Swimming with Sharks (2 page)

July 1998—New York City

Alex Sontheim didn’t regret her move from Morgan Stanley to Levy Manhattan for one single moment, and she was sure Vincent Levy wasn’t sorry he had won her over with his generous offer last February. With a fixed salary of two million dollars plus bonuses and commissions, Alex was among the best-paid investment bankers in the city, and she had already silenced any skeptics on LMI’s board of directors with three spectacular deals.

Along with their revenues, LMI’s reputation in the highly competitive M&A market went soaring. Levy was euphoric; it couldn’t get better than this. General Engines and United Brake Systems were both blue-chip companies, and, through Alex, LMI successfully represented them. The
Wall Street Journal
called LMI a “serious competitor” to Merrill Lynch, Goldman Sachs, and Morgan Stanley in the field of M&A, and Alex was solely responsible for it. She had a keen sense for the markets, a sharp eye, ruthlessness, and experience—plus the necessary connections to remain at the top of the food chain in this business. From her office window on the fourteenth floor of the LMI Building, she had a fantastic view of the Verrazano-Narrows Bridge and the harbor. It was this breathtaking panorama that made her realize how incredibly far she had come in her career over the past years. She smiled in satisfaction. At the age of thirty-five, she felt well on her way to the top.

Now she was playing in the major leagues—and she had made it completely on her own. The telephone startled her out of her reverie. It was Zack, her former colleague at Franklin Myers and currently the managing director of LMI, to whom she more or less owed this job. He asked her to join a board meeting, scheduled at short notice on the thirtieth floor. Alex shut down her computer, grabbed her briefcase, and quickly rushed across the trading floor. It was already late on a Friday afternoon, and the normally hectic floor was deserted except for a cleaning crew. The traders had vanished into their weekends the moment trading closed on the NYSE. Alex swiped her badge through the reader next to the elevator door. Security at LMI was as tight as at the Pentagon; every swipe of the card was recorded by a central computer.

Alex assessed her appearance in the mirror, while the silent elevator transported her sixteen floors higher. It was far more difficult for a woman in her position to be accepted by colleagues and business partners than for a man. She had to be tough and unyielding, but without seeming masculine. She had perfectly mastered this balancing act after twelve years on Wall Street. She gave her mirror image a friendly smile. People in this city had long stopped making the mistake of underestimating her. Someone had once accused her of being cold and ruthless, but Alex saw this as a compliment—essential survival skills in this tough man’s world.

The elevator stopped on the thirtieth floor with a subtle ring, and Alex took a deep breath. She walked along a mahogany-paneled hallway lined with exquisitely lit expressionist paintings—surely originals and worth a fortune. The thick Aubusson runner rugs over the reddish marble swallowed the sound of her steps. Every detail of the furnishings exuded solidity, power, and success. Anyone who sat on the thirtieth floor had made it. Alex smiled. One of these days, in the not too distant future, her name would also be on one of these doors.

She knocked on the door of the large conference room—it was as wide as the whole building—and entered. The windows stretched
from the ceiling to the floor, and the view to the east across the river to Brooklyn was spectacular. Although she had been here a few times before, she was impressed anew by the vast space. The thought flashed through her mind that this room was designed not just to impress but to intimidate.

The entire board of directors sat around the giant, polished round table, which looked like it was carved from one piece—like the legendary Round Table of Camelot: CEO Vincent Levy, Vice President Isaac Rubinstein, CFO Michael Friedman, Head Analyst Hugh Weinberg, Legal Department Head Francis Dayton-Smith, Chairman of the Board Ron Schellenbaum, Director of Emerging Markets and International Business John Kwai, and Managing Director Zachary St. John.

“Hello,” Alex said and smiled. “I hope I’m not late.”

Vincent Levy jumped up and walked over to her with a smile. “Oh no, Alex,” he said, extending his hand to her, “thank you for coming. I decided at the last minute to invite you to our meeting. After all, you made a major contribution to our recent successes.”

Alex smiled as she look around at the group’s benevolent but probing expressions. She couldn’t figure out Levy. There was a core as hard as iron hiding behind his smooth demeanor. People didn’t make it to the very top on Wall Street by being modest or friendly. She sat down between John Kwai and Zack. Her heart was beating in excitement when she realized that she was sitting as an equal among the most powerful men of the firm. Even though her job was exciting and satisfying, her next goal was to permanently establish herself in this circle. Levy spoke about the positive developments in M&A, but also about currency and equities trading and the underwriting of promising dot-com companies. Then Hugh Weinberg reported on his forecasts.

Levy had recruited Weinberg from Prudential Securities. Weinberg’s opinion was highly respected and second to none on Wall Street—he was known and feared for his accurate analyses and proven forecasts. Alex was
filled with pride that he had such high regard for her work. His market analysis was followed by Michael Friedman’s dry report on the past quarter’s revenues and profits. When at seven thirty Levy closed the meeting by thanking all of the attendees, Alex wondered why she had been invited in the first place. She was standing up, ready to leave, when Levy signaled for her to stay.

“We are very pleased with your work here, Alex,” he began in a friendly tone once they were alone in the conference room. “Hugh is impressed by your profound market knowledge.”

“Thank you.” Alex smiled in acknowledgment. After all, they were paying her two million a year for that knowledge. But what did he really want?

“The efficiency and success of your work speaks for itself,” Levy continued, “and as you know, we are willing to reward success.”

His smile grew wider.

“We are considering a bonus of a hundred and fifty thousand dollars on top of your regular bonus payment.”

Alex wondered if she’d heard him correctly.

“That’s a significant amount of money.” With some effort she concealed her surprise and maintained her composure.

“Yes, indeed.” Levy smiled in a kind and paternal way. “But you work eighty hours a week and have delivered remarkable results in less than five months. Others need this much time just to get accustomed to a new company. Furthermore, LMI owes its excellent reputation in the area of M&A to you. Why shouldn’t the firm reward you for that?”

“Well,” Alex responded without batting an eye, “that’s incredibly generous.”

She had the feeling that she needed to be very careful. She had no idea where this intuition came from, but the feeling was there.

Finally Levy spoke. “I would like to make you an offer—here, between you and me. Nothing in writing. Let’s call it a handshake agreement.
LMI could obviously give you the bonus in the customary form of stock options. But we could also transfer the money in cash, which means, well, tax free, to a foreign bank account.”

He smiled innocently, as if he hadn’t just suggested tax evasion to her.

“The decision is yours, Alex. Stock options are good. But considering your tax bracket, the advantage of a cash payment is obvious.”

Alex wasn’t quite sure whether she liked the proposal, but she slowly realized why Levy had invited her here today. He wanted to test her willingness to cross legal boundaries, to judge the extent of her moral scruples.

“Just slightly illegal, isn’t it?” she said nonchalantly, and smiled.

“Illegal.” Levy laughed quietly. “What an ugly word. By the way, I think that you already pay enough taxes, don’t you?”

Alex nodded. Whenever a few investment bankers got together, they always talked about legal tricks and loopholes to avoid taxes. The cut taken in taxes from salaries this high was enormous. A bank account in the Bahamas, Cayman Islands, Switzerland, or elsewhere was the rule rather than the exception.

“Let St. John know once you make a decision,” Levy said in a friendly tone. “But this is just one of two topics that I’d like to discuss with you. The other is the independence of your department.”

“I thought that you expected personal initiative?” Alex was surprised.

“Oh yes, I do,” Levy reassured her. “Please don’t think of this as criticism! Discretion is vital in your job. And we are certainly more than happy. But in the future, perhaps you can manage to inform the board about planned deals before you enter into initial negotiations with a client.”

He paused for a moment to let his words sink in.

“The board of directors,” he continued, “would like to stay informed about the activities in every department of the firm. This is pure interest, not control. You make all of the decisions as before, after consulting the CFO and the legal department.”

Alex looked at Levy for a moment and then nodded slowly. She was well aware of what one could do with information about imminent deals before other market participants could get in the game. There was a lot of money to be made by buying stocks of businesses prior to the public announcement of a takeover, which in turn would drive up the stock price. This was insider trading, and it was probably the most prohibited form of market manipulation. This is why investment banks were required to maintain “Chinese walls” serving as barriers between traders and investment bankers within a firm, so that undisclosed material information couldn’t be abused prior to its public disclosure. Levy was more or less asking her to circumvent this Chinese wall. Alex noticed the LMI president was eagerly awaiting her response, and she decided to cooperate.

“That’s no problem,” she said after a brief hesitatation. “I’ll keep you up to date.”

The relief that rushed across Levy’s face didn’t escape her notice, though his friendly smile soon returned.

“Excellent,” he said, satisfied. “I knew that we’d understand each other. You will report directly to Mr. St. John.”

Zachary St. John wasn’t particularly skilled in the banking business, but he very much understood the Wall Street power structure. He often threw parties at his penthouse apartment in Battery Park City, inviting only those he deemed important. Alex was invited for the first time this evening, and she was more than curious about who she would meet there. Invitations to Zack’s legendary parties were highly coveted in the Wall Street community because people exchanged important news, made contacts, and arranged deals while enjoying the finest food and the most expensive French champagne.

Alex took a while to think about what she should wear. At first, she considered one of the business suits that she customarily wore in the office, but she finally decided on an outrageously expensive, tight red evening gown by Versace. Tonight, she intended to show everyone that she was a woman first and foremost—despite her cleverness and ruthlessness. She arrived at the penthouse at nine thirty. It never ceased to surprise her how extravagantly people lived in New York when they had the means. About two hundred guests were spread over five thousand square feet of luxury, sitting or standing in small groups, having a great time. Zack approached her with open arms, a broad grin, and a thick Cohiba cigar between his fingers. He welcomed her warmly, admiringly eyeing her dress and her lean, shapely legs. Then he showed her off to a few very important people.

The complete LMI board of directors was of course present, together with their wives, but also a diverse group of others: lawyers, brokers, analysts, and—of course—investment bankers from other firms. Alex’s initial inhibition quickly disappeared after she realized how easily she was accepted into this illustrious circle. It felt like everyone was competing to speak with her. Zack reappeared at one point, just as she was absorbed in a discussion with Kwai and Weinberg.