, Fritz?” Bo watched Teddy pull out a cell phone.

“I got another report from a friend in Moscow confirming what my guy in France said about the European open tomorrow,” Fritz answered, his voice urgent.

“You’re full of reports this evening, aren’t you? The big question is whether you’re full of crap too.”

“The reports are accurate,” Fritz replied firmly.

Bo watched Teddy finish his call, noticing the furtive way in which Teddy had made certain to cover his mouth and speak softly. Fritz’s voice continued like a foghorn through the intercom.

“Does the guy in Moscow know the guy in France?” Bo asked.

Fritz hesitated. “I don’t know.”

“Find out,” Bo ordered, and cut off the connection once more. “Teddy, who did you just call?”

“Tom Bristow.”

Tom Bristow was Bo and Teddy’s brother-in-law, married to their sister Catherine. A wisp of a man with a receding hairline who always wore tortoiseshell glasses and his club or college tie, Tom came from a prominent Boston family who a decade earlier had invested a hundred million into Warfield Capital alongside the Hancocks as part of the firm’s deep capital. In return for the investment, Bristow senior had required that Tom be provided a job at Warfield, and, as further insurance over the well-being of the investment, had also required that Jimmy Lee pledge Catherine as collateral. Ten years ago a hundred million had been a meaningful amount to the Hancocks, enough to secure Warfield the additional loans with which to leverage its equity and reap huge incremental profits. So Jimmy Lee had consented to the union. Tom and Catherine were married on a lovely spring day. The grand ceremony took place on a beautiful lawn overlooking the Charles River. Since then Tom had managed Warfield’s overnight cash investments. A job, as Bo put it, that could have been handled by a chimp.

“Why did you call Tom?” Bo asked.

“I want his advice on this gold thing. I’ve asked him to come down here from his office.”

Bo’s face contorted. “Tom doesn’t know anything about the gold markets.”

“Just the same, I want his advice,” Teddy replied. “I’ve come to find that Tom is a very useful man.”

“Tom is weak.”

“Not everyone is a warrior, Bo.”

“Which is a damn shame,” Bo retorted.

Teddy rolled his eyes. “Spare me.”

“They stand up for themselves too,” Bo continued. “They don’t spend their lives kissing their father’s ass even when he’s wrong. They think for themselves.”

“Shut up.” Teddy bit his lower lip as if he’d been about to say something else, then thought better of it. “And get a haircut,” he said, noting that Bo’s dark hair was down to the bottom of his shirt collar in the back, “and wear a suit once in a while.” Teddy pointed disparagingly at the flannel shirt Bo was wearing. “People here would have more respect for you. You are COO after all.”

“People here have plenty of respect for me.”

“Do something about this office too,” Teddy went on, kicking at the frayed carpet. “It’s dreary as hell in here. It should look more like the office of someone with money. We have a certain image we need to maintain at Warfield Capital.”

Bo didn’t care about decoration. Things in his life were functional, not aesthetic. He liked his office to look worked-in, as he liked his living room at the estate to look lived-in. He reached for the phone and punched in a number. “You touch my office and I’ll cut off your—hello.” The person at the other end of the line had picked up. Bo rotated the chair so his back was to Teddy. Ten seconds later the conversation was over.