Buffett is right

So, you know how the old Legend of Omaha has said “It’s when the tide goes out that you find out who’s been swimming naked”?  Well, guess what…it’s Dumb Boss that might just have been caught without his duds on.

The last few weeks have been mad at work.  I returned and managed to wander about in a daze for a couple of weeks, but then got sucked into the Credit Crisis vortex, perhaps never to be seen again.  As you know, Dumb Boss is the CFO, and it seems that he hasn’t really been paying enough attention to our regulatory capital.  Whoops, it’s been invested in funds that are exposed to other institutional investors, as well as money the Company manages for others…

While the tide was up, the regulatory capital was in the black.  However, the past 3 weeks has been spent madly trying to unravell a bunch of cross-investments where we’ve mixed our own money with that which we manage for others.  Makes for an interesting legal conundrum when you have to battle with conflict of interest laws and act in the best interests of others.

So, we were busy working through the labyrinthian sets of investments, trying to make sure we protected everyone involved.  In one trust, we had the Company’s own dough, plus plenty of investor money.  Gee, what to do?  I said I could theoretically get it all out, but felt better about pulling only some out now and getting the rest later – to not do so would open us up to massive reputational risk, especially since there was a good chance we’d soon have to freeze the trust we were exiting to protect investors!

So, the CEO and head of the Business Unit agreed but I did ask the innocent question: is any of the remaining money regulatory capital?

Apparently, behind the scenes, all hell broke loose.  The CEO grabbed Dumb Boss, who hadn’t realised he had $135m in the trust, and the next thing you knew he was calling urgent meetings and sending unfortunate emails to the world, panicking about getting the Company’s assets out of the trust.

So, we had to remove it but I left it to DB and his cronies to justify it.  I gave massive warnings about the reputational risk, and sat back.  On Thursday, I updated the Board on this and their HEADS EXPLODED.  It was great.  I just told them I’d outlined the risks but the CEO and CFO made the call, so go talk to them.  The Board was reconvened the next day, after DB frantically began reinventing history by claiming not to have been warned about the risks, and quoting all sorts of so-called “pre-existing reasons” to pull the money out.  On Friday, there was another Board meeting and, as he spoke of all the reasons to get the money out, he was warned by one of the Directors that he was the CFO not only for the Company, but also this subsidiary.  This, bizarrely, was big news to Dumb Boss, who looked quizzically at me as I nodded to confirm the Director was right.

Meanwhile, 2 of DB’s peers were in the meeting and all 3 of us were exchanging looks of disbelief at DB’s massive and unrelenting stupidity.  It was great.  A true highlight.

Fingers crossed that he’ll unravel like a cheap pair of tights.