CHAPTER 9
“Familiar Taste of Poison” —Halestorm
“Your Honor, this is nothing but a delaying tactic on the part of the defense,” Ahuvit said. “The plaintiff’s father will have control of the funds in question. The heir’s father is a career soldier, a Georgetown graduate, and a member of the bars of Virginia, North Carolina, and Montana. The heir will have no control of the funds until he turns eighteen. If there are questions about his competency then, it will be a matter for another court.”
“Objection, Your Honor,” Rich Lowe replied in his usual, nasally tone. “The plaintiff has not been determined to be the heir, therefore the plaintiff’s counsel’s reference to him is premature and prejudicial.”
In the earlier, largely inconsequential proceedings, the courtroom had been chock full of reporters. They had dwindled as the case dragged on and now just a single, bored intern sat in the front row to take note of the highlights. However, the horde of Trust attorneys hadn’t diminished in the slightest, even though only Lowe ever actually spoke. Conn sat with a smug expression and arms crossed, as if he knew he’d already won.
“Your Honor,” Ahuvit said, “referring to the plaintiff other than as the legitimate heir creates a counter prejudice. I will remind the court and the defense that there are not only the statements of the plaintiff’s father, a member of the bar, but a positive DNA test. We really should just be proceeding to probate.”
“I think the term ‘heir’ is prejudicial,” Judge Mickelson said. He had the face of a bulldog, which was only exacerbated by his perpetual scowl, and his robes did little to hide his extra weight. “Sustained. Whether the defense sees this as a delaying tactic is moot. There is a question of competency. Young man?”
“Your Honor,” Mike said, looking at him.
“You are potentially the heir to a very large fortune,” the judge said. He leaned forward and spoke slowly as if talking to a much younger child. “That money affects many other people. It is currently primarily in stock in one company. Simply the public notice that there is a potential heir has caused that stock price to fall. People have their life savings tied up in similar stock. There are pension funds tied to it. This decision affects many people. Not solely yourself. Do you understand that?”
“Yes, Your Honor,” Mike said. “May I comment on that at some length, Your Honor?”
“You may,” the judge said.
Mike paused a moment in thought. It took significant effort to block out his intense desire to simply kill Conn and then leap out the window to escape. A glance at Derrick, who sat with rigid posture and perfect poker face, immediately grounded Mike.
Death is too good for him. Beat him in his world. Humiliate him.
“I recognize that, Your Honor,” Mike said. “The question for this hearing, however, is: Am I competent to manage the funds? If I am found incompetent for any reason, the Trust will argue that they should continue to manage the funds. I would like to speak to that matter as well.”
The longer Mike spoke, the wider the judge’s eyes got.
“I will refer to my counsel’s argument that that question is moot. My father will be in charge of the funds and thus my competence, either my psychological competence or my intellectual competence, is moot.
“However, we will entertain the defense’s argument for a moment to consider it carefully,” Mike said. “The question of competence also arises in the defense. Are they competent?”
“That’s not an argument we are addressing here,” the judge said. He was starting to glance around at the various lawyers in mild panic. The child was not only speaking but speaking intelligently.
“But it is part and parcel of the argument, Your Honor,” Mike argued. “And I think a review of that competence may define the question of my competence in Your Honor’s mind.
“The Trust chose to convert all of my family’s assets, save a few personal housing units here in New York, into Fieldstone stock. First of all, it is a common axiom to never put your eggs into one basket. It is certainly a common axiom in finance. You should always have a distributed portfolio. And then there is the question of placing them all in Fieldstone’s basket.”
The collection of Trust employees was breaking down into a torrent of whispering that grew into muttering, with expressions ranging from irritated to worried.
“The first issue in the question of their competence, is that they were specifically formed from the original Follett Trust for the purpose of holding the Follett fortune in the event that the potential heir should appear. When it was announced there was a potential heir, the sudden question of disposition of a large amount of Fieldstone’s stock caused a large-scale sell that caused the stock to drop.”
“Quiet!” Mickelson said with a bang of his gavel. The chattering ceased.
“Had the Trust spread the money, had a distributed portfolio instead of putting all my family’s eggs in one basket, that would have never happened. Part of it in stock here, part of it in bonds there, part of it in ETFs, part of it in commercial properties, possibly a high-risk portion, say ten percent, invested in tech and commodities.
“If the fund had been competent fund managers, Fieldstone would never have taken a hit! It is not my competence which should be on trial, Your Honor!”
“Objection!” Lowe said. “That is the point of this hearing, Your Honor.”
“Your Honor?” Mike said. “I would ask that you allow this line. There is a specific reason that directs to the point of this hearing.”
“Overruled,” the judge said. “Go on. But please don’t waste the court’s time.”
“I assure you, Your Honor, this is not a waste,” Mike continued. “Then there’s the issue of taxes. At least half of this will go to taxes. That would happen no matter who inherited. The Trust was specifically set up to search for an heir. An heir was presumed from its inception. Any heir would have to pay inheritance taxes. Where is the money to come from? Oh, that’s right, Fieldstone stock! Because there is no other source of funds due to the Trust putting all of it in one basket.
“So, it is guaranteed that at some point there will be a sell. If we spread the sell over time, it will have less effect. If we’re forced to hurry into a sell and dump half a billion in Fieldstone, it will be particularly painful to those investors you are worried about, Your Honor.”
Lowe had stayed out of his entourage’s conversation, but now he leaned back to pass one a quiet message.
“All of which could have been alleviated if the soi-disant trustees had bothered themselves to do all the hard work of managing a distributed portfolio. Heaven forbid they actually have to work!
“And then there is the issue of it being all in Fieldstone stock,” Mike said with an aggrieved sigh. “From the point that they converted all of my family’s assets, hard won over centuries, into nothing but Fieldstone stock, the stock price has only gone down. And that has nothing to do with my sudden appearance. That is all on Fieldstone.”
Most of the Trust’s lackeys were still fidgeting nervously, but one was sitting smugly with his arms crossed, as if Mike was saying things he’d already told them himself more than a few times.
“I find Fieldstone’s continual creation of novel ETFs charming in a naïf, loving sort of way. I tend to think of it as the Humbert Humbert of investing. But their international investment strategy is something from a Three Stooges movie!
“Fieldstone is heavily invested in China,” Mike said. “There are many issues with investing in China, not the least of which is losing money to contract breach and having no real remedy in Chinese court. Which has happened to Fieldstone several times.”
Conn waved Lowe over. The lead defense counsel leaned it to hear him. Conn jabbed a finger into the air and practically spat while talking. Lowe shrank away and nodded in obeisance. He turned to the judge and looked like a deer in the headlights trying to find words but failing.
“But the real issue of investment in China, currently, is demographic. The Chinese population is graying rapidly, and their total population is declining. Due to the one-child-policy that was in effect for so long and the cultural changes in childbirth it caused, the population of China is approaching a crash point.
“An economy depends on people. You literally cannot have an economy without humans. An environment without people is called ecology not economy. Economies and thus business wealth do not grow in a condition of declining population. Just ask the Japanese. The economy eventually stagnates and even regresses.”
The rest of the lackeys scoffed and shook their heads, but the one man shrugged and waved a hand as if to say “Exactly!”
“But Fieldstone continues to invest in China. They recently made a pronouncement about another multibillion-dollar investment that is, based on their recent history, probably going to go south in a big way.
“Do you know where Fieldstone does not invest in any significant fashion? India. Which is financially insane! If anyone should be in a competency hearing, it’s the leadership of Fieldstone!
“India has common law courts, which means that, unlike China, you can occasionally get a fair hearing. I will point Your Honor’s attention to the case of Allegheny v. Uttara as an example. The Allegheny Financial Corporation sued Uttara Chemicals for fiduciary breach, won in Indian court, and was financially compensated.”
Derrick had actually straightened with some pride and cracked the slightest approving smile—though it disappeared the second Mike noticed it.
“Show a single time when the same has happened with China. How many American companies have been ripped off by the Chinese and been laughed out of Chinese court? Hundreds? Thousands? Fieldstone has been ripped off multiple times, but they just keep going back to the well like Charlie Brown with Lucy and the football.
“And I must point out that every time they toss money into the firepit called China, that is my family’s money! That is my legacy they are burning like the Allies burned Dresden! Not to mention all of those other investors for whom you are reasonably concerned, Your Honor.
“Further, India has a similar population to China but a fraction of the GDP—literally only three percent of China’s. India has nowhere to go but up whereas China is reaching a combination maximum equity condition coupled with population limit. On the subject of demographics, India’s population continues to grow, slowly but steadily. People equal an economy. Its GDP continues to grow, slightly but not explosively ahead of its population growth.”
Judge Mickelson was staring at Lowe as if willing for some rescue. Lowe, looking somewhere between lost and distressed, remained silent.
“Right now, Indian IPOs—initial public offerings—are in the same condition as US IPOs in the 1980s. Not every company is a success story. But right now, you can more or less put all the names of Indian IPOs on a dartboard, close your eyes, throw three darts, and you’re going to make money. A well-run fund that is familiar with Indian business could be making returns similar to what Peter Lynch made with Magellan in the 1980s. The Indian Home Depot awaits, Your Honor!
“So, why isn’t Fieldstone investing in India? And the defense would question my competence? When they put all of my family’s money in a company whose stock is on the decline and is so purblind it cannot see the biggest financial windfall since the internet? What, is India too far to fly?
“So, at this very moment, Your Honor, my family’s fortune is being frittered away by people so incompetent, I am surprised they can tie their rather vulgar shoes.”
Mike then sat and looked at the judge, who was looking a tad confused.
“Does that, uh, complete . . . ?”
“I said, Your Honor, that the defense’s objection was to be put to rest,” Mike said. “That diatribe against the management of my family’s money should prove this hearing as well as their objections are moot. The question is not my competence, Your Honor, but Mr. Conn’s.”
Conn’s casual dismissal of the proceedings had evolved to quiet, angry stewing. But now he locked onto Mike with a death glare, as if trying to slice Mike to pieces with eye lasers. Mike, on the other hand, felt oddly relaxed, almost zen.
“I am competent to manage the funds both psychologically and intellectually, Your Honor. Am I PTSD? Yes, eighty-eight points, which is extremely high. Do I wake up at night screaming? Yes. I have a lot of bad things in my past to scream about. So did Oliver Twist. Am I ADHD? Very. Am I ODD and various other letters? Yes. Do I also have an untestable IQ? Yes, I do. Have I studied business and finance? I audit college courses for fun. I have taken and passed courses from Wharton at graduate level, Your Honor. I specialize in international finance and economics.
“So, what the defense is doing, Your Honor, is wasting your time,” Mike concluded. “That is all they are doing. While it’s fine to waste my time, Your Honor, you should be rather offended that they are wasting yours. That concludes my statement.”
“Okay, we’re here with Edward Folsom, who’s an investment counselor with Folsom and Folsom Investments. Yes, this is a law stream but we’re trying to sort out something that Mike Truesdale, the potential heir that just burst onto the scene, said during his presentation at a competency hearing. First of all, hi, Ed. Welcome to the podcast.”
“Thanks, Hank.”
“I think that Mike Truesdale’s competence in general was probably proven in court with his statement. He wasn’t reading from notes, either.”
“No, I watched that, too. Not so much from the law perspective but a lot of analysts wanted to know who this kid is. And wow! I was howling at his presentation. I’ve been warning people about Fieldstone’s international fund management for a long time, so this was right where I work.”
“Right, which is one of the reasons I asked you to be on. You’ve said similar things about Fieldstone in the past.”
“But I never managed to slip in a Vladimir Nabokov reference. I was howling at that one! I literally was laughing so hard I couldn’t even follow the next part.”
“Can you walk us through that? What the heck is a ‘Humbert Humbert of investing’ mean?”
“Let’s back up to the thing about ETFs. Can we play the whole clip?”
“Sure:”
“I find Fieldstone’s continual creation of novel ETFs charming in a naïf, loving sort of way. I tend to think of it as the Humbert Humbert of investing.”
“Okay, you’re laughing again.”
“Yeah! Okay . . . Uh . . . First, what’s an ETF? It stands for Exchange Traded Fund. An exchange traded fund is, well, a fund that you can trade on an exchange. That fund might be a fund of, say, agricultural stocks. Instead of investing in one stock, you’re investing in a group of them. And unlike a mutual fund, that does something similar, you can buy and sell your ownership of the fund on a trading floor, just like a stock. Does that make any sense?”
“Sort of got it.”
“Okay, so what’s a novel ETF? A novel ETF is when someone comes up with some new field to create an exchange traded fund. So, I used the example of agricultural company stocks. That’s fairly obvious. But then you get into things like an ETF that invests in a range of blockchain coins. Or an ETF that’s based on a range of ETFs.”
“Is that a thing?”
“That’s a thing, yeah. And Fieldstone is famous for setting up novel ETFs that are sort of out there. They have to have some think tank that sits around going ‘What’s the craziest thing we can think of to set up as an ETF?’ I mean, like, they’ll say, ‘How many times do financial podcasts mention ETFs? Can we set up an ETF for that?’
“So, Fieldstone will set up the Global Fund for How Many Times Financial Podcasts Mention ETFs with some of their money. Then people who seem like they will invest in just anything will buy shares in that fund, buying them from Fieldstone, and start trading them. Fieldstone sells the shares at a profit, then manages the fund for a fee.
“Mostly people end up losing money on it. And most of them are people who don’t know what they are doing. Sometimes it’s big-money managers but it’s more likely to be individual investors who just are investing in some hot new thing and lose their money. So . . . yeah, the entire reference is to the Nabokov novel Lolita.”
“Right, and the main character and narrator is named Humbert Humbert and he, well, Lolita is his stepdaughter and her mother dies and they enter into a . . . shall we say inappropriate relationship.”
“It’s basically an entire novel about him screwing a fourteen-year-old girl.”
“Right.”
“So, yeah, so setting up novel ETFs and screwing naïf investors with them is sort of being the Humbert Humbert of finance. It’s the best one-liner I’ve ever heard about novel ETFs. See why I was laughing so hard?”
“Yeah, I sort of get it.”
“Wow, was it an insider financial joke! I mean, it’s one of those things . . . If you’ve got to explain a joke to somebody it’s not funny. But to anybody who’s working in finance and who knows who Humbert Humbert is, it was hilarious. I called up a couple of other advisors who were watching and they mostly were wondering who the hell is Humbert Humbert . . . ?”
“I generally don’t prefer my clients talking much in court,” Ahuvit said as they drove back in the limo. “But I’m going to say that was a very nice presentation. ‘The Humbert Humbert of finance.’ Wow! That’s obscure in two different fields!”
“It just popped out,” Mike said, laughing. “It wasn’t really part of my mentally prepared statement.”
“I’m not getting the joke,” Wilder said. “I heard some laughs from the courtroom, and you grunted, sir, but . . .”
“It’s too hard to explain,” Ahuvit said, still laughing. “I think if his honor had been able to parse it out, he’d have probably had words to say. But even he didn’t get it. You could see him trying to figure out what you’d said when there was a titter in court.”
“No one studies the classics anymore,” Mike said with a sigh. “He’s still going to require I go through all this stuff. Motion to enter my results from the very complete psychological evaluation in October.”
“Wasn’t that the one that found you nuttier than a fruitcake?” Derrick asked.
“I am nuttier than a fruitcake,” Mike said. “But it also found me competent. And we’ll have their psychologist say I’m incompetent and ours will say I’m competent and maybe we will get Dr. Michelle to chime in, and in the end the judge is going to find me competent. Or if he doesn’t, then we’ll have to go to appeal. They’re just delaying the inevitable.”
“They may be able to delay it for some time at this rate,” Ahuvit said.
“Then I’ll just enjoy the Big Apple and try to stay out of trouble,” Mike said.