Death Wish

“Steady and tiresome. I haven’t found anything shocking.”

“Kind of hoped you wouldn’t.” George Eng was fleshy around the face and his movements were those of a heavy man but he was not overweight. Paul had only met him within the past year; he assumed Eng had done a good deal of dieting in the recent past but hadn’t yet got used to being slender. He had a thin feathering of dark hair and a self-conscious Fu Manchu moustache that lent his Oriental features a sinister appearance. He had been born in Hawaii into a wealthy family; he had no discernible accent. He dressed with conservative care and had expensive tastes; he was a good businessman with a quick decisive mind. Paul had met him only at business affairs and gatherings associated with business—cocktail parties, luncheons. He knew nothing about the man outside of that context; Eng was a private person, he didn’t open up. It had been months before Paul had screwed up the nerve to crack mild and inoffensive Oriental jokes at him, and he’d only started because it had become evident that Eng expected it and enjoyed it. He played the role of Chinese man-of-mystery with deliberate intent.

It was the sort of restaurant that did most of its business at the noon hour and attracted a business-lunch clientele of the kind that didn’t stint on expense accounts: The drinks were generous, the menu straightforward but served with a proper elegance, and the tables were separated by pillars and rubber plants and discreet distances. The lighting was recessed and indirect but you didn’t have to strain your eyes to read your partner’s expressions.

“All right,” George Eng said, “let’s wheel and deal. You’ve been at it all week. What can you tell me?”

“It’s pretty much what we expected. Nothing alarming. Naturally they’ve done everything they can to put the company in the best light—they’ve seen you coming, for quite some time.”

“In a way we did that on purpose. Wanted to see how much skulduggery their management was willing to indulge in. We’ve given them ample opportunity to show their true colors, don’t you think?”

“I’d say so, yes.”

“And what are their true colors?”

“I’d call it pale gray,” Paul said. “You’ve already seen the routine posting-and-footing audit; that was done back in New York with electronic data-processing. We already knew they’d done some mild fiddling with their earned surplus and net working capital and other vagaries like that.”

“You’re suggesting I needn’t be surprised to find they’ve carried that policy through to the rest of the company.”

Paul nodded. “I didn’t think it would put you off.”

“What specifically are we talking about now?”

“I’ve found half a dozen points you can use for leverage, I think. For instance, they’ve tried to show a sharp increase in assets by reporting the company’s subsidiaries at book value instead of original cost.”

Eng made a face. “That’s a little cheap. I’m disappointed in Jainchill.”

“You can’t really blame him for trying.”

“I had a sneaking hope he’d be a little less obvious than that. What else?”

“Well, they’ve started amortizing their research costs over a five-year span. They only started doing that last year—before that they were absorbing them immediately in each fiscal year. Nothing dishonest about it, but it does paint a brighter picture. The only other thing of any consequence I’ve been able to find is a sharp increase, within the past eighteen months, in stock options to their executives.”

“In lieu of cash bonuses, you mean.”

“Yes. They used to pay cash bonuses almost exclusively.”

“What do the stock options amount to?”

“I’m still working on those sheets. If I had to make a general projection I’d say it would be in the neighborhood of four hundred thousand dollars.”

Eng put a cigarette into a stubby silver holder and lit it with a jeweled lighter. “And of course those stock options aren’t charged to income.”

“No.”

“Stock options,” Eng muttered, “can turn out to be a long-run drain on per-share dividends. They could end up diluting their capitalization if they kept it up at that rate.”

“Well, I’m sure they had no intention of keeping it up. They knew you were nosing around, there was a good chance of a take-over bid from Amercon—you’d have done the same thing, in their shoes.”

“In effect, then, they’ve been paying bonuses to their own executives in the form of options on what they hope will be Amercon stocks.”

“It amounts to that.”

“That’s a little blatant,” Eng observed, “but if it’s the worst they’ve tried to pull, I’m not going to lose any sleep over it. I was more concerned about the possibility that their cost system didn’t reflect actual production costs, or that they might be saddled with big inventories of obsolete stock that they never bothered to write down or charge off. I’ve run into that several times—losses that should have been taken long ago, but somehow end up staying back in a warehouse somewhere with no liability accounts to cover them.” His eyes suddenly whipped up to Paul’s face. “But you haven’t found anything like that.”

“No. That’s not to say it couldn’t exist. I just haven’t found any signs pointing that way. We won’t know for sure until we’ve been over the inventory sheets for all their subsidiaries.”

“How long do you expect that to take?”

“Depends on how detailed an audit you want. Jainchill’s got five subsidiaries. He took over three of them within the past four years. Naturally at the time of the mergers he had audits done. Now either we can accept those figures or we can duplicate those audits ourselves.”

“What would you recommend, Paul?”

“I’d be willing to accept his audits. It would cost you quite a bit of money and three or four months’ time to dig back into all that stuff now. And don’t forget, Jainchill didn’t have a buyer for his own company sniffing around when he went into those mergers. He hired competent accountants and they did a thorough job of investigation for him before he moved in and took over these subsidiaries. He couldn’t afford to do any less than that—he had to be sure he wasn’t buying a pig in a poke. He was in the same position then that you’re in now.”

Eng speared a shrimp and sat with it half-raised over the plate. “Suppose we decide to accept those figures. How long will it take you to finish up the rest of your audit?”

“My end of it or the whole operation?”

“They should be finished in New York by the end of this coming week. I’m asking about your own work here.”

“From the way things look right now, I’d say I should have everything I need here by the middle of the week. Say Wednesday evening. Then I’ll need a few more days on the computers back in New York. Ten days from now ought to wrap up the whole thing.”

Eng nodded. “Good. Then let’s do it that way. My board of directors is anxious to get this merger rolling.” The shrimp made the rest of the trip to his mouth and disappeared inside. “How do you like it out here?”

The sudden switch of tone and topic took him off guard. “Well—it’s kind of hot.”

Eng shrugged. “Everything’s air conditioned. Half the year it’s pleasant anyway—no snow, you never need an overcoat.”

“So they tell me.”

“I gather you don’t like it much.”

“I wouldn’t say that. It’s too different a life-style for me, I suppose—I’ve spent my whole life in New York. I’ve nothing against it for other people. But it does remind me of the suburbs. Does that make any sense?”

“Yes. There’s a small-town flavor to it even though there’s half a million people here. I take it you must have tried the suburbs at one time.”

Paul nodded, finished chewing, swallowed, reached for his napkin. “Some years ago. You need a certain kind of patience to live in a house and put up with all the mechanical things. Every time you want to buy a newspaper or a carton of milk you’ve got to get in a car and drive somewhere. It’s all right for most people—I just never got in tune with it. And I always hated the idea of neighbors nosing around one another. In the city your neighbors don’t bother you unless you make it clear you want them to.”