“How are you doing with Iacardi?”
“That’s the good news. Thanks to the efforts of a few really good people, we’re off life support. In fact, we’re making a lot of money. We got lucky and hired some of the best traders in the game. I had no idea how many there were out there just waiting for a chance to work for Iacardi. They jumped at our offers. I always knew it was a great franchise. These people confirmed it. Anybody who thought Iacardi was going down was dead wrong. In a lot of ways, I think the company is stronger now than it was before September of last year.”
“There you go again. Modest as ever. I think you should give yourself some credit. Use a little first person singular when you answer that question. There is no way that company would be where it is without you. You were the spark plug. You were virtually alone after September eleventh.”
“You’re very kind. I just wish everyone saw it the way you do.”
Marsha’s smile melted to a frown. “On that subject, the Iacardi shareholders fall into that category. They smell blood, and want to get things rolling next week. They’re represented by Sydney Mortimer. He’s a litigant with Madison, Bolt and Stortz, heavy hitters here in New York. Mortimer’s dangerous. I’ve been in court with this dude. He’s experienced, smart, and a son of a bitch. He’s scheduled an examination for discovery at The United States Courthouse in Brooklyn for next Wednesday morning at ten thirty. I’m driving, so I want you here by nine. We’ll need the whole day. Does that work for you?”
“Sure. What’s an examination for discovery all about?”
“It’s an important part of almost every civil lawsuit. It’s a pre-trial process where lawyers for each of the parties question other parties or their employees, under oath, about the matters involved in the lawsuit. The questions and answers are taken down by a reporter and later, if necessary, can be produced as a written transcript. It’s one of procedures established by the rules of court for helping each party find out about the other side’s case in the lawsuit. The idea is to promote settlement of differences and save expensive trial time. No judge is present because this is not a trial or even part of the trial.”
“I’m delighted that you’re going to be there.”
“You bet your sweet ass I am. There’s no way I’d let you spend one nanosecond with that animal without me. He’s going to ask you a ton of questions, none of which I want you to answer, unless I nod. Just remember, he’s there for only one reason: he wants to win the case for his clients. To do that, he’s going to use every trick in the book to get you to say something you’ll regret, something he can use against you in court. Give him short answers, ideally one word. Don’t give him anything else. Don’t volunteer any information. Don’t lie to him. He’ll beat you like a drum if you do… One more thing, and this is crucial. Keep your cool and don’t let him see any anger. He’ll try, but don’t give in. Let him know you’re stronger than that. Got it?”
Kerri nodded. “I hate him already.”
“So do I. Just don’t let him see it. He’ll use it against you.”
“What about our side? When do we get a chance to examine our opponents?”
“Same day. Same place. It’s at two in the afternoon, and I want you there. I’m going to examine Peter Tavaris and Walter Deaks. Those two have more than money to gain from winning this case. Can you suggest anyone else?”
Kerri considered the wives of the two Iacardi brothers, but concluded that money and security were their sole motives for signing the Enerco Offer to Purchase. She also considered Andrea Dennis, but her motives were identical to the Iacardi wives. Then she was struck by the obvious. “Yes. Ken Layton and Jeffrey Wheeler, the power and glory of Enerco. They have everything to gain by forcing me to sign their Offer to Purchase. I can’t prove it, but I think they talked Tavaris and Deaks into organizing the lawsuit. Other than those two, you’ve picked the right ones, and you’re right about their motives. I’m certain they’ve been promised kingdoms if they help Enerco acquire Iacardi.”
“Okay. Next subject. Let’s talk about the I.R.S.,” Marsha said, sending an cold shivers through Kerri’s body. “Henry Markoff called me this morning. Believe it or not, he actually sounded pleasant. He gave me some good news and some bad news. The good news is that if I file the Notice of Objections I referred to earlier this week, the I.R.S. is prepared to grant the tax relief I asked for. The bad news is that you’ll still have taxes and penalties of at least ninety-eight million.” she paused to allow Kerri to digest the number. “He said that even though you stepped forward and voluntarily disclosed your foreign holdings, and you donated all of it to a worthy charitable cause, you still broke the law by failing to file an pay income tax for ten years on a very large amount of money.”
Marsha’s news came as no surprise or shock to Kerri. She had expected it. In fact, she had anticipated that her liability would be even higher. Her problem was a rather acute shortage of cash. She had given away all of the funds in her Swiss account and loaned one hundred million to Iacardi & Sons. Her only liquidity was the two million left in her Rainy Day account.
“I don’t mean to sound facetious, and I’m very grateful for what you’ve done, but where do I get ninety-eight million? I know it’s my own stupid fault. I should have prepared for this before I started giving money away.”
Marsha frowned. “This is the big time, my dear. Unless you have some more cash hidden away, you’re going to have to borrow it. The Feds’ meter is running on that ninety-eight million, and you can’t write off the interest. You can on a bank loan. I’ve spoken to some of my friends in the banking business. Two of them, acting independently and completely unrelated, are prepared to loan the money to you, on the condition that you use your Iacardi loan and your Iacardi stock as collateral. Also, they want their points.”
“I presume you mean interest.”
“Yup, plus fees and expenses, but don’t worry about it. It’ll hobble you for a while, but it won’t cripple you. You’ll still be in the game.”
CHAPTER 49
Dover, Delaware. Friday, February 2, 2002. 10:00 A.M.
There are numerous reasons why corporations elect to incorporate in the state of Delaware. Perhaps the most compelling is that the state assesses no income tax on Delaware corporations’ income which is derived from sources outside its territorial limits. This alone is why both Enerco LLC and Iacardi & Sons Inc. had decided to incorporate in Delaware. It followed that the case of Iacardi Shareholders, The Plaintiffs, versus Kerri King, The Defendant, was to be heard in the Delaware Chancery Court. An L-shaped, red bricked, two and a half story building on The Green in Dover, Delaware, it is a non jury court, specializing in matters of equity.
The judge assigned to the case was vice-chancellor, William H. McCarthy, forty-eight years of age and a specialist in corporate law. He graduated summa cum laude from Harvard Law School, cut his teeth by representing companies in their corporate wars, then was honored with an appointment to the bench at Delaware Chancery Court. He was giant of a man with heavy black eyebrows, thinning grey hair, and a scowl capable of terrifying the most aggressive lawyers in the game. In writing and by telephone he had invited the opposing litigants in the case to join him in his office. He was deeply troubled by the case and wanted to discuss his discomfort with the opponents.
First to arrive was Marsha Cooper. She was no stranger to McCarthy. They had shared numerous courtrooms over the past decade, and shared a mutual respect. He stood and hurried to receive her at his office door. “Thanks for coming, Marsha,” he said with a warm smile. “I appreciate it. Please come in and take a seat. I expect your colleague will be here shortly.”
The two sat on comfortable red leather upholstered chairs facing one another and proceeded to recapture highlights of their past experiences, scrupulously avoiding any mention of the case at hand. Their conversation was interrupted by Sydney Mortimer, the opposing attorney. Kerri had acqu
ired a profound hatred for Mortimer, a man who had subjected her to the indignities of discovery, a necessary evil in the legal process. To her, he represented everything that was wrong about the legal system in the United States. Rather than using the law to benefit society, he used and twisted it unscrupulously to benefit himself and his clients. A thin sinewy man with zero body fat, a hawkish nose, too many teeth, and dark beady eyes, he looked more like a mobster than a lawyer. His brown pin striped suit and matching suspenders reinforced the impression. Worrisome for both Kerri and Marsha, was his reputation. In his twenty-two years as a class action litigator, he had achieved national acclaim for his successes, and had managed to compile an obscene fortune for himself in the process.
McCarthy excused himself, stood and hurried to extend the same courtesy to Mortimer as he had to Marsha. “Welcome, Sydney. Thank you for coming,” he said, once again extending his hand and a warm smile. He offered him a chair, no larger or smaller than the one occupied by Marsha. He glanced at his watch, then his guests. “I’ve ordered coffee. It should be here shortly,” he said, then rounded his desk, a beautifully hand carved mahogany behemoth, then sat in what looked more like a throne than a chair.
He stared at Marsha, then at Mortimer. “I took the liberty of inviting the two of you here at this time because I thought it would serve a useful purpose. I’ve studied the…” He was interrupted by his secretary, a twenty-something blonde wearing wire-rimmed glasses and an ankle-length, loose-fitting pale blue dress. She looked more like a law student than a secretary. She placed a silver serving set on McCarthy’s desk, then exited without a word.
All three helped themselves to coffee, then McCarthy continued, “I’ve studied the transcripts of the discoveries and listened very carefully to your arguments. I commend both of you for a job well done.”
“Why thank you, William. It’s not like you to pass out compliments,” Mortimer said with an experienced smirk.
McCarthy glared at Mortimer, silently admonishing him for his comment. “I asked the two of you to be here today because I’m deeply troubled by this case. I believe I have a clear understanding of it. If I’m correct in assuming that there are no further arguments, it is my opinion that continuing this case will only serve to enrich the two of you at the needless expense of your respective clients.” He paused to scowl at his guests. “Am I correct? Are there no further arguments?”
Both lawyers looked anxiously at each other, then nodded to McCarthy.
“So be it. Then listen very carefully to what I have to say… Inasmuch as Iacardi & Sons Inc. has a Shareholders‘ Agreement requiring a one hundred percent acceptance of an offer to purchase the company in order to validate such offer, this is a very unique case. I find that while this particular clause in the Shareholders‘ Agreement may have served the initial interests of the Iacardi family, it no longer serves any useful purpose. In light of the expanded distribution of Iacardi common stock, the clause has impaired the effectiveness of the Agreement. Specifically, by conferring disproportionate power in the hands of a minority shareholder, the clause fails to serve the interests of any of the shareholders, save and except for that particular minority shareholder.
It is not within my purview to speculate, but if it was, I would assume the Iacardi brothers overlooked this particular clause when they undertook to offer shares to the company’s employees. In fact, they may not have considered the Shareholders‘ Agreement at all when they took that decision. I say this because I see no amendments in the company’s records. Unfortunately, we can’t ask the brothers because they are no longer with us. As a consequence, I have no alternative but to deal with the Agreement as it is written.
While I find that the Defendant has broken no laws in refusing to sign the Enerco Offer to Purchase the common stock of Iacardi & Sons, and I will add that I laud her alleged motives for so doing, her action has resulted in substantial paper losses to the remaining shareholders. Applying an arithmetic calculation to the proposed purchase, by deducting an independent valuation of Iacardi common stock from the current value of Enerco common stock offered, I find that the difference exceeds one billion dollars.
Accordingly, it is my opinion that, in the absence of any further information, and assuming no change in the relative value of the common stock of the two companies, this court would find for the Plaintiff. The award would be in the realm of my calculation, plus costs, which are yet to be determined. I arranged this meeting to give both of you this food for thought, and to urge you, in the strongest possible language, to stay this action and to submit it to arbitration. As a more viable alternative, I urge the Defendant to reconsider her position and to sign the Enerco Offer to Purchase. In so doing, the defendant would avoid what would surely be a catastrophic personal financial loss, substantially appease the Plaintiff, and give Enerco what it wanted in the first place. In other words, all parties would win. That result is in sharp contrast to most cases in which there is a winner and a loser.”
McCarthy paused again for effect. He stared at each of his guests. “It is for this reason that I make my appeal.”
While McCarthy’s discourse was not entirely unexpected, it still managed to hit Marsha like a thermonuclear bomb. It was clear to her that if events unfolded as McCarthy had speculated, her client would face debts that would surely bankrupt her. In addition, her tax liability to the I.R.S. had the potential to cripple her financially. Ironically, these negative consequences would not be the result of her selfish behavior, but because she had acted solely in the interests of other people, less fortunate individuals. Marsha had to think fast. She faced McCarthy. “My client has been very successful in her career, and has done well, financially. She is not, however, in a position to fund the award you’ve proposed. She would, in fact, have no alternative but to declare bankruptcy, in which case everyone would lose. My client would be impoverished, Enerco’s offer would be nullified, and Mister Mortimer’s clients would be denied the billion dollar award they have anticipated.”
Undeterred, McCarthy responded, “It would be inappropriate for me to compel your client to sign the Enerco Offer. I have merely offered that course of action as one of her choices.”
Marsha turned to face Mortimer. “I’m prepared to discuss this with my client. Where do you stand on this?”
Mortimer gave her a victorious smirk. “Real simple, Marsha. Get your client to sign the Offer and we go away. I say that with only one proviso: that Enerco is prepared to revive its offer. The deadline in the original has expired.”
McCarthy smiled. “Very good. I’ll wait to hear from both of you and won’t schedule another hearing until I do.”
CHAPTER 50
Delaware. Same day. 3:00 P.M.
Marsha turned her black Jaguar S-Type onto the Korean War Veterans Memorial Highway, clicked it into cruise control, and leaned back in her seat in preparation for the long drive back to Manhattan. She reached for her cell phone and dialed Kerri’s private number. Kerri answered after one ring. “You free for dinner tonight? I’m buying.”
“Sure, but I probably won’t be able to leave this office until seven. What’s the occasion?”
“I just left the Delaware Chancery Court where I had a meeting with William McCarthy, the judge in your case, and Sydney Mortimer, your friend and mine. McCarthy made some interesting comments. I need to discuss them with you as soon as possible. I thought dinner tonight would be a good time.”
“Okay, where do you want to eat? I’ll make the reservation.”
“How about Sylvia’s. It’s on Lenox Avenue up in Harlem. Try for eight.”
“You’ve got it. I’ll call back to confirm.”
Harlem. Sylvia’s Restaurant. 8:15 P.M.
Marsha drained the first half of her first and well deserved martini, then fixed her grey eyes on Kerri. “Let’s get right into it. Please make sure your seat belt is fastened.”
Kerri nodded, tighten
ing her grip on her wine glass, anticipating bad news.
“McCarthy thinks we’re in a stupid lawsuit. He flowered that conclusion with a lot of whizzy legalese, but that’s his bottom line. He focused his comments on the Iacardi Shareholders‘ Agreement, specifically the clause requiring one hundred percent acceptance of an offer to purchase the company. He thinks the Iacardi brothers should have amended that particular clause when they decided to give Iacardi stock to their employees. He said the clause puts disproportionate power in the hands of a minority shareholder… In this case, it’s you.”
“So what are you telling me?” Kerri asked, certain she already knew the answer.
“While he’s impressed by your alleged motive for so doing, he thinks you’re using the clause to gain unfair leverage, my dear. In other words, if the case goes to trial, he’d have no alternative but to rule for The Plaintiff. The award would be in the area code of a billion, plus costs.”
Kerri took a sip of her pinot and struggled to process the implications of Marsha’s news, all of which were horrible. “So he’s suggesting that I pay one billion dollars to The Plaintiff and we all get on with the rest of our lives?”
“That’s one alternative… There’s another one.”
“No!” Kerri groaned, again visions of an airplane crashing into the South Tower in a huge ball of orange, red and yellow flame recurring in her brain.
“He said he can’t compel you to sign. He knows the clause is valid, and that you haven’t broken any law by refusing to sign The Enerco Offer, but he strongly urged me to convince you to do it. He thinks that it would be best for all concerned.”
“Sure it would, for all concerned about Enerco’s pot of gold, but he doesn’t give a shit about the eighty-seven estates of the Iacardi employees who died for the company and didn’t own a single share of its stock. I’ve said it before and I’ll say it again. If I sign the Enerco Offer, those estates will end up with nothing. I’ve staked my reputation on that, Marsha. There’s no way in hell I can sign that piece of paper. If I do, I’d spend the rest of my life hating myself for being so selfish.”