By Abigail Caplovitz Field | June 12, 2012
Below I give the details, but here’s the takeaway: the Obama Justice Department, led by star white collar criminal defense attorneys Eric Holder and Lanny Breuer–and the Obama SEC, led by former securities industry’s self-regulator Mary Shapiro and Deutsche Bank CDO lawyer Robert Khuzami, ignored the business records of a Wall Street madam that document a few thousand Wall Streeters’ use of her brothel’s services. They’ve also ignored traders‘ and executives’ widely acknowledged cocaine and prescription drug abuse.
That information is useful in coercing insiders into cooperating with the govenment. That’s key to successfully prosecuting the top dogs. For so long as President Obama’s law “enforcers” refuse to use such information, they are simply not serious about prosecuting any of the individuals who looted our financial system, wrecking our housing market and economy.
Wall Street’s use of prostitutes and coke has been in and out of the news for years, and I hadn’t really connected the dots. The accountability failure aspect was brought home to me by watching and re-watching Inside Job, that must see documentary on our financial crisis. Like the Citigroup merger power play, prosecutors’ commitment to tying their hands behind their backs is exposed in just a couple of minutes of the 108 minute film. That density is why the movie must be watched and re-watched.
One ray of hope: prosecutors seem desperately interested in the records of a newly busted madam and are keeping her at Rikers awaiting trial unless she dishes on a list of 10 names that the the New York Post calls a ‘roster of real estate moguls and investment bankers.”
Obama defenders, take note: It’s not DOJ or NYAG Eric Schneiderman turning up the heat–it’s the Manhattan D.A.’s office, which did a five-year investigation, replete with wiretaps. Not that current D.A. Cyrus Vance deserves all the credit; he’s only been on the job since 2010. Nor is it likely that he’s really trying to make a case against Wall Street bigwigs; his idea of criminally indicting a bank–while more than what the Feds have done–involves minnows, not the sharks of the Street.
Prosecutors Need Insiders As Cooperating Witnesses
Explaining why so few cases have been brought against Wall Street, the Obama administration repeatedly said: hey, this stuff’s really complicated, the cases are really hard, and the activity was wrong but not criminal. Richard (RJ) Eskow of Campaign for America’s Future responds to examples here. Ok, these cases are complicated, and beyond a reasonable doubt is a tough standard. (The wrong but not criminal part is simply farcical.)
Both the complexity and the high burden of proof are why cooperating insiders matter so much. Insiders can point fingers and explain precisely what happened. Remember how the government convicted Ken Lay and Jeffrey Skilling of Enron? They flipped ex-CFO Andy Fastow:
DAN ABRAMS, HOST, ‘ABRAMS REPORT’: Loren Steffy look, you are there, you‘ve been in the courtroom. How is Fastow doing on the stand?
LOREN STEFFY, “THE HOUSTON CHRONICLE”: He has actually done a very good job as a witness. He has walked the jury through a number of these very complex partnership transactions and he has done it in a very clear and concise way. …
ABRAMS: Are they making it understandable? I mean the concern is that a lot of these deals that he was engaging in are pretty tough to understand.
STEFFY: Well, they are tough to understand. And I think he has done a very good job of breaking that down for the jury and kind of walking them through step-by-step not only what they were designed to do, but why Enron wanted to do it, and that‘s really kind of the key point in this whole trial. [bold added]
To pressure Fastow, prosecutors jailed his wife for a year on tax charges, among other things. That’s what determination looks like–ugly but effective.
Federal Prosecutors Ignoring Evidence of Illegal Sex and Drugs
Ugly but effective also describes evidence prosecutors could use to terrify Wall Street into cooperating: illegal sex and drugs, along with submitting fraudulent business records to pay for them with corporate, er, shareholder cash.
In March, 2008 cops arrested Kristin Davis, and took possession of her ‘little black book’ and its reported 10,000 names. In Inside Job she says that 40-50% of her high-end clients were from Wall Street, and that they frequently paid for her services with corporate cards, having her create false invoices. She also says, in the 2010 film, that when she was given a plea bargain, prosecutors were uninterested in her business records. Why?
Well, Eliot Spitzer, famously brought down for his use of at least one high end prostitute, tells the camera next that
“there’s a sensibility that you don’t use people’s personal vices in the context of Wall Street cases necessarily to get them to flip. I think maybe after the cataclysms we’ve been through, maybe people will re-evaluate that. I’m not the one to pass judgment on that right now.”
Think about that for a minute.
President Obama’s Justice Department has been so aggressive in the War on Drugs, that despite his promise to the contrary, the Feds have targeted medical marijuana dispensaries that are legal under State law. Our Justice Department goes after state-legal pot shops but has “a sensibility that you don’t use people’s personal vices in the context of Wall Street cases necessarily to get them to flip”???
And it’s not just the Feds; in Wall Street’s hometown, cops use the drug laws to harass and criminalize people so abusively establishment Democrat Governor Andrew Cuomo wants to change the law. See, complying with a police order to empty pockets during a ‘stop and frisk’ makes possessing small amounts of marijuana criminal instead of essentially a speeding ticket. And (surprise!) most New Yorkers stopped and frisked are black and Latino, so the current law is grotesquely unjust–the cops are systematically turning young black and Latino people, mostly male, into misdemeanants.
And yet systematically law enforcement gives rich Wall Streeters a pass for cocaine and other drugs, even when such prosecution could be used to hold the perpetrators of our financial, housing and foreclosure crises accountable?
So Much Evidence For the Taking
Note, Davis’s records and claims about Wall Street clientele are no secret. This Daily News story from March of 2008 said cops were pouring over her records, and she wrote a ‘tell-all’ book (The Manhattan Madam: Sex, Drugs, Scandal and Greed Inside America’s Most Successful Prostitution Ring.) I haven’t read it, and apparently she doesn’t really tell all, as she describes people without naming them. But the point is the type of information prosecutors could get from her is not a secret.
And it’s not like Davis was Wall Street’s only sex supplier; this Daily News annotated list of New York’s notorious brothels includes
- High Class NY, a Brooklyn-based escort service run by husband-and-wife team Mikhail and Bronislava Yampolsky, was busted last July . Prosecutors said it raked in $7 million over three years, catering mostly to Wall Streeters.
And just four months ago, the Manhattan D.A. busted the latest (alleged) high end ‘Manhattan Madam’ Anna Gristina. Almost immediately CNBC’s John Carney reported that “Wall Street Fears Manhattan Madam’s Black Book“. Carney cites the New York Post to report her
client list that includes “powerful politicians, top-law enforcement, influential lawyers, bankers, entertainment execs, and Fortune 500 businessmen, as well as several ultra-wealthy European clients,”
Carney talked to a Morgan Stanley employee who said only bigwigs were likely involved:
“It tends to be the senior guys, guys who don’t want to worry about a commitment and don’t have time to pick up regular girls,” he said.
Carney confirmed that take with a “junior investment banker at Goldman Sachs”:
“It’s not going to be a 29-year-old showing up in a madame’s black book. It’s going to be an MD [Managing Director].”
Not to worry, Carney reassures those powers-that-be:
“Those names will not necessarily become public. There’s a long history of police breaking up brothels and prostitution rings in New York without revealing who the alleged customers were.”
See? It’s not just prostitute-using Spitzer with the delicate, we won’t use your vices against you sensibility. Carney underscored the point by citing a “senior law enforcement official in New York City”:
“police are unlikely to reveal the names of private citizens “involved” in the case. Politicians, however, are fair game, he said.”
The real danger to Wall Street types and executives would be if Gristina herself went public with client names, he said.”
A Ray of Hope?
Still, maybe Carney’s got the story wrong. A few days later the New York Post reported that the Manhattan D.A.’s office was really sweating Gristina, trying to get her to tell tales about ten men on a list. And a few months later, she’s still stuck at Rikers. She’s been told that if she dishes on the ten, she can go; in the meantime, her bail is too high to meet (she and her family say).
Gristina’s continued incarceration looks very much like prosecutorial pressure to coerce her cooperation. As recently as a few days ago ABC News interviewed her husband, who says that she was a dating broker, not a madam, and that his wife should just go ahead and tell what she knows about the 10. If the D.A. is right about who she is and what evidence she can dish on big boys, I hope they keep up til she cracks. Maybe they can jail her husband on tax charges, Fastow-style.
Again, however, I’m almost certainly dreaming. That is, it does look like Vance is leaning hard on her. But to make cases against Wall Street’s big boys? That seems incredibly unlikely. Oh to know who the 10 men are…
Back to the feds and Kristin Davis’s ignored records–surely she has the goods on very relevant people, since she was busted in 2008. She says her clientele included people working at key crisis firms like Lehman that no longer exist.
Inside Job corroborates Davis’s statements about prosecutors’ disinterest not just with Spitzer, but also with celebrity shrink Jonathan Alpert. Alpert flatly states that the drug and prostitution use go right to the highest levels of Wall Street, implicitly revealing client information without breaking confidentiality by naming names. For more on Wall Street’s drug habits, check out all the links I put in the first paragraph.
Even now, four years later, Davis’s information is still valuable. I mean, who cares if any statutes of limitations have run? Surely those that were using prostitutes then are using them now; surely a little shoe leather would turn up fresh dirt, once cops were pointed at the right people. The Feds just have to want to prosecute the big boys. So far, they clearly don’t.
So as campaign 2012 wears on, and President Obama postures as a middle class defender, remember this:
Despite the devastation Wall Street traders and execs wrought, despite the ample evidence of their coked-up whoring, Obama’s “Justice” Department only targets skinny kittens.
Full Disclosure: I am an Amazon affiliate, so if you purchase Inside Job at the link I provide, I get a small percentage. If that bothers you, please find some other way to watch the movie.
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