Chapter Three - Continued - Blog Date 051306

Cedar Rapids 18April05 - 1730CDT

Calhoun took a long drink from the can of Coors Light as he stepped from the kitchen to the three-seasons porch at the rear of his house. He sat in his Mother's oak and rataan rocker that allowed a line of sight to the plazma TV above the built-in desk on the opposite side of the kitchen. The sound was muted on the TV which was set to ESPN News. Scores from the afternoon baseball and NBA games streamed on the bottom of the screen. The soft beat of New Orleans Jazz played from Bose speakers on the bookcases in the adjacent family room. In a moment of contemplation, he thought, when you live by yourself, should you call it the "self room"?

His afternoon had been generally successful. There was no particular news on Carmondii, but his call with Raymond Marshall and his meeting with his cousin Mary Cosgrove had both been productive. After filling in Marshall about his preliminary review of the email, they had agreed that the investigation needed an elevated priority. Marshall had learned from NSTF operatives in California that there had been an increase in communications between Cyberware and various institutional bond houses regarding an extension on a $300 million dollar indenture that was scheduled to mature on June 20th. Even more interesting was the highly unusual meeting today between Carmondii and Aaron Ginsberg. Although the two executives had once been closely alligned, the meteoric rise of Cyberware had seemingly given Carmondii his own financial kingdom. They hadn't been seen in public together in years. Now they're golfing buddies? Something just didn't ring true.

Marshall was glad that Calhoun was extending his inquiry of Melanie McDermott. He had suggested to Calhoun last Fall that Melanie had to know more than she had let on to SEC agents who had interviewed her at the time of the Cyberware IPO. Transcripts of those interviews had been reread recently as part of normal procedures when an investigation stalls. Nothing new was discovered, and there had been no post-IPO events that conflicted with any of her responses three years ago. But Marshall's intuition kept Melanie on the front page of his personal leaderboard of conspirators for the case.

The topic of expense reimbursements had not been part of the conversation. Calhoun had decided to save that needle for another day.

Calhoun looked across at the scores on the TV. The Cubs had lost again to the Reds. April games at Wrigley could be brutal.

He took another drink of his beer and considered Mary's last comment from their meeting three hours earlier, "Cyberware's cash flow is down. I think that some analysts may be overestimating the company's performance for the next couple of quarters. Off the record, I think that the play now is to short the stock." Mary had grinned when she said this, knowing that Calhoun was doing some kind of an investigation and that he was strictly prohibited from trading in any securities.

Mary Cosgrove was the daughter of his Dad's sister. Aunt Margaret. Margaret had been a pistol, and as the saying goes, the apple doesn't fall very far from the tree. Mary's journey to her high position at the university had included stops at Harvard, a Wall Street investment bank, and graduate school at Northwestern. She had spent time on the faculty at Vanderbilt and then Carnegy Mellon. After a stint at London's School of Economics she had returned to Iowa City to teach and conduct further research on the impact of technology in efficient capital markets. She had been promoted to head of the Finance Department a year ago.

Mary had obtained a grant from the American Stock Exchange (AMEX) to do extrapolated trend analysis on market prices for new offerings during their first five years of trading. The grant had allowed her to employ two graduate assistants to help her with her research, and to lease time on the RX2 Chromax computer at the Center for Quantitative Research in Falls Church, Virginia. Mary had named her project Pollyanna.

"You want me to add what company to the test?" Mary had asked. "Or is it that you want a separate test on this one outfit?"

"The company is Cyberware," Calhoun had answered. "And I'm actually just curious if anything that you are doing with Pollyanna could give me some answers to questions that I can't even define for this company." Calhoun went on to describe some of his investigation. Mary was aware of his work with the NSTB and she understood that he was not able to lay the whole case out for her because of confidentiality reasons. So she didn't ask too many questions, but made notes as Calhoun recounted the facts that he could share with her.

"I know just a little about Cyberware," Mary said. "Originally, it was your classic garage tech company that went from nothing to millions in the late '90's. I think that the company's original name was something like "CompuThought" or "CompuConscious". I can't remember. Their software was good stuff at the time. Then they got caught with the bankruptcy of their major customer, and they had to borrow a lot of money while the courts held up the transfer of their contract to a user who could actually pay. Unfortunately, the tech bubble then hit and they just couldn't recover. I think Equity Funding may have come in to the picture about then and it got renamed Cyberware."

"Good memory, Mary," Calhoun had replied. "But actually, I don't think that Equity Funding was ever an owner in this scenario. Carmondii seemed to have made enough money on the Indigo deal, and earlier ones, that he was able to be his own boy with Cyberware. And he structured the deal to use the tax loss carry-forwards. Which muddied the picture because his lawyers screwed up on the purchase, like I said before, and Melanie McDermott became a 50% beneficial owner through the trust arrangement."

"I see," said Mary. "Tell you what. This is really consistent with the overall research that we have in process. Let me put one of my grad assistants on a little project to add data about Cyberware to a separate Pollyanna program and see if any exceptions appear in comparison to the control group findings. If anything pops out, we can go to the second stage protocol and drill down further with some simulations. Kristen Maxwell started with me last semester and she is very bright and efficient. She can probably get started Monday. How's that?"

"That's very good of you, Mary. Thanks," said Calhoun. "I have had such a hard time making headway on this case over the last few weeks, I need all the help I can get."

"Hey, no prob, Frank. What are cousins for?, she said with her dimpled grin. "By-the-by, did you know that Melanie McDermott has been down here quite a bit this year trying to drum up support for some health care initiative with the medical school? Those people at the medical school always fall over themselves when they smell somebody new with money on campus. Word around the Faculty Club is that she's ready to drop several million into the deal." This was news to Calhoun.

Mary had followed that bit of gossip about Melanie's charitable endeavors with the tip on shortting the Cyberware stock. After good-bye pleasantries, Calhoun had left her office feeling entirely inadequate.

Calhoun drained the beer, rose from his chair and walked over to shut off the TV. His body ached just a little from his late afternoon bike ride on the paved county rodes north of town. He had cut his workout down to 32 miles when his return from Iowa City had been somewhat later than originally planned. He made his way to the medicine cabinet in the half-bath off of the kitchen and grabbed the bottle of ibuprofen. He took 3 of the 200 milligram tablets and washed them down with a glass of water. "It's hell getting old," he said to himself.

The digital clock on the microwave flashed 6:10. It took just 10 minutes to get to Norm's, but he didn't want Melanie to have to look for him. And she was not one to be "fashionable late." He pulled his wallet from the microwave (that'll fool 'em, Frank), picked up his keys from the countertop and walked out to the Expedition which was sitting in the driveway. He could not deny to himself that he was looking forward to spending the evening with Ms. Melanie McDermott.