“I take it Investor’s Blue Sheet is just an arm of Northstead Securities,” Gage said.
“It’s run by a defrocked stockbroker. He calls himself the Maestro.”
“Made to order?”
“All made up to order.”
On June 8, the stock jumped another fifty cents based on a rumor that the Chinese government was placing a thirty-seven-million-dollar order for sound amplifiers to be used as part of an early warning flood control system.
“Who started the rumor?” Gage asked.
“My guess? Maestro the Scumbag.” Alex Z almost spit out the words. He glared at the chart, shaking his head. “This whole thing really pisses me off. When I think of the naive people who fell for this scam…”
Alex Z lowered his head and exhaled, then waved his hand toward the share prices, as if each represented a tragedy in someone’s life. “Actually, it’s worse than that. For the first time ever, I imagined myself old and vulnerable. I felt queasy, almost seasick.” He pointed at a graph to his right and made a chopping motion with his hand that tracked the plummeting of the stock at the end of the scam. “Imagine what the older shareholders went through watching their futures collapse.”
Gage reached his arm around Alex Z’s shoulders. “Maybe we can help them get some of their money back, and give them a chance to start over.”
“I don’t know, boss. I haven’t been able to figure how the scam worked. And if we don’t know how they did it, we won’t be able to figure out where the profits went.”
“Let’s work on the how first, and the where later.” Gage dropped into a chair and looked up at the chart. “Did the Chinese ever buy anything?”
“SatTek put out a press release saying that they were still in negotiations and that was the end of it, but the share price didn’t drop back down.”
Alex Z pointed at the next entry. June 10. The stock had jumped to nearly four dollars a share based on a report that AB Labs was considering a buyout of SatTek.
“And that didn’t happen, either,” Gage said.
“AB Labs’ denial was taken as an attempt to keep the stock price down until they made their move. Meanwhile Matson, Granger, and an engineer started doing road shows. Granger to lend financial credibility, Matson to do the sales pitch and the engineer to explain the technology…And one more guy. Retired from the CIA. He talked about counterterrorism and military applications-”
“To combine the fear of growing old with the fear of dying young in a terrorist attack.”
“And it worked. The stock kept ratcheting up. You can even see little jumps every time Homeland Security raised the threat level.”
Gage scanned down to the next item. June 14–18. SatTek had been one of the most actively traded stocks on NASDAQ, and the price jumped to almost five dollars a share.
“One of the most actively traded on NASDAQ?” Gage asked. “You’ve got to be kidding.”
“Four brokers were responsible for most of the volume. It looks like Northstead just traded the stock among them, millions of shares, back and forth, and around and around. All the activity put the little investors into a frenzy, wanting to get in on it. A couple of days later the stock hit five dollars and thirty-five cents-and then the dump. All of the offshore companies, the blue companies, Cobalt, Blau, and Azul, started selling and the little people started buying heavy. Northstead’s boiler room couldn’t sell the stock fast enough.”
“Which stock?” Gage asked. “From the blue companies?” He didn’t wait for Alex Z to answer. “Couldn’t be. SatTek would’ve fronted a separate chunk to Kovalenko.”
Alex Z nodded. “And Northstead didn’t even pay SatTek for it until after they sold it off. They didn’t take any risk at all.”
Gage studied Alex Z’s chart. “What happened after the stock sold out?”
“SatTek filed its quarterly report with the SEC. Looked perfect. The company was booming like a son of a gun. Tons of money coming in, like from the Asian companies Mr. Burch set up. They paid in full and placed another ten million dollars in orders, each.”
Gage’s body stiffened. He stopped breathing. He could almost hear the cell door slam in Jack Burch’s face. He now grasped Peterson’s theory: Without Burch there couldn’t have been a SatTek fraud. He created the Chinese and Vietnamese companies, and they were the key to the entire scam.
Alex Z searched Gage’s face. “What is it, boss?”
Gage looked up. “Where’d the Asian companies Jack set up get the money to pay for the products?”
Alex Z shrugged again. “From sales, I guess.”
“Think. We know they didn’t do that. We found the devices SatTek sent to China piled in a basement, covered with a tarp. Same thing in Vietnam.”
Alex Z stared at the charts, as if the pattern would somehow emerge on its own. “But I don’t…”
Gage pushed himself to his feet. “The money to pay for the products came from the blue companies.”
Alex Z shook his head, almost a double-take. “What?”
“The money…to pay…for the products…came from the blue companies.”
Gage picked up a black marker and began charting.
“Look.”
Alex Z traced the lines with his forefinger. “But…” He locked his hands on top of his head and closed his eyes for a few seconds, then looked back at Gage. “You mean SatTek pretended to sell millions of dollars of products to the Asian customers to convince the SEC to let them issue stock…”
Gage held up a finger. “Step one.”
“Then used the blue companies to sell the stock…”
Gage held up a second finger. “Step two.”
“Then the blue companies wired the money to the Asian customers so they could pretend to pay SatTek for the products they had pretended to purchase?”
“Exactly.” Gage rotated his hand. “Step three was a pirouette. SatTek paid for its own products with the money it made from selling its own stock.”
Alex Z looked back at the flowchart, eyes wide, almost awestruck. “It’s the perfect crime.”
Gage sat down, then grabbed a pen and a legal pad from the conference table. There was a box missing from the chart.
“How many shares went offshore right after they went public?”
“At least eight million.”
Gage thought out loud as he wrote. “If the blue companies sold the stock for an average of five dollars a share…” He performed a quick multiplication on his pad. “That’s forty million dollars.”
“Right.”
“Even after the blue companies paid SatTek sixteen million dollars for the stock and sent ten million to China and Vietnam, they still had fourteen million left.”
Alex Z whistled. “That’s a whole lot of money.”
“And that was exactly the goal of the whole scheme-Matson and Granger have got to be behind all of the blue companies.”
Gage stood up and added to his flowchart.
“And that’s not the end of it, boss. A few months later, the SEC authorized SatTek to issue another twenty-five million shares, then another thirty after that.”
Gage looked back at the flowchart, his stomach in a knot. What if he was wrong and Faith was right? What if Burch’s rage really had turned into greed?
One thing he knew for certain was that when Peterson presented his own flowchart to the jury, the bottom box would read: Matson, Granger, and Burch.
CHAPTER 24
T he train is leaving the station,” William Peterson told defense attorney Sid Lavender. Peterson propped his legs on his desk, leaned his oversized ergonomic chair back to its limit, and locked his hands behind his head. “Sid, your client better get on board.”
“Come on, Billy-boy, I’ve been taking these cases to trial for twenty-seven years. No way you’ll convict Ed Granger, relying on Matson and Zink. Zink couldn’t investigate a plumbing leak. Why do you think he never got promoted?”
Lavender loved the game and loved to go to trial. He’d rather go to trial than have sex, eat prime rib, hit a hole in one, or win the lottery. In fact, trial was his lottery except the odds always were that he’d win. White hair, chubby face, playful smile, everybody’s favorite uncle. Juries adored him and prosecutors could never bring themselves to hate him.