Broker, Trader, Lawyer, Spy - Eamon Javers [11]
Back in London, meanwhile, Diligence’s team members manned the phones to gather the rest of the information they needed. Posing as potential customers, they called to book reservations in the hotels nearest the power plants they were targeting. Asking for room rates and availability weeks in advance, they could pinpoint when each hotel was at maximum capacity—or sold out. By trolling for “no vacancy” dates, they developed more data on when the maintenance was likely to happen.
Putting it all together, Diligence sent the raw data and video along to Enron’s intelligence operatives, who worked out when the plants were going off-line and passed the information along to the traders doing battle in the energy markets. At first, Diligence passed along the details from every flight, but soon it settled on a system of weekly reports. Enron gained a crucial edge over the rest of the traders in the market. The work was done for a monthly retainer that represented a key, regular stream of income for Diligence. Baker declines to say how much Enron paid per month, and he says he has no idea how much money Enron made from the overflight information.
The nifty little scheme crashed to a halt in late 2001, as Enron itself collapsed into bankruptcy. Even with the moneymaking European spy flights, Enron’s top executives had badly mismanaged the company, steering revenues into numerous secret shell companies. As the firm began to unravel, Baker says he got a sudden call from his contact at Enron: “If you’ve got any bills outstanding with us,” he said, “get them to me today, and I’ll make sure you get paid.”
THE LOSS OF Enron was a learning experience for the young spy firm. Baker says the message was clear: “There’s a lot of information available out there.” The key, he concluded, was to match a client who understands the value of information and an intelligence firm that has the wherewithal to go out and get it. And he took away one more thought: Diligence could have charged twenty times more for the information than it did. As he learned the value of information, Baker resolved not to undercut his own pricing again.
Over the next couple of years, Baker and Day traveled widely, rubbing elbows with some of the richest and most powerful people in the world. And they became close friends. Baker moved to Washington, D.C., to be near the lobbying firm Barbour Griffith and Rogers, which was still a major source of referrals for business.
By 2005, Diligence was eager to grow still further, and he was scouting around for investors to finance expansion. Ultimately, Burt provided an introduction to an Argentine private equity firm, the Exxel Group, run by a flashy buyout specialist, Juan Navarro, who was based in Buenos Aires. This Uruguayan-born investor cut a glamorous figure: he lived in a penthouse, cultivated expensive tastes, and was known for his aggressiveness. In 1991, he quit a successful career at Citibank’s Argentine venture capital unit to launch his own firm, Exxel. He secured investments from GE Pension Trust, Rockefeller and Company, Liberty Mutual, and Columbia University, and began investing billions in nearly 100 companies, mostly concentrated in Latin America.
During the course of negotiations with Exxel, Baker began to feel uncomfortable about the future of Diligence. The new cash would mean big-time expansion, and new management responsibilities for himself and Day. He says now that he