Present Value Read online

  “Purport?” Jellicoe demanded. “Purport? It doesn’t purport to do any goddamn thing. It cancels the contract!” He rubbed his temples.

  Suave Milt shook his head empathetically. No, Larry didn’t understand, Larry was overreacting. Milt had talked to the California guys. Reservation of rights, this was a lawyer thing. An ass-covering thing the board of regents needed. He’d talked to the California guys and gotten the sense—the strong sense—that they would like the product. There might be timing issues, that was all.

  Jellicoe pressed the cross-examination. It began to come out that one of Milt’s people had mentioned that maybe on some of the other sales there kindsasorta might be a few more of these side letters out there. Kindasorta most of the Point ’n Learn! deals had to be done that way, actually. Not that anyone would cancel, it was just a timing problem. A nonissue, as they said in sales. “I mean, Missouri and Illinois talk to California, you know?” What could Suave Milt do? Everybody knew California got that deal.

  Everybody except Playtime’s CFO. And its auditors. And its shareholders. Jellicoe, elbows on his desk, was in double-handed temple rub. “How many?” he asked through clenched teeth. His voice had gone all quiet and flat. It was beginning to tremble a bit, the way the sky does on an August afternoon in North Dakota—the way it does just before it rips open from horizon to horizon in an arc flash of heat lightning, setting off concussion bombs of thunder and lashing the prairie with rain and hailstones.

  “Well, Larry, hold on,” Milt answered. “Wait a minute. You guys called up last June—who was it, Les?” Suave Milt from sales would not be so rude in this group of friends as to name names himself. So now Leslie of the bright smile and luscious little pom-poms was hoisted on shoulder-top for her cameo cheer. “We got a call from Frank,” she said brightly.

  “Right, anyway, whoever, we got a call,” Suave Milt said, magnanimously waving off the little matter of whom he was prepared to fuck over big-time if people started pointing fingers (we’re all friends here). Validated by the pert and lovely smile of Leslie the deflector shield, Suave Milt went on, “And you guys wanted to know did we have that California thing, and I said yeah, we had it, I mean, they signed, you know? You remember, Frank. I said they signed, and you guys said great, send over the contract. And I said, you want the whole file or just the—”

  “How . . . many . . . of . . . these . . . are . . . out . . . there?” Jellicoe repeated, in a voice now dangerously stripped of affect. The barometer in North Dakota was headed south of twenty-nine like a number-eight lead sinker in a still pond, and women were rushing out back to gather in the washing from the line and find the dog.

  “You never said did I want the whole—” Frank interrupted.

  Suave, smooth Milt! Unruffled Milt! Finance guys got ruffled, but not for nothing was Suave Milt in sales. Milt’s smile was unshakable. He used Frank’s question to ignore Jellicoe’s. “I think I did, actually, Frank. Anyway, whatever, we weren’t asked for the whole contract file, I mean, all the detail and the specs and all the goddamn paperwork and correspondence. We would always send finance whatever they needed to see, wouldn’t we, Les?” (An earnest nod from the tasty assistant. Absolutely! Whatever finance wants, finance gets!) “You said send over the contract, am I right? So we sent over the contract.” Milt smiled his beatific, team-spirit, don’t-fuck-with-me-Frank smile.

  You had to say this for Milt. His smile was adamantine—nothing shook it. If you confronted Milt with evidence of fraud, he would tell you it was just a timing issue, and if you mentioned the indictment for pederasty, Milt would say he had talked to the guys in the prosecutor’s office and they were actually pretty much okay with it.

  At the end of the couch, Fritz hadn’t been following this minitrial. He’d seen it before. The CEO says, Get me numbers (nothing else! no bad news!). The CFO says, Get me enough information to book the numbers (not so much that I can’t book the numbers!). The controller mines for enough to book the numbers. Sales plays along. And when it blows up, corporate is shocked, absolutely shocked, at the news. It hadn’t been the first time.

  None of this interested Fritz. He was busy doing the math in his head. The sales guy was telling them 43 percent. That meant it was more like 60 percent. Sixty or 70. Eliminate 60 percent of projected cash flow and Eduvest was way underwater, a few atmospheres down, down with the bug-eyed lantern fish, down in the dark dank depths. You couldn’t recognize the investment anymore, not without an appraisal, because of these losses. The accountants knew what the auditors would say: Playtime would have to show the loss on its books, and that would trip a bank covenant. Seventy-five-million-dollar charge, $25 million bank payment due. Ba-ding!

  “Milt, for Chrissakes, I ask you for the contract, I expect you’ll send the relevant documents.” Frank was whining. He was bleeding and wounded, but at his flank there was only silence. How had this turned into Milt versus Frank? Where were the reinforcements? How the hell had Jellicoe dodged this again? Waiting for support that didn’t seem to be coming, he pressed on, “How could you fail to mention—”

  “It’s a hundred-mil charge,” Fritz interrupted. “Direct hit to the P&L.”

  CRACK! The storm broke. Lightning rent the Dakota sky. Cats cowered under porches, and kids ran for the kitchen. “I KNOW WHAT THE FUCK IT IS!”

  And they all stopped, dead as blocks of concrete, frozen in their conversational tracks. Larry Jellicoe had gone purple. They all saw him and then averted their eyes, embarrassed. Even Fritz felt awkward. Silence. For a few moments the only sound in the room was the splishy-splash sound from Jellicoe’s peace fountain, burbling faintly in the corner. (After Jellicoe’s last visit to the cardiologist, his wife had installed it on the credenza.) He was . . . he was purplish still. Would he burst?

  This was too much tension for the CFO of Playtime to be showing. After all, Playtime was a Fortune 100 company with a market cap in excess of $50 billion. A $100-mil charge was a bad thing, but it wasn’t a meltdown. Jellicoe went back to rubbing his temples while his staff wondered what else he knew that they didn’t.

  “I know what the fuck it is, Fritz,” Jellicoe repeated, more quietly this time. Everyone let out a breath. The storm had abated. “We’re not here just to do math, for Chrissakes. Let’s have a little creativity. We’ve got a lot of brainpower in this room. Let’s put it to work.”

  “It’s a timing issue,” said Milt. “I’ve talked to the California guys. We talked to them . . . yesterday, was it, Les?”

  Les nodded brightly.

  “It was a good conversation, a good conversation,” said Milt. “Wasn’t it, Les?”

  Oh yes, her eager smile and earnest nod and delectably scrumptious curves were saying, desperate to bring some sunshine back after that fearful storm. It so was a good conversation! The best! Everyone was totally friendly and nice throughout the conversation!

  “You guys are making too much of a deal out of this,” Milt said. But they weren’t listening to him anymore. They had heard enough from Suave Milt.

  “Got to book it,” Fritz ventured.

  “Book it?” They all looked at him incredulously.

  “Sure. You’re going to sign the Q, Larry.”

  “Just like that? Book a hundred-million-dollar charge?”

  “This isn’t that hard,” Fritz said. “We’ve got to put honest numbers out there. The company screwed up, now we know it, so we’ve got to put it out there. We’ll take a hundred-million-dollar charge and restate the Q2 earnings.”

  “That’s a relief!” said Larry Jellicoe, the storm cloud massing again, purple-black and menacing. “That’s comforting. It isn’t that hard! I’m so glad, Fritz, that you’ve dropped in to assure us that it isn’t that hard. Just restate Q2. Take a hundred-mil charge! Easiest thing in the world. And the stock in the toilet by morning!”

  “Oh yeah, the stock will dip,” Fritz agreed. “That’s what happens with stock. Goes up and down. And probably the class-action sharks will have a suit f
iled by return mail. To add to the other ones. Two more years of motions for Elboe, Fromme. But that’s not our department, that’s legal. We just weigh sheep, Larry, we don’t fatten ’em. This isn’t a close call. We’ve got to take the charge.”

  “Do you have any idea what the board will say? In fifteen minutes when they hear about the billion-five offering Peter wants to—”

  Shit. Jellicoe caught himself too late. “That’s highly confidential,” he said.

  They all nodded obediently.

  “Board-sensitive.”

  Oh yes, absolutely.

  “It doesn’t leave this room.”

  Suave Milt and Frank Pitts and Rachel and luscious Les all redoubled their obedient nods. A secret. Not a word to be breathed outside this room!

  This news wouldn’t just leave the room. It would rage across the office like a wind-borne wildfire across the August prairie. Because a $1.5 billion offering meant a new acquisition, and a new acquisition meant merging a division or two, and merging a division or two meant rifs (which was what they called firing people, a “reduction in force”). But you could be sure that not a word would be voice-mailed or e-mailed or written or otherwise communicated in any traceable fashion.

  The only one who wasn’t nodding was Fritz. You didn’t have to be a rocket scientist to guess that Peter Greene would be filling his war chest. Peter was always one acquisition ahead of Wall Street. This made it impossible to compare one year’s numbers with another’s, for one thing. And you could always blame lousy financials on acquisition costs, because you were always acquiring. It was easier to conquer countries than run them—that had been known since Alexander the Great’s time. The same was true of corporations.

  Fritz did some more quick math. Forty percent of the company’s assets were investments in off-balance-sheet partnerships like Eduvest. Have this one blow up, and Morgan and Credit Suisse, not to mention Settles, would be crawling all over every one of them. And if they started crawling all over everything, what else would they find in the VD unit? What would they find the Hare Krishnas in San Mateo had been up to?

  Say there’s 20 percent padding in the revenues. They’d get nervous and call it 50. That would kill the offering. Or mean really big write-offs. Or . . . worse.

  “Ask them to sign the Q, then, Larry,” Fritz said.

  “They pay us to sign the Q.”

  The Q was the Form 10-Q, a form that the Securities and Exchange Commission required a public company to file quarterly to show the world its financial health. The chief executive officer and the chief financial officer had to sign it. But if things ever got hot later, the CEO would always say he relied on his CFO for the numbers. The next 10-Q would be due in October, after the third-quarter numbers were final.

  “With all respect, Larry, they don’t pay me. They pay you. So sign it if you want to.”

  “I appreciate your help, Fritz,” said Jellicoe acidly, “I really do.”

  “Apparently not,” Fritz said in that way he sometimes had of seeming not to understand what play had been called by the team players. Fritz had about 2 percent of his ego invested in being the senior assistant controller of Playtime and, unlike the other guys in the room, about 98 percent of it hedged in stuff they couldn’t touch. Like sailing.

  “ ’Cause, Larry, I’m trying to help. I don’t think they pay you to go to jail. This is a public company. No one in this room is going to put a misleading financial statement out there, right? I mean, this may suck for Playtime, but the decision isn’t hard. We need to give the Street numbers it can trust. The revenue was bullshit, so we have to take the charge and restate it. Done. What am I missing here?”

  Everything. Everything was what Fritz was missing there, and had been missing for a long time.

  AT TEN-FIFTY Larry Jellicoe met with Peter Greene in the chief’s office. Greene was on the couch, the bifocals at the end of his nose, his studious pose. In the Hepplewhite chair beside the couch sat Don Fink. Fink’s business card said that he was Playtime’s senior vice president and general counsel, but his real job was to be Peter Greene’s senior vice butt-boy and general talisman.

  Ten years earlier Greene had been through a nasty litigation. Three days of depositions in a frivolous lawsuit claiming that Greene had made an oral agreement. Playtime had paid millions—just millions!—to its lawyers at Elboe, Fromme & Athol, and then had to be shamed in a grubby courtroom in Cambridge. The oily little hack who represented the plaintiff, and who did not come from a decent firm like Elboe, and certainly hadn’t gone to good schools like the partners at Elboe, had nevertheless survived all the motions that Elboe, Fromme—which had been paid millions!—was supposed to crush him with. And the thing went to trial. To a jury! Then millions more had to be paid out, all because the Elboe, Fromme lawyers had screwed up and handed over a couple of totally confidential, totally private memos Peter Greene had written that never should have been handed over and were totally misunderstood and taken out of context by the lunkheads on the jury.

  Greene had learned his lesson in that case. The slightest little thing gets said or written down—you jot a note, for Chrissakes, that you might have said in passing, to be polite, you know, in conversation you said sure, something sounded like a good deal, just making conversation—and a gang of envious beauticians from Medford ring you up for $15 mil. But he’d learned something else, too. If a lawyer was present, then things were “privileged.” That meant things stayed where they belonged: private. Outside the grasp of the Hun-like hordes of auditors, class-action shysters, shareholders, investors, media hacks, investment bankers, analysts, and other parasites who longed to destroy civilization. Fink’s job was to be available twenty-four hours a day to sit next to Greene, so the meetings would be protected by the attorney-client privilege. Greene privately thought that Fink was pretty useless, although he did bring one particular virtue to the table: he’d been well trained not to be Subject to Criticism, and he thirsted to be In the Loop. That meant he didn’t seem to mind that Peter Greene would give him about as much warning of plans as a man gives his dog. Like the dog, Fink was just glad to be riding in the car, too.

  Don Fink, in the Hepplewhite chair, had studied his board package and was looking forward to the meeting. He had not broken it to Peter Greene that his attorney superpowers were not quite what Greene imagined—that his mere presence would not act as a heat shield against all atmospheric effects. The privilege only worked if somebody was genuinely asking for or giving legal advice, which was the furthest thing from what was going on in most of those meetings. But Fink didn’t trouble Peter Greene with these nuances because, first, he liked being at the key meetings, and second, the explanation was too complicated and Greene wouldn’t have wanted to hear it.

  Greene was handsome in a New York investment-banker kind of way. He had that hot-cocoa, always-tan look. That Grecian Formula look. He looked great in videos, photo ops, earnest discussion on a shop floor, giving thoughtful, over-top-of-bifocal concern to some document the photographer had handed him, or making a dramatic point at a shareholders’ meeting. He had the snappiest formal dress-downs. His shoes were shined to mirrors and his chinos ironed to attention. His shirts stood straight as cardboard. His hair was slicked back. And his voice—he could have been a radio announcer.

  Then there was Peter Greene in person, the vital, active way he’d come at you physically and grab hold of your arm. He was always striding by. “Good to see ya,” he’d say, shaking the hell out of your hand as he executed a three-quarter-reverse ball-of-foot pivot, which was one of the moves he used to avoid breaking stride. The other favored move was the hand pat on the shoulder, but this worked only when you were headed in the same direction and he was in the passing lane. As far as Peter Greene was concerned, it was always good to see ya, but he never stopped to catch up with ya—never even broke stride, because there was always an assistant waving him toward a car that was waiting to take him to an airport.

  Peter Greene didn’t l
ike paper. The lawsuit had taught him that paper lived in files and reproduced like hamsters and you could never never kill it. Ultimately, it always fell into evil hands and then got blown out of context by ignorant judges and the gangs of beauticians they rounded up for jury duty. With a grudging exception made for financial statements, he didn’t like to see paper, and he never signed anything other than the most innocuous letters or press releases written by Don Fink. Answers to Peter Greene questions had to be brief, pithy, and unwritten. “Yes!” “No!” PowerPoint slides at board meetings were about as far as he’d go. Once in a while you’d get an e-mail from Peter Greene. It would be general, and short, and in large blue letters. It would contain exclamation points, and talk about being entrepreneurial, and platforms (nothing you did had to be justified on its own merit—it was always a platform for doing something else), and thinking outside the box, and being well positioned, and getting into this or that space. It would be signed “Best regards, Peter.” These Peter Greene e-mails would then become the subject of a vigorous internal debate, like the sayings of Nostradamus. What the hell did they mean?

  Larry Jellicoe came into the office and nodded all round. He sat down uncomfortably.

  “Larry, good to see ya, good to see ya,” said Peter Greene, looking up over his bifocals and switching from scholar mode to active mode. “Okay. Don, Larry, we got the board in ten minutes. We want to get them excited about the new offering, about diversifying this company. It’s clearly the right thing to do. Clearly.”

  The room nodded. Clearly it was the right thing to saddle Playtime’s shareholders with another $1.5 billion of debt so that Peter could go buy some new company. Clearly.