The waiter appeared and took their drink orders.
“Thanks for coming in early,” Gage said, as he walked away. “I need to run a couple of things by you.”
Gage reached for his wallet, took out a dollar, and handed it to Burch.
“Your fee to make this a privileged conversation.”
Burch accepted it and held it up to the light.
“Looks legal. Maybe I’ll frame it.” Burch glanced around the restaurant in mock furtiveness, then slipped it into his jacket pocket. “I shouldn’t be seen taking money in this place. What would the other members think?”
“I don’t recall that being a guiding consideration in your life.”
Burch spread his hands. “What does a man have, if not his reputation?”
“His integrity.”
“Yeah, I forgot about that part.”
“No, you didn’t.”
Gage leaned forward, resting his folded hands on the edge of the table. Burch followed suit.
“Excellent,” Burch said, “a conspiracy.”
“You remember when I called you about a company called Pegasus in the Caymans?”
“I was bloody jet-lagged in Moscow, not comatose. Sure. Captive insurance.”
“It looks like it began as a straight-up tax fraud, then as a cover for bribery, and finally a way to launder illegal corporate campaign contributions.”
“Who set it up?”
“Marc Anston, and maybe Brandon Meyer.”
“After he was appointed?”
“Before. More than fourteen years ago.”
“Was the political money for his brother?”
“At first I thought it was. Now it seems it was also used to push legislation through by secretly contributing to senatorial and congressional campaigns.”
“How did they do it?”
“Loans.”
“I thought loans had to be reported.”
“They do. But nobody really examines them. I did some research. One senator loaned himself over a million dollars in an early campaign, but nobody paid attention until eleven years later when the Federal Election Commission noticed something hinky about how he paid himself back-”
“By taking out another loan?”
“From a different bank. And now I think Brandon and Anston are in a race against time because Landon needs to get his nominations through before anyone-”
Burch smiled. “Meaning you-”
“Maybe… figures it out.”
“Because…”
“The two new justices will join with Sunseri, Thompson, Robins, and Ardino to roll campaign disclosure law back to the eighteenth century and open the gates on corporate contributions directly to political candidates.”
“And then Pegasus pays off all the loans in secret?”
Gage nodded. “I read Sunseri’s dissent in the Massachusetts Environmental Action case. He comes right out and says it. Limiting corporate contributions is the suppression of political speech, and forcing the disclosure of the contributors’ identities is a violation of privacy. Once you start with the idea that a corporation is a person, and not just an artificial creation, you’re forced to the conclusion that it has First Amendment rights.”
“And poof.” Burch made an exploding motion with his fingers. “The public will never again be able to figure out who’s controlling the electoral process.”
“I’d never realized Landon was that cynical. He constantly wraps himself in grand ideas.” Gage leaned back in his chair. “You know what Brandon told me when I went to see him after Charlie died? He said Landon took St. Augustine and Thomas Hobbes to read on a flight to Beijing a few months ago.”
Burch raised a hand like he was seeking his teacher’s attention in class.
“I know one. From Hobbes. ‘There is always war of everyone against everyone, and the life of man, solitary, poor, nasty, brutish, and short’.”
Burch glanced around the elegant, bright-lit dining room, and at the San Francisco elite now collecting at the bar.
“Not so poor here, of course.” Burch looked back at Gage. “I tried to read the Leviathan at Oxford, a long, boring book written in an archaic kind of English. I never finished it.”
“Landon didn’t either. I don’t think he struggled his way as far as the chapter where Hobbes says corporations are ‘like worms in the entrails of natural man.’ ”
“Maybe he just skipped that part while rushing to read the celebration of the all-knowing, all-powerful sovereign.”
They ceased speaking as the waiter delivered their drinks. Scotch for Burch. Beer for Gage.
Gage raised his glass, “Happy birthday.”
Burch raised his in turn. “Thanks, old man.” He took a sip and set the glass down. “Who else knows about what’s been going on besides you?”
“It’s hard to tell.”
“Landon?”
“I’m not sure he’s ready to accept the reality.” Gage said. “The question is whether there’s any way the scheme could be legal?”
“From a tax perspective or campaign finance perspective?”
“Both.”
Burch took a sip of his Scotch.
“Are they still doing it?”
“It looks like the tax gimmick ended four years ago, possibly because one of their clients got investigated by the IRS.”
Burch nodded. “I remember that time very well. Everybody who’d been using captive insurance to move money offshore and then back in again tax free, was bailing out. The real crime wasn’t making premium payments to an offshore insurer, it was that the money was returned right away to officers of the companies.”
“But what if the money was returned to the U.S. and put in someone else’s pocket,” Gage said. “Maybe sent from an offshore finance company and into a U.S. bank, and then invested in CDs or time deposits and held there until they needed it.”
Burch stirred the ice cubes in his drink with his fingertip.
“It wouldn’t be a good idea from an investment perspective,” Burch said. “They could make a lot more money elsewhere.” He paused in thought, then said, “This reminds me of a group in Chicago. They sent about two hundred million offshore as insurance payments, then invested the money in mutual and hedge funds operating out of the Caribbean and made a killing, tax free. An illegal kind of 401(k).”
“Except Brandon and Anston’s aim wasn’t to make money,” Gage said, “just to move it into political campaigns.”
“But that’s pretty risky from a bank regulator’s point of view. Campaigns are notoriously bad at making good on loans.”
“But there’s no risk if the loans to the campaigns are secured by the deposits Anston and his people made.”
“So, basically, you think it’s a money laundering scheme.”
Gage nodded. “Say the bank pays them three percent interest on their deposits and they pay the bank five percent interest on the loans. Or even two percent and four percent. The two percent spread between what the bank pays them and what they pay the bank is the bank’s fee for laundering the money.”
“Brilliant. The bank takes no risk at all.”
“And there’s something more,” Gage said. “I think they’ve put a lot more money into the banks they’re using than they’ve taken out. I’ll bet they have a couple of hundred million waiting to be tapped.”
Burch stared down into his glass, shaking his head.
