As a special favor, Louise Traynor was escorted to a couple’s table in the trattoria’s alcove by the establishment’s executive chef and owner late into the luncheon sitting. The faux Italian décor was complemented by Dean Martin crooning in the background. A tiny fountain listlessly gurgled in the centre of the room. Other diners noted the procession, passed a few words back and forth, but quickly returned to their meals. The linguine Bolognese was especially superb.
Louise was as polished as burnished marble. Black tailored business suit, wispy bangs curled down over a high forehead and blood-red lacquered fingernails made her an eye-catching presence. Her lithe frame was a stark contrast to Police Chief Baylor’s heft as the other member of the dining duo. The chief’s six-foot-five frame of mostly muscle rose skyward to a pumpkin-sized head topped with a steel wool thatch of hair. No slouch in the deportment department, Chief Baylor had come directly from a massage and manicure. His eagerness to talk threw off a barely muted incandescence.
CHIEF (standing to greet Louise): Lovely of you to join me Mrs. Traynor. With your husband so wrapped up in running for governor, I thought it would be easier for the two of us to have lunch together. I have something important to discuss with you.
LOUISE: (shaking the chief’s hand): My pleasure, Chief, glad to be here. You’ve certainly aroused my curiosity. Hope I can be of assistance.
They get a few more pleasantries out of the way and order from the menu before chewing on the true heart of the occasion. A couple of glasses of Valpolicella arrive with the gazpacho. The moment finally arrives for the Chief to be forthcoming.
CHIEF: I was working on my laptop at the office several weeks ago, when an e-mail arrived from the Mayor’s office. It was sent by your husband’s staff and I was mildly intrigued at first. There were links to an Internet site that was under development to promote your husband’s campaign for Governor. The message that came with the e-mail asked that I review the video clips and get back with some reactions and whatever other comments I might care to make.
Okay, fine, I tried to watch, but had some bandwidth problems. What I ended up seeing was sketchy and kept halting every fifteen seconds or so. I quickly gave up in frustration. So I faked it and e-mailed a response that the videos were terrific, a good job had been done by all and more of the same sort of thing. I thought that would be the end of it, but that was naïve of me.
LOUISE: Yes, I know the PR firm we’ve hired is tenacious in its market research.
CHIEF: Then I received back another e-mail asking for further clarification. What specifically did I like and what did I find off-putting in the promos. It was important to convey just the right impression of the mayor. The voters are being asked to put even more trust in him as governor.
I replied that the mayor looked very authoritative, but still relaxed. He conveyed the impression of a man comfortable within himself and truly in charge of his own actions. One would think that would be the end of it. But no, that was naïve of me.
LOUISE: (responding to his wry wit): You poor man.
CHIEF: Back came another response. What were the markers that suggested authority? Were they related to his wardrobe? Did I prefer him in a suit or dressed casually? In a sweater perhaps or with sleeves rolled up? What about eyeglasses versus contact lenses? Maturity compared with youthful vigor? Well, you know, what do I really care? It’s all about image, not substance.
I was starting to get annoyed. But it was turning into a game, to see what kind of response I could provoke next. I finally took the time to struggle all the way through the videos despite the fits and starts. I sent off my answers to the latest list of questions. Definitely in a suit and I liked the glasses. They made him look smarter. One would think that would be the end of it, but…
LOUISE (she interrupts him): Please, let me be your chorus. One would think that would be the end of it. But no, that was naïve of you.
CHIEF: Thank you. You see where this is leading. No matter how much I did, it wasn’t going to be enough. And this got me thinking. I remember when your husband first ran for mayor of our fine city. He was a simple man, with a fairly straightforward message. Rein in government spending while maintaining essential public services. Who has that man evolved into?
LOUISE: I can assure you, Chief, he’s the same man he always was.
CHIEF: Really? I don’t think so and that’s why I felt it was important for us to meet today. What I’m seeing is a man who has acquired a taste for more of the finer things than I would have thought likely ten years ago. He’s also a man with the money to finance a very elaborate and expensive campaign for governor. That’s a step up in ambition that seems out of character.
LOUISE: I don’t want you to waste your time Chief. You’re heading in a wrong direction.
CHIEF: Maybe, but bear with me please. The contents and tone of the video aroused my suspicions. Whenever an individual from our town runs for higher office, my department is likely to receive crank phone calls to tell us about some secret malfeasance the candidate has committed. We ignore most of these because, upon investigation, they almost always turn out to be groundless. Nevertheless, I advised my staff that if any such calls came in about your husband, I was to be alerted. Sure enough, shortly afterwards, a message was re-routed to me.
LOUISE: I can’t imagine that it led anywhere.
CHIEF: Let’s just say it was eye-opening. The lady on the other end of the line claimed she works in the city’s treasury department. She wondered why there had been no investigation into some shady practices the mayor had conducted on behalf of city government. I said that must mean an ethical problem in at least one of three areas, bribes accepted for position and promotion placements, kick-backs received for government contracts or skimming from financing schemes.
She confirmed I was on the right track. But she didn’t feel she could be more specific. Depending on the outcome, she might be revealed as a whistle blower. That was a risk she was unwilling to take. As a divorcée with children to support, she needed her job too badly.
But I was left with a dilemma. There was a limited time until the election. I needed to focus my efforts. I had only a one in three chance of being right. I pointed this out and asked for more help in narrowing down the investigation. My informant said she’d think about it and get back to me.
LOUISE (still quite relaxed): And did she?
CHIEF: Yes, the next day. When I picked up the phone, she asked what I thought the corrupt practice might be. At random, I said bribery. Kick-backs and bond financing were left as the other two choices. Then she surprised me. My informant said she had decided to help me out by lowering my odds to 50-50. That’s when she told me the problem area wasn’t kick-backs.
She clearly didn’t realize how much extra help she’d provided. This made me change my choice to bond financings, since they were now twice as likely to be the issue as bribery.
LOUISE: How did you leap to that conclusion, Chief?
CHIEF: This is a really interesting example of applied probability theory. Originally each of the three choices had a one-third chance of being right. After first picking bribery, there was also a combined kick-back and bond financing option with a probability of two-thirds. Then my informant revealed that kick-backs weren’t the answer. But that didn’t change the probability of the combined option. With kick-backs off the table, bond financing alone must have a two-thirds probability of being right. That’s why I switched my choice. Are you following me?
LOUISE: As a matter of fact I am. The situation you’ve just described is known in mathematical circles as the Monty Hall paradox. For years, Monty Hall hosted a TV show called Let’s Make a Deal. A treasure was hidden behind one of three closed doors and contestants were given the opportunity to choose one of the doors. After they made their selection, Monty would reveal one dud door among the other two. The contestant was then given the option of changing his or her bid to the final remaining door or sticking with the original choice. Two-thirds of the time, it would be more advantageous to switch. I’m impressed with how quickly you figured that out.
CHIEF: You learn something new every day Mrs. Traynor. Besides, there was the psychology to consider. If my informant tells me that kick-backs aren’t the answer after I’ve already mentioned bribery, doesn’t that imply she’s trying to head me into the financing area. Plus I’ve never heard any rumours about the Mayor or any of his senior staff members handing out positions based on cash favors. That sort of thing doesn’t stay buried under a rock for very long. In any event, I’ve concentrated my efforts over the past week in the financing area and I think I’ve hit pay-dirt.
LOUISE (starting to look a little uncomfortable): This should be interesting Chief. I suspect your intelligence is often underestimated by family, friends and co-workers. Is that fair to say?
CHIEF: I don’t know about that Mrs. Traynor, but I would like to continue, if it’s okay with you. As you may already be sensing, we’re now at the moment when I began to consider your role in this drama. Formerly, I never paid much attention to the fact the mayor is married to a high-powered and well-connected economist. But that may not be a coincidence, is where my thoughts strayed. Once I made that leap, my search for answers was no longer disappointing.
LOUISE: And in what direction did you look?
CHIEF: There’s the matter of an interest rate swap agreement that treasury made with the Golden Fleece finance agency. My investigations have revealed that such a swap works like this. Two parties agree to pay each other interest based on a hypothetical or notional amount of capital. The capital never changes hands. The first party pays the second a fixed rate of interest. The second pays the first a variable rate of interest. The variable rate is usually tied to a leading economic indicator, but it can actually be matched to anything – number of days of below average temperatures, the length of women’s’ dresses, you name it, as long as both parties agree.
Estimates are made about the variable rate such that the total payments back and forth add up to a zero sum game. Nobody wins or loses, in theory. In practice, the forecasts of the variable rate are rarely exactly right and who wins or loses depends on who makes a better assessment about the accuracy of the forecast. At the moment, the city is paying Golden Fleece a fixed rate of interest and Golden Fleece is paying the city a variable rate based on the Consumer Price Index.
LOUISE: You keep on amazing me chief. Your grasp of economics is astonishing. You may be in the wrong profession.
CHIEF: It isn’t rocket science. It’s more a means to an end and, in this instance, a means to spot possibly criminal behavior.
LOUISE (with a little moisture accumulating on her brow): Don’t you find it warm in here?
CHIEF: Not especially. You’re the economist that advised the city to accept Golden Fleece’s proposal to tie its variable rate payments to the Consumer Price Index. The swap was established as a zero sum game as long as the inflation rate averages 2.5% over the length of the contract. Above that figure, the city wins. Below it, the finance company wins.
LOUISE: That’s right. That was my recommendation.
CHIEF: But the actual inflation rate for the past several years has averaged less than 2.5% and the amount that Golden Fleece has been paying to the city has fallen short of expectations. That amounts to significant sums of money over the longer time.
LOUISE: Yes, I overestimated how prices would perform.
CHIEF: I did some research. The consensus of economists at the time the inflation forecast was made was pretty good, about 2.0% going out five years. It further turns out that in the PowerPoint presentations you were making at the same time, 2.0% was the forecast you were using.
LOUISE: I think I see where you’re going with this. But may I point out that you’re overlooking a substantial and highly publicized initial payment that Golden Fleece made to the city. Everyone, including the media and the man in the street was pleased.
CHIEF: That was simply to bedazzle the members of the Finance Committee. They saw the easy money and that was all the incentive they needed to sign on. All questions ceased. The fixed rate in the contract was adjusted to take into account the front-end loading and the payments have been proceeding as planned ever since. The advantage to Golden Fleece grows with every year.
LOUISE: And this leads you to conclude what?
CHIEF: I’m sorry, but my job is to be suspicious. Again, I’m wondering where the new affluence of the mayor’s family is coming from. I’m thinking there may be a cozy retainer relationship with Golden Fleece. Perhaps I should put more resources into studying the matter?
LOUISE: Let’s talk about what I might do to ease your worries in this matter.
CHIEF: Aw, you’re offering me dessert. Very well, then, the polls indicate your husband is sure to win next month. I’m thinking I’ve done about all I can for our community. I would like to offer my services to the state. I’m sure there are some special law-and-order initiatives your husband would like to see implemented. In time, I might even like to run for Attorney General. It would be good to have the backing of the man in charge. How do these options sound?
LOUISE: You’ve proven yourself to be a clever and resourceful honey-loving bear, Chief. My husband and I might very well have need for a man with your special investigative abilities on our team. I’ll take your proposition to the mayor, but I’m pretty sure he’ll like the sound of it.
CHIEF: That’s what I thought you might say. How about an aperitif to cap our meal?
LOUISE: Yes, please, I’ll have sambuca. But Chief, I must say, you worry me. Do I truly believe that what you have set out today will be the end of your ambitions? I think not. That would be naïve of me.