The Insider (2 page)

Bullock bristled. “How the hell did you find out all that?”

“I have—”

“It doesn’t matter how he found out,” Oliver interrupted. “What’s important is that he did. It’s obvious to me that Jay can access information when he needs to, which is the most important quality someone can have in the arbitrage business.” Oliver thought for a moment. “And he’s hungry. An HBS grad is likely to have a trust fund we don’t know about, Badger. When the going gets tough and the days get long, that person might bail out on us. Jay won’t. He’ll do whatever it takes to make money for McCarthy and Lloyd.” Oliver glanced at Jay. “Won’t you?”

“Yes,” Jay answered forcefully. “Whatever it takes.” He sensed that this was the deciding moment. “Whatever it takes,” he repeated.

“I worked with Jay on a transaction and I liked what I saw. I’ve been talking to him about this position for three months while I’ve been doing my background checks. I have confidence he would do very well here at McCarthy and Lloyd.”

Bullock shrugged, unimpressed by his superior’s argument. “You asked me to meet this guy and give you my honest opinion, Oliver.” Bullock eyed Jay skeptically. “I don’t think you should hire him.” He hesitated. “But you’re the boss.”

“Good, then it’s settled.” Oliver shook Jay’s hand. “You’ve got the job.”

Jay’s body relaxed, as if he’d finally been able to let go of a great weight. “Really?”

“Yup.”

“That fast?”

“I’m the boss.” Oliver waved a hand in Bullock’s direction. “I wanted to give Badger a chance to rage. Things have been pretty calm around here the past few days, and he gets out of sorts if he doesn’t have an opportunity to get angry once in a while.”

“What can I say except thanks?” Jay shook Oliver’s hand again. “I accept.” He gave Bullock a subtle victory smile.

Bullock stood up, shook his head, snorted, and exited the room without saying good-bye.

“Not a very friendly guy,” Jay observed, watching the strawberry-blond crew cut disappear into the hallway.

“Does that bother you?”

Jay exhaled heavily. “No. I want to work at McCarthy and Lloyd to make money, not friends.”

Oliver nodded approvingly. “That’s what I wanted to hear you say.” His expression turned serious. “I had to put you through all that because I needed to see how you reacted under pressure. I asked Badger to make things rough on you before I came in. It can get crazy around this place when deals unfold. You did great, like I knew you would.” Oliver rubbed his hands together. “Now let’s talk about McCarthy and Lloyd.”

Jay closed his eyes and allowed himself a moment of immense elation. He had made the jump to the major leagues of the financial world. “Okay,” he said calmly.

“As we’ve discussed, I run the equity arbitrage desk. My mandate is simple: to make money by speculating on publicly traded stocks.” Oliver flipped Jay’s resume over and scribbled something on the back. “Sometimes we buy stocks of companies that are ‘in play,’” he continued. “Those are situations in which a company has already received a takeover offer, and we bet that it will receive another, higher offer from a second bidder or from the original bidder. Perhaps several more offers surface from several more bidders. Ultimately, I sell our shares to the highest bidder. The risk for me in those situations is that no other bidders surface or that the target’s management can’t goose up the original bidder. Then I probably lose a couple of bucks a share when the stock price settles back down, because it usually pops above the initial offer price when the deal is first announced.”

“That makes sense.” Jay watched Oliver scribble again on the paper. He was constantly making notes to himself, carrying on the conversation with Jay and thinking about several other things simultaneously.

Oliver finished writing, then carefully replaced his Mont Blanc pen in his shirt pocket. “We’ll also buy shares of companies that my people and I think would make particularly attractive takeover candidates—situations in which a takeover
hasn’t
yet been announced, but we think it will be in the near future. If a takeover is announced, we benefit when the price of the stock we hold runs up toward the offer price, which, as you probably know, is always above the current trading price because acquirers must pay a premium for control.”

“Sure.”

Oliver smiled as if he were consuming a delicious dessert. “It’s beautiful when we buy a stock before the first offer is announced, because that’s where the real juice in the takeover game is. That’s when the stock price can double or triple overnight. After the first offer, subsequent bids are usually only a few dollars higher.” He laughed. “We sit back and watch the stock price soar. Ultimately we make millions, sometimes tens of millions in those deals.”

“It’s got to be tough to hit on many deals where you buy the stock even before the first offer is announced,” Jay pointed out. “You’d have to have privileged information to do it consistently.”

Oliver’s eyes narrowed slightly. “Do you mean
inside
information?”

Jay hesitated, aware that he had stepped into noman’s-land.

“Trading on inside information would be illegal,” Oliver said quietly after an uncomfortable silence. “Listen to me and listen to me good. We are absolutely ethical around here. If a deal smells at all, we don’t get involved. It’s like that piece of week-old meat in the refrigerator that doesn’t look or smell too good. Some idiots are willing to risk food poisoning because they can’t bear to see the meat wasted. So they eat it and end up in the hospital. Here at McCarthy and Lloyd, we don’t care. We make enough money that we don’t have to take those kinds of foolish risks. We toss the rotten meat out and make a fresh kill. Our chairman wouldn’t have it any other way. All you have in this business is your reputation, Jay. We want to keep ours pristine.”

“Of course,” Jay agreed. “How many people work in the arbitrage group?” he asked, quickly steering the conversation in a different direction.

“Right now three professionals, a secretary, and an administrative assistant. You’ll be the fourth professional.” Oliver hesitated. “We may hire one more at some point. Anyway, I run the desk, and my title is managing director,” he continued, gesturing at the door. “Bullock is a director, one title below me, and my right-hand man. We also have an associate. Her name is Abigail Cooper. You’ll be a vice president, the title between director and associate, and report to Bullock, as Abby does.”

Jay nodded. It wasn’t going to be much fun reporting to Bullock, but then, life couldn’t be perfect. And Jay knew Bullock’s attitude would improve if Jay made money.

“Now let’s focus on compensation,” Oliver said.

Here was the crux of the issue. The reason Jay was willing to have no life outside of McCarthy & Lloyd.

“Your annual salary will be fifty thousand dollars.”

“Excuse me?” Jay’s exhilaration faded.

Oliver saw the disappointment evident in Jay’s expression. “Yup, fifty grand. That’s what every professional at your level makes here at McCarthy and Lloyd.”

“But I earn more than fifty thousand a year now.”

“And we don’t make any fringe benefits available to the professional staff,” Oliver continued, ignoring Jay’s objection. “No health or life insurance, no 401K plan, not even a pension.”

“Are you serious?”

“Absolutely.”

Jay looked down.

“But I will make you one promise, Jay West.”

“What’s that?”

“I’ll guarantee you a minimum bonus of a million dollars, and I’ll guarantee it to you in writing. You show up on the arbitrage desk every day until the end of the year, and on January fifteenth McCarthy and Lloyd will stroke you a check for
at least
a million.”

Jay managed to control his show of emotion despite the anticipation tearing through his body. “Really?”

“Absolutely.” Oliver watched Jay’s reaction carefully, vaguely disappointed that the younger man hadn’t been more outwardly affected by news of the huge bonus. “And I want you to consider two things. First, it’s already the middle of June, so that million dollars represents compensation for only half a year’s work. I’ll let you do the math.” Oliver paused as if to allow Jay a moment to double a million. “Second, if you do more than simply come into the desk every day, your bonus next January could be well in excess of your guarantee. If you come up with a couple of stocks that end up being taken over and the firm makes some real money directly as a result of your contribution, your actual bonus in January could be multiples of what I’ve guaranteed you.”

Jay curled his fingers around the arms of the chair. A million dollars in one lump sum. His life would change dramatically with that deposit. His annual salary at National City had been seventy thousand dollars and his last bonus twenty-three. He had been at the top of his peer group in terms of the bonus amount and considered himself a success. Now he realized how wrong he’d been.

“You’re lucky,” Oliver remarked. “Around here we like to say that we eat only what we kill. But in your case, you’ll have a guarantee. At least for the first year. Of course, if you don’t produce, you’ll be out on your ass.”

“I understand,” Jay answered. “But I’ll earn the million.”

Oliver leaned back and yawned, as if a million was nothing to be particularly impressed with. “Bullock earned three million last January,” he said casually.

Jay’s heart rate jumped several notches, but he made certain Oliver detected no sign of his excitement. Being too excited about anything, even the possibility of a huge bonus, could be taken as a sign of weakness.

“He does an outstanding job, and I recognize him for it because I don’t want him jumping ship for another firm. He made McCarthy and Lloyd almost thirty million dollars last year using very little of the firm’s capital.”

“I won’t let Bullock know that you told me what he makes,” Jay said.

“I don’t care if you tell him. He’s proud of it. Wouldn’t you be?” Oliver hesitated. “There aren’t any secrets about what people earn around here. We want the figures to be out in the open. It makes you work harder.” His eyes flashed. “See, that’s the way Wall Street operates. We bring life down to its most basic element, survival, and its most powerful motivator, incentive. We make every day an all-out competition. If you win, you win big. If you lose, you find out pretty quickly and you get out. Or you get fired.” Oliver’s smile broadened. “But you strike me as a winner.”

“I am,” Jay said confidently. He had left his office at National City that night not knowing what to expect, and the last half hour had been an emotional roller-coaster ride. But the interview had ultimately turned out far better than he could have imagined. Taking the cut in salary would be a small, short-term price to pay for that million-dollar guarantee.

Oliver picked up Jay’s resume. “Let’s go meet Bill McCarthy. He’s the chairman of McCarthy and Lloyd.”

“I know who he is.”

Everyone in the financial industry recognized the name Bill McCarthy. Ten years before, he and Graham Lloyd had left promising careers at one of Wall Street’s most prestigious investment banks to strike out on their own. Now McCarthy was chairman of one of the Street’s most profitable private firms, a firm that executed stock and bond trades and provided financial advice to America’s wealthiest individuals as well as the world’s bluest-chip companies and most stable governments. McCarthy regularly counseled senior White House officials and prominent CEOs.
Forbes
had estimated his net worth to be half a billion dollars, and he counted the governor of New York and the mayor of New York City as friends.

“Hurry up.” Oliver beckoned to Jay from the conference room doorway. “Oh, one thing,” Oliver cautioned, holding up his hand.

“What?”

“Everything that goes on at McCarthy and Lloyd stays within the walls of the firm. You know what Bullock’s bonus was last year, but that figure doesn’t get to anyone who isn’t employed by McCarthy and Lloyd. Just the same way you wouldn’t discuss proprietary information about one of our clients with anyone outside the firm. If someone is caught discussing any of our business with anyone on the outside, it’s grounds for immediate dismissal. We are privy to very sensitive information around here on an almost hourly basis. We need to protect our clients’ privacy, and as the saying goes, loose lips sink ships.”

Only in times of war,
Jay thought.

“Bill McCarthy is a stickler on that issue, and people have been terminated for violating the policy,” Oliver continued. “For getting drunk in a bar and saying things they shouldn’t have. Got that?”

Jay heard an ominous tone in Oliver’s voice. “Yes.”

“Good.” The warning was over and the friendly tone returned. “Let’s go.” Oliver moved out into the hallway, and Jay hustled to keep pace. “It’s the press that’s the real problem,” Oliver called over his shoulder. “They’re so damn hungry to find out about this place.”

“I’m sure.” Jay was well aware that details of what went on inside McCarthy & Lloyd were not generally available to the outside world. The
Wall Street Journal
had nicknamed the firm Area 51 after the top-secret Air Force base in the Nevada desert where the government developed next-generation weapons and was rumored by conspiracy zealots to have interred the Roswell aliens. And reporters had dubbed Bill McCarthy “Howard Hughes” for his total abhorrence of publicity.

“Of course, our desire to maintain a low profile only feeds the press’s appetite.” Oliver smiled. “Bill is a smooth operator. We get more publicity by saying nothing than we would by advertising.”

The hallway suddenly opened up onto McCarthy & Lloyd’s huge trading floor—over an acre in size. In front of the two men lay row after row of lunch-counter-like workstations, each twenty feet long and facing a bulkhead, on the other side of which was another workstation of equal length. Four to five people sat elbow to elbow on either side of the bulkhead like patrons at a diner. Each chair was known as a “position” on the floor. In front of each position, and supported by the bulkhead, were several computer screens providing up-to-the-second data concerning stock, bond, currency, and derivative markets around the world. Also in front of each position were telephone banks with multiple lines so that the trader could buy and sell securities instantaneously. Televisions tuned to CNN were positioned throughout the room to give them information on world events, because a coup in Russia could trash U.S. markets as quickly as chaos at home—and vice versa. There was little decoration around the room, just a small country flag or two on top of the bulkheads of the foreign-exchange areas signifying the currencies traded there. Overall it was a bland and uninviting environment. But decoration was superfluous, and the people there didn’t have time for nonessentials. They were there to make money and that was all.