The Darlings (9 page)

WEDNESDAY, 3:45 P.M.

P
aul spotted Alexa through a sea of Japanese businessmen, like a peacock in a flock of penguins. She was standing under a wire mobile, part of the Calder retrospective, wearing the same bright blue coat that she had worn the last time Paul had seen her. She didn't notice him at first. Instead, she was looking up at the mobile overhead, a constellation of red stars or birds on the wing. Her mass of thick black curls fell gently behind her ears. She looked smaller than he remembered, more like the Alexa from college than the Alexa he had seen most recently. He had a distinct memory of wandering through the galleries with her at UNC's Ackland Art Museum during a high school field trip. They were sixteen then, and though he was desperately in love with her, they were just friends. A year later, they would sleep together, complicating everything.

Theirs had been the kind of love that blooms in a small town but fades when exposed to the elements of the wide open world. As adolescents, they were united by a desire to get the hell out of North Carolina. Alexa, the stronger willed of the two, was the first to go. She had always remained at arm's length from her peers, carrying herself with the quiet complacency of someone who knew that she would be moving on soon enough to something better. Paul had thought she'd become an academic, maybe, or a curator. He wasn't surprised when she was offered a scholarship to Yale. “Not bad,” she had said, “for a girl from Charlotte.”

Paul stayed behind, taking a full ride at Chapel Hill. When Alexa left, their parting was tender and tearful and they vowed to stay together despite the distance. For a few months they were steadfast, each logging hours on trains and planes when they could. But as the weather turned cold and the calendars filled with parties, exams, and football games, their visits became less and less frequent, and the phone calls shorter and more perfunctory. By the time Alexa came home for the holidays, they both knew it was over. They stayed friends, but afforded each other a respectful distance, especially when it came to the subject of current flames.

Alexa wasn't pretty, exactly, but she was pleasant to look at. She had a brilliant smile, and a maternal way about her that set dogs' tails wagging. Her curvy figure was the kind that played better in the South than in Manhattan. She had come close to marriage once, to a guy with whom they had grown up; Paul knew him only in passing. But “the bar exam had gotten between them” was the way she put it, which Paul took to mean that she hadn't been willing to give up her career for a life as a suburban mother in Charlotte. He didn't blame her.

“She's intense,” Merrill had said flatly after their first meeting. “I mean, what was she wearing? Is that some sort of statement?”

Paul couldn't recall what Alexa had been wearing, but she did tend to err on the side of casual. “That's just Alexa,” he said. He had underestimated how it would feel for Merrill to meet Alexa. They had, he realized, spent the majority of the dinner talking about home, a topic to which Merrill was rarely subjected. Alexa had meant to bring a date but she hadn't, and so the two women sat awkwardly beside each other on the banquette like a panel of interviewers, staring at him and not quite at each other. “She's just not that into the way she looks.”

She's not from New York
, Paul thought. Then a stab of guilt: he shouldn't defend his ex-girlfriend to his wife, if only in his head.

After a pause, Merrill said softly, “I bet she thinks I'm a brat.”

This was Merrill's tender spot. Her warm eyes grew earnest and worried; Merrill was not accustomed to people disliking her, and the thought that someone might always troubled her deeply.

“I promise she doesn't,” Paul said, wondering if that was true. “All she cares about is her work. She doesn't think about much else.”

“She cares about you.”

“She does. But as a friend. That's all, I promise.”

He kissed her on the head, and then the conversation was over, for that evening anyway. He knew it would come up again, if only in a raised eyebrow or slight shake of the head, anytime he mentioned Alexa's name. It became easier not to talk to Alexa at all. Being with her was like a detour off the main highway. Scenic, pretty but ultimately a distraction.

Paul had hoped that with time and a little distance, the complications of the past might slip away. The moment he saw her, he had the uncomfortable feeling that the exact opposite was about to happen.

“Hi, stranger,” Alexa said, giving him a fierce hug. She was happy to see him, but strain radiated from her eyes and the tightness of her jaw. “Thank you for seeing me.”

“Course.” He gave her a quick squeeze and then snapped back, fast as a rubber band. He hated that it felt good to see her again. “Look, I don't have much time, so . . .”

“I know. I don't, either. Let's walk? There's a new Rothko exhibit upstairs.”

“Sure.”

She took a deep breath and stepped onto the escalator. As they ascended to the permanent collection on the fourth floor, she glanced behind them. No one was in earshot. She seemed jumpy, like a person being followed. “I'm just going to start talking,” she said in a low voice, “and maybe you could just listen. And when I'm done, then you can ask questions. Okay?”

“You're the boss.”

He extended his hand to her as they stepped off the escalator on the fourth floor. “Okay. Here's the situation,” she said. “You've spoken to David Levin. He's technically my boss at the SEC; I report to him, he reports to Jane Hewitt. Also—” she shifted awkwardly now, fumbling to tuck a strand of hair behind her ear “—we've been seeing each other. For quite some time now. We live together.”

Paul was quiet. He stared straight ahead at the painting in front of him: a dark brown canvas, punctuated by thick strips of black and blue. At the top was a wispy streak of white, hanging like a lone hopeful cloud in a brooding, storm-filled sky. He could tell Alexa was looking at him, gauging his reaction.

Then she said, with slight irritation, “It's not exactly a big secret.”

“Hey,” he raised his palms. “No judgments.”

“Anyway, a couple of months ago, David started spending more and more time at the office. He wouldn't talk about it, but he seemed completely consumed with something. He couldn't sleep. Then one Saturday he didn't show up to dinner with some of our friends. No call, nothing. I started to wonder if he was seeing someone. This was, I don't know, early September? Pre-Lehman? I let it go, but he just kept getting more and more distant.”

“Mmm,” Paul said noncommittally. He would have said that Alexa was too pragmatic to drag him out of the office for relationship advice, but with women, you never did know.

Alexa stopped walking. In a low voice she said, “This is all confidential, okay? I know you know that, but I still think I have to say it. I'd get fired for sure if anyone knew we spoke about this.”

“I got it,” Paul said, not entirely sure that he did.

“Okay. Thanks.” As they moved together to the next gallery, the sleeve of her coat brushed against his. “So this weekend, David finally sits me down and tells me that something's up at work. He was freaked out, talking about it with me. Frankly, I'm scared now, too. That's why I'm here. I need your help.”

Paul's pulse had been steadily increasing since they arrived. Alexa was usually so calm, but today she was completely on edge, a little wild-eyed, almost paranoid. Not the girl he knew, and yet the girl he knew almost as well as anyone. He surged with the impulse to put his arm around her, but he stopped himself.

“Okay,” he said slowly. “Can you talk about it?”

She nodded nervously. “It started because David got a call from this woman named Claire Schultz; she was a classmate of his at Georgetown. She's an attorney at Hogan & Hartson. Claire found out that her mom, Harriet, had given over a substantial portion of her retirement money to this no-name accounting firm out in Great Neck. Firm's called Fogel & Moritz. It's basically just two guys and a desk—trust me, you've never heard of them. Anyway, in addition to doing Harriet's taxes, Gary Fogel also offered to invest some of Harriet's savings in an investment vehicle. He said he could guarantee her twelve percent returns. Harriet's not a rich woman and she's not a particularly savvy investor. But she trusts Fogel because he's done her taxes for years. So she hands him eighty grand without asking a lot of questions, and wouldn't you know it, a year later she gets back just over twelve percent on her investment. When the same thing happens again the next year, she calls her daughter Claire and brags a little about how smart she's being with her money. Now Claire's a securities lawyer, and so alarm bells go off when she hears about the ‘guaranteed' returns that Fogel & Moritz are promising her mom. She asks Harriet to send her the offering documents. In the meantime, Claire does a little digging of her own and discovers that Fogel & Moritz isn't a registered investment adviser. In fact, its nothing more than a three-man operation in a strip mall off the Sunrise Highway.”

“Uh-oh.”

“Right. Not good. So she ends up calling David, the only person she knows personally at the SEC. David goes out to visit Harriet in Great Neck, just on an informal basis. Harriet, of course, is embarrassed at the suggestion that she's been had. In her defense, she tells David that a number of her friends in the neighborhood have been investing money with Gary for years. That Gary has some ‘in' with a big-shot hedge fund manager in New York, who happens to be his brother-in-law. Long story short, the brother-in-law is Morty Reis.”

“No shit.”

“Harriet shows David some statement that appears to be from RCM. So on its face, it looks as though the money's being invested in a real investment vehicle and not just some scam. But the returns just seem eerily consistent, so he starts talking to her mother's friends who are also Fogel's clients.”

“At this point, no one's lost any money with Fogel, right?”

“No. They're all getting twelve percent, pretty much year after year. Some of them had been doing it for seven or eight years, in fact. But they all use the same words when they talk about Fogel, ‘guaranteed' and ‘bullet-proof'—stuff an investment adviser should never be saying to a client.”

“Harriet and her friends must not have been too thrilled that David was out there suggesting they hop off the gravy train.”

“No kidding. Most of them were just reinvesting their earnings in the firm or at least letting their initial investment ride. But a few redeemed out and were quite pleased with their net profit.”

Paul was getting impatient. He had begun rattling his keys in his pocket, a habit that drove Merrill crazy. “So the point is, twelve percent year after year is too good to be true.”

“That's what Claire thought. Oh, look at this . . . ” Her words trickled off, and she was lost for a moment in a painting. Her eyes gleamed, transfixed, and her forehead relaxed as if her worries were momentarily washed away.

Paul looked at the painting, but to him it was just a swirling mass of color and light. “Insider trading.” Paul prompted her. “Is that what you're thinking? Fogel's in on it, or at least, he's capitalizing on it.”

“Something like that,” she said, looking away from the painting. “Fogel's too small a fish to run some kind of insider trading ring himself. Not effectively anyway. So David started focusing on RCM. That's when things got scary.”

“Scary how? What did he find?”

“Nothing. That's the thing. There's no information on these people. The way David describes it, there is no RCM.”

Paul frowned. “That doesn't—that doesn't make any sense. They're one of the world's largest hedge funds. They're in the news all the time.”

“Maybe so,” she said. “But there's no
real
information. They've been operating as one of the biggest hedge funds in the world for over fourteen years, but they aren't a registered investment adviser, either. We have no file on them. As far as the SEC is concerned, RCM doesn't exist.”

Paul felt his heart drop into his feet. The key rattling stopped. “No. That must be some kind of mistake. Someone would have complained. RCM has a lot of very sophisticated investors. Us, for example.”

“Someone did complain. His name's Sergei Sidorov; he's a money manager up in Waltham, Massachusetts. It took David a year to find him. He's a total recluse now. Sidorov himself was invested with RCM for a while. But he got suspicious about the lack of transparency, so he pulled all of his clients out of the fund. A lot of them weren't happy about it. But RCM wouldn't give Sidorov online access to their accounts, so he never felt as though he knew what they were doing. He says RCM's a black box.”

Paul shook his head. “I don't know about that. Alain Duvalier is the head of our investment team. He's always dealt directly with RCM, so he's the one monitoring their trading activity. I just assumed he had online access to their accounts. I'm sure he does.”

“Paul!” Alexa said, loud enough to turn the heads of two mothers with toddlers in tow. Her eyes fell, embarrassed. She lowered her voice to a whisper. “Look, you realize the implications of what we're talking about here, right? This is a multibillion-dollar fund. And it's a fund that Delphic's heavily invested in. You're their general counsel, for chrissake. If there's an issue here, you can't just tell your investors, ‘Sorry, I didn't know.'”

They had stopped walking, and stood alone in an empty side gallery. Alexa went to sit on a bench in front of a large triptych. She patted the spot beside her. When he sat, she said, more gently this time, “I'm sorry. But I needed to tell you. With Morty dead, there's a spotlight now on RCM. You know that. The press, the authorities—everyone is going to want to know why a successful hedge fund manager with a beautiful wife and four houses would jump off the Tappan Zee Bridge the day before Thanksgiving. It won't take them long to figure it out.”