BLAGGARD
AVENUE
David Morisset
Copyright 2012 David Morisset
Smashwords Edition
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Prologue
The body was carved up as if it was a prop in a religious ritual. But somehow the sword strokes failed to effect dismemberment. The blood-soaked pieces stayed stubbornly stuck together as if held tight by random adhesives in the glutinous crimson liquid.
At the onset of the attack a vicious blow to the head delivered from behind had stunned him. He was barely conscious after that and died in a state of near-oblivion. It was a busy street in Wanchai and the bar he had just left had been crowded and noisy. The popular pub and its immediate surrounds were not places where one usually felt a compelling need to be on guard.
His limp body was quickly manoeuvred into the anonymous darkness of a stinking rubbish-strewn alley. Rats scattered like mangy cockroaches, sending eerie rustles through the crumpled paper and the rotting food scraps that defined the boundaries of this foul killing yard.
The assailants emptied three plastic garbage bags to encase the body. Then they carried it away to fulfil the next stage of their plan. The cargo fitted neatly into the empty boot of a cream Mercedes. They slammed it shut.
***
The look of surprise on the young man’s face evolved into an expression of terror before anyone could speak. The visitors were vaguely familiar but the weapons they brandished brazenly were their only recognisable credentials. They surrounded him and two of them soon had him in a martial arts hold. The pressure on the nerves in his neck and shoulders led to such pain in his left arm that he wondered whether he was having a heart attack. But he realised that, at his young age, it was unlikely. Terrified, his thoughts raced to the conclusion that death by coronary failure might be better than what he was about to experience and he cursed himself for his clarity.
They dragged him kicking but not screaming to a small balcony that was attached like an architect’s careless afterthought to the dark side of the apartment block. Twenty floors below were the streets of Central. But it was not just concrete and asphalt that awaited him. A brick fence enclosed a small moat of sparse grass that surrounded the building. Above the bricks were prongs of wrought iron shaped into fashionable replicas of medieval spearheads – perfect prongs for killing, especially when a body falling from a great height encountered them. And fall he did – after he was pushed – and then, finally, he screamed. The screams stopped as soon as the metal pierced his pounding chest.
***
He knew straight away what was about to happen. It was his turn now. They, he assumed, were repeating a well-tried method. A blow to the back of the head, a quick retreat into a putrid Kowloon alley, several strokes administered by hands wielding razor-sharp blades, and removal of the remains to another place – possibly a place for easy discovery so it would serve as a blunt warning to others. It was different this time only in that it was him – it would be his corpse.
He was a little drunk and he was very tired. His nerves had been on edge for weeks and he was so sick of that feeling that he felt death might offer a release. He was still conscious but the pain at the back of his bleeding head was intense. As they dragged him into the blackness, he realised he could not feel anything below his waist. His legs hung limp and the jagged tarmac scuffed the toes of his trekking shoes. Perhaps he was paralysed. That fearful conjecture was his last thought.
***
All the lovers had gone home, if they were ever there. It was his impression that everyone seemed to do it in the comfort of a bed in these affluent days. So, he thought, where were the suicidal misfits who were supposed to be the main clients of The Gap in the darkest hours of the night? Then it dawned on. That was why they had brought him here. Within seconds he was airborne.
For a moment it seemed like flying. He was propelled so far away from the edge that there was no way he could reach for an outcrop of rock or vegetation that might save him. So he stopped flying and started to descend. He made no sound. Perhaps, he thought, his recent diet of sleeping pills and anti-depressants had actually made him calm about his own death.
No-one except the two burly men on the edge of the precipice heard the thud as the man they had kidnapped hit the rocks and rolled half a turn towards the frothy salt water of an inquisitive sea.
***
He had completed the swim so many times that he sometimes wondered whether he needed a change in his exercise regime. The cool water and the gentle surge of the waves were usually so soothing though, that he could not really imagine doing without the therapy of this simple activity. He was only metres from the rock ledges that defined the end of his course when he felt the first tug.
His initial thought was that a wayward octopus had made a grab for his lower left leg. He swam on. Another grab – this time more purposeful – and his thoughts switched to the possibility of a shark. He dismissed it. No shark would visit this shallow end of the beach with its craggy rock shelves and sand bars that encouraged waves to break with crashes so loud they kept the rich residents of the privileged place awake at night.
The third grab was decisive and its author was obviously human – covered in a black wet suit, to be sure, but clearly human. A second man embraced his torso as the first one tore at his leg so hard that he felt a rip in his groin that burned like a sting from bluebottle. He was too small to resist and his wiry body was easily put into a position for the administration of a wrestling hold that would smother him. There was no opportunity to protest as his breath disappeared. The wet-suited assassins wedged the corpse into a crevice in the rocks below the water-level, expecting that it would be visible at high tide and that the fickle media would have another drowning to report.
***
Her shouts of distress eventually woke him from a sleep induced by scotch and complacency. They had burst through the locked door and immediately relieved the woman of the kitchen knife she had reached for in desperation. While two of them held her, one of the others was removing items of her clothing with rapier-like swishes of what looked like a short sword that belonged in a museum. Expressing approval of her luscious body, he pressed the point of the weapon hard against her naked neck and told her to shut up.
Three of them found him just where they had expected to find him – hiding under the king-size bed. One blow to the back of the head with the blunt side of a hatchet rendered him almost senseless. They dragged him across the plush carpet and down to the kitchen. Pushing him to the floor, so that he was on his knees, one of the thugs held his aching head back so that he could observe the pitiful state of the woman.
She was, by now, hysterical; but her panic prevented any sound coming out of her wretchedly dry mouth. It took one stroke to slice open her throat. They let him watch her bleed for a few seconds and then repeated the process on his neck. The scene they left might have suggested to a depraved observer that the couple had emptied a barrel of claret and decided to take a swim in the friendly fluid.
***
He had the head of a serpent. His expression was one of haughty condescension – an attitude totally out of step with his left of centre ideology and his ‘love they neighbour’ posturing. He smiled like all politicians – with a quality that suggested practice rather than sincerity. His voice was mid-pitched and not unattractive. It was, of course, seasoned with the accent of suburban family life and laced with evidence of a distinguished higher education. He was, they said, a man with a great future. Even his wife was lauded - for her loyalty and support and for her own unspecified achievements (in that order).
The room was full of the good and worthy of the superannuation industry – those growing fat on the complex regulations governing the compulsory savings of every working Australian. All of them were convinced that they were doing something vital and that they were doing it better than the rest of the people of in the room. Few of them had ever met a single member of the massive pension funds they depended upon for their bloated incomes and lavish entitlements – and they were happy to leave it that way.
Polite applause and a shuffling back of chairs from white table cloths greeted the politician as he strode to the podium. Napkins were folded or scrunched and flung forgetfully on half-finished plates of steak and seafood. Refills of wine were demanded. As the waiters filled crystal glasses, the opulent ballroom filled with the harsh sound of an arrogant legislator clearing his throat as he looked towards the spotlights with an artificial squint that made him look all the more like a snake.
‘Australia’s retirement incomes system is the envy of the world. Even the most enlightened foreign governments look to Australia for ideas in their eagerness to imitate our success. That success is not only a vindication of the farsighted policies of the Government in which I am proud to serve as a minister of state, but also of the diligence and dedication of every person in this room.
‘Unlike our political opponents, we do not favour one type of superannuation provider over another. We want a level playing field. Our opponents would tilt the field in favour of the for-profit funds of the retail sector and take steps to render industry funds unsustainable. The opposition likes nothing better than to divide and conquer. We govern for all Australia and for all Australians!’
He paused and waited for the mandatory applause. When it came it came in sections - polite baby-claps from the representatives of big banks and insurance companies versus raucous slapping of the table from industry fund officials and their union sponsors.
There was also a chorus of mumbling grumblers who called the speaker ‘a bloody liar’ (or expressed slight variations on that sentiment) at such a subdued volume than only their nearest neighbour picked up the remark.
And so the speech went on … and on … until it was obviously nearing an end.
‘As a final point, I want to make one thing perfectly clear. As I have stated many times, Australia also has the safest and most secure superannuation system in the world. Safety and security are underpinned by the hard work and expertise of our regulators – the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
‘APRA and ASIC work hand-in-hand to guarantee the integrity of the investment funds and the efficiency of the markets that Australia’s working families rely upon to generate returns that will, in turn, provide them with generous incomes in their retirement. The high standards of governance demanded by our rigorous regulatory framework mean that the Australian superannuation industry is immune to fraud and provides no openings for the criminal elements that are usually drawn to the opportunity to get their hands on vast amounts of other people’s money.
‘Maintaining our regulatory vigilance is vital. Should anyone in the industry seek – whether wittingly or unwittingly – to adopt practices that make the retirement incomes of Australian working families vulnerable, they will be dealt with in the most decisive and severe fashion. But I say this in confidence that our deterrence regime is so strong that I could be accused of overstating the potential for malfeasance.
‘And finally … I really mean finally this time ...’
Several minutes later the minister stopped talking, refused to take questions, retired to his place at the top table, and made a call on his mobile phone. The room buzzed with conversations fuelled by fine wines and premium beers. It had been a long speech and few had listened with much interest. One possible exception was a small Chinese man who had taken copious notes in a mixture of extravagant Cantonese characters and a delicately formed English script that featured exaggerated tails.
1
Michael Dimalanta had been murdered just minutes before his body was strapped to the bow of a Hong Kong ferry. The vessel’s docking collision with a Kowloon wharf had obliterated his face, smashed his jaw, and rearranged his teeth to such an extent that identification had been problematic. Final confirmation was achieved after an inspection of the documents he was carrying and the clothes that he wore.
Two Chinese ferrymen, who had shaken with fear at their discovery, had found the blood-soaked body stretched across the front of the boat just below the waterline. Overworked but politically sensitive police had come up with a familiar finding on the death.
Dimalanta was, they had surmised, just another American who got into trouble in a Kowloon brothel or a Wanchai bar and could not find a way out of it with all his vital arteries intact. The police reports had skirted around the demonstrably obvious facts that the weapons used and the nature of the wounds suggested Triad connections.
Michael Dimalanta’s death was shocking but it was not a surprise for Gerald Hawker. The day before, Hawker had been pondering the burden of the long term debt he owed to George Tsai. He had foolishly sought a meeting with Tsai’s assistant, Kevin Lee, in an effort to determine whether he could recast the deal that Dimalanta and Tsai had struck.
Lee was non-committal and excruciatingly exact in every aspect of their discussion. Exasperated, Hawker demanded to see Tsai. The softly-spoken Chinese man said that he would try to arrange something. But, he cautioned, Mr Tsai was preoccupied with other much more important matters.
Hawker blithely observed that he could not imagine anything more important than HDC Securities. He heard from Lee much later that day.
‘Mr Tsai would like to arrange a meeting so that he can understand your point of view better.’ Lee was matter of fact as usual but Hawker sensed a tone almost approaching glee in his voice.
‘Of course old chap. When and where?’ As it happened, Hawker had been drinking since the middle of the afternoon. While he was far from drunk in the vulgar sense, he was somewhat tired and decidedly emotional. In addition, he was not thinking straight.
‘Mr Ho will meet you outside the Mandarin at 9 pm.’
That meant another hour’s drinking for Hawker while he waited. Ho was Tsai’s rather tiresome bit of muscle. Hawker stumbled out of the men’s room into the Mandarin’s gloomy foyer and out into the bustle of the street just as the small hand on his Rolex signalled nine o’clock.
Seconds later he was in the back seat of a beige Mercedes between two men who were, even in the dim light, obviously cut from the same cloth as Mr Ho. Within half an hour, Hawker was strapped to an executive chair and face to face with Ho himself.
Hawker’s exuberant host hit him with such an efficient right cross that his chair twirled around for a full five seconds before one of Ho’s helpers brought it to a stop. At that point, the bout of drinking had a predictable effect. Hawker vomited with a violence that almost put his Chinese guards off their game.
‘Mr Hawker, why do you want to renegotiate such a good deal? Mr Dimalanta gave his word. Do you understand what that means? Surely you do not want Mr Tsai to have to renegotiate with Mr Dimalanta. Or do you?’ Ho was cracking his knuckles.
‘What do you mean?’ Hawker was petrified. Blood trickled from his broken mouth into the vile stench coming from the remnants of rice crisps and gin that dribbled down his chin and on to his chest.
‘Do you accept the deal, Mr Hawker? I have a beautiful girl waiting for me. Don’t waste my time. Soon I’ll be old like you. I want to fuck her tonight. That way I will have pleasant memories when you are long dead and my cock is no longer able to perform.’ Ho’s remarks brought some muffled laughter from the rest of the gathering of thugs in the room. Evidently some of them understood English and some pertinent Anglo-Saxon terms as well.
‘I want to see Tsai.’ Hawker was playing his next to last card far too early.
‘No.’ Ho spoke softly. Then he held out his hand in the manner of a surgeon requesting an instrument suited to making a key incision in a delicate operation. An eager assistant placed a large boning knife in his open palm.
‘For fuck’s sake! Dimalanta lost the money – not me.’ Hawker was frantic and he was out of cards.
‘You do it.’ Ho handed the knife back to his aide and nodded towards the two men standing on either side of Hawker.
The Englishman’s right hand was held tight against the arm of his chair with his knobbly index finger extended. Hawker screwed up his face, forcing his eyes closed. But he could see what was coming.
The knife was so sharp that it’s grotesque achievement was almost instantaneous. It was the horror of the act rather than the pain of the blade that drew a violent scream from the depths of Hawker’s throat.
When the finger dropped on the floor, the wielder of the knife picked it up, put it on a nearby table, cut it into tiny pieces, and threw most of them at Hawker’s white face. The injury put him into shock and on the verge of passing out. Hawker’s entire body shook so much that the cracks in his wrinkled face seemed set to rip apart.
‘You two can take him to his home at Repulse Bay. Drop him there. He can decide for himself whether he needs a doctor. Then come back for me. We need to do something about Mr Dimalanta.’ Ho inspected his suit to make sure that no spurts of blood or vomit had defaced it.
2
Dimalanta had been proud of his reputation as an investment guru in the baffling field of hedge funds and he had claimed the equivalent of 100 million US dollars under management. Still in his thirties when he was killed, he had set up supposedly sophisticated vehicles in various tax shelters to provide services for his clients in Hong Kong and was expanding into Australia.
He knew very little about the great southern land but he had been attracted by its various governments spruiking the notion of Sydney as a major financial centre. His young English colleague, Joel Collins, had an Australian mother and he had already set up a small Sydney office. Collins was ready to move there permanently as soon as Dimalanta made the call.
Like many Filipino Americans, Dimalanta was the product of parents who had escaped people power with a fortune assembled during the Marcos years. They had then relocated everything but their money to the land of the free. Both his father and his mother were from families with aristocratic pretensions. However, from their appearance, both parents must have had considerable Latin influence injected into their bloodlines through the amorous generosity of the officer classes of gallant Mexican garrisons stationed in the Philippines during colonial times. An only child, Dimalanta attended college at UCLA and then set off for New York to learn about hedge funds.
Tiring of the compliance obligations of working for Wall Street firms, he was seduced by a job offer from a fast-talking English investment banker who was looking for a hedge fund specialist to exploit new business opportunities in Hong Kong.
By this time Dimalanta was unencumbered by any unbreakable links to his adopted country. His parents had died and left him with ample financial resources, which his father had cannily spread around the Caymans, the British Virgin Islands, and several other similar havens of the rich and secretive.
There was even a large balance in a Swiss bank account that gave Mr Dimalanta senior some evident respectability when he wanted to source political donations. Where the fortune came from was not clear to Michael but he was grateful for it and determined to preserve it as a first priority and add to it as a matter of urgency before he retired to enjoy the rest of his life.
Inheriting his father’s entrepreneurial gifts and distaste for traditional ways of doing things, the hedge fund industry was a natural fit. It was mysterious, gently regulated and seemingly irresistible to high net worth customers. Returns were driven not by the overall market trend but by the wits of the investment manager. Some would say it was all a matter of luck. But Michael Dimalanta described himself as skilful without any embarrassment.
Gerald Hawker was more than twenty years older than Michael Dimalanta when they met by chance at an investment seminar in the Pierre Hotel. They encountered each other in a huge function room overlooking the yellow taxis of Fifth Avenue and the tree-lined borders of Central Park. The conversation soon switched to hedge funds and the opportunities for new business they presented.
‘I’m convinced that the Chinese investor is a natural for this type of investment, old chap. They love a punt. But they like to think they’ve got a way of controlling the deep, dark downside. As if! Hedge funds are go!’ Hawker smiled. His face was full of cracks. ‘Of course, that’s in my humble opinion, old chap. So, I’ve been planning to prospect the money men of Hong Kong. I see it as first foray into China itself. There’s a vast wealth management sector that’s ready to be coaxed into an explosive birth’.
Grinning throughout his exposition, Hawker almost sang his lines as if they were rehearsed. Dimalanta was all ears.
They walked over to Trattoria del ’Arte on Seventh Avenue. While they sampled the restaurant’s paper thin pizza and home-made pasta coated with subtle sauces, Hawker talked Dimalanta into coming with him to Hong Kong later that month. Dimalanta severed his Wall Street ties, sub-let his Battery Park City apartment, and hopped on a plane without a second thought.
To the eyes and ears of a young American, Hawker epitomised suave English manners and style. His navy pin-striped suit was expertly tailored, but a little crumpled, his sky-blue and white check shirt did not quite match his Ferragamo tie of tiny red golf clubs on a grey background, but his voice was full of rounded vowels and seemed to come from the depths of his throat, as if a double bass had lodged in his windpipe.
Another Briton might have noticed the traces of cockney in Hawker’s accent – traces that became more pronounced as he drank Tanqueray, his favourite gin. He had, in fact, been raised within the sound of Bow Bells. The now demolished tenement in which he spent his boyhood fronted Blaggard Avenue, so named, according to Thames folklore, because of its former associations with smugglers and pirates.
Hawker was a self-made man of the most determined sort. He had reinvented himself several times over. Now well into his fifties he could look back on an uneventful stint as a junior civil servant in the sprawling administrative divisions of the Foreign and Commonwealth Office.
He then talked himself into a job as a commercial banker for Barclays at a time the bank was struggling to come to grips with the fallout from deregulation. Soon that role no longer satisfied. So Hawker worked as researcher and, at times, stock-picker with various small funds management groups. Each appointment ended when Hawker’s moderately profitable employers were gobbled up by bigger players.
Later, he tried his luck as a time as a freelance investment consultant. Going it alone proved to be hard going to such an extent that his financial reserves had started to diminish at a rather alarming rate. Convinced that he was finished in England, he decided to try Hong Kong.
Within six weeks of his arrival, Hawker had set up a tiny office on the fringes of the Island’s financial district near where it merged into the night life of Wanchai. Soon after that, he acquired an apartment in a nondescript building just off Nathan Road in Kowloon.
He had also hired Bo, a pretty Filipina, as combination concubine, housemaid and procurer of alternative sexual services when he felt the need for variety or multiple partners.
A veteran of two disastrous marriages, Hawker made it clear from the outset that he offered Bo sexual experimentation. But he also promised a steady income that allowed her to meet the needs of her extended family in Manila’s slums. On top of that, she could have a comfortable place to sleep, ample food to eat, and a much more secure life than she had as one of the city’s unfortunate bar girls.
The fact that Bo was almost thirty and losing her ability to pull customers on a regular basis meant that she was easily persuaded. In many respects, she was actually grateful for the chance to be exploited on such a generous basis.
Setting about the task of networking amongst the expatriate community and finding his way around Hong Kong’s financial labyrinth was second nature to Hawker. He had a glib tongue and his resume was edited in such a way that it looked both impressive and authentic.
However, running an office and the administrative chores that went with it presented problems. When it was time to buy information technology items like computers, software and printers, Hawker was quick to surrender to the obvious.
He was a twentieth century man with enough in the way of people skills to sell himself and his services to people like him. But when it came to dealing with twenty-first century office infrastructure and its suppliers, he was lost in a jumble of words, symbols and unfamiliar business practices.
So he did what any sensible twentieth century man would do in the circumstances. He placed an advertisement for an assistant with a superior information technology skill set and an interest in starting a career in the investment industry on the bottom rung of a very high ladder.
Most of the respondents knew almost as little about IT as Hawker but one of them was different. Joel Collins had only been in Hong Kong for a few days and he just wanted a start. Hawker offered him the job and he commenced work immediately after the interview, during which Collins had babbled on about hedge funds and the dearth of them in Hong Kong.
Collins was more than capable. He had graduated from the University of the West of England in business studies. While students came from all over England to study at what used to be the Bristol Polytechnic, Collins was almost a native. He came from Portishead on England’s dreary west coast.
Unfortunately Collins’ West Country accent and the origins of his qualifications did not play well in the City of London. All he could manage after six years of trying was a series of low-paid but extremely stressful dealing desk jobs. One day he found himself gazing out of a Canary Wharf skyscraper window and looking east. Like many others before him, sensing failure in London, he decided to give it a go in Hong Kong.
After three months on the crowded island, Collins formed the view that Hawker was a bit of a pain-in-the-neck. The older man delegated only the most menial tasks and left his assistant almost office-bound.
However, new business opportunities were abounding. Very soon, Collins expected, he would be managing money in a hands-on way that would have still been light years away in London.
Hawker, unfortunately, had other ideas. He flew to New York, ostensibly to attend a hedge funds conference, but, in reality, his main aim was to find a fund manager. He found one in Dimalanta.
When Dimalanta landed in Hong Kong and set himself up in Hawker’s office suite in a corner offering a view over Wanchai, Collins was disappointed at first. However, that soon changed.
Dimalanta knew what he was doing and started taking care of all the details that were beyond Hawker and unknown to Collins. More importantly, he adopted the role of mentor to Collins in a collegiate fashion that reflected the small age difference between the two of them.
Within three weeks of Dimalanta’s arrival, the firm had adopted the bland name of HDC Securities and was about to launch its flagship fund, labelled, rather pretentiously, the HDC Masterly Macro Fund.
3
Hawker found Bo naked and bent provocatively over the kitchen bench in his apartment. He noticed her feet were dangling six inches from the floor. Dimalanta’s bare hips were bouncing off her curvy hindquarters with a rhythm that was unambiguous.
‘Bo, luv, what a pleasant surprise! Please carry on.’ Hawker’s face was expressionless.
The lovers separated and Bo ran for the stairs and disappeared. Dimalanta adjusted his clothing. Hawker eyed him with disdain and poured himself a gin and tonic.
Tension had been building up for weeks. It was Hawker who was forcing open the doors to access new business. But it was Dimalanta who had devised the means of managing the incoming money and he was usually the one who closed the deal with new clients. Indeed, Hawker had been feeling a trifle insecure. Suddenly, he had a way of regaining the upper hand.
‘It’s time we talked Michael. Now, if you don’t mind old chap.’
Bo had made an exit looking not for an escape but for a chance to savour the pleasure Michael had given her. It was not the first time she had cheated on Hawker. Moreover, on several occasions, the couple had shared a male lover.
Hawker had been openly bisexual since his early forties when he had been working in Luxembourg for a few months on a secondment. He had from the outset told Bo that he expected her to find similarly minded men as well as willing women for him.
Dimalanta, on the other hand, was uncertain about his own proclivities. He had had sex with guys at college drinking parties that had degenerated into orgiastic free-for-alls. At the time, he had found it stimulating enough, but lacking the potential emotional edge that usually arose at some point in his conquest of a woman.
‘I don’t mind you fucking my slut old chap, just so long as you don’t do it behind my back. In fact you can screw her all you like as long as I can bugger you – preferably at the same time.’
With that remark, Hawker poured two glasses of lager. He pushed one across the kitchen bench to Dimalanta, who raised it as if to acknowledge an unspoken toast, before drinking all of the cold liquid in one greedy swig.
In professional contexts, Hawker and Dimalanta were careful not to give anyone any hints of their broader relationship.
Dimalanta continued to mentor Collins. They registered the HDC Masterly Macro Fund in Hong Kong and promptly set up a series of dummy companies domiciled in selected tax havens around the world.
Wealthy Chinese business people and well-heeled expatriates were encouraged to invest in the Fund on the basis of a daringly simple pitch. Hawker, Dimalanta and Collins presented themselves as hedge fund experts who were too clever to try to manage all of the money in Hong Kong. Instead they trumpeted their ability to locate and identify the very best hedge fund managers in the world and then convince these managers to accept placements from the HDC Masterly Macro Fund.
In reality though, few such managers were listed on the Fund’s confidential panel. Most of the money found its way to offshore dummy companies controlled by Dimalanta and Collins. The HDC team, led by Dimalanta, made the companies’ investment decisions on the bases of whim, convenience, or their own personal financial needs. The result was a scam that concealed layers of fees upon fees and shoddy returns.
So, HDC Securities decided to falsify published returns at believable but consistently positive rates and ensure that no-one could access any portfolio data beyond sketchy unaudited financial statements from the dummy companies’ anonymous managers.
The money rolled in but there was a problem. After a time, some clients wanted their money and earnings back. For a while that was all right – as it had been with many Ponzi schemes throughout history. But it was only a matter of time before it would all unravel unless inflows abounded.
Hawker tried to schmooze clients by telling them that they must understand that, in many cases, it would take weeks, sometimes months, to fund withdrawals. He explained, with a smile, that this was inevitable because some of their underlying managers’ best performing investments were illiquid or had to be allowed to run to maturity. The barefaced lie was barely believable. But it worked with all but the savviest investors.
4
Hawker’s ideas about business development were uniformly old school. He was not happy sitting in an office and making cold calls. Instead, he hit the social circuit – horse racing, rugby clubs, cricket matches, conferences and society parties. He became well known enough to be able to force open doors so that Dimalanta could make a sales pitch full of technical jargon that concealed more than it disclosed. Collins watched and learned.
Nevertheless, the operation was under strain. It was getting harder and harder to generate enough inflows to create the liquidity needed to fund withdrawals and the published values of the underlying assets were getting more and more out of step with reality.
The reasons for the withdrawals were not hard to fathom. A large number of the initial investors, including some small institutions, had bought the idea of steady if unspectacular returns from hedge funds during a period of share market nervousness. Once world stock markets began their inevitable rebound many Hong Kong investors wanted to be part of the ride upwards. That meant abandoning other positions to go long in shares – any shares.
The dour but positive returns from hedge funds were suddenly unfashionable. HDC Securities was bumped from recommended lists and forced into a position of being a reluctant supplier of funds for the mad rush back into equity-based vehicles.
Just as Hawker was starting to really worry, he got lucky. He was introduced to a well-spoken Chinese gentleman between events at Happy Valley Racecourse.
George Tsai stressed that he was a private investor of some standing but confidentiality was vital to him. Hawker’s story of offshore hedge funds and tax haven domiciles caught his attention straight away. He promised to send his assistant to HDC Securities’ office the very next day to conduct what he referred to as “appropriate due diligence”.
Formalities like due diligence by accountant types were of no interest to either Hawker or Dimalanta. So, Tsai’s assistant, Kevin Lee, was steered towards Collins and told to ask any questions he liked.
Lee was a nervous little man with an annoying habit of responding to each of Collins’s answers by saying that he had just three questions and then asking precisely three questions – often repeating himself in the process.
He took copious notes – some in Cantonese and some in English in a delicately formed cursive script with exaggerated tails. Lee often paused to read some of his earlier entries before moving on to yet another compound query.
Wearing a charcoal grey Armani suit, white silk shirt, floral cotton tie and shiny black brogues, Lee’s sense of chic contrasted sharply with Collins’ linen shirt, khakis and hiking boots.
As the interview went on and on, Collins found himself staring out the window onto the hot streets of Hong Kong. When that view was no longer satisfying, he reverted to checking news stories on his desktop computer screen. When Lee had arrived Bloomberg’s coverage of the local markets was blaring from a television mounted above the window line. But the visitor had asked for the sound to be turned down so he could concentrate on his due diligence.
After more than two hours, Lee started to ask about HDC’s banking arrangements. He sought details such as account numbers and contacts in the relevant banks. At that point, Collins ran out of patience and also decided that the questions were better left unanswered. He even suspected that Lee was some sort of civil servant conducting a covert enquiry into HDC.
Collins declined to answer on the basis of commercial confidentiality and Lee looked disappointed but not daunted.
Subsequent questions moved back to less controversial matters – mostly about investment strategies favoured in current market conditions – and then Lee closed his notebook as if to bring the meeting to a close.
Collins could not get him out the door quickly enough and began to wonder where Hawker found people like Lee.
‘Did you manage to satisfy that young man?’ Hawker had just returned from lunch at the Peninsula and he was a little the worse for wear but far from incoherent. He said the word “satisfy” with a slur that reflected not only his slightly drunken state but also his dim view of Collins’s strident heterosexuality.
‘The only thing he didn’t ask me was my shoe size. Perhaps he’ll come back tomorrow to check that out.’
‘Did he seem happy? You know we can use every new investor old chap.’
‘He didn’t seem unhappy but … ‘
‘Yeah, yeah, I know – inscrutable!’ Hawker laughed at his own lame joke and jotted a reminder on his desk calendar to call George Tsai tomorrow.
When the nest day rolled around, Hawker was feeling fresh and confident. He had spent the night in Bo’s bed and had slept soundly beside her. A massage with scented oils had produced a coma-like state. The outcome was much to the Filipina’s relief. She had long since grown tired of his drunken habit of throwing himself on her like a rutting pig.
‘Mr Hawker, thank you for calling me.’ Tsai was full of charm. ‘It is good to hear from you and I look forward to seeing you at Happy Valley. We can resume our conversation about inconsistent form and the merits of some of your English jockeys. However, with regard to your investment fund, please direct all your enquiries to my assistant, Mr Lee. He has my instructions and he has my full confidence. He will contact your Mr Collins very soon.’
Tsai’s voice faded towards the end of the last sentence. Then there was quiet, although Hawker was certain he could hear a young Chinese woman giggling.
‘Of course, thank you Mr Tsai. See you at Happy Valley then.’ Hawker had barely got the words out when the line went dead with a click. ‘Yes sir, no sir, three bags full sir. Smarmy bloody chink! And I think he was getting a bit of sideways while he was talking to me, the dirty bastard!’
Lee contacted Collins two days later and said that he wanted to make arrangements to invest ten million US dollars. The banking arrangements were sorted out without delay and the money rolled into HDC Securities’ coffers.
At the weekend race meeting, Tsai was as effervescent. He and Hawker talked horses, jockeys, trainers and colours – anything but money. Then Tsai abruptly changed the subject.
‘The ten million is a first instalment. Do well and there will be more, my friend. Much, much more. Do badly and you will find out very quickly that terrible things can happen when you lose someone else’s money.’ The threat was whispered. But it was delivered with a broad smile, and followed by a parting handshake that almost crushed Hawker’s knobbly index finger and set off his arthritis.
5
‘You’re joking aren’t you?’ Hawker was half-hoping.
Dimalanta was serious.
‘It’s dead simple. We go long in Hong Kong shares with, say, five million of Tsai’s money. Then we fund the outstanding withdrawals with the rest. That gets those whinging mother-fuckers of our backs. Then we skim the profits from the share positions to meet new redemptions as they come along. By that time Tsai will be making more investments with us.’
Dimalanta’s plan was reckless but both Hawker and Collins heard only what they wanted to hear. They could see how it might just work.
Three months later the plan was working to perfection but Tsai threw a spanner in the works that none of the HDC partners had contemplated. It began with a telephone call.
‘Hello, Collins here.’
‘Good morning Mr Collins, this is Mr Lee. Mr Tsai would like to withdraw five million US dollars from your investment fund. How soon can the money be transferred to his bank account?’
‘Well, Mr Lee, I’ll have to check with my colleagues and get back to you.’ It was a stock answer. Usually, it worked.
‘Mr Tsai would prefer that there were no inordinate delays. We have been hearing some rather alarming stories from other investors.’
‘Certainly, Mr Lee. I’ll get back to you as soon as I can.’ Collins tried not to show Lee that his insistence had rattled him.
Hawker was in a café on Nathan Road. He had not yet made an appearance in the office that morning. Still bleary-eyed from last night’s sordid adventures, he recognised Collins’ number on his mobile phone. The wretched device belted out a series of tones that were meant to represent the opening bars of “A Hard Day’s Night”.
‘What is it?’ Hawker’s evident resentment was partly attributable to his chronic intolerance of mobile phone communication - a common enough complaint amongst middle-aged men. He also believed that Collins lacked initiative and sought guidance far too readily.
‘Tsai wants to withdraw five million US dollars as quickly as possible.’
‘Fuck! Can’t you stall him?’
‘How?’
‘For God’s sake old chap! Make something up.’
‘Like what for example?’
‘All right, all right. I’ll take care of it. I don’t know what you geniuses would do without me to wipe your arses. Make sure you let Michael know straight away. Can you manage that?’
‘Yeah.’ Collins disconnected and flipped the top of his mobile down with a bristly bang.
At that moment Dimalanta walked into the office and studied the nearest screen.
‘The charts say the market’s topping out. Fuck me! That really looks like a double top even though I don’t really believe in that stuff. Maybe we should sell some shares.’
Dimalanta’s eyes were dancing back and forth across the flickering screen as he spoke. Moving to his own computer screen, his fingers flitted across the keyboard. He called up daily, monthly and yearly charts for the major stock indices and key sectors.
‘Maybe we should. Tsai wants to withdraw five million.’ Collins said the words dead-pan.
‘OK. Maybe we should! The old boy’s done us a favour! Let’s do it!’ Dimalanta was transfixed by the flickering screens. ‘But make it nice and easy. Today, one million, tomorrow one million, and so on. We’ll be out by the end of the week.’
The phone rang and it was a nervous Hawker.
‘Michael, have you heard? I can’t get through to Tsai and that slimy little prick Lee won’t budge.’ Hawker was so upset that he had let his latte get cold.
‘No problems. We should be taking profits anyway. He can have his money in one million dollar tranches beginning early next week. Can you get him to put up with that? Just give him the usual shit about hedge funds needing to trade out of tailored securities in markets that can be illiquid from time to time. Then tell him that he’s lucky our managers have got a few positions maturing over the next week or so.’
Two weeks later Hawker was prepared to consider the possibility that Dimalanta and Collins were indeed geniuses. Tsai and Lee were happy. Some of the profits from the share market play had even been funnelled into personal offshore accounts in the names of each of the HDC partners.
The market itself was looking wobbly, although the sharp sell-off that Dimalanta had expected had turned out to be a minor blip.
HDC inflows had also started to exceed outflows as many investors came to the same conclusion about the share market that Dimalanta had reached a few weeks earlier. The fickle herd had decided that it was time to seek refuge in other asset classes including international hedge funds.
With the crisis passed, HDC Securities hired a secretary-cum-receptionist and moved to a better part of the Island with views of the harbour instead of the streets of Wanchai. The harbour view lasted much longer than the poor girl.
Hawker arrived late one morning to find the secretary in a tearful fury. She was a pretty Chinese teenager who always dressed modestly and had impeccable manners. Without looking at Hawker, she plonked a written resignation on the reception desk. The she picked up a small box filled with her few personal effects and stormed out of the office.
Dimalanta walked into the reception area from the direction of the men’s room. He wore a sheepish grin on his flushed face. Glancing at Hawker, he shrugged his shoulders with a weary smile.
‘I’ll get Joel to find a new secretary. That one was unsuitable – although she had real potential for a baby China doll. Actually had a shapely bum! Pity!’ Dimalanta ambled back to his desk and started to manipulate his Bloomberg keyboard. Hawker shook his head and almost laughed out loud.
That morning also brought another telephone call from Lee. There was a new subscription of twenty million US dollars on its way.
‘OK. Same plan with a sweetener called a little bit of leverage. We’re in good enough shape to borrow funds to bolster our returns. OK?’ Dimalanta was all confidence.
‘What about your view that the market was topping?’ Collins thought that Dimalanta’s attitude was approaching cockiness.
Investing borrowed funds at this stage of the market cycle was needlessly risky – at least that was what Collins argued. After all, he said, they still had to deal with the problems caused by their overstatement of investment returns. It seemed to Collins that Hawker and Dimalanta had both forgotten this inconvenient complication. The gap between reality and what was published in investment magazines and advertisements was getting bigger by the day.
‘Losing your nerve Joel? You won’t last too long in this business if you keep thinking that way. We had the sell-off and now the market’s on the up again – you know, China’s century, Asia-Pacific dynamism, and all the rest of the shit that the local punters and the global equities managers want to believe. And the more it goes up, the more it goes up. Because those lemmings who run the global funds are glorified index managers. If the Hong Kong market advances, they throw more money at it. It’s a virtuous circle.’
Over coming days Collins negotiated a loan equivalent to twenty million US dollars. He invested the proceeds along with Tsai’s new money.
Dimalanta gave minimal directions and there was no attempt to pick winners. The market was on its way up and only the real dogs were going to lag according to Dimalanta’s outlook.
Just as the last tranche was being invested, the Hong Kong share market took a tumble. The cause was a remote one. Some random event in New York prompted a wave of selling by American managers of global equities funds.
‘Don’t worry. Don’t get sucked in by the day-to-day action!’ Dimalanta’s words gave Collins little comfort.
The crisis quickly passed. Someone in New York said something soothing and everyone fell for it.
With the buoyancy of HDC Securities’ business and his growing personal net worth, Hawker had decided to indulge himself in a new apartment on the shores of Repulse Bay. Its immense rooms and marvellous views made it a much better playground for him and Bo and their casual partners than their cramped lodgings in Kowloon. Collins and Dimalanta also moved up in the world. But they preferred the bustle of the Island’s harbour to the relative quiet of Repulse Bay.
In any case, Dimalanta was spending more and more time at Hawker’s house. The relationship between the two men was taking some unexpected turns.
Hawker’s admiration of Dimalanta’s investing nous, his flamboyance, and his ability to defy market expectations and win was very real. The younger man was flattered by the compliment.
Both of them had no living relatives. So, they took the rather extraordinary step of making new wills in which the other was the only beneficiary. To celebrate they arranged a party that was fuelled by call girls, drugs and particularly exotic brands of alcoholic beverages.
The next morning Collins sat alone in the HDC Securities office and watched the market go into free-fall. Hawker and Dimalanta were not answering their phones. Collins took the initiative and tried to sell some stock. But all he was doing was realising giant losses. So he pulled back and thought it might be best to wait for a rebound, no matter how temporary.
When the other two showed up the next day, Hawker was beside himself with genuine panic. Dimalanta was calm.
‘Don’t worry guys. It’s just a two or three day wonder. If I had some cash, I’d be buying into it. Those sales you made yesterday, Joel. Reinvest the proceeds today. Anyway, if it does get any worse, our hedge funds will be flooded with inflows. I’m going to lunch.’
‘Who with?’
Dimalanta responded to Hawker’s question with a flirtatious wink.
Hawker’s state of mind got gradually worse over coming days and weeks. The market took some more leaps off steep precipices and then started to flat-line across the charting pages. Dimalanta was unmoved. Collins was almost as consumed by dread as Hawker.
6
Dimalanta’s lunch was with two potential Australian business partners. They met in the extravagant surrounds of the Mandarin Oriental Hotel. Both visitors were sure about what they had to offer Dimalanta. They were equally certain that they could remove any doubts the American might have about the merits of their proposals.
Jason Coote was a product of Sydney’s northern districts. He was raised and educated in the bushland suburbs that rushed up towards the shores of Broken Bay. Despite his Hugo Boss suit, rough edges abounded. Coote was blissfully unaware of them.
He had started work in real estate when he just twenty years old after a period as a trainee accountant. The small city-based firm had let him go when he failed one too many of his basic examinations and managed to get some new clients into a messy problem with the tax office.
While Coote considered himself a natural salesman his actual sales record was a poor one. He seldom did enough homework to understand the properties his agency listed. Also, he treated most would-be buyers as if they knew even less than he did.
As a result, Coote was always disappointed with his earnings but somehow he had always convinced himself that it was not his fault. Empowered by a delusion that he was too good for this type of sales work, he decided to use a small inheritance from a distant uncle to set up a funds management business specialising in residential property.
Thus far he had failed to attract any investors except from amongst his immediate and extended family. They, it seemed, were more than willing to overlook his inability to make a convincing case for his incomprehensible investment strategies.
Mark Simpson was almost Coote’s opposite. He came from Melbourne’s eastern suburbs. After gathering the benefits of a private school education, he moved on to an accounting degree. His passion for corporate finance led him into merchant banking. Later, his greed led him into the specialised field of private equity funds management where the fees were high and the facts hard to establish. He was a polished and reassuring presenter and had that rare ability to keep two steps ahead of most of his colleagues.
It was not so much that Simpson thought more quickly than others. But he could hijack most discussions by steering conversations into areas where he felt most comfortable and yet were oddly obscure.
Many of his investment themes of choice related to medical technology and cutting edge computer systems. Such ventures were not only mysterious but also bordered on a kind of science fiction. Simpson was able to furnish investors with fascinating stories to tell friends at Saturday night barbecues.
Nevertheless, business was slow. The big pots of money were in the superannuation sector in Australia. Trustee boards of major super funds were wary of private equity. Few of their directors understood it well enough to take risks with a new manager. Simpson was failing even though he was able to distance himself from the crowd by his impressive sense of style and demonstrable ability to spin a good yarn in front of a PowerPoint presentation.
***
Dimalanta, Coote and Simpson had met by accident three weeks ago at a superannuation conference in Sydney’s Darling Harbour Convention Centre. The American had been a participant in a panel discussion during which he put the view that Australian superannuation funds were not serving their members’ best interests. He argued that they were restricted to too narrow a range of asset classes.
Speaking to his own book, Dimalanta put a strong case for bigger exposures to hedge funds through funds of funds vehicles. He added that the standard view that hedge funds were risky was ill-informed. In fact, he maintained, they were capable of reducing the risk of a fully diversified portfolio.
Coote and Simpson had heard it all before. However, what Dimalanta had to say next, in response to a garbled question from the floor, turned out to be music to their ears.
‘You see, it’s not just about hedge funds. Australian superannuation trustees are neglecting other asset classes that are not only suitable for superannuation but are, in reality, more appropriate than traditional investments like shares and fixed income. Think of direct property and private equity and infrastructure. These asset classes have long term return profiles and, remember, most people have to lock their super away for decades. Why shouldn’t they have exposure to assets with very long term maturity profiles? And, I am only a visitor, but I know that most Australians make most of their wealth from residential property. Why not include a fair chunk of residential property in their super funds?’
At the end of the session, both Coote and Simpson sidled up to Dimalanta and separately requested time with him later. The two Australians did not know each other but, when they had their one-on-one meetings with Dimalanta, they made essentially the same points.
They saw a place in the market for a superannuation fund that featured exposure to non-traditional assets classes as its main point of differentiation in a crowded marketplace. Dimalanta had further discussions with them, but together on these occasions. A business strategy was beginning to emerge by the time Dimalanta flew back to Hong Kong.
***
As they lunched in the sumptuous dining room of the Mandarin, Simpson outlined the plan as he saw it. He passed the occasional organisation diagram – drawn with the assistance of PowerPoint - to Dimalanta to illustrate his points.
‘We’ve found a small superannuation fund administrator with around fifty million – that’s Australian dollars – under management. It would take only a year or so to get it properly equipped to become a superannuation fund trustee with a public offer licence.’
While Simpson was talking, Dimalanta only half-listened. He had pretty much worked a viable plan already. Simpson went on anyway. It was as if someone had wound him up.
‘We could fund the purchase and the investment in new facilities and personnel with some debt finance. Provided, of course, you’re prepared to come up with a couple of million up front.’
Dimalanta had expected it. The reluctance of Australian business people to put their own money at risk was the subject of many jokes in Asian financial circles. No matter. If only Dimalanta’s money was invested then he, and he alone, would call the tune.
‘We’ve also got a group of financial planners interested. They want to be able to feature private equity, residential property and hedge funds in their clients’ superannuation portfolios. They’ll move across to us if the trailing commissions are right. That will help us to persuade the authorities to give us the licence. What do you think?’
Dimalanta raised his glass of lager and the three men drank to their grand plan.
What attracted Dimalanta most about superannuation funds was that the money was sticky. Investors, he believed, only started to make large withdrawals when they retired. The problem of funding redemptions that had plagued his Hong Kong business was absent in the Australian superannuation setting. That created a lot of freedom for funds management philosophies like his own.
When Dimalanta made these points to Collins and Hawker they too were won over by the idea of setting up in Australia. However, as it turned out, Hawker would soon change his mind. In the meantime, it was agreed that Collins would move to Sydney as soon as possible.