End Game (34 page)

‘But it turned out that you couldn’t?’

‘No, ma’am.’

‘When did you become aware of that?’

‘It was only in the weeks leading up to our bankruptcy. Largely it was a function of the stock price. Our stock price, as you know, fell considerably, and as that happened it became clear that market sentiment towards the bank had turned sharply negative and we would not be able to raise the amount of capital we would require. At that point Morgan Stanley advised us they would not be prepared to underwrite the issue of our bonds.’

‘Do you think that was a fair assessment?’

‘Yes, ma’am. I’m not blaming them. I likely would have made the same assessment had I been in their place.’

‘Why did the stock price fall, Mr Custler?’

‘That I couldn’t say, Senator.’

‘It fell before any of the losses you mentioned became public knowledge.’

‘Yes. That’s correct.’

‘Are you aware that anyone was using inside information about the losses you had accrued?’

‘No, ma’am.’

‘So, it’s a mystery?’

‘Yes, ma’am.’

‘A mystery about why your stock price falls just when it needs to stay up so you can recapitalize the business.’

Custler didn’t reply. Whatever innuendo the senator thought she was making, he let it stand.

‘I’d like to come back to these losses you referred to. When did you become aware of them?’

‘Of the developing market losses? That’s what you’re referring to?’

‘Yes, Mr Custler,’ said the senator brusquely. ‘That’s what I’m referring to. When did you become aware of them?’

‘That would have been over a period of time, ma’am, as the picture became clearer.’

‘Were you aware of it when you became CEO of Fidelian?’

‘No, ma’am. I was recruited from a competitor bank and would have had no knowledge of any internal matters at Fidelian.’

‘Then when did you first become aware?’

‘That would be after I joined.’

‘When?’

Custler hesitated. He turned to his counsel, who covered the microphone in front of Custler and whispered in his ear. Bill Custler knew that a wave of law suits would likely arise out of the Fidelian failure – the first of which had already been filed – and that he himself would not be immune to prosecution.

Custler turned back to the congresswoman. ‘Various problems became clear to me as time went on.’

‘And yet you made no announcements about this to the public?’

Custler turned to his counsel again. This time there was a brief whispered conversation.

‘Ma’am, I believe that all announcements were made in accordance with regulatory requirements.’

‘Yet nothing was said until the day your bank went bankrupt?’

The lawyer whispered in his ear again.

‘Ma’am, I can only repeat what I said. To the best of my knowledge – and I was very clear about this throughout my time there with our chief financial officer and our chief compliance officer – we complied one hundred per cent with the requirements of the relevant accounting rules and regulatory authorities. I think the paper trail will show clearly that this was the case and it was certainly my intention. I think that’s all I can say on this.’

‘I hope you’re right about the paper trail, Mr Custler. I believe that’s going to be examined in some detail.’

Custler was silent.

Senator Givens turned to Donald Goss, a big bear of a man from South Carolina.

‘Mr Custler,’ he began right away, ‘let me explain why I’m confused. I don’t understand why your bank went bankrupt. See, where I come from, if business ain’t too good, well, you look around for someone who’ll take it off your hands and you sell it to ’em. You don’t just go belly up, not if you can help it. You don’t just throw your employees out on the street, you try to do a little better for them. How many people did your bank employ? Can you remind us, Mr Custler?’

‘Eighteen thousand, Senator. Slightly more.’

‘And how many of them still have a job?’

‘I don’t have that exact number,’ said Custler quietly.

‘Can you estimate?’

‘Not very many, sir.’

‘I see. Not very many. Now, I understand there was someone who wanted to buy your bank. And I understand that you did not accept that offer. Now you told Senator Westheim that your objective as CEO – and I have to say, I agree with the senator that if you think you carried out those objectives, sir, you are sadly mistaken – now you told him that one of those objectives was to get the best value for your stockholders. So perhaps you would like to explain to this committee how the course of action you followed got the best value for them.’

‘Sir, it is true that there was an offer for the bank.’

‘Well, we all know there was an offer. What we don’t know is why you said no to that offer.’

‘Senator, it was not an acceptable offer.’

‘Says who? Says you?’

‘No, sir. That was not a decision for me. That was a decision that came from consultation with my board.’

‘And who is your board, Mr Custler? Is that the People’s Investment Corporation of China?’

‘No, sir.’

‘Is that Mr Hu of the People’s Investment Corporation of China?’

‘No, sir. The People’s Investment Corporation does have two seats on the board of Fidelian Bank but that is far from constituting the entire board.’

‘So I’m going to ask you, did the People’s Investment Corporation of China tell you that you should not take this offer?’

‘Senator, as I said, the People’s Investment Corporation is not the only stockholder in Fidelian Bank.’

‘I know that, Mr Custler. Let me ask you a question. How many times, in your experience as the Chief Executive Officer of Fidelian Bank, did the board agree to do something that the People’s Investment Corporation of China did not want you to do?’

Custler looked at his lawyer, who whispered in his ear.

‘Senator, I …’ Custler paused and looked at his lawyer again.

‘Mr Custler, don’t worry about that. Let us assume it is a very rare occurrence. I would assume it would be a very rare occurrence for a board to act against the wishes of such a large stockholder. Would you agree, without naming any names, that it would be a rare occurrence?’

‘Yes, Senator. I think that’s fair.’

‘Thank you.’ Goss smiled. ‘Maybe it might happen once.’

Custler waited.

‘As a matter of interest, how much Fidelian stock does the People’s Investment Corporation of China hold?’

‘I believe that would be fractionally over twenty-five per cent of the stock.’

‘Mr Custler, how much does it
really
hold?’

‘Senator, I don’t believe I understand your question.’

‘Is it possible that the People’s Investment Corporation of China holds more that twenty-five per cent of Fidelian stock through its subsidiaries?’

‘Technically I suppose that would be possible.’ Custler paused as his lawyer covered the microphone and whispered in his ear. ‘That would be speculation, sir.’

‘Sure, I know. I know. Let’s speculate a little further. If they did hold more stock through these subsidiaries, and if they did not declare that, given the level of stockholding that would amount to, would that be illegal?’

‘I’m not a lawyer, sir.’

‘I am. It would be illegal. Now, Mr Custler, do you know how much stock of Fidelian Bank in total the People’s Investment Corporation of China holds through its subsidiaries?’

‘Sir, as you said this is speculation.’

‘I’ve heard it may be as high as forty per cent.’

Custler shrugged.

‘So you don’t know?’

Custler hesitated for a moment. ‘No.’

Goss stared at him.

Custler stared back.

‘Okay. That would be a hell of a loss if they held forty per cent of that bank.’ Goss shook his head theatrically. ‘They wouldn’t be too happy with you, Mr Custler. I wouldn’t be too happy if I owned a company and my CEO ran it into the ground, and someone came along with an offer and he didn’t even take it. I’d wonder if that CEO didn’t have a screw loose. Couple of screws. A whole boxful of screws. First he destroys my company and then he doesn’t manage to get a dime for what’s left. I wouldn’t think much of that CEO, would you, Mr Custler?’

‘I … don’t know what I’d think.’

‘I do. I’d think that was one hell of an excuse for a CEO.’

‘That’s your opinion, sir.’

‘That’s my opinion? What kind of a CEO is that, Mr Custler? Can you tell me? What kind of a CEO sees eighteen thousand people lose their jobs and can’t so much as lift a finger to try to save them?’

Custler took a deep breath, trying not to let the senator’s insults get to him, which was exactly what the senator wanted. ‘Sir, whether or not to accept any offer was not my decision.’

‘Of course not. Did you speak to anyone else on the board about this offer? Anyone outside of the board members of the People’s Investment Corporation of China?’

‘All the board members were consulted, sir.’

‘And did any of them say they were in favor of accepting this offer?’

Custler’s lawyer put his hand over the microphone and whispered in his ear.

Custler looked back at the senator. ‘Senator, I’m required to decline to answer that.’

‘You’re required to decline?’

‘Yes, sir.’

‘
Required?
’

‘Yes, sir.’

Goss smiled as if in complete disbelief. ‘Mr Custler, let me remind you that you are seated before a committee of the United States Senate. Now, I am giving you the opportunity to tell the American people how it came to pass that a viable, commercial offer for Fidelian Bank was rejected by yourself. I don’t know what
requirement
could be more important than the American people’s requirement to know how that happened. Now, sir, I’m going to repeat a question I asked you before. Did the People’s Investment Corporation of China instruct you to reject this offer? You have the opportunity to tell the American people what happened to your bank. Please answer this question.’

Custler listened to his lawyer whispering in his ear. He nodded grimly.

‘Senator, I’m required to decline to answer.’

‘Then I have to conclude that an agency of a foreign government led directly to the bankruptcy of this American institution. Now, Mr Custler, I am giving you the opportunity to tell me why I should not conclude that. If you will, Mr Custler, please tell me and tell this committee and tell the American people why we should not conclude that.’

Custler frowned. ‘That’s not how I would put it,’ he said quietly.

‘Then how would you put it?’

Custler’s lawyer began to speak in his ear, but Custler shook his head.

‘It was not an offer that my shareholders felt was acceptable. Senator, that is what happened. That is all I can say.’

‘That’s it? It was not an offer that my shareholders felt was acceptable.’ Goss repeated the words sarcastically. ‘That’s all you have to say on the matter? To your eighteen thousand ex-employees. To your customers. To your stockholders. I’m talking about the stockholders who were not big enough to tell you what to do, not Mr Hu of the People’s Investment Corporation of China, Mr Custler, but the honest stockholders who held the stocks of your bank, sir –
your
bank, sir – thinking they were going to help fund their retirement while all the time you knew you had these losses sitting on your books waiting to come out. Do you think they had a good Thanksgiving last week, Mr Custler? I don’t think they had very much to give thanks to you about.’

Custler gazed at him.

The senator gazed back with a look of disgust. ‘Well, I’m bound to tell you, I don’t know how you sleep at night, Mr Custler.’

Bill Custler continued to stare at the senator. The truth was, he hadn’t slept much at all recently.

‘Mr Custler?’

Custler looked at the chairman of the committee, Bill Givens. In the wake of the election results, in which three Republican members of the House in Givens’ home state of Louisiana had been deposed, the Senate Banking Committee chairman was toying with the idea of staging a run for the Republican nomination in two years’ time. He had no interest in protecting the president. By inflicting some damage on him in this hearing, he had the opportunity to get his own run started.

‘Did the president speak to you in the days before you declared bankruptcy?’ Givens asked.

Custler shook his head. ‘No, sir.’

‘Did you speak to anyone in the administration?’

‘Yes, sir. Naturally, I had a number of conversations and meetings with Secretary Opitz and Mr Rabin of the Federal Reserve and Mr O’Brien of the SEC and various of their officials.’

‘But you didn’t speak to the president?’

‘No, sir.’

‘Has he spoken to you since?’

‘No, sir.’

‘Has any member of the administration?’

‘I’ve spoken to Secretary Opitz and Mr Rabin and various of their officials.’

‘Have they suggested to you or intimated to you in any way what you should or should not say before this committee?’

‘No, sir.’

‘You say you spoke to Secretary Opitz and Mr Rabin in the days before the bankruptcy. Do you think it’s feasible the president was not aware of what they were saying to you?’

‘That would be–’

‘Do you think it’s feasible the president would not have approved of what they were saying to you?’

Custler waited to see if the senator had finished. ‘That would be speculation, sir.’

‘Would you care to speculate?’

‘No, sir.’

Givens nodded. ‘Are you aware if the president spoke to President Zhang of China during this period of time?’

‘No, sir. I am not aware if the president spoke to President Zhang.’

‘There are persistent reports that President Knowles spoke to President Zhang about your bank, Mr Custler, shortly before you filed for bankruptcy. I am going to ask you again whether you are aware if President Knowles did make such a call.’

‘No, sir,’ said Custler. ‘I am not aware.’

Givens stared at him silently.

Custler stared back.

‘Mr Custler, I want to ask you a question I asked before. Has any member of the administration, or anyone you have reason to think might be connected to the administration, suggested what you should or should not say before this committee?’