In fact, it could have been off by as much as a hundred million dollars. And if that was truly the case, the stock that Alex would pay $31 per share for was worth more like $10 a share. If the SEC, the government, or a vested third party ever audited the older books, the discrepancies would come to light and Herron Enterprises’ stock could drop like a hot rock.
I pulled up the old P&Ls again, the ones that Jeffrey Costas said were incorrect. I chewed on my thumbnail and went through the numbers again and got the same result.
The difference between what Levington’s current balance sheet showed, and what the historical P&L’s showed, was too wide a gap to be missed by Alex’s in-house people. Surely, they went back to investigate it.
Maybe that’s when the P&L’s were updated and I just didn’t get a new copy.
Either the numbers were wrong to begin with and were corrected after the mistake was found; or the numbers were correct in the first place and adjusted to show otherwise.
One, was incompetency.
Two, was highly illegal.
I stared at the screen for a moment, then a thought hit me. I picked up my phone and found the contact information for Lenny Bennett, my personal financial advisor. I didn’t have much money for Lenny to manage yet, but she knew I would someday, with any luck. It was the Sunday afternoon, so I called Lenny’s home number.
“Well hi, Carla,” Lenny said happily. When you manage other people’s money, you’re always happy for some reason. Even when they call you on a Sunday. “What can I do for you?”
“Hey Lenny, I just had a quick question about the stock of a company I’m consulting with. I apologize for calling you on the weekend, but I just needed to pick your brain if you have a moment.”
“Sure,” Lenny said. “What’s the company?”
“There are actually two companies,” I said. “Herron Enterprises and Levington Telecommunications.”
Lenny put me on speakerphone. I could hear her typing. “Okay, Herron stock closed at $97 per share on Friday. The stock is trending up on the news that Herron is acquiring, ah, Levington Telecommunications.”
“And what about Levington’s stock?” I asked. “I assume its ticking up in anticipation of the takeover.”
She tapped on the computer keys. “It was up 2% of Friday at $29 per share. It looks like Herron is offering $31 a share, so the Levington stock holders must be thrilled.”
“I’m sure they are,” I said, resting my chin on my hand as I stared at the numbers on my screen. “Lenny, what would happen if Herron acquired Levington, then some issue came to light that showed Levington’s stock was not worth what Alex, I mean, Herron, paid for it?”
Lenny took me off speaker phone. Her voice was clear when she asked, “Why would you ask that question, Carla? Is Silverman consulting with Herron on the acquisition?”
“I really can’t say anything more,” I said. “Just tell me, what would be the repercussions if something like that happened?”
She sighed in my ear. “Well, if it comes to light that Herron overpaid for Levington, both company stocks will plummet. The SEC and the state attorney general would launch an investigation and if anyone is found guilty of cooking the books or doing anything to falsely inflate the stock price, well, people could go to jail. At the very least, the fines could run into the hundreds of millions of dollars.”
I felt the breath catch in my throat.
“Carla? Are you there?”
“Yes, sorry. Um, one last question. And this is completely hypothetical. Why would someone do that? Cook the books to inflate a stock price before an acquisition?”
“There are a variety of reasons why someone might do that,” she said with an edge to her voice. “All highly illegal.”
“Like?”
“Like trying to make the deal look better than it really is. Or trying to make the company appear more sound than it really is. The best reason I can think of is if they were propping the company up so they could later knock it down. They would short both company stocks and when the stocks collapsed, they would make a fortune in the bargain.”
I chewed at my bottom lip. “Forgive my ignorance, Lenny, but can you explain to me what you mean by ‘short both company stocks’?”
“Basically, shorting a stock means that you are betting against the stock price going higher. You’re betting that it’s going to go lower in the future. You buy options called ‘puts’ that give you the right to purchase shares of stock at one price and sell it when the stock reaches a strike point. If you are shorting a stock, you option the stock when it’s at the higher price, and when the stock drops, you sell back the option and your profit is the difference.”
“So, if someone shorted Herron’s stock at $97 per share, with a strike price of say $57…”
“They would see a profit of $40 per share.” Lenny was quiet for a moment. “Carla, is there something going on that you’re not telling me?”
“No, Lenny, of course not,” I said, hoping I sounded convincing. “I’m just on the team doing due diligence for the acquisition and I have to look at every angle. That’s all. Just running hypotheticals through my head.”
“Well, that’s good to hear, dear,” she said with a sigh. I could tell by her tone that she was concerned that I was into something I shouldn’t be. She drove the point home by adding, “Because anyone involved in that kind of collusion and stock manipulation could go to jail.”
“Thanks, Lenny,” I said. “That’s good to know.”
Carla
I spent the rest of Sunday finalizing my report for Monday’s wrap-up meeting with Stan and the rest of the Silverman team. The discrepancies in the old P&Ls kept nagging at my brain, but I managed to brush them aside long enough to finish the report.
The report was all sunshine and unicorns.
There was nothing there that would cause an issue with the acquisition going forward.
The red flags had been lowered, now it was full speed ahead.
I patted myself on the back for a job well done.
The one thing I couldn’t brush aside was the fact that I missed Alex terribly. I was amazed at how close I felt to him after our brief time in Tucson. I’m not saying that I’m in love, mind you. I’m just saying that he was constantly on my mind. I hoped that I was on his mind, too.
We didn’t talk at all over the weekend, but I knew he was super busy in Atlanta. And the undefined status of our relationship prevented me from calling him every two minutes like I was dying to do. I didn’t want to frighten him away, but I didn’t want him to think that I didn’t want to hear from him either.
It was the age-old single girl dilemma.
Do I call him or wait until he calls me?
But what if he doesn’t call me?
What do I do, oh dating gods?
What do I do?
I decided that it was within modern dating etiquette to send a few short texts, adequately spaced out over the weekend so I wouldn’t sound too needy.
His responses were short and to the point.
Super busy.
In meetings.
With Jeffrey.
Getting lap dance from stripper …
Getting blowjob in limo …
Okay, I made those last two up, but sometimes that’s where my jealous imagination ventured. I forced those thoughts out of my head and focused on work.
Alex would call soon. I just knew it.
I’d hear his voice and know everything was all right.
I went to bed around midnight on Sunday with all my work done. The wrap-up meeting with the Silverman team was at ten the next morning.
I was going to knock their socks off.
I dropped my purse and briefcase behind my desk, then pried the lid off the cup of black coffee from the shop downstairs and fired up my computer.
Immediately, a message from Stan popped onto the screen.
Please come to my office as soon as you arrive. Stan.
I sipped the hot coffee and stared at the message for a moment. It wasn’t unusual to have inner-office messages waiting for me when I arrived, but this one popped up even before I was logged into the company network.
I slowly lowered the cup to the desk and clicked the login button on the screen. My fingers trembled as I typed in my user name and password and hit Enter.
I swallowed the lump that was in my throat as I read the words that flashed back at me from the screen.
Account Restricted. Contact System Administrator.
“What the fuck…” I typed in my user name and password again, pounding my fingers against the keys as if I thought that would do the trick. It was like hitting an elevator button over and over thinking it would get the elevator there faster.
I held my breath and hit Enter.
Account Restricted. Contact System Administrator.
I slowly withdrew my hands from the keyboard.
My fingers curled into my palms.
My heart began to race.
I struggled to keep the tears from welling in my eyes.
I knew exactly what was happening.
My god, how could I have been such a fool.
When I got to Stan’s office, his secretary escorted me to a conference room. She ushered me in and closed the door.
Stan was sitting at the conference table with his hands folded neatly in front of him. He had a nervous look on his face. He motioned for me to sit across from the table from him.
There was a sour-looking older lady sitting next to Stan.
Next to her was serious-looking man with salt and pepper hair and a Brooks Brothers suit.
I pegged them immediately.
She was from human resources and he was from legal.