Cold Wind - C. J. Box [109]
“You’re kidding,” she said. “Everybody’s heard of it. This is the one they call the Mob Bank? The one with all the questionable loans that just disappeared? Haven’t they been shut down?”
“They have now. But not before everybody got paid off in fees,” Joe said. “They were connected, too.”
“But that’s not The Earl’s fault,” she said.
“No, it isn’t. But that’s how he financed his company. And he was just getting started.”
He heard her take a long breath on the other end. He said, “Earl took the loan—which was backed by the Feds—and bought a hundred old wind turbines from the Texas remanufacturing company. He paid a million dollars each, Smith said, but applied for tax credits and incentives for new turbines, which run four to five million apiece.”
“Jesus!” Schalk said. “That’s outright fraud. That’s what, three or four million per turbine? Or four hundred million dollars in the clear?”
“You bet,” Joe said. “But who is checking on these things these days? There’s so much of it going on, and so much bureaucracy in the process, no one knows what’s what. I mean, how likely is it the Feds would send out an inspector to make sure the wind turbines were brand-new? And keep in mind, the profits are all paper profits at this point. They’re on a balance sheet, but that’s all. That’s how a guy like the Earl skims. Everything is under the surface.”
“I see your point.”
Joe consulted his notes and said, “So The Earl doesn’t stop there. He’s like a junkie when it comes to skimming. He got a fifty-million-dollar grant in federal stimulus funds from the Department of Energy because his project was about wind. That’s why he bought Rope the Wind, because it had been around for three years on paper and that was one of the criteria for receiving the grant—that the company have a track record. Then he has his people go out and secure power contracts with a bunch of cities and states who have passed laws that mandate that certain percentages of their power must come from renewable energy. With the farm going up and the contracts in place, Earl now owns a genuine electric utility, which gives him the right to condemn the private land owned by the Lees to create a corridor for transmission lines. Even though these places are buying power at a loss and there wasn’t any way of getting the power to them yet, it makes them feel good. So The Earl takes advantage of that.”
“I’m getting lost,” she said.
“Here’s how Smith explained it to me,” Joe said, looking at his scribbles. “It’s like Earl figured out a way to have someone dig a gold mine for him using their money and mining equipment, but he gets to sell all the gold he produces to others at an inflated cost that’s guaranteed by the government. Then he uses grants and new federal programs to guarantee that the mine will always make money or at least never lose it. Then he signs deals with people to buy his gold at a preset price, because they’re do-gooders and market prices don’t matter to them. He used all the grants, subsidies, incentives, and tax credits to bail out the losses of all of his other interests.”
“Joe . . .” she said, objecting, he thought, to the enormity and complexity of what he was telling her.
“I know,” he said. “But in order to understand this, you’ve got to throw out everything you know about how real capitalism works. That’s how The Earl thought. It was all a big poker game where the chips were free to him because he was one of the favored players. And with all those chips, he was able to create a multi-layered corporate entity that was completely cushioned against any kind of risk or loss. He could now protect all of his other assets like big ranches or homes all over the world, because the contracts, tax credits, and guarantees tied to Rope the Wind to offset all his losses and limited his