This past week we were given a close look at the most intractable problem we as a nation face: the thoroughly corrupt and parasitic financial elites on Wall Street.
Harry Markopolos, the whistleblower who in May 2000 first warned the Securities and Exchange Commission that former NASDAQ chairman Bernie Madoff’s investment firm was a fraudulent ponzi scheme, testified before the House Financial Services Subcommittee.
The most important – and most disturbing – part of Markopolos’ testimony was not about how Madoff ran his investment firm. Neither was it about how the SEC completely ignored Markopolos’ repeated warnings over eight years, including a 21-page document entitled "The World's Largest Hedge Fund is a Fraud" which Markopolos submitted to the SEC in November 2005.
Markopolos, you must understand, is a former U.S. Army Special Operations commander turned securities fraud investigator. Here’s the most important part of Markopolos’ testimony:
My army special operations background trained me to build intelligence networks, collect intelligence reports from field operatives, devise lists of additional questions to fill in the blanks, analyze the data, and send draft reports for review and error correction before submission to the SEC.
In order to minimize the risk of discovery of our activities and the potential threat of harm to me and my team, I submitted reports to the SEC without signing them. My team and I surmised that if Mr. Madoff gained knowledge of our activities, he may feel threatened enough to seek to stifle us. If Mr. Madoff was already facing life in prison, there was little or no downside for him to remove any such threat. At various points throughout these nine years each of us feared for our lives. . . .
Now think about what Markopolos is saying here. Do you think U.S. Army Special Operations commanders are the type who openly go about proclaiming they fear for their lives, and the lives of their families? Is Markopolos a looney bin? Is he some sort of conspiracy nut? Was he just spicing up his appearance before Congress?
Or does a guy who has gone through some of the most intense and ruthless training for lethal combat in the world have some idea about when it’s an appropriate time to be scared?
And, what does Markopolos’ fear tell us about our most powerful financial and banking institutions and the people who run them? What manner of Beast has Wall Street become?
Some people are pointing out that Markopolos had good reason to be afraid because of Madoff’s alleged connections to Colombian drug cartels and the Russian crime gangs. But that is not who Markopolos referred to. He referred explicitly to Madoff. But does it really matter? Does the possibility of involvement by Colombian drug cartels or Russian crime gangs in any way diminish the problem Wall Street has become?
In fact, we now know that 9,800 CEOs, lawyers, accountants, and traders have probably committed federal felonies of tax fraud by having an escort service write false invoices for various fictional services in order to use company funds and credit cards to pay for prostitutes.
According to Kristin Davis, who pled guilty last year to charges of running a prostitution business that used more than a hundred women,
"Some of these guys, I was invoicing on corporate credit cards," she said. "I was writing up monthly bills for computer consulting, construction expenses, all of these things, I was invoicing them monthly so they could get it by their accountants," Davis said. . . .
Davis provided ABC News with a print-out of her computerized client list . . .
The document shows Davis kept meticulous notes about her clients, their credit card numbers and mobile phone numbers.
Among the names ABC News was able to confirm on the list:
a vice president of NBC Universal
the part owner of a Major League Baseball team who "loves Kelsey"
the CEO of one of the country's largest private equity firms who met "Cameron" at the Peninsula Hotel
a major New York real estate developer who, according to the list, "will come to the door wearing women's panties," and who spent nearly $100,000
a partner at the Wall Street law firm Cravath Swaine Moore "looking for a party girl to come fully equipped" and spent a total of $20,000
an investment banker from Lehman Brothers who saw "Kelsey and Keely together" and later saw "Aria and Skyler at the same time"
an investment banker at JP Morgan Securities who "loves Brooke" and spent $41,600
an investment banker at Goldman Sachs who "only wanted all-American girls" and spent $27,000
a managing director from Merrill Lynch who saw "Lana" using the name "Nataly"
a managing director from Deutsche Bank "who called about seeing Nataly again"
I hope at this point that there is one name flashing in your mind: Eliot Spitzer.
So, of course these clients are going to be answering to the law soon. Right?
Nope.
Ms. Davis offered her computerized client list to the DA,
But prosecutors in the Manhattan District Attorney's office chose not to pursue any of the corporate titans, says Kristin Davis. . .
"They showed no interest," said Davis in an interview for broadcast Friday on the ABC News program 20/20.
9,800 of the highest CEOs, attorney, consultants, and accountants of Wall Street in a computerized list of a madam? With details of the fake invoices created? This is major tax fraud- and we’ve just seen how damaging just a whiff of tax fraud can be to a Washington insider.
If Obama truly wants to implement change, this list is an incredibly powerful gift. Prosecuting and jailing these elites would decapitate the Beast that is Wall Street.
Each and every one must be convicted.
And as a result, barred from ever working in their profession again.
But there is a larger issue here. A much larger issue.
Justice.
In your heart of hearts, in your gut, don’t you just have the feeling that none of these 9,800 Wall Street pricks will ever have to step into a court room to be tried for their alleged crimes?
Is that really acceptable?
If these men be not brought to justice, then let us be honest with ourselves and with our children, and with the rest of the world, and give up the pretense that our country remains a democratic republic governed by the rule of law. Like Abraham Lincoln wrote to a friend in August, 1855 regarding the extension of slavery, "When it comes to this, I shall prefer emigrating to some country where they make no pretense of loving liberty - to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocrisy."
The past two weeks we have been contentious amongst ourselves, debating the wisdom and efficacy of President Obama’s attempt to attract Republican support for the stimulus bill. How to measure success on the political game board is almost as contentious an issue.
But here is one clear, solid measure of change. One unmistakable and unambiguous goal. A list of 9,800 elites who appear to have committed tax fraud. There is only one reason not to prosecute them.
Who they are.
What ever else President Obama does, what ever great things he manages to accomplish, will all be meaningless if the Beast of Wall Street is not brought to justice.