Money, Motive, Technology,
and Plausible Deniability
February 11, 2011
If the figure is even approximately correct, and
I believe it is, the number is alarming because it suggests that democratic
oversight of US military research and development has broken down. In which
case our democratic values and way of life are presently at risk; not from
without, as there is no foreign enemy that can destroy the US Constitution,
but from within.
Any remaining hope that the US military might still get its budgetary house in order were dashed at 9:38 am the next morning, when the west wing of the Pentagon exploded in flames and smoke, the target of a terrorist strike. Incredibly, the exact point of impact was the DoD’s accounting offices on the first floor.
The surgical destruction of its records and staff, nearly all of whom died in the attack, raises important questions about who benefited from 9/11. Given the Pentagon’s vast size, the statistical odds against this being a coincidence prompted skeptics of the official story to read a dark design into the attack.
As Deep Throat said:
Was the Pentagon accounting office destroyed because diabolical individuals planned it that way?
No question, the west wing presented a much more challenging target than the east wing. Targeting the west wing required a difficult approach over the Arlington skyline.
The final approach was especially dicey and amounted to a downhill obstacle course, skirting apartments and a large building complex about a quarter-mile from the Pentagon known as the Naval Annex; which sits atop a hill that rises from the flat ground along the Potomac River.
In April 2008, I interviewed Army Brigadier General Clyde Vaughn, a credible witness to the events of that morning. Vaughn explained over the telephone that on 9/11 he was on his way to work at the Pentagon via Shirley Highway (I-395) when the strike occurred. The general told me the hijacked aircraft (presumably AA 77) just missed the Naval Annex and would have hit the US Air Force memorial that presently occupies the site, had the 270 feet-tall monument existed on 9/11.
The new memorial was constructed in 2006 and
dedicated the same year.
The location of their offices was no secret.
Surely terrorists would have been more interested in decapitating the
command structure of the US war machine than going after a bunch of
The crash of AA 11 into the North Tower at 8:46 am should also have raised red flags, because the point of impact at the 95th and 96th floors was too remarkable to be happenstance. Both floors were occupied by Marsh & McLennan, one of the world’s largest insurance brokerages, with family ties to the private intelligence firm, Kroll Associates, which held the security contract at the World Trade Center.
Indeed, the network of corporate ties is so
entangled that were I to trace all of the links, they would easily fill a
book. Here, I will sketch out only the most salient connections.
Maurice Greenberg had been a director of the New York Federal Reserve Bank for many years, and in 1994-95 served as its chairman. Greenberg was also vice-chairman of the Council on Foreign Relations (CFR), which in 1996 published his report, “Making Intelligence Smarter: The future of U.S. Intelligence”; as a result of which, Senator Arlen Specter floated Greenberg’s name as a candidate for the directorship of the CIA.
Although George Tenet eventually got the job, the mere fact that Greenberg was in the running shows the extent of his influence.
In 1993, Greenberg’s huge insurance conglomerate AIG reportedly bankrolled the Wall Street spy firm, Kroll Associates, saving it from bankruptcy. Thereafter, Kroll became an AIG subsidiary. After the 1993 World Trade Center bombing, Kroll acquired the contract from the Port Authority of New York to upgrade security at the World Trade Center, in the process beating out two other firms.
Kroll continued with the WTC security contract
through the period leading up to the September 11 attacks. One of Kroll’s
directors, Jerome Hauer, also managed New York mayor Rudolph Giuliani’s
Office of Emergency Management, which was located on the 23rd floor of WTC
Unfortunately, the official investigators were not interested in connecting the dots. Although Kroll was based in New York City, it served (and still serves) an international clientele through 60 offices in some 27 countries. Over the years, the firm has repeatedly been accused of, and/or formally charged with, conspiracy. In 1995 the French government expelled several Americans from the country, including a Kroll employee named William Lee, for allegedly spying on French industry.
Lee’s involvement with Kroll made French authorities suspicious that his Paris operation might be a CIA front.
The French were surely aware of Kroll’s longstanding practice of hiring former CIA, FBI, and British Intelligence agents. Kroll/AIG made no effort to conceal the fact that between 1997-2003 the AIG board of directors included Frank G. Wisner, Jr., son of one of the founders of the CIA.
Wisner Jr. is also a member of the Council on Foreign Relations. Wisner Jr. also served as US ambassador to several nations, including Egypt, and is a member of the Council on Foreign Relations. As I write, Wisner’s name surfaced in the news. Last week, President Obama dispatched Wisner as his personal envoy to confer with the embattled Egyptian dictator Hosni Mubarak.
Even as popular pressure continued to build for Mubarak to step down, Wisner embarrassed Obama by publicly encouraging Mubarak to ride out the crisis and hang onto power. No doubt, his action reflects the view from Langley, which would much prefer to see Mubarak remain in power.
The CIA has long supported the Mubarak regime
and in return was allowed to use Egypt as a haven for renditions and
torture. Wisner’s thumbing his nose at his own president, no doubt, is also
an accurate measure of the US national security state’s low opinion of
Obama. It certainly exposes Obama’s weakness as president.
Possibly, but the French had good reason to be wary of CIA meddling in their country. It is a safe bet the French have not forgotten Operation Gladio, the rogue intelligence network secretly organized in Europe by the CIA, NATO and British MI-6, after World War II.
“Gladio” means “sword” in Italian and is the root of the word “gladiator.”
Known as the “stay behind armies,” they were in
every NATO country, and totaled thousands of paramilitary soldiers. Their
ranks included known underworld criminals and drug traffickers; and
crucially, the CIA kept the whole operation secret for nearly forty years.
Before it was over, the CIA-staged terror
campaign added up to hundreds of incidents in Italy, France, Greece,
Belgium, and other European nations.
Shock turned to outrage as Europeans learned
that for decades the CIA and NATO had been sponsoring terrorist attacks in
the democratic nations of Europe. All of which, as noted, was blamed on the
communists. The purpose of Gladio had been to strike fear into the
population of Europe, and thus, to weaken the left-wing parties.
Although the average American is ignorant of the fact, most Frenchmen probably also know that under Gladio, the CIA lent support to an attempted putsch against French President Charles de Gaulle in 1958 by reactionary elements of the French army. The renegade French forces were opposed to de Gaulle’s controversial decision to end to the French military occupation of Algeria.
Most of the people of France probably also know about the CIA’s involvement in at least one other conspiracy to assassinate de Gaulle in the mid-1960s; but which fortunately failed.
De Gaulle survived some thirty assassination attempts. At the time, the CIA’s involvement caused a near rupture in US-French relations. De Gaulle reacted angrily by pulling France out of NATO, and ordered US military forces out of France.
The US was compelled to move NATO headquarters
from Paris to Mons, in Belgium. Nor did the American people hear the truth
about what really happened. In fact, they still do not know, because the US
press has never informed them.
In October 2001 the prestigious French paper Le Figaro reported that in July 2001, just two months before 9/11, Osama bin Laden received dialysis treatments and other medical care for a serious kidney ailment at the American Hospital in Dubai, one of the Arab emirates in the Persian Gulf. At the time, bin Laden was a wanted man, and had been indicted by the US Department of Justice for the 1998 bombing of US embassies in Nairobi and Dar es Salaam.
Yet, according to the detailed report in Le Figaro, the Americans treated bin Laden as a VIP guest. The Al Qaeda leader arrived with a retinue that included his personal physician, a nurse, four bodyguards, and at least one of his lieutenants.
Bin Laden reportedly held court in his hospital suite, welcoming members of his large family, Saudi officials, and even the local CIA station chief, who evidently was a well-known figure in the tiny country. The CIA official was evidently seen entering bin Laden’s room. Immediately after leaving, he caught a flight back to the US.
The article in Le Figaro was closely followed by a story in The Guardian (UK), which added more details. It noted that bin Laden’s Saudi guests had included Prince Turki al Faisal, then head of Saudi intelligence.
The story also named French intelligence as the source of the story in Le Figaro, and added that the information was leaked because the French were,
If the story is accurate, it means Osama bin Laden was a US intelligence asset right up until the morning of 9/11.
There is no other possible interpretation. In
which case, the American people have been seriously misled, indeed, have
been fed a pack of lies, about the events of that horrible day. I would add:
there were no retractions. Le Figaro stood by its story. Meanwhile, the US
media played dumb and never even reported it.
The Enron Corporation had collapsed in late 2001 amidst allegations of fraudulent accounting; then, in January 2002, hired Kroll Zolfo Cooper to handle its chapter 11 proceedings. The US Trustee Program, which administers bankruptcy cases, uncovered the billing irregularities after Kroll sought an additional fee of $25 million for its services.
The firm had already received a cool $100 million for scavenging the Enron corpse but wanted more, even as stockholders received nothing. Evidently, the folks at Kroll thought no one would notice a mere $25 million, which is chump change compared with the $30 billion in inflated energy costs that Enron gouged from the state of California in 2000-2001.
All of which must be good: because Enron got
away with it. According to economist Paul Krugman, emails confirmed that
Enron had rigged the markets. The heavily Democratic golden
state has yet to recover from what must be viewed as a partisan attack.
During the period leading up to 9/11, Grove worked as a salesman for Silverstream Software, an enterprise company which marketed designer solutions to a number of Wall Street firms, including,
According to Grove, Silverstream,
Grove was so successful as a salesman that (he claims) he became a millionaire before the age of thirty. He only realized, later, that the software he sold might have enabled fraudulent trading in the hours before and possibly during the 9/11 attacks.
The most advanced software of all went to Marsh & McClennan, which, he says, placed an order in 2000 for a technological solution,
Grove inked the software deal with Marsh & McClennan in October 2000.
After which, his employer Silverstream stationed a team of 30-40 technicians in the client’s offices in WTC 1, led by several software developers who proceeded to design and build the software package “from the ground up.”
During this period, Grove served as liaison between Silverstream & Marsh to insure that the software would perform as specified. The team worked around-the-clock, seven days a week, to meet Marsh’s pre-September 11, 2001 deadline.
The end result was,
Grove says he first noticed fiscal irregularities in October 2000 when he and a colleague helped “identify about $10,000,000 in suspicious purchase orders.”
Marsh’s chief information officer, Gary Lasko, later confirmed that,
But Grove did not worry too much about this at the time; nor did he run into personal trouble until the spring of 2001, when he learned, while negotiating a license renewal contract with Lasko, that his own employer, Silverstream, was over-billing Marsh “to the tune of $7 million, or more.”
Grove brought the matter to the attention of Silverstream executives, but was told to keep quiet and mind his own business.
A Marsh executive advised him to do the same. By this point, a number of Marsh employees had earned Grove’s trust and when he shared his concerns with them, they agreed that “something untoward was going on.”
Grove names these honest employees in his testimonial: Kathryn Lee, Ken Rice, Richard Breuhardt, John Ueltzhoeffer, in addition to Gary Lasko, all of whom perished on 9/11.
Incidentally, a simple check confirmed that
these names do indeed appear on the fatality list of World Trade Center
There were only two possibilities:
Later that day, Grove received word from Gary Lasko that Marsh had decided to retain Silverstream for the next phase of the project.
The extension was good news and he immediately informed his boss. Grove was personally delighted because his rightful commission “would have been a payday worth well over a million dollars.”
He never collected it, however; because the next
morning, Grove was summoned to his boss’s office and abruptly terminated.
Grove needed the continuing medical coverage and agreed to the terms. However, after his convalescence he became suspicious about the secrecy agreement and decided that, at very least, he should maintain contact with the honest employees at Marsh, several of whom were now close friends.
Shortly thereafter, one of them arranged for Grove to attend a meeting at the offices of Marsh & McClennan, at which the honest employees planned to,
The executive had agreed to participate via a video conference link from his apartment in uptown Manhattan.
This was the same individual who, months before, had warned Grove to look the other way. Grove was in possession of documents proving illicit activity, and he planned to produce them at the meeting. However, on the day of the showdown, he ran late, having been delayed by heavy Manhattan traffic.
Grove says he was within 2-3 blocks of the World Trade Center when UAL 175 hit the South Tower. By then, all or most of his friends in the North Tower were already dead, or trapped on the upper floors.
All told, some 300 or more Marsh employees
perished that morning. None of whom had any idea what was in store for them.
March 2, 2011
This paper will review the evidence for informed, or insider, trading in the days and hours before the 9/11 attacks. From the very first, the phenomenon appeared to be world-wide.
One consultant, Jonathan Winer, told ABC:
The list of affected nations was long, and included the US, Germany, Japan, France Luxembourg, Hong Kong, the UK, Switzerland and Spain.
Soon, independent investigations were underway on three continents in the belief that the paper trail would lead to the terrorists. Press statements by leading figures in the international banking community left little doubt that the evidence was compelling.
Ernst Welteke, President of the German Deutsche Bundesbank, told reporters that,
Welteke was blunt:
In the U.K., London City regulators investigated a flurry of suspicious sales processed just before the attack.
An FSA spokesperson confirmed that market regulators in Germany, Japan and the U.S. had received information about short selling of insurance company shares and airline stocks, which fell sharply as a result of the attacks.
Among the WTC tenants were dozens of banks and
insurance companies, including several that were now going to have to pay
out billions to cover heavy losses from the attacks.
Richard Crossley, a London analyst, stated that he had tracked suspicious short selling and share dumping in a swath of stocks. CBS likewise reported a sharp upsurge in purchases of put options on both United and American Airlines.
The uptick had occurred in the days prior to 9/11. A put option is a contract that allows the holder to sell a stock at a specified price, within a certain time period. Sources on Wall Street told CBS that before 9/11 they had never seen that kind of trading imbalance.
The only airlines affected were United and
American, the two involved in the attack. American Airlines stock reportedly
fell 39% in a single day. United Airlines stock dropped even more, by a
The biggest winner, though, was Raytheon, which manufactures Tomahawk missiles. During the week following the 9/11 attacks, Raytheon stock climbed by an astounding 37%.
Prior to 9/11, the purchase of call options (a contract to buy a stock at a certain price) for Raytheon had suspiciously surged by 600%. The sale of five-year U.S. Treasury Notes also spiked just before 9/11, as reported by the Wall Street Journal.
Among the purchases was a single $5 billion transaction, which pointed to large investors.
The Journal explained that,
Michael Shamosh, a bond-market strategist for Tucker Anthony Inc., told the Journal:
The article added that,
The Securities and Exchange Commission (SEC) launched its own probe into allegations of insider trading.
For weeks, the SEC remained close-mouthed about the scope of its investigation, then, in mid-October, sent out a request to securities firms around the world for more information regarding a list of 38 different stocks.
SEC Chairman Harvey Pitt told the House Financial Services Committee that,
By this time, however, the fix was in.
Wrote the Chronicle:
The requested information was to be held in strictest confidence.
The SEC statement included the following passage:
In his book “Crossing the Rubicon”, former LAPD detective Mike Ruppert explains the SEC’s unprecedented move to deputize:
Notice, this surely means that Al Qaeda had nothing to do with the insider trading.
When the evidentiary trail led back to Wall Street, the SEC moved quickly to control the evidence and muzzle potential witnesses. Despite the best efforts of the SEC, a few details did leak to the world press.
In mid-October 2001, The Independent (UK) reported that,
The evidence was all the more incriminating, because in at least one case the purchaser failed to collect a reported $2.5 million in profits made from the collapsing share price of UAL stock.
The only plausible explanation was that someone
at the purchasing bank feared exposure and subsequent arrest.
George Tenet writes in his memoirs that he recruited Buzzy Krongard in 1998 to become his deputy at CIA, probably to serve as Tenet’s personal liaison to Wall Street.
Until 1997, Krongard was chairman of Alex Brown
Inc., America’s oldest investment banking firm. Alex Brown was acquired by
Bankers Trust in 1997, which, in turn, was purchased by Deutsche Bank in
1999. In the mid-1990s, Krongard had served as a consultant to CIA director
At the time, Banker’s Trust, like other large U.S. banks, was in the business of private banking. This means that Banker’s Trust catered to unnamed wealthy clients for the purpose of setting up shell companies in foreign jurisdictions, such as on the Isle of Jersey, where effective bank regulation and oversight are nonexistent.
According to Ruppert, Krongard’s last job at Alex Brown was to oversee “private client relations.” 
This means that Krongard personally arranged
confidential transactions and transfers for the bank’s unnamed wealthy
In many such cases, the private banks do not even know who owns the account; which, of course, means that not even the bankers can follow the transactions with “due diligence.”
Many private banks do not even try, for fear of scaring away business, especially from foreign clients. Even though private bankers are responsible for enforcing legal controls against money laundering, where such laws exist, in practice, oversight is typically weak or nonexistent.
I was shocked to learn that although it is illegal for U.S. banks to launder ill-gotten money that originates within the United States, it is not illegal for them to accept dirty money from elsewhere.
No surprise then, that many U.S. banks openly
solicit business from Central American drug lords, arms merchants, and other
The experts estimated that the annual total was
between $500 billion and a trillion dollars, a mind-boggling number, about
half of which is washed into the U.S. economy, the rest into Europe.
In 1994, clients and regulators accused the bank “of misleading customers about its risky derivative products.”
The case went viral when tape recordings were made public that showed bank salesmen snickering about ripping off naive customers. In 1999, Banker’s Trust pled guilty to criminal conspiracy charges, after it was revealed that top-level executives had created a slush fund out of at least $20 million in unclaimed funds.
Bankers Trust had to pay a $63 million fine and
would have been forced to close it doors but for the fact it was acquired,
just at this time, by Deutsche Bank, Europe’s largest bank.
It is curious that Shattuck resigned immediately
after the 9/11 attacks.
Similarly, much of the seemingly suspicious
trading on September 10 was traced to a specific US-based options trading
newsletter… which recommended these trades.
But here it could just as easily refer to American Express. If Deutsche Bank’s pre-9/11 trading was truly hedged, as The 9-11 Commission Report contends in the footnote, then it would not meet the definition of informed or insider trading. However, without more information, it is not possible to confirm or refute the facts in this particular case.
Still, the commission’s token explanation is not convincing. Two statistical studies since published reported an unusual volume in options trading for both United and American airlines in the days before 9/11.
The author of the first study wrote that the results are,
The second paper, by the Swiss Banking Institute, reached the same conclusion.
A third study looked at the Standard & Poor’s 500 Index (SPX index options) and found,
The authors concluded that there is,
Notice also, the commission makes no mention in its footnote of the 36 other companies identified by the SEC in its insider trading probe.
What about the pre-9/11 surge in call options for Raytheon, for instance, or the spike in put options for the behemoth Morgan Stanley, which had offices in WTC 2? The 9/11 Commission Report offers not one word of explanation about any of this.
The truth, we must conclude, is to be found between the lines in the report’s conspicuous avoidance of the lion’s share of the insider trading issue. Indeed, if the trading was truly “innocuous,” as the report states, then why did the SEC muzzle potential whistleblowers by deputizing everyone involved with its investigation?
The likely answer is that so many players on Wall Street were involved that the SEC could not risk an open process, for fear of exposing the unthinkable.
This would explain why the SEC limited the flow of information to those with a “need to know,” which, of course, means that very few participants in the SEC investigation had the full picture. It would also explain why the SEC ultimately named no names. All of which hints at the true and frightening extent of criminal activity on Wall Street in the days and hours before 9/11.
The SEC was like a surgeon who opens a patient
on the operating room table to remove a tumor, only to sew him back up again
after finding that the cancer has metastasized through the system.
We know about this thanks to a 9/11 Commission memorandum declassified in May 2009 which summarizes an August 2003 meeting at which FBI agents briefed the commission on the insider trading issue.
The document indicates that the SEC passed the
information about the suspicious trading to the FBI on September 21, 2001,
just ten days after the 9/11 attacks.
The identity of the suspicious trader is a stunner that should have become prime-time news on every network, world-wide. Kevin Ryan was able to fill in the blanks because, fortunately, the censor left enough details in the document to identify the suspicious party who, as it turns out, was none other than Wirt Walker III, a distant cousin to then-President G.W. Bush.
Several days before 9/11, Walker and his wife Sally purchased 56,000 shares of stock in Stratesec, one of the companies that provided security at the World Trade Center up until the day of the attacks.
Notably, Stratesec also provided security at Dulles International Airport, where AA 77 took off on 9/11, and also security for United Airlines, which owned two of the other three allegedly hijacked aircraft. At the time, Walker was a director of Stratesec.
Amazingly, Bush’s brother Marvin was also on the board.
Walker’s investment paid off handsomely, gaining $50,000 in value in a matter of a few days. Given the links to the World Trade Center and the Bush family, the SEC lead should have sparked an intensive FBI investigation.
Yet, incredibly, in a mind-boggling example of criminal malfeasance, the FBI concluded that because Walker and his wife had,
The FBI did not conduct a single interview.
According to Reuters and CNN, in the period after 9/11, U.S. credit card, telecommunications and accounting firms hired a German company named Convar to recoup data from the damaged hard drives.
Convar got the contract because, two years before, it had developed a proprietary method for recovering data using a cutting edge laser scanning technology.
Peter Wagner, a Convar spokesman, told CNN that the new laser process makes it,
As of December 2001, Convar had examined 39 hard drives and in most cases succeeded in recovering 100% of the data. The company was specifically searching for encryption keys, indicating a financial record.
Convar found evidence stored on the drives of,
Convar director Peter Henschel told CNN that,
After the initial story by CNN and Reuters, the issue of the WTC hard drives disappeared from the news, and nothing has been heard since.
Although reports on the Internet that Kroll purchased Convar remain unsubstantiated, it is nonetheless clear that someone made the story (and the evidence) go away.
But what reason would they possibly have for
doing so? Unless the initial indications from Convar that insider trading
had occurred were correct.
The whistleblower, who insists on remaining anonymous for his own protection, told Mike Ruppert that,
Here, the important phrase is “five minutes before the attack.”
AIG and the Linkage to the Drug Trade
The more one studies the dark history of the US national security state, the more transparent the CIA-Wall Street connections become.
The links to the international drug trade are less obvious, but have existed from the beginning, that is, from the days of the Office of Strategic Services (OSS), the forerunner of the CIA.
Time and again, the same pattern has played out:
US military interventions in Southeast Asia, Central America and, since
2001, Afghanistan and Iraq, have been accompanied by a sharp increase in
narco-trafficking, with all of the attendant evils. These include the plague
of drug addiction, drug-related crime, the devastation of the family and as
I hope to show, the corrupting of democratic institutions at home and
It is no wonder that foreigners no longer view the United States with admiration and respect, but increasingly with fear and loathing.
But US elites are oblivious to such concerns. They do not care, and are quite candid about what they view as the CIA’s pragmatic “need” to associate with unsavory individuals and criminals in the interest of furthering US foreign policy goals. Their realpolitik can be read between the lines of the policy papers.
Take, for instance, the 1996 intelligence report, already noted, prepared by Maurice “Hank” Greenberg for the Council on Foreign Relations (CFR), and for which Greenberg was nominated to replace John Deutch as director of the CIA.
In the paper Greenberg affirms that,
Later, in the section titled “Intelligence and
Law Enforcement” he insists that
FBI and Drug Enforcement Agency (DEA) agents
operating abroad should not be allowed to act independently of either the
ambassador or the CIA lest pursuit of evidence or individuals for
prosecution cause major foreign policy problems or complicate ongoing
intelligence and diplomatic activities.
In 1982, the CIA and the US Department of Justice actually worked out a secret agreement to this effect.
The deal exempted the CIA from having to report drug trafficking by CIA assets, which, notice, made a mockery of then presidential wife Nancy Reagan’s much ballyhooed “just say no” anti-drug campaign.
At the time, most Americans trusted Ronald Reagan and believed
that his administration was serious about the so-called war on drugs. But hindsight shows that the Reagan White House
badly abused the public’s good faith.
Drug addiction in Muslim Iraq was almost unknown prior to the US invasion in 2003; but has since become a major problem. A similar recent explosion of heroin use has occurred in Iran, which, notice, is right next door to Afghanistan, where the poppies are grown with the blessing of the CIA. Such foreign policies are evil, a scourge upon the planet, yet, are intimately associated with US empire building.
Quite simply, the US power elite has followed in the footsteps of the British and French who, in their day, also exploited the immensely profitable opium and heroin trade.
The writer Chalmers Johnson has termed this descent into darkness the sorrow of empire.
The flow of drugs through Honduras had not diminished; in fact, just the opposite.
For years, the country had been a transfer point for illegal drug smuggling into the US, a reality that Contra leaders readily exploited to finance their war against the Nicaraguan Sandinistas; and they did so with the full knowledge and approval of the CIA.
For many years after, Langley’s veto blocked
legitimate efforts by US law enforcement to curb the drug trade.
In fact, we only know about it, today, thanks to a courageous journalist named Gary Webb, who published a groundbreaking series of articles in 1996 in the San Jose Mercury News, exposing Contra links and CIA complicity in the crack cocaine epidemic that ravaged the black communities of Los Angeles in the 1980s.
The series, appropriately titled “Dark Alliance”, was one of the first big stories to be carried on the Internet; and later, Webb expanded it into an important book by the same name, in which he lays out the voluminous evidence in stark detail.
But it was Webb’s series of articles in 1996 that initially focused media attention on the drug issue; and which compelled CIA director John Deutch to announce an internal investigation.
Meanwhile, the agency simultaneously launched a
disinformation campaign to discredit Webb, whom it viewed as a serious
The fawning mainstream press, always eager to do the CIA’s bidding, appeared to take pleasure in savaging the messenger, even while tacitly conceding that his facts were basically correct.
One of the low points occurred on live TV, on November 15, 1996, when NBC’s Andrea Mitchell, wife of Federal Reserve chairman Alan Greenspan, referred to Webb’s exhaustively documented expose as “a conspiracy theory,” the kiss of death for any serious journalist.
At this same time, as we know, Greenspan was
busily engineering the deregulation of Wall Street, setting the stage for
the 2008 financial meltdown of the global economy.
On December 19, 1998, an article by Tim Weiner in the New York Times and another by Walter Pincus in the Washington Post cited “unnamed sources” who insisted that Hitz had found no “direct or indirect” links between the CIA and cocaine traffickers.
This was a blatant lie; indeed, a breathtaking example of deception.
But it had its intended effect. Neither reporter
bothered to ask why Hitz’s report was still under wraps.
In 2011, the CIA’s support for Afghan drug lords is out of the closet. Even the major US papers have reported it.
However, in the 1990s, the political climate
simply would not allow an honest airing of the issue (much as 9/11 is taboo,
today). Webb’s publisher ultimately caved under pressure and threw his
Pulitzer Prize winning reporter under the bus, even as Webb was turning up
fresh confirmatory evidence which indicated that, if anything, he had
under-stated the case against the CIA.
On hearing this, Congressman Norman Dicks of Washington button-holed Hitz with the obvious next question:
According to Webb, who was in attendance, at
that point, a murmur swept through the hearing room as the meaning of Hitz’s
testimony sank in.
And why? Quite simply: for the crime of telling
I suspect the reader is not prepared for my answer, which I will present on the following pages. I must admit I was not prepared for it myself.
The truth, as the reader is about to learn, is that complicity with narco-trafficking is both insidious and inexorable. It affects a corrupting influence on government at all levels, for government officials are not immune to the temptations of the drug trade, which, after all, is the most profitable business on the planet by a wide margin.
Arms smuggling comes in a distant second. As with derivatives and insider trading, the possibilities for abuse are as unlimited as the human imagination. The outcome of a secret policy of complicity was entirely predictable.
I must admit, though, I was shocked to
learn just how far up the food chain the rot extends.
From the start, AIG’s international focus was made-to-order for intelligence operations. In 1939, the Japanese invasion of China compelled Starr to relocate to New York, where, in 1943, he joined with OSS chief William “Wild Bill” Donovan to form a special insurance unit to gather war-time intelligence about Nazi Germany and Japan. During the war, the OSS actually shared Starr’s offices in New York City.
The special unit used Starr’s connections in China, including his Shanghai newspaper, as a spy network.
Meanwhile, the special agents at the New York office sifted through mountains of insurance documents for blueprints of enemy bomb plants, the design of the Tokyo water supply, timetables for tide changes, and other details about shipping and manufacturing which aided the allied war effort.
As World War II drew to a close, the special unit
investigated how the Nazis might seek to launder their assets via phony
The next year, he issued a public stock offering and began to expand the company. According to various reports, Greenberg was a long-time confidant of Ronald Reagan’s CIA Director William Casey, who had headed the Securities and Exchange Commission under Nixon. Casey attempted to recruit Greenberg to be his deputy at CIA, but Greenberg declined, preferring to remain at AIG.
Once, during a New York Times interview, Casey mentioned Greenberg as one of the few individuals outside of government whom he relied on for advice.
Henry Kissinger was another close friend and client. In 1987, Greenberg appointed Kissinger as chairman of AIG’s advisory board.
For years, both men lobbied China’s leaders to
open the country to western investment, though Kissinger’s role is more
widely known. In 1980, the Chinese finally granted Greenberg a license to
sell insurance in Beijing, and in 1996 AIG reoccupied the same Shanghai
offices originally used by C.V. Starr.
While the rest of the insurance industry suffered periodic ups and downs, AIG behaved more like a “growth” company. Its consistently high earnings wowed investors. Some compared AIG to a perpetual money-making machine.
In a column, David Schiff, publisher of an insurance industry newsletter, wrote that,
The comparison was based on more than whimsy.
Rumor had it that Maurice “Hank” Greenberg drew his nickname from the first
Jewish superstar of baseball, Hammerin’ Hank Greenberg, whom the Yankees
recruited in 1929 (but who played first base, most of his career, for the
Writing in 1998, Schiff acknowledged that,
Many investors did not bother to try. They simply accepted the fact that Greenberg was brilliant, and that AIG was somehow unique.
The view expressed in 2002 by Morgan Stanley analyst Alice Shroeder was typical:
Some probably felt the same way about Bernie Madoff, but there were significant differences.
AIG was no Ponzi scheme. Whereas other large insurance firms like State Farm were fairly simple to understand, AIG, by comparison, was “fabulously complex,” virtually impenetrable from the outside.
The Wall Street Journal once referred to AIG as
a “black box” (the same op-ed also mentioned Enron.) This helps to explain
why Greenberg and AIG remained untouchable for so long.
By the 1990s, Greenberg had diversified into other areas, such as derivatives trading, private banking, financial services, and asset management. Another division boasted the world’s largest airline rental company. But AIG achieved its lofty reputation by succeeding where others failed.
I was surprised to read that most traditional insurance companies lose money underwriting policies. They turn a profit by shrewdly investing the premiums. AIG was different.
It had a reputation for actually making money writing insurance policies; or so people thought.
However, in the spring of 2005 when the dust finally settled, it was clear that AIG also lost money in the insurance business but obscured the fact through a myriad of creative accounting schemes that transformed AIG’s underwriting (business) losses to investment (capital) losses, a slick way to enhance AIG’s corporate balance sheets.
One of Greenberg’s favorite expressions was:
After 9/11, it gradually became clear that not even AIG insiders were privy to the decisions being made at the top.
In 2002, an internal audit committee reported that AIG’s financial accounting was suspect. Later that same year, the Securities and Exchange Commission (SEC) uncovered evidence of securities fraud. In 2000, AIG marketed an insurance product that enabled a company named Brightpoint Inc to conceal $11.9 million in losses.
When the case was settled, the SEC doubled the fine to $10 million because AIG’s CEO Maurice Greenberg refused to cooperate.
One of Hank’s tactics was to stall the investigation by delaying to hand over subpoenaed documents, including one internal white paper that,
It turned out that scamming the system was company policy.
In subsequent weeks, even as AIG sought to portray the Brightpoint case as an isolated incident, federal investigators uncovered another phony transaction that enabled a subsidiary of PNC Financial Services to remove problem loans and assets from its balance sheet, thus enhancing its financial position.
AIG paid a $115 million fine. The shady
transactions were reminiscent of Enron.
Spitzer refused to negotiate with Jeffry
Greenberg, Marsh’s CEO, whom the attorney general accused of stonewalling.
The apple, as they say, falls close to the tree. In the end, the younger
Greenberg was forced to step down and Marsh paid $850 million in
restitution. Two AIG executives pled guilty to criminal charges.
Cherkasky joined Kroll in 1994, became CEO in 2001, and replaced Jeffrey Greenberg as CEO when the younger Greenberg was forced out in late 2004.
Thus, it was Cherkasky who negotiated the final
settlement with Spitzer. Did AIG pass Kroll on to Marsh to better shield the
spy firm from Spitzer’s investigation, as Richard Grove has suggested?
Possibly. It certainly does appear that Cherkasky was named to lead Marsh
because of his previous relationship with Spitzer.
By this point, the AIG board was also pressuring Greenberg to name a successor and step down. But Greenberg, who was approaching his 80th birthday, had no intention of relinquishing control of the company he had dominated for 37 years.
Maurice Greenberg had always viewed regulators with disdain, and he had generally succeeded in intimidating them, one way or another. In 1996, for instance, when the state of Delaware launched an investigation of AIG’s bizarre relationship with a Barbados-based reinsurance company named Coral Re, instead of cooperating Greenberg rang up the Delaware insurance commissioner and gave her a tongue-lashing over the telephone.
Greenberg also sent Kroll detectives to harass the state regulators. The get-tough strategy produced the intended result.
Even though state laws had been broken Delaware had no stomach for a fight. The regulators drew back. In the end, the state “whipped AIG with a feather.”
AIG got off with a mildly-worded reprimand, and was not even required to pay a fine. No sooner had Coral Re been dissolved, as per the settlement, than AIG shifted its business to several new shell companies modeled in its image and likeness.
The case of Coral Re is
important because of possible links to the drug trade and to Arkansas
Bill Clinton, as the reader will shortly learn.
But here is the gist:
After conducting his own internal investigation, Joye sent Greenberg a bluntly worded memo informing him that AIG’s,
Joye determined that for AIG to become legal the company,
But according to the New York Times, Greenberg was not interested.
When the issue came up in a meeting, Greenberg famously asked,
An employee responded:
After Joye tended his resignation, Greenberg
sent Kroll a copy of Joye’s personnel file. It is not known what Kroll
detectives did with it, but the case illustrates Greenberg’s temperament and
The other firm, C.V. Starr (also named after the founder), was no less mysterious. Both were based in Bermuda, which is famous for having no corporate income tax. The island also attracts insurance companies because of the welcome absence of regulation. Both SICO and C.V. Starr held substantial amounts of AIG stock, and were used by Greenberg to reward top AIG executives.
But C.V. Starr was also reserved for an inner circle who received lavish compensation.
The inner group included Howard Smith, AIG’s
chief financial officer, and Mike Murphy, SICO’s treasurer. It is curious
that Smith had previously worked for PricewaterhouseCoopers, the company
that, for many years, conducted AIG’s annual audits. How convenient.
However, by this point, a rift was developing between Greenberg’s supporters and the rest of the board, all of whom wanted the public relations disaster simply to end. The plot thickened when the directors issued a company-wide order to cooperate with regulators.
The next day, AIG employees in the company’s Dublin office seized a SICO computer and placed it under lock and key. (Both firms also shared the Dublin office.)
Things quickly escalated. Mike Murphy, a Greenberg loyalist, led a group of SICO employees into the Bermuda office, under cover of night, using a passkey, and hustled 82 boxes of SICO documents out of the building to a separate location.
SICO was incorporated in Panama, a major center of money laundering, and there was concern that Murphy might attempt to move evidence beyond the reach of US law enforcement.
The next day, an SEC official in New York received a message:
It was the last straw.
The details gradually emerged about Greenberg’s largest deception:
AIG ostensibly bought $600 million in reinsurance from Gen Re for a $500 premium, indicating a risk of $100 million.
However, because Greenberg wanted zero risk exposure, the deal’s “purported terms were all undone” by his staff “in undisclosed side agreements” that rendered the transaction “a sham,” according to the SEC. Papers were altered to distort the nature of the transaction.
Buffet’s subsidiary provided records to Spitzer documenting everything. The records showed that AIG’s purpose had been to generate a large tax write-off, in order to make the company look more prosperous than it was. The documents also proved Greenberg’s personal involvement.
One of the investigators told the New York Times that the intent may have been,
In 2006, AIG reached a $1.6 billion settlement with state and federal authorities: the largest ever paid by any financial services company, in US history.
In February 2008, four former executives of Gen Re and one from
AIG were convicted of conspiracy, securities fraud, mail fraud, and making
false statements to the SEC.
While this is not a comprehensive list of
Greenberg’s credits, it should suffice to lend new meaning to the old adage
that scum rises to the top.
However, as we know, things turned out rather differently.
By 2008, AIG was in dire financial straits, largely because of the company’s exposure to the sub-prime mortgage market (the outcome of zero regulation of derivatives). By September 16, 2008, AIG stock had fallen by more than 95% to just $1.25/share, from a one-year high of $70.13. For the year, AIG reported a $99 billion loss, and received a controversial $85 billion bailout.
Greenberg pointed an accusatory finger at the current directors, and told the press that AIG’s sales of credit default swaps had exploded after he left. Sullivan denied this, insisting that AIG actually stopped writing credit default stops in 2005.
By March 2009, AIG’s federal bailout had expanded to $150 billion, making it the largest single bailout by far in US history. AIG also set another dubious record when it posted a $61.7 billion loss for the final three months of 2008, the largest quarterly loss in corporate history.
That same month, AIG announced that it would
disperse $1.2 billion in bonus packages to its employees, 73 of whom would
receive checks of at least $1 million.
The investigations of the Greenberg empire showed that AIG was no different than the rest of the industry:
Given that AIG managed its risks by ceding as much as 70% of its premiums to various reinsurers, this means that most of AIG’s insurance revenue was unavailable for investment.
Nor can the remaining 30% account for AIG’s impressive earnings, over many years.
The question, therefore, is:
What is clear is that AIG’s offshore dealings were key to the company’s profitability, even during the downturns that affected the rest of the industry but to which AIG seemed largely immune.
David Schiff, a Greenberg admirer, put it this way:
Former LAPD narcotics detective Michael Ruppert arrived at a different conclusion.
In August 2001, just weeks before 9/11, Ruppert posted an article exploring possible AIG involvement in the drug trade. Ruppert was astounded to learn that Coral Talavera Baca, the wife (or girlfriend, it is not clear which) of Medellin drug lord Carlos Lehder was, at the time, employed at AIG’s San Francisco office, ostensibly as AIG’s office manager, a position for which Talavera had neither the requisite training nor the credentials.
What was she doing there?
Talavera’s husband, Carlos Lehder, was one of the central figures in the notorious Medellin drug cartel, led by Pablo Escobar, which in the mid-1980s grew into the world’s largest cocaine smuggling ring. At the time of Lehder’s 1987 arrest in a Columbian jungle, he reportedly cut a deal with US officials and was allowed to keep much of his estimated $2.5 billion fortune amassed from the drug trade.
Lehder was extradited to the US, where he entered a witness protection program.
But why would the US government negotiate with a man who had been public enemy number one?
Lehder and his cohorts in Medellin are believed to have ordered the assassination of numerous Columbian officials, newspaper editors, journalists, informants, as well as 600 policemen; but are probably best known for their involvement in the grisly attack on the country’s Palace of Justice in November 1985 that left nearly 100 people dead, including eleven of Columbia’s supreme court justices.
Lehder was a bad apple.
I was shocked to read this, until I recalled
that Ronald Reagan named Bush in 1982 to head up his so called war on drugs.
As we will discover, this explains many things.
According to knowledgeable observers, Noriega’s conviction was a foregone conclusion, with or without Lehder’s testimony. Some wondered why the US was so interested in Noriega, in the first place, since Lehder was a much bigger fish in the drug world.
Narcotics expert Alfred McCoy may have provided the answer when he speculated that the US prosecution of Noriega probably had nothing to do with curbing the drug trade and everything to do with projecting US power in Central America.
Noriega’s crime was that he turned nationalist,
developed his own power base, and sought to chart an independent path, much
like his predecessor, General Omar Torrijos, who died in a mysterious plane
crash, probably orchestrated by the CIA.
The judge dismissed the appeal out of hand. No mystery there.
But what about the $2.5 billion in assets that Lehder reportedly retained?
I had hoped to interview Coral Talavera Baca
who, no doubt, has the answers. Unfortunately, I was not successful in
contacting her. In 2011, the questions raised a decade ago by Mike Ruppert
about Baca’s connections with AIG, and AIG’s possible involvement in the
drug trade, remain unresolved.
The details, as I have noted, came to light in the mid-1990s when Delaware state regulators discovered that AIG secretly controlled Coral Re. In the insurance world, companies often reduce their exposure to underwriting losses by passing on a percentage of the risk to insurance wholesalers, also known as reinsurance companies.
As payment, the reinsurance companies receive a percentage of the premiums.
Wholesalers are generally based offshore in places like,
...where taxes are minimal or nonexistent and accounting records can legally be kept secret.
Although US state laws require insurance companies to keep a certain amount of capital in reserve to cover losses, the amount is less if a company has reinsurance.
AIG was a major user of reinsurance because it specialized in high-risk policies. For regulatory reasons, however, both parties to such a transaction, i.e., the insurer and reinsurer, must be independent of one another, for obvious reasons. If the two are affiliated, then there is no true risk reduction.
This was the issue with Coral Re, and what attracted state regulators in the first place, because, despite persistent denials by AIG, Coral Re turned out to be a shell company created by AIG for reasons that have never been made clear.
At the time Coral Re was established, the broker Goldman Sachs sent around a confidential memo which cautioned that the whole business must be kept secret. Indeed, the memo stipulated that all copies of the memo were to be returned to Goldman Sachs. When Delaware state regulators nevertheless managed to obtain a copy, they were incredulous.
The dozen or so investors who lent their names put up no money of their own, yet were guaranteed a profit, a sweet deal if there ever was one. Within days of its creation, Coral Re recorded $475 million in losses, which soon topped $1 billion.
Between 1987 and 1993, AIG ceded $1.6 billion of insurance premiums to the new reinsurer. Yet, Coral Re’s total equity capital never exceeded $52 million.
In addition to being severely under-capitalized,
the new company had no actual offices of its own. In fact, it was managed by
a subsidiary of AIG. Coral Re’s board of directors made no decisions and
conducted no business. At the time, the chief operating officer at Goldman
Sachs was Robert Rubin, who later served as President Bill Clinton’s
Glass-Steagall had created a regulatory firewall between commercial and investment banking, for the soundest of reasons: to prevent conflicts of interest and other abuses within the banking system. But Robert Rubin, Alan Greenspan, and others on Wall Street viewed the New Deal as an aberration, and by 1999, they brought Clinton around.
In 1998, Rubin also joined with Greenspan in blocking attempts by Brooksley Born, chairman of the Commodities Futures Trading Commission, to regulate derivatives, which Born and others correctly saw as a threat to the stability of financial markets.
The result was the disaster we have witnessed in recent years.
The defeat of every attempt to regulate derivatives, together with the repeal of Glass-Steagall, opened the floodgates to the wild speculation that characterized the G.W. Bush years, and is responsible for the,
...and, ultimately, the global financial meltdown in 2008.
In short, we have suffered a replay of the
roaring twenties when bankers showed they were incapable of regulating
In 2001, the pattern repeated itself when Citigroup paid $12 billion to acquire the second largest bank in Mexico, Banamex, whose owner Roberto Hernandez Ramirez was known to be deeply involved in the international drug trade.
In December 1998, the daily Por Esto!, Mexico’s third largest newspaper, reported that Ramirez’s estate on the coast of Yucatan was a regular transshipment point for tons of South American cocaine.
According to local fishermen, the coke arrived by boat during the night and, after being offloaded, was sent to the US via small planes operating out of a private airstrip on Ramirez’s sizable estate. The property is located on the tip of Punta Pajaros, which in English means Bird Point.
So flagrant was the trafficking that local people dubbed it “la peninsula de la coca,” i.e., the cocaine peninsula.
When Ramirez sued Por Esto! for libel, a Mexican
court threw out the case after finding that the evidence for narco-trafficking
was genuine. A succession of Mexican presidents, including
Ernesto Zedillo and Vicente Fox, reportedly vacationed with the drug lord
banker at his lavish estate, as did President Bill Clinton in February 1999.
But not even laundered drug money could save Citigroup. The bank suffered enormous losses due to its sub-prime exposure, and at the height of the crisis received a $45 billion transfusion from the Federal Reserve, the second largest bailout after AIG’s.
By December 2008 Citigroup’s stock had plummeted to $8/share from a high of $55 in 2006.
Angry shareholders filed a lawsuit charging that Robert Rubin and other insiders not only lied to them about the bank’s losses, but had also cashed in their own inflated stock options before the collapse. Later, the SEC agreed with shareholders that Rubin and other bank officials knew about the losses. Which, of course, means that they are guilty of both defrauding investors and insider trading.
At last report, however, none had been indicted,
although one bank officer was fined $100,000. But the hand-slap is laughable
given Rubin’s reported earnings of $120 million while at Citigroup.
...none of which has ever been criminally prosecuted in a US court for their participation in the drug trade.
Recently, Bloomberg reporter Michael Smith learned the answer to the question why when he interviewed Jack Blum, a long-time US Senate investigator and banking industry consultant.
This explains why,
Blum called their too-big-to-fail status,
That is certainly how it played out when Wachovia was caught red-handed in,
The plot began to thicken in 2006 when Mexican authorities discovered 5.7 tons of cocaine packed in 128 black suitcases (estimated street value: $100 million) in a DC-9 at the international airport of Ciudad del Carmen, located 500 miles east of Mexico City.
Authorities later learned that narco-traffickers had purchased the plane with funds laundered through Wachovia Corp. and Bank of America. It was no isolated incident. A 22-month federal investigation disclosed that during a three-year period alone, from May 2003 to May 2007, Wachovia had processed $378 billion in questionable transfers from Mexican currency exchange houses, in the form of wire transfers, traveler’s checks and cash shipments.
The whopping figure is the equivalent of roughly
one-third of Mexico’s gross domestic product.
The cartels had used the laundered cash to purchase weapons, safe-houses, and aircraft for the narcotics trade. During the investigation, authorities also seized 22 tons of cocaine.
According to Jeffrey Sloman, a federal prosecutor involved in the case,
When Wachovia’s own anti money-laundering officer, Martin Woods, attempted to bring the problem to the attention of bank officials, the same officials told him to keep quiet.
Woods persisted, to his credit, and became the target of internal harassment and bullying by bank officials. He lost his job and, even though later vindicated by the federal probe, ultimately, had to bring suit against the bank to get restitution. In the end, Wachovia refused to curb its lucrative dealings with the dubious Mexican currency houses, that is, until the financial media began to report the ongoing federal investigation.
But then, Wachovia has a long history of caring more about the almighty dollar than the people it serves.
Charlotte, North Carolina in 1879, Wachovia foreclosed on so many farms and
businesses during the Great Depression that the bank became known in the
Southeast as Walk-over-ya.
The merger happened within days of Wells Fargo’s $25 billion federal bailout - which, notice, means that the US taxpayer footed the bill for the acquisition (and then some).
In 2010, Wells Fargo settled with the US government on behalf of Wachovia by paying $160 million in fines and penalties.
Wells Fargo agreed to upgrade its money laundering detection efforts; and, after a year’s probation, the federal government dropped all charges in March 2011. Although the $160 million fine was a hefty sum, it was still less than 2% of Wells Fargo’s reported earnings in 2009.
Indeed, bank officials probably viewed the fine
as just another cost of doing business.