No Accident (21 page)

Luke and Grant Steele faced off in a grand jury room in the federal courthouse. Steele wore an expensive suit, in contrast to the more casual dress of the grand jurors. In the chest pocket of his suit jacket he wore a handkerchief folded so that its four corners poked up in uneven triangles like alligator teeth. He looked at home at the podium.

Luke looked small sitting in the witness box. The grand jury sat in two rows in another wooden box along the side of the room, and the court reporter, motionless except below her wrists, sat to the other side, echoing each question and answer with a flurry of soft tapping on her stenography machine.

Steele’s questions started off easy, boring even
—preliminaries to establish the factual background. Despite Steele’s reputation as a smooth speaker, Luke was surprised to find that in the courtroom Steele wasn’t a very polished questioner. He paused frequently to consult notes, and ‘um’ and ‘ah’ were sprinkled throughout his speech. Luke kept telling himself not to let his guard down. Any bumbler can be dangerous—when he’s trying to indict you.

“You’re quite the Wall Street darling, aren’t you, Mr. Hubbard?” Steele said.

“I’m not sure what that means,” Luke said. He recalled Alan Matthews’ advice to keep his responses simple and concrete, not to say more than he needed to.

“What I mean is that in the past two years, you have appeared six times on the covers of these major business magazines,” Steele said, hoisting a stack of magazines. “Why do you think that is?”

“I think the interest some business journalists have in me is a reaction to the growth of Liberty Industries and its success over the past two decades.” Alan would have been proud of that response, Luke thought.

“Financial success?” Steele said.

“Yes, that’s how the financial press measures success,” Luke said. Steele scowled, and a young female juror giggled. Steele took a moment to compose himself, then continued.

“Has Liberty’s financial success surprised you?”

“I always had faith that, with a little luck, we could succeed.”

“Has Liberty’s financial success surprised the stock market?”

Luke considered the question, then responded. “I would say so. If everyone expected Liberty to be as successful as it is now, our stock price would have started out where it is now, instead of generally rising up to that level over the years.”

“So in the past, analysts expected Liberty to make less money, and now they expect Liberty to make more money, generally speaking.”

“Yes, generally speaking.”

“And so, over the years, you’ve often made more money than Wall Street analysts expected?”

“In many cases, yes.”

“And that made your stock price go up?”

“Generally speaking, yes, our stock price has risen when we’ve beaten the analysts’ earnings estimates.”

“And is the opposite true as well? When you don’t meet estimated earnings, your stock price has gone down?”

“That’s the basic idea,” Luke said.

“Thanks, this is helpful. I’m not a finance guy.”

Luke sighed. Steele had been going on like this for an hour.

Steele ostentatiously flipped a page in the notebook he had in front of him on the podium. “Let’s talk now about the life insurance policies that Liberty Industries purchased on the employees who were killed in the accident last December 23rd.”

“That accident was a tragedy,” Luke said gravely.

“That wasn’t a question,” Steele said sharply. “Here’s the question: you didn’t buy those life insurance policies knowing those men were going to die, did you?”

“Of course not. The policies were purchased years before, as part of a corporate policy in which we buy life insurance on many employees.”

“How much did those policies pay out when those employees died?” Steele said.

Luke responded loudly and clearly. “Two million dollars.” He figured there was no need to by shy about innocent facts like this one, especially since Steele was trying to insinuate they were somehow criminal.

“And how much of that money went to the men’s families, to their widows?”

“None of it,” Luke said. “As you know, the company was the beneficiary on those policies.”

“Two million dollars,” Steele said, turning toward the grand jury and raising his eyebrows. “Lot of money, isn’t it?”

Alan had warned Luke that Steele would resort to grandstanding like this. Luke took a deep breath and forced himself to relax. Then he responded. “Liberty Industries has been fortunate enough to grow its revenues and earnings to the hundreds of millions of dollars per quarter. Two million dollars is a lot of money, to be sure, Mr. Steele. But in the context of an enterprise as large as Liberty, it is not generally significant.”

“Is that so?”

“Are you going to ask me every question twice, Mr. Steele?”

Luke knew he shouldn’t taunt Steele, but it felt good, and now several of the jurors chuckled. Steele kept his gaze on Luke.

“What were your earnings in the fourth quarter of last year, the quarter that ended on December 31st?”

“You’ve seen our financials. You know that they were about $205 million.”

“Here’s a copy of Liberty’s quarterly income statement,” Steele said. “What does it say Liberty’s earnings were for the fourth quarter?”

Luke took the paper from Steele. “Two hundred and six million, one hundred and twenty-three thousand dollars. Like I said, about two hundred and five million dollars.”

“And here’s a copy of a report from Dow Jones from last December fifteenth. It sets forth the estimate for your fourth quarter earnings by each of the securities analysts that cover Liberty. At the bottom is an average of those estimates. What does it say?”

Steele flapped the paper in front of Luke as he asked the question. Luke impatiently took the paper from him and read off the number at the bottom.

“Two hundred and six million dollars.”

“So you met the consensus estimate by how much?”

“A little over a hundred thousand dollars.”

“Not a lot of money.”

Luke exhaled sharply through his nostrils and gave the grand jury a wry smile. “I doubt many people would agree with that.”

Steele stared coldly at Luke. “But not a lot of money in the context of Liberty’s operations, right?”

Luke paused and fought an urge to look back at the jurors. “Right.”

“So you barely met the analysts’ fourth quarter consensus estimate, right?”

“Right,” Luke said. His smile had sagged into a frown.

“And without the two million dollars in insurance money, you would have failed to meet the estimate, is that correct?”

Several seconds passed before Luke responded. The court reporter finished typing in Steele’s question, and the room was very quiet.

“That’s correct,” Luke said.

“So by the second half of December, Liberty had an incentive to increase its earnings before the end of the month, didn’t it?”

Luke paused, and took another deep breath. He was feeling butterflies in the pit of his stomach. That didn’t often happen to him. He knew that success or failure today
—and maybe his freedom—hinged on how well he responded to this question. But of all that was at stake, the prospect that haunted him most at that moment was that he would have to slink back to Alan and start following his lawyer’s playbook—the defensive, lawyerly playbook. Of course, Alan wouldn’t tell Luke “I told you so.” He wouldn’t have to.

“Mr. Hubbard?” Steele said.

“Yes, Mr. Steele,” Luke said. “It’s true that my company had an incentive to increase its earnings in December. But I might as well admit, we also had an incentive to increase earnings in November. October, too. And you should also know, it wasn’t just last year, but every month of every year since the company was founded. That’s what businesses do, Mr. Steele, they try to increase their earnings.”

Steele looked at Luke with a smug smile and malevolent eyes. “Mr. Hubbard, please confine your response to the scope of the question.” The message was unmistakable
—
this is my show
.

Steele moved on. “Mr. Hubbard, I am handing to you a statistical analysis of the effect of a failure to meet earnings estimates on the stock price of companies in your industry over the past ten years. Will you read the average that appears at the bottom of the page?”

“A five percent drop,” Luke said. There was nothing he could do but answer the question and wait to see where Steele was headed with this.

“Mr. Hubbard, how much stock do you own in Liberty Industries?”

“Just over two percent of the company’s outstanding stock.”

“So a five percent drop in Liberty’s stock price would reduce the value of the stock you own by how much?”

Luke thought for a moment. “About ten million dollars.”

“How much of your net worth does your stock in Liberty represent?”

“Oh, most of it.”

“Ten million dollars. That might not be a lot for company as
huge
as Liberty Industries, but it’s a lot for you then, is that right?”

“I won’t argue with that,” Luke said.

“Yes or no.”

“Yes.”

“So in the second half of December, Liberty was on track to miss Wall Street’s consensus earnings estimate. And if that happened, history said that the price of its stock was likely to fall.”

Steele paused and looked at the grand jury. Then he stared hard at Luke.

“Is there a question in there?” Luke said.

Steele pulled on the sides of the podium as if he were about to climb over it. “Mr. Hubbard, didn’t you have an incentive to increase earnings in whatever way you could, to avoid a drop in your stock price? To avoid losing ten million dollars of your personal wealth? Didn’t you have an incentive to kill those employees?”

“Mr. Steele, when we announced earnings in January, the stock price didn’t drop.”

“Because you met the earnings estimate. But without the two million dollars from those insurance policies, you would have
missed
the estimate. Don’t dodge my question. My question is not what happened
after
Liberty received that insurance money. My question is what did you expect to happen before five of your employees conveniently died in an accident that netted your company a seven-figure payday. Mr. Hubbard, my question is this: did you expect the stock price to drop if you missed the earnings estimate?”

The court reporter waited with her fingers curled above her keyboard. Luke took a moment to draw all tension from his face. Then he looked placidly at the grand jury, then at Steele.

“Mr. Steele, if I did expect the stock to drop, and if I cared about that, I still wouldn’t have killed anybody. I would have just sold stock before the dip. But I didn’t sell any stock in December. I’ve never sold a share of Liberty stock.” Luke turned toward the grand jury and spoke directly to them in a soft, open voice. “I’ve had a rich life, and I’m happy, but my wife and I didn’t have any kids. Liberty is the closest thing I have to a child. When my investors and I bought the company in the mid-nineties, it was nearly bankrupt—that was the only way a guy like me could ever have scrounged the funds to buy it. I nursed the company back to health, then grew it to a size and scope that the rest of the business community never dreamed possible. So, no. I didn’t sell any shares of stock in my company. And I certainly didn’t profit personally from this tragic accident.”

Steele’s face turned red and he tugged at his collar. Then, like a dog who’s just caught the scent of a squirrel, he turned to his papers on the podium and dug through them furiously until he found the sheet he was looking for.

“Here, here,” he said, waving the sheet of paper. “At least three times in the past five years, Liberty has failed to meet quarterly earnings estimates, and on none of those occasions did you sell shares beforehand.”

“So
 . . . that supports my point. I’m a believer in the company long-term. It’s important for management to be aware of periodic fluctuations in our stock price—we need to make sure that investors are understanding our story correctly—but those fluctuations will happen from time to time, and it’s not something we try to manage. We manage the business for long-term growth.”

Steele dug his fingertips into the sides of the podium. The skin around his knuckles turned white from the pressure.

“Mr. Hubbard, all I want from you is a simple answer.”

“All I can give you is an accurate one.”

Steele pushed himself from the podium in frustration and did a little spin on the sole of his shoe. When he spun back around, his head and arms had slumped like he was an abandoned marionette. The clock on the back wall loudly ticked off several seconds. Steele’s next words were barely audible.

“You can go, Mr. Hubbard.”

* * *

Luke stood in front of the courthouse, trying in vain to find a cab. For some reason, Crash wasn’t waiting here for him and wasn’t answering his cell phone. That was a first.