Ted Fell was one of the few people, in fact the only one, who could really talk to Lake like this. Blunt, no bullshit. But that was because Fell was the best addition to the organization that Lake had made. He complemented Lake’s own strengths and made up for Lake’s weaknesses in other areas. A graduate of Dartmouth College and Harvard Law School, Fell had held several positions with large law firms in Albany, Wilmington, and New York City, most in the areas of finance, insurance, and corporations. Admittedjo the bar in sixteen states, he was considered a leading authority on corporation organization — i.e., dummy corporations and offshore shells. He had worked for Lake since his days at Universal Equity, helping him on his real estate deals and then unwittingly, and then knowingly, participated as an engineer in the stock manipulation scheme that had gotten them both fired.
Lake wasn’t totally listening to his attorney, but what little that did register in his head made sense. The terrorist bombing of San Francisco International last night was an aberration, a total fluke — damn it, it had to be, or Lake was really sunk. Several hundred persons dead, thousands injured, hundreds of millions in damage to aircraft and property, and perhaps billions in lost revenues due to the closing of the airport for perhaps as long as a year.
A one-in-a-million occurrence…
But the damage to Lake’s portfolio was just as devastating, and simply because it was caused by a random event would not mitigate the damage. Because he rarely used his own money for most deals, Lake liked trading on the edge, leaving himself uncovered for short periods of time. One of Lake’s favorite options trading tactics was writing uncovered put and call options, or “naked options,” in which he agreed — for a price of course — to buy stocks at a certain price that he didn’t have the money to buy, or sell stocks that he did not yet own. In ordinary circumstances, the premiums received for writing such contracts made the risk well worth it. But if the market takes a nosedive and the contract is assigned, as it was during the night by some astute overseas investor, Lake was obligated to sell his stocks at low prices or obligated to buy stocks with cash he did not have. In both cases, he needed cash in a hurry to cover all his contracts.
Normally, in case of impending bad financial news, Harold Lake’s overseas brokers usually executed closing purchase transactions that canceled the more risky uncovered options before they were assigned, but the sheer speed of the terrorist attack and the rapid reaction by overseas traders made it impossible. Lake was stuck holding all the IOUs, and they were all due and payable by close of business, or he was out of business. The huge drop in price of Lake’s stocks in overseas trading alone was enough to queer several other deals in which he was involved. The New York Stock Exchange was not due to open for another three hours, the Chicago Board of Options Exchange not for four hours, and already Lake had lost 40 percent of his portfolio’s value, much of which had to be covered with cash. Dozens of nervous overseas investors bailed out on him through the night, withdrawing money that had been earmarked for scores of other projects — it was a huge maze of dominoes collapsing as quickly as the sunrise moved across the planet. Investors heard of the awful terrorist bombing, took defensive cash-saving positions, and left speculators like Lake sucking wind. Borrowing the money to make up for the losses and to continue his current obligations only prolonged the inevitable. Eighteen million dollars wouldn’t last Lake two months, even at zero-percent interest, let alone at an exorbitant 10 percent. Foreclosures and bankruptcy were inevitable.
But even more devastating than just losing your possessions or property was the loss of prestige, the loss of face. Normally talking about losing face was a Japanese notion, but it is very true on Wall Street as well. You are only as good as your last bad trade, the Street version of the old saying goes. No one likes a loser, and the stigma stays with a trader for a long, long time.
Technically, he was out of business right now, because no one would ever do deals with him again, but now it was a matter of survival. Bankruptcy was out of the question— it would save him from a few, but not the ones that mattered. A lot of the people he dealt with did not allow anyone to hide behind lawyers and bankruptcy courts.
Lake took a deep breath, then got to his feet, straightened his shoulders, and tightened his stomach and chest muscles until they tingled. When faced with adversity, he was always taught, get the blood running and the brain working. Start thinking and feeling like a warrior and you’ll start acting like a warrior. It was time to get on the offensive: “I’m going to need a face-to-face with George Jacox and get a report,” Lake said. Jacox was the outside tax attorney and accountant, leading a staff of two attorneys and six CPAs who managed Lake’s affairs. “I need to restructure that debt with McSorley first thing.”
“George is in Alaska on that hunting trip,” Fell reminded him. “Completely incommunicado until Saturday. I can get in contact with his partner.”
“Scherber’s an asshole,” Lake said. “Besides, George knows where all the bodies are buried. Get the jet and go pick him up. Better yet, pack all his records on a portable computer, grab a satellite transceiver, and take it all to him. Then let’s put in a call to—”
“Boss, I think our first move should be to sign those papers and get the loan moving,” Fell interjected. He wasn’t about to tell Lake, at least not this minute, that they could hardly afford to reserve a court at the YMCA right now, let alone fly the company’s private jet from New York to Alaska and back. “We’ve only got two hours before the last wire transfer from Europe. In an hour and a half the phone’s going to be ringing off the hook, and we’d better have a wire receipt to show the institutions that we’re covered or we’ll really be in trouble.”
“I am not going to spend all day on the phone with a bunch of nervous bean-counters,” Lake said. “They wanted to play, and this is part of the game — let them sweat for a few hours while we get our shit together here. Next time, Jacox doesn’t leave the fucking city without a cellular phone or I’m finding a new legal team.”.
“We don’t needJacox to read a spreadsheet or make a pitch to the venture capital types,” Fell said. “I can handle the legal side of the opening negotiations. But let’s get solvent first before we start bending anyone’s ear.”
“You don't get it, do you, Ted?” Lake snapped, turning angrily toward his longtime associate. Lake was a bit shorter than Fell and physically smaller, with tight, wiry muscles and a lean physique — physically, he was no match for the huskier, more solidly built attorney. But the air of desperation that hovered around Harold Lake made him seem all the more fearsome. The veneer of cunning control was gone — as much as he tried, Lake was not going to get it back. He ranted, “I am not going to go into eighteen-million-plus dollars in debt, get bombarded by jerkoffs who think they can push me around because the market takes a header suddenly one morning, and then try to pretend everything is going to be okay. This is a glitch in the market, nothing more. We’re in the middle of a sustained bull market, for God’s sake! The market hits new record-high territory every three months! Is it my damned fault that a fucking terrorist drops a bomb on San Francisco International?”