New Story – Old Saga
I’m sitting at the San Diego Airport with Kim, having just had a mediocre burger before boarding a Red-eye flight on Jet Blue to NYC. We get in at 5am at JFK and then hopefully get our checked bags (filled with Christmas gifts for the kids) fast enough to schlep over to the cab stand, which is a country mile from the main Terminal 5, and get on the GCP before the traffic heats up to its normal intolerable Friday standstill. I am wise enough to have booked my hotel room (we are heading back into Manhattan this time to stay at the Beekman near City Hall) for tonight so that I do not have to stand at the front desk and get told that we will not be able to get into our room until 4pm and that there is no way to help us. I’ve been down this road and I know how cranky I will get from staying up all night rolling around on what Jet Blue calls their Mint Service. It is a damn sight better that coach, but their idea of lay-flat beds still leaves a lot for my not insignificant bulk to get to something approximating comfort. I used to be able to sleep like a baby on overseas business flights to just about anywhere, which is where I used to go almost every week it seemed. Lots of Latin America, lots of Middle East, more Europe and Asia than you can shake a stick at and Africa whenever I couldn’t otherwise avoid it. It feels funny to realize that this will be my second flight of any kind in two years thanks to the Pandemic.
While I am sitting here in my N95 white surgical mask and the top three news stories every day still are about COVID and the ongoing saga of the latest variant, the mysterious Omicron that seems more contagious, but not necessarily more lethal. But then the added data about “long COVID” isn’t exactly heart warming….bad choice of words, since heart damage or at least impairment seems to be the leading long-COVID concern. But this story is NOT about the Pandemic saga that we have all endured for going on two years now, much longer than any of us imagined at the start of this drama. This is about a call I had with some friends from my old Wall Street days. I have cajoled them into gathering for a latte breakfast on Monday. These are the three guys who were my inner circle during my last action-packed stint of running a major money management business for one of the top Wall Street broker/dealers. That was fourteen years ago at this pint (wow, time does fly, doesn’t it?). I feel like it was just yesterday that we were all canoodling over this or that. I’ve known one of these guys since 1992, so thirty years, and another since probably 1997, which is still twenty-five years. Two of them are no longer in Wall Street harness. One is completely out and living the life of leisure from his apartment on Fifth Avenue (he hates it when I reference that and is quick to note that he had one of the back apartments that does NOT face the park (but it is still very close to the Met, so he is best to just stay quiet methinks).
The other “retired” colleague went on to his fifth major firm for the bulk of the past fourteen years, but is now in an entrepreneurial venture up to his neck, doing what we all did sooner or latter, trying to make a unicorn or something like that. My unicorn hunting days are past and while I still have a few private equity investments that might become unicorns, I will be one of the passive investors cheering from the sidelines and not the man in the arena, as Teddy Roosevelt would say. The last guy is a lawyer, who didn’t really want to be a lawyer all those years ago, but has found some security in that niche as a “left-eye” specialist focused on the 40 Act (The Securities Act of 1940, as opposed to the Securities Act of 1934). I think his one flirtation with us bad boys back in ‘07 may have cured him permanently of wanting to get away from the law, which is to say, away from the practice of the law AND the opportunity to interface directly with the U.S. Attorneys that were all over us in those bad old days.
I remember that the interregnum between Thanksgiving and New Years was a time when it was normal for people to spend some time lunching with old friends and going to obscure Holiday Parties for one reason or another. It was a always a lighthearted time of year even in the most difficult of times. That seems to still be the case since all three have unbound themselves to gather on Monday morning at a time usually reserved for staff meetings or important work of some sort. As I spoke to them in preparation for this arrangement, I picked up on a story I had not previously heard and which I thought was pretty interesting given the turn of current events.
In my “end of days” time at Bear Stearns in the summer of ‘07 we were wrestling with all the powerhouses on Wall Street in service of a set of hedge funds that were suffering under the plight of the imploding subprime market and the impact it was having up the chain to mortgage-backed securities and then the ever-vilified Collateralized Debt Obligations (CDOs). Those hedge funds were crashing and burning very badly and by July (I was relieved of my command in a nice sacrificial offering to the publicity Gods, at the end of June) they were being filed for bankruptcy based on their complete insolvency (none of the investments in their portfolios had actually traded…at all…since late January). If there is a picture in the dictionary under insolvency, it would be a picture of these funds.
Once the carcass was down, just like on the African veldt, the predators have their fill and then the scavengers swoop in for whatever is left. This was a $1.5 billion carcass so there were lots of scavengers. On the Wall Street veldt there are the hyenas and the vultures just like in Africa. I like to think of the lawyers as the winged version of the scavenger set. The litigious country we live in is nothing if not plentiful with sugarplum dreams of great torts on the hoof. As the carcass lay rotting, the vultures wanted more data on which to perch their legal actions so one of them got the bright idea to get the plentiful investors of the funds to reassign them as the new manager in liquidation. They had not interest in managing, but they had lots of interest in the data and historical files for whomever bore the title of manager. Naturally the Bear lawyers had refused them access, which did nothing but whet their appetite for whatever was in those files all the more.
The vote was turning against Bear when suddenly some bright legal eagle who was scouring over the ownership rolls saw that there was one particularly large block of shares that were not “reachable” since the owner was incarcerated in Florida for a conviction of sexual predation and sex trafficking. You can’t make this stuff up. Have you guessed who that owner was? Yep, none other than the now all too well-known Jeffrey Epstein. By the way, until I heard this story, I had no idea he had been an investor in the funds. So the cages at the top echelon of Bear were rattled and sure enough, one of the big boys was good friends with Jeffrey, something everyone from Bill Gates to Jess Staley to Prince Andrew is trying hard now to disavow. But back then, he was just a rich guy who had had some bad legal luck, I guess. So, the next thing everyone knew there appeared a proxy voting right statement giving the vote to the Bear team and putting a stake in the heart of the litigation-hungry law firm.
End of story, but it is hardly a surprise. The canyons of Wall Street are chock full of great stories like this and I got to hear this new one (to me anyway) right before heading back to see the kids and have a few yuks with the old gang. I wonder what other new stories will get added to this ongoing old saga?