“Hold steady,” he told each one, “and everything will turn out right.” But he didn’t believe it. Ted watched in horror as the effects of just one morning washed across the ticker tape. It was a bona fide stock market crash. The blue chips had taken a terrible tumble, but the junk bonds were in an out-and-out free fall.
By the end of the day, every broker at the firm—probably every broker in the world, for that matter—looked as if he had been battered to a pulp by Mohammed Ali. Frenzied radio reports tried to explain what had happened to an astonished, flabbergasted audience:
“After interest rates rose earlier in the year, many of the large institutional firms started using portfolio insurance. Because of the instability of the market from last week, worried clients, who had been brooding all weekend, decided to sell all at the same time. The futures market was taking in billions of dollars within minutes, causing the futures market and the stock market to crash from instability. Additionally, common stock holders all wanted to sell simultaneously. The market couldn’t handle so many orders at once, and most people couldn’t sell because there weren’t any buyers left! Within one day, five hundred billion dollars evaporated from the Dow Jones index. Markets in every country around the world collapsed in the same fashion.”
Collapsed. Ted felt he might collapse himself. This time he had been dead wrong. No upswing at all. Just a huge bear gobbling up everything he had put his faith in, a bear on a rampage. The phone continued to ring throughout the afternoon, long after the bigwigs had decided to close down the market. He heard later that some unstable individuals who had lost fortunes went to their brokers’ offices and started shooting, and several brokers were killed.
“God have mercy,” he mumbled to himself.
You deserve to be shot,
came the voice out of nowhere.
He did. But he wouldn’t go down with the market. There was always a way out, always a way to cover his tracks. He just needed to find it.
When he stumbled in the door late that night, the first words out of Lin Su’s mouth were not “Honey, are you okay?” or “Darling, what a horrible day. I’m so glad you survived.” Her first words were, “What does this mean for China? Will they still hold the trip? I hope none of this will affect you, Ted. I hope you were smart enough to see this coming.”
He poured himself a double Scotch and stared out the window onto Tuxedo Road. All the neighboring houses were still sitting on their perfectly manicured lawns. The neighborhood was calm. He even heard a few birds. By the light of the lamppost he watched a chipmunk hop across the road. Just another day, another ordinary day.
He opened the front door and slammed it behind him, ignoring Lin Su calling out, “Where are you going at this hour?”
In a fog he walked down Tuxedo to where it crossed Valley, thankful to be away from his wife’s accusing stare.
Don’t you understand that everybody lost out today? Everybody?
But Lin Su did not want to hear reason. She was a fiercer competitor than any of the guys at the office, and she knew how to get what she wanted. He’d put the idea in her head, but now she would make it come to pass. She was going to China.
Their marriage worked as long as the money kept flowing. They had ridden for five years on the back of a strong bull, but Lin Su was not one to stay with a raging bear. He had known the stakes of marrying her long ago. He had to succeed.
TUESDAY, OCTOBER 20
They named it Black Monday. In one day, the Dow Jones plummeted 508 points. At the end of the day on October 19, 1987, the stock market had lost 22.6 percent of its value and over half a trillion dollars, making it the worst crash in history. A broker from Paine Webber said it best, Ted thought: “The final hour was like a dream sequence. You knew what was happening, but you couldn’t believe it was real.”
Tuesday was just as surreal—the market was deathly calm, with absolutely no trading going on. Who could trade? All the credit had evaporated. The Federal Reserve tried to step in on Tuesday morning to prevent further losses. As the nation’s central bank, it affirmed its readiness to serve as a source of liquidity to support the economic and financial system. Later on Tuesday, the Fed, led by newly appointed Alan Greenspan, held a conference call with members of the Federal Open Market Committee to discuss what role the Fed should play in trying to calm investors and the markets. Greenspan said, “I think we’re playing it on a day-to-day basis. And in a crisis environment, I suspect we shouldn’t really focus on longer-term policy questions until we get beyond this immediate period of chaos.”
This immediate period of chaos.
Well, he’s got that right,
Ted thought.
By Wednesday the papers were filled with quotes from important individuals, commenting on the crash. Ted read every one with a nauseous feeling in his gut.
You’re right, Mr. Iacocca,
he thought.
We can’t “keep romping forever on borrowed money.”
He set down the newspapers and cursed out loud, so loudly that several brokers looked over and gave him sympathy smiles. If they let themselves, every broker in the firm could shout out a string of profanity that would travel around the world.
Why had he invested so much of his own money in those lousy junk bonds? How could he have been so blind? After all, didn’t the name spell it out in black and white? Junk. Not only had he lost hundreds of thousands of dollars for Dr. Kaufman in illegal trading, but his nest egg had shrunk by 75 percent.
When he awoke on Wednesday morning, he felt something he had not known in years. He was terrified. Not just scared. Fear pumped him up, got the adrenaline going. But terror drained him completely.
This was not the scenario he had imagined a few weeks ago. Then he’d been dreaming of the Million Dollar Club and China; today he was wondering how to stay out of jail. Jail! That’s what he’d get if they caught him.
Ted reviewed the past weeks of trading in Dr. Kaufman’s account. At first just a little hedging, a little more activity. Then he’d done it. Since the market continued to go against what he’d expected … down, down, down … he had made the step over into doing some illegal trading in the account. Ted wasn’t sure how he’d convinced himself to start buying junk bonds and very speculative stocks with Dr. Kaufman’s money. But he’d done it, and now the money was gone.
He had to get the money back in the doctor’s account before he noticed. All of his investors were expecting a loss because of Black Monday. If he could cover over the illegal trading, he could weather the rest of the storm like every other broker.
He made the decision quickly, before he could change his mind. He’d take money from the crazy old writer’s foundation. She wouldn’t miss it, not for a while. Reluctantly he pulled out the portfolio of Miss S. A. Green. She hadn’t even called in the frenzy of Black Monday. She’d held on to everything. Unfortunately, the good stocks went down with the bad. Even though her portfolio was much more conservative than others and had not been affected nearly as drastically, she had still lost at least half a million. All he needed was seven hundred grand. That would cover his tracks. Somehow he’d convince her that those blue chips had lost a lot too. He’d siphon off a tenth of her account and make Black Monday look like the culprit.
What did he have to lose? His marriage was rocky, and he’d already done enough illegal trading to spend a decade in jail. He had no choice, he convinced himself, but to take more risks.
Kenny White, his friend from the competing brokerage firm, called him late in the afternoon, whispering frantically into the phone, “I know Monday was bad, Ted, real bad. But if you keep your head, I think we can still make it work for us. The regular bonds are paying four percent at most. But look at our favorite type of bonds. They pay nine percent!”
“What are the companies behind them like?”
“What does it matter, Ted. Nine percent!”
“I need to know.”
“Okay, they’re not that hot, some are non-rated and some are BB- to C-rated. But don’t write it off. You can make a lot on these lowrate bonds. I swear it.”
Even as Kenny was speaking, Ted reviewed in his mind the speech Jerry Steinman had given to the younger brokers six months ago about integrity, honesty, perseverance, steadiness, not panicking in the midst of a crisis. How to hang tight in a bear market. Refusing greed.
The thing that gets brokers in trouble is greed.
How many times had he heard Jerry give that little talk to the new brokers?
Was it greedy to want to make the Million Dollar Club? Was it greedy to want a nice house and things for his kids … or to want to save his marriage? Was it greedy to want to stay out of jail?
He rehearsed the speech in his mind for the fifth time that day, a speech he would give to no one but himself.
First of all, you’ve gotta understand how things work in this business. To succeed, sometimes you have to make a few compromises. But it always pays off in the end. Sure, I’ve made some enemies, but I’ve also made a bunch of money and a pretty good reputation along the way. I’m a hothead, I’ll admit it. But I am loyal to those I love, and I love my wife. She deserves to have the best, and so do my kids. I’ll do just about anything to get it for them. If you knew our background, you might be a bit more sympathetic. But I don’t care what you think about me. I am not going to be found out. And heck, this writer lady is wacko and has a ton of money and all she does with it is to send it to some illegal foundation. She never sees the stuff herself, so what is wrong with taking some of that money and using it for a good cause? I mean, keeping a man out of the slammer is a good cause, isn’t it? I’m not a bad man. Not a criminal. What would happen to my wife and kids if they locked me up for ten years? I’ll do whatever it takes to cover my behind. And S. A. Green is heaven’s gift to me, as far as I’m concerned. The batty old woman is going to keep me out of jail.
Stella Green was no idiot. In fact, she was brilliant. Some creative types didn’t have a smidgen of business sense, but this lady was good, scary good. She didn’t want anyone following her tracks. So it was immensely important that Ted plan his strategy down to the last detail.
S. A. Green’s royalties all came to Goldberg, Finch and Dodge. From there, Jerry deposited the royalties into that strange charitable foundation— Stash Green Cash. The name was as wacky as the lady herself. Then once a year Miss Green wrote checks to her other bank account, the one in Switzerland—the one he was sure was set up for tax evasion.
He reviewed the portfolio. She always transferred at least five percent— as stipulated by law—and sometimes up to eight percent from the U.S. charitable foundation into the foundation’s Swiss bank account of the same name. In the end, no one at Goldberg had any way of knowing to whom the final checks were written, or if in fact they were written. All they knew was that the money was leaving the foundation and being deposited into the Swiss bank account. What really happened to this money? That was his question. Technically, it had to be distributed to a charity, but in reality it could be going anywhere in the world. Illegally. Ted figured she was avoiding taxes and no one ever knew. Who could trace it? Certainly no one at Goldberg, Finch and Dodge.
Jerry had helped Stella create the foundation way back in 1967, with the first deposit of two hundred thousand. A handsome royalty check at that time, Ted imagined. Twenty years of conservative trading had brought the foundation’s worth up to seven million—although Black Monday had taken its toll on the account. Every year, on the exact same date, Stella mailed a check for at least five percent of the foundation’s worth to the Stash Green Cash Foundation bank account in Switzerland.
She was sly. But so was Ted. He had another card to play. He had read about other brokers in trouble, who set up dummy accounts in which to trade illegally. In the space of a few hours on Wednesday morning, Ted set up another account for Stella Green—the Stash More Green Cash, he called it—at the brokerage firm, using a P.O. box right there in Atlanta. If anyone asked questions, he would say that Stella had called him up and given him telephone instructions—that was the right wording— to transfer 1.5 million to the new account because she wanted to take advantage of the market being so low to do some riskier trading.
It makes sense. Other conservative clients have done this before. People will believe me.
The bulk of Stella’s money—now just under five million—would remain in the old account to be used for the conservative investments.
Now was the time to make money quickly, while every stock was down low. He could purchase a number of speculative stocks, counting on their reputation to bounce back more quickly than the conservative ones. The purchase would generate a lot of commission for him and allow him to pay back the doctor’s account.
He took out a document with Stella’s signature and then placed a piece of lightweight paper over it, tracing the name. Then on the same sheet he practiced signing her name over and over, concentrating on the way she formed her capital
S
and then the
A
. At length he tore that practice paper into hundreds of tiny little pieces. Still he hesitated—a full thirty minutes—before forging Stella’s name on the document authorizing the opening of the new account.
Illegal! Illegal!
The words flashed in his mind.
No,
Ted argued with himself.
Just another little and necessary adjustment. That’s all.
When it came time for him to compose a letter from Stella, requesting that 1.5 million be transferred to the new account, he typed it out quickly and then scribbled her signature at the bottom before he could convince himself that this was a big mistake.
By the end of the day, he had begun trading the 1.5 million in options and low-grade bonds. He felt a momentary thrill as he calculated the commission. All the closer again to the Million Dollar Club, and with just a little bit of luck he’d make enough to pay back both Dr. Kaufman’s account and S. A. Green’s. Now he had the false documents to justify himself.