By Paul Erdman Published by Forge 406 Pages $24.95

What does a brilliant financial felon do when he leaves prison with nothing but his wits, a suitcase of clothes, and $75 million hidden in a Liechtenstein bank account?

Naturally, he goes into the municipal bond business.

At least that's the game plan for Willy Saxon, the superhero of Paul Erdman's new novel of high finance, "Zero Coupon."

But why municipal bonds?

Because, Willy explains, they are "the last surviving tax haven" -- and they are unregulated. Or as another character puts it, "nothing has ever happened that was bad enough to give sufficient cause for any governmental interference."

Tell that to the SEC.

It turns out that Willy has other reasons for going into the muni business, which he does by secretly buying both a San Francisco investment firm and a bond rating agency, the fictional Western Credit Rating Agency. "Underwriting municipal bonds is so ... so mundane, so tedious, so pedestrian," Willy explains.

"Therefore it's also the last place that anybody would look."

To say more would give away too much of the plot, but it does have something to do with the peculiar features of zero coupon bonds. Suffice it to say that it is all part of a complicated scheme to combine a legitimate municipal bond business with the world's most advanced derivatives operations, all hidden away from regulators in the forests of Northern California.

Despite his criminal record, Willy Saxon is heroic to the point of stretching credibility. Incarcerated for a vaguely described junk bond scam, Willy served a full three years in the slammer, primarily because, as he proudly puts it, "I absolutely refused to fink on anybody else."

Willy is also generous, loyal, irresistible to women, intellectually creative, multilingual, and cool under fire. Even after a three-year hiatus from golf, courtesy of the federal correctional system, he can immediately hit a ball 250 yards straight down the fairway.

The other characters mostly serve as Willy's enemies, accomplices, and lovers. They include a faithful financial sidekick awed by Willy's brilliance, a wealthy socialite with political connections useful in the bond business, an Episcopal bishop's large-bond daughter, who makes loud noises during moments of personal intimacy, a crooked rating agency official, and a couple of investment bankers and their "due diligence lawyer," all financially crippled by the same securities fraud litigation.

The reader is also introduced to the high-powered, computer-driven world of derivatives and "DGs" -- Derivative Geeks -- the math geniuses Willy hires, including actual rocket scientists laid off because of defense cuts.

The plot is not always credible, especially as it moves toward its half billion dollar climax, but the writing is crisp, the action fast and furious, and the financial machinations intriguing. The hero's immorality and criminality are lost in a kind of Robin Hood atmosphere in which there are no victims except the sleazy rating agency official, invisible currency traders, and government officials.

Bond lawyers merit only minor mention but some sympathy for their financial plight. "The problem is that almost all law firms are in trouble," a banker tells Willy, "so there's lots of competition among bonds counsels for whatever business is out there."

But bond lawyer ethics remain high. When Willy springs a spectacularly fraudulent bond scheme on an investment banker and a bond lawyer, the banker immediately signs on. The lawyer agonizes a full five minutes before joining the conspiracy.

Municipal bond types have always felt somewhat jealous of their more glamorous colleagues in the financial world. While the M&A boys were in London and the currency jocks were off to Zurich, the muni folk were more than likely traveling to Akron -- and not first class. Thus the idea of a "financial thriller" on bonds will naturally pique the interest of many.

Alas, the bond side of Willy's schemes provides only some essential infrastructure for his broader financial conspiracy. As in the real world, the kind of money Willy seeks is not to be found in municipal finance.

"There's nothing like that kind of money to be earned underwriting municipal bonds," the faithful sidekick tells Willy. "Believe me, that's been my business now for quite a while."

"I believe you, "Willy replies.

So say we all.

Despite occasional implausibility and a few misdescriptions of the bond world, "Zero Coupon" is lots of fun.

It's the perfect book to read at the beach -- especially while waiting for the conference call to come through from Akron.

Robert Dean Pope is a partner with Hunton & Williams in Richmond.

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