Regulation Has To Come From Within

So, in the wake of the damning report by U.S.-appointed bankruptcy examiner Anton Valukas, Dick Fuld, the disgraced former CEO of Lehman Brothers, has been called back to testify before the House. Summoned along with Fuld are the regulators — namely the Securities and Exchange Commission and the N.Y. Federal Reserve — who were supposed to be supervising Lehman as it limped towards its end, but who failed to flag any of the dodgy accounting the firm was busy using, despite inside warnings from people who were either ignored or fired (the whistleblower Matthew Lee for starters) …

Call me cynical, but I have to wonder where all this gets us. Dick Fuld was grilled in October 2008 and delivered one of the most cringe-worthy congressional testimonies ever. “I wake up every single night, thinking what could I have done differently? What could I have said? What should I have done? … ”

In other words he hadn’t got a clue … he couldn’t see that greed had led him and his merry band of acolytes way beyond the boundaries of common sense and seduced him into thinking he could make an absurd bet on commercial real estate right as the worst housing crisis ever was about to hit. He put $4 billion of the Archstone-Smith building on the firm’s balance sheet, thereby sinking Lehman …

In the wake of the Valukas report, I asked several former senior executives about Repo 105 – the so-called accounting mechanism that enabled Lehman to shuffle $50 billion off the balance sheet. Intriguingly, some of them — especially those close to Fuld, who never liked to be hampered by details — had never heard of it. (His lawyer says neither had he.) Yet others — like David Goldfarb, the former CFO, actually reportedly pioneered it way back in the day when he was at Ernst and Young, and couldn’t understand why it hadn’t saved the firm. Such was the dysfunction at Lehman, that the CEO often did not know the day-to-day matters that were largely run until June 2008 by an equally-out-of-touch president Joe Gregory.

Gregory was not interested in risk management. He was interested in growing revenues (after all, he needed to fund several homes, planes, helicopters, and a shoe closet for his wife that was twice the size of the Jimmy Choo Store in New York). What he wanted “little Lehman” to do was take MORE risk – not less. Which is why those who disagreed with him, like Mike Gelband, the head of fixed income, and Madelyn Antoncic, the head of risk, quit.

And now, if you ask Lehman senior executives why they thought it was OK to carry out Gregory’s instructions, the answer comes back, “Look, the SEC was inside our offices ever since Bear Stearns fell in March 2008; they had access to all our books. If there was a problem, why didn’t they shout?” Well, we all know how ineffective the SEC are as investigators – just ask any of the Bernie Madoff victims …

What the Lehman collapse really demonstrates is that no matter how many rules you enforce, people will always find a way around them. My new book on Lehman, The Devil’s Casino: Friendship, Betrayal, and the High Stakes Games Played Inside Lehman Brothers, shows that the Lehman culture was based on lies. It reveals how for the past four decades, Lehman fudged its trading volatility and how as one executive put it, “It became ‘what story are we going to tell the people who work here and what story are we going to tell the market?'” But it also shows how the culture of a trading floor can change men and women.

The book focuses on four men who knew that money could corrupt them — who took an oath to never let that happen. Yet it did. Tragically so. One of them not only lost his way and his job — but also, ultimately, his life. His funeral was an event that is still remembered as being one of the most traumatic in Lehman’s recent history.

So, though I am fully behind the efforts of Congress and the Senate to reform financial regulation, I am also skeptical. My book is essentially a morality tale in that it shows how four men with the best intentions were corrupted and ruined by money. It tells how the drive that made them succeed also turned them into monsters who would knife each other if need be to get a straight passage to the corner suite.

Does more regulation stop human urges like this? I am not sure.

Look at the unfortunate Erin Callan, Lehman’s infamous first female CFO. She let the power of the job ruin her judgment. We now know that she was not, as she once told Mario Bartiromo, “peeling back Lehman’s kimono” to reveal the firm’s real figures. She was part (consciously or not) of an insidious plot to hide them. She also grew so arrogant that she refused to take advice from Goldman Sachs CFO David Viniar, who thought she needed to get off CNBC. CNBC is a place for spokespeople, not CFOs.

So how do you regulate hubris? It’s a question I’ve pondered long and hard since finishing the book and waiting for its publication. You can try, as D.C. is trying now. You must try. But in the end, the only person who can stop ambition turning into something insidious — is you. V

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Why Did Lehman Behave So Idiotically?

I haven’t yet finished Anton Valukas’ 2,200-page report into Lehman, but I feel like I could have written it for him. The Chicago-based lawyer told me recently that he was greatly looking forward to my new book The Devil’s Casino: Friendship, Betrayal, and the High Stakes Games Inside Lehman Brothers, just as I was looking forward to his report. I had a feeling we’d be on the same page.

My book, due out shortly, explains the provenance and reasons behind many of Lehman’s idiocies unveiled by the Examiner’s $34 million report. These include: appalling risk management, accounting from the Twilight Zone (there was a reason the head of proprietary investing for Lehman, David Goldfarb, was nicknamed “Planet Goldfarb” by the U.S. Treasury staff; they felt that “what he said could not possibly be true on earth….”) and pitiful misjudgments, especially concerning investments in the real estate sector at a time when the world was about to collapse.

As Valukas points out, Lehman compounded its risky real estate investments by putting them on the balance sheet from 2006 through 2008. Their competitors did not do this…a fact that U.S. Treasury Secretary Henry “Hank” Paulson was well aware of. This was why he ultimately got exasperated with Lehman. The final straw for Paulson occurred on Sunday, 14 September 2008, when a very senior executive at Credit Suisse (note: not Goldman Sachs) warned him that the illiquid hole on Lehman’s balance sheet could be as big as $100 billion. According to one person in the room, Paulson said, “Screw it.”

Why did Lehman behave so idiotically?

Well, you will have to wait a week to read my book, The Devil’s Casino — but what it shows you is how, historically, the Lehman culture was more like a Renaissance feudal court than a bank. Disagree with the King and you were cast out. This did not create an environment for amicable argument. Quite the reverse. As one person tells me in the book, “It became a culture of lies: It was ‘what lie are we going to tell the people who work here and what lie are we going to tell the market.'”

The chief cheer-leader of this closed-off world, is not actually included in the list of people singled out by Valukas as executives who could allegedly be culpable of balance sheet manipulation: Dick Fuld, Erin Callan, Ian Lowitt and Chris O’Meara. Instead, he is the man who put them in their positions. This person is former Lehman President Joe Gregory – who many former employees now consider to be grotesquely hypocritical, telling incoming managing directors he did not want to hire “anyone who had to check their bank balance daily” – yet who himself took out over $300 million from Lehman over his 30-year tenure there and has now sued the Lehman estate for an extra $232,999,549. Dick Fuld made no claim, nor did virtually anyone else from Lehman’s Executive Committee, save the former legal counsel Tom Russo, who sued for $17.3 million.

Gregory was used to fudging facts when it came to public documents. He admits as much in a journal he dictated in 2002 in which he says he’s collecting the memories of other senior executives to compile an official “modern history” of Lehman that will be “sanitized.”

What he wants, he says, is to give Dick Fuld more credit than he was due in resurrecting Lehman — “for the sake of the brand.”

But Gregory quickly realized that no amount of sanitizing was going to make those memoirs palatable to him, his boss – or the public. Most of the “diaries” either ignored or belittled Fuld. Nor did the various accounts tally with one another, which threatened to destroy Lehman’s precious, often-pronounced motto: “One firm.” So Gregory had abandoned the project, obviously not realizing the papers could fall into a journalist’s hands….

Tellingly, given that Valukas labeled Lehman’s financials as “materially misleading” Gregory’s own dictated memories of the firm have him recalling being livid with John Cecil, Lehman’s former CFO (and CAO – chief administrative officer) in 1998 because Cecil wanted to take his time releasing the firm’s earnings in the immediate aftermath of the so-called Russian crisis, during which Russia had defaulted, and the small outfit of Lehman had faced a “rumor-storm” questioning whether it could survive.

Gregory says that he “could remember the conference call like it happened ‘two seconds ago.'” “We needed the CFO to say the firm is financially sound…John responded that he wasn’t sure he could say that for threat of being sued…we all went nuts. How could he say that? We were trying to keep the company alive – 12,000 to 13,0000 peoples’ lives were at stake.”

When asked about this Cecil, now running his own consultancy Eagle Knolls, replied dryly, “If only they’d applied the same caution in 2008.” Yes, if only….”

But Gregory did not see Cecil’s meticulousness as a plus. Quite the reverse. He made sure he was a marked man. Cecil left the firm in 2000. When asked why, Bob Genirs, Lehman’s former CAO (chief administrative officer) wrote succinctly to a colleague: “Joe shot him.”

Gregory, to be fair, was just a product of a system used to bending the facts.

Back in the 1970s when Lehman was run by white-shoe bankers, the traders in the commercial paper unit, Lehman Commercial Paper Inc (LCPI) used to hide their volatility from the partners. The traders used to put up their positions on five-by-seven inch cards on a wall so that everyone could see what had been bought and sold. The color of the ink indicated which type of security it was…but according to a senior person at LCPI, if the traders heard that Arthur Schulte, Lehman’s partner responsible for trading, was on his way over from 1 William Street (Lehman’s headquarters) to 9 Mill Lane (then the headquarters of LCPI), the cards were quickly pulled off the board. There were limits to the total value of their positions and at midday those positions might be higher. Essentially, they were hiding their volatility, how much risk they were taking on a daily basis.

As soon as Schulte left, the cards went back up. “It was a game,” says Paul Newmark, Lehman’s former senior vice president and treasurer of LCPI. “It was a game that was ingrained in people…Dick Fuld was very good at it.”

So good at it, that once LCPI was absorbed by American Express Shearson Lehman he allegedly carried on. “Dick’s reserve” was the name for what could also have been called “the Daily Fiction,” which the Lehman traders hid from their bosses, Jim Robinson and Peter A. Cohen. A former managing director says it worked like this:

Every day we would report up to Shearson and American Express our P&L [profits and losses] for the day. We knew that the management upstairs, if they saw the P&L going up and down dramatically — one day we made a lot of money, and the next day we lost a lot of money-they’d know that we were betting a lot of money, and taking a lot of risk. But if our P&L looked like a nice steady EKG kind of thing, then everything was okay. So on the days we made a lot of money, Dick didn’t report all of it, and when we lost a lot of money, he took a little out of that kitty to make that day’s P&L not as bad. We called that kitty (kept on a piece of paper) “Dick’s reserve.”

As for Gregory? He slowly rose through this culture to become head of fixed income in 1994 as Lehman got spun out. One problem: In a pre-run of what would happen in 2007 and 2008, he didn’t manage risk.

In November 1994 Gregory’s boss, Chris Pettit, then Lehman’s president, was livid to discover that due to Gregory’s carelessness, the firm had had $5 billion of gross exposure to Mexican bonds and related counterparties and it looked like Mexico could default soon. At the time, Lehman was only worth $3.5 billion. Pettit gave Gregory a public dressing down every Friday.

By the time the then Treasury Secretary Robert Rubin dived in and saved the Mexican peso, underwriting the country’s debt in February 1995, Gregory and Pettit were no longer sharing the same car into work.

But the battle between the two men was won in the end by Gregory who rose to preside over Lehman’s culture and day-to-day management, even though he took increasingly little interest in the firm’s businesses.

“What’s our China policy?” he was asked in 2008 in an Executive Committee meeting. “I have absolutely no idea,” he told a horrified room. Fuld, meanwhile, was nowhere near; he was out with clients.

So, no, the Valukas report did not surprise me one iota. Lehman, I believe, was so rotten at the top, so corrupt, so unwilling to tolerate dissension, and Dick Fuld and Joe Gregory were so obsessed with clinging to their seats, that eventually it would have failed, even without a housing or asset bubble.

As one senior executive manager put it to me: “In the end a car gets pushed over a cliff, – and that guy who pushed it would be Hank Paulson – but really who are you going to blame? Him or the people who drove the car right up to the edge?” V

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Former Lehman Women React to “Doozie” of a Story

On Monday night, in response to my article in this month’s Vanity Fair on Lehman’s Desperate Housewives (which was an excerpt from my forthcoming book, The Devil’s Casino: Friendship, Betrayal and the High Stakes Games Played Inside Lehman Brothers), hundreds (literally) of Lehman’s former women executives anxiously listened into a conference phone call helmed by Anne Erni.

Erni used to be the chief diversity officer at Lehman, and now works in the same capacity for Bloomberg. The participants on the call all used to belong to WILL — the acronym for Women’s Initiatives Leading Lehman, an organization set up by the diversity-obsessed former Lehman president Joe Gregory.

Erni, who was and remains a fan of Gregory (well he hired her, didn’t he?) apparently told all of them to take note of the article, saying that Gregory and his wife Niki had been “bashed” both for their need to “flash their cash” — remember there was talk of Niki Gregory’s shoe closet being “twice the size of the Jimmy Choo store in New York”? — and that Joe Gregory would likely come under further attack in my book for being too consumed with Lehman’s laudable diversity and inclusion programs, at the expense of managing risk and closely monitoring the firms’ core businesses.

She warned that the book would be a “doozie” (this author, being British, had to find out what a doozie was, since it does not feature in the Oxford English dictionary).

Still, good to know that despite what we all thought, Lehman, in a way, still lives. And as for the doozie, well I guess like everyone else, the members of Lehman’s WILL will have to wait and see. I am very happy to come and give a talk on the subject at one of your monthly meetings. Erni did not return calls for comment at the time of going to press. V

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Libyans Picked the Wrong New York City Realtor to Try to Dupe

New York has a new hero in the form of 32-year-old realtor Jason Haber, the guy who told Moammar Khadafy’s representatives that he would only find them a lavish Upper East Side New York abode, if they returned the convicted Lockerbie bomber Abdelbaset al-Megrahi to Scotland and the prison he was sentenced to for life. (Megrahi was given a hero’s welcome in Libya when released by the Scots on compassionate grounds on August 20th, as part of an alleged oil deal between Britain and Libya.)

But thanks to Haber, when Khadfy arrives here for the UN General Assembly this week, the Libyan leader will have to make do with his more humble country’s mission on 48th Street.

Haber, 32, first received a call from someone in Khadafy’s entourage around Labor Day weekend. Haber had seen the footage of Megrahi’s welcome and, like most Americans was appalled. Still he made no connection at this point between his new client and the news as, strangely, the person claimed to be representing a senior person in the “Dutch” delegation.

This person said the “Dutch’ wanted a triplex on East 78th Street. They wanted it fully furnished with very high-end furniture. Haber explained there were problems with this, since the building in question has only one leasable floor – for $28,000 a month. Another floor is being renovated. And a third has just been leased.

The “Dutch” person on the phone was clearly not used to being told “no”. Haber was rudely told “sort it out, NOW” and the person hung up on him.

More phone calls in this vein continued – until Haber, to his shock, suddenly found himself on the phone to “some person in Washington” at the Libyan embassy.

All sorts of alarm bells rang.

If the Libyans hoped to strong-arm a young ignorant realtor they’d missed their mark. Haber happens to hold a Masters in International Affairs from Columbia; as an undergrad he majored in political science at George Washington University and – oh – he ran for City Council in New York in 2001.

The Libyans gave him the opportunity to play politics. “I will find you a house if you return Al-Megrahi to Scotland,” he told the person on the phone in Washington. The phone went dead.

“At least I consider I did my part for the victims’ families,” Haber told me yesterday, referring to all those who lost their lives on flight Pan Am 103.

Next time perhaps the Libyans will check more carefully into the background of a New York realtor they want to bully.

And I think Haber should run again for political office. V

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President Obama, Gordon Brown, Deaths in Afghanistan and More British Deception Over Lockerbie

Earlier today the White House put out a press release noting that President Obama spoke with British Prime Minister Gordon Brown and expressed his “disappointment” over the Lockerbie affair. (In case anyone has been under a rock these past few weeks, Brown has been at the center of a controversy over allegations that the Scottish government’s decision to release convicted Lockerbie bomber, the Libyan Abdelbaset Ali Mohmed Al Megrahi, 57, on compassionate grounds, was linked to Britain’s fears that not releasing him would block oil deals with Libya worth hundreds of billions of dollars).

Brown has consistently denied the charges — only to have members of his own government — and Libya’s — contradict him. As I blogged last week, the British media then reported that the American’s professed outrage on the affair was “disingenuous.”

Well, speaking of disingenuous, Brown did not mention the fact that the American President had expressed his disapproval to the British press, who first learned of the conversation with Brown thanks to a White House briefing.

Further, the London press — both left and right — are reporting of great anger in the British army about Brown’s personal order to send in British commandos for a pre-dawn raid to rescue the British New York Times journalist, Stephen Farrell, who had been captured in Afghanistan.

Unfortunately for Brown, as we know, the rescue did not go smoothly. Both a British paratrooper and Farrell’s interpreter, Sultan Munadi, were killed. Top hostage negotiators have told the London Times they are furious — that they were days away from securing Farrell’s release. Even the Queen, it’s been reported, has recently read Brown the riot act over lack of equipment in Afghanistan.

The Guardian‘s Robert Fox writes:

Was the daring rescue of the New York Times journalist Stephen Farrell a risk too far, for all concerned?

Today we are hearing that the brass in the British Army are angry that valuable special forces troops had to be tasked to rescue the reporter from the Taliban in Kunduz, and that one of their own troopers died in the operation as well as the reporter’s colleague and two Afghans.

Questions are now being raised whether Farrell should have heeded warnings not to go to northern Kunduz. Since he dared to do so, shouldn’t he have been left to reap the consequences? Furthermore, wasn’t Gordon Brown, who took the ultimate decision to send the special forces in, too trigger-happy — in the clear hope that by daring to order such a bold move, he would win much-needed public applause?

Well, if applause is what Gordon Brown wants, he’s not getting it. What he’s got, instead, is blood on his hands and the stink of corruption all around him. One hopes there will be investigative reporting into what happened and why in Afghanistan — and if necessary, accountability for several tragic deaths.

The attempted cover-up over Brown’s less-than-cordial conversation with Obama is just one more signal that the truth is considered an inconvenience for this British premier. When, for the sake of his country, is he going to do the decent thing — and resign?

Outrageous Claims of American “Disingenuousness” Over Lockerbie by Britain Must Be Stopped – and Real Facts Found

Yesterday I wrote how Britain’s Sunday Telegraph claimed that Libya paid three doctors to give the Scottish government medical evidence that Abdelbaset Ali Mohmed Al Megrahi, 57, the convicted Lockerbie killer had only two or three months to live, when in fact he may have more.

The British Mail on Sunday meanwhile queried America’s outrage over Megrahi’s release as being “disingenuous,” suggesting that of course Secretary of State Hillary Clinton had known all along what was cooking – as had the Department of Justice and President Obama. The paper quoted Whitehall sources as being annoyed at what they perceive as the faux reaction this side of the Atlantic. They thought it was being overdone.

My column endorsed Tory Leader David Cameron’s call for an investigation into what smells like a pyramid of intricate double-dealing, with the defiant British Prime Minister Gordon Brown on its top.

Every day that passes, with Brown refusing to acknowledge that Britain’s interests in Libya’s oil had anything to do with Megrahi’s release – while his aides leak otherwise – the more tenuous his position atop Britain looks.

I got so many emails about this column, some agreeing with the Mail, that the Americans must have known, that I made some calls this morning to the US State department, the US Justice Department and Kenny MacAskill’s office. I found some answers to the allegations thrown out by the British press over the weekend. All of them contradicted what had been reported.

First, to deal with the Mail: According to MacAskill’s parliamentary office, US Secretary of State Hillary Clinton spoke to Scottish Justice Minister Kenny MacAskill on the phone a week before he made his decision about Megrahi on August 20th. MacAskill told Sec. Clinton he had not yet made up his mind what to do. She reiterated to him that the American position was clear. Megrahi must not be released. He had American blood on his hands. Enough to drown in. He must serve his sentence in a Scottish jail.

The two had no further contact until the day of Megrahi’s release., says MacAskill’s office. (It being a holiday here, the State department said they’d have to call back tomorrow to confirm this). MacAskill’s office says on August 20th he called the US embassy in London to say he’d be speaking in ten minutes and what he would say. Secretary Clinton publicly and privately expressed her outrage. So too did President Obama.

MacAskill has written back to Sec. Clinton. So far the contents of that letter are private.

Then to the Telegraph: MacAskill did not receive the reports of the three Libyan doctors stating Megrahi had only three months to live until after he had released Megrahi, says MacAskill’s office, so whatever they said was in vain. “He based his decision on prison services doctors,” says MacAskill’s office. Those letters didn’t even get here on time.”

Finally, to all those who would love to think that the Americans are secretly endorsing the British on this: I refer you to the spokesman in the US Justice Department this morning. “We most certainly did not know what they’d decided,” he said. He told me of a female FBI officer who had “worked very closely with the victims families and still does… when she found out, as MacAskill was speaking, that Megrahi was being released, what she had to say was unprintable.”

So once again, I reiterate what I wrote yesterday. David Cameron must be allowed to hold the swift investigation he wants and retrieve the facts about this whole messy affair. And perhaps Britain’s Mail on Sunday should look for “disingenuousness” within its own country’s government – before pointing fingers over here. V

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The Lockerbie Cover-Up Must Be Investigated

In Britain’s Sunday Telegraph, the British reporter, Andrew Alderson claims that Libya paid three doctors to give the Scottish government medical evidence that Abdelbaset Ali Mohmed Al Megrahi, 57, the convicted Lockerbie killer had only two or three months to live.

In fact, other doctors, according to Alderson’s report, said in June that Megrahi who suffers from prostate cancer could have nine months – or more – to live. But the three doctors whom Libya allegedly paid had their diagnoses included in the sealed files that Scotland refuses to open to the public, citing “privacy concerns.’

Alderson reports:
“Professor Karol Sikora, one of the examining doctors and the medical director of CancerPartnersUK in London, told The Sunday Telegraph: “The figure of three months was suggested as being helpful [by the Libyans].

[Sikora said] “To start with I said it was impossible to do that [give a three-month life expectancy estimate] but, when I looked at it, it looked as though it could be done – you could actually say that.”

He said that he and a second doctor, a Libyan, had legitimately then estimated Megrahi’s life expectancy as “about three months”. A third doctor would say only that he had a short time to live.”

The piece goes on to acknowledge what we already know – that though Britain’s government refuses to accept responsibility for Megrahi’s release – that Jack Straw, Britain’s Justice Minister has now stated on the record that the British were keenly aware that if Megrahi was not released trade deals worth billions, including a massive one with BP, would be cancelled.

Alderson writes: “British businessmen were also told that plans to open a London office of the Libyan Investment Authority, a sovereign fund with $136billion (£83billion) to invest, would be jeopardised if Megrahi died in jail.

Britain provided aid for Libya, believed to be the first since the Lockerbie bombing, when the release of Megrahi was being discussed. The £146,000 grant – which senior Tories suspect was a “sweetener” to Libya – was provided by the British Embassy in 2007-08 at the behest of the Foreign and Commonwealth Office.

The piece continues:
There were strong suggestions from Libya yesterday that it felt Britain had played a significant role in pressing for Megrahi’s release.

Abdul Majeed al-Dursi, the regime’s chief spokesman, said: “This is a brave and courageous decision by the British, which shows its understanding of Libyan culture by allowing a sick man to be at home when he dies.

“It showed the relations between Britain and Libya are strong and deep. We in Libya appreciate this and Britain will find it is rewarded.”

All this makes Gordon Brown’s denials of his government’s involvement in Megrahi’s release look deeply troubling. David Cameron, the young British Tory leader who looks likely to sweep Brown out of office by next May has called for an immediate inquiry. Understandably, Cameron wants to get to the bottom of this stinking business as fast as possible.

Meanwhile the US is still reeling from what it sees as outright betrayal from its oldest ally. When I spoke to the Justice Department last week I could almost hear the fury down the phone line. Was it true, I asked, that though the American government knew the Scots were making some sort of decision about moving Megrahi- against strong protests from FBI director Mueller, Secretary of State Hillary Clinton and Attorney General Eric Holder – they were only actually apprised of MacAskill’s final decision ten minutes before he stood up to make the announcement on August 20th, the response I got was terse. “We won’t deny that.”

Senator Barbara Mikulski (D) of Maryland, from where eight people died in the bombing, has written to the British Ambassador to the US, Sir Nigel Sheinwald. She does not mince her words: “How dare any one official in the Scottish government substitute their judgment to award freedom to a murderer for the careful deliberation of their courts…?”

Of course, given the Sunday Telegraph’s reports, and all the other leaks coming out of Whitehall about Britain’s ties to Libyan oil, increasingly it doesn’t look like “one official in the Scottish government” made this decision in isolation. Far from it. “We are going v. hard on this,” someone wrote me from Cameron’s office.

Frankly, David Cameron “can’t go hard” enough in retrieving all the facts. Meanwhile the air hanging over Britain and Scotland stinks of something rotten. V

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The Truth About Lockerbie May Now Never Come Out Thanks to Gordon Brown’s Thirst for Libyan Oil

A few weeks ago, in July, US families of the Lockerbie victims gathered in front of a TV screen in both the British embassy in Washington, DC and in the consulate in New York.

They were connected via video conference with Scottish justice minister Kenny MacAskill, who discussed with them both the options of prisoner transfer for Abdel Basset Ali al-Megrahi, the convicted Lockerbie bomber, and a compassionate release, since the 57-year-old was suffering from prostate cancer.

According to Frank Duggan, a former Chairman of the National Mediation Board who serves as president of the group of American victims of flight Pan Am 103, the conference was civilized and the Americans were direct with MacAskill. “We told him in no uncertain terms we did not want Megrahi transferred back to Libya. MacAskill did mention compassionate release as another option for him, but never in such a way as to make us believe it would actually happen. We view what subsequently happened as nothing short of betrayal,” Duggan tells me.

The shock in the wake of Megrahi’s release, his hero’s welcome in Libya — and now the leak of two letters from Jack Straw, Britain’s foreign minister, insinuating that the British told the Scottish that it was OK to transfer the convicted terrorist, since to keep him blocked a $30 billion oil exploration deal between BP and Libya — have led to proposals to boycott Scotland, a rally in New Jersey protesting Muammar Qaddafi’s plans to camp there (now canceled) during the upcoming UN General Assembly — and now calls in both Britain and the US for British Prime Minister Gordon Brown to stop evading the issue and tell the truth about his government’s involvement.

I have communicated with Duggan repeatedly over the weekend. “In our view the British have behaved worse than the Scots,” was his view on receiving the news about Straw’s leaked correspondence. We also discussed the op-ed that appeared in the New York Times under the byline of the Libyan dictator’s son, Saif Al-Islam El-Qaddafi; Qaddafi fils insists there was no “hero’s welcome” for Megrahi on his return to Tripoli, explaining away the hundreds of cheering, flag-waving supporters as members of Megrahi’s “extended family,” and makes the O.J. Simpson-like assertion that the “truth about Lockerbie will come out one day.” Call me skeptical, but when it comes to credible track records, even the British government, who wrote to their buddy Qaddafi asking that Megrahi enter the country quietly, by now must doubt the veracity of what comes out of the mouths and word processors of Libya’s leaders.

Many of those who have protested Megrahi’s innocence have ties to Libya, including having been paid or promised payments by the Libyan government — something that may come as news to all those busy protesting Megrahi’s innocence. In some cases the Megrahi apologists have some hidden reason to blame others — ranging from the Iranians or Americans, who some claim tampered with evidence or bribed witnesses to suit their own purposes.

First among the Megrahi defenders is Dr. Jim Swire, an English doctor who lost his daughter, Flora, in the bombing. Apparently Swire is a plausible, decent man — but according to people who have known him a long time, he was never pro-America; in fact, quite the reverse. He was upset that Flora was planning to marry an American just before she died, according to sources. This fact, obviously, is not mentioned when he is quoted by the media. Duggan is reluctant to criticize another victim’s family member, but says that Dr. Swire’s mind was made up before Megrahi’s trial.

Then there is Edwin Bollier, the Swiss businessman who worked for Mebo, the company that manufactured the bomb-timer and whose office was next door to Megrahi. He has said repeatedly that Megrahi is innocent and that evidence was suppressed at the trial. He has good reason to say all this. Last year it emerged that Libya offered him $200 million if he could help set Megrahi free. Bollier contributes almost daily to the blog maintained by Professor Robert Black, a Scottish law expert, calling for a new trial.

Then there is Dr. Hans Koechler, one of six UN observers — and the only one to believe that the trial in front of judges, rather than a jury because of all the publicity — was a travesty. Hans Koechler is a teacher at Innsbruck University; he heads something called “the International Progress Movement.” He holds himself out as having some official position with the UN, which appears to give him credibility. His view of the trial, in which Megrahi was found guilty beyond a reasonable doubt by eight Scottish judges — three trial judges and five appellate judges who came to a unanimous verdict — does not appear to be shared by the other five UN observers.

Finally we come to Professor Robert Black, the Scottish lawyer whose opinion perhaps carries the most weight because he was one of the architects who devised the judge trial instead of a jury trial. He has since said he regrets this because he believes that the verdict was based on weak circumstantial evidence that he believes would not have persuaded a jury. He is frustrated that other judges and lawyers — including those who denied the first appeal — just do not agree with him. He is like a dog with a bone and he will not give it up.

Why has the West been so slow to refute these conspiracy theorists? Duggan reminds me that other than a now-retired FBI agent, Richard Maquise (who is firmly of the opinion that though Megrahi did not act alone, he is guilty) all the other government officials involved in the case are unable to talk about it because they are still working and cannot comment. The strongly-worded letter from FBI Director Robert Mueller to MacAskill, calling MacAskill’s decision a miscarriage of justice, was unprecedented — a fact that seems to have been overlooked.

Ultimately however it is not the job of journalists to prove or disprove Megrahi’s innocence. That is for the courts. An appeal didn’t work once. It’s easy for protesters to say it would work a second time, but Megrahi is running out of time.

By releasing him, the Scots have ensured we will never know the truth. Kenny MacAskill has indeed betrayed the American families. And as for the British government, when are they going to tell the truth? If Gordon Brown continues to hide and to lie, then he is just the same as Muammar Qaddafi, whose oil he covets, apparently at any price. New Jersey should ban him too. V

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Why Britain Should Apologize for Releasing the Lockerbie Killer – and Why it Won’t.

I just received an email from a Madoff victim who is still reeling from the double-whammy of having watched his wealth vanish, and learning that the soft-spoken financier he considered a friend is in fact a crook – possibly it’s now been reported – with cancer. (Prison authorities deny this).

He wrote me: “I hope the government is smart enough not to do what Scotland did and give him compassionate release to fight his cancer.”

Ouch.

I am not Scottish but I am British – which, in terms of the disgraceful release of the Libyan Abdel Basset al-Megrahi, 57, jailed for killing the 270 people, mostly Americans, who died in the Lockerbie bombing – on “compassionate” grounds on account of his terminal cancer – is just as bad. No one I’ve spoken to in Britain believes that the Scots would have handed over a massive murderer who is a global symbol of state-sponsored terrorism, without checking it out with the British Prime Minister Gordon Brown, who is, after all, Scottish. (And no, I do not buy the argument that the Scottish National Party was just following its “normal” legal trajectory in releasing him – there is nothing “normal” about the scope of this man’s crime; nor do I buy the argument that his conviction was about to be squashed, so they decided to let him out anyway. If that were actually true there would – and should – be a public detailed report showing the world, particularly the victims’ relatives, exactly what was unjust about locking him up in the first place.)

Then there are those damning insidious remarks of Libyan dictator Col Muammar Gaddafi thanking, among others, the Queen, Prince Andrew (a so-called “Special Representative” for British trade) and Brown for their assistance, as well as open admissions by British trade experts as to the “helpfulness” of the release, leaving many to conclude, despite denials, that the deal was done in exchange for Libyan oil.

As a Briton who has lived in the US for twelve years, I feel strongly that we should apologize unreservedly to all families who lost their loved ones in the bombing. This, however, is unlikely to happen. Instead the British government will lay all the responsibility at the feet of the Scots and find a diversion as fast as possible. (Am I the only one sufficiently cynical to find it utterly fascinating that Gordon Brown should choose this moment, above all others, to pontificate here on the Huffington Post about how much he cares about promoting Womens’ rights – particularly in Africa?)

I hate to admit it, but the truth is my country has an appalling record when it comes to choosing between trade and moral principles.

For exhibit A, I give you the sudden closure in 2006 of the investigation by the British Serious Fraud Office into the alleged bribery of Saudi officials by executives at British Aerospace (BAE) in the 1988 $64 billion arms deal known as Al Yamamah (The Dove).

Though then British Prime Minister Tony Blair insisted the inquiry was not closed for “economic” reasons – (“national security” was cited instead) – most people believed that the chief reason the investigation, which was honing in on relevant Swiss bank accounts, suddenly stopped, was because the Saudis threatened to back out of a new arms deal with BAE, known as Typhoon, for 72 fighter planes and billions of dollars. Last year it was revealed that the Saudis had also threatened to withdraw cooperation in terrorism matters – but who is to know what mattered most in the eyes of the British government? As the late Robin Cook, who had served as Foreign secretary to Blair, wrote sarcastically in his 2003 memoir: “ I never once knew No 10 [home of the British Prime Minister] to come up with any decision that would be incommoding to British Aerospace. ”

Because the BAE investigation was largely a localized British (and obviously Saudi) issue the national press reacted angrily for a while but then the brouhaha died down. (The US Justice Department is said to be picking through the alleged money laundering aspect – supposedly done through the now defunct DC bank, Riggs Bank – but when was the last time we heard about that?)

From England, my father tells me that the release of the Lockerbie bomber will soon too be forgotten. “I think the government thinks there will be a ten-day fuss and then everyone will move on,” he said. He added with a resigned tone. “You have to remember we are run by a bunch of complete incompetents.”

Incompetents who don’t even put something as tumultuous and divisive as releasing a mass murderer who also happens to be a global political hot potato, to a vote? …Americans may either be weary of or sickened by the current healthcare reform uproar – but at least this side of the Atlantic there is a public debate about things that matter.

Imagine if Bernie Madoff were to have cancer and as my acquaintance, his victim, put it, he were to be released like the Lockerbie killer? There would, no doubt, rightly be outrage in the streets.

Americans should be proud that they live in a place where protest is still vibrant and, unlike my father, they don’t feel hopelessly repressed and depressed. And as for me? On behalf of my countrymen, I apologize – unreservedly. V

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Some Much-Needed Truths About Lehman

I have not yet finished David Wessel’s In Fed We Trust: Ben Bernanke’s War on the Great Panic – mostly because – full disclosure – I’m scribbling away on my own book: The Great Mistake: The Fall of Lehman Brothers and the Weekend That Changed The World for John F Wiley & Sons, due this Winter.

However, there are things expressed in the review of Wessel’s book by Robert Teitelbaum that, I know from my own research into the reasons why Lehman fell, need to be addressed – fast, before they seep into the consciousness of the reading public, as fact.

Both Wessel’s book and the far more risible account of Lehman’s demise by Lawrence McDonald, which is a misleading-bordering-on-hallucinatory account of what happened, contain certain key errors.

1) Hank Paulson did not dislike Dick Fuld. Quite the contrary.
2) Teitelbaum’s take on Wessel: “When Paulson finally decides the government can’t save Lehman, the decision remains opaque. He mentions politics and Moral Hazard. But Wessel has already slyly suggest that perhaps his disdain for Lehman fed the decision.”
This is also not true. Nobody tried harder to save Lehman Brothers than Hank Paulson and his team at Treasury.
3) Hank Paulson did not, as Teitlelbaum summarizes Wessel, “fail to understand the implications of Lehman’s failure.” Possibly, other people did. Read my book to see who.
4) Dick Fuld was not uninvolved in Lehman’s negotiations with KDB, the Korean bank. Anyone who knows the slightest thing about Dick Fuld’s character would know that he would never let Lehman engage in major merger talks without inserting himself into the process.

Finally, apologies for being so opaque myself. But I cannot stand to let these inaccuracies enter the public realm without resistance! I will hurry up and write my book which tells a rather different story. V

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