But the lockups and other precautions proved to be of little use. Late on the second day of the witch hunt, the Serious Fraud Office made a formal public announcement that it was conducting a criminal investigation of Alphabet Capital’s trading activities. Lawyers for several of Perkins’s largest investors were on the phone within minutes, saying that the lockup and notification agreements were nullified in the event of fraud. They wanted their money out.
Perkins instructed his managers to honor any valid redemption requests, and the firm massively sold off assets that second day, both fixed-income and equities. But it’s in the nature of things in the financial world that bad news breeds more of the same, and the firm’s distressed selling compounded its losses severely. By the third day, it had gone from the jewel of Mayfair to a firm that was perceived to be in a death spiral. No other major firm was prepared to act as a counter-party without a hefty risk premium, which accelerated the downward momentum.
Sophie Marx called Perkins back the second evening of his troubles. She was in Brussels then, with problems of her own, but she didn’t mention them.
“Talk to me, Tom,” she said. “What’s going on?”
“I’m fucked. I didn’t get out soon enough. Your friends have left me high and dry. They have pulled the plug on everything and disappeared. I am holding the bag. The British have their financial goons all over me. They’ve camped out here. It is a complete wipeout. Investors are running for the exit. So is anybody on my trading floor who can get another job. I don’t know if I can make it another month.”
There was a deadness in his voice that frightened her. In every other encounter with Perkins, he had been a resilient and buoyant personality. He had seemed to lead a charmed life. Now his voice carried the sound of exhaustion and despair.
“Hang on, Tom. These people aren’t my friends. I’ve quit. I’m trying to undo their screwups. I can help you. You just have to give me some time.”
“It’s too late. They’ve taken me down, Sophie. They have all the cards. I’m ruined.”
His words carried iron weights that were pulling him to the bottom. He was drowning.
“Stop it!” she said. “Stop feeling sorry for yourself. These people are professional manipulators, but they make mistakes. Trust me. Don’t give up.”
“I don’t ever want to hear those words again, ‘trust me.’ You fucked me, Sophie, you and your friends. You have destroyed my life. Now go away and let me pick up the pieces.”
“Listen to me. Get a grip. You’re worrying about the wrong thing. People from Pakistan have been inside Alphabet Capital. They know all your secret money flows. That’s why people have been getting killed. You have to be careful. There are more important things to worry about than getting busted.”
Perkins gave a long exhale, a sound of ruin and defeat.
“You have not been listening to me, my dear. The people inside Alphabet Capital who have been stealing its secrets are your people. They have looted me and left me for dead. I don’t want to hear any more of your crusader stuff. It’s all over. I’m finished. If someone shoots me or sets off a bomb at Alphabet Capital, they will be doing me a favor, frankly. So leave me alone, all of you.”
Perkins ended the call.
Sophie’s eyes filled with tears. What he had said was true; she had been part of a ruinous, deadly process. She cared what happened to Perkins, and she wished she could give him some of her strength.
34
On the third morning of the witch hunt, the chief of the Special Fraud Office himself, Herbert Crane, OBE, paid a visit to Perkins’s office. He was in his late forties, young to be decorated, but he had distinguished himself in cleaning up the City of London, to the extent that was possible, after the financial meltdown. He had a chip on his shoulder; he didn’t like the world of Mayfair, and he especially didn’t like American interlopers like Thomas Perkins, who had used the relatively relaxed rules of the British financial markets to take risks and cut corners-and bring ruin on themselves and others.
Crane brought with him to the meeting a red-haired Scotsman named Angus Ward, who was his chief forensic accountant. Ward had been combing the files for the previous two days and had the eager, twitchy look of a hunting dog closing in on its prey. The investigators sat on one side of the conference table; Perkins and his lawyer sat on the other. The two British men had three briefcases lined up between them, a veritable archive. They both were leaning forward as if ready to spring.
Perkins and his lawyer were slouched back in their chairs, their body language advertising that they wanted to be anywhere but in this room. Tarullo’s bulky frame and slicked-back hair gave him the look of a lounge singer on a bad night.
The fraud chief turned on a tape recorder, introduced himself and his colleague and asked Perkins to do the same. Perkins’s voice, drained of energy, was barely audible, so Crane asked him to speak up. The American spoke again in the same flat voice, so the interrogator simply repeated the name loudly, for the record, and then began with his questions.
“I want to show you a series of trades made by your firm,” said Crane, “and I would be grateful if you could affirm that these trades were, indeed, made by Alphabet Capital.”
The SFO chief passed a series of papers across the table, while his accountant read a summary of what they contained. The first was dated in late 2007, and there were other trades in the succeeding months.
“UK gilts,” intoned the investigator, as Crane pushed his document across the shiny tabletop.
Perkins studied it and nodded. Tarullo, the American lawyer, interjected that he reserved the right to challenge the accuracy of the document later, along with all the others, in the event that there was a formal legal proceeding. His reservation was noted and the inquisition continued.
“UK credit-default swaps, on four separate trading occasions, in March, April, May and June of 2008,” continued the investigator. Four sheets passed from hand to hand.
“I get it,” said Perkins. “You’re just going after the old stuff, when I was on my own.”
“Shush!” said Tarullo.
“Excuse me?” queried the fraud chief.
“Nothing,” muttered Perkins. Now that he understood the game, he was losing interest.
Tarullo, the lawyer, objected that Crane was using copies of documents, and that unless the originals were produced they were useless as evidence, and this objection was also duly noted.
Crane rolled on with his recitation of suspect trades.
“British sterling, intra-day trading and futures, very large movements.” Once again, the documents were transmitted, over legal protest.
So it went, as the investigators peeled off their deck of cards. The transactions all involved assets whose movement was affected by the activities of the Bank of England. Some trades involved the securities of certain large corporations that had been subject to British legal and regulatory proceedings over the period.
When they reached the bottom of their stack of papers, the representatives of Her Majesty’s government collected them and set them in a neat pile.
“Now, Mr. Perkins, I want to show you affidavits we have received, anonymous for the moment. They link each of these transactions with specific insider information from the Bank of England that was relevant to the trade in question. My accountant, Mr. Ward, will read a summary of this information. You needn’t respond to these crown exhibits, unless you choose to do so.”
“I object to this procedure,” said Tarullo. “You are presenting uncorroborated allegations with no explanation where the information comes from. That’s outrageous.”