Death Benefit (15 page)

“We already ran revenue models for you based on the idea of securitizing tranches of life insurance policies, and while it’s difficult to build into the models the prospect of degraded assets, in the final report there will be a recommendation that the securitization proceed immediately and that a significant portion of the funds obtained be set aside to satisfy premiums on those policies that will have to be carried longer than expected. As far as additional life settlements, it would make sense to buy only those life settlements involving individuals with clearly terminal illnesses like metastatic cancer . . . ALS . . . things like that.”

The list was a lot longer but Henry’s distaste had finally got the better of him.

Edmund thought that all this meeting had done was to confirm what Gloria Croft had told them less than twenty-four hours earlier. It figured: Gloria was one of the best analysts he ever had. And she knew about this before he did. Edmund was confounded by the fact that his great moneymaking scheme could be jeopardized by two geeks he’d never heard of.

“Let me ask you a question,” he growled at Ginny. “You find this research and you find a scientist to call in the evening who says the FDA is going to green-light this project that could revolutionize medicine or whatever. So why am I not reading about this in
The New York Times
?”

“Because researchers and their universities have become much more sophisticated about patent issues. There used to be a rush to print because they yearned for the notoriety, but they’re much smarter now. There are fortunes to be made in biotech, and this area of organogenesis might be the biggest yet. It will probably overshadow every other technological milestone in the history of medicine. Believe me, when the Rothman work hits
Nature
, it’s going to be all over
The New York Times
,
The Wall Street Journal
, and every other media outlet.”

 

 

E
dmund and Russell rode the elevator in silence. It was the same car that Edmund had assaulted the day before. He’d taken a prescription painkiller from his cache, so he was feeling only a dull throb in his left hand. He looked closely and thought he could make out a slight indentation in the metal elevator door. The trouble was he felt like doing it again.

Only when they reached the street, away from any prying ears, did they speak.

“What do you think?” Russell said.

“I think we paid those idiots too much money. And we will sue them.”

They met their car in front of the building and got in. Edmund thought for a moment. His mind was racing.

“Okay, here’s what we’re gonna do. Today. No more diabetics, obviously. Tell the sales force, even if they’re hooked on the line, even if they’re in the boat and you have the billy club in your hand, put ’em back in the water. Any contracts in the works—cancel. Checks being cut—cancel.

“Have someone go back and look at contracts of people who have diabetes and something else. We like the something else now. Get the lawyer to draft a letter in his best incomprehensible legalese to say we’re no longer interested in diabetes and send it to these people. Scrub those people out of the stats. They never had diabetes. And we need new policies. Target smokers. I know they’re the worst because none of them thinks they’re going to get sick and when they do, they die too fast. Find out if we can target smokers or ex-smokers with policies who’ve missed a couple payments. They’re all lying anyway. And offer them twenty-five percent—”

“But the model—” said Russell.

“Fuck the model!” roared Edmund. “Don’t you understand? As of today, there is no model. We don’t have a
business
if this shit goes down, never mind a
model
. Jesus. These are Band-Aids I’m talking about and we’ve got a head wound.”

“Potentially,” Russell said.

“Right, yes, there’s a chance this research may not get anywhere. But still, we’re up to our necks in this either way. Gloria Croft is already shorting us, and she won’t be shy talking about it. We have to do something. It’s not like we can sell our stock and walk away.”

“Perhaps we should go and see Jerry Trotter,” Russell said, after an awkward pause.

“Yeah, I was thinking the same thing,” said Edmund.

 

 

D
r. Jerred L. Trotter, an old friend of both Russell and Edmund, ran a very successful hedge fund. Trotter was a man who enjoyed outthinking people, which meant he wasn’t above a certain amount of sharp practice if he was confident he could get away with it. There were so many areas where the regulatory authorities were lax, or there just weren’t any regulations. It was by using Trotter’s good offices, and through a number of disguises of Trotter’s creation, that Edmund had purchased credit default swaps on his own company while continuing to sell subprime bonds to his corporate clients. It was just the kind of caper that Trotter relished. Especially when his cut was so generous.

Edmund had sounded Trotter out very early in the planning stage of LifeDeals. He sent Russell over on what looked like a fact-finding mission. Did Jerry think a model like this might work? Did Jerry think these were good assets to spin off bonds from? Did Jerry think enough investors would want to buy such a product? Russell never mentioned that they were seeking investors.

Three days later, Jerry had called, practically biting Edmund’s arm off over the phone. He’d run the numbers, and he wanted in. Edmund, after pretending to think about it, pretended to reluctantly allow Jerry to invest $25 million of his own money and more of his fund’s. Trotter would definitely want to hear about these new market conditions. He wouldn’t be pleased, to put it mildly, but he was always a man of action and he’d think of something.

The driver had been awaiting instructions as the two men sat in the back of the car. Now Edmund gave the driver an address, and they set off.

 

 

T
here was no way we could meet you guys today, no way. And then Russell said the magic word: ‘Terrasini.’” Everyone laughed, even Edmund, who was making an effort to calm down.

Dr. Jerred L. Trotter, former plastic surgeon, current hedge fund maven and LifeDeals angel investor, was holding court alongside his longtime number two, Maxwell Higgins. There was always a table at Terrasini for Trotter, and the four men—Higgins, Trotter, Mathews, and Lefevre—were nestled at a table in a corner of the restaurant’s front room.

“I thought it couldn’t hurt,” Russell said, attempting to sound breezy. Edmund and Russell were glad Trotter could see them at short notice, even if it had meant killing a couple of hours until lunchtime.

“You know it’s my favorite place to eat. Unless I’m picking up the tab, right, Edmund?”

“There’s no danger of that, Jerry,” Edmund said. “Everyone knows it’s against your religion to pay for lunch.”

Trotter guffawed. “Damn straight,” he said loudly, and waved expansively toward no one in particular and a waiter quickly came over.

“That glass of Barolo, make it a bottle. I trust that’s okay, gentlemen? Second thought, bring the glasses and then the bottle in a few minutes. I need a real drink after the morning I had.”

Edmund looked on, suppressed irritation sticking in his craw. That little sideshow just set him back at least a couple hundred bucks. But scenes like this were part of the cost of doing business with Jerry Trotter.

“No serious problems, I hope, Jerry,” Edmund said.

“Everything’s a fucking problem,” Jerry said in his usual penetrating voice. A man in a Cucinelli sweater who’d brought his family to lunch turned around and shot Jerry a look.

“Whoops, apologies, forgot where I was,” Jerry said to the man.

“I thought we should meet in the office,” Edmund said. “You know, easier to speak freely.” Jerry Trotter, like a lot of financiers, swore like a stevedore. Edmund didn’t care about that but he wanted to discuss LifeDeals’ predicament without having to hold back in front of the other diners.

“Got to eat, Edmund,” Trotter said, picking up the menu.

“Of course, Jerry.”

Edmund thought that Jerry Trotter probably knew the menu better than the restaurant’s own waitstaff. Everyone insisted on playing these childish games, thought Edmund, aware that, once more, he was the one being toyed with. Edmund studied Trotter’s face. He knew the man was at least sixty, but he looked closer to forty-five with his sweep of gunmetal hair, a few trace laugh lines, and bright blue eyes still a shade of azure that caused more than a few people to take a breath when they saw them. If he’d had any cosmetic work done, it was very good.

“Max, what was that special again?”

The waiter was handing out the glasses of Barolo.

“The pasta?” Higgins questioned with his upper-crust London accent. “Orecchiette with sweet sausage, broccolini, touch of ricotta. Sounds marvelous.”

“Ah, gives me a hard-on just to think about it. Of course. Times four, what do you say, guys? Cold day, calls for some soup, I think. The other special, squash soup, little bit of cream, am I right, Max? All around, sir, if you don’t mind.”

The waiter agreed it was a great selection. Edmund made a point of looking at his menu a couple of beats longer, then folded it and handed it over. He was too upset to protest. Now Trotter was swirling the red wine around in his glass. It was a lovely ruby color and on another occasion, Edmund would have been rhapsodizing about it.

In the often flamboyant world of hedge fund management, Jerry Trotter was something of a celebrity. He’d already enjoyed one very successful career as a plastic surgeon, catering mostly to the moneyed ladies of New York’s Upper East Side, for whom he performed face, eye, and buttock lifts. In truth, Trotter was a better showman than he was a surgeon. He knew, like everyone in the medical profession, that during medical training grades counted more than the need to display particularly good physical skills in obtaining training positions in such surgical specialties as the eye or brain, or in plastic surgery. Trotter had made sure he always got good grades to make up for his hand-eye coordination, which was poor enough for him to find surgery a taxing grind. But that was in the past, and he didn’t need good hand-eye coordination to manage money.

Trotter had always enjoyed looking after his own money and taking the odd risk here and there. After years of working six days a week at his practice, he had a lot of it to manage. Trotter had known Max Higgins for years and well enough to know he was keen to strike out on his own from his trading position at Goldman. Trotter made a proposition to Higgins: we’ll set up a fund, you run it and teach me what you know, and I’ll supply the money. It worked, and Trotter quickly found that his patients trusted him and were grateful and many were happy to let him invest for them. Trotter was a quick study and soon his fund, the immodestly and unimaginatively named Trotter Holdings, was heading toward the middle rank of name funds.

“So, Edmund, Russell, what was so urgent that we had to meet today?”

Russell looked over at Edmund before he started. The delay in Trotter being able to meet with them had at least allowed Edmund and Russell to decide how they were going to present their news to Trotter. They’d sat in a diner on Lexington Avenue for an hour and strategized.

“We have a potential public relations issue we want to give you a heads-up about. We thought you might be able to help us get out ahead of the possible publicity—nip it in the bud, so to speak.”

“Edmund, has your checkered past finally caught up with you?” Jerry asked, not sounding as though he was joking at all.

“We’ve heard about some medical research that’s taking place,” Russell continued, to spare Edmund from having to respond. “It’s at an experimental stage, with no guarantee it’s going to work or anything, but in some quarters it’s being taken more seriously than in others.”

“How does that affect LifeDeals?” asked Jerry, who glanced between Edmund and Russell even though it was Russell who was speaking. All the joviality had left his voice. The two waiters brought over the soup and left it quietly, detecting the tension at the table.

“It may not mean anything,” Russell added. “As I said, we want to get ahead of any potential bad publicity.”

Jerry Trotter picked up his spoon and tasted a mouthful of soup. It was delicious, of course, but when he sensed he was about to hear something unpleasant, his appetite faltered. “Russell, you’re going to have to tell me a little more clearly what’s going on.”

“Okay, Jerry, sure. There are a couple of researchers at Columbia who think they can grow artificial organs using human stem cells that they make from a patient’s own cells. Obviously I don’t know the details, but the process is called organogenesis. It’s supposed to start what will be called regenerative medicine. If they can grow new pancreases, for example, they can help people with diabetes live longer. But at this point, it’s a huge ‘if.’”

“I read something about that idea in some research we did on our due diligence for LifeDeals, but it sounded like science fiction,” Jerry said.

“Apparently not anymore. The future is now, as they say. Or it might be,” Russell said.

“How many people know about this?” Max Higgins asked.

“Not many,” Russell said. “Outside Columbia and the stem cell field, very few is my guess.”

“How did you hear about it?”

There was a pause. This was where it was going to get a lot trickier.

“Gloria Croft told us,” Edmund said.

Max Higgins quickly figured out the implications and, way ahead of Trotter, asked Russell the main question.

“Is she taking any action?”

“Yes.”

“And knowing Gloria, she’s shorting LifeDeals, am I right?”

“Yes.”