When the wind blows and the rains comes, thereπs not much to do with a four year old and a two year old on Nantucket. We stayed at home as long as the windows and the walls could allow, then we went out adventuring. With the help of Google, we searched out the summer homes of two more Plutocrats in trouble: Harold Baxter and Gary Pilgrim.

Eliot Spitzer, the NY Attorney General, just filed civil complaints against both men for some variety of financial fraud. Pilgrim and Baxter are two of the founders of PBGH, a mutual fund company that lit up the boards in the early nineties. Gary Pilgrim was the numbers guy who tried to make the straw turn gold and Harold Baxter brought the rich people into the barn to watch.

Pilgrim had a talent for this, mind you. Pilgrim picked small companies that seemed to be doing well, and then he bet on them with fund money. He was one of the leading ≥momentum investors≤ of the nineties. In 1992, the firm handled 2 billion dollars and had a little mutual fund called PBHG Growth. Mutual funds were the flavor of the day back then. PBHG had two years of being the top performing fund in the land. 3 million became 120 million to 2 billion in 1995.

Baxter was in charge of wooing institutional investors. This seems to involve a lot of golf. He would bring the guys out for a round, hit them with the nineteenth hole schtick, and get them to sign on the dotted lines. Suddenly, Pilgrim was handling money for state retirement boards, unions, and millionaire bowling leagues. While his partner had a hot hand, the ≥drive for show, putt for dough game≤ worked. You can see how Nantucket Golf Club would be a worthwhile investment.

In 1995, they sold the company to United Asset Management for 135 million. The two split the money. UAM let the two guys continue to call the shots and gave Pilgrim and Baxter incentives to bring new money in. PBHG Growth soon went from 2 billion to 5 billion. But, Pilgrim and Baxter learned that they had sold out too soon and missed the biggest part of the boom. With 65 million in their pockets, as well as all of the bonuses coming from UAM, they got greedy.

"I wake up optimistic and aggressive every morning,"

Baxter says. "That's why I like myself."

Harold Baxter did the pimp daddy thing. The jet came quickly, as did the house in the Shawkemo Hills . He played a lot of golf, bringing Buddy Marucci to play with him. (Buddy lost to Tiger in the U.S. Amateur. Great fodder for stories at the 10^th hole snack bar) Most egregious, it seemed, was the spot he made for his daughter, Chrissie. Some girls get pearls for graduation, others get trips to Europe. Chrissie got a job as a 1.5 billion dollar fund manager one month after she graduated with a degree in philosophy from UPenn. In her first three years, she got a 42% return on the fund, then it died an ugly death. But, even as it was dying, she was getting a 1.75 million dollar bonus at the end of the year. The guy with the 33% return only got a million. And Chrissie got the press. CNBC, Forbes, Money, and the rest of the wrapper mags featured her and her ≥picks.≤ By 1999, her brilliance had faded, her fund was one of the dogs of the market, and she retreated back into Schopenhauer.

Gary Pilgrim was much more laid back, although he did his share of fawning interviews and corporate blather. He seemed to sit back in his Oklahoma Aw shucks and pick the stocks. Starting in the mid-nineties, his run of luck went south big time and all of those billions of assets went with them. He did buy the house on Monomoy, though. It has the huge dock off the back.

The two of them got greedy shortly after 1995 and started playing some games. One of their games was market timing. Now, I donπt pretend to totally understand it, but the scam works something like the horse-betting parlor in ≥The Sting.≤ You see which horse won and which horse lost, then you bet on them. Suddenly, you look a lot smarter.

The game was only for them, however. The rest of the stock-owners were limited to four trades a year. In 1999, Pilgrim traded 50 times.

Now, both of these guys are worth over 200 million dollars at this point. Either guy could write a check for the waste water treatment plant and still buy the entire town a drink. But, the greed keeps going.

Now, they start aggressively using hedge funds. Pilgrim starts one with his wife and two other guys. That fund trades in PBGH Growth (his mutual fund). Each time they bring in cash, he gets a cut. Each time they sell, he gets a cut. (The hedge fund, however, only brought in 4 million). Baxter plays a simpler game. He has a buddy with a hedge fund. Baxter dumps a bunch of money in it, then telegraphs what the PBGH funds are going to do. Since PBGH was holding 16 billion dollars, itπs movement could bring a stock up or down. He was also making money three different ways.

They were making so much money that when Eliot Spitzer came after them, they resigned from SBGH and took a 60 million dollar severance package. Spitzer is looking for them to repay $250 million that he figures they stole. However, they arenπt going to jail. They will just be coming out here, with the rest of the thieves.

So, the boys and I are driving the north side of the island, looking at the houses of men who are worth about a billion dollars combined. As you can see from the pictures, their houses are big and ostentatious. Pilgrim has the deep water pier and the pool in the back yard. Baxter has the killer view and an acre under air.

But, there are lots and lots of other houses just as big and a good many that are bigger. Shawkemo Hills is nice, but Quaise and Quidnet are even nicer. 64 Monomoy Road is a good number, but there are better.

I used to believe that the island had a few crazy rich millionaires out here like Iaccoca, Egan, Koslowski, Acres, Scaife, and the rest, but they were few and far between. There wasnπt a critical mass of plutocrats. Rather, the island had hard working slobs in the winter and a plurality of genteel rich in the summer.

But now, I think that the Plutocrats have reached a critical mass. The new yacht club and the golf club have full membership lists even with half million dollar initiation fees. The real estate market is Lance Armstrong, crushing all comers on the hills. Hamptons, Hobe Sound, Aspen, Nantucket. And, if we play our cards right, we could pass all of them.

This year, the school budget will be around 16 million dollars. How many of our summer residents could write a check for that? 200? 500? How many could write a check for 15 million without any change in lifestyle?

Everyone has a private Nantucket stamped in the memory of their minds. Mine involves a downtown Downyflake, 30 Acres back porch, and Helene yelling at me. But, that Nantucket is long gone and I donπt really know the one that replaced it. It seems to involve migrant workers in tenements, old friends cashing in the lottery tickets, and the ≥personal golf partner≤ set.

As we move forward into our expensive future, we better take a good, long, sober look at the island as it now stands. Pilgrim and Baxter are here, with lots of others just like them. They have the money to do what they want, where they want. I am afraid that they are the future. They are the sharks. We need to decide whether we can be lamprey or chum.

B

(P.S. The fundraising golf tournament at NGC shows this change. The Friendπs used to make the lionπs share of their money with an antique show. Antique shows are for yesterdayπs rich. Todayπs rich raise the same amount of money in a day over eighteen holes)