The First Billion Page 5

  5

  At precisely 7:15, Jett Gavallan ducked out of his office, took the elevator to the garage, and jumped behind the wheel of his Mercedes. The rain had stopped and traffic was light as he pulled onto the street two minutes later and accelerated east toward the Embarcadero. He didn’t like being away from the office in the mornings; even the most important client meeting left him feeling like a choirboy locked outside of chapel. But today, there was nothing to be done. He had an appointment to keep, one that required discretion and a degree of stealth. One that on no account could be handled inside the walls of Black Jet Securities.

  To his left, Chinatown passed in a blur of weeping pagodas and shuttered storefronts. Steering around slower cars, Gavallan made good time, managing to make every light on Pine Street without seeing so much as a hint of yellow. He did not notice the silver Ford Taurus tucked neatly into his lane three cars behind him, following at a discreet distance. If he had, he would have had no reason to be suspicious of it. The FBI was a professional organization. They had made it a point to change their tail car every day since taking up surveillance on Mr. John J. Gavallan ten days earlier.

  Gavallan focused his mind on business. He had an earnings review at ten, and to prepare for it he’d spent an hour studying the firm’s pro forma revenue estimates for the second quarter. The results were not encouraging. He was beginning to wonder if it wasn’t the market that had gone sour, but his own touch.

  “Nine years,” he whispered to himself, recalling the arduous climb from one-man band to multinational touring act. Today, it felt like ninety.

  Gavallan had founded Black Jet Securities one year out of Stanford Business School. He’d had offers from plenty of blue-chip firms—IBM, Goldman Sachs, Ford—but he’d turned them down. Six years in the Air Force had left him wary of institutional authority. Instead, he rolled up his sleeves, took a job with Sutro & Co., a smallish California investment bank, studied for his registered rep’s license, and taught himself the investment business. Twelve months later, he quit his job and hung up his own shingle, taking with him a few of his largest clients and eighty thousand dollars in savings.

  For a year or two, he was content to act as a broker-dealer, hiring registered reps and managing clients’ money. But south of town, in Silicon Valley, things were happening that quickly caught his eye. Something called the Internet was springing to life, and overnight, companies eager to capitalize on its heralded, but unproven, potential were sprouting up like mushrooms. While their products and strategies differed wildly, they all shared one common trait: a dire, unquenchable need for cash.

  It was into this market that Gavallan jumped headfirst in the fall of 1996. He didn’t know much about initial public offerings, but that didn’t matter. Nor did a lack of pedigree or track record. Jett Gavallan had something none of his rival investment bankers did. Something his business school profs would have labeled a “unique point of differentiation.”

  During the Gulf War, he had flown twenty-six missions at the controls of an F-117 Nighthawk, the angular black jet known to the world as the Stealth bomber. And there was nothing that a gaggle of laboratory-bred “techies” liked hearing better than what it was like to man the controls of the world’s most technologically sophisticated aircraft and drop a laser-guided smart bomb smack on the top of a pack of kaftan-clad, Uncle Sam–jeering camel jockeys. Forget Quake. Forget Doom. Forget Tomb Raider. Here was the real McCoy. A first-person shooter with blood on his hands. And they would be proud to have him battle the wizards of Wall Street to secure funding on their behalf.

  For two years, Gavallan traveled between the towns of San Mateo, Menlo Park, and Palo Alto. His first clients were small ones, rinky-dink start-ups happy to raise ten million dollars on the Pacific Stock Exchange. Computer jocks with dirty fingernails who worked in their pajamas. He did eight IPOs the first year. Twenty the second. In time his reputation grew, and with it the quality of his clients and his company’s revenues. Black Jet’s annual gross rose in a vertiginous spiral. Sixty million dollars, one hundred forty, four hundred. Amazingly, the firm managed to break a billion before the bubble broke and things went to hell.

  Since then he’d been fighting to keep his head above water. The company was still making money, just not enough. He was sized for growth, not stasis. Euphemisms like “ramping up,” “burn rate,” and “top-heavy” and their connotations of boom and bust weren’t solely the preserve of Silicon Valley.

  He could imagine the earnings review later that morning. Retail brokering was coming back nicely, but nothing like it had been. IPO activity was only just recovering. M&A was off 20 percent the last two years. Only trading was making money, landing on the right side of the latest big leg up. As each managing director reported his or her results, their eyes would creep toward Gavallan. He knew the downcast glances, the uncomfortable silences, the nervous laughter by rote, each person wondering when the ax would fall, and whose head it would be thumping into the wicker basket. God, he hated being the executioner.

  “We’re not running a charity,” Byrnes had said during their last meeting.

  Gavallan was all too aware of the fact. Three times in the last year he’d dipped into his savings to fund increases in Black Jet’s capital. He’d liquidated his portfolio of stocks, sold off a large chunk of real estate in Montana he’d been planning to build on for his retirement, and cashed out of a promising hedge fund. This morning, he would take the final plunge—a second mortgage on his home. After that . . . An old adage about tapping a dry well came to mind.

  Arriving at the Embarcadero, he was pleasantly surprised to find an empty space in front of the building. He parked hastily, telling himself that the space was an omen of good things to follow. Entering his attorney’s office, Gavallan laughed at his desperation. He knew there was no such thing as good luck. Just good timing.

  Special Agent Roy DiGenovese, on temporary assignment to the San Francisco field office of the Federal Bureau of Investigation, double-parked the silver Ford Taurus a safe distance shy of Gavallan. Keeping the engine running, he rolled down the window and lit a cigarette. A glance in the side-view mirror confirmed that DiGenovese was Sicilian in looks as well as name. His hair was black, his eyes the color of midnight wine, his beard pushing up stubble three hours after he’d shaved. He had the brooding, patient gaze of a hunter, and a hundred years ago he might have been found wandering the rugged landscape of southern Sicily clad in chamois pants and a sheepskin vest, a lupara slung over one shoulder, tracking the wolves that regularly ravaged his family’s flock. Today, DiGenovese might still be called a hunter, but his prey was decidedly human, and his arsenal more subtle than his ancestor’s twelve-gauge shotgun.

  Armed with a Juris Doctor and an MBA from New York University, a CPA’s credential emblazoned upon his breastplate, Roy DiGenovese was the newest member of the FBI’s Joint Russo-American Task Force on Organized Crime. Prior to his studies, he’d spent time in the U.S. Army, earning his Ranger’s tab and serving with the 75th Ranger Regiment at Fort Benning, Georgia. Three years into what he hoped to be a lifelong career with the FBI, he was trim and muscular, and possessed of the same killer instinct as the wild-ass teenager who used to rappel out of helicopters in the dead of night, an M16 on his back and a K-bar strapped to his calf.

  Setting the cigarette in the ashtray, DiGenovese picked up a scuffed Nikon from the seat beside him and brought it to his eye. The speed-wind whirred nicely as he fired off a dozen stills of Gavallan hauling himself out of the crazy old car with the gullwing doors. Even through the shutter, the man looked tired and in need of a break. It was easy to understand why. Seven days of following Gavallan had convinced DiGenovese he’d made the right decision not to take a job on Wall Street. Twelve hours a day cooped up inside a skyscraper was no way to go through life. The guy’s desk might be made of mahogany, but the chain that tied him to it was pig iron, all the same.

  As soon as Gavallan disappeared inside the sleek office tower, Di
Genovese exchanged the Nikon for a two-way radio. “Zebra two, this is Zebra base, come in.”

  “Zebra two, roger.”

  “Maid gone?”

  “Two minutes back. On her way to pew number seven at St. Mary’s as we speak.”

  “Good. Tell her to light a candle for us, we who are about to sin.”

  Gavallan’s maid, a middle-aged Guatemalan illegal named Hortensia Estrada, hadn’t missed morning mass a single day that week. The service lasted between fifty and sixty minutes, leaving DiGenovese’s men plenty of time to do their work.

  “You’re good to go, Zebra two,” said DiGenovese. “Time at target is thirty minutes. I repeat: three-zero minutes. Are we clear?”

  “Roger, Zebra base. Three-zero minutes. Walk in the park.”

  Are you sure you want to do this?” Sten Norgren asked, clutching a sheaf of manila folders, legal envelopes, and stray papers to his chest.

  “Just give me the documents, Sten. It’s not that big a deal.”

  Hesitantly, Norgren laid the stack of papers on his desk. “It’s only for your protection,” he pleaded in an injured tone. He was short and barrel-chested, with a florid, cherubic face and curly blond hair. “Isn’t it just a wee bit crazy to stuff all your money in one investment?”

  “Not if it’s your own company,” said Gavallan. “Besides, can I tell you a secret?” He motioned the attorney closer. “That stuff about diversification? It’s bullshit. Just a ruse to bump up commissions. We can’t have our customers buying and holding the same stock for twenty years at a time. We’d be bankrupt by Christmas. Sector rotation, averaging in, market timing—that’s the ticket. Churn and burn, Sten, that’s the name of the game.”

  For a moment, Norgren didn’t answer, and Gavallan could practically see the lawyer’s analytical mind parsing over his statement, deciding whether what he said might actually be true. Then Norgren burst out, “Shut up, you bullshit artist. Sit your butt down in that chair, right now. I’ve got just the pen to sign your life away—a Mont Blanc that Sherry gave me for Christmas. Lousy thing cost more than my law school diploma.”

  Gavallan found his way to the chair and sat down. He had always hated lawyers’ offices. He had only to set foot inside one for a feeling of imminent bad luck to creep into his neck and shoulders. Norgren’s office was no exception, even with the Scandinavian furniture, the credenza packed with photos of blond, smiling kids, and the colorful modern art on the wall.

  “Last chance,” said Norgren.

  “The pen, maestro.”

  Norgren took a beautiful onyx and gold fountain pen from his pocket and plucked off the cap. “She’s all yours.”

  Recognizing the concern as genuine, Gavallan was flushed with a sudden fondness for the man. These days it was pretty hard to find a lawyer who gave a damn. “Thanks, man, but I know what I’m doing.”

  “I’m sure you do,” said Norgren, a little too quietly.

  The firm of Norgren, Piel, and Pine had done the majority of Black Jet’s securities work for years: fairness opinions, registration statements for the SEC, legal analyses of all manner of financial instruments. At some point, Gavallan and Sten had become friends. They had dinner once a month and Gavallan took his kids sailing when the westerlies weren’t too strong. Norgren had recently earned his pilot’s license and was always calling Gavallan to ask his advice on one matter or another, begging him to come up with him for a short flight above the bay. Gavallan always declined politely, without offering an excuse. He hadn’t taken the controls of an aircraft since the Gulf.

  Gavallan spent a few moments reading through the documents. On top of the pile was a statement from Alameda Trust Corporation, granting him a second mortgage on his home in Pacific Heights in the amount of two million dollars. Beneath it were envelopes containing Gavallan’s monthly bank and brokerage statements and the HUD-1 for the recent sale of his property in Montana—all the paperwork Norgren had needed to secure the loan on his behalf.

  Gavallan’s first action was to endorse the check made out in his name and hand it to Norgren. “You know where to deposit this.”

  “How much does this bring it to? North of twenty million, if I’m not mistaken?”

  “Twenty-five point seven, to be exact,” answered Gavallan, meeting his eye. “Don’t worry, Sten, I am keeping track.”

  Black Jet’s recent quarterly losses, combined with decreases in the value of securities the firm held for its own account and a certain fifty-million-dollar bridge loan he’d made to a less than investment grade customer, necessitated the capital injections. The Securities and Exchange Commission had strict requirements for firms underwriting new issues, especially ones valued at two billion dollars. Gavallan was not going to lose Mercury on a technicality.

  “Why don’t you let me make some calls,” suggested Norgren. “I know some money center banks who could help out. Your reputation’s sterling, Jett. You know that.”

  “I’m flattered, Sten, but it’s hardly a good time. We’re due to book our second quarterly loss in a row. We wouldn’t get close to the price we deserve.”

  “I thought business was picking up. Markets are a helluva lot stronger than a year back. I’m sure you could get a great price—two times book at least.”

  Gavallan wondered if Norgren had already placed a few calls on his behalf. Black Jet’s book value was close to four hundred million dollars; two times book gave the firm a value of eight hundred million. Gavallan considered the price, but the prospect of vast riches left him unfazed. And then? he mused. What happens after that? Report to a drone three thousand miles away? Sit on a beach reading paperback novels? Work on his golf game for eleven years in hopes of joining the Senior Tour? Sell? Never. The word wasn’t in his vocabulary.

  “The problem’s overhead,” said Gavallan. “Business isn’t too bad. Revenues might even inch up a little over last year.”

  “So fire some people, Jett. Come on. Rationalize, downsize, economize.”

  “Compromise, marginalize, capsize,” countered Gavallan, firing off the words like bullets.

  “Survive!” shouted Norgren. “Stop being so damned proud and do what everyone else in your place would have done a year ago.”

  “Proud? I’ve fired forty men and women so far this year. Is that ‘proud’ enough for you?”

  “It isn’t up to me to decide—it’s up to the market. It’s no sign of failure if you cut back a little, tighten your belt.” When Gavallan didn’t respond to his prodding, Norgren threw up his arms in frustration. “Whatever you say, Jett. I’m just your lawyer. You pay me to keep you apprised of your best options. Consider yourself informed.” And sighing, he bent over Gavallan’s shoulder and thrust out a beefy hand to indicate where he should sign. “Here. Here. And here.”

  Gavallan affixed his violent slash to the documents as indicated. “That it?”

  “That’s it, my friend.” Norgren added his own signature as witness, then gathered up the papers and laid them neatly in the out tray. “First payment isn’t for sixty days. After that it’s twenty-five grand a month, every month. And that’s on top of your regular nut. That’s a lot for a guy who hasn’t taken a salary since Christmas.”

  Gavallan figured that taking a paycheck was like robbing Peter to pay Paul. He was all too aware of his precarious circumstances. “Not to worry, Sten. I’ll have the entire amount paid back by the end of the month.”

  “Thousand-dollar prepayment penalty, just so you know. Couldn’t get them to drop it. Come on, I’ll walk you out.” When they reached the reception area, Norgren said, “Sorry if I’m being a nervous Nelly. It’s just that you’re cutting it awfully close this time—I mean putting it all on this deal. Frankly, if you weren’t my friend, I’d tell you you were out of your blazing mind. You sure it’s going to work out?”

  Gavallan smiled slyly as he threw an arm over the attorney’s shoulder. “You saying you don’t want your Mercury shares? Is that it?”

  “Jett, I’m serious. I
f Mercury goes south—even if you have to shelve it for a few months—you’ll be feeling the pain. You and your company. Think about what I said. About cutting. Make it temporary. A three-month vacation.”

  “Relax, Sten. It’s not that big of a deal.”

  “Better yet, let me make that call. I’m just wondering if it’s wise to bet it all on one number. It is a big deal, Jett.”

  “Nah,” said Gavallan, shaking his friend’s hand. “Betting it all isn’t such a big deal—losing it is. Anyway, didn’t you know? The house always wins.”

  Waving good-bye, Gavallan strode confidently to the elevator. He pressed the button for the ground floor, and as the car descended, his stomach went with it.

  Cutting it close? Norgren had no idea. Gavallan was down to three thousand dollars in his checking account, a hundred grand in certificates of deposit, and his prize Mercedes parked out front, its value beyond reckoning. He had a first mortgage of eighteen thousand dollars a month, a second of twenty-five grand kicking in in sixty days, and a quarterly tax payment of two hundred and eighty thousand dollars due on the 21st based on a salary he wasn’t receiving—and that was before he put one foot out of bed.

  Walking to his car, he considered his other obligations. To his three sisters and a widowed mother, all in Texas. To a club of broken and battered men spread around the world whom he’d adopted as his own. To a hospital that this very evening would fete him as its Man of the Year.

  “And so, Mercury,” he whispered, with a secret hope.

  And so, seventy million dollars in fees and a spigot of related business to come down the pike.

  And so, a twenty-first-century return to normalcy.

  Gavallan started the motor. He had one more stop before returning to the office.

  The team of three men and one woman worked quickly, efficiently, and silently. They entered Gavallan’s residence through the rear door, disabling the security system, then spreading out through the four-thousand-square-foot home to their assigned target areas. Each knew the house by rote. They had studied architectural drawings of the home as well as an electrical schema of its wiring. They carried the tools of their trade in black web belts hidden beneath striped cotton shirts declaring them employees of Pacific Gas and Electric.