Culture of Corruption: Obama and His Team of Tax Cheats, Crooks, and Cronies (18 page)

Disgraced trial lawyer Richard Scruggs donated $11,500 to Biden in 2008. After Scruggs was convicted of attempting to bribe a federal judge, Biden tried to show his ethical bona fides by donating the money to a worthy charity. But Biden couldn’t steer clear of nepotism. The money ended up with the National Prostate Cancer Coalition—a charity where,
The American Lawyer
pointed out, Biden’s son Hunter sits on the board of directors.
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Another Biden family pal in the trial lawyers’ community: Jeff Cooper. With his partner John Simmons, the 39-year-old Cooper built one of the biggest asbestos litigation firms in the country. SimmonsCooper, based in Madison County, Illinois, has donated a whopping $196,050 to Biden’s campaigns since 2003, according to the nonpartisan Center for Responsive Politics in Washington, D.C. In that same time frame, the firm poured $6.5 million into lobbying against the same tort reform bill that fellow asbestos litigators Cooney and Conway opposed—and which Senator Biden worked hard to defeat.
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Without a hint of irony, Cooper extolled Biden’s anti-tort reform stance: “He understands the plight of the little guy and is against huge corporate interest.”
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But what Biden did was help fuel lucrative business for the tort bar. When courts in SimmonsCooper’s home base in Illinois finally started cracking down on what had become “America’s No. 1 judicial hellhole” for filing out-of-control tort claims, the firm turned east. And in Joe Biden’s Delaware, they created a new sanctuary. The
Wall Street Journal
explained:

SimmonsCooper is a big asbestos player, and Madison County was until recently one of America’s meccas for jackpot justice. But the story gets better: Mr. Biden has been helping the tort bar turn his home state of Delaware into a statewide Madison County.

SimmonsCooper made hundreds of millions of dollars on asbestos cases in Madison County, but that started to change in 2004. The business community helped to elect conservative Lloyd Karmeier to the Illinois Supreme Court. Madison County Circuit Judge Daniel Stack also took over the asbestos docket, was determined to clean house, and began dismissing suits filed by residents outside his jurisdiction.

SimmonsCooper and other firms started shopping for a new legal goldmine. And where better than Delaware? Many companies incorporate there, which means a list of defendants usually includes a Delaware target. Beginning in mid-2005, SimmonsCooper began transferring its suits to Bidenland.

The trial bar’s strategy has been to overwhelm Delaware’s once-sensible legal system, taking advantage of rules that pressure companies to settle. In the 22 months following SimmonsCooper’s first asbestos filing in Delaware, the state was hit with 412 suits, primarily from SimmonsCooper and fellow asbestos giant Baron & Budd.

According to the
Madison County Record
—a legal journal that has doggedly followed this story—clerks in Wilmington were “working nights and weekends to keep up” with the filings. The trial lawyers drew sympathetic judges that have already overseen big verdicts against defendants, primarily Detroit auto makers. Plaintiffs have obtained certain procedures that raise the costs of defense, and restrict defendants’ ability to take discovery.
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Cooper first befriended Biden’s sons, Hunter and Beau, before deepening his financial and political relationship with their dad. There’s a personal connection: Cooper’s wife went to high school with Hunter Biden’s wife, Kathleen. And as Biden the Elder was carrying water for the trial lawyers in the U.S. Senate, SimmonsCooper was working another Biden channel through the Wilmington, Delaware, law firm of Bifferato, Gentilotti & Biden, where Joe’s son and Hunter’s brother, Beau, was a partner. SimmonsCooper found Delaware an attractive new magnet for its asbestos litigation racket, because many of the firm’s defendants included clients who had incorporated in the state.

SimmonsCooper recruited Beau’s firm to work as co-counsel on Delaware asbestos litigation cases. The Illinois firm steered dozens of cases Beau Biden’s way. He dropped an asbestos defense client to accommodate his deep-pocketed family friend.
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SimmonsCooper then forked over $35,000 to Beau Biden’s successful run for state attorney general in 2006. Steve Hantler, president of the American Justice Partnership Foundation, observed, “Delaware is fast becoming asbestos lawsuit central. . . . A tsunami of lawsuits being filed by the SimmonsCooper firm, along with the flow of campaign dollars to Delaware politicians, is quite the troubling coincidence.”
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Even more troubling was the financial partnership Hunter Biden and his Uncle James (Senator Biden’s brother) attempted to forge with SimmonsCooper. The Bidens approached SimmonsCooper with a proposition: team up with the family to buy a hedge fund investment firm for $21 million. Cooper agreed to chip in $2 million in exchange for 10 percent interest. The Bidens negotiated the hedge fund buyout of Paradigm Global Advisors with business partner Anthony Lotito Jr. in 2006.
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As Paradigm chairman, Hunter Biden oversaw half a billion dollars of client money invested in hedge funds while remaining a lobbyist at Oldaker, Biden & Belair.

But things fell apart. In their haste to clean up the Biden image, they ended up with dirtier hands. According to Lotito, the Bidens pursued the venture to help get Hunter Biden out of the lobbying business before Dad launched another presidential campaign. The
Madison County Record
, which tracked the dealings of the Bidens and SimmonsCooper closely, laid out the timeline:

According to court records filed by Lotito, Joe Biden wanted Hunter Biden to find a different line of work because he couldn’t afford to run for president as father of a lobbyist.

Lotito claims he and James Biden discussed Hunter Biden’s job prospects.

Lotito met James Biden in 2002 and they invested together in 2005, according to Lotito.

Lotito introduced James Biden and Hunter Biden to lawyer John Fascian[a], and the four began planning to buy Paradigm Capital Management.

Majority owner James Parks had started Paradigm in 1991 and successfully promoted it as less volatile than most hedge funds.

Everyone agreed that the Bidens and Lotito would form a corporation to buy 54 percent of Paradigm for $21.3 million in cash.

They would install Hunter Biden as chief executive officer at a salary of $1.2 million.

In April 2006, they formed LBB Limited Liability Corporation.

In May 2006, SimmonsCooper invested $1 million.

In June 2006, according to Lotito, the Bidens told him to stay away.

In August 2006, according to Lotito, the Bidens formed a corporation, executed a promissory note for $8.1 million, and purchased Paradigm’s assets.

In September 2006, Lotito signed an agreement relinquishing his third of LBB.

He sued the Bidens in January 2007, alleging fraud and breach of fiduciary duty.
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Lie down with shady partners, get up with a public relations nightmare. Lotito maintained that the Bidens cut a secret deal and tried to fraudulently trick him into signing away his interest in the LLC that they had formed together. In court filings, Lotito’s lawyer asserted that the Bidens used their political clout to intimidate his client: “Ultimately, the Bidens threatened to use their alleged connections with a former U.S. Senator to retaliate against counsel for insisting that his bill be paid, claiming that the former Senator was prepared to use his influence with a federal judge to disadvantage counsel in a proceeding then pending before that court.”
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The Bidens shot back that Lotito had neglected to mention that the lawyer he connected them with, John Fasciana, was a crook. Fasciana had been convicted in July 2005 on federal charges of conspiracy and wire and mail fraud over a scheme to cheat Electronic Data Systems (Ross Perot’s computer services company) of millions of dollars. Fasciana was sentenced in 2008 to four years in prison, but has appealed the case.
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He sued the Bidens for nearly $200,000 in legal fees; they countersued Fasciana for overbilling them and committing fraud by concealing his criminal conviction. Hunter and James Biden also countersued Lotito in February 2007 seeking $10 million. The Bidens asserted that Lotito “hid debts and falsely claimed he held securities licenses to lure them as partners in the planned $21.3 million acquisition,” the
Washington Post
reported .
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“Had James and Hunter Biden known the truth about Anthony Lotito, they never would have gone into business with him,” their complaint alleged.

Where did this leave SimmonsCooper, which had kicked in half of a $2 million investment at the request of the Bidens? The Illinois firm had withdrawn from the deal after watching $1 million of its investment allegedly squandered by Lotito. The investment “converted to debt,”
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which Hunter and James Biden then attempted to shift to Lotito. A New York judge didn’t go along with the Bidens’ attempt to play the victim card. In May 2008, he rejected their bid after concluding they should have vetted the fund more carefully and performed their own due diligence. Cutting through the ploy, the judge ruled that the Bidens’ counterclaims “seek only to foment uncertainty and chaos between the parties in the event that plaintiff is successful in presenting the main claims.... Such pleading will not be countenanced.” Moreover, he ruled, “Certainly defendants do not claim that the law permits sophisticated investors to rely on whatever representations a potential advisor makes without the need for a diligent inquiry by defendants, and that such representations are actionable if they wind up to have been faulty.”
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In January 2009, court papers announced that the legal fracas had been settled confidentially
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—preventing any disclosure or discussion whatsoever regarding the nature of the settlement or the subject matter of the action. The record did note that the lawsuit was resolved “without cost to any party.” For anyone paying close attention, however, the cost to the Biden family’s “just folks” reputation was clear. Alas, the settlement didn’t end the sordid story for the Bidens.

They and Lotito were named defendants in yet another lawsuit, this one filed by investor Stephane Farouze, global head of fund derivatives for Deutsche Bank. Farouze alleges in his $10 million suit that the defendants agreed to buy his membership interest in Paradigm knowing they didn’t have the money to back up their promise.
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Farouze asserts that the Bidens “engaged in an elaborate scheme to defraud” him. In February 2009, Manhattan Supreme Court Judge Bernard Fried halted court proceedings for forty-five days and ordered the two parties to submit to mediation.
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Adding yet another layer of taint, the
Wall Street Journal
reported in February 2009 that the Bidens’ sketchy hedge funds were marketed exclusively by scandal-plagued Texas financier R. Allen Stanford, who is facing Securities and Exchange Commission charges of engaging in an $8 billion Ponzi scheme. Stanford-related companies marketed the Bidens’ funds to investors, the
Journal
disclosed, “and also invested about $2.7 million of their own money in the fund, according to a lawyer for Paradigm.”
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Stanford’s investment in Paradigm was set aside for a special court-appointed receiver after the SEC probe was launched. The news “triggered a few client defections,” according to the Bidens’ hometown
Wilmington News Journal
.
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The Bidens responded, as always when questions were raised about their dubious associates, with defensive denials issued through intermediaries: “There is no connection between the Bidens and Allen Stanford or Stanford period, full stop,” Biden lawyer Marc LoPresti said. “There never was any meeting between any member of the Biden family, no phone calls, zero correspondence.”

And yet, LoPresti told the paper that the Bidens’ hedge funds worked out an agreement with Stanford entitling him to share in a portion of their fund’s management and performance fees. Either LoPresti is lying, or the Bidens failed to vet their high-risk business partners.

There’s more: Financial blogger John Hempton reported that Paradigm was closely connected with a separate hedge fund accused of fraud. Ponta Negra Capital shared its main New York City address with Paradigm’s office, Hempton wrote, and also shared a few staffers between the two firms.
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Ponta Negra Capital had its assets frozen by the Securities and Exchange Commission in April 2009 after the panel obtained an emergency court order “to freeze the assets of a Connecticut-based money manager and the hedge funds that he controls, alleging that he forged documents, promised false returns, and misrepresented assets managed by the funds to illicitly raise more than $30 million from investors.”
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Ponte Negra Capital was marketed by a company called Onyx, which also handled marketing duties for both Paradigm and Ponzi king Allen Stanford .
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And still more: In September 2009, Hempton wrote a letter to Australian regulators describing concerns about a fund manager in Australia known as the Astarra Strategic Fund (formerly known as Absolute Alpha, now known as Trio). As a result of Hempton’s letter, Australian securities regulators shut down Astarra.

Hempton later explained that a link to Paradigm is what caught his eye. One of Absolute Alpha’s principals, Charles Provini, used to be Paradigm’s CEO: