NEW YORK, June 10, 2013 — We know quite a bit about President Barack Obama and Attorney General Eric Holder; however, we know very little, so far, about the man who today actually administers federal justice inside the United States.
His name is James M. Cole and what emerges from ongoing review of his past suggests he is neither well qualified nor disposed to understand and expose the central affliction plaguing America as we struggle to re-ignite productive economic growth in our private sector.
That affliction is an unholy alliance among elites in the financial industry, the legal profession, and the establishment political class allied to Democrat and Republican parties.
To see clearly that exposing this alliance likely is not Mr. Cole’s mission, you need to dig into publicly available facts concerning roles he has played in ways that few so far have managed to do thoroughly.
A Lawyer Who Does Not Seem to Connect Numerical Dots, Even from the Inside?
Mr. Cole’s resume lists impressive accomplishments during a long career.
At his difficult confirmation process in 2010 and 2011, Senators tried to concentrate on understanding exactly what Mr. Cole may have done in connections with a multi-year assignment at American International Group (AIG) starting in 2005. They and the media failed to investigate an earlier set of assignments Mr. Cole had involving Enron.
Much has already been told about the calamitous fall of Enron.
Fourth on Mr. Cole’s list of accomplishments was when he “represented the chief risk officer of Enron,” Richard B. Buy.
An article in the Los Angeles Times from 2002 provides important additional context for those who forget nuances of the dreadful and corrupt meltdown at Enron that cost so many so much.
Accepting that even the worst American deserves able legal representation, what does it say about Mr. Cole that he would cite this assignment as among his most noteworthy?
Third on his list of accomplishments is when he “counseled Arthur Andersen in its efforts to revamp their document management and compliance procedures after the Enron-related events were uncovered”.
From this description, it is not possible to tell exactly what period Mr. Cole is referencing. Time Magazine created one useful chronology.
From the Time summary, we learn that “some Senior Andersen officials discuss dropping Enron as a client” on February 5, 2001. By October 12, 2001, we learn “Arthur Andersen legal counsel [please note there were many legal firms involved and we are not hereby accusing Mr. Cole of providing this advice] instructs workers who audit Enron’s books to destroy all but the most basic documents”. On October 16, 2001, “Enron reveals a $1.2 billion decrease in company value”. On October 23, 2001, “Arthur Andersen accelerates disposal of Enron-related documents”. By December 2, 2001, Enron filed for bankruptcy.
A Chicago Tribune article provides further context concerning the sudden demise of Arthur Andersen’s accounting practice. In brief, “a firm that once stood for trust and accountability ended 90 years as an auditor of publicly traded companies under a cloud of scandal and shame” by September 1, 2002.
Perhaps Mr. Cole covered himself in glory in his assignments for Mr. Buy and for Arthur Andersen, but it is quite difficult to see how. It is also quite clear that public hearings did not probe deeply enough under the surface.
Questions of Integrity: Ending the Cover-up of What Really Happened During AIG’s Bailout
The first assignment Mr. Cole lists in his resume is when he was “appointed as the [emphasis added] independent consultant for [AIG] to supervise the revision of their disclosure policies”.
To this day, questions remain concerning exactly why Mr. Cole and his firm were selected and precisely what services they performed.
On June 10, 2010, an extensive report entitled The AIG Rescue, its Impact on Markets, and the Government’s Exit Strategy noted:
“The trigger and primary cause of AIG’s collapse came from inside AIGFP [AIG Financial Products]. This business unit, which included CDS on collateralized debt obligations (CDOs) backed by subprime mortgages, produced unrealized valuation losses and collateral calls that engulfed AIG in the fall of 2008.”
On June 23, 2010, Senators Jeff Sessions, Chuck Grassley, John Cornyn, and Tom Coburn explained their lingering concerns:
“Numerous questions persist regarding Mr. Cole’s role in monitoring AIG in view of the Company’s recent history. Such questions could not adequately be addressed at Mr. Cole’s June 15 hearing; however, because Mr. Cole appears to be prohibited from disclosing the nature of his work as an independent counsel and because the underlying documents apparently remain confidential”.
A Justice Department spokesperson noted back in June 2010:
“Mr. Cole was never a general overseer or monitor of AIG’s entire operation nor was he assigned to examine many of the issues involving AIG’s near collapse such as credit default swaps or retention bonuses”.
In a public filing on June 28, 2005, AIG described Mr. Cole’s role as follows:
“The independent consultant has a broad mandate to review transactions entered into by AIG during [the period 2000 and 2004]. The review of the independent consultant is now ongoing and AIG cannot at this time predict the outcome of this review.”
The sudden erosion in AIG’s fortunes was far more significant than the implosion and bankruptcy of Enron. We do not believe the final chapters have yet been written concerning AIG, while Enron’s fate is known and sealed.
In recent months, we have been scouring and evaluating publicly available documents and analysis concerning the deeper origins of AIG’s brush with extinction in 2008. In coming days, we shall provide a new perspective—one that we hope will help us all understand better just how well qualified Mr. Cole is to sniff out financial dangers, to tell which companies deserve extraordinary assistance and which deserve bankruptcy.
At root, Enron and AIG are cases where disclosure standards matter—investors and regulators expect to receive full and fair disclosure of all material facts. As the Securities and Exchange Commission notes on its website:
“The world of investing is fascinating and complex, and it can be very fruitful. But unlike the banking world, where deposits are guaranteed by the federal government, stocks, bonds and other securities can lose value. There are no guarantees. That’s why investing is not a spectator sport. By far the best way for investors to protect the money they put into the securities markets is to do research and ask questions.”
We are not satisfied with disclosures made so far concerning the role Mr. Cole and his colleagues played in connection with troubles at Enron and at AIG, nor are we at all convinced the public yet knows enough about true motives behind the treatment AIG garnered.
As we dive back into the AIG rescue story, we urge you to evaluate publicly available evidence and Mr. Cole’s conduct using the standard President George Washington set for himself when he personally selected the first Attorney General in 1789:
“Impressed with a conviction that the due administration of justice is the firmest pillar of good Government, I have considered the first arrangement of the Judicial department as essential to the happiness of our Country, and to the stability of its political system; hence the selection of the fittest characters to expound the law, and dispense justice, has been an invariable object of my anxious concern. “
Is President Washington already spinning in his grave?
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