Zero Sum, Book One, Kotov Syndrome (2 page)

Refco, a brokerage house
that was shut down in a huge IPO scandal involving hundreds of
millions of hidden debt (believed to have been largely embezzled by
CEO, Bennett), was involved in negotiations with the SEC to
determine the amount of fines to be paid in the aforementioned
Operation Bermuda Short case when the accounting scandal came to
light. Some of the largest creditors and customers of Refco were a
Russian fund and a major Austrian bank; to be later embroiled in a
massive fraud case emanating from the Refco blowup. Hedge funds
were used to conceal Refco debt from the company’s auditors – in a
series of sham transactions – and there are multi-billion dollar
transactions that appear to be large-scale money laundering. The
SEC allowed Refco to go public even though the top managers were
involved in this prior stock manipulation scheme, and sanctioned
for it. No explanation for this remarkable decision has ever been
offered by the Commission.

The rest of this trilogy is intended as
a work of fiction. Any similarity between the characters depicted
in this work and real persons, living or dead, is
coincidental.

* * * *

Book One – Kotov
Syndrome

This chess phenomenon, first described
by Alexander Kotov, occurs when a player does not find a good plan
after considerable consideration of a position. The player, under
time pressure, suddenly decides to make a move – usually a terrible
one which was inadequately analyzed.

* * * *

Outside the parking garage the
temperature had dipped below freezing, and the rumble of traffic
had long since faded as the city shut down for the evening. Even
the smallest sounds reverberated through the stark expanse,
cascading in a diminishing ripple of echoes. A fluorescent light
flickered overhead, occasionally sputtering a warning of imminent
demise – resulting in an uneasy illumination of the ominously
darkened space.

A grey American-built sedan with
government plates punctuated the late-night silence as it pulled
down the ramp onto the lowest level and parked in a far corner,
cutting its lights and engine. Inside the vehicle, the driver sat
motionless, scanning the car’s surroundings. One hand silently
toyed with a worn key fob, an unconscious habit, mechanical in its
regularity.

After several minutes, footsteps
disrupted the equilibrium as a figure approached the vehicle from
the far end of the garage. The passenger door opened and the new
arrival sat down, passing a CD-ROM to the driver. The passenger’s
grey eyes darted to the rearview mirror, peering into the dim light
of the garage…searching.

“This is the outfit we need help with.
We have nine months,” the passenger said in a low voice, seasoned
with years of cigarette abuse.

The driver nodded and waited for more.
His passenger smelled of alcohol, garlic and dried
sweat.

“We appreciate the hand. I…I know it’s
a hell of a favor, but your guy said he could make this happen,
so...”

Satisfied there was nothing more of
value the visitor could impart, the driver leaned towards
him…slowly…invading the passenger’s space to whisper in his
ear.

“I’ll get it to him. This meeting never
took place.”

* * * *

Rick brushed past the Marine guard,
offering an imperceptible nod of greeting, and entered the familiar
confines of the large foyer that led to his office. Another day of
non-stop action, people moving urgently down the heavily carpeted
hallways, earnest looks and murmured dialog the rule.

His secretary handed him a sheaf of
papers as he passed her desk. Mandy had been with him in one role
or another since his days at the law firm, and when he’d accepted
his current position she’d been part of the deal. She organized his
life and kept his days running smoothly; no small feat, considering
the number of hours he spent working on behalf of his master. Rick
made a slitting gesture with his thumb across his neck, and she
smiled at him as she continued her telephone discussion. She knew
it meant he didn’t want to be disturbed by anyone, either in person
or by phone. It was the beginning of another brutal week and he had
his hands as full as usual. He settled back behind his neatly
organized desk and considered the trees out on the expansive,
snow-covered lawn.

What a month.

Every possible nightmare scenario had
come hurtling down the pike at them; from a new terrorist threat
emanating from the Mexican border to a bio-hazard scare in Boston,
then the discovery of E. coli in the San Antonio water supply. And
the month was only half over. He loved the adrenaline rush of the
job, but four years of it had put a lot of miles on the
chassis.

Another late night yesterday, and he’d
had more than his usual glass or two of wine with Stewart as they’d
discussed the Beltway’s intrigue and power plays. The whole point
of the evening had been to request some deniable assistance – and
the mission had been accomplished; he’d asked Stewart to help out
with a delicate matter, and Stewart had agreed.

But his head felt a little thick today,
which was no way to operate in this environment.

The red com light on his phone blinked,
and the synthesized ringer issued forth its annoying chirp. He
stabbed the speaker button.

“I don’t want to be disturbed,
remember?”

“He
needs to see you. Now.”
Mandy didn’t need to say anything else.

“Any idea what to bring, what he wants
to talk about?”

“He didn’t say. Just asked to see you
‘soonest’ as he put it.”

Rick sighed. “I’m there. Thanks. Sorry
if I’m snappy.”

He didn’t wait for a response, punched
the button again, got up and pulled on his suit jacket. Grey,
conservative cut, nothing fancy. Muted tie over a starched white
dress shirt, fine quality, but not too fine. Discreet, nondescript.
He cracked his neck, heard a pop, and pushed his shoulders back as
he walked through his office door and back to the main hallway. He
smiled at the older woman who was the gatekeeper. She waved him
into the large office, books lining one wall halfway up to the high
ceiling.

“Ah, there you are, Rick.” The man
sitting in his shirtsleeves looked up as he came into the room,
took off his reading glasses and fixed the younger man with a
penetrating gaze. A look passed which spoke of power, and a
disposition accustomed to being accommodated. It was
unmistakable.

“Good morning, Mr. Vice
President.”

Sweat trickled down Steven’s face, and
the ocean breeze did little to mitigate the increasing heat from
the rising sun. The usual parade of crazies was absent in the early
hours of the morning. Later, the nonstop rollerblading bikini
models and faux gangbanger/surf punks on elaborately configured
bicycle choppers would clog the boardwalk and the running path, but
for now it was the province of the athletically inclined, the pet
owners out for some pre-breakfast relief, the odd can collector and
metal-detecting hopeful scavenging for the previous day’s residual
treasures.

The Newport Beach maintenance squad
noisily raked the sand as he ran. The group of modified tractors
ensured that every new day was orderly and clean on the long beige
stretch, and that no cigarette butt or soda bottle was left to
sully the main attraction for the town’s summer revenue. A placid
ocean offered up the odd ripple to the ever-optimistic surfers
awaiting the perfect curl a few dozen yards offshore.

Mornings like this were the norm for
the privileged few who resided in the twenty-foot wide homes
squeezed along the beachfront. At three million dollars and up for
a sheetrock dwelling only slightly wider than a trailer, the
inhabitants had endorsed their love of the setting with their
wallets, and had a vested interest in keeping the locale
picture-perfect.

This was his favorite time; when his
mind could wander over whatever thoughts bubbled into his
consciousness, accompanied by only the rhythmic pounding of his
soles on the spotless pavement and the occasional cry of a seabird.
To any observer, Steven would appear to be a lean late-thirties
male with nondescript features – other than a crooked nose from an
ancient fracture and a small scar under his right cheek – with
carelessly cut light-brown hair and a somewhat vacant expression of
puzzled concentration on his not-quite-movie-star-handsome face.
His muscle tone was unusually well defined from years of martial
arts practice. He looked fit, tanned, easy-going and
friendly.

The run was part of his morning
routine. He got up at 5:30 and gulped down a cup of scalding black
coffee, threw some dog food into a bowl, pulled on sweats and an
old T-shirt and followed the strand for two and a half miles to the
second pier, and then back again.

Same routine every weekday, without
fail, for the last five years. His Belgian shepherd, Avalon, loped
alongside him, easily keeping pace and more than familiar with the
circuit. The green bungalow with the porcelain panda sitting in the
window meant only one more mile to go.

Breathe in, exhale slowly, shake out
incipient cramp in shoulder, brush sweat out of eyes.

Almost there now. Almost
there.

Put on a final burst of speed, feel the
familiar burn in his quadriceps and calves, and then hop over the
low gate that separated the patio from the thoroughfare.

Back in the house, he had enough time
to rinse off, towel dry his hair and then sit down at his computer
and log on to see the pre-market activity and scan the news. Any
passers-by seeing him hunched in front of his dual screens at the
oceanfront picture window would have probably thought he was a
securities analyst or portfolio manager or financial planner,
chained by vocation to his monitor in the wee hours.

Nothing could have been further from
the truth.

Steven had retired several years
earlier, having sold his software engineering company, pocketed
some ‘fuck you’ money and happily declared himself out of the
business world for good. At thirty-nine he’d been one of the
luckier entrepreneurs to emerge from the subsequent economic
carnage; many of his friends had lost everything and were
struggling to start over.

He couldn’t bitch.

The plan had been to devote some time
to mastering his martial arts hobby, and perhaps open a dojo to
occupy a few hours whenever he ran out of ways to amuse himself.
But events had conspired against him. Plans had changed. Bad
investments in real estate had eaten almost half his capital, which
left him far short of where he needed to be for permanent
retirement. So he spent the better part of 6:15 a.m. through 1:00
p.m. staring at rows of numbers on ever-changing computer screens,
interrupted only by fits of frenzied typing and the occasional
phone call.

“Damn it. They’re doing it again,”
Steven muttered to himself. “The stock’s up again on no news – it’s
like the market’s completely ignoring reality.”

“Honey, what’s up now?” a sleepy female
voice called from upstairs.

“Nothing. I’m just watching junk being
sold like it was platinum, and losing money each tick
up.”

“Don’t get too worked up,” she said.
“I’m going back to sleep. Wake me up around eight, and don’t forget
to turn off the coffee machine or it’ll boil down.”

Steven focused on the screens. On the
right were three windows with tables of numbers blinking and
changing constantly. On the left was the familiar format of the
Internet message boards. Overlaid were several open browser windows
with websites partially displayed.

All the windows and screens had the
same symbol on them.

APDT. Allied Pharmaceutical
Development.

Not exactly a household name; a
Milwaukee-based conglomerate that specialized in early stage
biotechnology development – one of thousands of entities that made
up the landscape of publicly traded companies in the U.S.
markets.

And Steven’s current object of
fascination and frustration.

Across the continent, the same symbol
was displayed on another set of computer screens twenty-four
stories above Wall Street, in a lavishly appointed office with a
panoramic view of the New York skyline.

“Take it up another few bucks, and then
let’s dump it and take out the stop losses.” The voice belonged to
a man in his late fifties hunched over a speakerphone, his grey,
curly hair framing an artificially tanned, heavily-lined face.
“Knock out at least twenty percent and run it into the ground
before we start covering…”

Nicholas Griffen was also not a
household name, and yet he’d achieved a certain notoriety on Wall
Street – an infamous trader, investment banker and financier who
specialized in biotech. He managed a $1+ billion domestic venture
fund that invested exclusively in early to mid-stage biotechnology
stocks, and also operated an offshore fund based in the
Caribbean.

Griffen’s technique was to make money
promoting companies, and then create volatility, swinging the
stocks up and down by related-party trading and passing out insider
tips – profiting from both the increases and decreases in price.
He’d be long on a company, holding options and shares whose value
increased significantly when the hype started on the stock, and
then when his network of media cronies and pet analysts created a
frenzy of buying and speculation resulting in triple or
quadruple-digit percentage gains, he’d contrive a media event that
would tunnel the company's share price. Of course he’d have sold
all his long positions at or near the top, and gone short to profit
again from the fall – and once he’d panicked the market, he’d reap
even larger gains on the trip down.