CHAPTER THREE - THE BOARD
Singapore, 10 December 2000.
Vermouth usually took a night flight to Singapore. It was one of those inconvenient six-hour flights, where by the time you have eaten dinner, you barely have time to snooze before they are serving breakfast. The advantage was that he had spent Sunday at the office in Dubai, on his return from London, and would have the full Monday in Singapore to do his banking business, before the Board convened in the evening at the Golden Grove Hotel, Board with a capital B.
He was an unusual member of the Board, the only one who was neither from the Middle East nor Asia, and he was effectively the right-hand man of Suleiman, the Chairman of the Board, at least as far as Board matters were concerned. In other spheres he had strong competition. Yet he was in some ways more "ethnic" than some of them. He had studied classical Arabic and Farsi, as spoken in Iran, at Cambridge, to which he had added the ability to speak as an Egyptian or Syrian through later travels, but always with a discernable English accent. He also had a smattering of Urdu and Hindi. It was not this that commended him to the Board, however; rather the fact that he had the experience of a Wall Street banker and had included Hebrew in his repertoire - a number of important Israelis considered him to be on their side of the fence, a window for them on the Arab world. He sat back and pondered the day ahead.
The Board meeting would be almost routine: it was the more important agenda that occupied him. He hoped to persuade Suleiman to convene a subsequent meeting of the "core group", so that he could win them over to the new project. It represented a drastic change from the way they had operated to date, and he felt they could move into another realm of possibilities, if they could work out how to implement his plans effectively. Only he and Suleiman had an inkling of the plan. As he juggled with the final presentation on his notebook computer, he was convinced that he had a powerful argument to demonstrate that this was panacea, the cure for all their problems, including his problems.
Singapore Airport is among the most efficient for the arriving passenger. Within ten minutes of touchdown Vermouth was on the East Coast Parkway, resplendent with roadside shrubs, heading for the centre of town. He would not have taken this route, but he had long since given up educating the world's taxi drivers. The trick of international travel with a heavy schedule was to sit back and relax when you could. He would drop his bag at the hotel and then launch into the day's meetings with two local and four foreign banks to conduct his banking business. After that it would be a brief rest, and then the Board.
The taxi headed for the city centre along Orchard Road, took a left turn and after a few hundred yards swung right into the Golden Grove Hotel complex. He gave the driver twenty-five Singapore dollars and stepped out into the humidity for the few steps to the air-conditioned foyer. They call it aircon in Singapore, and he smiled at the recollection of the old joke of the French community. When questioning a new arrival settling in, they would ask, "Tu as l'air con?" These facile thoughts were interrupted by the surprise of seeing Suleiman, the Chairman, at the far end of the foyer, almost out of view, in this vast plant filled foyer.
Suleiman was in conversation with Zenap, that red haired operative. How she irritated Vermouth! Suleiman seemed to trust her to go everywhere and do everything; and these stupid aliases she was always using. She never changed her appearance, so how come no one ever recognised her for what she was. Why didn't immigration at Heathrow stop her: Excuse me, Madam, we seem to recall having seen you pass through last week under a different name and passport. Would you mind coming with us? But they never had. Vermouth was one of the few with an insight into what she did, or indeed, to even know she existed.
He did not see her as a threat; it was just her manner, her sense of her own power, that drove him mad. In any interaction with him she seemed to come off best, and then she would smile at him warmly. Aggression he could have accepted: charm was tough to deal with. Still he had no time to do other than check in at the hotel reception and drop his bag, nor would he anyway have acknowledged their presence without Suleiman's invitation, which was not forthcoming.
Suleiman saw Vermouth across the foyer, but he wanted to get the story on Frank Chardonnay from his redheaded friend, Zenap.
"So," Zenap was saying, "Murphy's Law cuts in right at the start, like the lights go red but we've stuck the gear shift in reverse and go shooting off backwards."
"Tell me. It sounds fun!" Suleiman said.
"Yeah. Well I have a duty to tell you because we took a big risk. I'll come to that. We had this guy who lives near him, Hamid, on the job. Now we don't want to do a snatch in broad daylight on the street," Zenap continued.
"I agree," Suleiman concurred. "These things can easily get out of hand or be observed, scotching the whole thing."
"Anyway, Hamid has worked out when Frank will come by on his morning jog, and it clicks with him that this is right past the pick up point for Hamid's next rugby trip, and it's Hamid who organises the bus for them."
"Is this reliable?" Suleiman asked.
"Frank's regular, and we had a fallback. So this is how it goes. Hamid told the other players he had a bit of knee trouble and had called a friend who would be along in a moment to replace him. We'd worked out a few ruses about how we could stop Frank, but as it turns out, he goes for the very first one. Now everyone thinks this is a great joke when this guy comes running up and Hamid and I act like we're picking him up off the street, because they know he's supposed to be joining them as Hamid's replacement. But we know that he'll refuse because he doesn't know the first thing about it or even who Hamid is. Then Hamid will decide to play after all, the coach will drive off and we will do the snatch as planned. It'll look as if we were just a group of people having a joke, who then break up and leave separately."
"So what went wrong?" Suleiman asked.
"You won't believe it! We're kind of playing for time to get to the point where the coach will be leaving, and Frank says OK he'll play in the match and jumps on the coach. Who in their right mind would do that? Now we don't see how to get him off the coach, and sure enough it pulls out. What's more he plays in the match!"
"So this destroyed the entire plan of how to get him out of the country and down to Karachi," Suleiman said, seeing the implications for timing of the plan that he had approved: they would miss the plane.
"It did," she said, "but this when Murphy's Law got trashed. We shifted through the gears right up into overdrive, starting with the fact that the plane was delayed two hours."
"But you still had to get him on the plane, and our plan had fallen away," Suleiman objected.
"This is exactly right," she said. "I would never have planned what we did. It was so implausible that I would have said, no way. So the Heathrow guy, Azhar, says we can get him through security etc. The problem is what is Frank going to do when he gets to the boarding gate, if we get him that far, sees the destination, last call flashing, the works. But, I think to myself, if we abort now we lose a month."
"Probably more," Suleiman added. "What with their Christmas and New Year."
"Yes. So I say, let's take the risk. If he objects vehemently, we simply abandon him. I'll be in the air, the others will evaporate, and he can explain why he's the wrong side of passport control with neither passport nor ticket."
"How did you do it then?" Suleiman asked.
"It was incredible. We all had badges like we were a group. Frank just walked straight through. OK, he'd had a few drinks after the match. Then he's on the plane. A glass of laced Champagne and he's out cold."
"And now tell me about Karachi," Suleiman said with a smile.
"That was even better." Now she really launched into it. "He was scared out of his wits by the drugs to Frankfurt routine, spent the remains of the night knocking back beers in the hotel gardens, and after the first session in the morning, pre-breakfast, we decided we had our man."
"So you just brought in the others as belt and braces," Suleiman suggested.
"No need to pull in the rest of the team and go through the whole coercion programme. I mean, the reason we chose Karachi was because we couldn't have got half those guys visas to the UK, even if we had wanted. We had five guys lined up to put the third degree on him, tighten the thumb screws, stretch him on the rack. But we didn't need them. We could have done it in Tunbridge Wells. We just took him for a walk on the beach."
Suleiman was visibly pleased: "Alls well that ends well."
"Yup, and I hear from Vermouth's guys in Dubai, that the presentation Frank drew up for his bank the day before yesterday should fly. He must have landed back in London a few hours ago. We have the right man there, Suleiman: he's easy to manipulate. I think his bank will be on board within the week."
Suleiman convened the Board at seven sharp. Every member would be punctual, and Suleiman would control the entire process of the meeting. A formal agenda was never circulated, but there was an established pattern. Whatever was discussed, one thing was certain, the meeting would be to the point and short. Vermouth was well aware of this, and it had taken Suleiman less than a minute before the meeting to agree to a meeting of "the core group", after the Board meeting, and at a safe house.
Suleiman surveyed the members with authority. Each member admired and trusted him, but none knew why. Physically he was just short of six foot, powerful shoulders and strong features. Despite his fifty odd years his hair and moustache were jet black. He had always been a military man and still was, trained at Sandhurst, according to rumour later running several successful commando operations.
His manner was courteous, he knew when to apply humour and his dark eyes beamed out IQ. Maybe this explained how he also happened to be a professor of economics at an Internet based distance-learning institute. Incongruous maybe, but then he was also Chairman of the Board, not a position you would fill through an advert in the Appointments Section of the newspaper. The phrase the Board had coined to describe him was "a pragmatic idealist", oxymorons being the order of the day has far as he was concerned.
As usual Vermouth sat to Suleiman's right, and his report was the first.
"In the last three months I can report that we have added three new banks to work with us, the last and most important addition being last week. This is in connection with the power generation and distribution business of which you are aware. We have started the implementation phase. I will report to you with progress and precise figures at the next meeting." Vermouth had these figure in front of him, but he did not want to undermine the impact of his presentation later to the "core group".
"As to existing commercial operations, I will address the three spheres of activity. First, in financial instruments, we have seen substantial growth in our portfolios, particularly from technology and Internet stocks, which as you know we liquidated to take our profits just before the market collapse. We have managed to use our corporate finance activities in mergers, acquisitions and public offerings, as a vehicle to move substantial sums of money to where we can use them, as you will see from the folder in front of you. Secondly, as to powder, we see no change of flows, but a 12% increase in revenues. Pretties no change."
In the jargon of the Board "pretties" referred to the jewellery trade, and "powder", well, that was the equivalent in UK Customs speak of "grade A drugs." There you have it, gems and narcotics.
Only Vanesh or Suleiman would ever question Vermouth. Today they had no questions, and Vanesh proceeded with his report as Chief Financial Officer.
"The underlying problem remains. We have money where we do not need it, and we do not have it where we need it. We have mitigated this to an extent through the operations set up by Messrs Vermouth and Co., as he just mentioned, but we need to do more. This is the most crucial question that faces our finances. We have the money, but we still cannot use it all. In the last year our revenues have grown geometrically, both from the goods we trade and our investment of surpluses. My motion, which I have discussed with the Chairman, is that we turn our full attention to the funds transfer problem for presentation at an extraordinary Board meeting next month."
The Chairman is taking me seriously, Vermouth mused. As always, Vanesh, with his Indian accent and clipped speech, had restricted himself to the only issues that counted, as brash as a any business school graduate with none of the profiling. Vermouth had always admired him and could see how he had got where he had. A small man, his piercing eyes burned with an intensity, sufficient, no doubt, to change the polarity of the magnetic pole.
Vermouth knew that Vanesh would be at the "core group" meeting. The only other of the eleven Board members, apart from himself and Suleiman, would be Jamal Ali. Jamal Ali always came on last at Board meetings, and he did today. His report would list their disbursements to "charity". This was the sweetener, the reason why they did what they did. Hearing how the money was spent was a morale boost: it held each of them to his chosen path, justified the risks he took. The "charities" were typically fronts for organisations which either feature on the US sanction lists, or would feature on them if the US knew about them. There were few exceptions on today's list.
In other words, the Board used the profits made from its businesses to support movements and groups actively engaged, whether by peaceful means or violent, in pursuing their causes and redressing what they held to be wrongs against their brethren. Some members were suspicious of how Vermouth fitted in, but none dared challenge Suleiman's judgement.
Vermouth smiled to himself at the irony that they liked to meet in Singapore because it was so safe and secure, no riots, no terrorism, little crime. He looked across at Vanesh, the finance man. Vanesh had been in Suleiman's study group at business school, both of them in their late thirties then. Despite or maybe because of their cultural differences, a south Indian and a Saudi, the two had become firm friends. Like Vermouth, Vanesh had joined Suleiman back at the beginning in '87. They were a trading house at first, and Suleiman's idea was to use his profits to support commercial enterprises in Arab countries. Well, he could do what he liked with his profits as far as Vermouth and Vanesh were concerned. Jamal Ali had joined as their commodities man, which became their main business. The other Board members came later, usually proposed by Suleiman for a tenure of three years, but Jamal Ali had taken a growing role in these appointements in the last five years. Perhaps it was Jamal's influence that explained the shift from support of commercial enterprises to political and religious groups.
Jamal Ali who had started his report on disbursements to "charity". He could almost be a seventeenth century Italian aristocrat, Vermouth thought, with his aquiline nose, olive complexion and black hair. He had a noble look in his eyes, but then he is a pious man, Vermouth mused, and the Koran does favour trading, well certainly over banking as I do it.
Jamal also held unconventional ideas. Although he was not involved in the gem business, he had come up with the idea that customs and excise were unlawful misappropriations by the West of the profits that rightfully belonged to the producers. He had checked out tanzanite, a rare product in East Africa, and moved them into smuggling. Vermouth was sure that Suleiman had adopted similar reasoning when he had, unknown to Vermouth, sold out much of the other business and moved into narcotics.
As the meeting drew to a close, Vermouth was thinking over his position since he had first become aware of the new narcotics business. The growing cash surpluses in strange places had alerted him. At first Vermouth, who anyway held his regular banking job and now acted only at the central level of the Board's finances and not with the operating businesses, had felt there was sufficient distance from him, and that he need not be concerned. It was the need to shift cash surpluses that had finally dragged him in. He had had to bring in other banks to handle the volume, and this had brought for him a sense of personal danger. Now with Frank Chardonnay's bank, it concerned him that Frank was probably going to have to know too much, to be in a position to transcact the business. If Frank knew too much Vermouth could be incriminated. Maybe his new scheme really was the way out, giving them alternative business.
The meeting closed within forty-five minutes and broke up without formality. Socialising was neither desired nor encouraged. Travelling to the meetings was a huge drain on busy schedules, but there was no alternative to face-to-face discussions. It was unlikely that bugging the meeting would provide value to an uninformed intruder, but video-conferencing was definitely out. It was not unknown for a participant to fly in on a long-haul flight and straight back out after the meeting. The only hard and fast rule was that there had to be a secondary route to the meeting for the eventuality that the first route was subject to delay, however inconvenient - neither absence nor unpunctuality was tolerated.
Vermouth always experienced a buzz at the Board's meetings, so he was fully hyped for the ensuing meeting at the safe house. They would each travel there separately, at least fifteen minutes apart, so the meeting was unlikely to start before nine fifteen this evening.
The safe house was actually one of four houses. Each of the houses was kept free for a different three months of the year. The rest of the time they would be rented out to companies on a short term basis for expatriate executives at the higher end of the market, in banking, oil, power and so on. The tenants would usually have a string of foreign guests, parties, other expats around, so that coming and going was the norm at the houses. In the three months of own use, the Board and visitors would blend beautifully.
The rental income and real estate values had risen dramatically over the years, so that this arrangement for safe houses had also become a valuable investment, held through their Singpaporean intermediary. It reminded Vermouth of the offices and homes his old bank had maintained around the world in the old days. These properties had gradually been sold off over the years for a pittance, usually by managers trying to meet annual profit targets by realising the value in the house through sale. The justification would be something like: "We're in the business of banking not real estate." In practice the real estate had soared in value, while these clever bankers had lost money in one crisis after another: South America, foreign exchange markets, junk bonds, South East Asia, Russia, derivatives; you name it, they were there with their bank's money, losing it. What a contrast to the clear-eyed pragmatism of the Board, Vermouth thought.
The house in Andrew Road was the best of the safe houses. It was located just opposite the Singapore television studios, which meant that people were coming and going by taxi, car and limo at all times of day and night. The house, set in its own grounds, ran down the opposite slope from the TV studios in a series of split-levels. On the right was an open storm drain which led to jungle adjoining the Chinese cemetery, which in turn adjoined jungle stretching to the north of the island of Singapore and the short stretch of water to Malaysia.
Through the jungle, crossing just two roads, you could bring contraband or humans down from the sea to virtually the centre of Singapore, up the storm drain, dry except during the daily storms, and into the house. This route had been used many times. While the drain was potentially visible, the expats had again come to the rescue. The Hash House Harriers, those weekly international jogging groups, regularly ran along railway lines, through cemeteries, up storm drains and through swamps. The mountain bikers followed suit. Whereas in the rest of the world a drainage channel may be reserved for water and rats, in Singapore they were an integral part of the expat paradise.
Vermouth was the last to arrive. He stepped out of the taxi and passed through open electronic gates to the main door. The gates swung to behind him. He entered the house through the front door, descended red tiled steps to the first level past the dining room, and down another flight of steps to the lounge. On two sides of the lounge wall-to-ceiling windows opened to the terrace, and bougainvillea clad railings gave on to the pool fifteen feet below. Someone had dropped a white garden table and four matching chairs into the deep end of the pool and set places underwater together with a Champagne bottle and four glasses. With the pool lighting on it looked surreal. Vermouth was always tempted to try a dive into the pool from the railings, but he speculated that the only Board member who would clear the twelve odd horizontal foot leap and fifteen foot drop was Suleiman.
Vermouth was due to start his presentation immediately. He set up his notebook computer to project onto a screen set up at the end of the room. The other three participants were positioned on brown leather sofas, backing onto a natural brick wall. To the right was a two-foot high recess running at chest height along the entire wall. Set in the recess was a kind of 3D collage of Persian silver and brass jugs and vases, old musical instruments, antique Indian toys and miniature samovars, all backlit to shimmer and gleam.
The screen sprang to life with a world map, showing with multi-coloured arrows the routes taken by their merchandise.
"We have been very successful in trading," Vermouth said. "We have built substantial investments which are now inside the world financial system." He clicked a mouse and the world map broke up to reveal the New York skyline, the world financial centre.
"But mostly we are operating outside the system, and it treats us unjustly as far as our trading profits are concerned. We make money on commodities that the West wants, but they act as if we are criminals, and this is not true. We are not to blame if an Italian in Milan steals a car radio to finance his habit. It is not our fault and it is not our problem: it is Italy's problem. We meet consumer demand in the free market economy, just like any other supplier of basic commodities."
Vermouth was deliberately using arguments familiar to those in the milieu of his audience. "Yet they endeavour to confiscate our profits. They ask us where our profits arose. Even when we make money transfers which they deem legitimate, they charge us huge foreign exchange commissions. When the prophet, peace be upon him, rode through the desert, did anyone challenge him for what he owned? Did he pay out 5% on his credit card just because he was spending French francs from a dollar account? No."
Vanesh added: "It's the same with the fund managers: they charge us an up-front commission, hidden dealing charges, annual fees, and then they generate for us a profit below the stock market index, while paying themselves salaries of maybe ten million dollars a year or more." Vermouth looked around at the approving nods, and made his point.
"So what do we do? We have to get inside the system." Vermouth stated.
"I want you to really understand what I am driving at," he continued. "I shall start with a very simple example. Let's take a fictitious base metal. We'll call it "tulium" to avoid confusion with the real world. Suleiman, you are an economist, among other things. If I buy a tulium mine, how do I make money?"
Suleiman's response was immediate: "You invest in high quality equipment and extract tulium ore at the lowest possible cost, selling judiciously on world markets."
"That's equivalent to the approach we take in all our business today," Vermouth replied. "I want us to move on. Consider this alternative: we maximise our profits by extracting the least possible ore. As long as the ore is in the ground, we can continue to make money. As soon as we have sold it, it's gone. We have taken our profit just once instead of many times."
This was novel to Vanesh: "How?"
"We play both sides of the options markets. Our safety valve is to sell ore if, and only if, the market moves against us before we have been able to buy back at a lower price ore which we have sold forward earlier, or vice versa. Physical delivery we avoid at all costs; indeed, we may even take manageable losses rather than deliver. The point is that as long as the ore is in the ground, we can trade large positions in the markets with relative impunity. We can outmanoeuvre the end-users and middlemen indefinitely."
"So, you mean we sell ore at one price to deliver, say, next week," said Jamal, who had been listening intently, "but we hope that the price of ore has dropped before the week is out. Then we can buy someone else's ore at a lower price and use that ore rather than digging our own out of the ground."
"Exactly," Vermouth responded, "and as long as we have ore in the ground we can always play the market safely, because we can always deliver our own ore, if we have to. In reality we would play the market both ways. Our contracts to buy and sell will cancel one another out, leaving us with the profits. It is just as if we were selling our ore many times, instead of just once."
"But, gentlemen, I just wanted you to understand the principle. "This is where it gets complicated. We will be using other people's holdings, be they miners or end-users, rather than any product we own ourselves, and we will not be restricted to ore, but trade any product. This way we get the benefit of huge positions in the markets we choose to play for zero investment of our own." By now Vermouth could feel the atmosphere building. He clicked off the screen, preferring to move forward ad lib, addressing his audience as they reacted.
"Before we move into the plan," he continued, "I want you to consider one more angle. We are a pragmatic organisation. Mostly we deal with the doers, the people who actually get things done, at the various institutions we work with. Many of these people are highly qualified, experienced professionals. Some of them will rise to the top echelons; most will not, even though they are every bit as capable as their high-ranking colleagues. Some will rise because of their skills, commitment and the respect of their peers. Others, maybe most of those who do rise, will rise because they are willing to knife their colleagues in the back, lie, cheat and deny, all the standard procedures of corporate political life. They are motivated by ego and greed, and would probably make good politicians, present company excepted, of course. This latter group is ready to take risks and to put their self-interest above organisational goals."
He could see he was losing attention, with this commonplace statement, so he came to the point. "What we will do is match the venality and greed of these people to the new opportunities of the derivatives markets and play middle-man."
"I can't comment on the rogue trader affair that happened right here in Singapore, other than what the press speculated: namely, that huge supposed profits prompted top management to ignore warning signs, refusing to admit the limitations of their own lack of knowledge of the markets, preferring to stay on the band wagon for as long as these supposed profits rolled in. But I do know of other examples, where it is my belief that the auditors were either negligent or implicated in the rape of a company. I don't condone this, but if they are doing it, then we are going to help ourselves to the pirates' buried treasure."
Vanesh: "OK. How?"
Vermouth was ready for this one: "This needs a lot of work, but I have some ideas going with the lawyers. Let me first summarise the structure of one kind of deal and then talk about how we get it done. Let's take the big oil and energy groups. They are taking huge positions of the kind I talked about for tulium, but in their own products. Sometimes this business is more profitable than their underlying business. Some would like to take larger positions, but they can't. They would have to disclose the size of these additional commitments in their financial accounts and to the regulatory authorities. So what do we do? Well, we've come up with a limited partnership structure which takes this exposure out of their accounts. This means that they can do much more business by working with our structure. The bottom line is that they can take bigger risks and make more money."
Suleiman: "Why will they work with us?"
Vermouth: "We will cut the top officers, Chairman, Chief Executive, Chief Financial Officer, into the partnership profits personally. But let's make it even easier for ourselves. Let's look for a corporation that we can identify as already being underwater on its forward contracts. They may have hidden their losses for the moment, which is easy to achieve with some financial manipulation, but the losses will hit one day. Top management will be kicked out in disgrace, so let's give them a way out other than bankruptcy and public humiliation, at least in the interim."
The room remained silent and thoughtful, so Vermouth moved on.
"To do this we will need to use a combination of private bankers, accountants and consultants. The first two we have, the latter we will manufacture. We already have the man for the job on board."
He than presented the US dollar amounts he had in mind to a collective gasp from his audience. If this were true they would be doing the equivalent of twenty years of business in one year. Astonishing, but even better, all their profits would be right there in New York, clean, sparkling and fresh; no laundering required here. This was beautifully presented on the last slide of Vermouth's presentation, a cartoon sketch of the Board at lunch on Wall Street.
The "core group" examined the options, talked through different scenarios, and by midnight had reached a decision, a better decision than Vermouth could have hoped for: they would try to get the first deal going before the Board's next meeting, so that there would be something tangible to discuss. Vermouth was relieved. He was beginning to see a way of shifting to more legitimate business. He would not be dragged into the drug smuggling after all.
Unfortunately, Vermouth could not read the thoughts of the others. Suleiman was thinking, we'll play along and see, but it might be too big for us. Trading is what we know. Jamal was concerned by the elements of the structure which seemed to run contrary to his religious beliefs. Vanesh felt that if this scheme were to fly, then they would have to change the Board's objectives, because they could not give this kind of money to Jamal's friends. He felt that Suleiman had changed. He was entirely focused on running the business to maximise profits without regard for consequences. Suleiman is, Vanesh thought, becoming extremely proficient at doing well: it is just that he is doing the wrong thing very well.
They left the meeting as a group. It was less visible to casual onlookers.