A Week in December by Sebastian Faulks Read Free Book Online Page B

seemed at Allied Royal. He noted that when bank stocks fell, Allied Royal fell a fraction more than its competitors; when the other big banks returned to where they'd been, Allied Royal never quite clawed back all it had lost. These were only fractions, barely visible to the unfocussed eye. Daily calls to the trading desks of large investment banks told Veals that to buy credit protection on ARB would cost a little more than those on any of its big British rivals. These insurance policies against a bank failing to meet its debt obligations were always cheap, because the chance of default was so slight; but to insure against an Allied Royal debt failure over the standard five-year period of the insurance, or 'credit default swap', was just a whisper more expensive than it was for any comparable bank. This was what piqued Veals's interest. And then ARB's balance sheet publicly revealed how much money it had taken from the wholesale markets (or borrowed, in other words, from other banks): too much, in Veals's view.
    In March 2006, Allied Royal surprised the world by buying a large Spanish bank. Veals's analysts looked hard at the deal and concluded that it was 'testosterone-driven'. The figures did add up, but everything was stretched. ARB had raised large quantities of debt secured both on the anticipated future cash flows and on the expectation that there would be cost savings in merging the two banks into one big new structure. Veals knew people always underestimated how much it cost in mainland Europe to achieve such savings and was surprised that ARB had managed to prevent the analysts from pointing this out. By now, however, he was definitely interested.
    In April 2006, he fired his head of Compliance, a Scot called William Murray. In theory, such a person was meant to ensure that every deal made by the fund 'complied' strictly with the rules laid down by the regulators. The word, however, lent itself to jokes; Steve Godley suggested that Murray had been fired for not being 'compliant' enough. In the push-pull of dealings with Veals, Murray had pulled too hard: he seemed to have forgotten that it was Veals and not the FSA who paid his salary. The purpose of a compliance officer, in Veals's view, was to facilitate and to warn, in that order. If necessary, the third duty was to look the other way.
    'I suggest you apply for a job with Shields DeWitt,' Veals told Murray as he cut up his credit cards. This was an investment house of legendary rectitude, known to Veals as the Vatican. Its directors were often seen at Covent Garden, in black tie, or at dinners for charities to which they were willing and hefty donors.
    Murray had been in place for only four years. For the first three years of High Level's life, the compliance officer had been ... Well, there was only one person who knew the company intimately enough and who had done the day-long course required by the FSA; throughout its first prodigious growth spurt, the compliance officer of High Level Capital had been its founder and chief executive, John Veals.
    In Murray's place, Veals offered the job - naturally enough - to someone from Allied Royal, a ductile young man called Simon Wetherby. Veals promised to double his salary and bonus package, provided he could stay in 'lock step' with High Level's strategic ambition and not forget who paid him. Wetherby was amazed and delighted by the approach and joined High Level as soon as he could clear his ARB desk. The two men spoke every morning, and in the course of six months of doing little more than shooting the breeze, Veals had debriefed Wetherby on all he knew about ARB. It was natural that they'd want to talk about the most remarkable event of recent months, the purchase of the Spanish bank; rude not to, as Wetherby happily agreed.
    Veals took no written notes during these conversations and never let it show if anything that was said was of particular interest to him. Veals was known to be a man obsessed by detail - one or