Skin in the Game, page 12
“My brother and my friend have been killed. The information I trusted you with is at the center of all of this.”
His pained stare gave way to introspection.
She guided him in to the dining room where she had spread all of the documents across the table, amongst empty coffee mugs and diagrams sketched in a notebook.
“You’ve been busy.”
He held her gaze for a moment and took a chair beside her.
“Where’s the best place to start?”
She watched Joe as he ran his hand through his disheveled hair. She saw that his face was damp with perspiration, his shirt and trousers crumpled. He wiped the back of his hand across his face as he pretended not to notice her gaze. But he caught a glimpse of the smile she was hiding beneath her contrived composure.
She sat down beside him.
“Let’s start with the fund, what it does, and then follow Sam’s comments through the documents. Passage I was set up as an emerging-market private-equity fund. The focus was on growth companies in illiquid markets, mostly Middle East and Central Asia. Not everybody’s cup of tea. Control positions in the underlying companies. Small to mid-size businesses. No chance of floating them. Perhaps some private sales, but no clear exit on the investments.”
“So how does the fund make a profit?”
“The profitability of the companies in the portfolio is enormous. Implied valuations show that investors in Passage I made a year-on-year return in the high twenties. Earnings were mostly retained and reinvested, but some were dividended up to the fund. The fund tripled in value in its first three years after initial investment was completed. By the end of its eighth year, investors were looking at an implied valuation of eight times their original investment.”
“Is Density planning to sell the companies in the fund?”
“No. Most are being rolled over into the Passage II Fund.”
“At their new implied valuations, I assume.”
“Pretty much; slightly more conservative numbers are used for this purpose.”
Joe tilted his head and thought for a moment.
“The new investors in fund two validate the valuations made on fund one.”
“Yes, but on the face of it, there’s nothing funny going on here. Most of the investors in Passage I are rolling over their investment into Passage II. They are all sophisticated investors, big pension funds and other institutions. There are some new investors targeted, but they’ll be relying on the scrutiny of the first lot as a mark on the underlying values of the companies put forward.”
“Isn’t this all a bit too risky? Highly illiquid companies in third world countries?”
“Yes, but each investor will put only a relatively small amount into a fund like this, effectively a diversification strategy. They will get convinced based on Density’s reputation and the high returns that compensate for the risk taken. They will know who’s in through word of mouth and may get convinced of their own interest by virtue of the interest others show.”
Joe smirked.
“Herd mentality.”
Sofi grabbed the list of investors circled for Passage II.
“One investor stands out and is well-referenced in the fund presentations: DIA, a large sovereign wealth fund in the Middle East.”
She opened her laptop and looked up the DIA website, clicking on the tab for Senior Officers. “Sam’s list refers to Dr. Abdullah Samarrai. There he is.”
She clicked on his bio.
“That’s Sam’s contact at DIA. Chief Investment Officer. After the board, he will have final say on their investment portfolio.”
Joe examined the investor list.
“Sam circled his name and put a few stars beside it. They committed $200 million in the first fund. The target list shows them potentially in for $3-400 million in the second fund. That’s a big commitment, no?”
“Very large. The key investor. DIA are in the region. When one of the most sophisticated investors globally puts money into a fund to invest in their home territory, then you have instant credibility. Their stamp of approval spells ‘BUY’ in big bright letters to all the other investors Density will talk to. But there’s more. The investor lists also show Density investing affiliate monies in the fund. Together with DIA, this provides a very strong case of alignment of interest.”
“Alignment of interest?”
“Skin in the game. If Density’s own money is at risk, they rise or fall along with other investors, depending on how well they manage their investments. Sam has put a note beside the ‘Own Funds’ line in the investor list. He wrote ‘Discretionary Funds, Anno Domini, White Throne.’”
“Sounds religious.”
“The Anno Domini Christian Trust and White Throne Investors were two investors I looked at in my initial investigation. They are in fact pools of money set up by two separate Christian fundamentalist groups in the US. ‘Own Funds’ suggests that Density has access to monies from Anno Domini and White Throne that is not earmarked for any specific investment by Density. Effectively, it’s money they can invest as if it’s their own. No restrictions. For the purpose of Passage II, they are representing it as their own. There is a footnote in fine print in the materials disclosing this, so there’s nothing illegal here.”
Sofi stood and walked around the table. Joe’s eyes were glued to her every move.
“Could Anno Domini or White Throne have a terrorist angle?”
“No, well at least in my initial investigation, I found them to be clean.”
“Nothing so far sounds like a reason to kill Sam. Density set up a fund and the fund did very well. Now they’re raising money for a new one.”
Sofi removed her reading glasses.
“I think we need to dig deeper to see things through Sam’s eyes. The fund reports show summary information on profits, dividends and valuations of each portfolio company. It gets more interesting when you drill down to the underlying company detail.”
“Looks like around ten or so companies.”
“The companies are all doing business in the Middle East and Central Asia. The focus is on natural resources, infrastructure and construction, transportation and communications, defense.”
“Developing countries. How does defense fit in?”
“The defense company doesn’t manufacture weapons. Looks more like dual-use goods, some armored cars, logistics hardware. Much of the communications and transport activity could be considered dual-use as well. The rest fits generally into what I would call infrastructure for a resource-based economy, building roads and pipelines, ports, construction to support the extraction of oil and gas and mining product. There are two companies that don’t fit this mold. One is Serbon Surveillance. Looks positioned as a private security company.”
“Presumably to protect infrastructure investments?”
“Yes, and employees, government officials, VIPs. The purchase agreement is dated three years back. Looks like they cashed the owner out some and kept him in as key man to develop the business.
“The second is Passage Finance, which looks like an affiliate for what are effectively activities undertaken by Density itself: banking activities in the region. But it’s set up as an independent company with its own employees. Activities are focused on generating fees and revenues from classic banking work, locating financing for capital projects and other long-term investments. Revenues take the form of commissions and structuring fees.”
“There were notes all over the management accounts for these two companies. Notes in Sam’s handwriting.”
“I couldn’t make much sense out of these. The names Baexter and Mandrake kept cropping up in various places.”
“Baexter: multinational arms producer. US/UK merger recently. Mandrake: commodities conglomerate. Originally Canadian, I think, but with a global reach.”
Sofi leaned over and flipped through the pages.
“He seems to be pointing to specific work done for these companies. The striking thing about both Serbon and Passage Finance is the overall revenues and costs. Neither looks to be hugely profitable, but an enormous amount of business is booked through them.”
“Perhaps they simply support the activities of the other portfolio companies?”
“Maybe. Serbon makes massive investments in small and light weapons. These show up as balance-sheet items, presumably to support its military and security operations. But there is a lot of asset-replacement taking place. Passage Finance has numerous affiliated companies which look to be special-purpose vehicles. Companies set up in tax-efficient jurisdictions, having no real employees, usually acting primarily as a conduit for the transfer of funds.”
Joe stared at the bottom of a page from the Passage Finance accounts.
“Sam wrote ‘Uzbekistan—P II. Must stop deal’. Must be a reference to Passage II.”
He flipped further through the accounts.
“Beside Baexter and Mandrake it says ‘see original contracts.’”
“They weren’t in the pack.”
Joe rose, stretched and walked around the floorspace between the table and back window. He looked on as she loosened the tie in her hair.
“What about the other information Sam left?”
As she turned to him, he flashed his eyes in the other direction.
“The trading activity reports relate to gold trades made by Density for its own account, trades made on the London and Zurich bullion markets. And there is a list of terrorist organizations, with a scribble from Sam that says ‘given to MI6.’”
Joe skimmed the list Sofi handed him.
“The two don’t match. There are at least twenty or more account numbers on the trading reports. There are only ten names on this other list.”
Sofi yawned and folded her arms. She walked over to the other end of her living room and opened the door to the garden. Joe felt a light breeze on his face. The rear light deflected off the herbs and flowers she’d placed on the stairs to the deck. The breeze carried in their scent, mixing coffee blends with lavender and thyme.
Joe moved over to the kitchen counter and leaned on it, his head drooping from the conversation. He glanced over toward Sofi, who by now was lying on the couch; her head resting on a round purple pillow, her hair streaming down the side of her face. Eyes closed, the papers she held wilted from their original position. Barefoot, the legs of her jeans folded up past her shins. He gazed at her ankles—delicate.
She sensed him watching and opened her eyes. She stretched her arms and yawned and placed the papers across her center.
“Are you OK?”
Joe glanced away.
“I’m fine.”
Sofi rose and stood before him.
“Look, it’s getting late. I’m starting to get a headache from all of this. And I think you’ve missed your last train back to Oxford.”
“Would the couch be too much trouble?”
Sofi stared at the couch and back at Joe.
“No … No, I think that would be OK. You look like you could use a rest. We’ll pick things up in the morning.”
He stepped in closer.
“You never told me why you believed him?”
“Believed who?”
“Why you believe Sam was trying set the record straight.”
“Sam and I …”
Sofi looked away. She wet her lips.
“You’ve just lost your brother.”
She smiled and looked into Joe’s eyes.
“I haven’t been sleeping well lately. I better try to get some rest. Let’s talk more in the morning.”
“Yes, of course. Thank you. Not just for the couch. For everything.”
Sofi left for her bedroom. Joe lay down on the couch. He picked up the management accounts and looked through Sam’s handwritten notes. What did Sam see? He closed his eyes and conjured up a vision of himself and his brother. For a moment he saw them side by side, as if today, both of them smiling, happy. Then the image disappeared. Written documents, numbers, lists and handwritten notes filled his mind. Need to let go of the detail.
He peered over to the papers left scattered across the table. She’d put in a lot of work in one day. And while there was much that was still baffling, he could sense they were getting closer. He relaxed into the contours of the couch. He closed his eyes and at once slipped into a deep sleep.
*
Joe woke to find Sofi in the kitchen preparing coffee. He felt rested, in a way he hadn’t since arriving in England. The sun shone through the front window, and he had the sudden urge to jump up and start the day with some energy. Then he remembered Sam. And Carl. He sat up and gazed down at his clenched fists.
As they ate silently, he noticed Sofi was dressed and ready for work. She’d been up for some time. He smelt her fragrance and, without realizing, drew in closer, out of focus, facing her.
“Are you OK?” she said.
Joe rubbed his eyes and snapped back to reality.
“What we were talking about last night—I think we need something more. An angle.”
“I examine financial schemes through a money-laundering lens. My impression is there is more going on here, some bigger picture.”
“I keep going back to the reference to Uzbekistan. Sam thought innocent lives would be lost. That’s why he stood up to Density. That’s what cost him his life.”
“The bombing of the Al Kamar must be related to Sam and Carl. Ghazali and your brother worked closely together. It’s too much of a coincidence.”
“And DIA is key to the success of the Passage fund.”
“At the office, I can dig around to see if there’s anything more on DIA on the government databases I have access to.”
“We need to get in to see Density. Can you arrange that?”
“Joe, look, I don’t think …”
He drew closer.
“For whatever reason, you came to see me, and since then we’ve confided in each other. We are on the same page about Sam. We both know he was trying to stop something from happening and was killed for it. There must be a way you can get me involved.”
“I can’t see how.”
“Include me as an advisor. I’m begging you.”
“It would be … highly irregular.”
“Let’s see where we get. If you start getting major pushback, we can reconsider.”
As they finished breakfast, Sofi picked up her phone to take a call. She walked through to the front room while Joe freshened up.
*
“Sofi, it’s Hamish. We have the reports back from the autopsy and lab. Hawkins’ cause of death was potassium-cyanide poisoning. He was dead before he was dumped in the water. I’m going to need another interview with his brother.”
“Actually, he’s here with me now.”
“He’s there? What the hell is he doing there? What are you up to?”
“Nothing. I’ll bring you up to speed later today. I need to get in to see Density again.”
She gazed out the window and took a deep breath.
“I want to involve Joe Hawkins. In fact, I think we need to.”
“What? Have you lost your fucking mind? You know, his prints are all over Carl Frazer’s office.”
“I can explain, Hamish.”
CHAPTER V
The elevator is padded and secure. Kate descends two floors below ground to the interrogation level of the facility. The exterior of the farmhouse boasts a traditional veneer, but below, a modernized detention center has been constructed. The interrogation level has concrete foundations, with the surfaces layered in matte gray metal with embedded sensors. The east wing is comprised of fifteen long-term isolation units and a common area. The interrogation and debriefing rooms are situated in the west wing.
At the security gate to the west wing, Kate places her hand on the fingerprint identification pad on the wall and centers her gaze on the iris-recognition camera. The metal door slips into the wall and Kate proceeds to the third office on the left. Agent Mikos Santayana sits at his desk, reviewing some papers. She can see Subject 13’s file—Joe Hawkins’ file—open and spread out around him.
Santayana is the primary interrogator assigned to Hawkins. He has worked with Hawkins for over three months and produced most of the information contained in his file. Santayana has some formal training in psychology, but has learned most of his interrogation techniques over the last nine years working with Krug.
“I have no explanation for his failure to respond to the tactics employed. He was initiated into the program as usual, maximum shock and harassment at time of capture, hooded, stripped, medical prodding, physical exhaustion, all intended to produce a heightened level of anxiety and fear, combined with a sense of helplessness, in the subject. This sets up the longer-term phase of—”
“It says in the file that you kept him naked and isolated, made him stand for periods of up to twenty hours a day, put rats and cockroaches in his cell, served him rotting food, changed the temperature of the room from hot to cold randomly and introduced ‘mild levels’ of electrical current to his genitals. Am I to assume you prescribed these tactics?”
“Over time, yes. My instructions were to try every trick of the trade to get him to speak. So that’s precisely what I did, Dr. Farrow.”
“Sorry, I interrupted. You were going to tell me more about the longer-term phase of the interrogation.”
Santayana steps down from his stool and walks over to the filing cabinet. His height takes Kate off guard. At about 5’5” tall, he doesn’t look the part of one of the facility’s best interrogators.
“Primarily one of sensory deprivation and overload. Hawkins was kept isolated, no light or sound. He was subjected to an irregular routine, irregular meal schedules, sleep-deprivation, various manipulations of time. He was forced to stay awake for days at a time and, intermittently, was kept in an isolation box. Deprive the subject of all sensory input.”
“And you administered curare, inducing total paralysis of controlled muscle movement, effectively depriving him of control over his own body.”
“That is correct. As I said, I was instructed …”
Santayana pauses and leers at Kate.
