Bill Walton - Daisy Wheel Press

The Morcos Connection

copyright 2002

W. W. Walton

"Don’t forget your dentist= s appointment at 9:30, honey," my wife Nancy said as she kissed me goodbye that morning. She knows how I hate going to the dentist. I am one of those people who have very sensitive teeth and just the thought of Dr. Bauer grinding away with his drill gives me goose bumps. Nancy actually falls asleep in the dentist chair. At least that is what she tells me when she ribs me about being a sissy.

"How could I ever forget that?" I said, pulling on my gloves. It was minus 10 again today, snowing for the second time this week and it was only Monday. I was leaving early this morning. I had an appointment to meet the building contractor who was starting the electrical wiring in the addition to the office. By nine o= clock, Nancy would be at her usual place at the helm of the office. We each had our own cars since I never knew what hour of the day my work would end, so even though we worked in the same office, our paths crossed only by chance throughout the day.

Pilger and Associates were adding the new section to our building to house the Forensic Accounting Division that was my pride and joy. My father, Philip Pilger, attended to the normal accounting and auditing accounts that had built the firm, while I was busy getting new accounts to substantiate the expansion. Forensic accounting jobs tend to last only as long as it takes to rout out the people and systems that can cost companies thousands of dollars, often without their ever realizing they have a problem. We catch the bad guys, suggest some better controls and move on to the next job. We also take accounts where there is suspected commercial sabotage. The theft of ideas can be harder to track and prove, but Pilger and Associates have had some successes. Pilger and Associates, Forensic Division, also take insurance jobs where we attempt to recover monies for a percentage of the recovery. It is the detecting work that I enjoy the most. Nancy says it is because I crave the danger of apprehending criminals, but I try to deny that assertion.

The contractor was at the office precisely at 7:00 a.m., as promised, and we reviewed the changes we wanted. Jack ‘Scotty’ Holland, our computer manager, had changed the specifications on the original plans, and we now had to add more power to the computer room. He was worried about the extra heat the new processors and their myriad of peripherals would generate, so we decided to install a larger capacity air conditioner. Scotty was away at yet another computer conference where he would pick up even more ideas on what technology was at the cutting edge in the industry. By keeping current with the technology, we could offer our clients the latest solutions for any security needs. We also needed a power supply that could not be easily tampered with. Secure data and data processing were very important in our business; limiting the access to our outside power and our computer lines, as well as a secure office environment, was essential.

We designed the office access points carefully to prevent anyone from easily passing through the electronic door locks and into the computer room. The whole of our office was under video and audio surveillance. Our employees did not mind the electronic eavesdropping and in fact used the system to keep Dad and me aware of any grievances they had. The staff was used to me trying out all sorts of electronic equipment that could be used in an investigation - everything from infra red night binoculars to parabolic eavesdropping equipment. But the computers were the heart of our system. The building addition had its own fire suppression system, alarm system and remote video monitoring. Philip thought we were being paranoid until the day one of the suspects in a fraud case burst into the office, armed with a very large gun, and threatened to shoot whoever was responsible for having him suspended from his job. Somehow, Philip had talked to the fellow, listening to the poor man's story of grievances with his employer, and, feigning a genuine interest, suggested that the man had a valid complaint. Could Pilger & Associates look into this for him? After he surrendered the gun?

Dr. Bauer greeted me and then turned me over to his technician who would clean my teeth. Dr. Bauer had to make an important telephone call before the Toronto Stock Exchange opened for business at 10 a.m. I am even more leery of my dentist when he is worrying about his stock market investments. And he was not smiling this morning. Thinking to get his mind on more pleasant matters, I asked him where he was planning to vacation this coming spring. Dr. Bauer always takes the month of April off - right after Dad finishes his income tax return. Some kind of a ritual journey to the sun god to celebrate another financially successful year, I suppose.

"I may not be able to afford to take a vacation this year, Frank. I’m losing my shirt on the stock market."

"I keep telling you to stay away from those penny stocks. I suppose you had money in Bre-X, didn’t you?"

"No, I did have some but I got out when it split last fall. I should have stayed in a little longer as it turns out, but my broker advised against it. No, it’s a mutual fund that is worrying me now."

"How can that be? I thought that mutual funds were the safest investment anyone could make," I said. Personally, I never touch mutual funds, preferring the safe but sure Blue Chip stocks like Seagram’s or BCE. The fewer the people who touch my money, the better. Besides, those mutual fund managers drive far too expensive cars.

"Yeah, that’s what I thought too. Open a little wider, Frank. No, I bought into a fund called Wardwell and the whole thing seems to have collapsed."

I knew that individual companies could collapse, but how could a whole fund fail? My mouth was wide open with a mirror, a pick and two of Dr. Bauer's fingers in it, so all I could say was "hunh?"

"Yeah, that’s what I thought, too. However, according to my broker, the four companies that make up the Wardwell Fund all closed - without warning. It was obviously a fraud and my broker says they have applied to the Ontario Securities Commission for an investigation." He removed his fingers and said he needed an x-ray to see if I needed a filling replaced on a left molar. "Do you want freezing? This isn’t too deep and shouldn’t bother you much."

"Do I want freezing? You know me, Doc, I’m a real chicken when it comes to my teeth."

"Well, I’ve been using a couple of drops of anesthetic just around the surface of the tooth and most of my clients find that enough. You won’t have to go around all morning with a frozen mouth. Almost all of my business people are doing this now," he prompted.

Now he was really challenging me. With Nancy's taunts still fresh in my mind, I acquiesced, "Okay, I’ll try it this one time but if it hurts very much I may just bop you on the nose to get even!"

"Relax, Frank, it’s just a routine filling. The last time your wife was here she almost fell asleep while I did her fillings."

So it was true. There was no way out of this now. No matter how much it hurt, I was going to have to tough it out. It was bad enough to have Nancy ribbing me, but now Doc Bauer was rubbing it in too. To get even, I asked, "How much did you have in that mutual fund, Doc?"

"Well, as of last week, I was in for over fifty thousand dollars."

"Wow!" I said. That was a pile of dough in any man's language, even a dentist's. "So explain to me what happened. I can’t understand how a whole fund can collapse. I thought the very nature of mutual funds was to protect against that sort of thing – to spread the risk around."

The story was that Dr. Bauer's broker had a friend in another brokerage firm who was managing a really successful fund. Wardwell had only been on the market for three years but the fund manager obviously knew how to pick winners. The fund held only four stocks, all Indonesian high-technology companies. All four companies were showing strong returns and were very active on the Japanese market. The returns for the past three years had risen from a low of 15% in the first year to 28% in this last quarter. In the first three months of this year, everyone had jumped on the bandwagon. Registered Retirement Savings Plan money flowed into the fund as brokers placed more and more orders. Two weeks after the RRSP season ended, all hell broke loose. The 'friend' who had recommended the stocks simply did not show up for work one Monday. The four Indonesian companies had vacated their offices; trading was suspended on the TSE when the Canadian brokerage company backing Wardwell found it was short of funds; a large Boston firm announced it too, had found some discrepancies and the Japanese stopped all trading on Wardwell. The units that Dr. Bauer has purchased at $32.50 were worth absolutely nothing.

The drilling and filling were really quite painless, just as Doc has said they would be. Maybe I had been getting all those needles over the years for no reason. I tried to console Dr. Bauer with the thought of the capital loss he could claim against his other stock winnings. This was small comfort to him, but it was further evidence to me that you could not trust those mutual funds. Buy common stocks in blue chip companies, own a part of the business, take some dividends and wait patiently while the shares gradually increase as the stock markets creep higher and higher on the backs of mutual fund investors. That is my plan for getting rich. That, and getting high-paying jobs doing forensic investigations into people= s books.