PREFACE
Several months into a leading role at a global economic power, an executive tenders his resignation. The trading outfit he wishes to leave is a global behemoth with substantial worth. It is a matter of time before the enterprise itself collapses, an epic ruination with significant consequences.

The executive who resigns is responsible for infusing the industry with the ideas and bravado that creates new trading platforms and economic markets throughout the globe. But before the power collapses, the man confides feelings of personal unhappiness to friends and close colleagues.

After a decade he cuts ties with the organization. As the outfit is struggling the timing is enigmatic, but the executive stresses the reasons for his departure are strictly personal and not related to economic performance. The golden years of creation and innovation are dimmed by disenchantment and then forgotten as worst-case scenarios unfold.



1. Life as a Storm Merchant

On ports of distant shores, wares and commodities from far off lands are traded. Freight liners transport cargo loads as merchants bid and exchange newly distributed commodities, but the marketplace is fraught with disorganization as too many trading ships crowd the docks, often peddling inadequate wares.
One day a consultant for a trading outfit comes up with an idea: in order to trade on the harbors, you need a contract, and only several ships bearing contracts can trade on the docks at a time. That’s not all, however: the consultant realizes how important a contract can be, and its terms—including length of anchored time on the docks and the date of the contract—can be just as valuable as the contract itself. The consultant then begins trading contracts in the marketplace. In his famous analogy, he likens contract trading to butchering an animal: There are many parts to be divided up and exchanged.

The value this brings to his trading outfit is significant. He becomes a high ranking trader within the enterprise, proposing other brilliant ideas that involve limited assets but economic innovation: He is responsible for developing the idea of ‘securitizing the sea’ by offering square parceled plots to fishing boats who vie for prime oceanic real estate. Contracts for oceanic plots—‘securities of the sea’—become highly valuable and liquid assets on the harbor markets as the economies of cities even far beyond the realm of the trading outfit’s location begin to prosper.

The consultant continues to rise within the trading outfit. He begins to shape the organization in his way, employing merchants with little experience but high intelligence who will be able to grasp the whims of the modern markets. His managerial style is brusque and sometimes unpredictable. Rival traders even within his own company are pushed out as those who earn his trust are compensated handsomely.

The trading outfit grows larger until it is finally among the biggest in the world. The company is responsible for massive exports to foreign markets and in turn receives capital investments from distant governments who rely on the company to provide their unique contracts in the markets.

However, as the company has grown so have various problems; some of them serious. A foreign investment in an array of freight liners has become financially toxic and new commodities designed to meet modern needs are failing in the markets.

The outfit attempts to shield itself from losing money in poor investments by selling the investments to other entities. This works, but there’s a catch: the entities are controlled by the trading outfit that also supports them financially.
Amid the ups and downs of the company’s business, the trading outfit finally promotes the once-consultant to chief executive, the highest level of the organization. He begins his new reign touting the future of the trading outfit and implores financiers to continue supplying equity to the seemingly thriving business.

2. Rise of the Harbor Markets

The inventive methods of trading contracts on the harbor energizes commodity trading on the piers. The economy flourishes as freight liners and cargo ships adapt to the growing markets by increasing payload with higher quality goods.
The new chief executive attempts to model new industries by becoming an intermediary in emerging markets: The trading outfit purchases freight liner ships from manufacturers and then enters into deals to sell them to companies who offer commodities on the docks. The trading outfit is able to hedge its risk of losing money as an intermediary by selling the liners at a set price and then purchasing them from the manufacturers at a set price, thereby locking in a price for the liners that won’t fluctuate based on the price of steel.
Suddenly, traders enter the market, acquiring contracts to supply ships to merchants. The traders then sell these contracts to other companies, profiting on the difference. As the market grows and more traders become involved, contracts are traded many times over before reaching the hands of entities that actually desire – and have the ability to – supply ships to the merchants. The presence of traders increases the volume of the market, creating liquidity, and effectively transforms the market for ships into a financial market.

One of the qualities of this new financial market is that it allows traders exposure to the market without having to bear the responsibility of actually providing or purchasing ships or freight liners. Now traders can gain exposure to price fluctuations and enter markets which were previously unavailable to them.
However, as time wears on and the trading outfit grows, the executive is spending less time developing ideas as the responsibilities of being chief executive weigh down on him.

Various investments made years ago in developing nations are showing signs of becoming problematic assets down the road.

For now however, the piers bustle with merchants, traders and clientele as investors show their confidence in the trading outfit by continuing to supply investment.

3. Silhouettes of Distant Freight Liners

Now chief executive of one of the largest trading outfits in the world, responsibilities for the former consultant shift from logistics and innovation to maintaining public appearances and attending meetings. His job no longer revolves around building an empire, he now must maintain, sustain and cultivate the stream of capital coming from foreign investors.

With new divisions failing and business investments weighing down earnings, the trading outfit suddenly is faced with surprisingly simple dilemma: How will it make money? In the markets alone, trading is volatile and investors won’t supply the company with equity if trading is the main source of revenue.

These problems aside, those close to the new executive officer notice differences in his demeanor. He no longer appears thrilled by his work. He has confided in close colleagues that he isn’t enjoying the trading business anymore and that he is exhausted.

Some worry about his mood changes and mental state.

He lets documents slip by his desk without his signature. Some of these forms are created by the company financier and include increasingly fraudulent financial arrangements designed to hide poor investments and generate capital through webs of accounts and corporate entities that look suspiciously like the company is generating ‘profit’ by doing business with itself.

For now, the main concern is the appearance of the company to the global markets. Trade continues to provide some profit for the company and foreign financiers still are willing to invest money with the trading outfit.

There are whispers, though. Some foreign economists begin to study the financial documents the trading outfit releases to investors and sees odd language and ambiguous phrases that some simply can’t make sense of. One investor travels to the harbors of other lands and asks high ranking economic figures if they can explain some of the vague and shadowy information in the trading outfit’s financial reports. Not a single one can.

4. The Art of Trading Lightning

Lightning storms off the coast give the executive a new idea: What if storms could be developed into a commodity? The theory shows initial promise as the trading outfit develops energy-producing water-powered mechanisms that generate enough energy to power small ships.

The idea of lightning and electricity as a commodity is groundbreaking. It creates a frenzy in the economy as new start-up companies created to develop electricity flood the market. The startups go public on the piers, selling shares of their company to investors.

A speculative bubble begins to develop as prices for these shares are higher than many believe they are worth.

The trading outfit funds a new corporate division designed to trade wind and storms. The consultant believes contracts bearing rights to weather systems will attract those who wish to profit from the effects of weather systems to build energy plants. The idea fails miserably.

Soon, the speculative bubble bursts, wiping out investors who had supplied the energy startups with capital. Share prices crash and the economy is dealt a blow.
A few strong electricity companies do survive and become large entities, but the storm division of the trading outfit is not one of them: The division goes bankrupt and merges with the trading division. The executive and the company financier understand that reporting this loss – a significant financial hit but also a black eye to the company’s inventive and successful reputation – would be potentially devastating.

When the divisions are merged, losses in the electricity division are hidden.
Employees in the electricity division who now must be transferred – or fired – are astonished to browse the trading outfit’s new financial statements and come across no declaration of loss. Instead, they read that the company has reported a small gain.

5. In Advance of the Merchant Storm

The owner of the trading outfit is an old and wealthy man. He’d risen through the trading ranks himself years ago and now lives a short while from the harbors where he is widely regarded as a business visionary. One day, he has a meeting with his new executive officer—the same position he once held—and is stunned to learn that the executive office wishes to resign from the trading outfit.
The executive officer had recently returned from visiting a distant island with his family, relaxing on sandy beaches while watching merchant ships from foreign lands drift by on the horizon.

He tells the owner of the trading outfit that his heart is no longer in the business and he is not having the same drive he had several years before when the business was growing. The quiet but increasingly negative perception of the company was putting pressure on him, the executive says.

The owner urges the chief executive to stay, but he is unyielding. They speak to foreign investors and global economists on the docks and arrange for the owner to take over executive duties for the time being.

The resignation of the executive officer is met with concern from global investors. The owner of the trading outfit does his best to tell everyone who will listen that the resignation does not reflect on the company’s business operations.

The ‘negative perception’ of the company that worried the former chief executive is not news to the higher ups at the trading outfit. They are aware that the incoming capital from foreign investors is dwindling, but not all of them know what will happen if this limited income stream decreases further.

The bad investments and losses stored in off-company entities can only be held up by capital the trading outfit supplies the entities. If capital dries up, the entities collapse and the losses and bad investments can no longer be hidden. This scenario would result in a domino effect of ruin for the trading outfit as trading divisions and accounts would get swallowed up by debt as accounting structures unravel and collapse.

Finally, a foreign economist publishes an article that brings to light the entities that are shielding the entities’ bad investments and debt. Capital begins to dry up and worst case scenarios unfold. As government officials and market regulators begin to investigate the trading outfit, the company financier is fired.

6. Hurricane Vista

It is a day the economy won’t forget: the massive trading outfit has collapsed, adversely affecting foreign markets, blindsiding investors and limiting values of securities around the world.

The scope of fraudulent activity uncovered within the outfit is staggering: Much of the profit it has booked has come from selling assets, acquiring loans and hiding bad investments in other company divisions. Outside investment funds that engaged in dubious but profitable transactions with the trading outfit are really inside investment funds - operated by the outfit’s own financier!

In the seas off of the port, freight liners owned by the trading outfit are sold off as part of its liquidation process. The ships were vital to the economy and local investors as they operated on valuable commercial ocean plots and thus were responsible for major trading assets on the docks.

Once powerful executives are led off by government officials.
The former executive is not spared: he is accused of ‘jumping ship’ and leaving the trading outfit before the wheels came off the entire conglomerate. How much did he know? Did he see what was coming, know the profoundness of the company’s issues and try to get out before things began to break down?

These questions are among the most difficult and compelling of the trials. The former chief executive is a brilliant but complex figure. Those who knew him say that their interactions with him as he left the company led them to believe he was earnestly – personally – unhappy and that if he was leaving because he knew of the devastation forthcoming, he was the best liar in the world.

Documents released during the trial provide evidence for both sides. The former chief executive had instructed trading outfit employees to come up with solutions for problems that were ‘unfixable’ and thus encouraged shady arrangements. He expressed interest in the former financier’s inside funds, goings-on that should never have been tolerated.

On the other hand, documents containing fraudulent accounting structures and arrangements are missing his signature. He appears to have come late to meetings centered around shady investments opportunities that were arranged by his financier, thereby missing the information that should have set off alarms.
If I had known, he says, I never would have let these things happen.

7. Merchant Ships on Silent Piers

The markets on the dock are struggling to recover as traders must now adhere to reformed securities regulations. The trials of the executives find most guilty, including the financier. But the harshest penalty is brought down upon the former chief executive. The fact that he sold stake in the trading outfit prior to his departure is a major factor in the ruling. As chief executive, the court rules, it is his duty to be aware of the inner workings and financials of the organization that he runs. The fact that he was selling interest in his own organization is a damning revelation.

They tell him that it is not an excuse to see only what he wants to.

How much he truly knew about the fraud and deceit will never be known. Economists argue that it is highly likely he knew there were things being done within the trading outfit that overstepped boundaries.

However, even if he was aware of upcoming problems, his reason for leaving is still debated. This question is still discussed by traders on the docks who wonder if his departure was an act of jumping ship or if he was truly unhappy with the pressure as chief executive and yearned to spend more time with his family.
How could a man so brilliant, with so many ideas, make poor ethical business decisions or assume he was not liable for his outfit’s compliance? The company was so large and had been creating an illusion of profitability through deceitful means for so long that perhaps they became caught up in the success and believed what they were doing was not wrong – or that the day would never come where poor business operations initiated the domino effect of unwinding accounting structures.

The collapse of the trading outfit wiped out investments around the globe – a large amount of it allotted in the personal financial accounts of everyday citizens.
Stories come out that tell of the chief executives’ distraught and emotional last meeting as chief executive with the trading outfit’s owner. Some still believe that he was unjustly handed down the harshest penalty of all the executives. After all, they say, the company did not truly collapse until after he left. But the idea that he did not know that a particularly disastrous storm was headed for him and his trading outfit is too simplistic a perspective to hold.

Large freight liners are abandoned at sea by fishermen who no longer have reason to man them.

Ships owned by the trading outfit sit idly on silent piers.

8. The Reformation of Oceanic Markets

As a result of the disastrous collapse of one of the world’s biggest companies, government officials impose new regulations for trading on the harbors. The dubious and misleading accounting structures used by the trading outfit are brought to light and new accounting rules are created for companies that use separate entities to hold investments or assets.

Some argue that the old rules provided opportunity for mistreatment and played a part in encouraging the trading outfit’s serpentine accounting.
Four other large companies collapse, a result of misleading accounting practices and investor manipulation. Even years after these companies collapse, the economy continues to underperform.

In a decade or so, the economy will be brought to its knees yet again by a new bubble brought on by overinflated costs of housing in the cities surrounding the docks, exacerbated by manipulative funding practices.

But that is years in the future. For now, investors and traders must reignite confidence in markets left withered by fraudulent corporate activity. The former executive’s influence as an inventive mind in the creation of markets is forgotten as his trading outfit becomes the portrait of modern economic and corporate fraud.

9. On the Side Of Harbor Angels

“I came like water, and like wind I go.”
-Omar Khayyam,
The Rubaiyat