The AIG Saga Continues: Treasury Hides $40 Billion Loss? (UPDATED Video)

Neil Barofsky isn’t making any friends over at Treasury right now, considering he is slamming their changing methodology (without telling the American public) that make the losses at AIG looks significantly less than what they were 6 months ago.

Is anybody surprised?  No; didn’t think so. I know I will have died and gone to heaven when the Federal Reserve no longer exists and the big wall street banks aren’t telling our government how it’s going to be anymore.

Treasury Hid A.I.G. Loss, Report Says

The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program.

“In our view, this is a significant failure in their transparency,” said Neil M. Barofsky, the inspector general, in an interview on Monday.

In early October, the Treasury issued a report predicting that the taxpayers would ultimately lose just $5 billion on their investment in A.I.G., a remarkable outcome, since the insurance company was extended $182 billion in taxpayer money in the early months of its rescue. The prediction of a modest loss, widely reported as A.I.G., the Federal Reserve and the Treasury rushed to complete an exit plan, contrasted with an earlier prediction by the Treasury that the taxpayers would lose $45 billion.

And as an added bonus, Neil Cavuto covers the story of the Treasury looking for employees that know their way around the Freedom Of Information Act specifics.  How’s that for transparency…?  The Judge weighs in.

Judge Napolitano – Treasury Dept. Secrets

DoJ Jumps On The Wealth Redistribution Bandwagon

It just never ends with these marxists.  When can we perp walk these folks out of the White House for breaking their oaths to the Constitution?

Justice Department steers money to favored groups

By: Byron York
Chief Political Correspondent
August 5, 2010

The Justice Department has found a new way to pursue civil rights lawsuits, using the powers of the Civil Rights Division not just to win compensation for victims of alleged discrimination but also to direct large sums of money to activist groups that are not discrimination victims and not connected to a particular suit.

In the past, when the Civil Rights Division filed suit against, say, a bank or a landlord, alleging discrimination in lending or rentals, the cases were often settled by the defendant paying a fine to the U.S. Treasury and agreeing to put aside a sum of money to compensate the alleged discrimination victims. There was then a search for those victims — people who were actually denied a loan or an apartment — who stood to be compensated. After everyone who could be found was paid, there was often money left over. That money was returned to the defendant.

Now, Attorney General Eric Holder and Civil Rights Division chief Thomas Perez have a new plan. Any unspent money will not go back to the defendant but will instead go to a “qualified organization” approved by the Justice Department. And if there is not enough unspent money — that will be determined by the Department — then the defendant might be required to come up with more money to give to the “qualified organization.”

The arrangement was used in a recently-settled case, United States v. AIG Federal Savings Bank and Wilmington Finance. The Justice Department alleged that AIG violated the Fair Housing Act and the Equal Credit Opportunity Act by allowing third-party wholesale mortgage brokers to “charge African-American borrowers higher direct broker fees for residential real estate-related loans than white borrowers.” The financial institution denied any wrongdoing, and there was no factual finding of wrongdoing. Nevertheless, under the terms of a March 19, 2010 consent decree, AIG agreed to pay $6.1 million to “aggrieved persons who may have suffered as a result of the alleged violations.”

That is standard procedure in such cases. But then AIG also agreed, in the words of the consent decree, to “provide a minimum of $1,000,000 to qualified organization(s) to provide credit counseling, financial literacy, and other related educational programs targeted at African-American borrowers.” The money would come from unspent funds in the victim-compensation fund. But if it turned out that, after paying off the victims, there was less than $1 million left in the victim-compensation fund, AIG agreed to “replenish the settlement fund so that it contains $1,000,000 for distribution for those educational purposes.”

The consent decree directs AIG to consult with the Justice Department on which “qualified organizations” could receive money, and it gives the Department the right to approve where the money will go. In any event, the money will go to groups who have no direct connection to the lawsuit and its allegations of discrimination.
Xochitl Hinojosa, a Justice Department spokeswoman, says no money has yet been given to organizations under the AIG agreement. But she adds that the funds, and those from other cases, will “go to ‘qualified organizations’ that have a mission that addresses whatever the harm is that was the subject of the litigation.”
The Department followed a similar procedure in another case, United States v. Sterling. In that suit, which was first filed in 2006, the Department accused a large California landlord of violating the Fair Housing Act and other laws by “refusing to rent to non-Korean prospective tenants, misrepresenting the availability of apartment units to non-Korean prospective tenants, and providing inferior treatment to non-Korean tenants in the Koreatown section of Los Angeles.”

The defendants did not admit any wrongdoing, and there was no factual finding of wrongdoing. Nevertheless, in a November 3, 2009 consent decree, the defendants agreed to pay $2.625 million to compensate alleged victims. On top of that, the consent decree stipulated that if there weren’t enough alleged victims on which to spend the $2.625 million, then what’s left “shall be distributed…to a qualified organization(s) mutually agreed upon by the United States and defendants…for the purpose of conducting fair housing enforcement or educational activities in Los Angeles County.”

Hinojosa says that in the Sterling case, $40,000 will be split between the victim fund administrator and a group called the Southern California Housing Rights Center. According to the Center’s website, its goal is to promote “freedom of residence” through the use of “education, advocacy and litigation.” Thus, money used to settle a lawsuit over alleged discrimination might well go to fund yet another lawsuit over alleged discrimination.

Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, recently learned about the new Justice Department practice and on July 8 sent a letter to Holder asking for an explanation. “While these settlements may appear reasonable on their face, I am concerned that this change in policy has the potential to divert compensation intended for victims to third party interest groups that were not wronged by the defendant,” Grassley wrote. “Absent proper safeguards and internal controls, this policy change could drastically alter the way victims are compensated and could set the Department down a path where third party interest groups are compensated to a greater level than victims. Moreover, as a staunch supporter of victims’ rights, I want to know what this change in policy means for individual victims and for advocacy groups that are both selected and not selected to serve as ‘qualified organizations.'”

Grassley asked Holder which suits have been settled or are being settled in this fashion, how much money is involved, and what guidelines apply to the settlements. “What, if any, qualifications are taken into consideration when determining whether an organization should be designated a ‘qualifying organization’?” Grassley asked. “What protections and safeguards are in place to oversee the use of funds by the ‘qualified organization’ to ensure that monies that could otherwise be used for victim compensation are used in a manner free of fraud, waste, and abuse?”

Grassley has not yet received an answer from Holder.

Republicans are particularly concerned that the “qualified organizations” money might end up with groups that are associated with the community organizing group formerly known as ACORN. Republican lawmakers want to avoid sending federal money to groups that Congress has deemed unsuitable to receive it.

But the concerns of Republicans, and perhaps some Democrats, go beyond ACORN and other activist groups. The new Civil Rights Division tactic represents a departure from a fundamental principle of such cases, which is the pursuit of justice on behalf of actual victims. “If the Department of Justice recovers funds for alleged civil rights violations, the money should go to compensate victims or to the Treasury,” says Bob Driscoll, who was a top official in the Civil Rights Division during the first two years of the George W. Bush administration. “The practice of the Civil Rights Division steering settlement funds to favored advocacy groups is at odds with both civil rights laws and common sense. If Congress wants to fund certain advocacy groups or set up grants for agencies to award in order to promote non-discrimination, it can. But allowing the Civil Rights Division to steer a defendant’s money to its ideological allies is offensive.”

Live Streaming: The Geithner, Paulson, AIG Show On Wed. 1.27.2010

Want to watch a couple of former Goldman Sachs executives squirm while they try to explain a cover-up? At 10am eastern, 1.27.2010, on C-Span 3, Timothy Geithner and Hank Paulson are going to be in House hearings about The NY Fed, AIG, Goldman Sachs, the SEC and ‘national security’.  Click the C-Span 3 link to watch it streaming live on Wed.

For those that need a bit more information, Judge Napolitano speaks with Lew Rockwell about the ever growing mess that Geithner is finding himself in with thousands of emails that cover up just how Goldman Sachs was paid 100 cents on the dollar for AIG debt. (Among other items.)

Geithner’s Fed Told AIG to Limit Swaps Disclosure (Update3)

Jan. 7 (Bloomberg) — The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

Glenn Beck, 12.03.09: Jobs Summit, AIG, Ben Bernanke, & The Federal Reserve

Judge Andrew Napolitano is hosting Glenn’s show today because of the live stage performance that Glenn is doing tonight.  The judge starts out this show interviewing Bruce Josten of the US Chamber of Commerce who has been excluded from the pResident’s jobs summit, and whose organization represents businesses that employ 115 Million Americans.  Judge Napolitano seamlessly goes into the red crayon math surrounding AIG and Ben Bernanke’s effort to get another four years out of the Congress with more interesting numbers that show that the dollar gained 13% in value before The Fed was installed, and has lost 92% since 1913 when control of monetary policy was turned over to the private banking cartel that makes money when they loan our money to us.  How STUPID is that?

Part 1:

(more…)

“Unintended Consequences”; Maurice Greenberg And C.V. Starr

On one side there are the Barney Franks and Federal Reserve Bankers trying to control the financial industry while not listening to those that understood what was coming.  On the other side are the entrepreneurs who are still going to try to make a buck before the country completely flips over to communist China.  In the middle?  Why that would be us, the hardworking taxpayer that cannot get the Congress or this administration to stop the stupidity even when they are warned of “unintended consequences”.  Remember the $186 Billion that went to save AIG, and how limiting bonuses was going to be a drain on companies that “We The People” now own?   Barney Frank has an answer for this too, and we are about to hear about it soon.

Ex-A.I.G. Chief Is Back, Luring Talent From Rescued Firm

Maurice R. Greenberg, who built the American International Group into an insurance behemoth with an impenetrable maze of on- and offshore companies, is at it again.

Even as he has been lambasting the government for its handling of A.I.G. after its near collapse, Mr. Greenberg has been quietly building up a family of insurance companies that could compete with A.I.G. To fill the ranks of his venture, C.V. Starr & Company, he has been hiring some people he once employed.

Now, Mr. Greenberg may have received some unintended assistance from the United States Treasury. Just last week, the Treasury severely limited pay at A.I.G. and other companies that were bailed out by taxpayers. That may hasten the exodus of A.I.G.’s talent, sending more refugees into Mr. Greenberg’s arms, since C. V. Starr is free to pay whatever it wants. (emphasis mine)

“Basically, he’s just starting ‘A.I.G. Two’ and raiding people out of ‘A.I.G. One,’ ” said Douglas A. Love, an insurance executive who has also hired A.I.G. talent for his company, Investors Guaranty Fund of Pembroke, Bermuda.

While America generally loves stories of entrepreneurs making a comeback, Mr. Greenberg’s success may be at the expense of taxpayers. People who work in the industry say that if he is already luring A.I.G.’s people, he may soon be siphoning off its business and, therefore, its means to repay its debt to the government.

“To me, it’s just going to be a matter of time before the valuation of what he’s building is greater than the valuation of A.I.G.,” said Andrew J. Barile, an insurance consultant in Rancho Santa Fe, Calif.

Barney Frank and his buddies are either too stupid or too dangerous to serve.  It’s time to dethrone the chairman of the banking committee, and abolish The Fed.

I’m feeling a post all about Barney is coming soon; how does a fascist liberal democrat end up in charge of the nation’s banks?

Somehow The Financial B*tchslap Is Becoming Normal

Are any of us surprised about this, the organizations involved, or that it is our money that is being used?

AIG breakup nets Wall Street $1 billion bonanza: report

NEW YORK (Reuters) – Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Reserve Bank of New York and American International Group Inc to help manage and break apart the insurer, The Wall Street Journal said on Wednesday, citing its own analysis.

Morgan Stanley could collect as much as $250 million, the newspaper said, citing banking experts and documents released by the New York Fed.

Bank of America Corp, private equity firm Blackstone Group LP, law firm Davis Polk & Wardwell LLP, accounting firm Ernst & Young, Goldman Sachs Group Inc and JPMorgan Chase & Co are among others that have or could get big paydays for helping dismantle AIG, the newspaper said.

To calculate dollar amounts, the newspaper said it tallied estimated fees for transactions already announced and those AIG is considering, planning or may be forced to pursue. It said it obtained assistance from Freeman & Co, Thomson Reuters and documents provided by the New York Fed.

According to the newspaper, the situation creates potential conflicts of interest in oversight by causing the government to employ many companies it regulates. (emphasis mine)

Imagine that?  I am pretty sure, (I would have to go back and look at screenshots), but every single one of the emphasised names has been on this little tiny blog out in left field when I wrote about The Fed and the Pilgrims.

First they used our money to save these guys and now they are using the money to pay fines and reward each other.

I hate capitalism on steriods…

Lawsuit Against Geithner And The Fed Allowed To Proceed

Lawsuit Against Geithner And The Fed Allowed To Proceed

(H/T Rescottish)

For those readers just joining us; AIG is heavily involved in Shariah finance, and our taxpayer money was being used to continue this practice.  Separation of Church and State anyone?  You may want to spend some time at Thomas More Law Center website.

Trouble Brewing for AIG and Federal Government; Challenge of AIG Bailout Allowed to Proceed

ANN ARBOR, MI – Proclaiming that times of crisis do not justify departure from the Constitution, Federal District Court Judge Lawrence P. Zatkoff allowed the lawsuit against Treasury Secretary Timothy Geithner and the Federal Reserve Board challenging the AIG bailout to proceed.  The lawsuit was filed last December by the Thomas More Law Center, a national public interest law firm based in Ann Arbor, Michigan, and attorney David Yerushalmi, an expert in security transactions and Shariah-compliant financing.

In his well-written and detailed analysis issued yesterday, Judge Zatkoff denied the request by the Obama administration’s Department of Justice to dismiss the lawsuit.  The request was filed on behalf of Treasury Secretary Timothy Geithner and the Federal Reserve Board – the named defendants in the case.  In his ruling, the judge held that the lawsuit sufficiently alleged a federal constitutional challenge to the use of taxpayer money to fund AIG’s Islamic religious activities.

Richard Thompson, President and Chief Counsel of the Thomas More Law Center, commented, “It is outrageous that AIG has been using taxpayer money to promote Islam and Shariah law, which potentially provides support for terrorist activities aimed at killing Americans.  Shariah law is the same law championed by Osama Bin Laden and the Taliban.  It is the same law that prompted the 9/11 terrorist attacks on our soil that killed thousands of innocent Americans.   We won this skirmish.  But the war to stop the federal government from funding Islam and Shariah-compliant financing is far from over.”

In its request to dismiss the lawsuit, the DOJ argued that the plaintiff in the case, Kevin Murray, who is a former Marine and a federal taxpayer, lacked standing to bring the action.  And even if he did have standing, DOJ argued that the use of the bailout money to fund AIG’s operations did not violate the Establishment Clause of the First Amendment.  The court disagreed, noting, in relevant part, the following:

“In this case, the fact that AIG is largely a secular entity is not dispositive: The question in an as-applied challenge is not whether the entity is of a religious character, but how it spends its grant. The circumstances of this case are historic, and the pressure upon the government to navigate this financial crisis is unfathomable.  Times of crisis, however, do not justify departure from the Constitution.  In this case, the United States government has a majority interest in AIG.  AIG utilizes consolidated financing whereby all funds flow through a single port to support all of its activities, including Sharia-compliant financing.  Pursuant to the EESA, the government has injected AIG with tens of billions of dollars, without restricting or tracking how this considerable sum of money is spent.  At least two of AIG’s subsidiary companies practice Sharia-compliant financing, one of which was unveiled after the influx of government cash.  After using the $40 billion from the government to pay down the $85 billion credit facility, the credit facility retained $60 billion in available credit, suggesting that AIG did not use all $40 billion consistent with its press release.  Finally, after the government acquired a majority interest in AIG and contributed substantial funds to AIG for operational purposes, the government co-sponsored a forum entitled “Islamic Finance 101.”  These facts, taken together, raise a question of whether the government’s involvement with AIG has created the effect of promoting religion and sufficiently raise Plaintiff’s claim beyond the speculative level, warranting dismissal inappropriate at this stage in the proceedings.”

General - PDF Links Click here to read Judge Zatkoff’s entire ruling.

The lawsuit, which was filed in December of last year in the U.S. District Court for the Eastern District of Michigan, is a constitutional challenge to that portion of the “Emergency Economic Stabilization Act of 2008” (EESA) that appropriated $40 billion in taxpayer money to fund and financially support the federal government’s majority ownership interest in AIG, which engages in Shariah-based Islamic religious activities that are anti-American, anti-Christian, anti-Jewish.

According to the lawsuit, “The use of these taxpayer funds to approve, promote, endorse, support, and fund these Shariah-based Islamic religious activities violates the Establishment Clause of the First Amendment to the United States Constitution.”

The lawsuit was brought on behalf of Murray, a former Marine who served honorably in harm’s way in Iraq to defend our country against Islamic terrorists.  Murray objects to being forced as a taxpayer to contribute to the propagation of Islamic beliefs and practices predicated upon Shariah law, which is hostile to his Christian religion.  He is being represented by Thomas More Law Center Trial Counsel Robert Muise and by David Yerushalmi, an associated attorney who is an expert in Shariah law and Shariah-compliant financing, as well as general counsel to the Center for Security Policy.

According to the lawsuit, through the use of taxpayer funds, the federal government acquired a majority ownership interest (nearly 80%) in AIG, and as part of the bailout, Congress appropriated and expended an additional $40 billion of taxpayer money to fund and financially support AIG and its financial activities.  AIG, which is now a government owned company, engages in Shariah-compliant financing which subjects certain financial activities, including investments, to the dictates of Islamic law and the Islamic religion.  This specifically includes any profits or interest obtained through such financial activities.  AIG itself describes “Sharia” as “Islamic law based on the Quran and the teachings of the Prophet [Mohammed].”

With the aid of taxpayer funds provided by Congress, AIG employs a “Shariah Supervisory Committee,” which is comprised of the following members: Sheikh Nizam Yaquby from Bahrain, Dr. Mohammed Ali Elgari from Saudi Arabia, and Dr. Muhammed Imran Ashraf Usmani from Pakistan.  Dr. Usmani is the son, student, and dedicated disciple of Mufti Taqi Usmani, who is the leading Shariah authority for Shariah-compliant finance in the world and the author of a book translated into English in 1999 that includes an entire chapter dedicated to explaining why a Western Muslim must engage in violent jihad against his own country or government.  According to AIG, the role of its Shariah authority “is to review our operations, supervise its development of Islamic products, and determine Shariah compliance of these products and our investments.”

An important element of Shariah-compliant financing is a form of obligatory charitable contribution called zakat, which is a religious tax for assisting those that “struggle [jihad] for Allah.”  The amount of this tax is between 2.5% and 20%, depending upon the source of the wealth.  The zakat religious tax is used to financially support Islamic “charities,” some of which have ties to terrorist organizations that are hostile to the United States and all other “infidels,” which includes Christians and Jews.

The Holy Land Foundation for Relief and Development, an example of an Islamic “charity” that qualifies for receipt of the zakat, was recently convicted by a federal jury for providing millions of dollars to Islamic terrorist organizations.  As a direct consequence of the taxpayer funds appropriated and expended to purchase and financially support AIG, the federal government is now the owner of a corporation engaged in the business of collecting religious taxes to fund interests adverse to the United States, Christians, Jews, and all other “infidels” under Islamic law.

The Thomas More Law Center defends and promotes America’s Christian heritage and moral values, including the religious freedom of Christians, time-honored family values, and the sanctity of human life.  It supports a strong national defense and an independent and sovereign United States of America.  The Law Center accomplishes its mission through litigation, education, and related activities.  It does not charge for its services.  The Law Center is supported by contributions from individuals, corporations and foundations, and is recognized by the IRS as a section 501(c)(3) organization.  You may reach the Thomas More Law Center at (734) 827-2001 or visit our website at www.thomasmore.org.

Related Story:

Texas: Leaders of Muslim Charity Are Sentenced

On The Hunt…

Something is afoot and I wanted to share the beginning of the trail with you….stay with me.

Late last night, I read that Edward Liddy was stepping down as AIG’s chief, and then found the following article this evening.

AIG chief Edward Liddy to step down – without being paid

Edward Liddy, the finance industry executive brought out of retirement by the US government to run the nationalised insurer AIG, is to quit as soon as a replacement can be found, foregoing the chance of being paid for his work.

After eight months at the centre of political rows and public opprobrium over the spiralling cost of the AIG bail-out, Mr Liddy said last night he wanted to go back into retirement.

His departure leaves the Obama administration with the headache of filling one of the toughest jobs in the government-controlled sector of the finance industry, or more accurately, two of the toughest jobs, since Mr Liddy recommended that AIG split the roles of chairman and chief executive.

And then I ran across this:

Evercore’s Altman to Give Up CEO Post

BlackRock Inc. co-founder Ralph L. Schlosstein is expected to take over as chief executive of Evercore Partners Inc. from Roger C. Altman, who will remain as executive chairman but give up daily management of the firm, according to people familiar with the matter.

The planned changes, which have yet to be approved by Evercore’s board, are designed to expand the firm’s asset-management unit and other areas outside its core advisory practice. The firm has made a number of investments in that area, including the recent acquisition of a Bank of America Corp. unit that manages employee benefit plans.

Mr. Schlosstein is a veteran asset manager, having co-founded BlackRock with Laurence D. Fink back in 1988. Messrs. Altman and Schlosstein have been close for most of their careers. Both worked at Lehman Brothers Holdings Inc. and served in the administration of President Jimmy Carter.

Mr. Altman, who started his career at Lehman Brothers in the 1970s, is one of the few remaining Wall Street bankers who helped transform the practice of mergers and acquisitions from a backwater into a highly sophisticated and profitable business.

In 1996, he started Evercore, using his political and banking connections to build one of Wall Street’s more successful boutique investment banks. The firm derives most of its revenue from advising clients on deals and corporate restructurings. In addition to its asset-management arm, Evercore also operates a small private-equity business, an area where it has stumbled.

Evercore has weathered the financial crisis largely unscathed, and its stock has risen nearly 20% over the past year. The firm ranked 10th among Wall Street firms by the total dollar volume of the transactions it advised on in the first quarter, according to Thomson Reuters.

In 1988, Mr. Schlosstein left Lehman, where he headed the firm’s mortgage-backed-bond group, and co-founded BlackRock with Laurence D. Fink. BlackRock, where Mr. Schlosstein served as president until last year, manages more than $1 trillion in investment assets. The firm has recently drawn attention for its role helping the government design programs for managing banks’ distressed assets.

Go here for more on Blackrock and their interesting business practices.

And THEN I saw this just a few minutes later:

Xerox CEO Mulcahy retiring, Burns to replace her

NEW YORK (AP) — Xerox Corp. said Thursday that Chief Executive Anne Mulcahy will retire July 1, to be succeeded by Ursula Burns, the printer and copier maker’s president. She will make Xerox the largest U.S. company to be headed by a black woman.

The move has been in the works since Burns, 50, became heir apparent and company president in April 2007.

No company in the Fortune 500 has ever had a black woman as CEO, according to Daniel Kile, a spokesman for the magazine.

Burns, who joined Xerox in 1980, takes the top job in a period of renewed stress on the company, as the recession crimps spending on printer equipment and supplies. Xerox said late last year it would cut 3,000 jobs to reduce costs, and the company’s first-quarter revenue fell 18 percent.

Mulcahy, 56, will continue to chair the Xerox board.

Okay – please explain to me the odds of what you have just read.  Three big name chiefs announcing “retirement” on the same day?  I wonder how many more I will find in the next few days, and on whose orders they are leaving/moving around?

I will keep you posted as to what I uncover down the rabbit hole.

The Back Story Of The CEO Meeting With Barack Obama

The Back Story Of The CEO Meeting With Barack Obama

I have so found someone after my own heart, and readers, you are going to love this writer, but we need to cover something else first.  Bambi and the Bankers.

On March 27th, a group of bank CEOs met with the usurper-in-charge at the White House and now the back story to that meeting is starting to leak out.  I was wondering what the newspapers were going to print about this meeting, knowing full well that we probably could not believe a word of it because at this point it is all smoke and mirrors with AIG as the front piece and funnel for American taxpayer dollars to every other bank, and the American aristocracy milling in the shadows.  Lovely touch; the comment about pitchforks – intended to get your blood racing and make you feel like Bambi is actually on the side of the American public.

From Politico:

Inside Obama’s Bank CEOs Meeting

The bankers struggled to make themselves clear to the president of the United States.

Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees – and, by extension, to themselves.

“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”

But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation, and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”

“My administration,” the president added, “is the only thing between you and the pitchforks.”

The fresh details of the meeting – some never before revealed – come from an account provided to POLITICO by one of the participants. A second source inside the meeting confirmed the details, and two other sources familiar with the meeting offered additional information.

The accounts demonstrate that despite the public comments on both sides that the meeting was cordial, the tone in the room was in fact one of mutual wariness. The titans of finance – men used to being the most powerful man in almost any room – sized up a new president who made clear in ways big and small that he expected them to change their ways.

There were signs from the outset that this was a business event, not a social gathering. At each place around the table sat a single glass of water. No ice. For those who finished their glass, no refills were offered. There was no group photograph taken of the CEOs with the president, which typically happens at ceremonial White House gatherings, but not at serious strategy sessions.

“The only way they could have sent a more Spartan message is if they had served bread along with the water,” says a person who attended the meeting. “The signal from Obama’s body language and demeanor was, ‘I’m the president, and you’re not.’”

Just for your information, here are the names of the CEOs in the meeting.  Please note that the House of Morgan and the House of Mellon among others was in attendance.

Jamie Dimon, JP Morgan Chase
Ken Chenault, American Express
John Koskinen, Freddie Mac
Ronald Logue, State Street
Robert Kelly, BONY-Mellon
Rick Waddell, Northern Trust
James Rohr, PNC
Lloyd Blankfein, Goldman
John Mack, Morgan Stanley
Vikram Pandit, Citi
John Stumpf, Wells Fargo
Cam Fine, Independent Community Bankers
Edward Yingling, ABA
Richard Davis, US Bank
Ken Lewis, Bank of America

Now let’s get to what I really wanted to share.  A few weeks ago I had a choice to start digging on AIG or go find the “spider” (Pilgrim Society).  I am going to finish what I started with AIG, their board, their owners, yada, yada, yada…but wanted to introduce you to Justice Litle, Editorial Director, Taipan Publishing Group.

The AIG Connection – Far Worse Than You Think

The Real Story Behind AIG

Back in my student days, I had the privilege of living abroad in three countries. (I would say studying abroad, but there wasn’t a whole lot of studying taking place.)

For one of those semesters I was based in a little town called Olomouc, on the Morava River in the Czech Republic. This was in the mid-nineties, when Eastern Europe was still amazingly cheap. You could get a seven-course meal in Prague, complete with drinks and dessert, for under 10 dollars. The best beer in the world was less than 50 cents a pint. A number of Americans working for U.S. corporations in Prague were earning $30K a year in after-tax income, saving $20,000 of that, and using the other ten grand to live like kings.

One of the interesting things we quickly discovered about Olomouc – a fairly provincial town at the time, and a far cry from Prague – was the surprising number of bars, jewelry stores and restaurants. The locals had very little money for the most part. Besides students and backpackers, who was frequenting these places? The setup just didn’t make sense.

A local Czech we befriended quickly clued us in. These were real businesses – as we knew from firsthand acquaintance with the bars and restaurants, though not the jewelry stores – but the real “business” wasn’t taking place up front. It was happening in the back.

Most of the high-end joints in Olomouc were little more than mafia fronts.

The whole town had a very strong organized crime presence. (Again, this was well over a decade ago. I don’t know if it’s the same way now.) Once we knew what to look for, the clues were easy to spot. On the battered San-Francisco-style trams that ran down the cobblestone streets of Olomouc, for example, you would notice that all the locals wore basically the same clothing… drab, post-communist-era type stuff… and then you would spot the bald guy with the black gloves and full-length Armani trenchcoat, talking on his new-model cell phone.

Or if you watched the cars go by on the main thoroughfare, 19 out of 20 would be durable little Skodas – and then a shiny new Mercedes Benz would hulk along. That kind of thing.

So what does this have to do with our Wall Street detective story?

Well, as it turns out, the Washington guys seem to have taken a page from the Czech mafia guys. AIG has been made into a “false front,” like all those Olomouc joints – the real business of which is to hand out taxpayer dollars under the table.

Flashback, September 2008

The plot stretches back to that fateful weekend in September 2008 when Lehman Brothers collapsed. (I’ll never forget it – I was in Paris at the time, wondering what the hell just happened and how soon I could get home.)

Immediately after letting Lehman go bust, the Fed and Treasury realized the magnitude of their error and announced a massive bailout of AIG. The amount was crazy – if I recall correctly, something like $80 billion right off the bat. (That number has since grown much bigger.)

So here’s a picture of what AIG did with that money, and how they got into the “false front” business of spreading cash around to other players.

As soon as the bigwigs at AIG realized they were hosed, they called up the Treasury and the Fed (Hank Paulson at the time, and Ben Bernanke still) and probably said something like the following:

Listen, we’ve got payout exposure to credit default swaps and other exotic derivatives out the yin-yang here – hundreds of billions’ worth – and if you let AIG go the way of Lehman, it’s going to be full-on financial armageddon. You had better bail us out right now if you don’t want to see the global economy vaporized.

Of course, Paulson and Bernanke gave in, authorizing an insanely massive lump sum of funds to go to AIG.

So what do you think AIG did with the money? They gave it to the counterparties on the other side of their trades.

As soon as the government stepped in to bail out AIG lock, stock and barrel, the AIG execs stopped caring about profitability. The game of being a viable business was toast, and the taxpayer was on the hook for everything. So it looks like AIG’s traders were ordered to unwind many of their mind-bendingly complex deals at fire-sale prices that were massively favorable to the parties on the other side of the trades.

Highly Efficient

Now, if you’re a muckety-muck high up in the Treasury Department, think how efficient this setup is.

What you really want to do is write big fat taxpayer-funded checks for all your buddies. Billions for Goldman, billions for Morgan Stanley, heck, billions for those European guys who are always so nice when you hop across the pond… billions for everyone.

The trouble is, writing all those checks would be a public relations disaster. People would be furious. Congress would go crazy. More than likely they’d give you major grief and try to block your efforts, just like they did with the multiple tries it took to pass the original TARP plan.

So writing many checks is a political no-go… but what if you could just focus your bailout efforts on ONE player? What if you could shovel hundreds of billions into one overly complex black hole… and then let all that money trickle out to your friends via the back door?

AIG offered the perfect set-up for this.

  • As a huge global insurance firm, people intuitively accepted the notion that an AIG failure would be devastating to the financial world.
  • As a firm with notoriously complex and impossible-to-read accounting records, AIG also acted as the perfect sinkhole in terms of being able to plausibly pour hundreds of billions in.
  • As a scapegoat, AIG was almost perfect too. Instead of blaming all of Wall Street for this whole toxic mess, AIG allowed the powers that be to mop up all the public outrage and focus it on just one player.
  • Last but not least, the whole $165 million bonus flap was icing on the cake. Congress got so lathered up over the bonuses, they forgot to notice that AIG itself had become a massive “false front” conveniently used to funnel billions of dollars to every major counterparty on Wall Street that had connections to AIG. (And that counts as most all of them.)

Sleight of hand, folks, sleight of hand. Kind of beautiful in a sick way, no? They figured out how to concentrate all the outrage into one convenient spot, deflect it onto a trivial issue, and set up a powerful funnel that would let the real handouts (from AIG to various counterparties) go virtually undetected.

Bravo, sirs. Bravo.

Make sure to go over and read the whole post and check out the included links.  I definitely have a grin on my face.

Here is a little bit of information about AIG to get your started, and just pick one name and click on the relationships (i.e. Richard Holbrooke), and look at all the people and companies owned by the aristocracy in the background.

INSIDERS ON BOARD OF DIRECTORS AT American International Group, Inc. (AIG)

Name (Connections)Board RelationshipsTitleAge
Edward Liddy 202 RelationshipsChairman and Chief Executive Officer60
Edmund Tse 39 RelationshipsSenior Vice Chairman, Senior Vice Chairman of Life Insurance, Head of AIGs Worldwide Life Insurance Operations, Director, Chairman of American International Assurance Company Ltd and Chief Executive Officer of American International Assurance Company Ltd69
Paula Reynolds 95 RelationshipsVice Chairman and Chief Restructuring Officer51
Win Neuger CFA46 RelationshipsChairman of AIG Investments and Chief Executive of AIG Investments58
Louis Iglesias 16 RelationshipsChairman of AIG Risk Management Group and Chief Executive Officer of AIG Risk Management Group
Joseph Boren 16 RelationshipsChairman of AIG Environmental and Chief Executive Officer of AIG Environmental
Anastasia Kelly 76 RelationshipsVice Chairman of Human Resources, Vice Chairman of Corporate Communications & Corporate Affairs, Vice Chairman of Legal, Vice Chairman of Corporate Affairs, Executive Vice President, Senior Regulatory & Compliance Officer, General Counsel and Director58

Other Board Members on Board of Directors*

Name (Connections)Board RelationshipsPrimary CompanyAge
Morris Offit 65 RelationshipsAmerican International Group, Inc.71
George Miles Jr.167 RelationshipsEQT Corporation65
Michael Sutton 46 RelationshipsAllegheny Energy Inc.67
Richard Holbrooke 499 RelationshipsPerseus, L.L.C.
James Orr III62 RelationshipsGevity HR Inc.65
Martin Feldstein Ph.D.140 RelationshipsEli Lilly & Co.68
Virginia Rometty 16 RelationshipsInternational Business Machines Corp.50
Stephen Bollenbach 209 RelationshipsAlba Caracas65
Suzanne Johnson 227 RelationshipsGoldman, Sachs & Co.50
Dennis Dammerman 68 RelationshipsGEFS (Suisse) AG62
*Data is at least as current as the most recent Definitive Proxy.
And one more note, this particular chart was published about an hour before I went looking for it….timing and karma.

The Center of The Web; Let’s Start With The Lawyers

(4/2/09 Author’s note: Debevoise?  Nice Browser!  And for Debevoise and Davis – why are you looking at the Bilderberg list when the Pilgrims are running the show?)

(4/1/09 Author’s 2nd note: Davis – you should donate to the Monster!)

(Author’s Note: Please refresh the page from time to time and go to the end to see the who’s who that has come by to see this post.)

On New Year’s Eve of 2008, I published the first article in the series ‘America’s Economic Collapse: An Intricate Web of Money, Power, and Political Agendas’ which I then moved to The Fed page at the top of this blog.  In that series, I wrote about how the Federal Reserve System was formed, who was behind it, and how these same people moved onto start the Council on Foreign Relations and quite a few other big name players in the game.  I stated somewhere in those four articles that I had not yet found the center of the web.  A few weeks ago I stumbled on something that sent up red flags and now I am convinced I have found the center, but the scope of the web and it’s various threads is going to do what the Socialism series and The Fed series did not; your head will explode and many of the nagging questions you are having about everything currently happening in the world are going to be answered.  The scope of the web is so great,  I have decided to start writing about the different cast of characters so that when I present the web, you will already have some of the background.  These particular characters are just the facilitators, not the main spiders.  Let me just add that it is my belief that the Bilderberg Group, though powerful, is a red herring to attract and distract.

Debevoise & Plimpton have spent some time on my site and they were the first to let me know that something was afoot, and when Davis, Polk & Wardwell showed up, the confirmation was in hand.  The attacks my site has suffered in the past two weeks are probably nothing to which will probably occur as soon as I post this, so be advised that if my site goes down or is running slow, it is because of the web.  The areas bolded are my emphasis, and are your guideposts to the players involved.

Let’s meet Debevoise & Plimpton.

From Wikipedia:

Debevoise & Plimpton LLP is a prominent international law firm based in New York City. Founded in 1931 by Eli Whitney Debevoise and William Stevenson, Debevoise has been a long established leader in corporate litigation and large financial transactions. In recent years, its practice has taken on an increasingly international component. The firm currently employs about 680 lawyers in eight offices throughout the world.

Debevoise & Plimpton is mentioned several times in the TV show The West Wing. In the show, White House Deputy Chief of Staff Josh Lyman’s father was a partner at Debevoise. Additionally, an assistant attorney general in the show was a Summer Associate at Debevoise and a prospective White House counsel candidate was interviewing for a position as an Associate at Debevoise.

Controversial Georgian businessman, Badri Patarkatsishvili spent the six hours of his final day at the offices of Debevoise & Plimpton, meeting his lawyer Lord Goldsmith QC, shortly before being driven to Berezovsky’s office in Mayfair and then to his country mansion in Leatherhead, Surrey where he collapsed and died with heart attack at the age of 52.

Some of Debevoise’s clients include: American Airlines, AXA, BNP Paribas, CNN, The Coca-Cola Company, Delta Airlines, Deutsche Bank, Gap, MetLife, JPMorgan Chase, NBC, SONY, The New York Times Company, Goldman Sachs, National Football League, National Hockey League, Prudential Financial, Shell Oil Company, Siemens, Universal Music Group, Verizon, Yahoo!, and Hasbro.

From FundingUniverse:

Company History:

Debevoise & Plimpton is one of the United States’ major law firms. Clients such as American Airlines, the Democratic National Committee, the National Football League, and The New York Times receive advice from the Debevoise firm on intellectual property, tax, litigation, mergers and acquisitions, and other legal specialties. Although the firm has relatively few foreign offices, its far-flung international practice makes Debevoise & Plimpton a major player in the globalization of the world’s economy. It also is a leading provider of pro bono services to those with limited resources.

Origins

In 1931 Eli Whitney Debevoise and William Stevenson, two associates at the New York law firm of Davis Polk & Wardwell, decided to form their own partnership. Two years later, Francis Plimpton joined them, and in 1936 Robert G. Page became the fourth name partner.

Initially the new partnership received work from some of New York City’s large law firms, including Davis Polk & Wardwell, Sullivan & Cromwell, and Milbank Tweed. Its early work for Phelps Dodge increased until it became their first corporate client. The firm’s bankruptcy work for Kreuger & Toll in 1932 also helped it get started. The partnership also represented the Southwestern Bell Telephone Company in one of the first public stock offerings issued under the newly enacted Securities Act of 1933.

Starting in the Depression years, lawyers at the young firm did considerable reorganization work for the Florida East Coast, Central of Georgia, Norfolk Southern, New Haven, and Erie railroads, and also public utilities such as American Power & Light and General Gas & Electric. The 1930s also marked the beginning of the firm’s service for the St. Joe Lead Company that had mines in Missouri and New York State and also for the Consolidation Coal Company that eventually became the nation’s major bituminous coal company. In 1937 the John Hancock Mutual Life Insurance Company came to the partnership to request assistance in a private securities placement, a new form of financing that was developed to avoid the strict requirements of public securities. Similar work for other insurance companies became a prominent part of the law firm. By 1940 the partnership gained as clients the investment counsel firm of Scudder, Stevens & Clark and also Tampax Inc., later renamed Tambrands Inc.

During World War II, the law firm lost several lawyers as they left to support the war effort. For example, Stevenson left to head the Red Cross. Although Debevoise remained with the firm, he spent many hours as the chairman of an Alien Enemy Hearing Board in New York City. At the time, because the firm’s attorneys were not specialists, they were able to handle work left by those who had joined the military. After the firm merged in 1943 with Hatch, McLean, Root & Hinch, it had 13 lawyers. At the end of 1944, the number had grown to 19 lawyers, increasing further as veterans returned in 1945.

Postwar Practice

In 1948 the young law firm gained American Airlines as a major client when it decided to move its headquarters to New York City from Washington, D.C. As the airline’s general counsel, the firm earned at least $150,000 in annual income, and American Airlines remained a client for several decades.

In the early years of the Cold War, firm partner Edward C. McLean defended Alger Hiss in what D. Bret Carlson called ‘undoubtedly the most publicized matter ever handled by the firm.’ Accused in 1948 by Whitaker Chambers of transmitting government documents to the Russians in the 1930s, Hiss demanded a public trial to defend himself. Although he was never convicted of spying, in 1949 he was convicted of perjury in a controversial case during the second Red Scare.

After World War II, the firm’s reputation increased from its partners’ work in government, higher education, and business. Phelps Dodge Corporation chose Page as its president in 1947. Debevoise became counsel to the high commissioner of West Germany in 1951 and served as the acting deputy high commissioner in 1952 and 1953. Stevenson was the American ambassador to the Philippines and later became the president of Oberlin College. In the 1960s Presidents Kennedy and Johnson appointed Plimpton as ambassador to the United Nations. In 1956 the law firm represented The Ford Foundation when it completed its first public offering of stock of the Ford Motor Company. According to George Lindsay, in the firm’s history, ‘That was the largest financing that had ever been held up to that time and was replete with new inventions in the law,’ and thus involved complex negotiations among the company, foundation, and Ford family members.

In 1959 Debevoise & Plimpton became general counsel for the First National City Trust Company that administered the pension fund of the affiliated First National City Bank, later renamed Citibank. In 1961 the law firm moved its offices to a new building at 320 Park Avenue constructed for the bank and trust company. After the trust company merged with and became a department of the bank, the law firm continued as its general counsel. Meanwhile, Debevoise & Plimpton represented the Rockefeller family in various matters, including the transition of Rockefeller Institute into Rockefeller University and the family’s real estate dealings through the Rockefeller Holding Company.

Growth of the Firm in the 1970s and 1980s

In 1980 the firm accepted a request by Chrysler to serve as its lead counsel in its struggle to survive financially. Following the Arab oil embargo of 1973, many Americans chose small foreign cars that used much less gas than did American cars. Thus, Chrysler lost market share, acquired a large inventory of unsold cars, and received over 400 loans from American, Canadian, Japanese, and European banks and other entities by the end of the decade.

In 1979 Congress had passed a law guaranteeing loans to Chrysler, but the automaker had to adhere to strict requirements for the law to be implemented. Debevoise partners, with the help of more than one-fourth of all its associates, helped Chrysler understand the complex federal law and then restructure its old loans and gain new ones. Although its operations were disrupted by a major fire in Debevoise’s New York office, the firm finally helped Chrysler avoid bankruptcy and eventually recover in what James B. Stewart described in 1983 as ‘the largest corporate rescue mission ever attempted.’ The firm continued to do work for Chrysler on other matters in the years to come.

In 1982 Debevoise & Plimpton joined the growing number of law firms with offices in Washington, D.C. The number of lawyers in the nation’s capital increased from 11,000 in 1972 to 45,000 in 1987.

In the 1970s and 1980s, Debevoise & Plimpton grew rapidly. From its origins with 2 lawyers in 1931, it had grown to employ 102 in 1970. By 1980 it employed 147 lawyers, and then in the 1980s it grew even faster, reaching a total of 368 lawyers at the end of 1990. Important corporate clients at the time included Prudential, Aetna, John Hancock, Equitable Mutual Life, Mass Mutual, American Airlines, KLM Royal Dutch Airlines, St. John Minerals, Continental Corporation, Cooper Laboratories, Wheelabrator Frye, and Kelso and Company. The firm also represented the Ford, Russell Sage, and Hartford Foundations and Columbia and Princeton Universities.

Debevoise & Plimpton’s growth was part of a general trend that transformed many law firms. In the late 1970s two major developments spurred the changes. First, the U.S. Supreme Court ruled that professional restrictions on advertising violated the First Amendment’s free speech provision. That led to more lawyers and other professionals openly soliciting clients. Second, legal journalism changed dramatically with the publication of two new periodicals, The National Journal and The American Lawyer, both of which covered the internal management practices and finances of law firms. With such data available, and attorneys becoming more aware of salaries and opportunities elsewhere, lateral hiring increased significantly in the 1980s as large law firms added literally hundreds of lawyers to their ranks. Intense competition for top talent, more formal management methods, the use of public relations experts, and the use of management consultants were also part of the transformation of America’s large law firms.

Practice in the 1990s and Beyond

In 1992 Debevoise & Plimpton represented Infinity Broadcasting Corporation when it became a public corporation. In 1996 the law firm helped the broadcasting corporation acquire TDI Worldwide, Grannam Holdings, and Alliance Broadcasting, then assisted Infinity when it was in turn acquired by Westinghouse Electric Corporation.

The law firm began to take on more work representative of the Information Age. Starting in 1994, it helped the Internet service provider CompuServe deal with the U.S. Patent and Trademark Office’s rules concerning online intellectual property rights. Around 2000, the firm was involved in other major developments related to digital technology and the Internet. It represented The New York Times, Time Inc., and Newsday in Tasini v. New York Times, an important case that dealt with publishers’ rights to disseminate their work online. Its media and technology practice also served clients such as the National Football League, the National Basketball Association, Dow Jones, Reuters, The Washington Post, Times Mirror, CNN, and USA Today that were concerned about the proper role of the Internet.

Like several other law firms, Debevoise & Plimpton cut the number of attorneys that it employed during the economic downturn of the early 1990s, decreasing from 397 attorneys in 1992 to 376 in 1993, when 307 worked in New York and the rest in branch offices in Washington, D.C., Paris, Los Angeles, London, and Budapest. According to Of Counsel of May 3-17, 1993, Debevoise & Plimpton assisted the Mexican telephone company Telmex and Bancomer, a large Mexican bank, when they were transformed from government to private businesses. The firm also participated in developing the oil and natural gas resources of Russia’s Sakhalin Island and in the privatization of the Prague Ruzyne International Airport. Later the firm closed its offices in Los Angeles and Budapest and opened its Moscow office.

In a 1996 survey by the Volunteers of Legal Service, Debevoise & Plimpton was one of the top New York law firms for pro bono work; it was one of only four New York firms that averaged 91 to 110 hours per lawyer and had increased its pro bono totals from 16,085 hours in 1995 to 30,714 hours in 1996. Debevoise & Plimpton’s pro bono activities ranged from international human rights and poverty law cases to prisoners’ rights, civil rights, and various environmental, educational, arts, and other nonprofit concerns.

The firm’s Washington, D.C., office, with about 30 lawyers in the late 1990s, operated differently from other firms. From that office’s 1982 beginning, ‘We had an odd-duck philosophy,’ said partner Ralph Ferrara in Of Counsel on October 18, 1999, explaining that the firm did not do legislative work for its corporate clients. He also said, ‘Washington lawyers do trade regulatory work. … We do [Securities and Exchange Commission] stuff, but it’s not regulatory, it’s disclosure.’ The Debevoise office represented financial, telecommunications, and other business clients in arranging mergers and dealing with complex litigation. For example, in the 1990s it helped insurance companies like New York Life and John Hancock deal with unprecedented class actions filed by policyholders.

In 1999 Debevoise & Plimpton provided counsel in over 135 mergers and acquisitions worth more than $435 billion. Merger and acquisitions clients included 1) the Jim Henson Company (Jim Henson was the creator of the Muppets) when it was purchased by EM.TV & Merchandising AG, 2) Lawrence Dolan in his purchase of The Cleveland Indians, 3) and Chrysler in its $38 billion merger with Germany’s Daimler-Benz. Fashion house Prada, LG Electronics, GlobeNet Communications, and AXA Financial, Inc. also used the Debevoise firm during 1999.

The firm’s litigators in 1999 won victories for Gap Inc. in a copyright/trademark case, General Electric in both British and American courts, and Showa Aluminum Corporation in a patent trial. It also represented American Home Products Corporation, American Express, Citibank, MetLife, the Council for Tobacco Research, and American Lawyer Media in litigation cases.

According to The American Lawyer, Debevoise & Plimpton was ranked as the nation’s 37th-largest law firm in 1999, based on its annual gross revenues of $269 million. Its revenue per lawyer was $670,000, which placed it at number 13 nationally, and its profits per partner of $1.225 million ranked the firm as number eleven in the United States. With an 80 percent increase in its profits per partner since 1990, the firm was considered one of the ‘Winners of the Nineties.’ Debevoise & Plimpton also was the nation’s 18th most prestigious law firm, according to a survey of 4,800 lawyers published in 2000 in the third edition of the Vault.com Guide to the Top 50 Law Firms. These statistics and surveys indicated that Debevoise & Plimpton was well prepared to confront the numerous legal challenges of the new millennium. However, the firm needed room to expand, so it planned to move its New York headquarters in summer 2001 to newly built offices at 919 Third Avenue.

Now aren’t you glad you know that?  Probably not but it needs to be understood that there is no conspiracy theory here, just facts and you decide.  Next up, the parent of Debevoise & Plimpton; Davis, Polk & Wardwell who should be paying my server’s fee considering how much time they have spent here.

From FundingUniverse:

Davis Polk & Wardwell

Company History:

Davis Polk & Wardwell is one of the largest U.S. law firms, ranked by its annual gross revenues. It represents some of the world’s largest corporations, including J.P. Morgan and Morgan Stanley Dean Witter, the modern companies founded by J. Pierpont Morgan, who first became a Davis Polk client in the late 1800s. The law firm’s other clients are found all over the world, including EMI Group in the United Kingdom, Telefonica in Spain, and Korea Electric Power. It consistently ranks as one of the top law firms involved in corporate and financial transactions, with expertise in securities, banking, taxation, antitrust, government regulation, and most areas of modern business law. Its litigation practice includes defending RJR Nabisco in much publicized lawsuits filed by smokers. In addition to its New York City headquarters, the firm maintains offices in Menlo Park, California, to serve Silicon Valley clients; offices in Washington, D.C., to help clients deal with government laws and regulations; and five overseas offices (London, Paris, Frankfurt, Hong Kong, and Tokyo) in response to the increasingly globalized economy. The firm’s legacy includes participation in major American court cases, probably the most famous being the 1954 case of Brown v. the Board of Education of Topeka, Kansas. That was also the last of 140 U.S. Supreme Court cases argued by John W. Davis, the most of any 20th-century lawyer at that time.

Origins and Expansion in the Early 20th Century

Davis Polk & Wardwell’s roots began in 1849 when Francis N. Bangs started a law practice in the days when relatively few businesses incorporated. Francis L. Stetson graduated from Columbia, fought against the corruption of New York City’s Democratic Party Boss Tweed, and then served New York City as its assistant corporation counsel before he joined Bangs as a partner in 1880.

Stetson brought the young partnership some of its most important early clients, most notably J.P. Morgan & Company, named for J. Pierpont Morgan, the famous banker and big businessman. In 1895, for example, Stetson went with Morgan to the White House to buy $65 million worth of bonds to help the federal government survive the depression that had started in 1893. In 1901 he helped Morgan create the United States Steel Corporation, the nation’s first billion-dollar corporation, which survived in the late 20th century as USX. Stetson in 1901 also served Morgan when he set up the Northern Securities Company, a railroad trust that later was split up because it violated the 1890 Sherman Antitrust Act. Stetson helped J.P. Morgan & Company on various mergers.

In addition, Stetson after 1900 reorganized the United States Rubber Company and helped establish the International Harvester Company. Thus ‘Stetson became one of the most prominent corporation lawyers in the nation,’ reported author William H. Harbaugh. ‘He pioneered in transforming the corporate mortgage from a simple real estate lien into a complex agreement running to as many as 200 pages, and he eventually became the country’s foremost specialist in corporate reorganization.’

Although Stetson had partners and associates at his firm, called Stetson, Jennings & Russell, he was not interested in expanding his partnership. The firm from 1896 to the start of World War I in 1914 had no more than seven partners. Its average annual income between 1911 and 1914 was just $287,197.

Younger attorneys became frustrated since they did the bulk of the routine legal work without receiving adequate compensation. The time was ripe for a major change, which happened in 1919, after Stetson had become senile and Jennings and Russell partially retired. The younger generation created the first ‘true partnership,’ according to Harbaugh, under such leaders as Allen Wardwell, who had joined the firm as a clerk after graduating from Harvard Law School in 1898.

Acting as the de facto head of the law firm, Wardwell recruited two key men in 1920. First he negotiated with Frank Polk, who in turn wrote to his friend John W. Davis about the advantages of joining the New York law firm. Davis was in the process of leaving public service as the U.S. ambassador to Great Britain. Polk told Davis that the Stetson law firm represented Morgan and was general counsel to New York’s Guaranty Trust Company. It also represented the Associated Press, the International Paper Company, the Erie Railroad, and various others in trial and estates work. Admiralty and patent law were the only two areas it ignored.

John W. Davis, the law firm’s most prominent attorney for several decades, was born in 1873 in West Virginia. When he became the head of the firm in 1921, it was renamed Davis Polk Wardwell Gardiner & Reed, the last two name partners being George H. Gardiner and Lansing P. Reed. According to the 1932 Martindale-Hubbell Law Directory, the partnership at 15 Broad Street in New York City had 17 partners and one ‘of counsel’ member. It consistently received an ‘av’ rating, the highest available from the directory.

During the Great Depression, John Davis represented name partner Louis Levy of the New York City law firm of Chadbourne, Stanchfield & Levy, later named Chadbourne & Parke. In spite of Davis’s vigorous defense, Levy was disbarred after helping get Judge Martin Manton a $250,000 loan, which was never repaid, from American Tobacco’s ad agency at the same time American Tobacco faced a lawsuit before Judge Manton.

In a 1939 article, Ferdinand Lundberg described Davis Polk as one of the nation’s top ‘law factories,’ meaning it was ‘organized on factory principles and [grinded] out standardized legal advice, documents, and services …’ Lundberg mentioned how the nation’s top corporations tended to rely on the major law firms, thus concentrating wealth in just a few institutions. With 20 partners in 1939, Davis Polk Wardwell Gardiner & Reed for years had represented J.P. Morgan & Company and the Guaranty Trust Company. The law firm’s attorneys also served as 22 corporate directors.

Post-World War II Law Practice

After being delayed by World War II, the federal government finally brought a major antitrust lawsuit against the nation’s major investment banks, including Morgan Stanley and Harriman Ripley, who were represented by Davis Polk. The government accused the banks of price fixing, stifling competition from smaller investment banks, and several related charges. Whereas most banks and their lawyers wanted to settle the case, the New York law firm of Sullivan & Cromwell took the lead in fighting the government. The trial ran from 1950 to 1953, when the judge accepted the defense motion to dismiss United States of America v. Henry S. Morgan, Harold Stanley, et al. doing business as Morgan Stanley & Co., et al., described by authors Nancy Lisagor and Frank Lipsius as ‘the granddaddy of modern antitrust cases.’

During the Korean War, President Harry Truman in April 1952 announced that he had seized control of the nation’s steel industry to prevent a threatened work slowdown or complete shutdown because of an industry-union dispute. John Davis represented Republic Steel in the steel industry’s fight to reverse the seizure. After many calls for President Truman’s impeachment, the U.S. Supreme Court in 1952 heard arguments from Davis and others before ruling in a 6–3 decision that Truman had no constitutional or congressional authority to take control of the steel industry.

Although John Davis won in the steel case, he lost just two years later in one of the nation’s most famous court rulings, Brown v. Board of Education of Topeka, Kansas. Davis represented South Carolina in Briggs v. Elliott, which along with others was lumped together with the Brown case. Davis and other attorneys argued that the 1896 Plessey v. Ferguson ruling in favor of separate but equal schools should be upheld. Led by attorneys such as Thurgood Marshall, the NAACP won this court battle that led to school desegregation and was a major development in the postwar civil rights movement.

That was the last time John Davis argued a case before the U.S. Supreme Court. Starting in 1913, Davis made oral arguments before the nation’s highest tribunal in 140 cases, the most of any 20th-century lawyer. Only two 19th-century lawyers exceeded that number: Walter Jones with 317 cases and Daniel Webster with at least 185 cases. Davis’s distinguished career brought him many honors before he died in 1955, including the United Kingdom’s highest award for a non-British citizen.

In 1954 the law firm included 26 members or partners, according to the Martindale-Hubbell Directory. It then was called Davis Polk Wardwell Sunderland & Kiendl. The last two name partners were Edwin Sunderland and Theodore Kiendl.

Four years later the firm had 30 partners and 67 associates when Spencer Klaw published his Fortune article on the large Wall Street law firms. Klaw mentioned that Davis Polk, ‘sometimes known as the Tiffany of law firms,’ was one of the so-called ‘white-shoe’ law firms where its lawyers wore ‘buckskin shoes that used to be part of the accepted uniform at certain eastern prep schools and colleges.’ Part of that law firm tradition involved hiring mostly prominent young associates listed in the Social Register.

By 1964 the law firm of 37 partners had added a Paris office and moved to its new headquarters at One Chase Manhattan Plaza in New York City. The firm, renamed Davis Polk & Wardwell, had overseas branches in both Paris and London in 1974 and included 43 partners and nine ‘of counsel’ lawyers.

In the 1970s some of Davis Polk’s major clients included Morgan Stanley & Company, Morgan Guaranty Trust Company, International Telephone & Telegraph, International Paper, Johns-Manville, LTV Corporation, R.J. Reynolds, and McDermott, Inc.

During the Carter Administration, the United States suffered from its seeming inability to resolve the Iranian hostage crisis after Moslem fundamentalists captured Americans in Tehran. Carter froze Iranian assets in American banks, while millions in U.S. money was loaned to various Iranian institutions. The crisis finally was resolved in early 1981 when a group of lawyers from New York law firms representing the nation’s largest banks negotiated with attorneys representing Iranian interests. Davis Polk & Wardwell, on behalf of its historic client Morgan Guaranty, thus helped end one of the nation’s more humiliating episodes during the Cold War. Unfortunately, few history books mentioned such behind-the-scenes roles of law firms.

Practice in the Late 20th Century

Starting in the late 1970s and early 1980s the nation’s largest law firms began a major transformation. Part of the change came from a 1977 U.S. Supreme Court ruling that said restrictions on professional advertising violated the First Amendment’s guarantee of free speech. At about the same time two new periodicals, the National Law Journal and the American Lawyer, began publishing articles on law firm management and finances. From that point on, law firms began to be more open about their operations, ending much of the secrecy of the past. In addition, lawyers gained competitive data about law firm profits, thus fueling more lateral hiring of experienced lawyers. The bottom line was that most big law firms became much larger in the 1980s, a time of rapid expansion in the American economy. They became more business-oriented as well, adding public relations personnel and hiring consultants for advice on better management practices.

As attorney salaries increased rapidly, law firms competed not only with each other for the top talents but also with corporations, including some of their clients. That happened relatively rarely in the 1980s, but by the mid-1990s more senior partners left for top corporate positions. Ellen Joan Pollock, in the September 11, 1996 Wall Street Journal, wrote, ‘What makes this recent spate of legal defectors noteworthy is the sheer number making the switch, and that they are moving into top corporate posts.’

A good example was Steven Goldstone, a senior partner at Davis Polk & Wardwell. In 1994 he earned about $1 million at the law firm. He had represented RJR Nabisco for several years, including a 1994 tobacco lawsuit. As the company’s outside general counsel, Goldstone said he spent more than half his time on business strategy, not legal issues per se. Then in late 1995 Goldstone accepted an offer to become the CEO of RJR Nabisco Holdings Inc.

In the so-called New Economy, high-technology firms required all kinds of legal support, so the nation’s largest law firms opened new offices to meet the demands of their clients. For example, in 1999 Davis Polk & Wardwell, along with two other New York firms, Shearman & Sterling and Simpson Thacher & Bartlett, started branch offices in Silicon Valley. Davis Polk’s high-tech clients included ComCast, Compaq Computer, and Texas Instruments.

In March 2000 Davis Polk & Wardwell represented its long-term client Morgan Stanley & Company Incorporated and other underwriters of Crayfish Company, Ltd. in its initial public offering (IPO). Crayfish was a ‘Japanese e-mail hosting services provider,’ according to the Davis Polk web site.

Although Davis Polk & Wardwell continued to serve both Morgan Stanley and J.P. Morgan, the two firms formerly united as the House of Morgan, their relationships had changed. For decades Wall Street law firms had very close institutional ties to investment banks. ‘When I started 30 years ago, [these relationships] were virtually monogamous,’ said Francis J. Morison, Davis Polk’s managing partner in the Investment Dealers’ Digest of November 3, 1997. But as laws became more complex and law firms specialized, such long-term ties dwindled as clients turned to the firms that possessed the expertise they needed for specific situations.

In the 1990s Davis Polk & Wardwell advised clients in more than 700 mergers, acquisitions, and joint ventures valued at more than $1 trillion. Some of its corporate clients in 2000 were Banco Santander Central Hispano; Comcast Corporation; Network Solutions, Inc.; ImClone Systems Incorporated; Quintus Corporation; Bass PLC; Mission Critical Software Inc.; Emerson Electric Company; Salomon Smith Barney; Merrill Lynch International; Warburg Dillon Read; Credit Suisse First Boston; Canadian National Railway; and Pharmacia & Upjohn.

Davis Polk & Wardwell continued to be one of the major law firms in the late 1990s. The American Lawyer in July/August 1998 ranked Davis Polk as the United States’ sixth largest law firm, based on its 1997 gross revenue of $390 million. At that point it had 447 lawyers.

In November 1998 the same magazine, in cooperation with London’s Legal Business, published its first ranking of the world’s largest law firms. Davis Polk ranked number eight based on its 1997 gross revenue, but it did not rank in the top 50 based on the number of lawyers. Its revenue per lawyer of $870,000 was the third highest in the world.

Based on its 1998 gross revenues of $435 million, Davis Polk & Wardwell ranked number five in the United States, according to the American Lawyer in July 1999. In 1999 the firm slipped to number eight based on its gross revenues of $460 million. Its profits per partner in 1999 were $1.61 million, a 63 percent increase since 1990 that made Davis Polk one of the ten most successful American law firms in the 1990s.

At the dawn of the new millennium, Davis Polk & Wardwell faced numerous challenges. Law firms were getting larger and larger, whether from mergers or internal recruiting, thus making management issues more crucial. Law firms faced competition from accounting firms that hired many lawyers, raising the possibility of the American bar allowing multidisciplinary practices involving lawyers, accountants, and other professionals. Rapid technological change, involving such issues as intellectual property conflicts and computer security for Internet transactions, also gave Davis Polk & Wardwell and other large law firms plenty to deal with in the Information Age.

Principal Operating Units: Corporate; Tax; Litigation; Trusts Real Estate.

Principal Competitors: Baker & McKenzie; Skadden, Arps, Slate, Meagher & Flom; Debevoise & Plimpton.

That is not all of the lawyers, and for those of you interested, AIG is in the mix also.

(Author’s update: 3/31/09: Everyone please welcome back to the Monster; Debevoise & Plimpton and Shearman & Sterling…) (Also welcome Simpson Thacher & Bartlett who JUST joined us…think they are texting each other or calling?) (15 minutes have gone by and now it is time to welcome Baker & McKenzie; everybody wave.) (5 minutes have gone by; everybody wave to Skadden, Arps, Slate, Meagher & Flom.  Now I understand why these people started landing on my site 3 months ago.) (10 minutes later; please welcome the London Office of Debevoise & Plimpton.) (5 minutes later…please welcome Columbia University.) (The second Columbia U ip has shown up, and would any of my readers like to start digging on Stetson University College in Clearwater, Florida to find the link.  They came in directly.) (Everyone please welcome The Monitor Group.) (Wow – it took Davis Polk & Wardwell almost two hours to show up – we know who the granddaddy is…)(Please welcome the Commonwealth of Massachusetts.)

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