The Concealers (30 page)

As they lay there, cuddling together under the warmth of their bodies and covers, for once in her life Katherine had no questions and only one answer. She knew at that moment she wanted to spend the rest of her life with this man.

Sean looked to Katherine as if he were reading her mind. “There's one thing you need to know,” he said. “In the Service, I will be gone for long periods of time, not knowing when I will return, and often, not in a position to communicate with you, or if I am, to tell you where I am or perhaps more importantly, what I'm doing.”

“I guess that's why they call the Service ‘secret.' Is there a question in there?”

“Inherently, yes. It's an old question. Will you wait?”

“Forever.”

Readers e-mailed, called, and even stopped in to talk about the injustice of what happened to Constance Shipman. The news got better when Constance called Katherine to tell her she'd been offered a senior teller's job with Golden Shore Bank. When Katherine's thoroughly researched piece about the FDIC lawsuit hit, audience response tripled. Readers were beginning to connect the dots. In the third week, when the
Twin Forks Press
' readers learned of the collective millions lost by investors—many of whom were their neighbors—response increased ten-fold.

The reaction—verging on small-scale celebrity—fueled Katherine's determination even more. What happened next exceeded her wildest expectations.

Congressman Brian Quinn called her at the newspaper office the week after Labor Day. Of course she knew he was up for reelection and likely trying to change his image anyway he thought he could to make a difference, but his concern also seemed genuine.

“I want to congratulate you on the stories I've been reading,” he told her. “You may know, as the ranking member of the House Financial Services Committee, I have a keen interest not only in the health of our financial institutions, but in the way they are run.”

“Apparently for some at the top, avarice is a way of life.” Katherine asked him point-blank, “How do you propose to change that?”

“We've already done a lot. Investigations are going on, as we speak, on multiple levels—numerous federal offices and all the state agencies. It's also the focus of several of our committees in Washington.”

“Why did you call me, Congressman?”

“I was particularly interested in your story about local investors and the money they lost when Hamptons went down. Many of my constituents have contacted me about this, asking what we can do to help. I'd like to sit down with you and go over how we can work together—help each other.”

“I'd like that. When and where?”

“I'm in Brentwood today. Can we meet this afternoon?”

“Yes, what time?”

“How about 2:00 p.m.? I can send a car for you, if you like.”

“Can my golden retriever come along?”

“Are you serious?”

“Yes. She's here at the newspaper office with me, but, of course, I could drop her off at my apartment if need be.”

“Bring her. See you then.”

“At what number may I reach you, if something comes up?”

He provided her with the number.

Katherine went straight to Sol's office. The door was open, and he waved her in.

“Hey, kiddo. What's up?”

“I'd like to ask your advice. Congressman Quinn just called me. Said he liked our stories, particularly the one on the Hamptons Bank investors. Said many of his constituents have been asking him for help in connection with their losses. I asked him why he called me, and he said he wanted to meet and discuss how we could work together and help each other.”

“Really? He has a high profile.”

“Several questions come to mind. For one thing, nothing in my stories has been political. He's a Republican. Chip Reider, our congressman in the first district, is a Democrat. What are the ethics? Should I talk to him at all? Should I try to talk with Reider and Quinn together? Give equal time? I'm digging deeper and deeper into the bank issues. Obviously, Quinn has deep investigative resources—on a national level. Either could be a big help.”

“Talk to him. Record everything—with his permission. Ask a lot. Say little. Keep me in the loop. It's getting interesting.”

A couple of hours later, Katherine and Hailey stepped out of the limo at Representative Quinn's local district office.

“It's nice to meet you, Miss Kelly, and your dog as well,” said the congressman.

“Thank you. It's Katherine. This is Hailey's first ride in a limo. She's very appreciative. She told me she'd be happy to wait quietly in your reception area while we talk, if you like.”

“No, I think she should hear this. Bring her in.”

When Katherine saw a picture of a blonde golden retriever on the congressman's trophy wall—among the pictures of famous people—she understood.

They sat at one end of a large conference table.

“I'm pleased to meet you, Congressman,” said Katherine. “I've followed you more closely since I moved to Southampton, and I'm under the impression that you truly care about your constituents, as does your neighbor to your east, Congressman Reider.”

“Nicely done, Katherine,” Quinn said with a smile.

“Do you mind if I record our conversation?”

“I'd rather you didn't. In fact, I'd like your agreement that this conversation will be off the record—at least until we can agree on what we want to be on the record.”

“This may be a short conversation, but we'll see how it goes,” Katherine said. “We both share interest in the banking industry, but our constituencies are obviously different. How do you see our helping each other?”

“You're a young reporter and you have gotten your teeth around a juicy bone. We can identify and pursue our common interests. Press—depending on how the story's written—can be an incentive for those in the banking world who want to do the right thing and pressure on those who don't. In fact, it can cause the worms to come out of the woodwork. That can lead to better evidence, stronger testimony, and more political capital to achieve banking reform.”

“I won't be able to provide you with my sources, and I won't do anything to compromise my stories.”

“I may have information that can add to your stories. You can decide what you want to use. I won't interfere with what you write or ask you not to write it. If you have information you feel may be helpful to what we're trying to do, and providing it to us is not a problem for you, we'd like to receive it.”

“Do you ever work in conjunction with Representative Reider?”

“We often work together. There are always bipartisan issues where cooperation can help. There's no exclusively Democratic or Republican way to defraud a bank.”

“I'd like to talk with my publisher about all of this. May I have your permission to tell him what we talked about—providing it will remain off the record?”

“You have it, and give Sol my regards. By the way, I'm not sure if you've heard that Bank North America's acquisition of CCB has been finally approved. I've enjoyed talking with you, Miss Kelly. I think we should be able to find a way to work together.”

“I certainly hope so. I enjoyed meeting you and appreciated our conversation. I'll be back in touch.”

Congressman Quinn walked her to the door, gave Hailey a pat, and asked his driver to take them both back to the newspaper.

Katherine reported her conversation in full to Sol.

“What did you think of him?” her boss asked.

“Smart. Cagey. Committed. He had so many layers, I thought I was talking to an onion.”

Sol smiled.

It started with her curiosity about CCB's responsibility, if any, in taking over Hamptons Bank. Katherine reviewed her file. Did CCB bring in its own people because it wanted to keep its own culture and for economic reasons, or was it also for prophylactic purposes?

Another piece that intrigued Katherine was how many of the Hamptons employees who were terminated pointed out that CCB was doing the same things that brought Hamptons down. Apart from how they knew that, which was important, was it true? And if CCB was dirty, would the FDIC have facilitated its takeover of Hamptons?

In an effort to unbundle the potpourri of bank wrongdoing, she turned her attention to the CEO of Hamptons, Henry Wilkins. The indictment was self-explanatory. Multiple charges of bank fraud, conspiracy, providing false information, overvaluation of bank assets. But what lay underneath? She wanted to understand the schemes and with intense focus, finally sorted it out.

Wilkins's real estate department had loaned money to Ronton Real Estate Development, Inc., to finance Ronton's purchase of lots. Ronton had the lots appraised based on current sale prices—which were inflated because the lots were resold at the closing to investors looking for large returns when they developed and sold them. Wilkins and his loan officers knew the appraisals were inflated, because the lots were flipped for twice Ronton's purchase price, but they were happy to arrange the mortgage loans based on false qualifying information and even happier to receive a fifteen percent kickback. While Wilkins's scheme forced many properties into foreclosures causing lenders, insurers, and others to incur millions of dollars in losses, Wilkins pocketed more than eight million dollars.

How pervasive were schemes like this?
Katherine wondered. Her research showed that the Manhattan U.S. Attorney's office nearly two years earlier had secured the first conviction against a bank president and CEO, for attempting to steal eleven million dollars from the tax-payer funded TARP, and had continued its investigation into the misconduct at the bank, vowing not to tolerate fraud or those who stole from taxpayers for their personal gain.

Katherine knew from her off-the-record discussions with SIGTARP's special inspector that those investigations were getting hot and likely to break at any time. The hook there was that a bank CEO had conspired with others to falsely represent that he had invested $6.5 million in the bank in order to convince regulators that the bank had improved its capital position, and then later tried tried to get $11 million in TARP funds.

In April of that year, Reginald Harper pled guilty in U.S. District Court in Louisiana to conspiracy to commit bank fraud. Harper, the former president, CEO, and loan officer, and his co-conspirator Fouquet, a Louisiana real estate developer, had orchestrated a fraudulent scheme to conceal delinquent, non-performing loans at First Community Bank by creating new “sham” loans. Harper arranged for First Community to provide more than two million dollars in loans to Fouquet to purchase land and build houses on it. When they couldn't find enough qualified buyers, Harper and Fouquet devised various cover-up schemes to avoid reporting the delinquent loans. They used “nominee” loans and “straw” buyers to apply for new loans, and the bank submitted a false “call” report to hide the institution's true financial condition.

Katherine's research showed conviction of bank presidents and CEOs on a variation of these fraudulent schemes in small or regional banks all over the country, including, as she had already learned, Braydon, South Carolina. So why not CCB? That would be her next target.

Katherine placed a call to CCB's vice president, commercial real estate development.

“Mrs. Stacy Bowers?”

“Yes.”

“My name is Katherine Kelly. I'm a reporter with
Twin Forks Press
—”

“I know who you are.”

“I'm working on a story that involves CCB and certain real estate transactions. May I ask you a few questions?”

“No, you may not,” the bank executive said and hung up.

“Good morning, gentlemen,” Tom Gallagher said with a broad smile, walking around the table and extending his hand. Preston thought he was reliving the past. “Let me introduce Floyd Ritter, our vice president and general counsel, and Arthur Goldberg, our vice president, commercial finance in New York City.”

Preston shook their hands and introduced Austin Disley as his CFO. The five exchanged business cards and took their places around one end of the conference table.

“I hope you had a nice flight,” Ritter said. “Did you use the corporate jet?”

“Absolutely,” Austin said. “We flew the G5. It was almost too fast.”

“It's not our corporate jet,” Preston interjected before Austin could go any further. “We have an arrangement for hours with Marquis Jet.”

“Help yourselves to coffee or whatever you would like on the credenza,” Gallagher said. “If Mr. Casey were here—and I'm sorry he's not—I would have asked for some sandwiches and maybe a couple of Snickers bars,” he said with a chuckle. “Good man.”

Preston decided to leave it alone, feeling the same way and overexposed without Casey present. “It's your meeting, Mr. Gallagher,” he said.

“Mr. Ritter?” Gallagher said.

“Thank you for coming down,” said the vice president. “There are two purposes for this meeting. One is to formally let you know that your file will from this point be transferred to our Manhattan office. Arthur?”

The other VP picked up the ball smoothly. “Gentlemen. We already are handling several of your bank accounts, and we are, of course, the lessor of Wilson Holdings' office space—”

“Do you know Teddy Thompson?” Austin interrupted.

“Yes, I know Mr. Thompson. We understand you've had some dealings with him.”

“Yeah, great guy. Real asset to you guys.”

“If you don't mind, I'll continue,” Goldberg said.

“No, sure, go ahead,” Austin replied, oblivious to the disdainful looks from others around the room, including Preston.

“One of our questions in looking over the current financials and other materials Mr. Disley has submitted is whether you have reviewed your real estate appraisals provided in support of the office lease renewal,” Goldberg said.

“I know they were submitted and met Teddy's requirements. I'm under the impression that BNA has its own appraisals as well,” Austin said.

“And what causes you to be under that impression?” Goldberg asked.

“I assume you must have,” Austin replied.

“As you know, these appraisals state the value of the underlying single-purpose real estate pledged as additional security for the floor plan exposure and to support your capital loans.”

“I'll look into those,” Preston said.

“I'd appreciate that,” Goldberg offered. “After you return to the city, I'd like to meet with you and do a more exhaustive review of all of your capital notes, our current floor plan arrangements, and the financial statements—Wilson Holdings, your joint personal financial statements with Mrs. Wilson, the consolidated operating statements, and your 2011 personal and corporate state and federal tax returns.”

“Certainly,” Preston replied.

“Thank you. That covers my end of things for the time being,” Goldberg said. “Back to you, Floyd.”

“The other purpose of the meeting is to identify the steps necessary and the process required to complete the twelve-month review, assessment, and audit required under the terms of our Workout and Forbearance Agreement,” Ritter explained.

“I thought all of that was behind us,” Austin said.

“It's an ongoing process, Mr. Disley, as set forth in the agreement. I'm sure you understand, as I said earlier, BNA wants to fulfill its due diligence requirements in connection with the workout process. We have regulators and others to whom we are required to report. You are, after all, still classified as a distressed asset, although we recognize how much you've accomplished in the last three years.”

The conversation continued for another thirty minutes or so, with the bank officers gently but firmly detailing all the steps required in the process. Preston was greatly relieved when Austin stopped asking questions and started taking notes. Within two hours, the meeting was completed.

“Again, thank you for coming down,” Gallagher said. “I'm sure you'll be in good hands with Mr. Goldberg up there in the big city. I would like to have a word with you privately, Mr. Wilson, if I may.”

“Of course,” Preston said as he followed Gallagher out of the large conference room to a smaller one around the corner.

“What happened to Casey?” Gallagher asked. “Is he in good health? Is he okay?”

“He's fine. And his health is good—still a little overweight. He wants to spend more time with his wife and three children. They're growing up fast, and he supports them in their baseball activities and whatever else they do. I guess he's had enough accounting for a while.”

“He did a lot more than accounting,” Gallagher said. “He was a full-blown CFO with oversight over all your operations. Those are pretty big boots to fill. Are you sure Disley's going to hunt?”

Preston looked at the President with a quizzical expression.

“What I mean is, will Austin be able to do the job? That's your call, of course. I'm not meddling, but I am asking.”

Preston didn't know what to say, so he said nothing.

“Well, we all have our jobs to do, Mr. Wilson. I don't have to tell you there was a man missing in this room today. And he'll be missed for a long time by a lot of people. My suggestion to you is that you take all of this morning's discussion seriously. I wish you the best of luck. Please give my regards to Mrs. Wilson and be sure to tell Casey I asked about him.”

Preston thanked Gallagher, shook his hand, and joined Austin in the hallway in front of the elevators. It was a quiet ride down, neither one saying a word.

On the flight back, it wasn't so quiet.

“Austin, what's the story with you? You interrupted Mr. Goldberg. That stuff about the appraisals. Have you even read the forbearance agreement? It sure didn't sound like it. I must tell you, I was not only disappointed, I was embarrassed.”

“I think you're getting worked up over nothing, buddy. And I think you're scared, because Casey wasn't there. I have this thing covered. We can't let these guys push us around. They know damn well that our appraisals are higher than the current values. You know that, too, don't you? It's no secret that the market collapsed in a lot of the cities where Wilson owns property. That's not our fault. We can't control that. Lighten up. We'll get through this.”

Preston was disgusted. Austin was right about one thing. He was scared. He decided his best strategy for the moment was to have a scotch and sleep for the rest of the flight.