The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [359]
Someone came out to the stage and told Buffett he had a phone call from the Treasury. He hurried from the dais, leaving Maughan, astonished, twisting in the wind alone. Nevertheless, Maughan managed to answer some questions in the perfectly articulated monotones of a BBC announcer narrating a documentary about the mating habits of the wildebeest.
Buffett returned with a press release from the Treasury Department, announcing that Salomon had part of its credibility back. The journalists were not mollified. They pressed on.
Did the ex-executives really resign or had they left through arm-twisting? Buffett assured them repeatedly that Gutfreund, Strauss, and Meriwether had resigned voluntarily. Were the ex-executives getting special compensation? Was Salomon paying their legal fees? How much money did illegal actions earn the firm?
After well over an hour, one of the directors who was sitting next to Munger nudged him and said, “Isn’t Warren ever going to end this thing?”
“Maybe he doesn’t really want to,” Munger said. “Warren knows what he’s doing.”94
How much did the phony trades cost the government? How many customers had told Salomon they wouldn’t do business with the firm? What severance would be paid to the ex-executives? Why didn’t Wachtell, Lipton take the situation more seriously? What were the details of the strange fraudulent trade the investigators had discovered, the one referred to in the press release as the “billion-dollar practical joke”?
“It is not a joke. I suppose if you had to characterize it in some way—” began Buffett.
“Those were your words in the release,” retorted the reporter, sharply.
“Those were not my words. It was in the release. My name is not on the bottom of the release. You can characterize it as a bizarre incident. My definition of a practical joke is one you can laugh at after hearing it. I don’t see it as the least bit funny.”
The reporters, most of whom had read Liar’s Poker, waited for an explanation. Salomon, they knew, was famous for its “goofs.” Traders were constantly stealing the clothes out of each other’s suitcases and replacing them with wet paper towels or lacy pink panties. The most famous goof at Salomon concerned the game of liar’s poker itself, which Gutfreund once allegedly offered to play Meriwether for a million dollars on a single bet, no tears. Meriwether supposedly countered with ten million, causing Gutfreund to stand down. While even this story was thought to be a sort of goof, containing apocryphal elements, until now ten million dollars was the outside limit that anyone had ever imagined for a Salomon goof.
But for a billion dollars, you could fill New York Harbor with rubber chickens as high as the Statue of Liberty’s thighs. What, then, could have been the “billion-dollar practical joke”?
“Apparently a woman was leaving the department after many, many years—retiring, I guess,” Buffett said. “An order was worked out with somebody, to give her a very large order. A billion dollars. A billion-dollar order on a new offering of thirty-year Treasury bonds. Then—and this gets vague—I guess the plan was to maybe convince her somehow that the order was not submitted and have the client question the fact that it was not submitted. It was to try to scare the hell out of her or something. I don’t know.
“The bid actually did get submitted.”
A hundred fifty reporters sat in silence. Salomon had bought a billion dollars’ worth of bonds in a practical joke gone wrong. Buffett was not kidding that the culture of Salomon was going to have to change.
“It should have been crossed out. My guess is that whoever did it did intend to cross it out. It has to be the dumbest joke ever attempted to be perpetrated.”
No one said a word.
Maughan: “Any more questions?”
The hot air had been let out of the room. After this