Among thieves

“And how likely is Crane to blow up?”

“Over the long run, it’s pretty much inevitable. But short term? Who knows? If he’s lucky, it could go on for quite some time.”

“What’s he doing?”

Olivia shook her head. “It’s not just one thing. It’s a series of things. A lot of it co

“It’s something you do when you think a stock is going down in value.”

“Right.”

Beck said, “You borrow shares of a stock, own it at a given price. If the stock goes down, you decide at what point you will pay for it, plus the cost of borrowing. The difference in price is your profit. If the stocks go up, you lose. You have to cover the difference. But I admit, the mechanics of it are a little murky to me.”

“I’m impressed. What about naked short selling?”

“Not as clear on that. Isn’t it illegal?”

“It’s not completely illegal. You can do it in foreign markets and in the United States if you follow SEC regulations, but those regulations pretty much eliminate the advantages, so the guys who do it often skirt the legalities. It amounts to short selling, but never actually taking ownership of the stock. Never delivering it back.”

“I’m not going to bother asking how you do that. But what’s the point? You save borrowing costs?”

“For starters. But the main advantage is the leverage. If you don’t plan on delivering the stocks anytime soon, if ever, you can leverage the whole thing by buying up tons of shares. Some guys ratchet up the leverage with options. Crane’s been known to do that, too.

“Anyhow, you don’t take true ownership. Of course, eventually you have to complete the transaction. You can delay delivery for some time, but not forever. If you cover the short, you get creamed, but traders who don’t care about the rules”—Olivia raised her good hand and made a quote sign as she said the word—” buy, huge amounts of stock because they don’t tie up capital to cover it. And then they do all sorts of shady stuff to ensure the stock price goes lower.”

“Wait, you’re telling me they can ensure that a stock goes down?”

“Not really. But they can sometimes influence a stock price more than you think. Don’t get me wrong, it’s hugely risky. But guys like Crane, they do anything they can to stack the deck. They systematically attack companies in ways to drive down the price of the stock. Naked shorting on a massive level to pull down the price. Poisoning the well with lies and rumors. Any kind of deception they can come up with. Bribes, threats. Collusion with law firms to wage class action suits. Manipulating the media. It can get really bad.”

Beck thought about that for a moment and began to see what he might be dealing with now.

“Bad how?”

“Traders that reckless, guys who go all the way out on a limb, they lose perspective. I’m sure I don’t know everything he’s doing. There’s tons of dirty stuff that could be going on.”

“And how do you know all this?”

“I’ve been around for a long time. I worked at other financial services companies. I know how things work. There’s always some group, some people who go too far. In terms of Summit, I know all the gossip, the rumors. People talk to me.”

Looking at her, seeing how agitated she was, Beck decided she was telling the truth.

“So are you saying that you tried to do something about all the shit Crane was doing? That’s what he meant by interfering with his business?”

“Yes. But don’t get the wrong idea. I’m not stupid. I didn’t threaten to blow any whistles. I mean, one thing I know is that it’s impossible to stop these guys. Or at least impossible for me. Maybe some big FBI SEC investigation could do something, but I wouldn’t depend on that. No way.”

“So what did you do exactly?”

Olivia sat back in her chair, crossed her long legs, and then her arms. It wasn’t her intention, but crossing her arms emphasized the fullness of her breasts. Beck actually looked down to stop from being distracted.

“It really wasn’t all that much. A couple of days before Crane attacked me, I saw Milstein sitting at his desk, looking older, more worn out than I’d ever seen him. I guess I felt sorry for him. That’s a stupid mistake, I know, but I walked in and asked him how things were going.”

“What’d he say?”

“He said, there’d been better days. I asked him if I could do anything. He said no. And then, I just said, ‘You know, there’s not a lot that’s wrong with this place. Most people are doing the right thing. Maybe you should do something about the ones keeping you up at night.’”

“Meaning Crane.”

“Yes.”

“And he knew who you meant?”

“Of course.”

“And what did he say?”

“He just said, ‘I wish it was that easy.’”

“Meaning?”

Olivia shrugged. “Meaning he needs the profits Crane is generating, even though it causes him a lot of worry.”

Beck thought about it for a moment. It didn’t seem like much, but if Crane was unstable, maybe the threat of having his operation shut down would have been enough to push him over the edge.

“But why would Milstein tell Crane what you said?”

“I’m not sure he did. He might have said something to one of the other partners. I don’t even know if it was that. Look, it’s my job to assess risk, monitor positions. I haven’t been totally quiet about Crane, but it’s not like I got up on a table and yelled, This has got to stop.”

“But you think it was you going to Milstein that set him off?”

“Yes. “

“Anything else?”

“What do you mean?”

“Anything else that might have set him off?”

“Of course. Guys like Crane are way off the risk charts. They’re under huge pressure. Things can blow up any minute. Maybe a big position went south. Who knows?”

“How much money is this guy playing with?”

“I don’t know his exact positions, but I’d say well over a hundred million. That’s not the leveraged money. That’s the principal.”

“How much is well over a hundred?”

“Call it a hundred fifty.”

“And how much of that goes in his pocket?”

“Not just his, all the partners.”

“How much?”

“It’s the usual setup. Two and twenty.”

“What’s that?”

“Two percent management fee. Twenty percent of the profits.”

Beck calculated two percent of 150 million, frowning at how big the number was.

“Yeah,” said Olivia, “three million in management fees, minus expenses. And if there are profits, then the numbers go up very fast.”

“How much is fast?”

“Crane is swinging for the fences, so thirty percent easy. Fifty would be more like it. Twenty percent of seventy-five million? Say fifteen million or so. For as many years as they can run it. Fifteen million in pure profit, since the fees are more than enough to cover expenses.”

“Spread around to how many?”

“Not many. That much money goes a long way in a firm the size of Summit.”

Beck thought about what people would do with that much money at stake. Breaking a couple of fingers by accident and screaming threats didn’t seem so hard to believe now.

“So after the blowup, what happened?”

“He sort of used up all his anger and then walked out of my cubicle.”

“Did he say anything about your hand?”

“No. It was like he couldn’t have cared less. I doubt he even realized he broke two of my fingers.”

“So then what did you do?”

“I put on my coat, picked up my purse, got to an elevator as fast as I could. Went downstairs to the guy at the main security desk, but it was after normal work hours and there was just this young guy there. I didn’t bother with him. What was he going to do? My hand hurt so much I felt like I was going to pass out. I went out, hailed a cab, and went to the hospital.”

“Didn’t shut down your computer, turn out the lights…?”

“No. Just got the hell out of there.”

“And then what?”