Kent was rather shocked when he got the signed contract back from the board of directors. The odd thing was it came with a formal letter telling him to proceed with this plan per the details of the contract. He took it all to Margret’s office to ask her about it.
“What is so unusual?” asked Margret. “Oh, I forget, you haven’t been here that long. Any time the board actually has to sign off on a capitalized project they include a letter stating they authorize only what is explicitly stated in the contract. The legal department tells them it protects them against cost overruns. It doesn’t really, but they think it does. Yes, we have legal grounds to not pay the bills for an overrun, but what usually happens is the vendor stops working until they get paid, the lawyers get involved, then the project dies.”
Margret could tell Kent still didn’t believe her.
“Ever been to our branch in Des Moines, Iowa?” Kent shook his head.
Margret picked up the phone and called Carol. “Can you please pull out the pictures of our branch in Des Moines, Iowa, for Kent? He’s sitting in my office and this is a story which really needs pictures.”
A few minutes later Carol came in. “Here is the file. Dare I ask what this is about or do I not want to know?”
Margret laughed and handed Carol the letter. Once Carol had finished reading it she looked up and said, “So?”
“Kent doesn’t believe the board always sends these with a project sign-off. It helps if you explain why that is with pictures,” Margret responded.
“You don’t need Crayons!” Kent said in a combination of disgust and embarrassment.
“Here, look at the pictures of our branch in Des Moines,” said Margret, handing Kent the folder.
There were several shots of a construction site and a partially erected building. Not enough was completed to tell for certain it was supposed to be a bank.
“What does this tell me?” Kent asked.
“That’s as far as the project ever got. The board didn’t include one of these letters when they signed off on its construction. The builder bid the project with a concrete mix which wasn’t up to code. When the building inspectors called him on it he tried to bill us for double his bid price. The lawyers got involved. Court case lasted nearly a year. We ended up not building a branch in Des Moines because of it. I have no idea what happened to the lot or that partially constructed disaster,” Margret said.
“They did finally sell it,” Carol volunteered. “After the city of Des Moines fined them for an eyesore and public safety hazard.”
“So Kent, this letter now comes with each and every project the board signs off on,” continued Margret, “or should I say the new board signs off on. None of those board members are still around, are they?” she asked, looking toward Carol.
“Nope. There was a meeting of the shareholders after that debacle and we got all new blood,” said Carol. “It was the first and only $5 million loss this bank ever put on its books.”
“Surely they’ve issued notes larger than that which went bad,” Kent said.
“Totally different. We hold a mortgage less than a week. They get bundled up and sliced up into financial instruments. Wall Street and investment firms hold them, we don’t. All we have to ensure is that they meet the initial requirements when we issue the mortgage. If you are talking about business lines of credit, the shareholders don’t tend to hold the board accountable if some publicly traded company has a line of credit with us and goes under. We’ve usually terminated them long before that happens, and if we haven’t there has always been some kind of criminal investigation. The shareholders hold the board accountable for projects they authorize, not standard banking ebbs and flows.”
“But they didn’t do this for the data center project,” Kent retorted.
“They didn’t sign that contract, you did. They told you to go ahead since the cost of the project was going to be paid for in large part by the sale of the unused assets,” said Margret. “All funding for that project came out of the IT budget. They simply agreed to let us have the proceeds from asset sales to fund the project to completion.”
Kent hadn’t thought of that. He did sign the offshoring contract. The initial dollar amount was within his authorization limit and he had told Kathryn to keep each invoice below that dollar amount so he could approve it rather than having to go to the board. Sometimes they got two invoices per month and other times they went two months without getting an invoice. Kent had merely received a phone call from a board member telling him to go ahead. There hadn’t even been an email message. Then again, where the data centers were and what it cost to run them was under his realm of responsibility. The board simply needed to know how much he was cutting costs, not the details of the plan.
This conversation seemed to alleviate Kent’s fears. He went back to his office and left the women to continue laughing at him. At least they had the decency to close the door. He was a manager, and sometimes your employees laughed at you. He did feel better now that he had heard it from a lawyer. Now all Kent had to do was send this contract off to Kathryn and figure out a way to put in the annual report to shareholders that he saved the company $12 million per year. If they fired the entire board of directors over a $5 million debacle they should more than support his elevation for saving such a princely sum of money.
After Kent left, the girls closed the door and began to laugh. “Do you think someone is finally catching on?” ask Carol.
“I don’t think he is that bright,” responded Margret. “At first I was completely against him getting that position, but now I think the board brought in a Grade-A patsy.”
“Oh well, someone has to take the fall, might as well be him,” Carol laughed.
“How true!” responded Margret. “At least I can profit from it.” “How so?” asked Carol.
“I probably shouldn’t say anything; you are a lawyer after all,” Margret responded.
Carol got a serious look on her face, sat down, and said, “Tell me about it off the record.”
“I gave a friend some money to open an online trading account for me. It isn’t in my name and nothing ties to me directly. I told them to buy as much Pytho stock as they could before the announcement. The stock for this company I buy as part of the employee purchase plan. Once Pytho goes public with the product I expect their stock to jump quite a bit. Ours will bounce once Kent gives his interview saying how much we are saving. Once they have both peaked I plan on liquidating all shares of both.”
“Definitely not something you want the SEC finding out about, but as long as you don’t get greedy and you didn’t write a check for them to trace you will probably get away with it. Pytho didn’t make anyone here sign a nondisclosure agreement, so it isn’t like it was insider information. They handed out product literature,” responded Carol.
“Well, that only makes you a little,” responded Margret. “Once I’ve dumped all of the shares, I plan on using all of the money to short the hell out of this company’s stock. When the news hits about the data center issue we are going to tank and I want to be paid for it. As far as being greedy, I should be able to retire if we go below twenty dollars per share.”
Carol’s eyes went wide with that statement.
“I never got married or had kids. Never bought a fancy car and rarely bought a new car. I paid my house off years ago. It’s not a palace, but it is more than enough for me. I’ve been putting money into that trading account for over ten years. My friend is pretty good at picking and I’ve had my own information to work on from time to time. It’s not dot-com-type money, but it is more than enough for me to retire anywhere I want. This last round will cement that fact.”
Carol knew what the bank paid and about how long Margret had been here. She must have had a friend that was amazingly incredible at picking stocks. “I don’t want to know how much,” she said finally. “I like what we have now and I don’t want it to change.”
“Speaking of that,” Margret continued, “What are your plans for the next few weeks?”
“Summer vacation before the kids go back to school. I think we are taking them to Disney since they are both about the age to really appreciate it.”
“And I’m sure you will be swamped when you get back.” “I’ve already told hubby I will end up having to work late the first three nights back just to catch up,” she replied with an evil grin. “I wanted to have some options after playing supermom and adoring wife for two weeks.” Both women laughed.
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