Category Archives: Kleptocracy

Ron Paul On Fed Coverup Of Watergate, Saddam Funding

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Statement of Congressman Ron Paul
United States House of Representatives
Statement for the Record
February 25, 2010

Madame Speaker, I would like to enter into the record the following letter from Professor Robert D. Auerbach, a professor at the LBJ School of Public Affairs at the University of Texas. This letter provides additional information regarding remarks I made at yesterday’s Financial Services Committee Humphrey-Hawkins hearing, remarks which Federal Reserve Chairman Bernanke categorized as “bizarre.”

I thank Congressman Ron Paul for bringing to the public’s attention the Federal Reserve coverup of the source of the Watergate burglars’ source of funding and the defective audit by the Federal Reserve of the bank that transferred $5.5 billion from the U.S. government to Saddam Hussein in the 1980s. Congressman Paul directed these comments to Federal Reserve Chairman Ben Bernanke at the House Financial Services Hearing February 24, 2010. I question Chairman Bernanke’s dismissive response.

BERNANKE: “Well, Congressman, these specific allegations you’ve made I think are absolutely bizarre, and I have absolutely no knowledge of anything remotely like what you just described.”

The evidence Congressman Ron Paul mentioned is well documented in my recent book, Deception and Abuse at the Fed (University of Texas Press: 2008). The head of the Federal Reserve bureaucracy should become familiar with its dismal practices.

First, consider the Fed’s coverup of the source of the $6300 in hundred dollar bills found on the Watergate burglars when they were arrested at approximately 2:30 A.M. on June 17, 1972 after they had broken into the Watergate offices of the Democratic Party. Five days after the break-in, June 22, 1972, at a board of directors’ meeting of officials at the Philadelphia Fed Bank, it was recorded in the minutes [shown on page 23 of my book] that false or misleading information had been provided to a reporter from the Washington Post about the $6,300. Bob Woodward told me he thought he was the Washington Post reporter who had made the phone inquiry. The reporter “had called to verify a rumor that these bills were stolen from this Bank” according to the Philadelphia Fed minutes. The Philadelphia Fed Bank had informed the Board on June 20 that the notes were “shipped from the Reserve Bank to Girard Trust Company in Philadelphia on April 3, 1972.” The Washington Post was incorrectly informed of “thefts but told they involved old bills that were ready for destruction.”

The Federal Reserve under the chairmanship of Author Burns not only kept the Fed from getting entangled in the Watergate coverup, which the Fed’s actions had assisted, it allowed false statements about bills the Fed knew were issued by the Philadelphia Fed Bank to stand uncorrected. Blocking information from the Senate and House Banking Committees [letters shown in my book, Chapter 2] and issuing false information during a perilous government crisis imposed huge costs on the public that had insufficient information to hold the Fed officials accountable for what they had withheld from the Congress. Had the deception been discovered the Fed chairmen following Burns may have been forced to rapidly implement some real transparency to restore the Fed’s credibility. That would have reduced or eliminated many of the lies, deceptions, and corrupt practices that are described in my book.

The second subject brought up by Congressman Ron Paul is the exposure of faulty examinations of the Federal Reserve of a foreign bank in Atlanta, Georgia through which $5.5 billion was sent to Saddam Hussein that a Federal Judge found to be part of United States active support for Iraq in the 1980s.
On November 9, 1993, several federal marshals brought a prisoner, Christopher Drogoul, into my office at the Rayburn House Office Building of the U.S. House of Representatives. The marshals removed the manacles. Drogoul took off his jump suit and changed into a shirt, tie, and business suit. He immediately looked like the manager of the Atlanta agency with domestic headquarters in New York City of Banca Nazionale. Drogoul had come to testify about a “scheme prosecutors said he masterminded that funneled $5.5 billion in loans to Iraq’s Hussein through BNL’s Atlanta operation. Some of the loans allegedly were used to build up Iraq’s military and nuclear arsenals in the years preceding the first Gulf War.”[1]

Drogoul’s “‘off book’ BNL-Atlanta funding to Iraq began in 1986 as financing for products under Department of Agriculture programs.”[2] The loans allegedly had been authorized by the U.S. Department of Agriculture. Since Drogoul told the committee he was merely a tool in an ambitious scheme by the United States, Italy, Britain and Germany to secretly arm Iraq in their 1980-88 war, the testimony was politically contentious and unproven. He was sentenced in November 1993 to 37 months in prison and he had already served 20 months awaiting his sentencing hearing.

U.S. District Judge Ernest Tidwell found that the United States had actively supported Iraq in the 1980s by providing it with government-guaranteed loans even though it wasn’t creditworthy. The judge said such policies “clearly facilitated criminal conduct.”[3]

Gonzalez was drawn to Drogoul’s answer about the Fed examiner who had visited his Atlanta operation. Gonzalez said that:

“At the November 9, 1993 Banking Committee hearing I asked Christopher Drogoul, the convicted official of the Banca Nazionale Del Lavoro agency branch in Atlanta, Georgia, how the Federal Reserve Bank examiners could miss billions of dollars of illegal loans, most of which ended up in the hands of Hussein.

Mr. Drogoul stated:

“The task of the Fed [bank examiner] was simply to confirm that the State of Georgia audit revealed no major problems. And thus, their audit of BNL usually consisted of a one or two-day review of the state of Georgia’s preliminary results, followed by a cup of espresso in the manager’s office.”

Gonzalez was appalled at the of lack of effective examination of a little storefront bank and also appalled by the gifts exchanged by officers of the New York Federal Reserve and the regulated banks in New York City where the main U.S. office of BNL was located. A description of what followed is in my book.

The Fed voted in 1995 to destroy the source transcripts of its policy making committee that had been sent to National Archives and Records Administration. Chairman Alan Greenspan had the committee vote on this destruction, telling the members: “I am not going to record these votes because we do not have to. There is no legal requirement.” (p. 104 in my book.) Greenspan thus removed any fingerprints on this act of record destruction. Donald Kohn, who is now Vice Chairman of the Board of Governors at the Federal Reserve, answered some questions I had sent to Chairman Greenspan about this destruction. Kohn replied in a letter on November 1, 2001 to me at the University of Texas that they had destroyed the source records for 1994, 1995 and 1996, they did not believe it to be illegal and there was no plan to end this practice. That is one reason why the Federal Reserve audit supported by Congressman Ron Paul is needed. The Fed must stop destroying its records.

[1] Marcy Gordon, “Banker Imprisoned in BNL Case Tells Story to House Committee,” The Associated Press, November 9, 1993.

[2] U.S. Newswire: “Former Executive of Atlanta Agency of Italian-Owned Bank Pleads Guilty to Conspiracy”, from U.S. Department of Justice, Public Affairs, June 2, 1992.

[3] Peter Mantius, “Drogoul given 37 months Judge in BNL case also blasts actions of U.S. prosecutors,” The Atlanta Journal and Constitution, December 10, 1993, Section A, p. 12.

Robert Auerbach is Professor of Public Affairs at the Lyndon Baines Johnson School of Public Affairs, The University of Texas at Austin. He was an economist with the House of Representatives Financial Services Committee during the tenure of four Federal Reserve Chairmen: Arthur Burns, William Miller, Paul Volcker, and Alan Greenspan. Auerbach also served as an economist in the U.S. Treasury’s Office of Domestic Monetary Affairs during the first year of the Ronald Reagan administration and as a financial economist with the U.S. Federal Reserve System. Auerbach has been a professor of economics at the American University in Washington, D.C. (1976-83), and a professor of economics and finance at the University of California-Riverside (1983-93). He has written numerous articles, and two textbooks in banking and financial markets. He received two Masters degrees in economics, one from the University of Chicago and one from Roosevelt University, where he studied under Abba Lerner, and a Ph.D. in economics from the University of Chicago, where he studied under Milton Friedman.

Sibel Edmonds On Traitors In High Places

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“Sibel Edmonds: The Traitors Among Us,”

by Brad Friedman, Hustler Magazine, March 2010

“Edmonds’s most disturbing allegations, however, may be against high-ranking appointed officials in the Bush Administration. Elaborating on testimony she laid out in her sworn deposition, Edmonds told American Conservative magazine’s Phil Giraldi—a 17-year CIA counterterrorism officer—very specific details of alleged traitorous schemes perpetrated by top State and Defense Department officials. As already noted, these included Douglas Feith, Paul Wolfowitz and, perhaps most notably, former Deputy Undersecretary of State Marc Grossman, the third-highest-ranking official in the Bush State Department.

Edmonds said that Feith and Wolfowitz were involved in plans to break Iraq into U.S. and British protectorates months prior to 9/11. She also claimed that the duo shared information with Grossman on how to blackmail various officials and that Grossman had accepted cash to help procure and sell nuclear weapons technology to Israel and Turkey—and, from there, on to the foreign black market. There the technology would be purchased by the highest bidder, such as Pakistan, Iran, Libya, North Korea or possibly even al-Qaeda.

Additionally, Edmonds claimed that Grossman, the U.S. Ambassador to Turkey before taking his State Department post, had tipped off Turkish diplomats to the true identity of covert CIA operative Valerie Plame Wilson’s front company, Brewster Jennings & Associates, a full three years prior to their being publicly outed by columnist Robert Novak. That in itself, according to George H.W. Bush, would be an act of treason carried out by “the most insidious of traitors.”

Former CIA counterterrorism officer Giraldi summed up Edmonds’s disclosures to me in blunt terms: “This was a massive coordinated espionage effort directed against United States nuclear secrets engineered by foreign agents who successfully corrupted senior government officials and legislators in our Congress. It’s that simple.”

According to a declassified version of a 2005 Department of Justice Inspector General’s report, Sibel Edmonds’s allegations are “credible,” “serious” and “warrant a thorough and careful review by the FBI.”
Perhaps more damningly, the FBI’s John Cole recently confirmed a key element of Edmonds’s claims when he revealed the existence of “the FBI’s decade-long investigation” of the State Department’s Grossman. Edmonds claimed that Grossman was perhaps the top U.S. ringleader for the entire foreign espionage scheme. The probe, Cole added, “ultimately was buried and covered up.”

More at Antiwar by Philip Giraldi, on Edmond’s credibility.

Here is an op-ed written by Sibel Edmonds about the role of foreign agents in “hijacking” the country.

I should note that Edmonds herself has been seen by some as playing a sophisticated role of disinformation by overemphasizing Arab involvement in 9-11.

Frankly, I don’t know enough about her to argue if that’s plausible or not. In any case, even if her revelations serve an ulterior purpose, they are bad enough as they stand….

Financiers Used 9-11 Diversion of FBI to Loot American Middle-Class

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Great interview at Forbes, between Steve Forbes and Senator Ted Kaufman on the capital markets, naked short selling, the uptick rule, sponsored access, HFT (high frequency trading) and digitalization, dark pools, and fraud…

“Forbes: Finally, Fraud Enforcement Recovery Act.
Kaufman: Yeah, yeah.
Forbes: You’re proud of it.

Kaufman: Yeah, I am.

Forbes: What it does, and what will it do?

Kaufman: OK, here’s what it did. After 9/11, we moved a lot of FBI agents over to cover terrorism, which we should have done. But we left only like 250 FBI agents in the country to cover financial fraud. We did more financial fraud cases in 2001 than we did in 2007, can you believe that? So, what we did with this financial and regulatory forum, with Pat Leahy, who is chairman of judiciary committee and Chuck Grassley, an Iowa Republican. It’s a bipartisan bill and we got a bill passed to give us more FBI agents, give us more prosecutors and to go after these folks. And so that’s basic what we passed, and we’re getting organized. Had a really good hearing of the judiciary committee. Rob Khuzami at the Securities Exchange Commission, Lanny Breuer’s head of the criminal division, Kevin [Perkins] from the FBI financial thing.

And we’re really, we’re going after this thing. And I know you agree with me. You know, if you, the folks that committed crimes while this thing was going on, we can all argue about what caused it or not, anybody who took advantage of this situation and lined their own pocket for it should go jail.”

Did Bethany McLean Even Break The Enron Story?

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n “Enronathon,” Seth Mnookin of The Wall Street Journal suggests Bethany McLean wasn’t quite the first person to break the story of Enron…and that she had a good bit of unacknowledged help:

“If journalism were in the Olympics, the Enron story might well be pairs figure skating. Bethany McLean, the young Fortune writer who first wrote about Enron’s shady finances a year ago, has, of course, already been awarded the gold.

And with that have come the requisite endorsements: In the past two months, she was hired as a consultant by NBC News and shared in a $1.4 million deal to co-author a book on the scandal. But another team is also vying for top honors — amid complaints about shoddy judging.

Reporters and editors at the Wall Street Journal believe their work has been unjustly ignored, with some wondering whether Pulitzer rivals like the Washington Post and the New York Times have gone out of their way to praise McLean.

Enron did not collapse under its own weight,” says Jonathan Friedland, the Journal editor who’s been in charge of much of the paper’s Enron coverage. “Without our reporting, I don’t think any of this would have happened.”

In response, McLean’s former editor at Fortune and current Time Inc. editorial director John Huey says, “Bethany was the first journalist in a widely respected national publication to suggest that the emperor at Enron had no clothes.” (Not that her own publication took much note: Fortune had to airbrush out Kenneth Lay from a November SMARTEST PEOPLE WE KNOW cover photo.) Let’s recap: In September 2000, Jonathan Weil wrote a long story for the now-defunct Texas edition of the Journal about odd accounting at various Texas-based energy traders; it included four paragraphs on Enron.

James Chanos, a well-known short-seller who was one of the first to start unloading Enron stock, says he got interested in the company after reading Weil’s piece.

Almost six months later, in March 2001, the then 30-year-old McLean (who Times columnist Maureen Dowd has suggested will be played by Alicia Silverstone in the inevitable movie) wrote her little-noticed 2,400-word story, “Is Enron Overpriced?”

Then, in October, the Journal ran a three-day series by Rebecca Smith and John Emshwiller detailing Enron’s unorthodox partnerships. Their articles are seen by many on Wall Street as ultimately sinking the company. Weil’s partisans think he should get credit for crossing the finish line first (an item, “Credit Due,” ran in “Page Six” recently).

But even Chanos says that “Bethany’s piece was the first one to raise really specific questions.”

Most of the Journal‘s brain trust, though, are plugging Smith and Emshwiller, who, of course, wrote their stories in 2001 and are thus eligible for this year’s Pulitzers. “The Fortune story basically said this is a company that nobody understands,” says Journal deputy managing editor Daniel Hertzberg. “It didn’t show what was wrong with the company. It took Becky and John to do that.” That’s the competition.

Now for the judging. In January, Howard Kurtz, the Washington Post‘s media writer, highlighted McLean as the first journalist to ask questions about Enron. Ten days later, the Times‘ Felicity Barringer wrote her profile of “the financial reporter everyone loves to lionize.” While McLean was being anointed as a journalistic sex symbol in a story hitherto dominated by a balding Kenneth Lay, folks at the Journal felt they were being robbed:

“People are trying to queer the Pulitzer pitch for the Journal,” says one editor there. That’s sour grapes, counters Kurtz: “In this case, a 31-year-old reporter beat them and the rest of the world by a considerable margin.”

In a bit of circular logic endemic to media reporters, Kurtz adds, “I must have been onto something, since after my piece appeared, she was profiled in the Times, given a contract by NBC, and offered a book deal.” As for McLean, she seems slightly embarrassed by all the attention. “I’ve told people I’ve gotten too much credit,” she says. “I did raise alarm bells, but I didn’t know the half of it.” “Read more: Enronathon http://nymag.com/nymetro/news/media/features/5756/#ixzz0dvvQZvUI

My Comment:

Please note also that the book was co-authored with Peter Elkind, who isn’t attributed in many of the stories.

Not that I’m all that sympathetic to the Wall Street Journal on the Enron story, since they don’t give credit to the alternative press either, and what goes around comes around. (My own experiences of plagiarism from articles and books can be found at the tab, ABOUT –  half-way down the page).

If liberal columnists steal without attribution even from liberal bloggers, can you imagine the cone of silence that descends when the victim isn’t liberal? Libertarians and conservatives get stripped clean by the vultures of the “free” (of all ethics) press.

With them, it’s never about public welfare or the good of the nation, even though that’s the standard that they like to foist on other people. Even with the global economy melting down under their noses, they’re jealous of sharing the information that activists, bloggers, and ordinary citizens give out generously for the common good.

(Again, there are honorable exceptions).

In short, they make up credit – just like the Federal Reserve.

Or they steal it – like their banker friends.

Or they collude with each other to “take-down” anyone not part of their game – just like their hedge-fund allies.

And no matter what, they always cover for each other.

Notice how other people’s personal lives are fair game for stalking, extortion, and exposes, but never theirs, as this piece on Maria Bartiromo suggests.

(Ms. McLean figures in that piece too. In fact, a brief google tells us that McLean´s had plagiarism problems and conflicts of interest more than a couple of times).

Item One. Here’s an earlier complaint about Fortune magazine plagiarism. A Fortune writer apparently used material from interviews and articles by an outfit called Annex Research, without attributing or acknowledging it. An email to Fortune got no response, either. The Fortune writer? Bethany McLean…

Item Two:  McLean at it again, swiping material from the Orange County Register Weekly

Item Three: Libertarian economist, Bill Anderson, in a piece called “The Most Dishonest ´Journalists´ In the Room,” describes how McLean was having a romantic relationship with the lead prosecutor in the Enron trial, Sean Berkowitz, before the sentencing, while she was covering the trial and getting out the government´s side of the story. Omitted in that story as well  was the disturbing fact that the prosecutor had suborned perjury in order to get a full conviction of Jeffrey Skilling.

And that´s besides Item Four….

That fetching stock-manipulation thing she had going with hedge buddies Marc Cohodes and Jim Chanos.

No wonder none of them can get the story right.

And no wonder they still won’t get it straight, not until after activists, or bloggers, or less-known writers at their own outfits or elsewhere do the hard work. Then they’ll slide in to take the credit.

Nice work.

Just as cushy and exploitative as anything on Wall Street, in its way.

Business men and real capitalists do the hard work of producing. Then the faux capitalist money-men and their shills in government rush in to cream the money off and cover themselves with glory via their mouthpieces in the shill media.

No wonder the media doesn’t understand capitalism. No wonder they love the crony capitalist bordello they call home. It’s the only one they know, the poor things.

[Again, they really ARE a minority of journalists, just a powerful minority. There are hundreds of honorable hard-working journalists who write their own stories rather than steal them off the net, whose names never get into headlines, and who wouldn’t be caught dead behaving like this].

And don’t miss the other telling details:

Enron’s Ken Lay was a Republican.

Goldman Sachs is a Democrat cash-cow, for the most part.

Jim Chanos, hedge-fund master mind, used to work at Deutsch Bank.

And Bethany McLean was once a Goldman Sachs banker….. (Maybe that explains her kid-glove treatment of Hank at Vanity Fair).….

….And her equally interesting white-washing of Spyro Contogouris, who colluded with hedge funds to attack Prem Watsa’s Fairfax Financial.

Honestly.  Rielle Hunter has nothing on any of these gold-diggers.

Policing Wall Street…

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From Black Star News:

“In the 1980s there was one great stock fraud, which captured the imagination of the American public. That stock fraud involved a chain of electronics stores, which went by the name of “Crazy Eddie.”  These stores were founded by Eddie Antar (“Crazy Eddie”) of Brooklyn.  “Crazy Eddie” used radio advertising to hype his stores.  In the end the retail chain of “Crazy Eddie” went bankrupt; a $300 million fraud.

At the center of this fraud was Sam E. Antar, a cousin of “Crazy Eddie” Antar and the Chief Financial Officer of the “Crazy Eddie” retail chain. Currently Sam E. Antar has publicly stated that he has reformed and is now lecturing, without charge, on the “dangers” of crime. It is strange that Sam E. can afford this largesse because he filed for bankruptcy several years ago. He claims to be supported by the real estate interests of his wife’s family.

Recently he was the focus of an article, “Crazy like a fox,” by Aaron Elstein, which appeared in the October 4, 2009 issue of Crain’s New York Business.  Once a felon, always a felon. Yet Elstein referred to Sam Antar as “a former felon.”  That alone shows his bias and makes the reader believe that rather than an article the piece is meant to rehabilitate Antar.  A felon is someone convicted of a felony. There is no such thing as a former felon.

Elstein also reported:  “Mr. Antar admits working for a short-seller before.  He did research for Barry Minkow, an investor who served prison time in the 1990s for running a fraudulent carpet cleaning service.” This is like saying “The titanic ran into an ice cube.” There are several understatements in the “article.”

Sam Antar not only worked for Barry Minkow but contributed $250,000 to Minkow’s Fraud Discovery Unit, which supposedly ferrets out false information in filings by publicly listed companies. Antar claims that this $250,000 was his wife’s money. Antar’s wife must be the most generous woman in the world- doling out $250,000 as a gift to her husband’s friend.

Here’s what happened: Minkow finds false information in SEC filings. Minkow then sells the stock short, in hopes that the stock price declines. Minkow then releases his findings. Minkow then buys back the stock after the price has declined. By that very fact alone, Minkow is not an “investor.” Minkow is a short seller.

As the reader can readily determine someone is making money from this arrangement. What’s not stated in the article is that Minkow did not just run “a fraudulent carpet cleaning service.”  Minkow’s carpet cleaning business was called ZZZZ Best, a stock fraud that defrauded the American public of hundreds of millions of dollars. Minkow served seven years in federal prison for fraud among other charges.

The article is a “white wash,” a “fix.” Minkow owes the government approximately $16 million and his salary is garnished to pay the amount owed. That is why the payment could not be made out personally to Minkow but to the Fraud Discovery Unit- the money would have been seized.

During his incarceration Minkow converted to Christianity and studied for a Divinity Degree. Currently Minkow is a pastor of a Church. I find it rather amusing when convicted felons turn to God.  It has been my experience that once a stock fraud artist- always a stock fraud artist.  The money is too good and too easy. That is why the members of Aish Kodesh in Long Island participated in the stock frauds of Maier Lehmann.

Sam E. Antar is a fraudster; as is Barry Minkow.
Both have now found God. Perhaps they have monetarized God.”

Manfredonia, a trader and whistleblower on Wall Street in the 1980s, is now on a campaign to expose corruption on the Street. Please e-mail him tips to Edward@blackstarnews.com

More From The Easter Bunny…

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I’ve been curious about the identity of the Easter Bunny, although, strictly speaking, it doesn’t affect the validity of the anti-NSS campaign.

The Bunny has zeal. Bunny-speak is brave, plain-spoken and easy to read:

“The SEC was created to reassure the unwashed masses that it was safe to invest in the markets, after the Great Crash of 1929 proved it was anything but. It was a PR firm for Wall Street, slipped through as an alternative to a regulator who would or could actually do anything to curb the real crookery on Wall Street. At the helm was one of the greatest stock manipulators of all time, Joe Kennedy, who along with Percy Rockefeller and others amassed incredible fortunes running stock pools in the 1920’s.

For those who don’t know what a stock pool is, it’s a hedge fund whose sole purpose is to manipulate stocks, first up, then down, making money in both directions. Which was enormously lucrative for the operators of the pools, and the investors therein – the only losers were always the general investing public, and other participants who weren’t on the inside. I would argue that’s precisely what some of the most lucrative hedge funds of modern times also do – there aren’t a lot of ways to beat the market with 30 or 40% returns, year after year, that don’t involve larceny and criminal behavior, at least in my study of the last century of market history.”

The Bunny doesn’t mince words:

“I concluded a while ago that the rot in the system is pervasive, runs from top to bottom, and is largely unfixable. You have oligarchs, powerful and rich families and corporations, who are having their bought-and-paid-for politicians operate the country for their personal enrichment, at the direct expense of everyone else…..

“My point is that absolute power and wealth enable one to control the safeguards that were put into place to protect populations. By co-opting politicians and capturing regulators, the bad man is allowed to come into the room and do whatever he wants, whenever he likes – and the captured media merely pretends that it can’t hear the cries for help or investigate the countless damaged lives. It’s as bad as Russia under the communists, or perhaps worse.”

The Easter Bunny stays under wraps for a reason I can guess… but maybe not express publicly.

I asked a couple of people in a position to know if it was so-and-so. They denied it stoutly.

I could, of course, go the route of the New York press, which likes to stake out, tap phones, access medical records illegally, go undercover,or violate court orders, or any number of other things.

Including hounding erstwhile presidential candidates long after they have ceased to be of political importance.

(If only John Edwards knew how lucky he was to avoid a life as a national figure, official prey for every predator with a pen)

But that particular game doesn’t seem worth either the moral or social candle. And, most often, almost as much can be learned by reading between the lines and studying public evidence as by sleuthing.

But, while sleuthing only requires elbow grease and chutzpah, analysis requires a degree of knowledge, judgment, and intellect that is simply beyond the pay-grade of some journalists, however exalted their professional status. These petty despots have pens and they have power, but they have no clothes, as surely as the emperor they shill for.

A few have figured that out. More will follow suit.

To make the story short, I went and reread a few public records that reference NSS and replayed the stout denials in my mind, recalling as best I could the silences, the gaps, the tone of the answers. I reread The Bunny carefully.

He’s an erudite man, it’s clear. I came to my conclusion about who he was. Right or wrong, time will tell.

I only bring it up to show how looking at the big picture and developing the correct perspective can be as useful and is far more cost-efficient than private-eye sleuthing that reporters think is the one and only credible way to tell a story. Baloney. And morally dangerous baloney. Dirty tricks, even for some intended good you believe in, inevitably corrupt the people who play them, in the same way  black ops corrupt intelligence agencies.

Sleuthing is good to add the footnotes and the QED at the bottom of a piece of research and critical analysis. But as a way of curing social cancers – and financial racketeering is more social cancer than legal infraction – it has limited use. By the time you have written your expose to your editor’s satisfaction and done what it takes to avoid libel litigation, the story is old, the crooks have covered their tracks in paper dirt, and a new game is afoot.

Far better to play Sherlock and deduce your conclusions. Leave the investigative reporters to do their thing. You do yours but you do it to appease your own conscience, out of love for what human beings might be (hard to love them as they are, frankly), out of sheer intellectual curiosity (a great part of what drives me), glee at pelting stones at arrogant predators, and…yes…because after life’s fretful fever, we really don’t know what comes next. It might be wise to hedge our bets, as Pascal did.

There may or may not be Judgment Day. But should it roll around, we want to be able to pass muster. Well, at least, we want the She: Who Is Probably Not There to know we tried…

And  then of course, we write mainly because it’s fun…

How, my dear Mary, — are you critic-bitten
(For vipers kill, though dead) by some review,
That you condemn these verses I have written,
Because they tell no story, false or true?
What, though no mice are caught by a young kitten,
May it not leap and play as grown cats do,
Till its claws come? Prithee, for this one time,
Content thee with a visionary rhyme.

(Percy B. Shelley, “The Witch of Atlas”)

Bill Anderson On The New KKK: Kleptocrats, Kartels, and Kon Men

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“As I see it, the bankers are not clueless at all. They understand the game, they understand that the government is going to clean up the mess that they and their friends in Congress and the Bush and Obama administrations have created, and they understand that their antics are going to give them what they always have wanted: a nice, cozy, financial cartel which will provide sweet political contributions for the political classes, bonuses and high pay for themselves, and very little for everyone else. Continue reading →

Former Spy Bosses, Goldman Exec Behind Full-Body Scanner

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I blogged earlier about the full-body scanner.

It turns out that one of the scanner’s strongest advocate, Michael Chertoff, former Homeland Security Czar, stands to gain by the sale of the scanner, via his security consulting outfit, Chertoff Group.

Its 8 members include 3 former senior executives from Homeland Security, 2 from the CIA, 3 from the NSA, 1 from FEMA, and 1 from Goldman Sachs. Continue reading →

Goldman Charity Prompted By PR Concerns

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RaceTotheBottom, a law blog on corporate regulatory issues, has this on the latest PR move  by Goldman Sachs, one we noted in our previous blog post on Haiti. which mentioned the donations made by the big banks.

“The latest effort by Goldman to ameliorate the criticism is apparently to require top officers and managers to donate a certain percentage of their compensation to charity. As the NYT noted:

* While the details of the latest charity initiative are still under discussion, the firm’s executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay, according to a person familiar with the matter who did not want to be identified because of the delicacy of the pay issue.

Apparently Bear Stearns had done something similar in the past, requiring the top 1000 employees to contribute 4% of their compensation to charity.

The specifics have apparently not yet been determined. Nonetheless, unlike the stock bonuses, the approach effectively reduces the amount of compensation paid to each employee.

Goldman could have considered reducing the amounts paid in compensation and contributed the saved amounts directly to charity. The financial institution in fact added an additional $200 million to its charitable foundation. But making direct contributions would have potentially violated state law.

Corporations are obligated to profit maximize. Some portion of the company’s profits can be donated to charity. Companies may do so, however, only if there is a business benefit. See RMBCA § 3.02(15)(permitting “donations, or do any other act, not inconsistent with law, that furthers the business and affairs of the corporation.”). For modest amounts of contributions, the business benefit can be vague, with enhanced reputation in the community enough of a justification.

For more significant amounts, however, there must be a sufficient nexus to the business of the company. Had Goldman chosen to donate 5% of the amount left aside for compensation, an amount that would probably exceed $1 billion, it would have needed to show some type of meaningful connection to its business. Any failure to do so would likely generate lawsuits from shareholders alleging that the board had failed to engage in the required profit maximization.”

My Comment:

Isn’t this exactly why the more laws you have on the books, the more complicated your problems get?

Think about it. Goldman can’t make direct charitable contributions, because companies are obligated to maximize profits. Why are they obligated to maximize profits?

Because that’s what shareholders are due, per company law.

You might ask whether maximizing profits is always in a company’s best interests, versus building long term value or market share or any number of other things that stake-holders in the company might value more than high returns, but those things don’t count, because that’s how a law works – like a blunt instrument.

And then when managers focus on these short-term horizons and start doing legal (or illegal) tricks to show quick gains on their books, then we need another set of laws to curb them, with incentives running in the opposite direction….

The end result is a muddle of misplaced directives and restrictions that distort the market.
And people criticize the free market!

Sith-Lord Sweep: AG’s Pending Indictments Cover Major Hedgies, Journalists, and Regulators

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Corporate finance generalist, investment banker and expert in derivatives, Austin Burrell, sums up last week’s announcement by Attorney-General Eric Holder that there are 5000 pending indictments [sic] arising out of the investigation of fraud in the capital markets:

[Note: the DOJ is involved in some 5000 odd cases of fraud related to the financial industry… Continue reading →