“At first, I reflected on lending hedge fund money to lawyers, instead of their injured clients. Then the lawyers could, in turn, reinvest in the lawsuit and lend needed money to their clients.”
“What happened?”
Joshua pursed his lips. “Unfortunately, most of the lawyers got bogged down in the details of my forty-page contract and refused to sign. They groused about allegedly exorbitant interest rates. It got old. Once again, small-minded lawyers and ill-thought-out laws hampered my free-market thinking.”
Ryan typed something in his laptop. “What did you do then?”
Joshua’s smile was like a beacon, even in the overly bright room. “One day, the light came on. If I couldn’t legally lend money to catastrophically injured people for a percentage of their recoveries, why couldn’t I just purchase a property right in the lawsuit? If the injured party lost the case, my property right would be worth zero. But if they won, they would have lots of money. And my contracts could force an automatic resale of the property rights back to the injured party for a predetermined amount, based on a “schedule of payments” fully detailed in footnotes on page 38 of my contract.”
Ryan cringed. “What did all the lawyers say about that?”
“No laws or regulations even addressed such a deal.” Joshua smiled again. “None outlawed it. I don’t think anyone had even thought of the idea before. So there were absolutely no regulations limiting how much I could charge in my “schedule of payments.” Bottom line: No law stopped me from taking big, rightful profits through my JFC contracts. Not only that, but I could legally market my product directly to disadvantaged, severely injured people who needed help. And then use my finely tuned marketing skills to make the deal. It was a thing of beauty—for me and the free market.”
“Sounds like it,” said Ryan, nodding his head, then smiling. “Got to tell you, I’m so happy to be working here. Before I was always nose to the grindstone and getting nowhere. Yes, a Harvard MBA, and at 26—CCO of a Fortune 500 company, but miserable. Really miserable.”
Joshua twitched. “CCO?”
“Chief Compliance Officer. In charge of making sure the company complied with all federal regulations. And yes, it was as bad as it sounds. Worse. I was trapped in a 200K-a-year mind-numbing corporate job. I hated it. Then, I read that article about you in the Wall Street Journal. And well, here I am, ready to work as hard as I can and learn as much as possible from you.”
Joshua cracked a smile, thinking to himself, I wish I had ten more like him. Then, he stared intently at Ryan. “And you will. You will. I promise. Follow me. Do as I say, and a whole new world will open up. But right now, let’s get back to my memoir. Where was I?”
Ryan looked down at his notes. “Using hedge fund money. To buy up property rights in lawsuits brought by desperate, severely injured people. Brilliant.”
“Yes. And with only hedge fund money at risk, I was able to pull in huge fees, and still kick back principal and a minimum of 25% to 30% extra to the hedge funds. That’s all hedge fund investors care about.”
Ryan was typing like a madman. “Did anyone ever question the contracts or challenge the set up?”
Joshua twirled his silver and gold Mont Blanc pen. “At first, a few courts questioned me. About the arrangement. But by putting money in a few critically placed judicial hands, as charitable contributions, I was able to set early precedents—opinions in my favor. My lawyers used those precedents to convince other judges my property-right contracts were valid. In fact, one key ruling established that my contracts did not violate lending-law limitations on maximum chargeable interest rates, because I was not lending money, just purchasing a piece of a potential transaction and then reselling that piece to the original owner.”
“Sweet.”
“Yes. Life was sweet. In our society, Ryan, the only real need is money. Everything else follows. And the sky was the limit on what I could make. Better yet, by continuing charitable contributions to the private foundations of certain judges who helped with earlier precedents, I was able to network my hedge-fund-investment cases into courts that basically ensured a win. Everyone was happy. Everyone was making money.”
“Wow,” said Ryan.
Joshua placed his pen on the desk. “Of course, don’t mention the networked judges in my memoir. But play up the philanthropy thing. Big time.”
Ryan nodded his head. “Of course. How long did this arrangement go on?”
“Things went well. Extremely well, for a little over six years. Then in 2000, through no fault of my own, hedge fund money started to dry up. Dot-com bust. Worse yet, despite the cases in front of my networked judges, I had arranged too many other deals that ended in lost lawsuits. Truth is, I never was much of a litigator. Of course, leave that out of the book too. But I had real trouble seeing whether a lawsuit was destined to go down the tubes. And by then I had an L.A. lifestyle that required major bucks. And my company, Justice Finance Corporation, had significant overhead.”
Ryan stopped typing and looked up, concerned. “What happened?”
Censkey shifted and sat taller in his chair. “I hung on for some years. Sheer skill and cunning. But finally, everything came down like an avalanche. I thought about going to friends in high places, but unfortunately there weren’t many left. In fact, none, except a bunch of networked judges I’d been providing funds to on a regular basis for years. So rather than give up, I leveraged that end of my business.”
“Leveraged how?”
“Since the 1990s, I’d contributed hundreds of thousands of dollars, if not more, to private charities designated by my judges—you know, private foundations, non-profits set up by them, closely-held corporations, like that. Even election committees. But here’s where my true genius came in. If those judges could help ensure hedge-fund-investment cases resolved for the injured victims, why couldn’t they do the same for the other side?
“What do you mean?”
Censkey pointed his finger at Ryan and shook it. “Why couldn’t I flip the process on its head? Make hedge fund loans—or underwrite—the corporate defendants.
“Wow,” said Ryan.
Censkey chuckled. “Corporations understand risk. If I’m putting my cash on the line—not theirs—they can fight supposedly injured people tooth and nail without putting a dime of their investor’s money at risk. They lose, I lose. They win, I win. They pay me back at an interest rate high enough to compensate me for putting my money at risk, especially as more and more lawsuits resolved in their favor. Like spending money on insurance. A sound investment. In the end, I won, the judges won, and corporate defendants won. A perfect world.”
Ryan stopped typing for a moment to move back in the chair. “Where did your clients come from?”
Joshua peered at his own reflection in the mirrored back of his desk clock and straightened the knot on his tie. “Interestingly enough, most came from the insurance industry itself. They were paying to defend high-stakes litigation and were the most interested in ensuring the outcome of certain cases, cases that might set unwanted precedents and open the floodgates to even more litigation in other cases. If I could ensure the outcome, they wouldn’t mind the exorbitant interest rates. So, I renamed JFC, Joshua Finance Company. The rest is history. Now, JFC is a multimillion-dollar company, and I’m, well, a very rich man.”
“What a story!”
“Right. And it ain’t over yet. It’s still work in progress. And you’ll be part of it.”
Just then, Amanda said over the intercom: “Mr. Censkey, a representative from Chesterfield Insurance is here to see you.”
“Ryan got to take this. Our biggest client,” said Joshua. “Look, the next chapter will deal with a mess called the Silent Conflict, but we’ll get to that later. In the meantime, handle your notes carefully. Our eyes only. Got it?”
“Got it,” said Ryan as he closed his laptop and stood to leave.
Censkey smiled. “Show the Chesterfield rep in, then get back to your day.”
“Will do,” said Ryan.
The meeting with the Chesterfield man was short, not sweet, and very much to the point. The guy, in a black suit, black shirt and black tie, didn’t even squint as he entered Joshua’s office. He just stood there, eyes hard and focused, and told Joshua that Richard Chesterfield wanted a sit-down with him that evening at his Santa Barbara estate. Joshua agreed. Truth was he didn’t have a choice. Richard Chesterfield scared the shit out of him. Always.
