Death Benefit

11.

NEW YORK CITY MARCH 2, 2011, 1:30 P.M.

After leaving Gloria Croft’s office, Edmund Mathews, still steaming mad and nursing a sore left hand, turned east onto Lexington Avenue and found a Duane Reade pharmacy. He bought a bottle of Motrin and took four. His hand throbbed sharply, but he was certain he hadn’t broken any bones when he slammed the elevator door. Had he used his stronger right hand, he surely would have. Russell Lefevre often found Edmund’s behavior during crises to be unpredictable and alarming, but he knew Edmund had a laser-like focus that he could bring to bear at times like this. Edmund had the ability to break down complex problems and attack them piece by piece until he had it licked.

Edmund had the car brought around and the two men sat in it double-parked on East Fifty-eighth Street. Russell swore he could hear Edmund thinking.

“We have to get a head start on securitizing what we have,” Russell said.

“Yes. For certain. And look at the diabetics whose policies we own,” said Edmund. “See if it mightn’t be cheaper to cancel some rather than carry them. And we should lay off some of our sales force until further notice.”

Edmund had Russell call a contact at Goldman Sachs, a man named McDonald in the asset-backed securities division. McDonald had been interested in LifeDeals but was wary. Russell was still confident they would get one of the major players on board, and he hadn’t spoken to McDonald in a while. It happened that McDonald had a few minutes to spare an old client, and Edmund and Russell headed down to West Street in Battery Park City and Goldman’s global headquarters.

That guy’s small-time, no vision,” Edmund said, after the unsatisfying meeting. Russell had answered all the questions the traders asked about securitizing their portfolio of life settlements sooner rather than later. But the traders couldn’t see what the hurry was. From their perspective the more policies they had to bundle, the better their product was going to be. And they hadn’t done the grueling legal legwork to create the complex CDOs to be in a position to take them to market. What Russell and Edmund had been looking for was reassurance after their meeting with Gloria Croft. As they left Goldman they admitted to each other that the reaction they’d gotten wasn’t exactly negative, it just wasn’t wildly positive either.

In the car Russell and Edmund made another decision. As Gloria Croft had so devastatingly demonstrated, the main problem they were facing was with the mortality-rate bell curves that LifeDeals’ viability was predicated on and the damage that medical advances might do in terms of moving the curve to the right.

“We need to go see Henry Green,” Edmund said. Henry Green was CEO of Statistical Solutions LLC, the company that had produced all the actuarial data, including the bell curves. Edmund got out his BlackBerry. This was a call he wanted to make.

“Henry Green, please…. Okay, well, tell him Edmund Mathews is in the city and on his way over and needs to see him right away. . . . Well, I’m sure he’ll understand when you tell him. Our key data has flaws. There’s new information. We need to fix it.” Edmund hung up.

“He’ll see us,” Edmund said.

LifeDeals had put Statistical Solutions on an expensive retainer. Russell wanted to be armed with the best available statistical analysis when they went on the road selling their product. One supposed lesson from the subprime debacle was that investors wanted to know exactly what they were investing in. It might appear to be self-evident, but it wasn’t. Russell wanted to be able to show an investor the latest data, even individual policies, if they cared to see them.

For his part, Henry Green was less than pleased to be hearing from Edmund Mathews at all, let alone when he was demanding a face-to-face meeting without notice. While Russell Lefevre wanted the full breadth and depth of research that Statistical Solutions offered, he gave the firm time to accomplish what was asked for. In contrast, Edmund Mathews would call up and want immediate answers to complicated questions. Green had had to drive his people hard, squeezing every last cent’s worth of work out of the company to comply. Edmund expected Henry to drop everything whenever he called.

Edmund and Russell arrived at the Statistical Solutions offices in Chelsea in short order and within a couple of minutes were sitting with Green in his office.

“Edmund, I gather you mentioned something on the phone about ‘new information,’” Green said hesitantly.

“That’s right,” said Russell, who wanted very much to avoid having Edmund yell at Henry Green, which had happened in the past. “There’s new material and we need your expert opinion to see if we need to be concerned about it.”

Edmund sighed at the understatement.

“What my colleague is trying to say, Henry, is that you may have been wrong in some of your forecasts by amounts that could put us out of business. So I’d be very grateful, Henry, if you could get those geniuses you told us about who could have gotten jobs at Google to come in here and prove to us that they are in fact smart enough to tie their own shoelaces after all.”

Edmund’s voice was rising in volume but the dam held, just. Henry Green pressed a number on his phone pad and picked up the receiver.

“Yes, Laura, would you have Tom and Isabel meet us in the conference room right away?” Green hung up the phone.

“Gentlemen, shall we?”

Everyone Russell and Edmund could see around the office was young. Henry Green at least affected the look of a businessman with his dress slacks and dark shirt, but his messy hair was at least two inches too long in back. The numbers geeks, dressed in black, looked like they had just come in from an all-night party. Statistical Solutions was gaining a reputation for all kinds of data collection and algorithm solving, and a lot of their employees did indeed go on and work for Silicon Valley giants that paid for their dry cleaning and accommodated their dogs at work. To keep them, Henry Green had to be equally tolerant and generous. As long as they gave him six months of hard work, Henry Green didn’t mind. Statistical Solutions was strongly in the black.

Anticipating that Russell wanted to speak, Edmund dove right in, addressing Isabel and Tom directly.

“What do you know about stem cell research in relation to the treatment of diabetes?”

“I know what stem cells are,” Isabel Lee said.

“Did you build it into your projections?”

“Build what in?”

“The fact that a professor up at Columbia is making strides toward creating human pancreases outside the body to be used as transplants. If he succeeds, he’ll be prolonging the life of diabetes patients.”

“Which is a good thing, of course,” Isabel said. Neither Isabel nor her colleague Tom Graham enjoyed working on mortality statistics for LifeDeals, even less when they found out what LifeDeals was doing with them. They’d mentioned their misgivings to Green, but he’d waved them off, saying they were not being paid to make ethical value judgments. Yeah, the concept of making money from people’s deaths is creepy, but the pay is good.

“Yes, it’s a wonderful day for medicine and fat people, less good for my investors,” Edmund said.

“Listen, we gave you full license to draw up parameters for us, using actuarial data and cross-referencing it with our cash-flow projections, and nowhere did we see any information about this,” Russell said, getting a nod of agreement from Edmund.

“Russell, we built in increases in life expectancy and added tolerances for unexpected developments, but they were capped at five percent,” Henry said. “As we discussed, as you agreed. If there is about to be a major breakthrough like custom-made transplantable pancreases from stem cell research or fallout from the human genome project, we can’t be held responsible. You can’t anticipate once-in-a-century events.”

“Then all this fucking statistical research is useless,” Edmund snapped, throwing up his hands in frustration. “It’s all nothing but mental masturbation.”

“Na-ha,” Isabel said, not at all intimidated. “It’s good data for what we had. If there’s a paradigm shift, then numbers change and graphs have to be adjusted to reflect it. Simple as that.” She shrugged and sat back in her chair.

Tom Graham was looking at a fingernail and didn’t respond.

“That’s it! That’s what we get! Whoops, sorry, wrong number. We didn’t think of that! We were paying you to think of everything. It’s not as if stem cells popped out of the blue. What sort of company are you running anyway?”

“Okay, let’s not get worked up here,” Russell interjected. “Henry, Edmund apologizes-”

“Don’t apologize to me, apologize to them,” Henry said, indicating Isabel and Tom. Isabel glowered at Edmund, who eventually raised a hand to speak. It was about as contrite as he was going to be.

“Henry, listen, we need some fresh models run based on some new assumptions that I can e-mail to you in an hour or so, soon as we get back. We need to see how our cash flow is affected in these new scenarios. You’ll have to make assumptions as there is no real data available. We’d be very grateful if you could do it for us. And we need it right away. As you know, there’s provision in our contract-”

“Yes, Russell, I know,” said Henry. “In actual fact, I happened to take a look at our contract when you were on your way over. We’ll do the work for you, have it for you tomorrow, as soon as we can. As you know, Russell, there’s a mutual twenty-four-hour cancellation provision in the contract, under certain circumstances. I believe circumstances such as these cover the provision more than adequately. So consider this your notice.”

More deflated than they had been on arrival, Edmund and Russell didn’t have it in them to protest. They got up to leave.