Bankruptcy Happens

Congressional gasbags say we now need the U.S. government to warn us when our investments become "endangered."

Don’t fall for it. My parents tried that 42 years ago in Cuba. Within a month their investments became the LEAST of their worries. They were scrambling for an innertube or big chunk of Styrofoam to try and save their very LIVES!

No folks, there’s GOTTA be a better way. Mom and Dad learned their lesson, believe me. Nowadays they’ll look to other signals. In the 50's most middle-class Cubans fancied themselves with dual citizenship; Cuba and the U.S. – not formally or legally, but more or less practically and culturally.

"Aw come on, Chico!" Cubans snickered to each other at cocktail parties in 1950–60. "Fidel can’t possibly be a Communist? You think the U.S. Government would allow that 90 miles off their shores?!..Come ON!..That’s ridiculous!" especially seeing as how the CIA helped Castro while in the mountains, and the State department put on arms embargo on Batista in 58.

I don’t mean all Cubans, of course. Many had Castro’s number from day one, got their money out in time, and tried repeatedly to warn the State Dept–only to be denounced as "greedheads," or "Fascists" or "gangsters." Others heroically took up arms from day one, only to face Communist firing-squads. But too many Cubans looked northward for guidance in that sort of thing – disastrously as it turns out. We depended – not financially, but diplomatically – on the U.S. Government. I’m afraid dependence on Big Government leads to folly and disaster in ALL fields.

Much like the Romans when the Goth was at the gate, we were too busy partying. Forget the hogwash you read from pinks about the beastly Fulgencio Batista and his bloody "repression." He actually had Fidel Castro incarcerated for murder in 1953. Then in a general amnesty at the behest of Cuba’s liberal media.(they’re the same everywhere, I’m afraid) – released him!

Pinochet would have told the media to take a flying leap. And Chile is today free and prosperous because of him.

Some dictator, that Batista. If he’d been 1/100 the vicious dictator of leftist legend, today Garth Brooks would be the most popular musician in Miami, my kids would speak Spanish, and Taki would be groveling for invitations to MY parties at the Havana Yacht Club.

Cuba was a case of a whole country "cooking the books" and duping investors. I know a little about the private-sector version too. For 15 years I worked for a company named Dun & Bradstreet. Their business was assigning credit ratings and attempting to predict bankruptcies. For 2 years I actually analyzed balance sheets etc. and assigned the ratings. Then I wised up – went into sales.

I sold the very information I once helped compile. This stuff guided creditors and investors in their decisions. Many said we were the best in the business. D&B’s longevity, market share and consistent profits seemed to bear this out.

On sales calls I laid in on with a shovel – I’m being modest. Actually I piled it on with a dumptruck and bulldozer. You never heard such BS in your life. I sold D&B’s ratings and "Bankruptcy predictors" and "Credit Scores" like crazy. I’d win "Salesrep of the Year" awards, plaques, prizes, trips for the wife and I to the Virgin Islands, Hawaii, Cancun, blah, blah, blah – the whole bit. In brief, I had a kick in the ass.

A year later I’d go renew the contract with these same clients...remember the movie Patton? Remember Patton’s reaction to the soldier in the hospital with battle fatigue? Well, compared to my "clients" on those renewal calls, Patton was fond of that soldier.

Whooo boy. I faced lynch mobs more vicious than anything Bill Maher later sicked on me on Politically Incorrect. ("Tonight’s guest include the bloodthirsty author of Helldiver’s Rodeo and Cuban-American Fascist, Humberto Fontova – sick-him!" )

Comptrollers, credit managers, CFOs – they all wanted my ass. I had to be quick on my feet. My colleague Artie was actually chased out of a client’s building on a "joint call" once. I didn’t like the drift of the call, excused myself for a second, then scooted through a red-striped exit-door in the lunch room.(Hell, it was Artie’s client). This set off a hair-raising fire alarm – which was just the cover Artie needed to make his move.

Like a flash, he was off. His tasseled loafers slid dangerously on the waxed floor as he scurried down the hallway, passed a water cooler and pivoted towards the exit sign. His tie flapped furiously over his shoulder as he turned on the afterburners, fled past the receptionist and into the parking lot.

I swooped by just in time. "Over here, Artie!" I yelled as I came around the corner and opened the car door. Artie cleared the Azaleas with a stunning leap and sprung in.

"Fast!" He gasped while throwing his briefcase in the back . "GUN IT! It’s the collections manager – Bella! She’s seriously pissed ! Let’s get OUTTA here!" (Her name was actually Charlene. But she was a ringer for Bella Abzug. So the moniker stuck.)

Then I stomped it for a tire-squealing get-a-way.....Remember Charlie Daniels? "When I hit the gas I was really wheelin’..had gravel flying and tire’s squealin’..and I didn’t slow down till I was almost to Arkansas!"

I finally slowed down at the Gold Club. "That was close," Artie sighed with a visible shudder while twirling the ice in a double Scotch. "She says they wrote off $50,000 in bad debt and D&B had the company rated "Excellent."

Then a truly skillful and conscientious lap-dancer erased the ghastly image of Bella, snarling, bellowing threats, and muscularly stabbing the air with her letter opener, from our minds. The comptroller who invited Bella into the meeting was a fool. That lap-dancer was originally reserved for him.

Usually after screeching and spraying spittle all over me, my clients’ faces lost the crimson hue, the forehead and neck veins shrunk, and they renewed. In the big scheme of things, we’d probably provided a return after all. At years’ end I’d go back to Hawaii or Cancun or Martinique and whooped it up with the ‘ole lady and my chums on another company-paid junket.

Point is, predicting bankruptcy ain’t easy. In fact, it’s close to a joke. Fast-track Yuppies and Gen Xers weren’t always the premier investors. We didn’t always have a Greenspan to open the floodgates. Common horse sense used to trump asinine buzzwords like "empowerment!" "paradigm-shift!" "Proactive!" Wall Street once respected boring stuff like the law of supply and demand over Zen and Yoga. Roughscrabble entrepreneurs without college degrees but with a sound business plans based on tangible assets who learned their business as apprentices once impressed loan officers and investment bankers over wiz-kids with their MBA’s who want to "live their dreams "in the "'new-economy.'" And – most amazingly – companies used to spend more compensating their valuable employees than in hiring buffoons to flap and squawk New Age twaddle about "empowerment" and "paradigm-shifts" to them at "seminars" and "workshops."

Amazing but true. But even when most business thinking was strictly "inside-the-box" predicting a Bankruptcy was no piece of cake. No "cooking of the books" was alleged for those that snuck by D&B back then. It’s just the nature of the beast, I’m afraid – indeed, the nature of capitalism itself.

And we were far from alone. I just read a study in Newsmax of 50 investment banking and brokerage firms and the ratings they issued to 19 companies that filed for Chapter 11 this year. On the very day of the Bankruptcy 94% of the 50 rating firms said "buy" or "hold."

And I repeat, D&B was considered the best in the business. Obviously we weren’t always wrong. We were kinda like the weather man. People always remember the blunders. And those ratings firms in the Newsmax article who blew the call were all hot-shot private-sector outfits too. And you’re telling me (John Mc Cain, Billy Tauzin et al.) that the Federal government’s gonna do better? Why do I doubt this?

It’s all those SEC regulations that led to much of this "cooking" in the first place. As Paul Craig Roberts pointed out, Corporations are hung up on this "quarterly posting of profits" because the SEC mandated that timetable. In his State of The Union message President Bush called for "tougher disclosure requirements" for corporations. Yikes! you mean it’s gonna get worse? Imagine the "cooking" if they have to post the profits monthly!

My wife who (Thank God!) is an accountant tried to explain some other SEC blunders to me, and I nodded vacantly for five minutes or so, before dozing off.

Humberto Fontova [send him mail] holds an M.A. in History from Tulane University. He’s the author of Helldiver’s Rodeo described as "Highly entertaining!" by Publisher’s Weekly, as "Terrific!" by Salon.com, and as "Just what the doctor ordered!" by Ted Nugent.