The First Billion Read online

  A tingling not so different from the one he felt this morning.

  Shaking off the memory, Gavallan drove his foot against the accelerator, taking the sports car to seventy miles an hour. The rain hardened and a gust sheeted the windshield with water. Blinded, he downshifted expertly, braking as he crested Russian Hill. “Instrument conditions,” he whispered, eyes scanning dials and gauges. A moment later, the wipers cleared the screen. Off to his right loomed the Transamerica Tower, a pale triangular needle framed by a score of steel and concrete skyscrapers. The buildings were dark, except for random bands of light encircling their highest floors. He glanced at the mute forms a moment longer, feeling a kinship with those already at their desks. He’d always thought there was something daredevilish about starting the workday at four in the morning, something not completely sane. It had the whiff of tough duty that had always attracted him, the raised bar of an elite.

  At age thirty-eight, John J. Gavallan, or “Jett” as he was known to friends and colleagues, was founder and chief executive of Black Jet Securities, an internationally active investment bank that employed twelve hundred persons in four countries around the globe. Black Jet was a full-service house, offering retail and institutional brokerage, corporate finance advice, and merger and acquisition services. But IPOs had been the ladder it had climbed to prominence. Initial public offerings. The company had made its fortune in the technology boom of the late nineties and, to Gavallan’s dismay, it was still suffering a financial hangover from those halcyon days.

  Nine years he’d been at it. Up at three, to work by four, finished twelve hours later, fourteen on a busy day. Once, the days had passed with astonishing rapidity. Success was an opiate and mornings bled into evenings in a hazy, frenetic rush. Lately, the clock had assumed a less benign stance. Time meant money, and every month that passed with revenue goals unmet was another inch cut from Black Jet’s financial tether.

  Dropping a hand to the stereo, Gavallan spun the dial to National Public Radio. The 4 A.M. business report was under way, a summary of action on the world’s major markets. God, let it be an up day, he thought. In Asia, the Nikkei and Hang Seng Indexes had closed higher, both with solid gains. In Europe, markets were divided, with the London FTSE, or “footsie,” strongly ahead and the German DAX and French CAC 40 (“cack quarante”) lagging only slightly below their highs. But what about New York? He’d been in the business long enough to know there was only one market that really counted. A moment later he had his answer. At seven-oh-five Manhattan time, the futures markets were up sharply, presaging a solid opening in just over two hours.

  “Nice!” he said aloud, landing his palm against the varnished oak steering wheel for good measure. It didn’t take a genius to know it was best to sell in an up market. But just as quickly his exuberance faded, replaced by a cold apprehension. If all went well, he could celebrate at the end of the day. For now, though, he had to wait. Too many cards remained facedown on the table.

  The offices of Black Jet Securities occupied the fortieth and forty-first floors of the Bank of America Tower, a fifty-two-story slab of red carnelian marble not dissimilar to Mies van der Rohe’s Seagram Building in New York. The elevator opened, disgorging Gavallan into a brightly lit reception area. Sofas and chairs upholstered in Corinthian leather offset terra-cotta carpeting. A combed birch counter stood to the left, and behind it a seven-foot wall of polished black granite bearing the firm’s name in silver matte letters.

  “Six days!”

  Gavallan slowed, turning to meet the source of the words.

  “Six days,” Bruce Jay Tustin repeated, cresting the interior staircase that led from the trading room on the floor below. “The countdown for Mercury is on. T minus a hundred twenty-two hours. Fuckin’ A, bubba!” Tustin was the firm’s head of syndicates as well as a member of the executive board. He was forty-five years old, short, and svelte, a bantamweight clad in a Brioni suit. He had a boxer’s mug, too—the broad forehead; the flat, broken nose; the sly, determined cast to the eyes.

  “How’s the book?” Gavallan asked. “Holding strong?” The “book” referred to the nimble piece of software that held all orders and indications of interest for the new issue.

  “A few cries in the jungle, but we’re working to calm the savages.”

  Gavallan sensed there was more to it. “Any of the major players backing out?”

  “Just one so far. Mutual Advantage in Cincy canceled their order. Said they wanted to put the money into bonds. Doesn’t look like anyone else is taking the rumors seriously. The market wants this deal to happen.”

  “Let’s stop it there, Bruce. I don’t want a snowball effect. We’re standing behind the deal one hundred and ten percent. Keep putting the word out: Mercury is hunky-dory.”

  Tustin nodded obediently. “You find out who it is bad-mouthing us? Not one of your girlfriends, is it?”

  Gavallan shook his head, thinking that someday Tustin’s mouth was going to kill him. “Not yet. But we’re looking.”

  “Ah, that’s right, I forgot. She left you. Hang in there, kid. You’re young yet.” Tustin clapped Gavallan on the back. Features brightening, he added, “Opening’s looking strong, Jefe. The market’s getting primed for Mercury. Six days. Hoo-yeah!” And pumping his right fist in the air, he spun and bustled down the steps to the trading floor.

  “Hoo-yeah,” repeated Gavallan, but his parting smile disguised a pressing urge to get to his office. Walking briskly, he shifted his calfskin satchel to his left hand while withdrawing a set of keys from his pocket.

  At first glance, he looked more the affluent bachelor than the driven executive. Tall and fit, he’d dressed for the day in his usual outfit: jeans, moccasins, and a faded chambray shirt, throwing on a navy cashmere blazer for good measure. He was finished with uniforms, be they dress blues or three-button worsteds from Savile Row. In the same disobedient spirit, he kept his sandy hair cut long, sure that it brushed his collar and hid the tops of his ears. His face was strong rather than handsome. Creases dimpled weathered cheeks. Wrinkles bracketed eyes hard and gray as agate. His nose was slim and straight, the boldest testament to his Scottish ancestry. His jaw was steadfast, and as usual raised an extra degree, as if he were trying to peer over the horizon. A pillar of the yacht club, you might guess. A regular at the nineteenth hole.

  But a second look would give you pause. His gaze was direct, and when not combative, confrontational. His gait was compelling and hinted at tensions simmering within, some urgent, inner purpose. You would never, for example, stop him on the street to ask for directions. It was his hands, though, that gave him away. They were the hands of a brawler, large and callused, the knuckles swollen from long-ago fights. No Ivy Leaguer he, you might say, and take a step back. This one was hewn from rougher stock. This one had required polishing.

  Even at this hour, the hallways were abuzz. The day’s first conference call originated at four-thirty. Everyone present in the office at that hour—usually about sixty traders, analysts, and brokers—gathered in the company conference room to share earnings announcements, analysts’ reports, and street gossip with branches in New York and London. Video cameras, color monitors, and microphones linked the participants, and for thirty minutes they hashed out anything that might boost a particular stock’s price or knock it down. Information was the market’s universal deity—rational, impartial, and above all merciless—and it was worshiped accordingly.

  Inside his office, Gavallan turned on the light. A glance at his watch gave him ten minutes until the conference call began. Not bothering to unbutton his jacket, he sat at his desk and checked his E-mail. Seventy-four new messages had come in since yesterday evening. Hurriedly, his eyes scanned the flat panel screen. The usual brokerage recommendations: Buy Sanmina, hold Microsoft; so-and-so initiating coverage on Nortel. Delete. Delete. Delete. Notes from a few venture capitalists in the Valley. An invitation to a golf tournament in Vegas. “Don’t think so,” he muttered, hitting the delete
key; he’d take his clubs out of storage when the world righted itself. A smattering of messages from his colleagues in the firm. He’d check these later.

  “Byrnes, Byrnes, where are you, buddy?” He looked for Grafton Byrnes’s handle but didn’t see anything. “Damn it,” he muttered, rocking in his chair.

  He’d hardly slept, expecting his number two to call with an update on the trip to Moscow. At the least, he’d hoped for an E-mail. Finding nothing, he unlocked the top drawer of his desk and located a square slip of paper bearing the initials G.B. and a ten-digit number. He picked up the phone and dialed.

  “Hotel Baltschug Kempinski. Good afternoon.”

  Gavallan snapped to attention. “Yes, good afternoon. I’d like to speak with one of your guests. Mr. Grafton Byrnes.”

  “One moment.”

  Where are you, my boy? he wondered, drumming his fingers impatiently on the desk. You’re my ace in the hole. Pick up the goddamn phone and tell me everything’s all right. Tell me I was a fool to worry and that we can put some champagne and caviar on ice for our European friends.

  “Mr. Byrnes is not in the hotel.”

  “Very good,” said Gavallan, though in fact he was curious as to why Byrnes hadn’t finished his work yet. Drawing a manila file from his desk, he flipped open the cover. Inside lay the photographs—the reasons for Grafton Byrnes’s last-minute trip.

  The first showed the façade of a two-story building that could have been a warehouse or a manufacturing plant. A sign above the entry read “Mercury Broadband.” The photo was captioned “Moscow Network Operations Mainstation.” A second picture purported to show the building’s interior: room after room packed with standard telephone switching equipment, circa 1950, gray rectangular dinosaurs sprouting black connector cables like unruly hair.

  Founded in 1997, Mercury Broadband was the leading provider of high-speed Internet service in Russia, the Ukraine, Belarus, and the Czech Republic—an area that Gavallan, with his training as a Cold War jet jock, would forever think of as “the communist bloc.” Through its network of coaxial cable, fixed wireless, and satellite relays, Mercury Broadband serviced over two million businesses and residential customers and had contracted rights to service an additional twenty-seven million. It also packaged and offered multimedia content and E-commerce in the form of Red Star, a multilingual portal similar to America Online that boasted over seven million subscribers.

  But here was the good part: Not only had the company doubled its revenues each of the last three years, it had begun turning a profit as of third-quarter fiscal 2000. In six days, Black Jet Securities would take Mercury Broadband public on the New York Stock Exchange in an IPO set to raise two billion dollars. The seventy million in fees the deal generated was crucial to relieving Black Jet’s worsening financial malaise. Every bit as important was the boost to the company’s reputation a successful offering would bring. From regional mighty mite to international presence in one fell swoop.

  Which brought Gavallan back to the photographs. He had another picture in his manila file, also purporting to show the interior of the Moscow network operations center. This one positively beamed with the latest in Internet hardware—Sun servers, Cisco routers, Lucent switches—and it was this photo he’d showed to his investors.

  “I’d like to leave a message,” he said. “Please tell him Mr. Gavall—”

  “Mr. Byrnes is not in the hotel,” the Russian operator interrupted.

  “Yes, I heard you. If you don’t mind I’d like to leave a—”

  “No sir, you do not understand,” cut in the operator again. “Mr. Byrnes has checked out.”

  “That’s not possible. He’s not due to return to the States until tomorrow. Please check again.” And before the operator could protest, he shouted, “Do it!”

  “Very well.” The “sir” was distinctly missing.

  Confused, Gavallan ran his eyes over the computer screen, reconfirming he hadn’t received any E-mails from Byrnes. His instructions had been clear: Once Graf picked up something about Mercury—good or bad—he was to let Gavallan know. Immediately.

  “Sir? Our records indicate that Mr. Byrnes checked out of the hotel yesterday evening at eleven-thirty.”

  “Eleven-thirty? You’re sure?”

  Moscow was eleven hours ahead of San Francisco; 11:30 P.M. in the Russian capital meant lunchtime in the office. Byrnes had called in four hours before that, at around eight yesterday morning, to report that he’d arrived safely and would start his investigations the next day. The notion that he’d checked out without spending the night was as unsettling as it was absurd.

  “Mr. Byrnes is no longer a guest with us,” replied the operator. “If you’d like to speak with our general manager, I’d be happy to connect you.”

  “No. That won’t be necessary.”

  “Po Zhausta. Da Svidaniya.”

  Gavallan put down the phone and strode to the window. For a long time, he remained still, looking out over the city. Through the rain, he could make out Telegraph Hill, and beyond it the bow lights of a supertanker advancing slowly out to sea. Farther to his left, pale red beacons glimmered atop the cable towers of the Golden Gate Bridge. Staring at the melancholy panorama, he experienced a sudden tremor, a shiver that rustled his spine and caused him to cross his arms and hug himself as if fending off a stern winter’s breeze. It was the same yawn of anxiety that had passed over him two days earlier, when on a foggy Monday morning he’d first broached the idea of a trip to Moscow to Grafton Byrnes.

  3

  So you’ve seen it?” Gavallan had demanded as Grafton Byrnes entered his office.

  “Yeah, I’ve seen it,” answered Byrnes with a calm Gavallan did not share. “Not the best PR one of our deals has ever gotten, but not the worst, either.”

  “I’m not so sure. Timing couldn’t be worse, that’s for certain.”

  Byrnes strolled across the room with the easy authority that was his trademark. He was taller by an inch, dressed in a navy crew neck sweater over a white oxford button-down, brown corduroy slacks, and Belgian loafers polished to a spit shine. His face was craggy and lean, with eyes that appraised but never accused, and a smile that forgave all sins.

  “Want something to drink? Pellegrino?” Gavallan spun in his chair and opened the compact refrigerator hidden in his credenza. “I’ve got one those new lattes in a bottle. How ’bout that?”

  Byrnes took up position behind him, peering over his shoulder. “Nothing with caffeine, thanks. I’ll take a mineral water. No, no . . . one without any bubbles.”

  Gavallan handed him a bottle of Ozarka and selected an ice-cold can of Orange Crush for himself. He considered his teenager’s sweet tooth his only vice. Vintage European automobiles, chilled Russian vodka, and Stevie Ray Vaughan playing the blues at excruciating volumes counted as passions, and were thus exempt.

  “Skoal, brother,” he said, lifting the can of soda pop.

  “Skoal, my man.”

  It was a joke between Texans, “Skoal” being both an informal “Cheers” and the tried-and-true chewing tobacco of their youths.

  Gavallan had known Grafton Byrnes his entire adult life. They had met at the Air Force Academy in Colorado Springs, where Byrnes had played regimental commanding officer to Gavallan’s plebe. Every time Gavallan mouthed off, it was Byrnes who administered the punishment. A hundred push-ups on the deck. A thousand-yard sprint in shorts and tennis shoes through waist-high drifts of midwinter snow. Two hours of reciting the Uniform Code of Military Justice while doing Roman chairs against the commons room wall. If harsh, the abuse was well-intentioned. It was Byrnes’s job to make sure Cadet John J. Gavallan made it through the Zoo, and to that end he tutored him in calculus, instructed him on how to properly hold his knife and fork, and taught him to iron a razor-sharp crease into his trousers.

  Retiring from the Air Force a major, Byrnes had followed him to Stanford Business School, then to Black Jet Securities two years after its founding. He was prett
y much Gavallan’s older brother, and as close a friend as he could ever hope for.

  “You know this guy, the Private Eye-PO?” Gavallan asked.

  Byrnes shrugged, offering a wry smile. “I do now. Who is he exactly? Or should I say ‘what’? Some sort of Internet gadfly?”

  “You could say that. Calls himself the Robin Hood of the Valley’s pink slip brigade. He spies on the rich to protect the poor.”

  “The poor being who?” smirked Byrnes. “The laid-off techies who can’t afford their Beamer payments?”

  “More like the average investor who lost his shirt when tech stocks took a beating.”

  “Oh, you mean our retail clientele. So he’s the bastard responsible for the plunge in our commission revenues. Got it.”

  Outside, a blanket of fog sprawled across the Bay Area, a pea soup so thick Gavallan had trouble making out the gargoyles on the roof of the Peabody Building a hundred feet away. Rising from his chair, he circled the desk, swiveling the computer monitor 180 degrees so they could both read from the screen. As usual the Private Eye-PO’s posting was written in a style somewhere between the Motley Fool and a fifties Hollywood tabloid.

  For weeks now, Wall Street has been in a lather for the $2 billion Mercury Broadband deal being brought to market by Black Jet Securities. Well, kids, your own Private Eye-PO has learned that the offering is fully subscribed, with plenty of savvy investors looking to get in on the action. Caveat emptor. Mercury is not what it appears. My own no less savvy gumshoes swear to me that Mercury is only a shadow of its trumped-up self, and Red Star, a sheep in AOL’s clothing. What do you expect from Black Jet Securities, itself a pretender to the throne? When will Mr. Gavallan learn? Black Jet can never be white-shoe. But, hey, friends, why listen when you can look? After all, isn’t seeing believing?