All Things Whistleblower: A GAP Blog

The Latest on Geithner

Two Senate Republicans sent a letter to Treasury Secretary Timothy Geithner asking for an explanation as to why the Treasury removed a $400 billion cap on how much money it would give Fannie Mae and Freddie Mac to prevent them from failing. The Treasury's decision to act on Christmas Eve effectively avoided the need to seek approval from Congress.

This move follows last week's scandal in which newly released emails have shown that under Geithner's leadership, Federal Reserve Bank of New York lawyers told AIG to withhold details from the public about its payments to banks during the financial crisis.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Representative Darrell Issa, California Republican and ranking member of the House Oversight and Government Reform Committee, who obtained the emails. Citizens “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

The emails include a draft filing in which it is apparent that AIG was ordered by the New York Fed to pay banks, which included Goldman Sachs, 100 cents on the dollar for credit-default swaps they bought from the firm. AIG removed the language when the filing was publicized. "The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking," according to Bloomberg News.

A Treasury spokesperson claimed that Geithner himself had no role in the decisions, saying “he was recused from working on issues involving specific companies, including AIG,” after being nominated for Secretary of the Treasury on November 24, 2008. 

In the News Today

A US judge in Florida denied two motions to postpone and reduce the prison sentence of Bradley Birkenfeld, a former UBS employee who blew the whistle on the Swiss banking behemoth’s illegal offshore banking practices. Defense attorneys had argued that prosecutors at the Justice Department misled both the judge and Birkenfeld. GAP Homeland Security Director Jesselyn Radack was quoted in the article (Law.com):

Jesselyn Radack, homeland security director for the Government Accountability Project in Washington, said Birkenfeld is a victim of a power struggle between two branches of government."What appears to be the case is that the Department of Justice got upstaged by the Senate and is punishing the whistleblower," she said.

In environmental news, the CIA is sharing information with top U.S. climate scientists (NYT) to evaluate the effects of climate change around the world. This partnership was initially shut down by the Bush administration, but has been restarted of late. Some of the information shared includes satellite images. Also, world leaders issued many directives at the Copenhagen climate summit in December; however, none of the follow up work necessary to ensure the realization of the major directives was finished by the end of the conference (ClimateWire). Many are unsure when and how the directives will play out, including the major concern of funding to poor nations for climate change adaptability.

In the News Today

A New York Times masthead editorial argues that the while the Obama administration has taken a stance against torture, policy makers are continuing to rationalize it, after the Supreme Court declined to review a case brought by four Guantánamo detainees who were never charged with a crime. The Supreme Court’s decision not to review has deprived victims of a remedy and Americans of government accountability, while further damaging the country’s standing in the world.

The Justice Department is considering asking a federal judge to decrease the sentence of UBS whistleblower Brad Birkenfeld (NYT). Birkenfeld was sentenced to three years and four months in prison after blowing the whistle on illegal offshore banking practices by UBS. Because of his disclosures, the IRS was able to recoup $780 million dollars and thousands of names of tax cheats.

A dairy in China recalled milk products after they were found to contain too much melamine. The recall comes after a 2008 Chinese massive food scare, in which melamine in milk was blamed for killing six children and sickening 300,000. While the new recall is much smaller in scope, it does raise questions about whether or not the Chinese dairy industry has reformed itself.

A Washington Post editorial by science and politics writer Chris Mooney argues that while scientific scandals such as “Climategate” have not proven that science is fraudulent, they have indeed proven that scientists are not well armed with communication skills. Because the media is increasingly cutting back on science-focused journalism, the ability of scientists to communicate their own data efficiently is progressively more vital.

Subsidiary Employees Finally May Get Protections

Congress is looking to close a loophole that prevents employees of subsidiary companies from filing suing under the Sarbanes-Oxley (SOX) whistleblower protection provisions.  

SOX protections were passed in 2002 in the wake of the Enron scandal, and granted whistleblower rights to employees of all publicly traded companies. Unfortunately, many cases over the past several years have been dismissed on a technicality – the non-extending of such rights to subsidiary company employees – which are not technically publicly traded, despite their parent company being public. GAP has previously written about this lame judicial interpretation in this op-ed, which ran in the Baltimore Sun, Houston Chronicle, and other major newspapers back in 2006.

Since the Sarbanes-Oxley protections were passed in 2002, the government has ruled in favor of corporate whistleblowers in only 1.4% of complaints (21 out of 1,455). Almost 1000 complaints were dismissed.

Democrats on the House Financial Services Committee approved the whistleblower amendment, without Republican support. The amendment should come before the full House in upcoming weeks.

Sen. Levin: UBS-U.S. Settlement on Tax Havens is "Tortured"

This post was written by GAP Homeland Security Director Jesselyn Radack for her Daily Kos Blog.

Today's Washington Post has an article on exactly what I got slammed for writing yesterday; namely, that the UBS-Swiss settlement was no "bargain." For those of you who say I need to get my facts straight, maybe you'll believe the MSM Post. http://www.washingtonpost.com/...

Annually, the treasury loses over $100 billion in revenue due to illegal offshore tax havens.  UBS, Switzerland's largest bank, admitted that for years it helped thousands of American clients hide billions of dollars from the IRS.

Yesterday, the IRS revealed the criteria for the lame settlement of a civil lawsuit in which the U.S. sought the names of 52,000 UBS tax cheats.

I explained why this was lame, http://www.dailykos.com/....  Senator Carl Levin (D-Mich) agrees:

The tortured wording and the many limitations in this annex [to the settlement agreement] shows the Swiss government trying to preserve as much bank secrecy as it can for the future, while pushing to conceal the names of tens of thousands of suspected U.S. tax cheats. . . It is disappointing that the government went along.

Incompetence #1: The U.S. sought the names of 52,000 tax dodgers and settled for 4,500--fewer than 10%

Incompentence #2: They knew back in June 2007, courtesy of whistleblower Brad Birkenfeld, that there were 19,000 undisclosed accounts.

Incompetence #3: If your Swiss bank account was under $1 million, you're off the hook.  

Incompetence # 4: If you voluntarily disclosed your Swiss bank account under the IRS "Amnesty" (the IRS's words, not mine) Program, then you will not face criminal liability.

Incompetence #5: The government underfined the bank.

Incompetence # 6: The government indicts people like Raoul Weil in show maneuvers, knowing he won't be extradited.

Incompetence #7: The U.S. had UBS kingpin Martin LIEchti in its claws back in April 2008 and released him back to Switzerland, scot-free.

Incompetence #8: The whistleblower, Brad Birkenfeld, who in the words of prosecutor Kevin Downing, we would have had no other means to have learned what was going on but for an insider in that scheme providing detailed information, which Mr. Birkenfeld did, is the ONLY one going to jail in this whole scandal.

Breaking Justice Dept. Corruption in Birkenfeld Case: U.S. Gave UBS Kingpin Immunity

This post was written by GAP Homeland Security Director Jesselyn Radack for her Daily Kos Blog.

It's gone from bad to worse.  I've written previously about how Brad Birkenfeld, the whistleblower who shattered 75 years of Swiss bank secrecy, is the only one going to jail in this multi-billion dollar scandal.  But now my dyspepsia has turned to projectile vomiting.  I have asked in previous diaries why, when the U.S. had UBS kingpin Martin Liechti in its claws, it set him scot-free back to Switzerland.

Well, we now know why.  Consistent with a disturbing trend, the United States granted the worse of the worst immunity, and is imprisoning not just a bit player, but the whistleblower... and an American.

If you don't know about financial whistleblower Brad Birkenfeld already, then I recommend you watch this:

In Le Temps today, Switzerland's leading daily newspaper, http://www.bilan.ch/...
it states that Martin Liechti received immunity.  I know it is in French, but the relevant part translates as follows:

Despite incriminating documents pointing to LEICHTI, he was granted immunity.

But the U.S. would have had nothing on Liechti (as evidenced by the fact that it searched his place some five years ago and couldn't make a case), but for Brad Birkenfeld, who blew the whistle on Liechti and other top UBS executives.

So, it is especially shocking to find that the U.S. granted immunity to Liechti, the mastermind, when it wouldn't grant immunity to Birkenfeld, and actually prosecuted him!  

There is no justice.  What can you do?  Watch the YouTube video, rate it, and post a comment.  Spread this wretched story.

Bad Amendment Exempts Companies from Fraud Oversight

Yesterday, a House committee voted in favor of an amendment to exempt small public companies from a provision of a law designed to prevent financial fraud – despite heavy objections from regulators and key Democratic leaders. The House Financial Services Committee voted for the provision under pressure from Rahm Emanuel, President Obama’s chief of staff. Committee Chairman Barney Frank is so at odds with the amendment (which was passed by voice vote) that he is calling for another vote today on the matter.

The provision, part of the Sarbanes-Oxley law, is designed to prevent financial fraud, and requires that publicly traded companies hire auditors to examine their internal systems to ensure compliance with accounting reporting rules. These protections were put into place in the wake of the Enron scandal.

This is a step in the wrong direction by the Obama administration. It is wrong to allow businesses not to comply with anti-fraud measures, especially coming out of a deep financial recession and a climate of greed. The protections were put into place to defend investors and consumers, and if small companies make the choice to become public, extra legal measure should obviously be enacted to ensure that they do not defraud investors.