They Are All Crooks So Why Not Bail Out Jeff Skilling?

Hunt for Justice by Cynthia Hunt

(Treasury Secretary Timothy Geithner, left, talks with Fed Chairman Ben Bernanke before the start of a House hearing on AIG.)

Is the United States Morally Bankrupt?

I’m not a negative person so it’s hard for me to think in that way, but facts are facts. I sit here day after day shaking my head about the financial crimes perpetrated by some of our nation’s finest minds and most educated individuals. It makes me worry about the moral health of our nation.

I’ve covered many violent crimes during my career as a journalist, and you can usually find the triggers. When you put a killer or rapist under a microscope, you almost always find a past that explains how the person transformed into a monster. Notice, I didn’t say it excuses them, but at least they are often explainable.

(Pic of Blogger Covering a Triple Murder in Houston)

Will White Collar Crooks Destroy Our Great Nation?

I find this new wave of white collar crimes grounded in greed and dishonesty more disturbing. I believe it reflects a moral decay in some of our nation’s most accomplished individuals. How could any AIG executive accept part of the $165 million in retention bonuses? Their company failed. They failed. A Big Fat F. We all know when you fail, you are not rewarded. We learned that in grade school Most of the executives receiving these ridiculous bonuses were from the same AIG unit that caused some of the insurance giant’s most severe problems. Accepting that bonus money is clearly stealing. Theft. A ripoff.

AIG is nothing compared to Merrill Lynch. Executives there rushed out $3.6 billion in bonuses. New York Attorney General Andrew Cuomo discovered Merrill paid four executives a combined $121 million and distributed bonuses of $1 million or more to 696 employees. The firm lost $15 billion in the fourth quarter. Again, I call accepting or giving bonuses at a company that is failing theft. What would you call it? Kudos to New York Supreme Court Justice Bernard Fried for ordering the list of Merrill bonus earners be disclosed to the taxpayers. After all, Bank of America bought Merrill Lynch. Bank of America has been allocated $45 billion in federal bailout funds and the Treasury has guaranteed to protect it from potentially billions of dollars in losses from investments Lynch made in real estate loans.

These bonuses are just the latest crimes. Yes, I said crimes. Shouldn’t we investigate the executives whose potentially fraudulent decisions caused the failures in the first place. Let me again quote a Wall Street Journal editorial from 2006:

A joke in Washington goes like this: "What's the difference between Enron and Fannie Mae? Answer: The guys at Enron have been convicted.”

Today Enron Would Get A Bail Out

I covered the Enron story from the beginning. We called the Enron guys' work voodoo accounting. They were put on trial, called liars and thieves, and sent to prison. Founder & CEO Ken Lay died before he went to the federal pen. Former CEO Jeff Skilling was sentenced to 24 years and recently lost his appeal. The damage Enron did is small compared to the Americans suffering now. This 2009 gang of white collar thieves is largely getting off except for the worst of the worst, Bernie Madoff.

(The FBI Arrests Former Enron CEO Jeff Skilling 2004)

Jeff Skilling was once one of America's brightest and brashest stars. I sat in his Houston mansion one night as he meticulously explained everything that went wrong at Enron and what he knew and when he knew it. I must tell you that he knew they pushed limits to create a new kind of industry. However, he never believed their company was in real financial trouble and would go down and destroy so many people financially. I am not defending just comparing. After he was convicted, he was ordered to pay $45 million in restitution to Enron investors.

I find Skilling more like a school girl when compared to this new gang of still unnamed executives--the people who ran their companies into the ground with complicated deals and shady investments and then stole taxpayer money. I am sure if federal prosecutors spend as much time investigating all of these huge companies as we did Enron, we could send a bunch of these modern suits to prison.

Let's not forget the politicians who gladly pocket donations from these sharp dressed crooks. I think they should go to jail first and stay the longest. Unfortunately, you know that will not happen when you follow the money trail.

A NEWSWEEK review of recent filings with the Federal Election Commission found that the political action committees of five big TARP recipients doled out $85,300 to members in the first two months of this year—with most of the cash going to those who serves on committees who oversee the TARP program. Among them: Bank of America (which got $15 billion in bailout money) sent out $24,500 in the first two months of 2009, including $1,500 to House Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels.

We have elected crooks overseeing the hearings of the business crooks while the elected crooks pocket money from the business crooks they oversee. Instead of sending our 2009 crooks to prison, we, the hardworking taxpayers, are bailing them out. We strive for equitable treatment in our justice system. Should we bail out Jeff Skilling too? At least, he went before Congress and testified instead of cowardly taking the fifth or fighting in court to keep his name and his bonus amount secret. He didn't try to take taxpayer money as a bonus after Enron collapsed.

They say our economy will recover from this, but what about our national character? Politicians taking control of our banking sector is a dangerous development that keeps getting scarier. It's all so un-American. Many historians believe Rome fell because of internal decadence and excessive self-indulgence. Will we too?

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Wishing We Could Send Congress to Federal Prison Over the Financial Crisis

Hunt for Justice by Cynthia Hunt

A joke in Washington goes like this: "What's the difference between Enron and Fannie Mae? Answer: The guys at Enron have been convicted.”

That's no new joke. In the beginning of a Wall Street Journal editorial from June 2006—that's right, two years ago—the WSJ wrote 20 editorials starting all the way back in February 2002, and continuing through June 2006, warning of the impending mortgage crisis.

Again and again, the WSJ described the disaster that was being created, a building crisis that could endanger our entire financial system. In 2004, a top FBI official also warned that the mortgage boom made the market ripe for shady operators, but he said the FBI was on top of it.

Convictions aren’t the only difference between Enron and the current crisis. If you remember, Enron executives fooled everyone for a long time with their voodoo accounting. A special investigative committee worked for months to unravel and explain how Enron executives cooked the books. The committee released its findings in what was called the “Powers Report.”

The current financial crisis is no surprise. A WSJ editorial in October 2004 said Fannie has been “cooking the books. Big time.” (at left: NYSE traders yesterday after the Dow plummetted 800 points).

Repeated warnings were sounded.

Our elected government do-nothings did nothing.

And yes, greed on Wall Street contributed too. As a matter of fact, there's plenty of blame for us all to be sickened as taxpayers with Congress and with Wall Street.

Here's what you need to know. Fannie and Freddie are the two biggest mortgage holders in the country. Fannie Mae and Freddie Mac are government-sponsored entities that were designed to help with the noble goal of allowing more Americans to own a home. Congress gave Fan and Fred special privileges long ago. They were allowed the benefits of completely private companies but not required to follow the same rules. They don't have to register their securities or file insider trading forms with the Securities and Exchange Commission. In other words, they don't have to disclose how they are running their business to investors.

This exemption from the rules allowed Fannie and Freddie to pile up massive debt knowing there was an implicit guarantee by the American taxpayers. To make matters worse, this accounting funny business with Fan and Fred allowed their executives to manipulate numbers and make huge bonuses.

While Fan and Fred were engaged in their bad business, Wall Street investment firms were buying up subprime mortgages and bundling them as investments so complicated that few understood what they were. When the housing bubble burst, the firm's investments were in deep trouble.

In 2003, The Bush White House tried half-heartedly to impose regulation and stop the runaway train. But the president never took his case to the American people so that he could rally support and force Congress's hand. In 2004, the mighty Alan Greenspan said Fannie and Freddie must be reformed or they posed a risk to the entire financial system. However, the bipartisan Fan and Fred defenders in Congress, who were lining their pockets with campaign contributions from the duo, defended and protected the ugly couple.

Now the FBI and SEC have launched more than 75 investigations into this debacle to find out if laws were broken. Government lawyers are already warning that the current crisis is so complex that it may be impossible to prove that a crime was actually committed.

Two WSJ editorials in 2002 and 2004 were entitled "Fannie Mae Enron" in an attempt to show the scary similarities between Enron and Fannie Mae. The losses in the current banking crisis dwarf those of Enron, and it took government investigators five years to make their complicated case against the Enron executives. One wonders if they'll ever figure this one out.

Years ago when I covered the Enron cases, I sat in the beautiful Houston mansion owned by former Enron Executive Jeff Skilling (pictured left) while he meticulously presented his case to me that he committed no crime at Enron. Bad business decisions are not necessarily crimes. But in 2006, a jury convicted him of fraud saying he intentionally misled investors. He is in federal prison appealing his case and is scheduled to get out in 2028.

I remember Skilling describing the collapse of Enron as an "old-fashioned run on the bank" when investors lost confidence in that business. I am struck now as I am already starting to hear some use that same phrase in the current crisis. Remember, Skilling didn't plead the Fifth. He went before Congress and answered all their questions because he was and still is convinced that he did no wrong.

The current crisis makes Enron look like a hiccup. Common sense says that someone should be put in a federal jumpsuit over this. Perhaps the most deserving culprit is the body of Congress. If Jeff Skilling misled investors, then Congress not only misled Americans but was a willing accomplice to this horrific crime.

I believe this is the real "crime of the century," and like O. J. Simpson after his first trial, I predict Congress members will spend the next few years feigning disgust in congressional hearings and on beautiful golf courses while looking for the "real killers" of our economy.

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Extra Cash? Please send . . .

by Kathryn Casey

Okay, we need to pass the plate for Linda Lay, widow of the Enron debacle’s chief crook, Ken. This is the Ken Lay who was convicted but then had the audacity to die before he even started serving his sentence. Since he had no time to appeal (Laws are convoluted at times, don’t ya think?), the conviction was set aside. At the center of the current controversy is the family high-rise, Linda’s home sweet home, and some of the most expensive real estate in Houston, Texas.

What’s that old theme song? You know, the one from "The Jeffersons"? Sing it with me: We’re moving on up, to the big time, to a deluxe apartment in the skyyyyyyyy. . . .

Well, that’s what the Lays did during the flush Enron years, when Ken’s ill-gotten gains flooded in like a tropical storm and Space City was their playground. Linda and Ken, then darlings of the social set, bought a condo on the 33rd floor of the tony Huntingdon (pictured above), with four bedrooms, four bathrooms, three half-baths, and four fireplaces now valued at $4.75 million. Linda’s current dilemma is that first the government filed suit on the estate for $13 million, including the condo. Now, alas, there’s also the little matter of more than $100,000 in unpaid condo fees. To add to the widow Lay’s problems, the condo board has also filed suit, threatening to take away her 12,827-square-foot abode.

Now is that fair?

Of course, this is the same woman who appeared on national television early in the Enron catastrophe crying: “We’ve lost it all.” At the time, we later learned, the Lays owned dozens of homes all over the country and the world. I’ve got the feeling that Linda’s definition of being hard up doesn’t quite mesh with regular families’ budget woes?

So start passing that plate. Linda Lay needs help! I’ll donate, as soon as I find a couple million extra I don’t need for house payment or groceries.

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