Last week the Wall Street Journal broke the news that the Justice Department had appointed a lawyer to monitor an accounting fraud-fraught AIG in 2005. And today the paper reports that the House Oversight Committee has demanded the full dossier of records kept by the longtime Washington-based Bryan Cave attorney named James Cole, on what he saw while he was there. Yesterday the committee fired off letters jointly to Bryan Cave and Attorney General Eric Holder demanding all available records — “to be construed on the broadest sense” — from Cole’s tenure in the post:
Mr. Cole evidently had routine access to the highest levels of the company and participated as an observer in AIG Board meetings. In effect, Mr. Cole had a seat at the table as the company decided to oust two CEO’s, developed its strategy in the midst of the housing bubble and subsequent collapse, and made critical decisions concerning restructuring AIG-FP, allocating retention payments, generating options to produce liquidity, and ultimately requesting taxpayer capital injections from the Federal Reserve and Treasury now amounting to nearly $180 billion.
Cole was appointed to monitor the insurer’s meetings as part of a “deferred prosecution” agreement with the SEC after investigators unearthed a complex tangle of fraudulent partnerships the company had set up to hide debt on behalf of its client PNC Bank. At the time Cole was retained — which has so far cost AIG (us) $20 million — the “independent monitors” installed to sit in on the senior meetings of the 103 companies with whom the government had struck such bargains were the source of much hand-wringing in corporate circles.
So much hand-wringing, in fact, that the Criminal Law Review in 2007 worried:
With respect to the corporation, DPA’s “cooperation” provisions typically obligate the corporation to act at the direction and on the behalf of the government in the investigation and prosecution of individuals. This has the potential to turn corporations into agents of the state, with resulting corporate governance and constitutional implications.
Ha, AS IF.
Two years later, of course, the salient question is what have the highly remunerated surveillance officers appointed to monitor the nation’s most ethically dubious corporations done for us lately? We don’t really know, because we can’t find a single case in which one has ever before been called to testify before Congress — or else the Oversight Committee might have filed its requests to talk to Cole before the business day after the Journal informed us of his existence — and we can’t even find the names of most of them, although we did learn that AIG’s accounting alchemist friends at KPMG are monitored by an “activist investor” named Richard Breeden.
Mercifully in the case of AIG, the Journal reports, monitor Cole is “close friends” with Holder, his boss at the government. Hopefully they communicate a bit better than the various branches of government.