“You’re a hero for what you’re trying to do. This isn’t about profits or personal glory. This is about something bigger.”
Marks sat back and smiled. He was silent for a few moments. He appeared slightly uncomfortable, even embarrassed.
“No, you’re right about that. It’s not about profits.”
“What
is
it about then?” Badenhausen asked. “You’re going to get that question. The harder we pound the patriotic theme, the more it begs the question of why a company cares about anything other than the profits.”
Marks sat in silence. “If they ask, I’ll be ready.”
Badenhausen leaned forward and refilled the empty champagne glasses. He looked to Nick Anson. “So what do you think?
America’s energy company.
Keeping America free from Middle East oil. Can you repeat that about a hundred times?” he asked with a smile.
“I think I can handle that,” said Anson as he reached for his glass and the three men shared a long laugh.
The next morning, Marks and Anson rang the opening bell at the New York Stock Exchange, the two executives clearly enjoying their time
together. Marks even invited Anson and his wife, Annie, to his ski house in Aspen that weekend, an invitation Anson found himself, to his surprise, accepting. The mood on the floor of the stock exchange, and throughout the day, was celebratory.
After opening up trading on Wall Street, the two men held a press conference off the floor of the stock exchange. Present was a room full of reporters from various news outlets; ABC, CBS, NBC, CNN, Fox, Bloomberg, MSNBC,
The Wall Street Journal,
Reuters,
The Financial Times, The New York Times,
and a variety of others.
The two executives stayed on theme throughout the press conference.
“Won’t this merger create a company that controls a substantial portion of the energy that is produced and consumed in a large section of the U.S.?” Sara Jamison from NBC pressed Marks halfway through the press conference.
“I’m glad you asked that,” said Marks. “What this announcement is really about is keeping America free from Middle East oil.”
“Isn’t it dangerous to give that kind of power to one company?” followed Jamison. “To one man?”
“Dangerous is relying on oil from suppliers who do not have our best interests at heart,” said Marks. “Dangerous is depending on others for one of the most critical products used in your daily life. Would you buy a bottle of water from someone who doesn’t have your best interest at heart, someone who might in fact be an enemy? A loaf of bread?”
“Do you anticipate any problems getting support from members of Congress, the SEC, or the Federal Trade Commission?” asked Bill Radford from
The Wall Street Journal.
“When you’re creating a company that helps America become independent of Middle East petroleum, I think that’s something most citizens will rally around,” Anson shot back.
After half an hour of similarly predictable questions, the reporters started to slow down and prepare for the press conference to end. A young female reporter in the back stood up. She had auburn hair, and a yellow cable knit sweater.
“Hi. Astrid Smith,
Baltimore Sun.
”
“Good morning, Astrid,” said Marks. “What’s your question?”
“You say this is all about creating independence from the Middle East, right? But is that really your concern? Shouldn’t you be concerned with profits? With financial performance? I mean, my grandparents own KKB stock. They rely on you to create the dividend that allows them to live comfortably in their retirement.”
The room was silent. The question Badenhausen had warned of had come. Everyone looked at Marks. He took a few steps to the right, silently, looking down as he walked, deep in thought. He glanced at Badenhausen, who stood against the wall to the side of the room. Marks’s limp was visible as he walked. After a moment of silence, he looked at the young woman who’d asked him the question.
“Great question,” Marks said after several moments. “Oh, we’ll make money. I can assure you of that. Your grandparents can continue to sleep at night. But no, it isn’t just about the money. For me, it never was. It never will be. Of course, if I didn’t make money for the shareholders of this company, the board of directors would fire me. But so far they haven’t needed to. We’ve done pretty well. You know, I think sometimes it’s the guys like Nick and me who don’t care so much about the money that end up being pretty good at making it.”
Marks paused and smiled. He waited a few moments, looking at the crowd of reporters, then back to the young reporter.
“I fought in Vietnam,” Marks said, looking past the wall of cameras and reporters to the young woman. “I almost died there. An Irishman from Boston named Henry O’Brien saved my life. I vowed if I ever had a son, I wouldn’t let him die in a meaningless war. I had one child. A son. We named him Henry. I used to call him Hank, God bless his soul.”
Marks paused. He walked back to the center of the stage. He turned back toward the reporters, who remained silent, mesmerized by Marks, waiting to see where he would take this clearly unrehearsed moment.
“On August 22, 2006, Hank was killed in Iraq, shot in the chest in a meaningless war, all because the rest of us needed gasoline for our cars. I failed to protect my son. America failed to protect its sons and daughters.
I swore then, if I ever had the ability, I’d do whatever I could to make it so nobody else had to collect their son’s remains like I did, picking them up at the airport in a wooden box because the rest of us need our gasoline.”
The KKB-Anson merger was the lead story on every network that evening. Badenhausen’s positioning worked, and so did Marks’s answer. The emphasis on the KKB-Anson deal wasn’t about the financial terms of the transaction. The proposed merger wasn’t discussed in terms of cost synergies, putting two companies together in order to find duplicative cost centers, like employees, who would then be terminated. The deal had a larger logic to it, a marriage of complementary energy sources, and of supply and demand. But most of all, it was about American energy independence. Several members of Congress, and even the president of the United States, hailed the deal. Marks was celebrated as an American hero.
But in another office high in the Manhattan skyline, the mood was neither patriotic nor happy. In the penthouse floor of a sterile-looking steel and black glass skyscraper at Fifty-first Street and Madison Avenue, the announcement of the KKB-Anson merger was not only expected, it was long overdue.
A young man not more than thirty-six years old sat behind his desk staring at the flat-screen television in front of him.
Alexander Fortuna was handsome, disarmingly so. He looked Mediterranean, with a tan glow to his skin, a perfect nose. His eyes were dark black pools. Their depth had a sinister quality, a dangerous aspect that, when framed against the beauty of the man’s face, became somehow disarming. His clothing was impeccable, expensive, custom. A dark blue button-down was tucked into white corduroy pants, formal looking yet casual. He wore his black hair slightly long, down to the top of his shoulders.
Alexander Fortuna had been waiting for this moment. Like a hand
on a light switch, the merger announcement caused him to flip on. It was time. The years of careful planning were over. It was his turn to act.
“America’s energy company,” Fortuna said aloud, to no one in particular, as he watched replays of Marks’s press conference on the screen, over and over.
Standing up, he walked to the window and looked to the north. He could see Central Park in the distance, his favorite view.
“America’s energy company,” he whispered to himself.
PASSWOOD-REGENT L.P.
CANARY WHARF
LONDON, ENGLAND
On the eighty-eighth floor of a skyscraper in the Canary Wharf section of London, a young man sat at a desk of polished steel. It spread out in front of the big window and was at least eight feet long. Four flat screens shone with spreadsheets and colored, fine-print numbers and figures.
Derek Langley was a thirty-two-year-old trader for a hedge fund called Passwood-Regent. One of the two phones on the desk rang.
“Langley,” he said as he picked up the phone.
“Hi, Derek. It’s me.”
“Alexander,” said Langley. “Hi.”
“How are you?” asked Fortuna.
“Super, thank you, sir.”
“Are you ready?”
“I am.”
“As we’ve discussed, I want us to begin aggregating within U.S. energy equities. I want us to buy KKB and Anson, but not a lot, perhaps one hundred and fifty to two hundred million dollars’ worth. The rest I want in direct competitors; electricity suppliers, distributors, especially in the
eastern part of the U.S. Put at least half and up to two-thirds of Passwood-Regent assets into KKB and Anson Energy competitors.”
“Yes, sir. Understood. Southern Company. Duke Power. ConEdison. Entergy.”
“Exactly. Start buying oil stocks, too. Use whatever long instruments you feel most appropriate; calls, options, swaps, swaptions, whatever. Nothing that will be too hard to get out of. Lever it up. Press your margin. I trust your judgment. I assume it’ll be predominantly straight block trades.”
“Yes. I think we can accomplish this without having to do anything overly fancy.”
“I want you to make some commodity bets. Allocate at least a quarter billion to oil futures. Currency too. I want us to short the hell out of the Colombian peso. At least two hundred and fifty million.”
“Got it.”
“Finally, most importantly, I don’t need to tell you this, but—”
“Don’t aggregate more than five percent of any single company.”
“Precisely. We don’t want to file a Thirteen D. Don’t go anywhere near it.”
“Passwood will not own more than five percent of any single company. We won’t need to.”
“Good. The announcement was a few minutes ago. Did you see it?”
“I did, sir.”
“How much do we have in the different Passwood-Regent accounts? I’m including any current long positions, which you’ll have to get liquid.”
“That’s already taken care of. As of last night, we have approximately three point six billion dollars liquid, sitting in cash.”
“Invest across the Passwood-Regent entities. Use them all. Spread this around. Don’t place too much in any one trade. Self-impose at twenty-five or thirty million dollars per trade. Ideal trade size would be twenty million dollars.”
“Got it. How much time do I have?”
“Twenty-four hours.”
Langley’s receiver went dead. He smiled and took a sip from his coffee cup.
_____
The morning after the announcement of the proposed merger between KKB and Anson Energy, Langley went on a $3.6 billion buying spree. Working feverishly, camped out at his office, he quickly established a series of positions in companies that were direct competitors to KKB and Anson, in oil futures, and in shorts against the Colombian peso. By the end of the trading day, Langley had executed more than 150 trades across fourteen separate Passwood-Regent entities, none of them U.S.-based. About a quarter billion dollars went toward the purchase of KKB and Anson stock.
Fortuna repeated his phone call to Langley twice that same day, once to a young female trader named Orieshe Yang in Hong Kong, at a hedge fund called PBX Fund; the other call to a Wall Street fund called Kallivar, and a trader named Sheldon Karl.
By evening, on three different continents, across three different hedge funds, more than $8 billion had been invested in companies that were direct competitors to KKB and Anson Energy. More than a billion and a half dollars had purchased a smorgasbord of oil contracts. At least half a billion dollars lay in a variety of trades betting the Colombian peso would drop in value.
To make it appear they weren’t excluding anyone, half a billion dollars sat in either KKB or Anson Energy stock.
One man controlled Passwood-Regent, PBX Fund, and Kallivar: Alexander Fortuna.
When his three hedge fund managers informed him, in three separate phone calls on the morning after the announcement, that their funds were fully invested as instructed, Fortuna left his office, walked briskly up Madison Avenue for sixteen blocks, then took a left into Central Park. Near the Sixty-fourth Street entrance, he came to the Central Park Zoo. There, he bought a ticket and proceeded straight to the popular polar bear exhibit, where he picked up a pay phone and dialed a number.
“Yes,” said the voice.
“It’s done. Go ahead as planned.”
SAVAGE ISLAND PROJECT
Terry Savoy looked out the window of the silver Gulfstream G500. He hadn’t been to Savage Island in more than a year. Normally, a death wouldn’t be reason enough to make the trip. After all, many men died at Savage Island. But this was different. This was Jake White.
The flight to Savage Island Project was a ballbuster. Windy, with an approach to the landing strip that required a steep drop from 10,000 feet in order to avoid wind shear off the Hudson Strait. At least the Gulfstream was comfortable, and fast, one of four KKB company jets.
Savoy had received the call from Ted Marks’s assistant, Ashley, the night before.