The Glass Hotel by Emily St John Mandel
Philip Fisher reviews an exciting new novel with much to interest members of the accountancy profession.
Very few novelists are capable of elucidating on financial issues without demonstrating insurmountable ignorance of the subject. Emily St John Mandel, best known as the author of Station Eleven, a previous novel that is fast garnering cult status, proves a highly-skilled exception to that rule.
In her fifth novel, The Glass Hotel, St John Mandel has not only written a gripping book filled with memorable characters and situations but, along the way, initiates those with limited knowledge into the fraudulent intricacies of Ponzi schemes. The character who holds the novel together is a young woman named Vincent who hails from a Canadian island off the coast of British Columbia – so remote that its main street has two dead ends.
Following the loss of her mother in what is assumed to be a canoeing accident, the barely teenage Vincent becomes wild and skips school and town at the first opportunity. Soon enough, she returns home and gets a job as a bartender in an eccentric five-star hotel on the isolated island, which has a strange attraction for those who enjoy slumming it in luxury.
One of the attractions of five-star hotels is that many rich and exotic characters pass through, potentially making life interesting for the staff. A lady, who fits that bill, encourages Vincent’s addiction-haunted half-brother Paul to make a daring statement, which inevitably leads to his departure.
Separately, our young protagonist finds herself chatting to the hotel’s owner, Jonathan Alkaitis who has made his money by trading on the financial markets. In no time at all, the septuagenarian sweeps the twentysomething off her feet and transports her to the life of dreams, enjoying untold wealth at the end of a credit card with no limit. Her part of the bargain lies in making him feel loved and behaving impeccably when required to as a dinner hostess, guest or in any other social and business situation.
The novel really begins to hot up when Alkaitis’ over-performing financial business finally hits the rocks. Convincingly, we discover that he was running two different operations, one that was 100% legitimate, the other as fictitious as the book in which he appears.
According to the acknowledgements, his story is based on the legendary Bernie Madoff, the former head of NASDAQ. He somehow managed to persuade investors and even industry insiders that his business was legitimate, even though every one of the purported transactions was invented and he was doing nothing more than sending money round in circles – desperately fending off those who wished to withdraw funds.
The Glass Hotel does a wonderful job of making something incredibly complex easily intelligible, alluding to the incredible fact that this charlatan was good enough to cow auditors and beat off the SEC first time around, even though they eventually came knocking again.
Having analysed the scam, Emily St John Mandel then focuses on a number of the individuals involved in perpetrating the hoax. She then goes on to show the consequences for a variety of “investors” who lost everything in the kind of disaster from which it appears that very few, if any, ever managed to recover.
The underlying story makes for such compelling reading that, like this reviewer, intrigued readers may be tempted to investigate the subject further. This is easy enough to do as several journalists have written in-depth factual explorations about the Bernie Madoff phenomenon. One of these, Too Good to Be True: The Rise and Fall of Bernie Madoff by Erin Arvedlund is also fascinating. It makes the SEC appear embarrassingly inept and shines a withering light on our profession.
““This is not just a hedge fund issue, this is a global auditing issue. There is no suggestion that big-name auditors did anything illegal,” but perhaps their terms of reference need to be looked at.” Despite all that has happened since the fraud was exposed in 2008, that message is still just as valid today.
While the Ponzi scheme lies at the heart of, there is far more to this book with excellent depictions of the high life, the low life and almost everything in between. It will prove an intoxicating experience for anybody but particularly illuminating for those of us who have a reasonable understanding of financial matters and the ways in which they are supposedly monitored.
If nothing else, by the end of The Glass Hotel any accountant who reads it will wonder how the auditors and regulators could have been so negligent in the case of Mr Alkaitis but more pertinently Bernie Madoff.