Whipping Boy (16 page)

“They told me it was the Presidential Suite and that Clinton had stayed in the rooms the night before. They made a big deal of that. It could have been true. The setting was pretty amazing.”

“Did you go to the meeting alone?”

“No. I brought three colleagues along. My attorney, a Wall Street go-between, and Victor Benetar, my merchandizing expert.”

The Badische roster was substantially larger. Nine men, representing three branches of the Trust, were on hand: the prince, the colonel, and the baron; three members of the Trust’s finance committee; and Badische lawyers based in New York, London, and Zurich. “There were also a couple of bodyguards and Winky’s ‘private nurse,’ who I’m now convinced was a hooker hired for the evening.”

After twenty minutes of chitchat focused on the fragile health of Prince Robert’s Maltese lapdog—like its owner, small, old, unstable, incontinent, and pedigreed—the borrowers and lenders again arranged themselves on opposite sides of a long conference table.

Once Prince Robert was ensconced “in another one of his thrones,” Colonel Sherry announced that the Badische Trust Consortium had formally approved the Cuchifritos proposal. Laurence recalls he then said, “His Highness is now prepared to sign a funding agreement in the amount of $500 million.”

The sum shocked Laurence. “Five hundred million dollars?” she remembers blurting out. “I came here for
fifty
!”

“Where did the extra zero come from?” I ask.

“I wondered the same thing. The way the deal worked was I was to receive $500 million in ‘collateral instruments’ that would be used to purchase medium-term notes with an average yield of 7.5 percent and a maturity of ten years. My $50 million would come from the ‘spread’—that was the colonel’s term—between the discounted purchase price of the notes and their face value at maturity.”

“Sorry. I’m not following you.”

“Basically, I’d be getting my money from interest spun off the larger sum.”

“What were the repayment terms?”

“There were none,” Laurence says.

“Excuse me?”

“Badische said they’d put up half a billion dollars so that I could buy discounted notes on their behalf for $450 million, and that I could retain the prepaid interest—$50 million—free and clear.”

“You didn’t have to pay them back?”

“That’s what they said. At which point I asked the obvious: ‘Why the hell would anyone do that?’ It sounded too good to be true, which I later learned was the case.”

“How did the Trust respond?”

“The colonel explained that the prince regularly signed loan agreements on behalf of individuals with too much cash on hand.” The loans were designed to preserve capital
and
confidentiality. “That’s why the anonymous lenders were willing to pay $50 million. It was considered a parking fee.”

Laurence discussed the proposal with the lawyer she flew in from Washington. He said he would need to review the contract before endorsing its legality. “That’s when Colonel Sherry told us that wouldn’t be possible. That my lawyer would not be allowed to read the actual contract.”

“Seriously?”

“Seriously. A Badische representative would read the loan agreement out loud.” If the terms, as presented orally, were deemed acceptable, Laurence and the prince would sign a “principal-to-principal” agreement. Once she satisfied certain prerequisites detailed in the contract, the prince would dispatch, by courier, a fully executed agreement, along with a confidential “transaction code” authorizing the transfer of $500 million in Badische funds to the offshore companies Cesar had set up in Tortola.

When the lawyer representing Laurence questioned this unusual protocol, the colonel shut him down. “Sherry told me, ‘This is a principal-to-principal transaction. Your attorney cannot ask questions.’”

He then instructed Robert Gurland, the Trust’s London lawyer, to begin reading aloud the twelve-page agreement. In a plummy British public school accent, the dapper sixty-eight-year-old obliged: “‘It is hereby agreed between the parties as follows . . .’”

“It was a crazy contract,” Laurence now acknowledges. Much of the language was impenetrable and imprecise. Periodically, her lawyer, prevented from raising objections directly, would whisper a concern to his client so that she could request clarification.

Two clauses proved particularly problematic. The first, Clause Three (“Banks and Venues”), imposed seemingly insurmountable geographical constraints by prohibiting Laurence from using financial institutions based in the United States, Great Britain, Australia, New Zealand, France, Spain, Switzerland, Italy, or Mexico. Also banned: all nationalized, state, or central banks, all Eastern-bloc banks, and all banks in “any Middle Eastern, Latin American or
otherwise ‘Third World’ countries.” In addition, Clause Three entitled the prince to reject, without explanation, any bank “not of satisfactory status or reputation acceptable to ‘THE LENDER.’”

“That didn’t leave you with too many options, did it?”

“No, it didn’t,” Laurence says. “But I came up with what I thought was a pretty clever work-around. I asked to use the offshore branch of a US bank.”

The colonel discussed her request with his colleagues. After considerable debate, the Trust gave its approval, with the caveat that the offshore American branch had to be both exempt from US banking law and willing to receive what the contract identified as “clean good funds” no questions asked.

That concession removed the first sticking point.

Robert Gurland continued the legal recitals, with the colonel and the Trust’s in-house counsel, Richard Zeif, taking over whenever the Londoner’s voice grew hoarse. At eleven p.m., the second nettlesome issue surfaced: Clause Seven (“Performance Guaranty”).

“Before receiving funding, I was required to put in escrow a tenth of 1 percent of the total loan. Badische called it a performance guaranty.”

One tenth of 1 percent didn’t sound like much until Laurence did the math.

“I lost it when I realized what that meant. I said, ‘You’re asking for another $500,000? On top of the $54,000 I’ve already paid to Cesar? But I came here to
borrow
money!’”

“What did Cesar say while all this was happening?”

“Nothing. Like I told you, once he handed me over to Winky and Young Dracula, his job was done.”

Colonel Sherry tried to placate Laurence, explaining that the performance guaranty was
not
“a processing fee, retainer, or advance fee.” It was simply a deposit required, as the contract stated, to verify “the borrower’s bona fides, good intentions, and serious ability to fulfill the terms and conditions of the agreement.”

“The colonel said, ‘We have to know that you can afford to travel and pay your lawyers and your accountants, and that you will be able to complete this transaction. Once the deal is closed, the $500,000 will be returned. There is really no risk if you feel you can perform.’”

“
Perform
? That’s the word he used?”

“It was,” Laurence says. “I know it almost sounds sexual. Maybe it was for Sherry. One giant perverse performance.”

“What did you say when they shanghaied you with that upfront fee?”

“I said, ‘What happens if
you
guys can’t perform? What happens to my security deposit?’”

The colonel assured her that the funds would be returned, minus “10 percent in consideration of legal costs and professional expenses.”

But that reassurance was moot. “I didn’t have $500,000 to tie up,” Laurence later testified.

Tensions mounted until Victor Benetar, the Cuchifritos merchandising expert, intervened. “Victor stood up and said, ‘Hey look. Her grandmother just died. She should be sitting shivah. Go easy on her.’ One of Winky’s helpers gave me some bottled water, and I took a few minutes to compose myself.”

When the talks resumed, Laurence tried to remove the fee clause from the contract. The colonel wouldn’t budge. “He said, ‘Sorry. That condition is written in stone.’”

From the head of the table, Winky summed up the stalemate succinctly when he told Laurence: “‘Sometimes, dear, it comes down to cold hard cash.’”

With the negotiations at an impasse, the two teams agreed to adjourn until the following day. Once outside the suite, Laurence and her partners did what executives often do when a deal collapses. “We ordered a pizza.”

The postmortem that accompanied the late-night snack focused on the $500,000 performance guaranty—the one stumbling block
separating Laurence from the $50 million she needed to launch Cuchifritos. The prince’s remarks about “cold hard cash” apparently resonated with Victor Benetar. He offered to front the fee.

The proposal wasn’t exactly selfless. It was tied to a side agreement granting Benetar one third of the funding Laurence was expecting from the Trust. As the merchandizing expert saw it, scoring one third of $50 million—almost $17 million—by fronting $500,000, represented a healthy return on investment, certainly better than the profits he made on the steeply marked-up consumer electronics he sold at his Times Square enterprise, Broadway Video and Computer.

Laurence agreed to his terms. “I chalked it up to the cost of doing business.”

Negotiations with the bankers were supposed to continue the following afternoon. “But when Cesar greeted us at the entrance of the Dolder, he said things were delayed. Then I saw him scurry off to handle some other clients. It was a repeat of the Waldorf experience. Hurry up and wait. We ended up sitting in the lobby for hours and hours.”

Late that evening, well past midnight, Laurence was granted another audience with the prince. “I told Winky, ‘I have the money. Let’s do a deal.’”

The news so pleased Prince Robert that he ordered champagne and asked for his “laptop”—an antique escritoire containing, Laurence recalls, “a bottle of green ink, a very large Montblanc pen, and some sort of thing you make a seal with.”

After a round of toasts, everything was set. Under the watchful gaze of some dozen Cuchifritos and Badische executives, lawyers from three countries, an ailing lapdog, a couple of bodyguards, the prince’s private nurse (“Like I said, I think she was a call girl”), and Cesar Augustus, Barbara Laurence and “Prince Robert von Badische” began signing their $500 million principal-to-principal loan agreement.

They didn’t get very far. Things hit a snag when Laurence, agitated by the promise of her hard-won $50 million (minus Benetar’s cut),
knocked over the ink bottle. Green ink stained the wooden laptop, Laurence’s hands and dress, and—most problematically—the loan papers. New contracts had to be rustled up before the transaction could continue. The two principals completed their deal just before dawn, signing their names and initials more than a hundred times on three duplicate contracts using a fountain pen the size of a large cigar.

Cesar witnessed the Zurich loan agreement between Prince Robert and Barbara Laurence.

“And guess who served as witness?” Laurence says coyly.

I fish out a copy of the loan agreement from one of the milk crates. The very bottom of the last page bears the name of Cesar Augustus Viana, the managing director of the Barclay Consulting Group and exclusive liaison to the Badische Trust Consortium.

As I’m staring at the signature, I imagine Cesar in Switzerland, signing his name with a flick of a Montblanc fountain pen. Okay, okay. Technically, it wouldn’t have been a
flick
. Still. What are the chances that the twelve-year-old kid I nailed with a Parker 45 in 1972 would return to Switzerland, Montblanc in hand, thirty years later?

I ask Laurence what she thinks Cesar was thinking about when he helped close the deal.

“In a word? Same thing all those guys were.
Ka-ching.
”

Barbara Laurence left Zurich empty-handed (and green-fingered). To secure the loan for her cable network, she needed to do two things.

First, she was contractually required to wire $500,000 to the Trust’s London counsel, Robert Gurland, by “16:00 hours, Greenwich Mean Time, the 25th day of June, 1999.” That gave her a week. Second, she had to furnish a so-called bank letter from a Badische-approved financial institution willing to handle $500 million no questions asked. Under the terms hammered out at the Dolder, the bank letter had to be presented
in person
within thirty days of the signing.

Laurence satisfied the first requirement—payment of the performance guaranty—in the time allotted, thanks to Victor Benetar’s predawn pizza pledge. Doing so triggered a reciprocal obligation from the prince. He had three days to deliver a copy of the loan agreement, complete with transaction code.

“
His
deadline came and went, and guess what? No contract.”

Only on July 6, two weeks after she posted the performance guaranty, did Laurence receive the paperwork. “It was
supposed
to be hand-delivered by courier.” It wasn’t. “It was tossed like it was a newspaper. I spotted a package in the bushes beside the front door.”

Laurence tore open the envelope and began reading. “All at once I started to panic. The confidential transaction code Winky promised wasn’t on the contact.”