AIG

In Letter To Liddy, Lawmaker Probes AIG Risk Practices

Zachary Roth | April 3, 2009, 5:32PM

Investigators are starting to zero in on the crucial issue of how much access AIG's risk control team had to Joe Cassano's deals.

Earlier this week, we wrote about a December 2007 presentation in which AIG execs assured investors that the firm's risk control officers looked closely at the credit default swaps made by Cassano's financial products unit. But as we noted, those assurances were contradicted last month by AIG CEO Ed Liddy, who told Congress that Cassano limited the access of the risk control team to his unit. And there's additional evidence (sub. req.) supporting Liddy's claim.

And now it looks like one Democratic lawmaker is picking up on that same discrepancy.

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Pat Fitzgerald

Feds: Blago Tried To Shake Down Rahm

Zachary Roth | April 3, 2009, 4:23PM

One of the more interesting new details in the Blagojevich indictment was the allegation that the former Illinois governor held up the state funds for a publicly supported school, in an effort to pressure an unnamed congressman who supported the school to have his brother hold a fundraiser for Blago.

Who, we wondered, was the congressman? And who was his brother?

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AIG

AIG's PR Blitz

Zachary Roth | April 3, 2009, 1:53PM

So as we reported yesterday, longtime AIG CEO Hank Greenberg went before Congress and placed the blame for the firm's collapse squarely on the execs who took over after he left in 2005 -- including on the crew currently at the helm, who Greeenberg said should be replaced.

But we've been struck by the ferocity of AIG's response to Greenberg, who's been skirmishing with the firm pretty much since he stepped down. Despite its awkward position as a ward of the state -- not to mention as the prime corporate face of the greed and recklessness that caused the financial crisis -- AIG has mounted an aggressive public-relations counter-offensive.

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Alaska

Palin Jumps On Begich-Should-Resign Bandwagon

Zachary Roth | April 3, 2009, 9:00AM

Looks like Sarah Palin agrees with the Alaska GOP:

The Anchorage Daily News reports:

Gov. Sarah Palin and the head of the Alaska Republican Party said Thursday that Sen. Mark Begich should give his Senate seat up to a special election now that prosecutors have abandoned their case against Ted Stevens. "Alaskans deserve to have a fair election not tainted by some announcement that one of the candidates was convicted fairly of seven felonies, when in fact it wasn't a fair conviction," Palin said in a Thursday interview with the Daily News.

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Pat Fitzgerald

Feds Pull Out RICO On Blago, Team

Zachary Roth | April 2, 2009, 6:42PM

The indictment of Rod Blagojevich and his associates includes one RICO conspiracy count. From the DOJ's press release:

The RICO conspiracy count alleges that Blagojevich personally, the Office of the Governor of Illinois and Friends of Blagojevich were associated and, together, constituted the "Blagojevich Enterprise," whose primary purpose was to exercise and preserve power over Illinois government for the financial and political benefit of Blagojevich, both directly and through Friends of Blagojevich, and for the financial benefit of his family members and associates. Blagojevich and Kelly, the only RICO conspiracy defendants, allegedly conspired with Monk, Cellini, Harris, Robert Blagojevich, Rezko and previously convicted cooperating defendant Stuart Levine, to conduct the Blagojevich Enterprise through a pattern of multiple acts of mail and wire fraud, extortion, attempted extortion and extortion conspiracy, and state bribery.

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Pat Fitzgerald

Feds: Blago And Cronies Were Scheming To Make Money From The Start

Zachary Roth | April 2, 2009, 6:18PM

Here are the major new allegations contained in the indictment of Rod Blagojevich, his brother Robert Blagojevich, and four associates (from a very detailed DOJ press release (pdf)):

[B]eginning in 2002 and continuing after Blagojevich was first elected governor, Blagojevich and Monk, along with Kelly and previously convicted co-schemer Antoin "Tony" Rezko, agreed that they would use the offices of governor and chief of staff for financial gain, which would be divided among them with the understanding that the money would be distributed after Blagojevich left public office.

And:

[I]n 2003, Blagojevich, Monk, Kelly, Rezko and other co-schemers implemented this agreement by directing lucrative state business relating to the refinancing of billions of dollars in State of Illinois Pension Obligation Bonds to a company whose lobbyist agreed to provide hundreds of thousands of dollars to Rezko out of the fee the lobbyist would collect, and Rezko in turn agreed to split the money with Blagojevich, Monk and Kelly.

And:

After it became public that Kelly and Rezko were under investigation and ceased playing a significant role in raising campaign funds, Blagojevich personally continued to trade his actions as governor for personal benefits, including, for example, delaying a state grant to a publicly-supported school while trying to leverage a U.S. Congressman, who supported the school, or the Congressman's brother, to hold a campaign fundraiser for Blagojevich.

And:

[I]n an interview on March 16, 2005, Blagojevich lied to FBI agents when he said that he maintains a separation, or firewall, between politics and state business; and he does not track, or want to know, who contributes to him or how much they are contributing to him.

Rod Blagojevich

Blagojevich Indicted

Zachary Roth | April 2, 2009, 6:06PM

Chicago Breaking News Center reports:

Former Gov. Rod Blagojevich, his brother Rob and Christopher Kelly, a former top fundraiser for Blagojevich, were all indicted today on corruption charges, the U.S. attorney's office in Chicago announced.

Also charged in the indictment were Lon Monk, a lobbyist and former Blagojevich chief of staff; John Harris, also a former chief of staff to Blagojevich; and William Cellini, a Springfield insider for decades.

Will bring you more from the indictment itself...

George Will

Thank You Sir, May I Have Another? Will Distorts Global Warming Data Again

Zachary Roth | April 2, 2009, 5:50PM

We kind of figured George Will would leave the issue of global warming well enough alone after what happened the last time he tried to tackle it.

Guess we were wrong. Today, Will waded back into the mire, with a Washington Post column about the folly of requiring flourescent lightbulbs as an energy saver. In setting up his argument, Will wrote:

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Alaska

Begich To Alaska GOP: Yeah, Right!

Zachary Roth | April 2, 2009, 5:29PM

We told you how the Alaska Republican party earlier today reacted to the news that the Justice Department is dropping the charges against Ted Stevens by absurdly calling for the resignation of Sen. Mark Begich, the Democrat who beat Stevens last fall.

Well, now Begich has put out a statement in response:

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Alaska

Alaska GOP: Stevens Decision Means Begich Should Resign

Zachary Roth | April 2, 2009, 3:48PM

Here's the logical (read: nuts) conclusion to the fast-growing Poor-Ted-Stevens movement:

Via Think Progress, a press release from the Alaska GOP:

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AIG

Greenberg To Kanjorski: "May I Finish?"

Zachary Roth | April 2, 2009, 2:56PM

Here's one more interesting extended exchange from Hank Greenberg's testimony, in which the former AIG honcho is being questioned by Rep. Paul Kanjorski about regulation of the firm's financial products unit London office, and about how AIG should be regulated going forward.

At one point, the witness, clearly not used to being ordered around, asks Kanjorski exasperatedly, "May I finish?" -- a request the congressman ignores.

Watch:

AIG

Greenberg: Get Rid Of AIG Management

Zachary Roth | April 2, 2009, 2:19PM

More nuggets of news from Hank Greenberg's testimony before Congress....

Greenberg, with the prominent Washington lawyer David Boies at his side, declared that government efforts to rescue AIG -- taxpayers now own almost 80 percent of the insurance giant -- have failed. He said that that stake should be reduced to 15 percent, and that the company should be restructured, and current management should be removed.

Greenberg has been embroiled in legal wrangling with AIG almost since his 2005 departure from the firm, amid allegations of accounting improprieties.

He also quarreled with AIG's decision, apparently blessed by the government, to pay back in full its counter-parties on the credit default swaps.

It would have been more beneficial for the American taxpayer if the federal government had walled off AIG Financial Products...and provided guarantees to AIGFP's counterparties rather than putting up billions of dollars in cash collateral to those counterparties.

And asked by Rep. Rep. Elijah Cummings whether he took any responsibility for the firm's collapse, Greenberg replied flatly: "No I don't."

AIG

Greenberg: "We Had No Problem Controlling Cassano

Zachary Roth | April 2, 2009, 2:00PM

Asked about whether Joe Cassano was given a free hand at AIGFP, Hank Greenberg, the former AIG CEO who stepped down in 2005, told Congress:

I'm sorry if you can't believe it, but I'm telling you, we had no problem controlling Cassano.

Justice Department

Beltway Establishment's Misplaced Orgy Of Stevens Sympathy

Zachary Roth | April 2, 2009, 1:02PM

We told you yesterday about Chris Matthews' flub on the Ted Stevens news -- telling viewers that the decision by Justice to drop the charges, thanks to prosecutorial misconduct, means that "the charges should never have been brought."

But it looks like Matthews was just the tip of the iceberg. Since yesterday morning, the self-appointed guardians of the Beltway discourse, in Congress and the press, have been lining up to express their sympathy for Stevens and lament the way the case has unfairly "besmirched" his sterling reputation.

Please.

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AIG

Greenberg To Taxpayers: Drop Dead

Zachary Roth | April 2, 2009, 11:43AM

Nice guy, that Hank Greenberg.

Here, Rep. Jason Chaffetz (R-UT) asks the former AIG CEO whether he'd be willing to use a separate company that Greenberg has stocks in to pay back taxpayers for AIG's bailout.

And Greenberg pretty much tells him to shove it.

Watch:

Bernard Madoff

Madoff Feeder Fund Charged With Ignoring Red Flags

Zachary Roth | April 2, 2009, 11:28AM

We're a little late to this, thanks to some developments in other areas, but Fairfield Greenwich, the feeder fund that placed much of its assets with Bernie Madoff, was sued Tuesday by the state of Massachusetts, for defrauding its customers.

Secretary of State William Galvin claims that Fairfield, the largest of several feeder funds that funnelled investors to Madoff, failed to conduct due diligence as it promised. For instance, Galvin alleges, Fairfield didn't question Madoff about his unusual trading strategy, or about the fact that he hadn't hired an outside firm to handle record-keeping.

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AIG

Greenberg: AIGers "Got Greedy"

Zachary Roth | April 2, 2009, 10:35AM

Greenberg:

You don't have control, and you don't have management oversight, things can go wrong. And they did.

...

I think they got greedy. I think they wrote considerably more business than they should have.

Hard to argue with that. But it only happened after Greenberg left, of course.

Also: this is coming from the man whose net worth was rated by Forbes at $3.6 billion in 2004.

AIG

Greenberg: Managers Failed (After I Left)

Zachary Roth | April 2, 2009, 10:30AM

From Hank Greenberg's testimony in front of Congress, which just started:

AIG's business model did not fail. Its managers did.

In 2005, Greenberg stepped down after a 37-year run as AIG's CEO.

We'll be following his testimony closely.

Alaska

Siegelman: Stevens Case Is Dropped, So Why Not Mine?

Zachary Roth | April 1, 2009, 7:04PM

For Don Siegelman, DOJ's decision on Ted Stevens just adds insult to injury.

"There seems to be substantial evidence of prosecutorial and other misconduct in my case, that would dwarf the allegations in the Stevens case," the former Alabama governor told TPMmuckraker in an interview moments ago.

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Alaska

MSNBC's Matthews Goofs On Stevens Decision

Zachary Roth | April 1, 2009, 6:03PM

Chris Matthews says a lot of things. So it's to be expected that sometimes they're smart and insightful, and sometimes they're embarrassingly wrong.

Just now, the MSNBC anchor, opining on the news that DOJ is dropping the charges in the Ted Stevens case, declared that the decision means "the charges should never have been brought, there should never have been a prosecution."

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Charles Millard

Failure Of Oversight On Risky Investment Scheme?

Zachary Roth | April 1, 2009, 5:48PM

A bit more on the Charles Millard affair.

Earlier today, we reported that lawmakers had, in a letter, warned Millard, the former head of the government agency that guarantees workers' pensions, that his planned strategy to shift the agency's investments from bonds to stocks to jeopardize its ability to meet its obligations, and had laid out some guidelines he should adhere to ensure a cautious approach. Millard, of course, made the shift anyway, apparently just in time to absorb major losses for the Pension Benefit Guaranty Corporation as the stock market tanked last fall.

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AIG

Did More AIG Execs Mislead Investors About Risks?

Zachary Roth | April 1, 2009, 2:46PM

Yesterday, we told you about how several AIG execs reassured investors at a December 2007 presentation that company risk officers had closely scrutinized the transactions of the financial products unit -- the part of AIG that made those credit default swaps. And about how several pieces of evidence have surfaced in recent months that appear to contradict those claims.

This is serious business: US and British prosecutors are already investigating former AIGFP chief Joe Cassano, and, it appears, former AIG chief Martin Sullivan, for potentially painting an unduly rosy picture of the firm's exposure to the sub-prime crash -- and are said to be focusing on that December 2007 presentation in particular. So it's worth taking a moment to lay out what exactly we know here, and what it might amount to.

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Charles Millard

Lawmakers Warned Millard About Risky Investment Scheme

Zachary Roth | April 1, 2009, 1:40PM

Remember Charles Millard, who we told you about earlier this week?

He was the Bush-appointed head of the government agency that guarantees workers' pensions, who made the genius decision to switch the agency's investments from conservative bonds to risky stocks -- right before the stock market tanked. The result: the Pension Benefit Guaranty Corporation's stock-related investments were down 23 percent as of September -- the up-to-date figure is believed to be much higher -- putting in grave doubt its ability to cover the expected losses in private pension funds that the market slump has already caused.

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Alaska

Decision To Drop Stevens Case Was Triggered By Latest Government Fumble To Emerge

Zachary Roth | April 1, 2009, 12:10PM

It sounds like the decision to drop the charges against Ted Stevens was prompted by a new example of prosecutorial misconduct, which only came to light recently.

Here's the key excerpt from the Justice Department's motion:

The Government recently discovered that a witness interview of Bill Allen took place on April 15, 2008. While no memorandum of interview or agent notes exist for this interview, notes taken by two prosecutors who participated in the April 15 interview reflect that Bill Allen was asked about a note dated October 6, 2002, that was sent from the defendant to Bill Allen. The note was introduced at trial as Government Exhibit 495 and was referred to as the "Torricelli note." The notes of the April 15 interview indicate that Bill Allen said, among other things, in substance and in part, that he (Bill Allen) did not recall talking to Bob Persons regarding giving a bill to the defendant. This statement by Allen during the April 15 interview was inconsistent with Allen's recollection at trial, where he described a conversation with Persons about the Torricelli note. In addition, the April 15 interview notes indicate that Allen estimated that if his workers had performed efficiently, the fair market value of the work his corporation performed on defendant's Girdwood chalet would have been $80,000. Upon the discovery of the interview notes last week, the Government immediately provided a copy to defense counsel.

Defendant Stevens was not informed prior to or during trial of the statements by Bill Allen on April 15, 2008. This information could have been used by the defendant to cross- examine Bill Allen and in arguments to the jury. The Government also acknowledges that the Government's Opposition to Defendant's Motion for a New Trial provided an account of the Government's interviews of Bill Allen that is inaccurate.

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Alaska

DOJ's Motion To Dismiss Stevens Case

Zachary Roth | April 1, 2009, 9:31AM

Here's the Justice Department's undated motion to dismiss the case, which lays out the rationale in detail, and was presumably filed yesterday or this morning.

Eric Holder

Holder: Withholding Evidence Was Key Factor In Decision To Drop Charges

Zachary Roth | April 1, 2009, 9:21AM

So which of the many well-documented prosecutorial missteps was most important in leading to the Justice Department's decision to drop the case against Ted Stevens?

The initial read, based on DOJ's statement, is that it was prosecutors' withholding of evidence from the defense.

Holder:

After careful review, I have concluded that certain information should have been provided to the defense for use at trial. In light of this conclusion, and in consideration of the totality of the circumstances of this particular case, I have determined that it is in the interest of justice to dismiss the indictment and not proceed with a new trial.

We'll have more on the details of this soon.

Alaska

DOJ Statement On Stevens Case

Zachary Roth | April 1, 2009, 9:10AM

The Justice Department has released a statement on the decision to drop the Ted Stevens case:

STATEMENT OF ATTORNEY GENERAL ERIC HOLDER REGARDING UNITED STATES V. THEODORE F. STEVENS

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PERMALINK | COMMENTS (10) | RECOMMEND RECOMMEND (10)
Topics: Alaska, Justice Department, Ted Stevens

Alaska

Justice Department To Drop Stevens Charges

Zachary Roth | April 1, 2009, 8:43AM

NPR:

The Justice Department will drop all charges against former Sen. Ted Stevens of Alaska, NPR has learned.

It added that Attorney General Eric Holder decided the conviction could not be defended thanks to problems with the prosecution.

The news of the case being dropped has now been confirmed independently by the AP and CNN.

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AIG

Did Risk Team Look At Cassano's Deals? AIG Execs Offer Contradictory Claims

Zachary Roth | March 31, 2009, 6:42PM

We've told you that the Feds are looking at that December 2007 presentation that Joe Cassano gave for investors, to determine whether he, along with AIG CEO Martin Sullivan, knowingly gave an unduly rosy picture of AIGFP's exposure to sub-prime losses.

But a review of that presentation suggests that a few other AIG execs may also have shaded the truth, to put it mildly, on a different question.

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AIG

Cassano: CDOs Are "Money Good Assets"

Zachary Roth | March 31, 2009, 5:23PM

Earlier today, we picked out some fascinating-in-hindsight excerpts from a May 2007 presentation given by Joe Cassano, then the head of AIG's financial products unit.

Since then, we've been looking at a similar presentation (via Nexis) for investors given by Cassano and other AIG execs in December of that year. By that time, the collapse of the subprime housing market could no longer be downplayed, and Cassano's appears more anxious than ever to reassure clearly nervous investors about AIG's exposure to losses on its credit default swaps.

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AIG

Joe Cassano, In His Own Words

Zachary Roth | March 31, 2009, 2:41PM

How did Joe Cassano -- the man who brought down AIG, and with it, perhaps the entire global financial system, with those disastrous credit default swaps -- talk about what his unit, AIG Financial Products, was up to?

We've been looking through a presentation that Cassano gave to a group of entrepreneurs and analysts in May 2007 -- just as the extent of the collapse of the sub-prime market was becoming clear. In his speech (accessed by Nexis), Cassano detailed AIGFP's various business lines, and, of course, painted a rosy picture of the unit's future earning potential.

The entire performance has an almost poignant quality, looked at in light of the tumult that would soon befall AIGFP. (Less than nine months later, it would announce Cassano's resignation after an $11.1 billion writedown of credit-default swaps.) But we've pulled out a few of Cassano's comments that day that are particularly noteworthy...

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John Murtha

Murtha: If Loving Constituents Is Wrong ... I Don't Wanna Be Right!

Zachary Roth | March 30, 2009, 5:25PM

Backing down isn't Rep. John Murtha's style.

The cantankerous House power-broker is under fire for his ties to the PMA lobbying firm, which just shut down amid reports of an FBI probe into its campaign contributions to friendly lawmakers, including Murtha, who have steered millions in federal earmarks to PMA clients.

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John Murtha

Flake's Call For PMA Probe Gaining Support

Zachary Roth | March 30, 2009, 3:03PM

Remember that ongoing FBI investigation of PMA, the lobbying group with close ties to Democratic power-broker Rep. John Murtha?

Well, up until now, House Democrats -- led by Speaker Nancy Pelosi, who's a close ally of Murtha, the powerful Defense Appropriations subcommittee chair -- have been successful on fending off GOP calls for a congressional probe of the matter. But that may be changing...

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Bailout

Bush Bailout Architect Lands On His Feet -- Helping Private Clients Adjust To Brave New World Of Finance

Zachary Roth | March 30, 2009, 1:29PM

We should have seen this one coming -- government officials who helped respond to the financial crisis, now cashing in by helping private sector clients "navigate the new world of finance."

That's what David Nason, a former assistant treasury secretary under Hank Paulson will be doing for clients of Promontary Financial Group, which he's joining as a managing director, reports the Wall Street Journal (sub. req.). Nason, who had a major hand in drawing up Treasury's bailout plan last fall, "is expected to advise big financial institutions on everything from how to participate in the government's rescue programs to meeting regulatory requirements."

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AIG

Wife Of London-Based AIG Exec Claims He's Aiding Federal Probes Of Cassano

Zachary Roth | March 30, 2009, 12:01PM

Following in the footsteps of martyr to truth Jake DeSantis, another AIG Financial Products exec just can't help himself from going public about how unfairly he's being treated by just about everyone from his employer, to Congress, to Andrew Cuomo. But a blog post by his wife may be even more interesting....

The blog Clusterstock has posted a long rant from London-based Paul Harriman, which originally appeared on the site Live Journal. The predictable gist: Harriman complains that without his bonus, he won't be able to afford his $10,000 a month apartment and his kids' school fees.

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Financial Crisis

Genius! Federal Pension Guarantor Switched From Bonds To Risky Stocks Last Year

Zachary Roth | March 30, 2009, 11:27AM

In the highly competitive race for the title of "Stupidest Recent Financial Decision Made By A Government Official", this one's got to be a strong contender....

The Boston Globe reports:

Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

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