Zero Sum, Book One, Kotov Syndrome (5 page)

Back at the house, he rinsed off and
checked his e-mail. His new mailbox had 38 messages congratulating
him on the new site. Jennifer was spending the night at her place,
while Avalon was chasing rabbits in his sleep in the den, so Steven
was free to begin slogging through his inbox.

Once done, he logged into what he
thought of as his ‘paranoia group’, an invitation-only collection
of cyber friends with ‘unusual’ interests in fringe topics and
esoteric conspiracy theories. He’d been invited to join years ago,
when his company had developed software for a longtime friend who
structured privacy solutions for clients concerned with
cyber-snooping. Steven had always been interested in clandestine
and off-the-beaten-path knowledge, probably a kickback from his
military days, or perhaps just a function of his somewhat
conspiratorial personality – so the invitation had been readily
accepted. When Steven’s friend had moved to Ireland, he’d remained
in ‘The Group’, as it was called by its participants, and Steven
was still an active poster.

If you could sit through the sometimes
contentious sparring over the best mechanism for creating a Trojan
horse to invade a server, or the ongoing debate over the level of
Big Brother’s encroachment into everyone’s privacy, he found the
repartee and information exchanged was often riveting. Everyone was
anonymous in the group, and used aliases. Steven’s was
‘Bowman’.

He hadn’t shared with The Group that
he’d created the site yet. All the participants would have strong
opinions on everything from the font style to the background color.
He figured he’d work out any bugs before letting the gang have at
it.

Still, he couldn’t resist a tickler
post:

[Fellas, this is Bowman. I've got a
little surprise for you. I’m a webmaster now - been working on a
hobby site that’s live and kicking.]

Immediately several responses came
back.

[What’s the URL?]

[Since when do you know how to work
anything more than a mouse?]

[What program did you use to write
it?]

[Is it porn?]

Ahh, you could always rely on the lads
to be inquisitive.

[Sorry gang, not porn, though if it was
I’m sure you’d know how to route it through Kabul. Just a little
project that will be ready for your shredding in a day or
two.]

A few seconds, and the
predictable:

[If it’s not porn, I’m not
interested.]

[Just what the world needs, another
site hosted by a sad geek who wants to whine about how
misunderstood he is.]

[You mean he ripped off your
site?]

And so on. Fun banter, but these guys
were some of the sharpest he’d ever encountered.

After spending a few hours catching up
on the latest scuttlebutt he decided to log off, scarf down a
sandwich, read a little and tuck in early. He was beat from weeks
of focused activity developing the site, and needed some
rest.

One last look confirmed the site had
already gotten 2,861 hits; my, but word spread quickly on the
web.

* * * *

Steven had never registered the
slightest interest in stocks or financial markets until he’d sold
his company. Once retired he’d gone stir crazy, so as a pastime had
indulged a lifelong fascination with fine timepieces by collecting
high value watches; favoring Patek Philippes and Rolexes. That had
gotten old quickly and he’d switched his focus to cryptography,
which still engaged him as an ongoing fascination. But that didn’t
pay well so he began dabbling in the market as an avocation – a fun
way to make a few bucks and follow trends in industries that
interested him. It started out more as a hobby than the borderline
obsession it had evolved into over the last year.

He’d lucked out and inked his company’s
sale when a competitor had wanted to consolidate, and his cut of
the proceeds had come to a little over five million bucks. Thanks
to his attorney, Stan Caldwell, he’d been able to structure the
deal so that virtually no tax was paid, leaving him set for the
rest of his life. Timing was everything; one year later, he’d have
been lucky to get the value of the furniture.

Steven would have been set for life if
he hadn’t subsequently gambled $2 million on a friend’s ‘can’t
miss’ real estate play – which crashed and burned in the ensuing
economic crisis. After that experience, his investment philosophy
became all about minimizing losses while positioning for outsized
gains, and thus he gravitated to biotech – with a lot of research
carried out before any real money got invested. He’d gotten more
involved over the last eighteen months as his comfort with the
market grew, and had begun actively trading his holdings; making a
decent chunk of change by playing the dips. He was hooked…but only
enough to keep him occupied during his days.

So far so good.

And then he discovered
Allied.

Steven’s former partner and technical
half of the setup, Jason Mallory, now ran a consulting firm
specializing in designing computer networks; when he’d gotten back
from Milwaukee last year he’d been talking about his new client,
Allied. He’d built a scalable network for them capable of growing
ten-fold over the next five years; which Jason had been highly
skeptical they’d ever need, given his assessment of the operations
and the cynicism of the employees.

Steven did a slug of due diligence on
the company and discovered several things he found surprising.
First, Allied was mainly involved in vaccine development, which was
not the typical small company play – it was usually the big boys
who were involved in that sort of thing. Second, the internet
message boards on Allied were abuzz with rumors about Griffen
Ventures, which had apparently been instrumental in funding the
last investment round and taking the company public. Griffen was
one of the more controversial investors one could have because many
of his past ‘triumphs’ ultimately blew up – to the detriment of
most smaller stockholders. And one of the board regulars had
discovered Griffen was a sponsor of several online business sites
that had been writing puff pieces on Allied since February; about
the time daily volume of the stock had quadrupled, and the price
had gone parabolic for no apparent reason.

It looked to Steven like a classic
stock manipulation from the 1920s; he couldn’t believe it still
happened in this day and age, but if he was right it could mean
huge returns – and then some. Manipulation was usually a short-term
game to create volatility and control the price. It could be
effective for a while, but fundamentals and performance ultimately
carried the day. A savvy investor could ride the upside wave with
the big boys and make a killing – and if it came out the company
was a dud, and that investor was short, he could be set for
life.

Jason’s insights told him the market
had gotten it badly wrong so far, and that Allied had the stink of
rat all over it.

Peter Valentine was one of Steven’s
longtime friends. Originally his father’s buddy, he’d become
Steven’s mentor when Steven’s dad had passed away 28 years earlier.
They’d developed a lifelong bond and Steven duly respected Peter’s
perspective and opinions.

Years of working for the FBI had left
Peter with a substantial network of contacts, and when he cashed in
his chips and retired he became a part-time private investigator to
supplement his pension. As a concession to retirement he moved to a
place where the weather was warm and he could fish every day:
Sarasota, Florida. Peter was an amazingly resourceful guy, and his
wife, Penny, was among the nicest and most patient women Steven had
ever met.

Steven had phoned on a weekend,
figuring he’d be able to get them at home. The phone had rung and
Penny had picked up. Her distinctive, chirpy voice never failed to
raise his spirits.

“Why, hello, Steven. To what do we owe
the honor of this call, mister rich guy?”

This was Penny’s customary greeting –
never failed. They’d dubbed him ‘rich guy’ ever since he’d sold his
company. In their universe it was unheard of to retire in your late
thirties.

“I was trying to make an obscene phone
call and hit speed dial by mistake. How’s everything at geriatric
country safari?” Steven asked.

“Oh, pretty wild. We had a shopping
cart get away from a neighbor last Saturday at the market, and it
almost hit a car door. You probably got it on the satellite
news.”

“Yeah, I heard about that. I hope
you’re all okay, I was going to call...”

“You want Peter? I’ll get him. He’s out
wrestling a crocodile or something. Hang on a sec.”

He heard her yelling in the distance, a
door slamming.

“Hey, Steve.” Peter was the only person
who called him Steve.

“Hey, Peter. How goes the
war?”

“Bloodied but not bowed, my friend.
What’s up on
your
coast?” Peter asked him. “How’s the beach
bunny action? Still with Nadine?”

“Uh, no, actually I’ve been seeing a
girl named Jennifer for a couple of years.” (Peter knew this full
well, but liked to make mischief with Nadine; a spectacular
brunette Peter had sworn he’d leave his wife for had he been twenty
years younger). “Peter, I need a favor,
professionally-speaking.”

“All right, Steve, what’s
up?”

Steven had laid out the whole Allied
story for Peter, giving him a breakdown of Griffen’s involvement,
backed up with a summary of the trading irregularities. Peter had
listened carefully, stopping occasionally to write down a name or
ask about spelling. At the end of the discussion they’d agreed
Peter would look into Griffen and Steven would e-mail him all the
info he’d accumulated.

Steven took his time before investing
in Allied, preferring caution over being foolhardy. All his
inquiries confirmed his negative impression, and experience with
other biotech bombs had taught him the stock could easily fall
ninety or more percent within eighteen months; it was perfectly
positioned to drop off a cliff if the science turned out to be
bogus. If he was right, it was a once-in-a-lifetime
opportunity.

He decided to get involved.
Big-time.

Over the course of the next few weeks
he violated every investing rule he knew and went short seven
hundred thousand dollars worth of stock. In his view, the collapse
wasn’t a matter of if, but rather a matter of when.

The problem was that short positions
required he pay to borrow the stock he’d sold short, and if the
stock kept going up he could get badly hurt – if not wiped out – so
once he’d established his position, he’d taken to following the
stock minute by minute, real time, every day.

The trading chicanery and implausibly
glowing press kept coming and hardly a week went by where some
pundit didn’t opine that the company was on the brink of greatness,
or at least of being acquired at a substantial premium. So even as
the company sucked money and generated nothing of apparent value
the positive rhetoric was undiminished, and there were days where
it rose five percent for no reason. It was disheartening, although
he could see why many shareholders got sucked into the feeding
frenzy. He remembered vividly one man from the message boards who
claimed to have made millions from his position. It was heady
stuff. Steven couldn’t believe a company with such obvious question
marks surrounding its investors and technology could rate such
optimistic coverage in the modern, supposedly safe markets, and his
anger at the manipulation mounted even as his determination
strengthened.

One morning, after watching in
frustration as the price jumped for the fifth straight day on
little or no volume, he had an epiphany. The idea was so
simple.

Griffen had his captive media buddies
to inflate the Allied bubble. Why not create a website that laid
out the case for manipulation, and which skeptically evaluated the
company’s supposed innovations and scientific
‘breakthroughs’?

It seemed straightforward. Just a
matter of creating a few pages – finding a place to host it – and
uploading it. A snap.

What could be easier?

* * * *

Another morning, and Nicholas Griffen
was furious again. He’d gotten calls from several of his investors
who’d seen the new site and wanted to know if his involvement in
Allied, and the precariousness of the technology, were
true.

One in particular had indicated that
any publicity could endanger their ‘special’ relationship, and
Griffen was no idiot. He understood the stakes involved, and
further understood that while he was an important part of that
particular investor’s strategy, he could rapidly lose value as his
machinations were exposed. And he didn’t ever want to have his
currency devalued with that player.

The problem was, word spread faster
than the speed of sound nowadays as a result of the internet, and
that was hurting him. His first stage pumping of Allied had worked
like a charm, luring the dumb money speculators in droves. But he
still had a long way to go before they’d hit his target of a market
top for the stock, and he was long in a massive way. Now, with this
new website, he recognized he had a problem brewing; the longer the
speculations about manipulation and the doubts about the technology
were out there, the greater the likelihood a predatory player would
come in and take the other side of the bet, which could be a killer
given the current size of his position. The last thing he needed
was a few big short funds to sense blood in the water and go to
work tunneling the stock.