Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies (10 page)

White House spokesman Robert Gibbs blithely insisted the day after the Killefer and Daschle withdrawals, “The bar that we set is the highest that any administration in the country has ever set.”
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It was getting harder to listen to such lofty claims every week without hearing a laugh track or drum rimshot.

BAILING OUT AT TREASURY

Treasury Secretary Tim Geithner probably savored the
Vanity Fair
photo shoot more than any of the other Cabinet members. He hasn’t had that much company since taking office. By mid-March 2009, only one of fifteen key Treasury Department positions requiring Senate confirmation had been filled.
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Treasury officials denied there were any vetting problems. But Mr. Lonely saw at least five staff picks withdraw before the Obama administration had reached the 100-day mark:

On March 5, Geithner’s choice for chief deputy, Annette Nazareth, dropped out of the running after drawing criticism of “what some considered to be a lax oversight of the banking industry,” the Associated Press reported.
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She had served as a former senior staffer and commissioner with the Securities and Exchange Commission (SEC), where she founded the Consolidated Securities Entities program. According to the
Wall Street Journal
, the Consolidated Supervised Entities program “was created in 2004 to coax global investment banks to voluntarily submit to regulation.” The five major investment banks that participated in the program no longer exist. The program was abandoned in September 2008, the
Journal
reported, after then SEC Chairman Christopher Cox declared it “fundamentally flawed from the beginning.”
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In addition, SEC Inspector General David Kotz faulted the SEC program for failing to respond to “numerous, potential red flags” at Bear Stearns, which collapsed in 2008.
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It also failed to detect the $50 billion Ponzi scheme engineered by convicted mega-swindler Bernie Madoff.

The same day, White House aides acknowledged that Caroline Atkinson, the Treasury pick for Undersecretary for International Affairs, had withdrawn after a “tax problem” was discovered in the vetting process.
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A week after Nazareth and Atkinson bowed out, New York Attorney H. Rodgin Cohen withdrew his bid to replace Nazareth. Cohen was a preeminent counsel to Wall Street firms and a partner at prestigious Sullivan & Cromwell LLP, which had donated nearly $242,000 to the Democratic National Committee during the 2008 campaign cycle.
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Democratic sources told ABC News, “An issue arose in the final stages of the vetting process.”
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The “issue” may well have been Cohen’s hands-on role as a primary engineer of the very banking crisis he was nominated to help fix. The
Wall Street Journal
noted in the fall of 2008 that Cohen “helped mold the financial system that is now under assault,” “helped draft the rules that led to the emergence of powerful national banks, waged the first hostile bank takeover in the U.S.,” “lobbied . . . to expand the Federal Reserve’s power to provide the emergency loans now being employed by the government,” and “helped broker the deal that put Fannie [Mae] and Freddie [Mac] into conservatorship.”
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Yes, it certainly would have been an “issue” if Geithner’s top deputy pick were approved for office—only to be forced to recuse himself from every aspect of his job over conflicts of interest.

On March 24, 2009, hedge fund manager Frank Brosens withdrew his name from consideration for the Treasury job overseeing the $700 billion bank bailout program, surprising many who expected him to take the position. Obama economic adviser Larry Summers lobbied on Brosens’s behalf.
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Brosens, a Goldman Sachs alum who was a $200,000-plus fund-raising bundler for Obama and actively campaigned for the candidate, abruptly jumped ship citing “personal” reasons.
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On March 26, 2009, another Treasury official took a fall—at a time when Tim Geithner could ill afford to lose any of the few staffers actually working in the department with him. Scott Polakoff, the acting director of the Office of Thrift Supervision, was put on an underdetermined leave “pending a review of the agency’s role in the backdating of capital infusions by some banks.”
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The late-night announcement indicated that Polakoff’s office allowed at least six instances of apparent book-cooking on behalf of IndyMac and other banks so that earlier quarterly financial statements looked healthier than they would have. In addition, Polakoff’s agency was faulted for lax oversight of bailout behemoth AIG. President Bush originally appointed Polakoff to his post. But this wasn’t merely an “inherited” problem. President Obama made the decision to promote Polakoff in February 2009. In early March 2009, Polakoff testified before a Senate Banking Committee that his office should have exercised its authority in 2004 to stop AIG’s troubled financial products division from engaging in risky derivatives and credit default swaps. Polakoff hasn’t been heard from publicly since.
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EPA DEPUTY NOMINEE JON CANNON’ S ROUGH WATERS

And the hits kept coming. On February 23, 2009, the White House heralded the nomination of Jon Cannon for the Deputy U.S. Environmental Protection Agency Administrator slot. Cannon was a law professor at the University of Virginia. Less than a month later, Cannon voluntarily removed his name from consideration for the post. “It has come to my attention that America’s Clean Water Foundation, where I once served on the board of directors, has become the subject of scrutiny,” he acknowledged in a brief statement. “While my service on the board of that now-dissolved organization is not the subject of the scrutiny, I believe the energy and environmental challenges facing our nation are too great to delay confirmation for this position, and I do not wish to present any distraction to the agency.”
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The withdrawal was abrupt and curious. For the past month, he had been working in Washington as a member of the Obama transition team and had prepared to leave his job in academia.

An EPA report from 2007 documented how America’s Clean Water Foundation mishandled three huge government grants totaling nearly $26 million:

The Foundation (1) could not provide support for any of its general journal entries; (2) included duplicate transactions in its accounting system; (3) recorded labor charged to EPA grants incorrectly; (4) could not support the recorded indirect costs; (5) claimed unallowable preaward costs; (6) recorded EPA cash draws inaccurately; (7) did not submit required indirect cost proposals to EPA; (8) did not complete the required single audits for fiscal years ended June 30, 2003, June 30, 2004, and June 30, 2005; and (9) did not submit a Federal Cash Transactions Report when required.

The Foundation’s procurement practices and procedures did not comply with the grant regulations. The Foundation awarded sole source contracts without performing the cost/price analysis required by Title 40 CFR 30.45. It also awarded a contract to a member of its Board of Directors, contrary to the conflict of interest provisions at Title 40 CFR 30.42, and reimbursed a contractor for billings above contractual ceilings. Because the Foundation did not adequately document its costs and did not comply with the EPA regulations, we questioned the Federal share claimed of $25,372,5 90.
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The America’s Clean Water Foundation disappeared soon after the discovery of financial shenanigans:

While performing the single audit for the year ended June 30, 2004, RAFFA, the Foundation’s accounting firm, discovered accounting irregularities and a potential embezzlement of funds.

. . . In a July 14, 2006, letter, the Foundation’s attorney notified EPA that the Foundation was formally dissolved. The letter stated that all members of the Board of Directors had resigned, the Foundation filed dissolution papers with the District of Columbia, and it no longer had any employees or an office location. The stated reason for the dissolution was the lack of program funding; the Foundation could no longer operate effectively or respond to Agency inquiries. The letter indicated that Foundation records and files had been moved to a storage facility in Standardsville, Virginia, that access to the records can be arranged, and that the Foundation retained its right to initiate and maintain claims .
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The investigation also uncovered a smelly arrangement between the foundation and the pork industry. One of the foundation’s contractors, which raked in tens of millions in federal EPA grants through no-competition bids, was a firm called Validus Services LLC—a for-profit subsidiary of the National Pork Producer Council. Agricultural journalist Alan Gubert originally broke the story of how the pork lobby collaborated with the not-so-clean Clean Water Foundation to set up federal environmental assessments funded through the EPA—and from which they both profited.
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The agency gave up efforts to recover the taxpayer money squandered by the foundation.

Cannon remained tight-lipped about his withdrawal. Supporters portrayed him as a victim of guilt-by-association.
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“I appreciate your interest in this,” Cannon told
The Hook
, a Charlottesville weekly newspaper, “but I said what I wanted to say in the statement I released, and I want to leave it at that.”
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CHARLES FREEMAN: AN UN - INTELLIGENT CHOICE

The directorship of the National Intelligence Council is not a position for the thin-skinned, paranoid, or ethics-compromised. Or at least, it shouldn’t be. Somehow, however, President Obama nominated former U.S. ambassador to Saudi Arabia Charles Freeman to the post in late February 2009. Freeman’s responsibilities would include preparation of important National Intelligence Estimates about potential threats to our national security. Both the left and right in Washington balked at Freeman’s baggage. Once again, Obama supporters were left wondering why the Ivy League geniuses in the White House didn’t see this coming.

His conflicts of interest abounded. Freeman had served for four years on the board of the China National Offshore Oil Corp, a company owned by the Chinese communist government. The state-owned firm has invested in Sudan and Iran. Freeman also led the Middle East Policy Council, a Washington, D.C.-based group funded by the Saudi government.
Washington Times
reporter Eli Lake also disclosed that Freeman chaired Projects International, a consulting firm that has worked with foreign companies and governments.
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To compound those ethical concerns, Freeman was a Jewbasher and tyrant-coddler with a Blame America axe to grind. Liberal writer Jonathan Chait called Freeman an “ideological fanatic” of the realist school blinded to morality.
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Freeman endorsed hyperbolic attacks on “Zionist political influence” and wrote in a leaked e-mail obtained by the
Weekly Standard
that China’s problem in handling the Tiananmen Square Massacre was that it was
too restrained
:

[T]he truly unforgivable mistake of the Chinese authorities was the failure to intervene on a timely basis to nip the demonstrations in the bud, rather than—as would have been both wise and efficacious—to intervene with force when all other measures had failed to restore domestic tranquility to Beijing and other major urban centers in China. In this optic, the Politburo’s response to the mob scene at ‘Tian’anmen’ stands as a monument to overly cautious behavior on the part of the leadership, not as an example of rash action....

I do not believe it is acceptable for any country to allow the heart of its national capital to be occupied by dissidents intent on disrupting the normal functions of government, however appealing to foreigners their propaganda may be. Such folk, whether they represent a veterans’ “Bonus Army” or a “student uprising” on behalf of “the goddess of democracy” should expect to be displaced with despatch [sic] from the ground they occupy.
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On the right, the editors of
National Review
ripped the appointment as an abject “intelligence failure”:

He has distinguished himself as a rabid Israel-hater who regards the Jewish state’s defensive measures as the primary cause of jihadist terror. He is a shameless apologist for Saudi Arabia (where he once served as U.S. ambassador) despite its well-documented record of exporting terrorists and jihadist ideology. And he is a long-time sycophant of Beijing, where he served as Richard Nixon’s interpreter during the 1971 summit and later ran the U.S. diplomatic mission.
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In 2002, Freeman echoed President Obama’s former Pastor, the Reverend Jeremiah Wright Jr., waxing indignant: “And what of America’s lack of introspection about September 11? Instead of asking what might have caused the attack, or questioning the propriety of the national response to it, there is an ugly mood of chauvinism. Before Americans call on others to examine themselves, we should examine ourselves.”
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Doing the vetting the Obama administration wouldn’t do, critics examined the Saudi government’s $1 million grant to Freeman’s Middle East Policy Council. National security journalist Gabriel Schoenfeld quoted Freeman acknowledging that the group owed its endowment to the “generosity” of Saudi King Abdullah bin Abdul Aziz.
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The panel also paid Freeman nearly $90,000 in 2006. “Whatever else you think of the Saudis, they spare no expense in rewarding their lap dogs,” syndicated columnist Rich Lowry noted.
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But instead of the regular vetting process, Freeman’s advocate, Director of National Intelligence Dennis Blair, assigned a special inspector general to probe Freeman’s foreign financial ties. The White House claimed ignorance of the matter. For his part, Blair insisted on praising Freeman’s “inventive mind” (that’s one way to put it) at a Senate hearing just hours before the withdrawal was announced.
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