Satyajit Das - Traders, Guns and Money, 3rd Edition

I was shown into the conference room. It was old-fashioned dark wood panelling, lined with slightly dusty old law reports. Lawyers, especially in England, proudly resist modernity. Modernity in the world of investment banks and dealers means trendy architecture by the latest wunderkind. It manifests itself in acres of glass, steel, marble and uncomfortable chairs. Lucre & Lucre was untouched by these fads. The thickly padded leather chairs were comfortable. It was, I feared, going to be a long meeting.

The clients were already there. There were two of them Indonesians of Chinese extraction. They were part of the infamous bamboo network of ethnic Chinese business interests that criss-crossed South East Asia. I was introduced. We exchanged business cards. I took care to accept the proffered card with both my hands, my body slightly inclined at a respectful angle.

I carefully studied the cards as required by custom. Adewiko President Director was about 50. He was short and dressed in a somewhat ill-fitting designer label suit. He appeared solemn. The other man Budi Titra was younger, no more than 30 I guessed. Budi was the Chief Financial Officer. His card announced that he had an MBA. The younger mans ebullience seemed inconsistent with the seriousness of the matter.

Two people from a Big Four accounting firm were also there. (As I write, the Big Four are PricewaterhouseCoopers; KPMG; Ernst & Young and Deloittes.) It could have been the Big Three this week after a new round of mergers. Andrews, the partner, was a reedy older man with small, intense eyes. There was a junior, relatively innocent looking, who did not introduce himself. He said nothing during the meeting.

The associate from the law firm was there. Albert, call me Albie, everybody does. The partner eventually arrived. Short and with a full figure, Morrison Lucre lumbered into the room. There were more introductions and civilities. Then it was down to business, well almost. Morrison produced four pencils and carefully sharpened each one. He then laid them carefully next to the thick legal writing pad on the table. It took about five or six minutes to complete this activity. At the hourly rates of the professionals present, I calculated that the total cost of pencil sharpening was $2,000 about $500 per pencil. It was truly a Zen moment.

Shall we begin, Morrison intoned. I think it would be helpful to go over the chronology of the transaction, I began. Splendid, Morrison beamed. Everybody presumably was familiar with the transactions, but we were getting paid by the hour.

OCM is a noodle maker? I asked. Yes it was Budis turn to beam. He unleashed a detailed history of the company. The description was punctuated by the occasional detail supplied by Adewiko. It was irrelevant. It was not even interesting. Lets focus on the transactions, I interrupted. Splendid. Yes, lets. It was Morrison.

OCM operates in Indonesia and all its income is in rupiah [the Indonesian currency]? I asked. Budi confirmed it. In 1995, you decided to convert your borrowings into dollars? I continued quickly before Budi could launch another tangential verbal assault. Yes, Budi confirmed. Why? I asked. Cheaper, much cheaper, Budi said. Adewiko nodded his head in silent assent.

What about the currency risk? You have borrowings in dollars but no dollar income. If the dollar rose against the rupiah, then your dollar borrowings would show losses. Did you consider the currency risk? I pressed. No risk, no risk, Budi countered. Why? Rupiah fixed against dollar, no risk, Budi continued. Adewiko nodded. So you assumed there was no risk? No risk, no risk. Budis exasperation at the expert witness me showed. He was contemptuous of my seeming lack of financial acumen on this basic issue.