On Monday, January 5, 2009, members of the House Financial Services Committee promised widespread reform in the U.S. financial regulatory process- a miserably abused financial machine known for self-serving blindness and favored whitewashing- failings recently brought to light by Madoff’s self-proclaimed $50 billion swindle.
Something else was oddly overlooked yesterday, even by members of Congress. As members questioned why such a fraud had not been revealed earlier, they should have also been asking, “What other pertinent information is being withheld right now from the committee and the American people?” Had they asked that simple question, they just might have gotten some sort of answer. But since they didn’t even ask, a farcical New York-styled “investigation” will proceed.
The only hint of the latest Madoff surprise can be gleaned from the growing beads of sweat upon the forehead of Irving H. Picard, the court-appointed trustee for the liquidation of Bernie Madoff’s company. Mr. Picard, an attorney at the Baker & Hostetler law firm, is in the process of conducting a “broad investigation” of Madoff’s affairs, and he was recently able to get $28 million of Madoff money from the Bank of New York Mellon Corporation to fund his courageous efforts. That $28 million is now, most likely, in one of the Baker & Hostetler law firm bank accounts
Crack or Crater
The Congressional Committee needs to digest the reality that the financial regulatory deficiencies are not simply “cracks’ through which a few errant misdeeds crept. The misdeeds are the norm in an era of non-existent oversight, a void of accountability reserved for those who are connected to the right people.
Going back momentarily, there was another hint to the latest Madoff surprise, in addition to Mr. Picard’s perspiration. In a January 2, 2009 Bloomberg News article by Christopher Scinta, David Glovin and Erik Larson, un-New-York-like silence is noted, “George Stamboulidis, an attorney at Baker & Hostetler who represents Picard, didn’t return a call seeking comment.”
It seems that Mr. Picard’s attorney is the same George Stamboulidis who is enforcing the Bank of New York’s 2005 “Non-Prosecution Agreement.” (See Agreement below) That’s right, the Bank of New York, so to avoid the status as a convicted felon, entered into a “Non-Prosecution Agreement” in 2005 with the U.S. Attorney’s office in New York; and Mr. Stamboulidis was charged with overseeing the bank’s compliance with that agreement. News articles in November of 2005, in the New York Times and Wall Street Journal, point to serious crimes by top management at the Bank of New York. That not-so-proud moment in Banking just might turn out to be the beginning of events to come involving Madoff and the various yet-unnamed financial institutions.
It was no surprise to the many who read Laura Italiano’s December 29, 2008 New York Post story, “Bernie Cash Stash- Offshore loot sought.” (See reference 2 below) In quoting the London Observer, the silence of Picard and Stamboulidis might be best explained by the words of the official receiver of Madoff’s now-defunct fund, Securities Investor Protection Corp. (SIPC) Chief Executive Stephen Harbeck, “There are accounts at New York Mellon Bank that we have been looking at that appear to have sent and received money from offshore locations. We will trace funds wherever the trail goes.” We’ll see about that.
No Worry: Rooster Has Hen House Covered
In theory, Mr. Stamboulidis, of Baker & Hostetler, has been overseeing The Bank of New York’s compliance with the 2005 “Non-Prosecution Agreement” for the last few years. And now, in theory, court appointed Mr. Picard, of Baker & Hostetler, will dutifully conduct “broad investigations,” that just might reveal additional wrongdoings, and possibly by the Bank of New York.
This type of a set-up is considered a “conflict of interest” in most third worlds. But this is New York, the home of George Washington Plunkitt, of Tammany Hall fame, and who so eloquently clarified the difference between “honest” and “dishonest” graft as he became a millionaire off the public teat.
Would it be a surprise to anyone that the Bank of New York, and their successor company may, at some point, become a defendant in one or more of the growing list of Madoff court cases? And especially since the SIPC has said that it has already found oversea transfers for Madoff through the Bank of New York.
The time might have finally arrived for someone- outside of New York- to look into the affairs of The Bank of New York, including that $3 billion the bank recently received in the Fed bailout package. If a review of any worth does ever begin, there are a few other New York banks that could use a closer look.
NY State Ex-Senator George Plunkitt, who had a knack for cheaply buying land before public development plans were announced, wanted his epitaph to read, “He Seen His Opportunities, and He Took ‘Em.” Justice, and the American people, want Congress to restore accountability and impartial oversight. Congress would do well to start with New York. (Frank Brady can be reached at FrankNBrady@gmail.com)
See Related article, “FBI Swamped with Bank of New York Violations”