whole damned investment business is based on faith. And considering the debacles of the last few years, it doesn't take much to shake the faith. If there's going to be a sudden sell on Bitter Canyon, I want to be at the head of the line. Now, what's your connection to it?'
'I can't tell you, Lou.'
'I don't believe this! You call me at home in order to pump me and then refuse to tell me why. Alex, you and I-'
'Lou, this has nothing to do with finance. I haven't heard anything even hinting the bond's in trouble. Fact is, I don't know a damn thing about it. It's the people behind it that I'm interested in.'
'Which people?'
'Ivar Digby Chancellor, Beverly Hills Trust. The Cadmus family. Any connections between them.'
'Oh. That case.'
'That case.'
'What's your connection with it?'
'Defence consultant.'
'Not guilty by reason of insanity?'
'Something like that.'
'From what I hear you've got your work cut out for you. Kid's supposed to be really crazy.'
' You get that from the Wall Street Journal?'
'The financial whiz grapevine. Anytime a major corporation's involved in something nasty, we money types make it our business to assess the impact.'
•And?'
'And the general consensus is that the impact is zilch. If the kid had control of the corporation and planned to turn the lake into a giant Jacuzzi, there might be something to worry about. But in his condition that's hardly likely, is it?'
'Hardly.'
'Something the matter, Alex?'
'No. About Chancellor - '
'Gay as a blade but a smart fellow and a hell of an arm twister - the right combination of creativity, caution, and cojones. Beverly Hills Trust is one of the strongest small banks on the West Coast. Chancellor took good care of his depositors. Put through enough smart deals to beat the big boys on interest rates without overextending himself. Made money the old-fashioned way: by inheriting it and watering it until it grew nice and tall. If you're rich enough, you can get away with liking young boys and wearing eye shadow. What else do you want to know?'
'Was he involved in setting up the Bitter Canyon deal?'
'Most probably. As a skid greaser. He'd been dealing with the Cadmuses for years and had plenty of clout with the Water and Power boys, so his influence could only be salutary. But his major involvement was when it came to buying. BHT was a major purchaser of the initial short-term serials. I remember that because by the time the offering came out, all the serials had been snapped up. I was curious who got them and did a little research. He also bought into the long terms. Let me move to the phone by the computer, and I'll punch in the data.'
He put me on hold and returned in a moment.
'Okay. I'm calling it up right now Bitter Canyon Consolidated System Power Revenue Bonds, Series of 1987 - here we are. It's a state bond, not a muni, because there's no municipality of Bitter Canyon yet. We're talking seventy-five million dollars in revenue - fifteen thousand lots of five-thousand dollar bonds at par. Eighteen million were in serials maturing from 1988 through 2000, staggered toward the end; the rest, in long terms: one-third twenty-year maturities; one-third, twenty-fives; and one, thirties. Nineteen million each.'
'What was Chancellor's buy-in?'
'Wait a sec. I've got that on another file. Okay, here it is. Now, this isn't rock solid precise 'cause there may have been some under-the-table trading, but it's pretty damn close. According to my data, BHT snapped up ten million of the serials - including the shortest terms, which were the most desirable - and another ten in long terms. That's through the bank. Chancellor may have bought more for himself personally, but it'd be difficult to trace that.'
I calculated mentally.
'Over a quarter of the total. Isn't that a big purchase for a small bank?'
'Sure is. It's also atypical for any bank to get that heavily involved in long terms, especially considering the downward trend of the bond market over the last few decades. But Chancellor was known as someone who bought aggressively when he believed in something. No doubt he figured to sell at a premium in the secondary market.'
'How'd he get such a large share?'
'The Cadmuses and the government gave him the inside track because a big buy by BHT was mutually beneficial. When a savvy investor demonstrates that kind of confidence in an issue, it raises the general level of enthusiasm.'
'Where did the rest go?'
'The serials were evenly distributed among several major financial institutions: other banks; savings and loans; brokerage houses; insurance companies. As were a healthy chunk of the long terms, with a little left over for a few eagle-eyed independents such as yours truly.'
'Sounds like a hot issue.'
'Red-hot. By the end of order-taking period all of it was gone. What does that have to do with defending the Cadmus kid?'
'Probably nothing. Let me ask you one more thing: Could a prior agreement by Chancellor to buy large numbers of bonds influence approval of the issue itself?'
'As a guarantee? Sure. If there'd been initial feasibility issues regarding the project, it couldn't hurt to have a major supplier of project revenues lined up a priori. But that wasn't the case with Bitter Canyon, Alex. The reason it was a hot issue was that the setup was a sweet deal all around. The Cadmus family's owned the land since the war. They bought it dirt cheap from the army and could afford to sell it back at a very substantial discount and still make a whopping profit. That profit, in turn, enabled them to put in a highly competitive bid to build the plant. And I do mean highly. That allowed the bond's interest to come out at half a point to a point over market. These days that's a hell of a lot, and since everyone's projecting lower rates in the foreseeable future, the premium could be juicy.'
'One hand washing the other.'
'Exactly. It makes the world go 'round.'
'I've heard there was some opposition. Conflict-of-interest questions.'
'Nothing substantial. Some of the other construction companies tried to raise a fuss, but it died in the back rooms. Most of them weren't big enough to put together a project of that size. The two companies that were couldn't come close to competitive bids. Pushing the objection would have raised the risk of a public outcry over expense padding - which they're all guilty of - and major delays. The surrounding municipalities and DWP wanted the project to be approved quickly and were exerting pressure to speed things up. Being seen as obstructionist would have been a major liability, politically speaking.' Make waves and forget future contracts.'
'A little more subtle than that, but you've got the general idea. Politically speaking, this was easy street, Alex - no Sierra Club types screaming about sacred cactus, high rates of local unemployment. Going to be lots of smiling faces when they break ground.'
'When's that supposed to happen?'
'Early next year. Right on schedule.'
'And Chancellor's death has had no effect?'
'Why should it? Sure, people are going to be looking at who takes over the bank. If it's a moron, you're going to see a slow, steady trickle of withdrawals - nothing sudden, because everyone gets hurt in a run. But that's an internal issue that has nothing to do with Bitter Canyon. Or the bonds.'
'What could affect the project?'
'Nothing smaller than your basic act of God - always nice to blame Him when things go wrong isn't it? The lake evaporates overnight; Cadmus Construction turns socialist and converts to a macrame factory - I don't like the tone of this conversation. What the hell are you getting at, Alex?'
