Trading Reality (44 page)

Hartman smiled a thin smile. ‘Nothing. It’s just an investment like any other. The company makes no sense by itself. It should link up with another partner that’s financially stronger. When it does, the share price will go up. I’ll make some money and sell out. Easy.’

‘And what happens to people who get in your way?’

‘If they’re doing the wrong thing for shareholders, and there’s a move to remove them from the board, then I’ll support that, naturally.’

‘What about other ways of removing them?’

‘What do you mean?’

‘You know my brother Richard was murdered?’

‘Yeah. I heard. Bummer.’

He was goading me. I didn’t respond.

He stirred himself. ‘Fairfax, if you think I killed someone over your chicken-shit little company, you must be crazy.’ He pointed back towards the way we had come, back towards his dealing room. ‘I have two billion dollars under management through there. Your entire company is worth, what, fifteen million tops? Why am I going to get a guy killed over that? Even if I am into getting guys killed, which, by the way, I’m not.’

I sort of believed him. I tried another tack. ‘You have a reputation for being extremely well informed about companies in which you invest.’

Hartman laughed, a short sharp bray. ‘I like the way you put that. Yes, I am well informed. I do anything I can to get as much information as I can, legally. It pisses off some people. But it’s good for the markets.’

‘Oh yes?’ I said.

‘Oh yes. You ever hear of the lead steer?’ I had, but there was no stopping him now. ‘The market is like a herd of cattle in a stampede. Except they’ve all got to follow someone. Some smart beast has got to be in front deciding where to run. And that’s me. I’m the lead steer. I get the information first, and show the other guys which way to go. They need me.’ He was really animated now, waving his arms. ‘These securities laws are all bullshit. Someone’s always going to know more about stocks than the dumb widows and orphans. Hell, no one knows more about FairSystems than you, and you’re allowed to buy and sell shares, aren’t you?’

‘Well, not till two years after the initial placement,’ I corrected him.

‘OK, OK. Detail. But after that? You can buy and sell shares all day long to guys like me who are trying to figure out what the hell is going on. Who can blame us if we try to get an edge?’

‘Even if it’s against the law?’

Hartman calmed down a touch. ‘No, I don’t break the law. But what I’m saying is, they should change the fucking law.

‘Anyway, you wanted to know what I want from your company. It’s simple. I want you to quit screwing around and sell it. Then I can take my money and go find something a bit more interesting to invest in. Got it?’

‘I’m not going to sell,’ I said.

‘Jeezus!’ exclaimed Hartman. ‘Another one of these fucking freeloaders! Anything to keep your job! It’s management like you that brought this country to its knees, until we investors got smart and started demanding some shareholder value from our companies. You just want to keep your fucking job. Well, tough shit!’

I ignored the fact that I was English with a good job already and we were talking about a Scottish company. It was obvious that Hartman already had clear ideas on this issue. Still, at least I knew where he was coming from. I’d got what I wanted.

‘There’s no point in continuing this discussion any further,’ I said. ‘Goodbye, Mr Hartman.’

‘Yuk,’ Rachel exclaimed, when we were safely out of the building. ‘Talk about a capitalist monster! People like him should be lined up against a wall and shot. Where’s Lenin when you need him?’

‘Maybe. But I don’t think he killed Richard, do you?’

‘No,’ she admitted. ‘I wouldn’t put something like that past him in a mega takeover. But FairSystems is just too small.’

‘You know what the worst thing is?’ I said.

‘What?’

‘When Project Platform comes off, and the shares jump to a hundred dollars, that bastard is going to make a fortune.’

‘Oh yeah,’ said Rachel sadly. Then she brightened. ‘Still, at least we can help the SEC with their inquiries.’

‘That will be a real pleasure.’

We emerged from Chambers subway station into Foley Square, beneath the imposing columns of the Federal Courthouse. We made our way behind it, past a row of fast-food kiosks to a small scruffy plaza littered with bored-looking cops, just hanging out. Opposite a large ugly red sculpture was an even uglier brown block, the office of the United States attorney. It was from here that much of the work that had led to the convictions of Ivan Boesky, Dennis Levine and Martin Siegel had been carried out. The convictions had brought tremendous publicity to Rudolph Giuliani, the former US attorney. He was now mayor of New York.

When I had called the SEC in Washington, I had eventually been put through to a lawyer called Adele Stephenson who had agreed to meet us at these offices.

We were escorted through a range of narrow corridors to a conference room. There, four people were waiting for us. As we entered they all sprang to their feet. One of them offered his hand.

‘Good morning, Mark. My name is Adele Stephenson. We spoke on the phone.’ She was about forty, with a lively, intelligent face. ‘This is my fellow attorney from the SEC in Washington, Mike Lavalle. And this is Tony Macchia, and Dan Gilligan from the US attorney’s office here in New York. We’re cooperating on this investigation. Please have a seat.’

Rachel and I sat down. It was interesting that both the SEC and the US attorney’s office in New York were involved. Steve was right, this clearly wasn’t just another routine investigation. But it wouldn’t have surprised me if the current US attorney had developed a special interest in financial crime, after the success his predecessor had made of it.

‘Thank you for seeing us,’ I began.

‘Not at all. It’s good of you to come all this way. And believe me, we’re very interested in what you’ve got to say.’

‘As you know, I’m the acting managing director of FairSystems. As you may also know, my brother was murdered a couple of months ago.’

‘Yes, we had heard about it from the police in Scotland. I’m sorry.’

‘Thank you. I’m not sure how much you know about FairSystems?’

‘Assume we know nothing. Tell us from the beginning.’

So I went through FairSystems’ history since my brother’s death, and the interest shown in the company by Jenson, Onada and Hartman. I told them I was sure that the activity in the shares showed that illegal stakes were being built up by Hartman and possibly by Jenson Computer as well. I also told them of Richard’s suspicions that the stock price was being manipulated and about his murder.

All four listened. All four took notes.

When I finished, they were still scribbling. ‘Does this fit with what you know?’ I asked.

‘Pretty much. What you’ve told us will be very useful. We need to build as strong a case as we can before we make a move.’

‘I heard a rumour that you are investigating Frank Hartman?’

Adele winced. ‘Yes. We’ve been trying to keep it quiet. We’ve been investigating Hartman for two years now. Since Boesky was put away in 1987, insider trading hasn’t stopped, it’s just gone underground. People were blatant before, careless. And it still took us years to nail them.

‘Well, now they’ve wised up. We can tell from stock-price action that people are still trading on inside information; indeed, we’ve developed sophisticated computer programs to detect it. But it’s very hard to work out who is behind it, harder still to prove it. Nevertheless, the name of Frank Hartman is involved a statistically significant number of times. So we set out to catch him.’

Stephenson was leaning forward in her chair. She looked earnest, and very determined. ‘We want to take our time, use the same techniques that pinned down Boesky in the end. We pick off the weak links in the chain. Offer them immunity if they agree to pass on information to us and testify against Hartman eventually. Over the last two years, we’ve turned three little insider traders.

‘Then, in April, we received a call from your brother, Richard. He was suspicious about trading in FairSystems’ stock. He’d put together a complicated analysis that he claimed backed this up.’

‘So Richard got in touch with you? I never knew that.’

‘Yes. It was just one phone call shortly before he died.’

‘And his analysis made sense?’

‘Our own systems didn’t pick anything up in FairSystems’ trading. But our analysts thought your brother might be right.’ She smiled. ‘In fact they’ve incorporated some of his ideas into our own system. Anyway, from then on we watched the company closely. As you’ve discovered, Frank Hartman has been trading illegally to build up a stake.’

‘Can you prove it?’

‘Difficult. It’s going to be hard to prove that all the offshore funds that have been buying your stock are related. Nor can we show that Hartman has any inside information. Is there anything he could know about FairSystems that isn’t public knowledge? Something that might cause the shares to rise?’

I thought a moment. ‘There are two possibilities.’

‘Yes?’

‘The first is a takeover bid by Jenson Computer. Although they haven’t formally made an offer for the company, Jenson has bought five point seven per cent, maybe more.’

‘We’re aware of that. He made the appropriate filings. But we don’t know whether Hartman knew of this beforehand.’

‘He might have done. I’m pretty sure Wagner Phillips are acting for Jenson Computer, and of course they’re the brokers who helped Hartman accumulate his stock.’

‘We have our suspicions about Scott Wagner, too. We’re watching him closely. But you mentioned something else?’

‘Yes. There’s some new technology that FairSystems is just about to announce. Actually, it’s more like a new set of alliances. I’d rather not give you the details, but the code name is Project Platform. Anyway, if this project is as successful as we think it might be, then FairSystems could be worth many times its current share price.’

Adele Stephenson leaned forward with interest. ‘Who knows about this Project Platform?’

‘Just a very small group of people within FairSystems. And a similarly small group in Jenson Computer, including Carl Jenson himself. Come to think of it, there must be some people in Microsoft who know as well.’

Macchia interrupted. ‘So the leak could have come from anywhere, if there is one?’

‘I suppose so,’ I admitted.

Macchia picked up a sheet of paper.

‘We’ve learned a bit about Hartman’s methods,’ he said. He was slightly built, with a dark complexion and a small moustache under a large nose. He was probably a couple of years younger than Adele. They were clearly working together as uneasy equals. ‘He’s set up a tangle of offshore funds, controlled either by himself or by people he cuts into his network. This means that any stock buying he and his friends do seems to be spread over dozens of purchasers.’

‘I see.’

‘This is a list of eight companies which we believe Hartman has been involved with.’

‘Can I look?’

He pushed across the table a white sheet of paper with the names of the companies, their eventual acquirors, and the date. No title, no headed paper, no signature.

Rachel and I glanced down the list. I only recognised one. Futurenet, eventually acquired by Jenson Computer in September 1992.

‘Does he always use Wagner Phillips as a broker?’

‘No,’ said Adele, eager to take control again. ‘He uses a range of brokers, all the big firms that will still deal with him. Of the smaller firms, Wagner Phillips is probably the one he does most of his business through, especially anything high tech.’

‘Were they involved in the Futurenet transaction?’

‘They certainly were. They were acting for Jenson Computer, the acquiror. And Hartman did a number of his trades through them.’

I wasn’t surprised. ‘May I keep this?’ I asked, raising the sheet of paper.

‘You should know that we sent a copy of this list to your brother. After he was killed, the British police got in touch with us. Like you, they were concerned that his death might have had something to do with his suspicions.’

So Donaldson had done his follow-up. And drawn a blank, presumably.

‘Have they discovered any connection?’

‘No, they haven’t. I spoke to Superintendent Donaldson when I knew you were coming to see us. He said he was happy for us to give you this information.’

That was big of him, I thought. But I knew that Donaldson had been suspicious of me when he had first questioned me about trading in FairSystems’ shares, so I was glad I now seemed to be off his list. I wondered who was on it now that Doogie was dead.

Adele Stephenson nodded towards the piece of paper in my hand. ‘It looks like FairSystems is next. We’d like to gather enough evidence to prosecute on this one. Anything you can find will be much appreciated.’

Rachel and I got up to leave. The four lawyers stood up and shook our hands.

‘Oh Mark,’ Adele said as I opened the door.

‘Yes?’

‘Be careful. When these guys are in a corner, they can get dangerous.’

We caught an American Airlines flight from La Guardia to San Francisco that afternoon. The plan was to drop in on Walter Sorenson the next morning, and then go on to see Jenson at his factory in Palo Alto. A taxi took us to a hotel in Menlo Park, at the northern end of Silicon Valley. It was only six p.m. San Francisco time, but, of course, it was way past the middle of the night in Scotland. It had been a long day, and it looked as if the next day would be just as long.

I looked across at Rachel. She was staring out of the window of the taxi, watching San Francisco Bay race by. We made a good team. Although we had very different backgrounds, somehow we had a similar way of thinking. I smiled as I remembered that evening in her flat in Glenrothes when she had read to me.