factfinding mission to Chile on behalf of the World Bank to determine the success of the Milton Friedman- and Augusto Pinochet-imposed economic upheaval on the country.
A government economist named Orlando Ferrada had slipped Abrams secret data showing that the result of those policies was that forty-five percent of Chilean families had descended into poverty, seventy percent of family incomes were being spent on bread alone, and most of the country’s wealth had been transferred to offshore tax havens. Among those funds were ten million dollars in World Bank loans that had been diverted to a secret account in Bermuda controlled by Pinochet’s wife.
Abrams had passed through Chicago on his way back to MIT. He showed the documents to an economist at a think tank founded by a Friedman disciple, hoping that the evidence would persuade them that the attempt to impose their economic theories on the people of Chile through shock and terror had been disastrous.
Days later, Ferrada was arrested at his office by Pinochet’s National Intelligence Directorate.
“What happened to Hennessy is not your fault,” Gage said.
“I feel it in my gut. It’s Orlando Ferrada all over again.”
“Who did you tell about Hennessy?”
“My assistant, the director of the FBI, and his deputy. Who they later told, I couldn’t say. But only my assistant knew I was meeting him in Marseilles.”
“If history is repeating itself, then it’s Ibrahim we should be worried about, and not because of anything that you did, but because of what Hennessy may have done or learned.”
“History is already repeating itself. You got hurt rescuing Ferrada. You got hurt yesterday.”
Gage smiled. “The first time was my fault. I was driving too fast.”
“Only because they were shooting at you.”
Gage had broken Ferrada out of a jungle prison, then had missed a turn on the dirt track leading from Chile into Bolivia. His jeep rolled down a hillside and came to rest in a frigid Andean streambed, fifty yards upstream from a Bolivian customs checkpoint, and they swam across the border.
This morning he’d also driven back roads, from Albany to Manhattan, hoping to determine whether Gilbert or his people were on his tail and whether they were set up around Abrams’s apartment house. He’d only hoped that he could use Strubb to shake them off long enough to get a few steps down the trail ahead of them, but listening to Abrams now, he wasn’t sure that would happen.
Gage glanced at the television. It was the start of the local weather report. The reporter announced that it was cold outside. The mysteries growing about the fates of Hennessy and Ibrahim made Gage wonder why weather reports always began by telling people what they already knew.
“I have the feeling that you’ve made the Orlando Ferrada-Michael Hennessy connection before,” Gage said.
“I was thinking about that while you were gone, but it’s not Chile that worries me. It’s the Relative Growth Funds. They’re supposed to be based on the work Ibrahim did when he was at MIT-but I don’t believe it. For political reasons they don’t use Ibrahim’s name, but when they refer to fractal analysis, insiders know what they mean.”
Abrams sat down and folded his arms on the table.
“I think it’s a scam,” Abrams said, “at least an intellectual one. Ibrahim being right about the markets tending toward the extremes doesn’t mean that you can build an investment model on it. But that’s what Relative Growth says is the reason they’ve beaten the performance of every other hedge fund over the last ten years, even through two economic collapses.”
“And you don’t see how it’s possible to predict the unpredictable.”
“Nobody can-and not just as a matter of logic, but of fact. Despite that, they’ve attracted almost two trillion investment dollars into their funds. Most from the U.S., the rest from Europe.”
“How did you find out? I thought Relative Growth was based in the Caymans.”
“The CIA director. He was concerned about the foreign entanglements of former U.S. government officials. Their board of directors has three former U.S. presidents, two former defense secretaries, and two former secretaries of state. After Time magazine called Relative Growth Funds ‘a Republican administration in exile,’ he felt he’d better make some inquiries and warn those guys about conflicts of interest.”
Abrams glanced at the television screen. A reporter stood in the middle of the Rockefeller Center ice skating rink surrounded by racing, screaming children.
He looked back at Gage.
“There are only three explanations I can think of for Relative Growth’s success. The first is simple market manipulation. Shorting a stock like Apple or Microsoft, then planting false stories in the press. But you can’t do that too many times before even the most dim-witted reporters figure out they’re being used.
“The second is insider trading. Altogether, the Relative Growth members sit on about a hundred corporate boards. No major move happens without them knowing about it.” Abrams bit his lip and shook his head. “But I don’t think that’s what’s going on. I know former president Randall Harris well. Very well. He’d blow the whistle, regardless of the personal cost to him.”
“There’s only one other possibility,” Gage said.
Abrams nodded. “It’s a Ponzi scheme with an offshore loop. Running new investors through a Cayman Island black hole, then back in to pay off old investors. And something like that could be concealed from the board by a first year accounting student.”
“How solid is the two-trillion-dollar number?”
“Only little better than rumor. For the most part, the CIA can only track the money when it moves from place to place. They don’t have access to the inner workings of private banks. Relative Growth could have a lot more stashed.”
“Or a lot less.”
“That, too.”
“You think that Hennessy figured it out?” Gage asked.
“Which, the total or the method?”
“The method.”
“If so, not in the same way I did. There’s no way anyone other than someone with a graduate-level mathematics background could’ve figured out that you can’t build portfolio allocation and risk models based on Ibrahim’s theories.”
Gage thought of Hennessy’s highlightings in the books in his home-office library.
“I think he tried,” Gage said. “Maybe he made a kind of intuitive leap and came to the same conclusion you did.”
“It’s possible, but I didn’t ask. I was less interested in Hennessy’s financial theories than in what he knew about Ibrahim and where he is. If I could get Ibrahim to cooperate, then I could do something about the Relative Growth Funds.”
“And you think they killed Hennessy to keep him from bringing you and Ibrahim together.”
Abrams nodded.
“And they’ve been following you, and then me, to see if we were trying to pick up the scent again.”
Gage then realized that it was a mistake to have used Strubb to shake off Gilbert. It would’ve been smarter to have led Gilbert into a trap. But it wasn’t too late. Even if Gilbert had been scared off the case, he still knew what he knew, and while he might not have known why he’d been hired, he knew who hired him.
“You have a phone book handy?” Gage asked.
Abrams reached over and pulled out a drawer of the counter under the television.
The screen showed a view down a commercial alley, and a voiceover said, “New York private investigator Anthony Gilbert was found beaten to death in downtown Albany this morning. Homicide detectives are-”
Gage shook his head, and then said, “Don’t bother.”
Gore, Steven
Absolute Risk
CHAPTER 19
