>>UPDATED Geithner and Bernanke: Laundering Money Through an Illegal Trust?
Posted February 3, 2010on:
Updated with part two added below.
Well, well, well Dear Readers do we got news today. The AIG big wigs, about 200 of them, are due to get $100 million in bonuses this year. Yes, the very same group that carried their company to the brink of bankruptcy so the tax payers had to give them $181 billion (BILLION) in a bail out that we will never get back. The banks who got bail outs have paid the government back with interest and sometimes a severance type fee on top of it for paying back the bail out too soon. AIG on the other hand was one of those “too big to fail” conglomerates. Of course the “too big to fail” stuff is nonsense since the parts would just be sold off and those that were worthless and not worth saving would be terminated. (NOTHING is too big to fail, and sadly that includes the United States Government which is right on the verge of failing with no one out there to bail us out or break up the parts and keep functioning. But that is another story which I have been pounding away at for over a year now.)
Anyhow the AIG bonuses are legal because due to the bail out AIG made a profit and it is in these peoples contracts which were signed well before the financial crisis and the contracts say they will get a bonus based on the profits, plus a bonus just for breathing. The contracts can not be broken.
Some people are saying the contracts should be broken. Think carefully on this one people. If these contracts are broken than that leaves all contracts open to be broken and that is a slope we really don’t want to go down. Some will argue that contracts are broken everyday and that too is true, but there are heavy penalties to be paid and can only be broken with an agreement (another contract) between the parties to the contract.
So to break the contracts with the 200 AIG wigs would cost a bundle and it is just better to let them have the bonuses.
NOW read the following from Big Government Blog and see how this bit of info makes the bonus bit look like fluff blowing in the wind:
by Frank Gaffney This afternoon on Secure Freedom Radio we announced a breaking news story concerning the Administration’s ongoing cover-up of AIG financial wrong-doing. In an interview with David Yerushalmi, senior litigator on the Murray v. Geithner et al lawsuit, we expose possible fraud, money-laundering and criminal activity.
As Yerushalmi says in the interview, “So here’s what we find out in the midst of discovery when we depose the Treasury Department’s deponent and the Fed and get documents, here’s what we’ve learned: The Federal Reserve Bank of New York at the time that it structured the debt that it was going to give AIG insisted that not only did it get the debt, not only would it get principal and interest payments and collateral for that, it wanted 80% of AIG, precisely 77.9% of the shares and the voting rights. But the Federal Reserve Bank and Geithner knew that it was illegal for the Fed system whether there’s a Fed or the Federal Reserve Bank of New York to own that, so what did they do….”
Read the rest – the transcript and audio of the interview – at Secure Freedom Radio. Come back for an update tomorrow involving Neil Barofsky, Special Inspector General for TARP….and an animated movie showing exactly how the AIG, Treasury and Federal Reserve scheme worked…
I copied the transcript here before Obama has it taken off. this is being done all the time. BB
aking News: Evidence of criminal wrongdoing in Treasury’s handling of AIG?
by admin on February 2, 2010
Today Secure Freedom Radio has breaking news from senior litigator David Yerushalmi, a major story uncovering evidence of criminal wrongdoing in the AIG matter.
FRANK GAFFNEY: Congressman Darrell Issa, ranking member on House committee on Oversight and Goernment Reform, confronting Treasury Secretary Tim Geithner:
ISSA: In recent weeks, this committee, receiving these documents, have caused us to better underst the NY Fed pressured AIG to avoid negotiations designed to obtain the haircut, as its called, from its counterparties and to keep the details of the counterparties payments from appearing on the firms’ forms at the SEC.
David Yerushalmi, Securities specialist and senior litigator in Murray v. Geithner et al.
DAVID YERUSHALMI: In September of 2008 the US govt took over AIG, effectively over a period of months they invested $180 billion in AIG, collateralized all of its assets, and took 80% of its ownership through shares and voting rights. They controlled AIG from top to bottom. Part of that money that they gave to AIG.
When Mr. Geithner was serving prior to his current position as Secretary of Treasury, he was President of Federal Reserve Bank of New York. They were the ones that originally gave AIG $85 billion of debt by opening up a discount window. He went to AIG and said, we want you to pay off all of the financial institutions (our buddies on Wall St and even in Europe) because they’re demanding money from you for all these credit default swaps and toxic assets that everyone hears about.
So when AIG started talking to these financial institutions, what would you normally expect, that they would go to their creditors and say, we’re on the verge of bankruptcy they’d ask them to take less than 100% on the dollar – to “take a haircut.” But the Federal Reserve Bank of New York and Mr. Geithner said no – you need to pay them 100 cents on the dollar because it would be wrong for the Federal Reserve Bank to use it’s clout to gain a better bargaining position. Companies like Goldman Sachs, UBS, Societe Generale in Paris, etc. were involved as creditors.
GAFFNEY: Here’s the breaking news – what did you discover in the process of your lawsuit on behalf of this Iraq war veteran that sheds further light on this story and raises real concerns about not just peculiar and fiduciarily-challenged behavior but maybe even criminal activity?
YERUSHALMI: Keep in mind that the forcing of AIG to pay the counterparties to pay 100 cents on the dollar may have been stupid, or bad policy or bad business, but it wasn’t illegal. But in our lawsuit, which we had brought against the Federal Reserve and Treasury when they acquired AIG, they acquired the world’s largest provider of Shariah-compliant insurance products.
GAFFNEY: Shariah, of course, a term we use all the time (people here are familiar with it at Secure Freedom Radio), namely the theo-political-legal program– that oppressive, barbaric ideology– that the authorities of Islam claim is the true faith. And this is practiced by AIG through its insurance products.
YERUSHALMI: Not just practices, but promoted. Not just to Muslims but to the non-Muslim world…
GAFFNEY: … And we own them as taxpayers. and the lawsuit questions the constitutionality, given the Establishment clause regarding of separation of Church and State. We’re running out of time, jump to the news that we have here.
YERUSHALMI: So here’s what we find out in the midst of discovery when we depose the Treasury Department’s deponent and the Fed and get documents, here’s what we’ve learned:
The Federal Reserve Bank of New York at the time that it structured the debt that it was going to give AIG insisted that not only did it get the debt, not only would it get principal and interest payments and collateral for that, it wanted 80% of AIG, precisely 77.9% of the shares and the voting rights. But the Federal Reserve Bank and Geithner knew that it was illegal for the Fed system whether there’s a Fed or the Federal Reserve Bank of New York to own that, so what did they do? They created this independent trust.
GAFFNEY: The same was true of Treasury right?
YERUSHALMI: Well that’s exactly right. You would think that if they couldn’t own it maybe they could’ve got the Treasury Department. But the Treasury Department had no legislative authority to take equity from AIG either. So what did they do? They came and opened up a discount window but created a so-called “independent trust” and they hired three trustees, and they insisted that these people were independent non-governmental actors, no conflicts of interests. But in crafting the trust agreement they slipped in a barely noticed provision of the trust agreement which said “Oh by the way, the Fed controls the trust completely, its terms and effectively the trustees.” Under anybody’s rendition of trust law this is not a valid trust, this is simply a ruse or an artifice for the Federal Reserve Bank. The second–
GAFFNEY: Which makes the proposition- David we’re just about out of time. Which makes what they did as I understand it from a technical, legal sense, money laundering.
YERUSHALMI: Exactly right, if you try to do something which is illegal, gaining control of ownership by the Federal Reserve Bank of AIG which was not authorized through a fraudulent artifice then you have violated- that’s a classic violation of money laundering.
GAFFNEY: You heard it here first at Secure Freedom Radio folks. We have evidence of criminal activity on the part of the man who is now Secretary of the Treasury and the man who was just reconfirmed as Chairman of the Federal Reserve Board. We will be pursuing this, David Yerushalmi, as I know you will be very closely. Thank you for joining us here at Secure Freedom Radio. We will be hopefully seeing some of these congressional auditors like Congressman Issa taking up this issue as well. Obviously this plot is continuing to thicken.
Shariah Finance, Criminal Wrongdoing in the AIG Takeover: Will the Special Inspector General for the TARP Funds Investigate the Illegal Trust?
by Frank Gaffney Yesterday we broke the story of possible criminal wrongdoing in regards to the bailout of AIG by Treasury Secretary Tim Geithner, then Director of the New York Federal Reserve, and Federal Reserve Chairman Ben Bernanke.
It appears that, through it’s 77.9% control of AIG’s equity and voting rights, the NYFed “sought to accomplish an illegal financial transaction through false means” by creating an “independent”: trust that was in fact not independent, placing it “in violation of federal anti-money laundering statutes (18 USC § 1956).” Here we elaborate a bit further, laying out the issue in the text of a letter submitted to Neil Barofsky, Special Inspector General for TARP (SIGTARP)– as the government takeover of AIG was accomplished using funds provided to the Troubled Asset Relief Program.
First, however, some context: Crucially, these facts were discovered while securities litigator David Yerushalmi and the Thomas More Law Center was representing Iraq War vet Kevin Murray in Murray vs. Geithner, et al. Mr. Murray is rightfully horrified that the very doctrines of the enemy he faced in combat would be promoted by the US government. Specifically, prior to the U.S. government’s takeover of the insurance giant AIG, the company was the world’s leading promoter of Shariah-compliant finance products and businesses. Bailing out and forcefully (and illegally) taking ownership of AIG put the American taxpayer in the position of advocating Shariah-compliant finance, which is troubling on many levels:
First, the Shariah authorities themselves tell us that Shariah is a holistic and indivisible whole and that you cannot carve out “business law Shariah” from any other of its constituent parts, like the law of jihad. And, you can see this in that part of Shariah called civil law or fiqh al-muamalat. According to Shariah, AIG cannot invest its takaful funds in a business that might rent space to a church, because that would violate the principle of not supporting any religion other than Allah’s. Further, AIG may invest its funds in a military armament factory for Muslim armies but not US or infidel armies. In other words, these laws which seemingly have nothing to do with business concerns or ethics but rather everything to do with theo-political concerns apply as forcefully to Shariah-compliant finance as the laws on interest. And, of course the reason for this we know because the Shariah authorities tell us: Shariah makes no distinction between religion, law, politics and war. It is all subsumed under Allah’s law called Shariah.
Second, the very Shariah authorities who have the legitimacy to be Shariah board members for such an international concern are themselves advocates of violent jihad or they are the students and disciples of such Shariah authorities. For example, AIG employs Mufti Imran Usmani, who is the son, student and disciple of Mufti Taqi Usmani, the very authority who sat on the Dow Jones Islamic Index Shariah advisory board for almost 10 years beginning in 1999 and who wrote a book and had it translated into English also in 1999 which called on western Muslims to rise up and engage in violent jihad against the West. Now, either Dow Jones was recklessly blind to this fact or willfully blind to it. Now, we see that AIG and the US Treasury have succumbed to the same reckless disregard of what are now quite obvious facts.
Shariah-compliant finance is the use of Shariah (Islamic law) to sell financial products that are approved by Shariah Islamic authorities. Principally this means that since interest is illegal under Shariah, interest payments are disguised as profits or payments for services rendered. While there is nothing wrong with the use of legal fictions, there is when the details of the guiding force—Shariah—is not disclosed to the investing public. Most problematic, is Shariah’s call for the murder of apostates and global jihad against the very infidels in the West buying these Shariah products. Among some financial institutions’ ‘Shariah advisors’ is Sheikh Yusuf al-Qaradawi (who moonlights as spiritual leader of the Muslim Brotherhood). He famously promoted Shariah-compliant finance as “jihad with money.”
For an in-depth look at Shariah-compliant finance, see David Yerushalmi’s Utah Law Review article, “Shariah’s ‘Black Box’: Civil Liability and Criminal Exposure Surrounding Shariah-Compliant Finance”. Look for a video tomorrow called, “Understanding the Takeover of AIG.”
The following is a letter sent by Mr. Yerushalmi to Neil Barofsky, Special Inspector General for TARP:
Dear Mr. Barofsky:
I am an attorney who has worked in the securities litigation arena for more than 25 years and I also serve as General Counsel to the Center for Security Policy, a highly-respected think tank in Washington, D.C., headed up by former Reagan administration official Frank Gaffney, which focuses on matters of national security. I have cc’d Mr. Gaffney on this email.
In this capacity, I am representing Kevin Murray in a First Amendment/Establishment Clause case against the Fed and the Sec. of the Treasury in his official capacity as head of the Treas. Dept. We have alleged that the takeover of AIG by the US Government encourages, promotes and indeed sustains AIG’s advocacy of Shariah-Islamic insurance products worldwide in violation of the First Amendment. The government filed a motion to dismiss which was denied. I have attached that opinion. Currently, we are in the throes of discovery and awaiting the court’s ruling on our motion to compel Secretary Geithner’s deposition, which was necessitated by the fact that the Fed and Treasury Rule 30(b)(6) deponents either testified inaccurately or feigned ignorance (no surprise to you I am sure). I have attached our Motion to Compel and our companion Response to the government’s Motion for Protective Order.
I write to you today because in the course of our discovery investigation, we effectively uncovered a fraudulent artifice which allowed the Fed/FRBNY and the Treasury (using TARP funds) to accomplish that which it could not accomplish legally at the time (pre-EESA)—the acquisition of 77.9% of AIG’s equity and voting rights. We discovered this because we were looking at “standing” issues relative to the Fed/FRBNY funds provided to AIG under the Credit Facility approved in the latter half of Sept. 2008. But, what we learned was quite simply astounding.
The FRBNY wanted more than just a standard debt deal; it wanted absolute control and ownership of AIG. But, it was illegal for the FRBNY to hold equity and the Treasury Dept. did not yet have the legislative authority, later granted under EESA, to do so. But this didn’t stop then-President Geithner or his general counsel Thomas Baxter. They crafted the AIG Trust to accomplish the same goal. But the Trust was transparently invalid and illegal for two fundamental reasons: One, the FED maintained absolute control over the Trust’s existence, its terms, and the Trustees through Section 1.03 of the Trust Agreement. This, as we explain in our Response papers attached, invalidates the trust; yet the government continues to speak about this as an “independent” Trust.
Two, the Fed/FRBNY could not take legal title to the equity but neither could the Treasury Department during this pre-EESA period. So, the FRBNY named the U.S. Treasury (in the Trust Agreement) as the beneficial owner. But again, as our Response papers point out, it is elemental trust law that a beneficiary must be a person or entity that can actually hold title. While the Treasury Department can hold title, the U.S. Treasury can no more hold title than a bank account – because that is what it is. You can deposit funds or assets into a depository account but the account cannot have “ownership” because it has no more authority to do so than a tree log. But, the FRBNY had to conceal the fact that this transaction was really for the benefit of the Treasury Department (something the Treasury Dept’s Rule 30(b)(6) deponent conceded under oath (also provided in our Response papers), because the Treasury department had no legal authority. And, even if it did, as under EESA a few months later, to grant the federal government voting rights would be to create a Gordian Knot of conflicts-of-interest, which is why presumably the legislation seeks to avoid the government from taking both the equity and exercising voting rights. But, at the time of the AIG Trust, there was absolutely no legislative authority for the Treas. Dept to take control of AIG. Yet, this is what the purportedly Trust accomplished.
In the world of finance, and you certainly know this as well as I, if you seek to accomplish an illegal financial transaction (“specified unlawful activity”) through false means (the Trust structure), you are in violation of federal anti-money laundering statutes (18 USC § 1956). I have attached a ppt presentation my office has prepared for oral argument in our case (although the criminal violation is not at issue insofar as we don’t have standing to raise it). Since this artifice included TARP funds, you, in your capacity as the SIGTARP, do. Please feel free to use this material as you deem best.
I will be in Washington, D.C. on Tuesday meeting with some Congressional leaders on this point, and would be more than willing to discuss this in greater detail.
David Yerushalmi. Esq.