This Little Piggy (31) MICHAEL DECIDED TO EXPLOIT ‘his dinner buddy,’ Marc Melrose. “Marc, I was wondering if you might be able to do me a favor. I’m not quite sure where to go. As you may know, ITI has going through a temporary lull in deal flow. To tide the Company over, Bob and I have reduced corporate overheads and taken salary cuts. But maybe our ship has come in. Nachman and Tothson have found an extraordinary deal that will deliver millions in profits. But I need to raise two million to put into a good faith escrow. I was wondering who I might talk to in the bank about a personal collateral loan. My ten million shares are registered and fully vested.” “What’s the stock at?” asked Marc. “A tad above four bucks.” “The ratios certainly fit bank guidelines, about two million shares as collateral should more than do it. But, we are primarily a business-to-business lender. So it’s a little tricky. Let me explore the situation.” Michael sensed a subtle appeal to Marc’s greed wouldn’t hurt. “Sam estimates the profit conservatively at eight to ten million. That should make shareholders and the SEC happy and get us back on track with the Barter Bank.” “Absolutely. Let Bob know I’m still interested but obviously not until we clear the SEC.” “I understand.” Michael really didn’t. Melrose’s string at the Bank was running short. The internal investigation was coming to an unflattering conclusion. Melrose had maybe forty-five days before his own personal shit would stink. Seven hours later… “Michael I’ve got some good news. The committee approved your loan, although to be on the safe side we’d like to hold four million shares as collateral.” “Fine by me,” said Michael. “I’ll have the loan documents faxed right over. Sign them and send them back. By the way, where do you want the money wired?” To maintain his story, Michael had the money wired to his joint personal account at Chase Bank. “How long will the paperwork take?” said Michael. “The money will be in your account by tomorrow afternoon.” Interestingly, the Bank never asked for the stock certificates to collateralize the loan before, during or after the money was wired. * THE FOLLOWING MORNING TOTHSON called to explain the plan. “Our inside finder wants comfort before he releases the deal to us. So we’ve got to deliver the $250,000 to him first.” “I understand.” “We’ll drop the envelope off for you around 5 p.m..” “For me? said Michael quizzically.” “You didn’t expect one of us to make the connection? We’re too well known. You’re the logical candidate because nobody will recognize you. Didn’t Bob discuss this with you before he took off for Aspen?” “Aspen? No, but let’s keep going.” “The meeting is scheduled for Madison Square Garden during tomorrow night’s Knicks-Celtics game. Pick your ticket up at the will call window. The contact will be sitting to your right….” As Michael listened to the details, pictures flashed in his mind (A&J Chairman Ed Ney standing by the fountains at the Metropolitan Museum of Art; Jerry Foreman, leaning back in a chair; Indians making smoke signals in the middle of a forest; Sandra shopping in Beverly Hills on Rodeo Drive.). Tothson described what the contact looked like and the password that had been established for each party. “I’ll have the honorarium messengered by Barbara. Her I can trust.” “Feels messy,” said Michael. from midtown “The payment needs to be in cash,” responded Tothson. “Absolutely no paper trail.” A few hours later, honorarium in pocket, Michael hailed a cab in the height of rush hour. Destination: Madison Square Garden to meet Mr. Inside Finder. As the cab pulled over to wait for Michael another businessman, vying for the same cab, bumped into Michael and knocked him to the ground. Michael, thinking he had been pick pocketed, almost had a cardiac arrest. Moments later he reached two conclusions: he had not been robbed and the least stressful route to the Garden was a twenty-three-block walk. Once at the Garden, events proceeded as planned. Michael sat silently next to a tanned, well-groomed man with dark wavy hair as the crowd screamed “Defense, Defense.” Minutes later, during a time-out, they exchanged passwords. Michael handed the man the envelope, which he immediately locked in a handsome brown Coach leather legal portfolio case and then left. A prespirating Michael was nauseous. He felt 20,000 pair of eyes staring directly at him. He burst from the arena, gasping for air. When he arrived home it was near midnight. Sandra was waiting impatiently in the living room. She explained the bank called earlier to confirm a $2 million dollar transfer in and out of their account. “What the hell is going on?” she screamed. Michael tried his best to lie. “Actually it was a business transaction. It was just more convenient to use our account.” “And, that’s not all.” “I got an apologetic call from the Beverly Hills Hotel. They said they had done an audit and found the last time you stayed at one of their private cottages, they had neglected to charge ‘your wife’s use of the spa.’ Since the charges were over $2,000 they asked if they should put it on your house account!” “Honey, there must be some mistake. I’ll call and get it straightened out.” “You pig! How can you lie straight to my face after seventeen years? Has Bob taught you that all women are fools? I’m not sure I know you anymore.” * A PLEASED TOTHSON CALLED Bob to report, “we got the TPL deal and it’s even bigger than we expected. The final inventory had an original wholesale value of one hundred and fifty million dollars.” Although, as Tothson explained, there was another ‘slight twist.’ “You may remember the deal was originally required a two million dollar escrow payment. Given the size of the final inventory, our guy says his board wants a little more escrow and a little taste of the profits. Nothing surprised Bob at this point. “How much is a little? And, what’s a taste?” “Four million. I figure the revised profit is closer to fourteen million. If the money’s a problem let me know. We don’t want to be embarrassed at the last minute. And, they only want five per cent of the profits or the four million, whichever is larger.” Bob never even heard the ‘whichever is larger part.’ He instructed Tothson, “Just stall them for a few days while we raise the cash.” Bob pitched Sol Reinberg. “Sol, we may have the mother of all deals here. I thought maybe you’d want a piece of the action.” “Give me the headlines,” said Reinberg. “It’s a hundred and fifty million dollar inventory at original wholesale. CD’s, cassettes and vinyl’s earmarked for international distribution.” “I don’t know much about the entertainment category, it’s pretty fungible. Especially if the distribution is restricted to international markets,” quickly and accurately analyzed Reinberg. “Christ, my guys tell me the merchandise is pre-sold pending final inspection. They pencil the profit at somewhere around fourteen million.” Sol smelled the blood of desperation. Like a shark circling his prey, he went for the kill. “How much cash do you need?” “We’ve already put two million in escrow. We’re only another two million shy.” “Tell you what. I like you guys. I’ll take a punt, even though, like I said, I’m flying blind. I want first money out to cover my investment plus the first fifty percent of the profits or a minimum profit guarantee of five million, whichever is larger.” “Sol, that’s fucking ridiculous.” “Bob, please, the language. Remember, you called me. That’s a better deal than I gave to the guy who sold me the apartment. Take it or leave it.” “I need to pass this by my Board,” said Bob wanting to keep his options open. Just in case. “You do that Bob.” A disappointed Bob called Michael on his cell phone to explain the latest twist and his call to Reinberg. “Michael, Reinberg’s a fucking greedy pig. I’m out of ideas. I think maybe we better pass on the deal.” Pass on the deal? thought Michael. Hell no. I’d be out $2 million. Besides, he rationalized, if he stepped up again he could squeeze a bigger piece of the action out of Bob, and the Company would still come out way ahead vis a vis Steinberg. “Bob, do you really want this whole thing to collapse and have you become the laughing stock of Wall Street?” Bob was hooked. He knew Michael was right. “We’re too close to let this one slip away. Tell you what, let me see if I can use my stock to get another collateral loan.” “You’re fucking crazy,” said Bob. “The deal this time is I get four million of the profits. Call it what you want, a finders fee, a financing fee, a cost of doing business.” “You fucking, greedy pig” said Bob. “Take it or leave it!” said Michael sounding like Sol Reinberg. * MICHAEL WENT BACK TO the ‘Melrose Well’ one more time. He explained the deal in detail, leaving out the bribe payment and his finder’s fee agreement. Melrose was extremely reluctant. “Michael, a personal two million dollar loan was hard enough. But another two in less than a week, I don’t know.” “Marc, I’m desperate, I’ll do anything. Suppose I put up the whole fucking ten million shares plus my house and apartment as collateral?” “That might just give the loan committee the comfort it needs to issue the line. Can you live with a ninety-day irrevocable call?” said Melrose. “If I have to.” “Let me see what I can do. I’ll keep the ninety-day card in reserve, in case we have to beg,” joked Marc. The next morning Melrose convened his loan committee to discuss the application. Melrose was purposely low-key. “Even though this is somewhat atypical loan for Billingham, we can generate some significant above-market fees, and still protect ourselves on the downside.” “What are you thinking?” said the lone female, Mary Doherty, a charming, easygoing gray haired woman in her mid fifties. “We can charge prime plus four instead of the usual prime plus one. And, I would suggest we hold the entire ten million shares plus the two houses as collateral.” “I’m a little confused,” said David Barth, the committee’s most experienced loan officer. “Are we talking a personal loan or a business to business loan? Generally, we only do loans of this magnitude with corporations.” “David, this one’s actually a hybrid, a personally guaranteed loan that will be used exclusively for corporate purposes.” “Do you know Mr. Martini personally?” “Yes, I do.” “And?” “I think he’s a fine young executive with a tremendous future. He’s the kind of high net worth customer the bank wants to attract. Remember, he’s even willing to put up his homes as additional collateral.” “He’s obviously willing to make quite a commitment,” said Barth. The next morning Melrose called Michael to tell him the loan had been approved, however the terms were more onerous than originally envisioned. The call would be thirty days anytime the stock fell below a dollar a share, and the interest rate was prime plus six. Michael figured the deal was such a quick in and out that the terms didn’t really matter. And once the deal was announced, there was no way the stock was going to drop further. He would make sure of that, if he had to hand deliver a deal proforma to Berger and Dothan. “Marc, time is of the essence. What are the next steps?” “Just sign and notarize the documents. TPL also sent their papers for signature. About two hours after I receive the papers your line will be available.” A short time later the documents arrived at the office by messenger. “Shit, the personal loan documents need to be co-signed by Sandra. There isn’t a chance in hell she’ll agree,” said a disappointed Michael. He also noticed the ‘whichever is greater’ clause but that was a non-issue given Fred’s estimates. The real problem was Sandra. “I think we’re in luck, Astrid just got her notary license,” which was Bob’s way of saying, ‘forge the documents, I’ll make sure Astrid notarizes them.’ “Astrid, we need you to notarize these loan documents. Michael got Sandra to sign them at home last night.” Astrid knew Bob was lying because she signed for the messenger. After notarizing the documents, she suggested “Let me make each of you a copy for your records, and get the originals back to Mr. Melrose.” A relieved Bob and Michael returned to Bob’s office to have a congratulatory scotch and soda. Astrid made three copies of the documents. She sent the originals to Melrose, gave a set to Bob and Michael and put a third set in her bottom desk drawer and locked it. * THE NEXT DAY the ITI roller coaster ride continued. Michael instructed the Bank to transfer the two million into a joint ITI-TPL Records escrow account and hand deliver notarized receipts to the Mansfield offices, attention of Fred Tothson. Michael called Fred to tell him the confirmation was on the way. “Fred, knock ‘em dead. My wife and kids are depending on you,” joked a dead serious Michael. Around lunchtime a subpoena was delivered to Bob and Michael on behalf of Bernie Dyckman and Jack Finer. They filed a $50 million corporate class action lawsuit against ITI and another $50 million suit against Bob and Michael personally. The summons demanded Michael and Bob appear for initial depositions on May 20, two weeks hence. Bob, as always, had his own view on matters. “Those greedy little bastards. I’ll fix their ass for good. After everything I did for them.” He then identified and hired a high-powered litigator, William Penn, to represent them both. He knew litigators from his past lives. Penn was a vicious pit bull. But he was also expensive, real expensive. “Bob, these depositions are right around the corner. I’ll need a retainer of fifty thousand dollars from each of you to cover the discovery phase. Then we’ll see where we are.” A flush broke Michael had little choice but to put the retainer on his American Express Card, giving him thirty days to explain yet another debacle to Sandra. Around 4 p.m., the Nike Corporation filed a $25 million lawsuit suit against Fred Tothson and Mansfield for barter credit non-performance on a deal dating back to ten months before ITI acquired Mansfield. Since the contract extensions made ITI liable for damages up to eleven months prior, ITI’s executive officers—Bob and Michael—were named co-defendants. As always, the good news was on The Street by the time the market opened the following morning. At 11 a.m. the stock had tumbled to $1.30. * “FELLAS, I CALLED TO GIVE an update on the TPL deal,” said Nachman, through the speakerphone. “Sam, where’s Fred? He’s the guy who sold us on this deal. He said it was better than mother’s milk,” kidded Michael, in anticipation of smashing good news. “It’s so unlike him to let somebody else bask in the spotlight.” “Fred’s not doing so well,” said Nachman. “Jesus,” said an alarmed Bob. “What happened?” “Easy fellas. It’s not Fred. It’s Barbara. He got a call early this morning on the way to the office that she crashed her private plane into a clump of trees somewhere in upstate New York after drinking a lot at some party last night. They found her in the woods around Buffalo. He got the first plane out.” “Any word on how she’s doing?” said Michael. “Not really.. She’s in intensive care with lots of internal bleeding, kidneys and stuff. They said the plane looked like a liquor store.” “Gee, that’s too bad,” said Michael. “Anyway fellas, I’ve got some more bad news. After our Chilean buyer, Jose Luis Boloco, opened the inventory, he reported it was shit. Old tapes, broken packages, the works. Nothing like the oral representations.” “You sure?” said a shocked Michael. “That was my first instinct also. So I put Albert on a plane to Santiago to personally check it out. He reconfirmed what Jose found. They worked together for a week or so on the deal. Our only option was to fire sale the stuff in the less developed South American countries like Paraguay, Ecuador and Bolivia. I just got the final numbers. After repacking, shipping and other costs, there’s absolutely no profit.” “Sam, are you absolutely fucking sure?” screamed Michael. “Easy Michael, this shit happens sometimes. I know you guys were depending on this one to make up for some of our bad breaks. We’ll nail the next one.” Michael stalked the conference room like a man possessed. “Sam, are you absolutely fucking sure?” screamed Michael again and again. “Michael, why would I make up shit like this? Yes, for the second, third and fourth time, I am absolutely, positively sure!” “Okay. Sam, thanks for the update. Keep swinging. Talk soon,” said Bob calmly. Michael lost it. “Talk soon. I’m fucking bankrupt! I put everything on the line for this deal including my houses! I’m forty years old and I don’t have a dime! I’m totally fucked! And all you can say is ‘talk soon!’” Michael slammed a coffee cup against the wall and slumped down into a chair, sobbing like a little child. Astrid peaked into the conference room to observe the scene. Bob waved her away as he grabbed Michael and shook him. Michael moaned and wailed liked a baby. A disgusted Bob threw him to the floor, “Grow up, you fucking baby. Shit like this happens. That’s business!” Bob headed back to his office, leaving Michael weeping pathetically on the floor. Out of the corner of his eye, Bob noticed Astrid on the phone down the hallway speaking quietly. He slipped over to eavesdrop. “Jack, I think you better tell everybody to get out while they can. The record deal fell through. Michael’s wigged out, I don’t see how…” Bob grabbed the phone from her and said, “You little bitch.” Then started smacking her around. “Get out of here, you sneaky little cunt! I never want to see you again!” He struck her again and again. She started to bleed across the mouth. As she pulled herself up from the floor, she had fire in her eyes. She spit in Bob’s face, splattering blood over his white shirt and then stumbled out the door. Bob rummaged through her desk drawers, finding nothing until he got to the locked bottom draw. He ripped it open and found a library of ITI documents, files and notes of telephone conversations. “Son-of-a-bitch. If I ever see her again, I’ll kill her.” By 10 a.m. the following morning the stock had tumbled to fifty cents a share. ########### Chapter 28. To Hell and Beyond AFTER WATCHING THE STOCK plummet for almost five hours, Scarborough angrily called an emergency board meeting. Unbeknownst to Bob and Michael, Scarborough had also summoned Melrose and Dothan to the meeting as well as his legal executioner, Clive Davis. “What the hell is going on?” screamed Scarborough, ignoring the usual Robert’s Rules of Order protocol. Bob decided the best defense was a strong offense. “Phil, I’m as disappointed as you are. Michael, Fred and Sam talked me into a big record deal that supposedly required no cash upfront and had a ‘guaranteed fourteen million dollar profit.’ After they had me salivating, Fred and Sam told me the deal had one little wrinkle. We had to donate two hundred and fifty thousand dollars to the president of TPL, to be appointed the vendor. I said no. Michael insisted we go ahead. He said he could raise the funds privately. Unbeknownst to me, he obtained a short term loan from Billingham and made me agree to give him a hundred thousand dollar kickback.”
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