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“The Global Bust-Out Series (Chapter 7): Michael Milken and the “Insider Trading” Network (as of 2013)

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“The Global Bust-Out Series (Chapter 7): Michael Milken and the “Insider Trading” Network (as of 2013)


This is Chapter 7 of a multi-chapter series. On your right is a Table of Contents to all chapters published so far.

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In earlier chapters of this series, we learned about an incredible enterprise known as the Bank of Credit and Commerce International (BCCI), which was operated by oligarchs with ties to the Muslim Brotherhood in partnership with governments that were among the Muslim Brotherhood’s principal state sponsors. We also learned that the BCCI enterprise operated with the consent and protection of Washington even though it not only counted among its partners numerous mobsters and global terrorists, but was also operating what amounted to a transnational organized crime syndicate involved in everything from the trafficking of narcotics and nuclear weapons components to terrorism and the perpetration of destructive financial crime.

In addition, we learned that BCCI counted among its most important business partners some of the leading figures of the American establishment, including Michael Milken, who was, during the 1980s, the most powerful financial operator on Wall Street. As we know, Milken and some of his closest associates, in league with the BCCI enterprise, perpetrated the “bust-outs” of numerous savings and loan banks, thereby contributing to the devastating savings and loan crisis that began in the late 1980s, and which ultimately cost taxpayers more than $2 trillion in bailouts—a portent of bigger and better things to come.

Also involved with these “bust outs” were (see earlier chapters of this series) some of the nation’s leading organized crime figures, such as Carlos Marcello, who was then the top Mafia boss in the city of New Orleans. Meanwhile, we know, BCCI was involved with a global network of brokerages, most of them operated by people with ties to organized crime, and most of them specializing in the “bust outs” of small to medium-sized publicly listed companies. As a judge remarked after BCCI shut its doors in 1991, the BCCI enterprise singlehandedly “shattered the integrity of the global financial system.”

And history did not end in 1991, when BCCI was shut down.

Most of BCCI’s former principals and their partners (“the larger BCCI enterprise”) continued in the years that followed to involve themselves with similar enterprises, the only difference being that the enterprises came to include some new and younger players, while the enterprises innovated new and more destructive financial schemes. Indeed, we will see that people formerly involved with the BCCI enterprise, along with their newly acquired business partners, contributed significantly to the great meltdown of 2008, and are presently threatening to deliver a repeat performance.

This might be one reason why the president of the United States was recently moved to take the unprecedented step of declaring a state of “National Emergency” in response to certain conditions that currently prevail in the American markets. See Chapter 1 of this series for more on the “National Emergency,” but I will remind readers that in the summer of 2011, President Barack Obama, in explaining why he had declared a “National Emergency,” stated that there was a clear “nexus” between transnational organized crime syndicates, the intelligence services of several unnamed countries, and the world’s leading terrorist organizations.

In addition, the president explained that transnational organized crime syndicates (and, we can confirm, others in the “nexus,”) had “penetrated” the “legitimate financial sector” (i.e. Wall Street). Not only that, but the president stated that this was a “National Emergency” because transnational organized crime syndicates with ties to terrorist organizations (presumably with help from the “legitimate” financial sector on Wall Street) were “undermining markets” to such an extent that they now posed a serious and imminent “threat to stability of the global financial system.”

Unfortunately, officials in Washington have yet to prosecute any of the people (e.g. mobsters, terrorist financiers, and miscreants on Wall Street) who account for our present “National Emergency.” Indeed, as was the case in the 1980s, when BCCI and its partners owned many of America’s leading politicians (including multiple U.S. presidents), it presently seems to be the case that Washington has been “deep captured” by a network (or “nexus,” as the president calls it) that includes the world’s leading mobsters, billionaires with ties to terrorist organizations, and the “legitimate” miscreants on Wall Street who do business with mobsters and terrorists.

In addition, officials in Washington have done little to crack down on the sorts destructive financial weapons (e.g. the “bust outs” of major banks and associated schemes, such as manipulative short selling, self-destruct CDO’s, mortgage fraud, death spiral finance, toxic debt, etc.) that nearly destroyed the world in 2008, and which are now, once again, threatening to collapse the global financial system.

Later chapters of this series will discuss in much greater detail the “global bust-out” that accounts for our current predicament, but first it will be useful to review a bit more history so far as it concerns the network of Michael Milken, formerly known as the most powerful man on Wall Street, later known as one of history’s most destructive financial criminals, and presently known (to readers of the major U.S. newspapers and officials in Washington) as one of Wall Street’s all-time greatest heroes and a “prominent” fixture of the American establishment, worthy of our respect and admiration.

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When Michael Milken was indicted in 1989, the major U.S. news organizations reported that he and one of his co-conspirators, Ivan Boesky, were the central figures in a nationwide “insider trading” network. In addition, the major U.S. news organizations reported that Milken was indicted thanks mostly to the fact that Boesky had cooperated with the government, providing the key evidence that allowed prosecutors to expose the “insider trading” network. It was true that Milken and Boesky were involved in “insider trading,” but the reports by the major U.S. news organizations contained some important omissions.

For starters, Milken and his network were involved in much more than “insider trading.” As we know from earlier chapters of his series, Milken and his closest associates, including Boesky, conspired with the BCCI enterprise and some of the nation’s leading organized crime figures to “bust out” (i.e. loot and destroy) many of the nation’s leading savings and loan banks. We also know that Milken was involved with numerous brokerages (some of them linked to the BCCI enterprise) that specialized in perpetrating the “pump and dump” bust-outs of small to medium-sized publicly listed companies.

In addition, a careful reading of Milken’s 99-count indictment (with many of those counts pertaining to his “bust-outs” of savings and loan banks and other companies, though he pled guilty to only seven counts) reveals that Boesky provided little of the information that was used to prosecute Milken. Instead, the government obtained the vast majority of the evidence used against Milken (and Boesky) in a 1989 raid of a major investment and brokerage operation called Princeton Newport, which had been a key component of the Milken network, involved not only in insider trading, but also the full panoply of other schemes that Milken and his network perpetrated during the 1980s. At the time, Princeton Newport was operated by man named Edward O. Thorpe, who was most famous for having worked with the Genovese Mafia family to develop a method for beating the black-jack tables in Las Vegas (Thorpe has never been charged with any crime, and he is presently one of the nation’s most prominent hedge fund managers).

Pulitzer Prize winning author James Stewart similarly reported in “Den of Thieves” (the seminal work on the government’s prosecution of Milken) that Boesky provided little information to the government. According to Stewart, Boesky told the government that he could not testify against Milken because he was afraid of what might happen to him. As Boesky put it, Milken had “friends in Vegas” – an apparent reference to the Mafia. As Stewart also reported, soon after Boesky expressed his fears, one of Milken’s closest associates, John Mulheren, got into his car and headed towards Boesky’s house. Police officers had been watching Mulheren, and knew that he had a gym bag in his car loaded with two handguns, a 12-gauge shotgun, and a .233 caliber Galil assault rifle.

Suspecting that Mulheren planned to murder Boesky, the cops arrested Mulheren and put him in jail, where Mulheren spent most of his time conversing with Anthony “Fat Tony” Salerno, who had been the top boss of the Genovese Mafia family until he was jailed on charges of manslaughter. Mulheren himself was investigated for his alleged role in Milken’s network, so it is possible that Mulheren thought about killing Boesky to keep Boesky from providing the government with information about his own (Mulheren’s) activities. Alternatively, it is possible, as some have reported, that Mulheren was simply on the wrong psychiatric medications and didn’t know what he was doing.

Either way, Mulheren was never charged for his suspected role in Milken’s insider trading (and “bust out”) network, and nor was he charged for trying to kill Boesky. He was quickly released from prison, and he subsequently reconciled with Boesky. Contrary to the message put forth by Milken’s public relations machine (which maintains that Milken despises Boesky, and that Milken was convicted only because Boesky was a dirty rat who provided the government with false information about Milken’s activities), Milken also reconciled with Boesky, and after Milken was released from prison (he served two years of a ten year sentence), he and Boesky began again to do business together.

Meanwhile, Mulheren c0-founded, with a trader named Izzy Englander, a hedge fund called Millennium Management, and though Mulheren died in 2003, Millennium is presently one of the most powerful hedge funds in the nation.

In 2010, the media began reporting that the FBI was once again investigating what the FBI described as a “network” of financial operators who were involved in “insider trading.” According to the FBI, this was, in fact, the biggest “insider trading” investigation in FBI history. This investigation is presently ongoing, and a key focus of the investigation, according to media reports, is the giant hedge fund SAC Capital, which is run by Steve Cohen. Back in the 1980s, Cohen was investigated by the Securities and Exchange Commission (SEC) for allegedly trading on inside information that he received from Milken’s shop at Drexel Burnham Lambert, and back in the 1980s, Cohen and all the others in Milken’s insider trading “network” were, of course, involved in much else (e.g. manipulative short selling, the “bust-outs” of publicly listed companies, etc.) besides insider trading.

Similarly, the “insider trading network” that the FBI is presently investigating has been involved in much else besides insider trading. Previous DeepCapture stories have provided ample evidence that SAC Capital and other hedge funds in its “network” have perpetrated a great deal of manipulative short selling, and they have, along with others, including Michael Milken (who is. to this day a key figure, along with SAC Capital and others, in an “insider trading” network), perpetrated the “bust-outs” of publicly listed companies. Cohen himself has not been charged with any crime, but multiple traders have been indicted for insider trading that they conducted while working for SAC Capital, and the media has reported that prosecutors are hoping to indict Cohen and SAC Capital, though the media continues to report that SAC Capital’s only alleged offense has been to trade on inside information.

Meanwhile, it is clear from SEC filings that SAC Capital and a larger “network” of other hedge funds (many of which employ former SAC Capital traders, and many of which have ties to Milken going back to the 1908s) regularly trade in the same stocks, and many of these hedge funds have not only coordinated their manipulative short selling attacks, but have also come under closer scrutiny during the course of the FBI’s investigation into what the FBI continues to describe as a “network” of financial operators.

One hedge fund in this “network” is Millennium Management, the outfit that was founded by Mulheren and Izzy Englander. The FBI has not publicly implicated Millennium in the “insider trading” network, but Millennium has acknowledged that it is concerned about the greater scrutiny. Indeed, soon after the FBI investigation became big news, Millennium hired an advisory board whose job is to make sure the hedge fund remains in compliance with regulations. Millennium’s advisory board includes former FBI Director Louis Freeh, former SEC enforcement division chief Stanley Sporkin, and former SEC Chairman Harvey Pitt (who has been a leading advocate of reform to address the problem of manipulative short selling).

Hopefully that advisory board will keep Millennium in compliance with the rules, and it will certainly keep Millennium immune from further scrutiny on the part of the FBI and the SEC, but it is clear that Millennium and SAC Capital, along with others in their “network” of hedge funds, have continued to collaborate with Milken, investing in companies that Milken was promoting, and attacking companies that Milken was seeking to undermine or destroy. Some details can be found in my recently published book (title: “The Dendreon Effect: How Felons, Con-men, and Wall Street Insiders Manipulate High-tech Stocks”) which also provides other information about the techniques used by a network of powerful hedge funds (and Michael Milken) to undermine the markets and hurt individual investors.

As we will see in later chapters of this series, this same crowd (i.e. Milken and the “network” that the FBI is now investigating, though so far with no prosecutions of any big fish) contributed to the meltdown of 2008, and continue to pose a threat to the markets today.

For our present purposes, we need to stress that Boesky was right when he said that Milken had “friends in Vegas.” Milken’s best friend in the world, according to Milken, is Steve Wynn, the Las Vegas casino mogul. Meanwhile, Wynn’s friends, according to Scotland Yard, have included the dons of the Genovese Mafia family. Indeed, according to a declassified report written in the late 1980s by Scotland Yard investigators, Wynn had “been operating under the aegis of the Genovese Mafia since he first went to Las Vegas in the 1960s.” Scotland Yard noted that both Wynn and his father had a long standing relationship with Genovese Mafia boss Anthony “Fat Tony” Salerno (the mobster with whom Mulheren spent most of his time convening during his stint in jail).

Wynn, however, denies any relationships with the Mafia, and he has won a defamation lawsuit against a Las Vegas newspaperman who published a book (title: “Running Scared”) that advertised itself as “explaining why a confidential Scotland Yard report calls Wynn a front man for the Genovese crime family.” Wynn also filed a suit against the book’s publisher, Lyle Stuart, who had published other controversial books, such as the “Anarchist Cookbook,” and “Turner Diaries,” which is a fictional account of home-grown rebels overthrowing the “Zionist” government of the United States. In explaining why he had filed a lawsuit against the publisher, Wynn said, “I want to put Lyle Stuart out of business. Every law enforcement agency has always vouched for me that any suggestion of me and organized crime is preposterous. I know one thing: If anybody says any different, they’re a fucking defendant.”

It is true that law enforcement agencies (other than Scotland Yard) have vouched for Wynn. Indeed, former FBI Director Louis Freeh (the same fellow who is employed by Millennium Management) is presently employed by Wynn. Freeh is helping Wynn investigate one of Wynn’s former business partners, a Japanese billionaire named Kazuo Okado. Meanwhile, Wynn has won multiple other defamation lawsuits against people and journalists who have accused him of having ties to the Mafia. For example, Wynn has successfully sued Joe Francis, creator of the “Girls Gone Wild” porn empire. Francis had said that Wynn wanted to “hit me in the back of the head with a shovel and bury me in the desert.” Wynn said that was a “terrible lie,” and that his friend, the Dalai Lama, taught him to be a man of peace and calm.

The takeaway, we must conclude, is that Wynn has no ties to the Mafia. As for Milken’s other closest friends and business partners, however, there can be no doubt that many of them have ties to the Mafia. As we know from earlier chapters of this series, Milken’s closest business partner is Gene Phillips, who was the central figure in the junk bond merry-go-round that Milken operated in the 1980s, and which was a key component of the larger operation to “bust-out” savings and loan banks. Phillips operated (and still does operate) an outfit called Southmark Corporation, which was the largest recipient of Milken junk bond finance in the 1980s. The largest subsidiary of Southmark in the 1980s, meanwhile, was San Jacinto Savings and Loan, which was “busted-out” with help from such Mafia luminaries as Herman Beebe and Carlos Marcello (the top boss of the New Orleans Mafia).

The man whom Gene Phillips appointed as the chief loan officer of San Jacinto Saving and Loan was named Joseph Grosz. Aside from being a banker, Grosz was a leading mobster, affiliated with the Chicago Syndicate, according to prominent journalist Pete Brewton, who is one of the nation’s leading experts on the involvement of organized crime in the savings and loan crisis. Brewton has also reported that San Jacinto’s parent, Southmark, was “used as a mob dumping ground to buy the investments of mobsters,” including not only Herman Beebe and Carlos Marcello, but also organized crime figure Harry Wood, and Morris Shenker, a former lieutenant of Meyer Lansky, then the most powerful mobster in the nation.

In 2000, Phillips was arrested and charged with manipulating stock prices in league with other leading figures in La Cosa Nostra. More specifically, Phillips was arrested as part of Operation Uptick, which was described by FBI spokesmen as the largest Mafia bust in U.S. history. More than 120 people, all with ties to organized crime, were arrested in Operation Uptick, and FBI officials described them as being part of nationwide “network” of stock manipulators, some of whom had committed various other crimes, which included (according to an FBI statement): “controlling and infiltrating broker-dealers…and employing tactics of violence, including threats, extortion, physical intimidation, and the solicitation of murder…”

Some of the 120 people arrested in Operation Uptick were members of Russian organized crime syndicates, while others were, variously, described by the FBI as having ties to each of La Cosa Nostra’s five major families—Genovese, Colombo, Gambino, Bonanno, and Lucchese. Among the 120 defendants, aside from Phillips, were: Robert “Little Robert” Lino, a capo in the Bonanno crime family; Anthony Stropoli, a soldier in the Colombo crime family; Frank “Frankie” Persico, a Colombo Mafia family capo; Sebastian “Sebbie” Rametta, an associate of the Colombo crime family; Robert Gallo, an associate of the Genovese crime family; and John Black, an associate of the Lucchese crime family.

The DOJ charged that Phillips, in league with various members of La Cosa Nostra, had manipulated the stock of one of his companies, an outfit called Transcontinental. Aside from Phillips, the largest shareholder in that company was Michael Milken. Meanwhile, the Dallas Business Journal reported that Phillips “allegedly met with two associates of New York’s legendary Bonanno organized crime family to discuss a plan to bilk a couple of ‘very friendly’ union pension funds through the sale of inflated stock.” However, Phillips was acquitted on all charges. In addition, most of the other people who were arrested as part of Operation Uptick got off with nothing worse than small fines, though this was the biggest Mafia bust in history, according to then FBI director Louis Freeh (who, of course, is now employed by Wynn and Millennium Management).

That same year, 2000, the media reported that an outfit called Sinex Bank was linked to the Bank of New York scandal, which saw the Bank of New York laundering upwards of $10 billion ($3.9 billion of which passed through Sinex Bank) for organized crime syndicates. The syndicate most closely linked to that scandal was the Mogilevich organization, the leader of which was (and is) a Russian (actually Ukranian, but he is a Russian citizen) named Semion Mogilevich, widely known as “the most dangerous mobster in the world.” What the media did not report was that the money laundering involved a network of brokerages that first invested dirty cash into the “bust outs” of publicly listed companies, with the money coming out partially cleaned as short selling profits that were delivered onwards to cooperative banks, including Sinex Bank and the Bank of New York.

Also linked to that money laundering was a brokerage called Sinex Securities, which was a subsidiary of Sinex Bank. Sinex Securities was controlled by Gene Phillips, though it was registered in the name of his son, Brad Phillips (Sinex changed its name to National Alliance Securities when it was linked to the Bank of New York scandal). SEC filings show that Transcontinental (the Phillips outfit whose largest shareholder was Milken, and which was at the center of the Operation Uptick charges) had placed more than 700 thousand of its shares with Sinex as “collateral for borrowings”. That is to say, a chunk of the cash that went through Sinex was delivered, as collateral, to Transcontinental shareholders. However, neither Sinex nor Phillips were charged with any crime related to the Bank of New York scandal.

With the exception of Mogilevich himself, nobody else of any significance was charged with any crime related to the Bank of New York scandal, and Mogilevich (“the most dangerous mobster in the world”) subsequently hired a lobbyist in Washington. Mogilevich’s lobbyist is William Sessions, formerly director of the FBI. The FBI still lists Mogilevich as one of the “Ten Most Wanted” criminals in the world, but there is no evidence that the FBI has ever tried to arrest Mogilevich, and others in the Mogilevich organization continue to this day to operate openly in the United States.

Some of them, we will see, are key figures in the Milken network.

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Back in the 1980s, another of Milken’s closest business associates was Fred Carr, who, like Phillips, was a central figure in the junk bond merry-go-round that was part of the larger scheme (that had help from BCCI) to “bust out” numerous savings and loans banks. Fred Carr used Milken junk bond finance to seize control of Executive Life, and that financial institution (like most of the other savings and loans that Milken’s closest associates took over with Milken junk bond finance) was subsequently looted and demolished (that is, “busted out”).

Prior to taking control of Executive Life, Carr had been a principal with Investors Overseas Service, which had ties to BCCI, and which was, at the time, the biggest Ponzi scheme in history. Investors Overseas had been founded by a financier named Bernard Cornfield, and later involved a criminal named Robert Vesco, who subsequently fled to Cuba and became involved (according to CIA reports) in trafficking drugs with Cuban dictator Fidel Castro. (Castro later claimed that Vesco had been imprisoned in Cuba).

One of Investors Overseas Services’ key “feeders” (that is, one of the people who “fed” the Ponzi much of its money) was Sylvian Ferdman, a Genovese Mafia courier, who routed money into the Investor’s Overseas racket from clients in South America. Another Investors Overseas feeder was John Pullman, whom the U.S. government had named as a close associate of Genovese Mafia boss Anthony “Fat Tony” Salerno. That’s the same “Fat Tony” who was later conversing with Mulheren in prison, and whom the Scotland Yard report linked to Wynn (The Scotland Yard report, however, was false, according to Wynn, and U.S. law enforcement officials have not accused Wynn of having ties to organized crime).

Another key component of Milken’s junk bond merry-go-round in the 1980s was MDC Global, an insurance and savings and loan company that (see Chapter 6 of this series) had been co-founded by a BCCI subsidiary. MDC Global, meanwhile, controlled a brokerage called Blinder Robinson, which specialized in “busting out” small to medium-sized publicly listed companies. MDC Global, of course, was itself “busted out,” and in 1989, Blinder Robinson was indicted, along with its founder, Meyer Blinder.

Blinder Robinson was known as “Blind’em and Rob’em” because it was not only a key player in a nationwide stock manipulation network, but also among the most crooked brokerages in America. Among the miscreants who manipulated stocks in league with Blinder Robinson were (according to various indictments) Thomas Quinn and Arnold Kimmes, both of whom (as we know from earlier chapters) had operated a number of brokerages linked to BCCI. Quinn, recall, was an associate of the Genovese Mafia family, while Kimmes had been identified in a 1973 FBI report as a “major organized crime figure.”

When Kimmes was arrested, he escaped prison by ratting on Meyer Blinder, who did not escape prison (though he was quickly released). In 2000, Richard Walker, then the SEC’s director of enforcement, gave testimony to Congress in which he described Blinder Robinson as being part of a “network” of brokerages — including D.H. Blair, Rooney Pace, FN Wolf, A.R. Baron, and many others – that were tied to organized crime. Most of these brokerages had been financed by Michael Milken and/or his close associates.

The proprietor of Rooney Pace, which was financed directly by Milken, was Randolph Pace, who was later indicted for running a $200 million stock manipulation scheme with a man named Judah Wernick. Many of the other brokerages mentioned in the SEC’s Congressional testimony – including D.H. Blair, A.R. Baron, and FN Wolf — were financed by Zev Wolfson, a Milken business associate who also financed Millennium, the hedge fund co-founded by Boesky’s prospective assassin John Mulheren.

D.H. Blair was particularly close to Milken. It was founded by Morty Davis, and run with help from Davis’s son-in-law, Lindsay Rosenwald, who served as vice chairman. After Milken went to prison in 1991, one of Milken’s top Drexel Burnham employees, Richard Maio, became president of D.H. Blair. In 2000, D.H. Blair was charged on multiple counts of stock manipulation and forced to shut its doors. To describe the full extent of D.H. Blair’s relations with La Cosa Nostra and Russian organized crime, I would have to bore you with a list of names so long that this story would begin to read like a telephone directory. But to give you just a small sampling, I will mention that the people indicted in just one of the hundreds of stock manipulation schemes perpetrated by D.H. Blair included: Frank Coppa, a capo in the Bonanno Mafia family; Edward Garafola, a soldier in the Gambino Mafia family; Daniel Persico, a capo in Colombo Mafia family; and Ernest Montevecchi, a soldier in the Genovese Mafia family.

After Milken got out of prison, he hooked up again with D.H. Blair’s former vice chairman, Lindsay Rosenwald, who is now one of the most powerful hedge fund managers in America, and perhaps the single biggest player in the world of biotech stocks. As described in my book (“The Dendreon Effect”), Milken and Rosenwald have sought to destroy biotech companies that were developing promising medicines while promoting dubious companies (financed by Rosenwald and Milken) whose medicines were killing people.

Many other powerful hedge fund managers operating today got their start in the 1980s working for Milken-financed brokerages with ties to organized crime. SEC filings and other evidence compiled by DeepCapture show with perfect clarity that all of the hedge fund managers in this network regularly trade in unison, investing in (or, more often, attacking) the same companies.

This does not mean that they have necessarily broken any laws, but, again, press reports suggest that some of the biggest players in this “network” are currently the targets a massive FBI investigation said to be targeting a “network” of financial operators suspected of insider trading. As I mentioned, one of them is SAC Capital’s Steve Cohen, who was investigated in the 1980s for trading on inside information that he allegedly received from Milken’s shop at Drexel. Cohen has been described by BusinessWeek magazine as “The Most Powerful Trader on the Street.”

When Cohen was investigated for trading on inside information that he received from Drexel, he was not yet a famous hedge fund manager, but he was among the select traders who effectively ran Gruntal & Company , a Mafia-tied brokerage that received much of its finance from Michael Milken.

There were just a few other traders who had special partnership agreements with Gruntal, and who effectively ran the place. I will name most of them, beginning with Maurice Gross, who handled the accounts of the Gambino Mafia family. Gross later founded his own operation with a Pakistani trader and former BCCI figure named Mohammad Ali Khan, who (according to a case filed by the New York attorney general) alighted with some of the Gambino family’s cash. This was no doubt much to the dismay of Gruntal CEO, Howard Silverman, who had come to depend on the Mafia’s good graces.

As of 2008, Silverman was running one of the nation’s biggest “dark pool” trading platforms, an outfit that enabled his hedge fund clients to conduct trading in total anonymity. It should be a matter of concern that a guy who once ran a brokerage with ties to the Mafia went on to run a major “dark pool”–especially since experts such as the authors of a report (see Chapter 1 of this series for details) commissioned by the Department of Defense say that such platforms could easily be deployed to do serious damage to the markets.

One of the people Silverman brought in to help run his brokerage – another of the select traders with special partnerships at Gruntal – was a fellow named Felix Sater, who was (and is) a Russian mobster and a member of the Mogilevich organization (controlled by Semion Mogilevich, often described as the “most dangerous mobster in the world”). While still at Gruntal, Sater was charged with stabbing a Wall Street trader in the face with the broken stem of a wine glass (actually, it was martini glass, according to a man who witnessed the attack).

While still at Gruntal, Sater and several other former Gruntal traders founded a brokerage called White Rock Partners. Most of White Rock’s employees were former Gruntal employees, and there is no doubt that White Rock’s partners all had ties to organized crime. In 1996, the FBI discovered a locker at a Manhattan Mini-Storage in Soho that belonged to Evgeny Klotsman, a White Rock principal who was formerly among the select traders who had effectively run the Milken-financed Gruntal & Company. The FBI announced that the locker contained guns and documents that linked Klotsman and Sater to a “global market manipulation and money laundering network controlled by Russian organized crime.”

In 1999, White Rock (renamed State Street Capital Partners) was indicted for orchestrating stock manipulation schemes in league with the above-mentioned D.H. Blair and A.R. Baron (financed by Zev Wolfson) and five members of La Costa Nostra, including a Genovese Mafia soldier named Ernest Montevechi, and Danny Persico, a capo in the Colombo Mafia family (and the son of Alphonse “Allie Boy” Persico, the top boss of the Colombo Mafia family). White Rock’s principals, in fact, included some of the top bosses of the Colombo Mafia family, among them not only Danny Persico (who was arrested, along with Gene Phillips, in Operation Uptick), but also a Colombo Mafia capo named Greg Scarpa, to whom we will return.

According to one of Felix’s White Rock partners (and according to The New York Times, which lent credence to the story), Felix escaped indictment (he was named only as an unindicted co-conspirator in the White Rock case) because Felix and his other partner, Evgeny Klotsman , had ties to the Russian intelligence services, and promised the U.S. government that they could work with Russian intelligence to buy Osama bin Laden’s stockpile of Stinger missiles (thereby preventing Al Qaeda from using the missiles to shoot down commercial airlines).

It should not be surprising that Felix Sater, a member of the Mogilevich organization, would have ties to Russian intelligence, and it is equally unsurprising that he would be capable of cutting a deal with Al Qaeda. As the White House national security staff made clear in August 2011, when the president announced that organized crime had “penetrated” the financial system (thereby inspiring the president to officially declare an “Emergency Order”), the Mogilevich organization has close ties to both the Russian intelligence services and to multiple terrorist organizations, including Al Qaeda.

A 1996 classified FBI report (since made public) noted that the Mogilevich organization was involved in everything from major league market manipulation to prostitution, Afghan heroin, and trafficking in nuclear weapons materials. This is why Semion Mogilevich sits high on the FBI’s list of “Ten Most Wanted” criminals. But, of course, Mogilevich has a good lobbyist (i.e. a former director of the FBI, the outfit that publishes that “Most Wanted” list), and few, if any, members of the Mogilevich organization are presently in jail. Many of them are residents of the United States, and we will see that many of them, including Sater, remain active in the U.S. markets.

Multiple reports from law enforcement, the United Nations, non-governmental organizations in Russia, and the mainstream media in London (distinct from the mainstream media in the United States, which has a peculiar reluctance to publish anything interesting) state unequivocally that members of the Mogilevich organization have been selling conventional weapons to Al Qaeda for many years. On at least one occasion, the Mogilevich organization tried to sell highly enriched (nuclear bomb grade) uranium to Al Qaeda. This is a matter of dispute for some “experts”, but European Union officials confirm that it is true, and there is evidence that members of the Mogilevich organization did, at a minimum, claim in meetings with Al Qaeda operatives in Europe that they could obtain the nuclear materials.

Felix, through Russian intelligence, was prepared to cut a deal with Osama bin Laden, but the CIA balked when Klotsman demanded that the U.S. government pay him and Felix $3 million for each Stinger missile. Nonetheless, Felix escaped doing jail time, and some of his other associates say that this is because he and his Russian intelligence associates promised that their relationship with Al Qaeda would eventually be put to use for the U.S. government. However, if American officials believe Felix is helping the U.S. government, they are certainly mistaken. Indeed, it is a bit unsettling that this dangerous criminal is still on the loose. Not only was Felix once charged with stabbing a Wall Street trader in the face with the broken stem of a wine glass (actually, a martini glass), but Felix has also threatened to kill multiple other people. For example, Felix Sater has threatened to kill DeepCapture founder Patrick Byrne.

According to one of Felix’s White Rock partners (who has written about this in a book called “The Scorpion and the Frog”), Felix also once threatened to kill a short seller named Alain Chalem, who then ran a brokerage called Taluca Pacific in partnerships with DeCalvacante Mafia capo Phil Abramo, who was widely known at the time as “The King of Wall Street.” As we know from earlier chapters of this series, Abramo had formerly been involved with brokerages linked to the BCCI enterprise.

Felix’s partner says that Felix did not ultimately kill Chalem, and we should assume that he did not, but soon after the threat (in late 1999), Chalem was, in fact, murdered, execution-style, in his New Jersey mansion. The FBI has yet to prosecute anyone for the murder, but media reports have suggested that one suspect was Danny Persico, the Colombo Mafia capo who was a partner in Felix’s White Rock Partners. Other media have reported that the FBI believes the murder was related to Chalem’s dealings with Russian organized crime.

In later years, Felix co-founded a real estate and mortgage outfit called Bayrock. As we will see in later chapters, Bayrock played a role in the larger “bust out” of the mortgage markets, but for the purposes of this chapter, I will note that Bayrock’s former CFO, Jody Kriss, has alleged that Bayrock is a massive money laundering operation. In 2009, Kriss filed a lawsuit to this effect, and noted that Felix had once threatened to have him (Kriss) tortured and then murdered.

One of Bayrock’s co-founders was Tevfik Arif. In 2011, Arif was arrested in Turkey after Turkish commandos raided a party that Arif was holding on a yacht that had once belonged to Mustafa Kemal Ataturk, Turkey’s founding president. Arif, a native of Kazakhstan, was arrested along with a small harem of prostitutes and some unnamed government officials from Central Asia. (It is unclear why the commandos raided the yacht; the media has reported that Arif was charged only with illegally hiring prostitutes, a crime that does not usually result in commando raids).

Another Bayrock partner was Tamir Sapir, a billionaire real estate investor whose real estate portfolio was managed by a man named Frederick Contini, whom the government has named as an associate of the Genovese Mafia family. In 2008, Contini entered a secret plea to racketeering. He has also faced charges for stabbing a man in the face with the stem of a broken wine glass. It seems to be the thing to do.

As Tamir Sapir himself has admitted, he spent his formative years running a company that specialized in selling high-tech electronics equipment to KGB operatives in New York. As Sapir has not admitted (though public records show that it is true), Sapir’s partner in his espionage operation was Semyon Kislin, who was (according to the FBI) a “member” of the Russian organized crime syndicate run by Vyacheslav Ivankov, then the top boss of the Russian mafia in the United States. In 2009, Ivankov was assassinated on a Moscow street, but not before admitting that his organized crime syndicate (which had close ties to the Mogilevich organization) had long been employed by the Russian intelligence services.

It is clear that Felix Sater has maintained relationships that he developed while working as a trader for Gruntal & Company. For example, he remains a close associate of SAC Capital’s Steve Cohen, and a man involved with a private investigation of Felix’s Bayrock says that Felix has laundered money for Cohen and other hedge fund managers. (Cohen presumably would deny this, and he has not been charged with any wrongdoing).

Meanwhile, Bayrock has had partnerships with several investment funds, nearly every one of which is controlled either by Milken’s former top employees at Drexel Burnham, or by others among the small band of people who are Milken’s closest associates. One of Bayrock’s partners, for example, is Apollo Real Estate, part of Apollo Management, a private equity fund controlled by Leon Black, who is one of the most powerful investors in America. Leon Black is the son of Eli Black, who was, in the 1970s, the head of United Brands, formerly known as United Fruit, a company that was accused of everything from bribing tin-pot dictators to dealing with La Cosa Nostra and funneling money to Latin American narco-terrorists.

In 1975, Carl Lindner, another of Milken’s closest associates and a key participant in Milken’s junk-bond merry-go-round and “bust out” scheme , used Milken finance to take over United Brands. In the midst of this takeover, Eli Black crashed through a plate glass window on the 44th floor of the Pan Am Building in New York, and fell to his death (the death was reported as a suicide). After this incident, Eli’s son, Leon Black, was named head of mergers and acquisitions at Drexel Burnham, the investment bank effectively controlled by Milken. The two men became friends, and after Milken’s criminal indictments, Black insisted that Drexel defend his friend at all costs. Even after Milken’s indictments resulted in Drexel’s collapse, Black continued to insist that Milken was innocent, and today the two men are close friends, involved together in multiple business ventures (some described in my book). Milken’s son, Lance, is a partner at Apollo, the Leon Black fund.

Another of the most powerful financiers in America (and also among Milken’s closest associates) is Carl Icahn. In the early 1980s, Icahn was the head of the options department at Gruntal & Company (the outfit whose key clients included the Gambino Mafia family, and whose key traders, such as Felix Sater and Evgeny Klotsman, were major Russian organized crime figures). After leaving Gruntal, Icahn started his own investment outfit, funded mostly by Michael Milken and Zev Wolfson (Wolfson being the guy who funded Mulheren and the above-mentioned Mafia-tied brokerages, which were indicted for schemes they perpetrated with La Cosa Nostra and Felix Sater).

As soon as he launched his investment fund, Carl Icahn hired several key employees: Harvey Houtkin, Allen Barry Witz, Gary Siegler, and Alan Umbria. Meanwhile, Umbria, who represented Icahn on the floor of the American Stock Exchange, served as the front-man for the Genovese Mafia in a New York restaurant called Crisci’s, which was featured in the movie “Donnie Brasco”—a movie about an undercover FBI agent who infiltrates the Mob. Umbria was also the Mafia’s front-man in another New York restaurant — The Court of the Three Sisters.

One day in the late 1980s, Umbria’s close business associate walked into The Court of the Three Sisters and found Umbria presiding over a meeting in one of the restaurant’s private rooms. The business associate was asked to leave before he could hear what was discussed at this meeting, but the businessman knows who was in attendance – namely, Alan Umbria, a collection of Genovese Mafia thugs, and Louis Micelli, who was a stock broker until his untimely death in 2005. In addition to being a stock broker, Micelli was a major league narco-trafficker with deep connections to the drug cartels of Colombia, and to a Paraguay cell of Hezbollah, the jihadist outfit that takes its directions from the regime in Iran.

It was the Paraguay cell of Hezbollah that helped Iran blow up a synagogue in Argentina, and for a long time, this cell trafficked in cocaine from bases in Ciudad del Este and other cities in the “tri-border” region where Brazil, Argentina, and Paraguay meet. That region has since come under greater scrutiny, so Hezbollah’s drug kingpins have moved deeper inside Paraguay, but they continue to traffic coke, working with Hezbollah jihadis resident in North America – especially in Toronto, Detroit, New York, and my hometown, Chicago. Hezbollah’s trafficking operation continues to be a partnership with La Cosa Nostra, the Russian mafia, and (yes) some stock brokers, more of whom we will meet later.

* * * * * * * * *

Back to Gruntal & Company, the brokerage that was financed by Milken.

As we know, there were just a few traders who had special partnerships with Gruntal, and who effectively ran the place. In addition, we know, all of these traders had close ties to Milken. One of them, of course, was Steve Cohen, future founder of SAC Capital. Another was the Russian crime figure Evgeny Klotsman. And yet another, of course, was the Russian mobster Felix Sater, who, along with Klotsman, was, in 1996 linked to what the FBI described as a “global market manipulation and money laundering network controlled by Russian organized crime.” Other key figures in that “global market manipulation and money laundering network” were, of course, members of La Cosa Nostra, several of whom were involved, along with Felix, Klotsman and other Gruntal principals, in White Rock Partners.

There were just a few other traders who effectively ran Gruntal, and one of them was Andrew Redleaf, whose wealthy family did a lot of business with Milken’s operation at Drexel. Redleaf got his job at Gruntal on Milken’s recommendation. After leaving Gruntal, Redleaf invested in Sun Country Airlines in partnership with Tom Petters, who was arrested in 2008 and indicted for orchestrating a massive Ponzi scheme in cahoots with Michael Catain, the son of a famous Genovese Mafia enforcer named Jack Catain. Redleaf currently runs a large hedge fund called Whitebox Partners, another of the hedge funds that regularly trade in unison with SAC Capital and others in the network. (Neither Whitebox nor its principals has been charged with any crime).

Another one of the hedge funds in this network is the massive and eminently powerful Cerberus Capital, run by Stephen Feinberg and Ezra Merkin. In the early 1980s, Feinberg was one of Michael Milken’s top employees at Drexel Burnham. In the mid-1980s, Milken asked Feinberg to move to Gruntal & Company to help the others (namely, Russian mafia boss Felix Sater, Evgeny Klotsman, Gambino Mafia broker Maurice Gross, and Steve Cohen, among a few others) oversee Gruntal’s operations, which had become important to Milken’s nationwide network. But aside from the SEC’s investigation of Steve Cohen, regulators did not catch on to Gruntal’s criminality until the mid-1990s, when it was forced to pay the largest fines in SEC history after a series of scandals that saw some of its other managers charged with embezzlement and cooking the books. By then, the traders who really ran the place in the 1980s had moved on to much bigger projects, one of which, we know, was Feinberg’s Cerberus Capital.

In 2006, Mainichi Shimbun, Japan’s most respected business newspaper, reported that Cerberus was tied to the Japanese Yakuza. Feinberg said it wasn’t true and he sued the Japanese newspaper for libel, but there is no doubt that Mafia outfits worldwide are becoming more closely intertwined, and I think we would be justified in asking whether Feinberg came into contact with various Mafia outfits while working for Gruntal & Company (which was effectively controlled by a select number of traders, some of whom were mobsters). Feinberg’s partner in Cerberus, Ezra Merkin, meanwhile, has been charged with civil fraud for his role in the massive “Ponzi” scheme (in fact, it was not just a “Ponzi” scheme, but more on that later) perpetrated by the infamous Bernie Madoff. One of Merkin’s other funds, Ascot Partners, was the second biggest “feeder” to the Madoff criminal operation.

Other big “feeders” to Madoff’s operation were, according to court documents, “made” members of the Mafia. One of them was Ralph Mafrici, who had a joint account with Madoff’s investment fund in the name of Eleanor Cardile, a relative of Madoff’s right hand man, Frank DiPascali. Mafrici was a Genovese Mafia capo who allegedly ordered the assassination of another Mob boss named Albert Anastasia. Since Anastasia was getting his hair cut at the time, the assassination was famously dubbed “The Barber Shop Hit.” In fact, Madoff’s operation had extensive ties to organized crime, as we will see in later chapters, wherein we will also see that Madoff’s brokerage was a key component of the Milken network (and had, in the 1980s been a key component of the larger BCCI enterprise). First, though, let us meet some of the other characters in the “network” that will feature in our later discussion of the 2008 meltdown.

Another of the traders who, in the 1980s, effectively ran Gruntal & Company was Sam Israel, who later became the proprietor of a criminal hedge fund called Bayou. When Israel was indicted in 2008, Bayou was said to be the “biggest Ponzi scheme in history.” Before that, the biggest Ponzi schemes in history had been the Ponzi schemes run by the above-mentioned Fred Carr and Tom Petters. Unfortunately, in December of 2008, Sam Israel’s Ponzi was topped by Bernard Madoff, who turned himself in to the FBI and announced that his “Ponzi” scheme (which absconded with upwards of $65 billion) was bigger.

When it came time for Israel to show up for prison, Israel instead parked his car on a bridge and left a note in the window that said, “Suicide is Painless.” Then he ran away.

After that, Israel had second thoughts and decided to turn himself in. Meanwhile, it emerged that Israel had been in business with Robert Booth Nichols, whom the FBI had identified as a close associate of both the Gambino and Genovese Mafia family and perhaps the key U.S. contact for the Japanese Yakuza. Back in the 1980s, Nichols had been involved with BCCI, and he was tied to a big scandal surrounding a software program called Promis.

The developers of Promis alleged that the software was stolen from them by the U.S. government, which (according to the developers) modified it so that it included a back door feature that would allow the U.S. government to access information on computers that had installed the software. At the time, the media gave considerable credence to this story, and suggested that the U.S. government had sold Promis software to multiple foreign governments. What has not been widely reported is that Mafia-tied Robert Booth Nichols also managed to gain rights to sell Promis software, and Nichols handed those rights to the famous Saudi arms dealer and market manipulator Adnan Khashoggi, who had been a key figure in the larger BCCI enterprise.

As a document obtained by DeepCapture shows, Khashoggi, in turn, licensed the software to Sheikh Khalid bin Mahfouz, then the largest shareholder of BCCI and executive director of the bank. (Recall from earlier chapters of this series that Sheikh Mahfouz was, until his death in 2009, also one of Osama bin Laden’s most important business partners). Mahfouz proceeded to sell this software to major banks around the world, raising the question of whether he used its back-door feature to obtain confidential information from the computer systems of banks that used the software.

The bizarre nature of the business that Nichols and Israel later did together has been reported in an entertaining book called “Octopus: Sam Israel, the Secret Market, and Wall Street’s Wildest Con,” which suggests that Israel was conned by Nichols into believing that he, Israel, could recoup his hedge fund losses by tapping into a “secret market” that was, according to Nichols, controlled by 13 powerful families who also controlled the whole world. The book, of course, casts doubt on the notion that the 13 families actually control a secret market, much less the whole world, and the book reports further that Israel was scammed by Nichols into paying a large sum of money to get his hands on U.S. Treasury notes with a face value worth billions.

The Treasury notes were said to be linked to “Yamashita’s gold,” which was reputed to be gold that had ostensibly been stashed in the Philippines by the Japanese just prior to the end of World War II, and later recovered by a secret U.S. government operation. This, too, seems an unlikely proposition, but there might, in fact, be more to this story than a tale of a hapless hedge fund manager (Sam Israel) who lost millions to a clever con-man (Nichols). Which is not to say that 13 families actually control the world (though, of course, anything is possible), but as court documents obtained by DeepCapture show, Nichols and Israel had, in fact, obtained U.S. Treasury notes valued at $250 billion (as in a quarter-of-a-trillion dollars).

Israel and Nichols told people that their $250 billion in Treasury notes were secured by 2,500 metric tons of gold (serial number SC 3040-20) at the Atlanta Federal Reserve. In fact, physical gold in this quantity was not sitting with the Federal Reserve, but Nichols and Israel said the Atlanta Federal Reserve had issued a serial number in confidence that the gold would be forthcoming, much of it from the Philippines.

More specifically, Nichols and Israel told people that many of their $250 billion in Treasury bonds were secured by “Yamashita gold” that had been located years earlier by then Philippine dictator Ferdinand Marcos, who had moved the gold to a new hiding place in the jungles of Mindanao, an island at the south end of the Philippine archipelago. According to Nichols, Adnan Khashoggi (who was once indicted for laundering money on behalf of Imelda Marcos, then widow of the former dictator) had reported that this gold was now in the possession of the Abu Sayyaf terrorist group on Mindanao, and that his associates were traveling to the Philippines to retrieve the gold.

Nichols later changed the story and said that the $250 billion in U.S. Treasury bonds were related to long-standing U.S. government obligations to the offspring of Chinese nationalist leader Chiang Kai-shek. Specifically, Nichols said the obligations had been confirmed by Tansri Teong, a representative of the Maiwah family, descendents of Chiang Kai-shek who lived in Luxembourg. However, Nichols began telling the Chiang Kai-shek story after Israel was arrested, perhaps to distract investigators from the fact that their scheme revolved primarily around Khashoggi’s assurances concerning the Yamashita gold in the Philippines.

In either case, while Khashoggi had spoken of this gold in the past, many considered the story to be rather implausible. Of course, anything is possible, but it is equally possible that the $250 billion Treasury bonds were a fake. Nonetheless, according to journalist Cheryl Seymour (who first reported parts of this story, though not the information about the gold in the Philippines), bankers around the world were convinced that the Treasury notes were real. And, again, they had a face value of a quarter trillion dollars—which is around 60% of what the U.S. government pays each year in interest on the national debt. It’s also around 60% of the U.S. government’s annual defense expenditures. Moreover, Nichols and Israel circulated the story about this supposed massive obligation just as the U.S. financial system was beginning to weaken.

That is, just as the system was weakening in 2008, Israel and Nichols claimed that they were going to cash in notes that would (if it they were real) effectively bankrupt the U.S. government and fuel panic with regard to any major banks that had liens on Treasury notes. As one banker told Seymour, this “shook the financial foundation around the world.” Other bankers reiterated that statement: Sam Israel’s claim (whether true or false) to have $250 billion in Treasury bonds linked to a stash of gold in the Philippines actually rocked the global financial system (though, of course, there were other activities that did quite a lot more to rock the global financial system).

After Israel was arrested, he and Nichols filed lawsuits against each other. Soon after, in 2009, reports emerged that Nichols had been found dead in Switzerland. People close to Nichols insist that Nichols faked his own death, but the truth remains unknown. It is also unlikely that we will learn whether the U.S. Treasury notes were fake because soon after Nichols and Israel filed their lawsuits, the notes vanished. They had been briefly entered into the public record, but they are not there anymore. There is no doubt, though, that the notes (whether they were counterfeit or not) did exist. And some bankers apparently did take them seriously.

No doubt I will be ridiculed as a conspiracy theorist simply because I have told this true (albeit weird) story, but I have been accused of worse, and I will note that an almost precisely similar story (though with a different set of protagonists) was recently discussed on the floor of the British parliament.

* * * * * * * *

Before he got involved with the bizarre $250 billion Treasury note scheme, and after he left Gruntal & Company, Israel spent time working for one of Michael Steinhardt’s hedge funds. In that capacity, Israel helped Steinhardt corner the market for U.S. Treasuries, posing a threat to economic stability until the government threatened to press criminal charges, convincing Steinhardt to back off.

John Lattanzio, the manager of Steinhardt’s hedge fund, was extremely secretive. There wasn’t much information on him until a court case revealed that Lattanzio once proposed marriage to a Russian hooker and gave her a $289,275 diamond ring. Nothing wrong with that (marriage is a wonderful thing), but the interesting development in this case was that the lovers quarreled, Lattanzio wanted his ring back, and the prospective wife told the judge that Lattanzio had big-time Mafia connections. She also said that Lattanzio “would not hesitate to use [the Mafia] to harm me.” Which is not surprising because the man who launched Lattanzio’s career, Michael Steinhardt, also has big-time Mafia connections.

When it became evident that Steinhardt’s ties to the Mafia might become public, Steinhardt preemptively published a book in which he revealed (as if were no big deal) that his father, Sol “Red” Steinhardt, had done time in Sing-Sing prison because he was, in the words of a Manhattan district attorney, the “biggest Mafia fence in America.” In fact, as noted in earlier chapters of this series, Steinhardt’s father was effectively the chief financial officer for the Genovese Mafia family. In his book, Steinhardt admitted that the first and most important investors in his first hedge fund were: the Genovese Mafia family; Ivan Boesky (Milken’s most famous criminal co-conspirator); and Marc Rich (who then shared office space with Boesky).

In previous chapters of this series, I discussed Marc Rich’s ties to BCCI and the Iranian regime, noting that Steinhardt’s lobbying helped convince President Bill Clinton to pardon Rich from his indictment for illegal trading with Iran. Although Rich was pardoned, he still owes the U.S. government taxes, so he lives in Switzerland, where his palatial home is guarded by a private army of mercenaries.

Rich has done quite a lot of business with companies, such as Highland Capital, that were under the control of Russian organized crime boss Semion Mogilevich, and Rich was linked to the late 1990s scandal that saw Russian organized crime syndicates (most notably the Mogilevich organization) launder more than $10 billion through the Bank of New York. This was the same scandal that involved Sinex, which handled around $3.9 billion of that money, most of it belonging to the Mogilevich organization. Rich was not charged in the Bank of New York affair, and nor were any of the other oligarchs (many of them previously linked to the BCCI enterprise) who were implicated in the Bank of New York affair.

Of course, Steinhardt was also among Milken’s closest associates. Nowadays, Steinhardt runs a big exchange traded fund (ETF) outfit called Wisdom Tree Investments. His partner in that operation is Jonathan Steinberg, son of Saul Steinberg, who was a key player in the junk bond “bust out” scheme that Milken ran in the 1980s. Steinberg used Milken junk bonds to seize Reliance, a giant insurance and financial services firm, which was subsequently looted and destroyed (i.e. “busted out”). Steinberg was not charged with any crime.

As noted in Chapter 6 of this series, a Wall Street Journal story published in 1985 (read it, as it was the last serious investigative report on short-side market manipulation published before the media started describing these miscreants as heroes worthy of our admiration) identified Steinhardt as being part of a “network” of short sellers who regularly attacked public companies using unscrupulous tactics, such as posing as journalists to obtain inside information and conspiring to cut off victim companies’ access to credit.

Among the others identified as being part of that “network” was Jim Chanos, who is now the proprietor of a famous hedge fund called Kynikos Capital, and the head lobbyist for the hedge fund industry. Chanos is also a favorite source for the New York financial media, one reason why the media no longer publishes stories about short-side market manipulation (which does not occur, according to the lobby headed by Chanos). When DeepCapture first started reporting on Chanos’s ties to Michael Milken and associates, Chanos went to lengths to distance himself from Milken, telling journalists that he had identified the fraud at Milken-financed companies.

In an email to some of his associates (the email was obtained by lawyers for the Canadian financial institution called Fairfax Financial, and later obtained by DeepCapture), Chanos outlines the party line, suggesting to the recipients of the email (namely, a long list of Milken-tied hedge fund operators and billionaires, such as Carl Icahn, who owed their careers to Milken) that they communicate the fact that he, Chanos, had been a short seller of companies financed by a “certain junk bond king” (i.e. Milken). But while Chanos, Steinhardt, and others in their “network” were certainly short sellers of Milken-financed companies, their short selling was always beneficial to Milken, and was simply the tail-end of the “bust-out” schemes that I have described, noting that every “bust-out” ends in a wave of short selling.

Indeed, as was revealed in the 1985 Wall Street Journal story, Chanos got his big start by shorting a company called Baldwin United. According to this story, Chanos went so far as to go to Baldwin’s bankers with false information that convinced the bankers to cut off Baldwin’s access to credit. As a result, Baldwin went bankrupt, and Milken got himself named as the advisor to the bankruptcy. According to a well-known and highly respected businessman who was involved in the bankruptcy proceedings, Milken abused his advisory role and ensured that all of Baldwin’s assets were delivered to his cronies at firesale prices. This success brought Chanos to the attention of Michael Steinhardt.

At the time, Chanos (who is now revered by The Journal) was working for a Mafia-tied brokerage called Gilford Securities. In 2000, five Gilford brokers were arrested (along with Phillips) in Operation Uptick, which was, of course, then the biggest Mafia bust in the history of the FBI. Gilford’s brokers were charged with manipulating stocks in league with ten members of La Cosa Nostra and a corrupt New York cop. By then, though, Chanos had left Gilford to start his own hedge fund, receiving his initial finance from Steinhardt (son of the biggest Mafia fence in America) and Steinhardt’s limited partner, Ivan Boesky (Milken’s most famous co-conspirator). Steinhardt’s other limited partner, Marty Peretz, introduced Chanos to Dirk Ziff, another powerful hedge fund manager (Och-Ziff Capital and Ziff Brothers), and for a while Chanos ran his hedge fund out of Ziff’s offices.

While Chanos was launching his hedge fund, future CNBC reporter Jim Cramer (who had once planned to work in partnership with Boesky) was running a hedge fund out of Steinhardt’s offices. Later, Cramer and Chanos were the biggest fundraisers for the political campaign of New York Governor Elliot Spitzer, who had been Cramer’s college roommate. For a time, Spitzer’s favorite hooker, “Ashley Dupree” lived (rent free) at Jim Chanos’s beachside villa. She called him “Uncle Jim.” As Patrick Byrne once said, Ashley should be ashamed of herself for associating with this crowd.

SEC filings make it clear that Chanos regularly trades in league with other hedge funds in the Milken network, and in 2006 they were attacking Fairfax Financial, one of the largest financial institutions in Canada. Fairfax filed a lawsuit against others in his “network,” including SAC Capital, and some of its affiliates, such as Exis Capital and Sigma Capital. (A judge has ruled that SAC Capital should be dropped from the suit, but Sigma and Exis are still in litigation, and Fairfax has appealed the ruling).

Emails obtained by Fairfax’s lawyers make it clear that these hedge funds were using the same tactics (such as trying to cut off the company’s access to credit) that they had been using since the 1980s.In one email, an employee of Exis Capital (a SAC Capital subsidiary) wrote that “the way to get this thing [Fairfax] down is to get them where they eat, like the credit analysts and holders. We’re taking this baby down for the count.” This email was addressed to Jonathan Kalikow, son of Peter Kalikow, who had, in the 1980s, been one of largest investors in Ivan Boesky’s criminal arbitrage fund (or “hedge fund,” as it would now be called).

Kalikow is also a former owner of The New York Post. At the time, the newspapers’ fleet of delivery trucks was controlled by La Cosa Nostra. The operation was run by Bonanno Mafia soldier Richard “Shellack-head” Cantrella. Soon enough, the New York Post delivery fleet began transporting cargos of smuggled weaponry and cocaine, in addition to newspapers. (Kalikow was not charged with any crime, and it is possible he was unaware that his delivery trucks were controlled by the Mob).

At any rate, back in 2006, this network was going to take Fairfax “down for the count.” Fortunately, though, Fairfax was a strong company. Its bankers did not cut off access to credit, and it had the good luck to buy a lot of credit default swaps that massively boosted its profits.

However, two years later, Bear Stearns, Lehman Brothers, and other banks were taken “down for the count.” The public attack on Lehman began in May, 2008 with a speech by David Einhorn, a famous short seller who got his start working for Gary Siegler, one of the first people whom Carl Ichan hired after leaving Gruntal & Company. Einhorn is, for all intents and purposes, Ichan’s boy, and when he gave his Lehman speech, he was standing by Icahn’s side, just as he was standing by Ichan’s side when he initiated previous attacks on public companies.

In his speech and subsequent media tour, Einhorn cited data from a strange firm called The Markit Group to support his exaggerated contention that Lehman had improperly accounted for the value of its property and collateralized debt obligation holdings. See my earlier DeepCapture story, “The Markit Group: A Black Box Company that Devastated Markets,” which notes that this company was founded by a few hedge funds, which the company refuses to identify. It was, in 2008, run by two former Canadian bankers and a developer of Bulgarian property, and seemed to cherry-pick its data, which was provided by a few investment banks that are passive investors in the company.

The Markit Group is wholly without transparency, and yet it essentially dictates perceptions of market prices for collateralized debt obligations and other instruments (including credit default swaps) that are important barometers of health in the banking sector. And during the crisis of 2008, it consistently churned out wildly overstated valuations on credit default swaps, while valuing all collateralized debt obligations based on a sampling of CDOs that included only the worst of the worst (or more specifically, the “synthetic” CDOs that had been designed by short sellers to self-destruct).

The Markit Group’s wildly off-base statistics fueled the panic that helped bring down Bear Stearns, and it was a useful tool for Einhorn, when he initiated his attack on Lehman. That attack was akin to the launch of a new Ipod, with much-hyped speeches and a whirlwind media tour handled by a public relations firm, which presented Einhorn as the boy-wonder fraud-buster who had proved his mettle in an earlier battle with a financial services firm called Allied Capital. (See DeepCapture’s story, “Notes on David Einhorn: The Predator in a Cute T-Shirt,” for a fuller deconstruction of Einhorn’s blatantly dishonest attack on Allied Capital, which was perpetrated in league with Michael Milken and Carl Icahn).

While Einhorn was on his media tour, most of the other hedge funds in his network initiated a short selling attack on Lehman. After Lehman’s collapse, the bank’s creditors filed a lawsuit against the above-mentioned Steve Cohen and Dirk Ziff, alleging that the two hedge fund managers (along with Citadel Investment) helped destroy Lehman with manipulative short selling.

To be continued…Click here to read Chapter 7

Mark Mitchell is a journalist who spent most of his career working as a correspondent for mainstream media publications before joining DeepCapture.com. Mitchell is the author of a recently published book: The Dendreon Effect: How Felons, Con-men, and Wall Street Insiders Manipulate High-tech Stocks, which is available from most major online booksellers.

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The Global Bust-Out Series (Chapter 6): An Oligarchic-Organized Crime and Terrorism Syndicate (and Some Stock Promoters)

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The Global Bust-Out Series (Chapter 6): An Oligarchic-Organized Crime and Terrorism Syndicate (and Some Stock Promoters)


This is Chapter 6 of a multi-chapter series. On your right is a Table of Contents to all chapters so far published.

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In this chapter of the Global Bust-Out Series, we learn still more about the Bank of Credit and Commerce and International (BCCI) and its business partners (the “larger BCCI enterprise”). Although this might seem like ancient history, it is history that we should not forget because the people who were involved with the BCCI enterprise did not simply disappear when BCCI collapsed in 1991. To the contrary, most of them remained in business. This despite the fact that Manhattan District Attorney Robert Morgenthau had described BCCI as “the largest banking fraud in world financial history.”

Recall, too, that the larger BCCI enterprise did more than operate “the largest banking fraud in world financial history.” It also deployed a variety of schemes to “bust-out” publicly listed companies, some of them among the largest savings and loan banks in the United States. This contributed to the savings and loan crisis that began in the late 1980s, and which ultimately cost American taxpayers upwards of $2 trillion in bail-outs—a portent of bigger and better things to come.

The larger BCCI enterprise also “busted out” (i.e. looted and destroyed) smaller public companies, and it “busted out” other national economies besides the one in the United States. When a few BCCI principals were brought to trial (they were sentenced to pay nothing more than fines that were a fraction of what they had looted), the sentencing judge correctly remarked that the BCCI enterprise had single-handedly “shattered the integrity of the global financial system.”  They had also shattered the integrity of Washington, where officials went to lengths to protect the larger BCCI enterprise from prosecution.

Because the BCCI enterprise was never seriously prosecuted (or exposed in the media), the people who had been involved with BCCI and the larger BCCI enterprise (some of them global terrorists) continued during the years that followed not only to remain in business, but also to operate an almost precisely similar enterprise, the only difference being that the enterprise came to include some new and younger players, while people involved with the enterprise innovated new and more destructive financial schemes. More specifically, they innovated new ways to “bust-out” publicly listed companies and national economies.

Indeed, as we will see, a number of them contributed to the great meltdown of 2008, and they are presently threatening to deliver a repeat performance.

It is no overstatement to say that miscreants (some of them operating big banks on Wall Street) who were formerly involved with BCCI and the larger BCCI enterprise presently pose the single biggest threat to the stability of the global financial system and our economic well-being. More than that, they pose a serious threat to the future of our democracy and to political stability in many other nations as well.  This is, in other words, the history that partly accounts for our present predicament, and it is the history that has (already to the great detriment of our democracy) been covered up by officials in Washington, and ignored by the major U.S. news organizations (many of them owned by people previously linked to the BCCI enterprise).

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During the 1980s, there existed a global network of brokerages linked to BCCI, and it is essential that we know more about these brokerages and their activities because some of their proprietors later established a similar global network of brokerages—and that network, we shall see, remains in business today.

The first fact to know about the brokerages linked to BCCI is that they looted many billions from the global financial system, and most of this looting was accomplished by the perpetration of so-called “pump and dump” schemes. See Chapter 1 of this series for a fuller description of “pump and dump” schemes, but I will repeat the essentials because these schemes have never been properly defined by the media, and rarely, if ever, has anyone been prosecuted for the most damaging component of these schemes. That is to say, American law enforcement officials sometimes prosecute the “pump” end of the schemes, charging miscreants for inflating (or “pumping”) stock prices, which is a relatively minor infraction, but law enforcement officials (and the media) routinely ignore the “dump” end of the schemes even though it is the “dump” that causes the most damage to the financial system.

In a typical “pump and dump” scheme, miscreants first gain a degree of control over a company and/or its stock, and then initially “pump” the shares, causing the stock price to soar in value. But as the name of the scheme suggests, the miscreants eventually  “dump” shares into the market, causing the stock price to decrease in value. And when the miscreants “dump” shares into the market, they always simultaneously attack the target stock with manipulative short selling that causes the stock price to go into a death spiral, thereby ensuring that the stock will hit zero before ordinary investors can realize what is happening and recoup some of their losses.

It is the manipulative short selling where the miscreants make much of their money, and obviously it is the manipulative short selling that wipes out ordinary investors and does the most damage to the markets, but it is this component of the scheme—the manipulative short selling—that is rarely prosecuted.

The manipulative short selling is rarely prosecuted partly because the targeted companies (especially in “pump and dump” schemes) are often fraudulent companies, and authorities apparently believe that the stock price of a fraudulent company ought, in any case, to be zero. But often, the targeted companies are legitimate, while others are not fraudulent until such time as miscreants gain a degree of control over them. And fraudulent or not, the result is always the same: the companies are “busted out” (i.e. destroyed), with the manipulative short selling triggering death spirals that ensure that ordinary investors have no chance whatsoever to exit the stock before it hits zero.

As Congressional investigators tasked to look into the BCCI scandal noted, the global network of BCCI-affiliated brokerages manipulated the U.S. markets and victimized countless investors in North America. However, the whitewashed report produced by the Congressional investigation into the BCCI scandal failed even to identify these brokerages by name, and failed also to identify the people who operated the brokerages. The major U.S. news organizations, meanwhile, reported almost nothing about these brokerages, and on the rare occasion when the brokerages were named, the media not only failed to note that the brokerages were affiliated with the BCCI enterprise, but also failed to report that the brokerages were involved in any criminal activity whatsoever.

The Wall Street Journal, for one, never mentioned any of these brokerages, but one of The Wall Street Journal’s award-winning journalists, Larry Gurwin, did publish a seminal book about the BCCI scandal, and this book (title: “False Profits”) contained much information that apparently could not appear in the newspaper that employed him. For example, Gurwin’s book noted that many of the BCCI-affiliated brokerages were operated by a man named Thomas Quinn, which was interesting because Quinn had been identified by the FBI (which never arrested him) as a major organized crime figure with ties to the Genovese Mafia family.

Quinn operated his brokerages—a global network of BCCI-linked brokerages with names like Equity Management Services, Kettler Investment, etc.—in partnership with other mobsters, including a man named Arnold Kimmes. The FBI identified Kimmes as a “major organized crime figure” in a classified report published in 1973, but the FBI did not arrest Kimmes in 1973, nor did the FBI  arrest Kimmes in any subsequent years, though Kimmes (being a “major organized crime figure”) committed  a lot of major organized crimes in league with BCCI and Quinn.

Quinn traveled often to the Middle East, where some of his brokerages were located, and spent part of every year in the United States, where he manipulated markets in league with a network of other brokerages with ties to organized crime. When he wasn’t traveling in the Middle East or the United States, Quinn was based in France, where he owned a pink villa overlooking the Mediterranean – a villa that he had named Farmhouse of the Roses, suggesting that major organized crime figures appreciate things that are cute and pretty.

In 1988, French police stormed Farmhouse of the Roses, kicking down doors, ransacking the place, hauling away evidence, and arresting Quinn, who was subsequently sentenced to four years in (French) prison on charges of securities fraud and market manipulation. When he was released, Quinn returned to the United States, where law enforcement officials and regulators never bothered him, though it was known that he was once again operating multiple criminal brokerages in this country. For example, Quinn co-founded an outfit called Sovereign Equity Management in partnership with an American criminal-oligarch named Phil Abramo, who was widely known as “The King of Wall Street.”

In addition to being known as “The King of Wall Street,” Abramo was a capo in the DeCalvacante Mafia family.

There were many other major organized crime figures involved with brokerages linked to the BCCI enterprise in the 1980s (and with similar brokerages in subsequent years). Among them were such Mafia luminaries as Canadian mob boss Vic Cotroni; and Antonio Commisso, a.k.a. L’avvocatu, or The Lawyer – the Toronto boss of the Ndrangheta Mafia organization, also known as the Siderno Group because it  has its origins in Siderno, Italy. Meanwhile, these mobsters and others–including Abramo, Quinn, and Kimmes–had extensive business with a famous Canadian stock promoter and organized crime figure named Irving Kott.

In 1979, a hit man named Cecil Kirby placed a bomb under Kott’s car. The bomb exploded, but Kott survived to co-found several brokerages in the global network linked to BCCI. For example, in 1983, Kott co-founded an outfit in Amsterdam called First Commerce Securities, which was the largest and most destructive of the BCCI-linked brokerages.

In 1984, Kott crossed paths with man named Ali Nazerali, who was then a senior employee of an outfit called the Gulf Group and also acted as a principal of a company called Ayla Holdings BV. This lead to Nazerali’s involvement with First Commerce Securities, which has been described as history’s largest-ever “boiler room” operation (“boiler room” being a common name for brokerages that “pump” stocks that are subsequently “dumped” to rip off investors). In 1986, a crack-down by Dutch authorities forced First Commerce to cease operations. The Dutch authorities requested a bankruptcy declaration against First Commerce in December 1996, which was granted in January 1987. Dutch authorities at one point estimated that First Commerce had scammed innocent investors of nearly $400 million (in 1986 dollars).

Nazerali later claimed in an affidavit filed in Canadian court proceedings that Ayla Holdings only had a “conditional” agreement to purchase First Commerce, but a number of sources allege that Nazerali was involved along with Kott in the operations of the brokerage during the period from 1984 to 1986. Neither Nazerali nor anyone else associated with First Commerce was charged with any crime related to operating First Commerce, although a First Commerce managing director was briefly arrested in November, 1986, and the Dutch authorities issued a warrant for Kott’s arrest in 1987. By this time, Kott had (in 1985) survived a second assassination attempt, and was traveling under a false name, reportedly because he feared for his life.

One of First Commerce’s top executives, meanwhile, had been a fellow named Joseph Gamal, who had transferred to First Commerce from BCCI headquarters in London, while another top executive of First Commerce had been a man named Simon Raouff, who had previously worked for Iraq’s foreign ministry, and who was, according to “False Profits” and others, involved with BCCI’s shipments of weapons to Iran and Iraq. Raouff also formerly worked for the Gulf Group, and Nazerali (the fellow who operated First Commerce from 1984 to 1986) was (as mentioned) formerly a top executive at the Gulf Group.

According to multiple sources, including “False Profits,” Nazerali was, like Raouff, also involved in the arms business, and it is likely that he began selling arms while working for the Gulf Group.

The Gulf Group was one of BCCI’s most important affiliates, involved in everything from container shipping to arms dealing and financial services. As Manhattan District Attorney Robert Morgenthau and many others later made clear, much of the cash that BCCI looted from the global financial system was delivered to the Gulf Group in the form of loans that were not expected to be paid back (and most of that money disappeared). The Gulf Group was controlled by a man named Abbas Gokal and his two brothers, Murtaza and Mustapha Gokal. The Gulf Group and the Gokal brothers themselves also had connections with First Commerce Securities and other brokerages linked to the BCCI enterprise.

Abbas Gokal subsequently became the only major BCCI figure to do jail time for his BCCI crimes, and after his release from jail, he moved to Tehran, where he and his brother, Mustapha, became financial advisors to the Iranian regime. Back in 1969, another Gokal brother, Hussein Gokal, was hanged by the Iraqi government, which had convicted him (albeit in the Iraqi courts, which had a low burden of proof) of being an Iranian spy. That was before the 1979 Islamic revolution, but after the revolution, the surviving Gokal brothers and the Gulf Group had (like their affiliate, BCCI) extensive and close working relationships with the Iranian regime.

The Gulf Group, like BCCI itself, also worked closely with the Pakistani intelligence service, the ISI, and Abbas Gokal, who was one of Pakistan’s most prominent oligarchs, served (as did many of Pakistan’s oligarchs) as an asset of Pakistan’s intelligence service. Among other ventures, the Gulf Group helped the Pakistani intelligence service deliver weapons to the mujahedeen in Afghanistan, and the Gulf Group was linked to the nuclear weapons proliferation network operated by Pakistan’s intelligence service and Pakistani nuclear scientist A.Q. Khan, known as “The Father of the Islamic Bomb.”

One of the beneficiaries of that nuclear proliferation network was the regime in Iran, and the Gulf Group’s dealings with the Iranian regime were so extensive that the mullahs who ruled Iran considered the Gulf Group to be not just one of their most important business partners, but a key ally in furthering the Islamic revolution. The Iranians relied on the Gulf Group for financial and policy advice, and also for a steady supply of sophisticated weaponry. Rachel Ehrenfeld (now director of the Economic Warfare Institute) has written that the Gulf Group “was the major player in delivering strategic and nuclear weapons [components] from the West to Iran and other Muslim countries.”  Congressional investigators reached similar conclusions.

Abbas Gokal, the man who controlled the Gulf Group, was also an intermediary for American oligarchs looking to do business with BCCI and the Iranian regime. Among these American oligarchs was a financial operator named Ivan Boesky, who would later become best known as Michael Milken’s most important criminal coconspirator.

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During the 1980s, Boesky ran what was then one of the nation’s most powerful arbitrage funds (today it would be called a hedge fund), and he had a reputation on the Street as a mysterious character who liked to operate in the shadows – a guy known to deliver suitcases full of cash to gorillas with handguns holstered on their hips. According to Pulitzer Prize winning author James Stewart (see his book, “Den of Thieves”), Boesky often told people that he had spent an earlier period in Iran working as a CIA agent.

Prosecutors would later describe in colorful detail the armed gorillas and suitcases full of cash, but Boesky’s claims to have been working as a CIA agent in Iran were somewhat dubious. It is more than likely, as one of Boesky’s former business colleagues confirmed in an interview with DeepCapture, that Boesky had (and still does have) deep ties not to the CIA, but to the regime in Iran (though, of course, it is possible that he had ties to both).

In any event, it is certain that Boesky spent time in Iran. He was, for example, in Iran soon after the 1979 Islamic revolution that brought the current Iranian regime to power, and when he returned from that trip Boesky went into business with a trader and oligarch named Marc Rich, who, like Boesky, was transacting large volumes of trading with the Iranian regime. The intermediary for Rich’s trading with Iran was, of course, Abbas Gokal, and Rich relied on BCCI for much of his finance. Indeed, Congressional investigators would later identify Rich as being a key figure in the larger BCCI enterprise.

Throughout the 1980s, Rich and Boesky shared New York office space in a building (at 650 Fifth Avenue) that was owned by an outfit called the Assa Corporation, which was controlled by the Iranian regime. Much later, in 2009, the Department of Justice indicted the Assa Corporation, alleging that it was a front for Iranian espionage in the United States, and that it was funding Iran’s nuclear weapons program. The DOJ also presented evidence that the Assa Corporation had ties to organized crime, and it is likely that the Assa Corporation’s had been conducting business with organized crime since the 1980s. As we will see, Rich and Boesky also had extensive ties to organized crime and they continue to this day to do business with the Assa Corporation (which has dealings with numerous brokerages in the United States, its indictment for espionage and funding Iran’s nuclear program notwithstanding).

In 1983, Rich was indicted for illegally trading with the Iranian regime during the 1979-1980 Iran hostage crisis, which saw U.S. soldiers die in an unsuccessful attempt to rescue American diplomats who were being held hostage at the U.S. embassy in Tehran. After he was convicted, Rich fled to Switzerland and lived as a fugitive from the law, but U.S. President Bill Clinton, on his last day in office, granted Rich a pardon from his crimes, and by this time Rich was, perhaps, the world’s most powerful commodities trader, in addition to being a big player in other markets.

President Clinton’s decision to pardon Rich from his crimes was influenced by a hedge fund manager and oligarch named Michael Steinhardt, who had persistently lobbied Clinton on Rich’s behalf, and who was one of the largest funders of the Democratic Party. In addition, Steinhardt had co-founded an outfit called the New America Foundation, which played a key role in securing the presidency for Clinton, and was later credited with having authored much of the Clinton administration’s policy platform.

As Steinhardt has himself admitted (possibly because he worried that the information was going to become public anyway, and because he wished to deliver the news as if it were no big deal) the largest investors in his first hedge fund were the Genovese Mafia family. This was because Steinhardt’s father, Sol “Red” Steinhardt, was (in the words of a Manhattan district attorney) the “biggest Mafia fence in America.” More specifically, Steinhardt Sr. was the chief money manager for the Genovese and affiliated Mafia families.

According to Steinhardt, the second biggest investors in his hedge fund (after the Genovese Mafia) were Marc Rich and his office mate, Ivan Boesky. Steinhardt, meanwhile, had become one of the more prominent (and some say “notorious”) hedge fund managers on Wall Street. In 1991, Steinhardt was implicated in a scheme to corner the U.S. Treasuries market—a scheme that would have had disastrous consequences for the U.S.A. if had been successful. Two years earlier, in 1989, The Wall Street Journal described Steinhardt as being part of a “network” of financial operators who deployed manipulative short selling to attack publicly listed American companies. Indeed, though The Wall Street Journal did not report this, the same “network” had conspired with BCCI to “bust-out” (i.e. destroy) some of America’s largest financial institutions.

In addition, this “network” remains in business today, so there is more that we need to know about the “network,” beginning with the information that the “network” includes Ivan Boesky and Marc Rich, not to mention former BCCI figures like Abbas Gokal and some of the world’s leading organized crime bosses. Meanwhile, of course, a central figure in the “network” is Boesky’s most famous criminal coconspirator, Michael Milken, who was (in the 1980s) the most powerful man on Wall Street, and who remains to this day one of the most destructive financial operators in the nation.

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Although Milken spent two years in prison, and is, without doubt, one of history’s most destructive financial criminals, the major U.S. news organizations presently describe Milken as being not only a Wall Street hero, but also one of the most “prominent” fixtures of the American establishment. Even the usually reliable Economist magazine published an article in September 2010 that hailed Milken as an “innovator” whose junk bond finance in the 1980s helped build some of America’s greatest companies.

It is true that Milken’s finance contributed to the growth of a few major companies. For example, Milken financed Rupert Murdoch’s News Corp. In addition, Milken finance helped Ted Turner build CNN into a media powerhouse. And it is perhaps no coincidence that CNN was, meanwhile, doing business with BCCI subsidiary Capcom Financial, which, during the 1980s, transacted $90 billion (a mighty sum in those days) in “wash” trades through Milken’s trading desk at Drexel Burnham Lambert.

As noted in earlier chapters, “wash” trades are usually accompanied by manipulative  short selling, and they cause extensive damage to the markets. In addition, “wash trades” usually involve money laundering (hence the term “wash”), so it is probably notable that Capcom Financial and its director, Ziauddin Ali Akbar, who also served as BCCI’s treasurer, were, in the 1980s, indicted for laundering money on behalf of Colombian drug cartels. And of course, the larger BCCI enterprise was laundering money for terrorist outfits and the world’s leading organized crime syndicates. (Congressional investigators determined that Capcom principals, one of whom was the chief of Saudi intelligence, might also have influenced CNN’s coverage of the Middle East and of BCCI itself).

In any event, while  Milken did finance a few successful companies, Milken and a close-knit cabal of criminal-oligarchs destroyed (i.e. “busted out”) far more companies than they built, and, often, they did so in league with the BCCI enterprise.

It would require another book-length blog to discuss all of the companies that the Milken cabal destroyed in the 1980s, and the subject has already been covered to some extent by other books, so I will leave it to the reader to consult, for example, Connie Bruck’s highly acclaimed book, “The Predators’ Ball,” which describes Milken’s  larger scheme in general terms. Perhaps the best book on the Milken cabal is Ben Stein’s “License to Steal,” in which Stein posited that the principal business model of Milken & Co. was to “bust out” (a term that Stein also used, which is to say I didn’t make it up) publicly listed companies, including many of the nation’s leading savings and loan banks. (Stein later became a columnist for The New York Times, which never publishes anything negative about Milken nor any other oligarch).

Although the major U.S. news organizations devoted little attention to the “bust-outs” of savings and loan banks, the “bust-outs” were noticed by others, including the Federal Deposit Insurance Corp. (FDIC) and the Federal Savings and Loan Insurance Corporation (FSLIC), whose deputy director at the time was the crusading William Black, a rare example of an honest man in government who later (as a professor of economics) developed the concept of “control fraud,” in which financial executives (e.g. Michael Milken and his associates) deliberately use entities that they control as a “weapon” to commit fraud that undermines markets and the broader economy. Back in the 1980s, as the FDI noted, Milken and his closest associates “willfully, deliberately, and systematically plundered certain S&Ls.”

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The Milken variation of the “bust out” worked as follows: Milken issued junk bonds to finance about two dozen of his closest associates, who used the finance to take over good companies. Under the direction of Milken’s cronies, the companies took on ever greater amounts of Milken’s junk bond debt. But rather than use the finance to grow the companies, the Milken cronies simply looted the companies of their cash. To create the illusion that there was a liquid market for the junk bonds, the Milken cronies meanwhile traded their bonds amongst each other at stair-stepping prices.

As the government’s indictments of Milken made clear, this junk bond merry-go-round was conducted with Mafia-like secrecy – nobody other than Milken’s closest associates knew that the only buyers for the junk bonds were Milken’s other closest associates. Meanwhile, Milken was involved with a nationwide network of brokerages and investment funds (many featured in later chapters of this series, and many still in business today) that traded on inside information about these companies and manipulated their stock prices. When the Milken’s junk bond cronies were done looting their companies, Milken and his cronies, along with others in their network, would attack the companies with manipulative short selling, thereby triggering a death spiral in their stock prices and ensuring that the companies could not be saved.

One of the short sellers who regularly attacked companies that were “busted out” by Milken and his associates was, of course, Michael Steinhardt (the guy with the hedge fund whose biggest investors were Marc Rich, the Genovese Mafia, and Milken’s criminal co-conspirator Ivan Boesky). Others were among the short sellers who were part of the short selling “network” exposed by the 1989 Wall Street Journal story that identified Steinhardt as being a key figure in the network. Later chapters of this series will discuss the network in greater detail, but for now it is enough to know that the 1989 Wall Street Journal story reported that others in the network, including a fellow named Jim Chanos, were employed at the time by a brokerage called Gilford Securities.

By 2000, Chanos had left Gilford Securities and (with funding from Steinhardt, son of the biggest Mafia fence in America) started his own hedge fund, Kynikos Investments, one of the most powerful hedge funds in the nation. Chanos also headed up (and still does head up) a hedge fund lobbying organization and, by 2000, he had become a  favorite source of information for journalists at major U.S. news organizations, including The Wall Street Journal, which never again published a story exposing manipulative short selling. Meanwhile, in 2000, five former brokers at Gilford Securities were indicted as part of Operation Uptick, billed by the FBI as the largest Mafia bust in history. The FBI reported at the time that the Gilford brokers had manipulated stocks in league with a “network” that included ten of La Cosa Nostra’s leading lights and a corrupt New York cop.

When I called Chanos’ former boss, H. Robert Holmes, to ask about Operation Uptick and the Mafia’s infiltration of his brokerage, he said: “This is bullshit.” Indeed, almost none of the 120 people arrested in Operation Uptick (ostensibly the biggest Mafia bust in history) were ever sentenced to anything worse than small fines, and most of them remained in business, so maybe Holmes was right: it was bullshit.

Back in the 1980s, when Gilford and Chanos were part of Milken’s nationwide network, their manipulative short selling targeted numerous companies that had been financed with Milken’s junk bonds. Chanos presently tells reporters that he was Milken’s nemesis and that his short selling of Milken-financed companies was evidence that he had a keen nose for fraudulent companies, but this is pure spin. Milken financed those companies fully intending that they would be “busted out” (i.e. destroyed) with help from manipulative short selling perpetrated by others, including Chanos and Steinhardt, in his network. And the short selling attacks, of course, triggered the essential death spirals in the stock prices of the target companies so that even if the companies’ boards of directors were to remove the Milken cronies, the companies would be unable to raise finance from more reputable sources.

When the companies went bankrupt, Milken and his cronies, including the short sellers, would make a fortune. Other Milken cronies would make still more money by purchasing the companies’ assets at fire-sale prices in the bankruptcy proceedings. And then they would repeat the process all over again, assured that the junk bond merry-go-round would supply a constant stream of lootable finance.

But, of course, this scheme eventually collapsed – and it must be stressed, the vast majority of the companies that Milken financed ultimately were destroyed.

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As already indicated, many of the companies that were destroyed by Milken & Co. were savings and loan banks, and in the case of the savings and loan banks, there was another important component of the scheme that involved a small number of people who specialized in so-called “brokered deposits.” Indeed, “brokered deposits” were one of the more important contributors to the savings and loan crisis, and they have been similarly cited as a contributing factor (other factors being manipulative short selling and “control fraud”) in our more recent financial crisis.

The full story of brokered deposits is a long one, but the short version is that a brokered deposit is, as the term implies, a bank deposit that is acquired through a broker.

More specifically, the broker aggregates deposits from many sources, and is paid by a given bank to deliver his bundle of deposits to the bank in question. The hitch is that these brokered deposits, unlike, say, checking and savings accounts, are generally not a stable source of funding, and technically, undercapitalized banks are not allowed to accept them. However, in the 1980s, there were loopholes (and there remained loopholes in all the years that followed) that enabled some well-connected brokers to deliver huge bundles of deposits to the most dubious banks, and in the process those banks would take on costly liabilities. In the case of the savings and loans that were part of the Milken junk bond merry-go-round, the deposits were simply looted.

In the 1980s, the single most important deposit broker—and a central character in most accounts of the savings and loan crisis (see, especially, the book “Inside Job.”)—was an organized crime figure named Mario Renda. And Renda’s most important business partner was Adnan Khashoggi, who, of course, was a key figure in the larger BCCI enterprise. Khashoggi was also closely involved with the global network of brokerages linked to the BCCI enterprise, and he (along with others already mentioned) will prove extremely important to our later discussion of the financial crisis that began in 2007, and which continues to this day.

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It is not an understatement to say that the savings and loan crisis would not have happened if it were not for the work of Renda and his sponsor Khashoggi, who, along with Milken, was one of the masterminds of the scheme to “willfully, deliberately, and systematically plunder” not just a few banks, but more than a hundred savings and loan banks across the nation, some of them among the nation’s most important financial institutions. Also central to this scheme was an outfit called CenTrust, which was based in Miami, and was the largest savings and loan bank in the southeastern United States. As Congressional investigators would later reveal, CenTrust was controlled by BCCI, and financed by Milken.

CenTrust was also a key component of Milken’s junk bond merry-go-round—i.e. the merry-go-round that allowed a host of Milken-financed savings and loan banks, including CenTrust, to appear healthy, even though they were taking on ever greater liabilities in the form of brokered deposits, and even though they were being “systematically” plundered (i.e. “busted out”). Ultimately, of course, CenTrust was one bank that was “busted out,” and its inevitable collapse alone cost U.S. taxpayers more than $2 billion.

Another key participant in the Milken junk bond merry-go-round and the larger scheme to “bust-out” major savings and loan banks was a monumental criminal and prominent American oligarch named Charles Keating. With Milken’s finance, Keating seized control of an outfit called Lincoln Savings and Loan, which was then the largest savings and loan bank—and one of the most important financial institutions—in the nation. Ultimately, of course, Milken and Keating, along with others in their network, “systematically plundered” (i.e. “busted out”) Lincoln Savings and Loan, and they did so in cahoots with the BCCI enterprise.

A later Congressional investigation would reveal that one BCCI figure involved in the “bust-out” of Lincoln Savings and Loan was a shadowy Swiss financial operator named Alfred Hartman, who was a member of BCCI’s board of directors and the head of BCCI Swiss subsidiary, Banque de Commerce et de Placements, based in Geneva.  Also involved in the “bust-out” of Lincoln Savings and Loan, according to Congressional investigators, was Abbas Gokal, head of the Gulf Group. As we know, the Gulf Group was one of BCCI’s most important affiliates, closely tied to the Iranian regime and Pakistani intelligence.

When the Senate Foreign Relations Committee began investigating BCCI for its role in Pakistan’s nuclear weapons program, the Committee announced that it intended to take a close look at Keating’s relationship with Gokal and the Gulf Group. It is not clear what, if anything, came of that investigation, but we would be justified in asking whether any serious investigation occurred at all given that Keating had successfully corrupted (or “captured”) at least five senators. Those captured senators would later become known, famously, or notoriously, as “The Keating Five,” at which point it was widely reported that the senators had, for many years, been intervening on Keating’s behalf, helping to derail law enforcement investigations into the goings-on at Lincoln Savings and Loan.

The same senators—and other senators besides—had given speeches on the Senate floor singing the praises of BCCI and ridiculing those who suggested that BCCI was a criminal enterprise. Presently, U.S. senators continue to sing the praises of billionaires who were formerly involved with the BCCI enterprise, and many of those billionaires continue to be given VIP treatment by other top officials in Washington.

Therefore, it is necessary for us to learn more about the billionaires who were formerly involved with the BCCI enterprise, beginning with the observation that all of these billionaires are, like Milken, also treated with reverence by the major U.S. news organizations, including The New York Times. And it is to one recent (and typical) New York Times article that we now turn, if only because it gives further credence to my contention that The New York Times is less reliable than People magazine, while the New York Times slogan—“All the News That’s Fit to Print”—is false and eminently fraudulent advertising that should be reported to the Better Business Bureau.

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In 2009, The New York Times published an obituary marking the death that year of Sheikh Khalid bin Mahfouz, the Saudi billionaire and Muslim Brotherhood oligarch who had, in the 1980s, been the largest shareholder of BCCI, and who had served as executive director of the bank. Sheikh Mahfouz was also one of history’s most destructive financial criminals, and when he and other BCCI principals were tried for their BCCI crimes, the presiding judge (who sentenced them to pay fines that were fraction of what they looted) named Sheikh Mahfouz as one among the people who had “shattered the integrity of the global financial system.” Aside from that, Sheikh Mahfouz was the most prominent banker in Saudi Arabia.

Not only was Sheikh Mahfouz the principal banker to the Saudi royal family, but he had also been the principal financier of numerous other Saudi oligarchs, including Adnan Khashoggi, who had been involved with the BCCI enterprise during the 1980s. In addition, Sheikh Mahfouz had been the proprietor of numerous other financial institutions, all of which had been affiliates of BCCI during the 1980s, and most of which remain in operation today. For example, Sheikh Mahfouz founded an outfit called National Commercial Bank, which is presently one of the largest and most powerful financial institutions on the planet, with extensive operations in the United States, and partnerships with some of Wall Street’s leading brokerages and investment houses.

If all that were not enough, Sheikh Mahfouz was also the most important business partner of a Saudi oligarch and terrorist named Osama bin Laden.

For these and other reasons to be discussed, Sheikh Mahfouz was, in fact, one of the most important people in the world. That alone is enough to cast doubt on The New York Times slogan—“All the News That’s Fit to Print”—for The New York Times rarely printed anything at all about Sheikh Mahfouz until his death in 2009, at which point The Times published an obituary for Sheikh Mahfouz that is worthy of our attention not because it was exceptional, but because it was entirely typical of the reporting by America’s most important newspaper, and this typical story was so ingratiating to power and so grossly propagandistic that it might not be an exaggeration to suggest that The New York Times itself poses a greater threat to the republic than do any of the terrorists who purportedly hate our freedoms.

For starters, The New York Times did not describe Sheikh Mahfouz as one of history’s most destructive financial criminals, and nor did the Times note that Sheikh Mahfouz and his BCCI associates had “single handedly shattered the integrity of the global financial system.” The Times did report that Sheikh Mahfouz had paid some money to settle fraud charges related to his involvement with BCCI, but the always “balanced” New York Times noted (and gave credence to) Sheikh Mahfouz’s claim that the payment (around $250 million, but the Times didn’t say how much) to settle fraud charges was just a “business decision,” and that he had not technically paid a “fine” because he denied all wrong-doing.

As for the nature of the BCCI enterprise, The New York Times reported only that BCCI had been shut down in 1991 after being accused of “financial chicanery and money laundering.” That was it. Just “chicanery,” as if it were nothing more than a slap-stick funny sort of mischief. Recall that this was a bank that helped “bust out” the American economy, meanwhile running a global network of criminal brokerages in partnership with transnational organized crime syndicates and providing a full package of services to the world’s leading terrorist outfits, with some terrorists themselves counted among the key figures in the larger BCCI enterprise. This is the same BCCI enterprise that thoroughly corrupted Washington and captured leading U.S. news organizations.

This was a bank (see “The Outlaw Bank,” by Johnathon Beaty, who was chief investigative reporter for Time Magazine until he reported the truth about this bank) that operated its own “Black Network” involved in everything from terrorism and coups de’ tat to weapons smuggling, narco-trafficking, nuclear weapons proliferation, prostitution, political assassinations, kidnappings, and murder for hire.

The New York Times has never reported any of that, and in its obituary for Sheikh Mahfouz (which was also the last time the Times mentioned BCCI), the Times literally had nothing more to say about BCCI other than those few words:  “financial chicanery and money laundering” (i.e. standard banking procedures), tempered with the assurance of Sheikh Mahfouz that neither he nor BCCI had committed any wrongdoing. Aside from that, this story in the Times demonstrated nothing short of admiration for Sheikh Mahfouz, noting that “Sheikh Mahfouz typified Saudi Arabia’s super-wealthy.” The Times gushed further that Sheikh Mahfouz “maintained opulent homes around the world and traveled in his own Boeing 767 with gold-plated bathroom fixtures.”

The Times also reported (approvingly) that Sheikh Mahfouz had, in 1977, joined a “Washington insider” named John Connally and unnamed “others” to buy an outfit called Main Bank of Houston. In addition, the Times reported that Connally introduced Sheikh Mahfouz to some Texas billionaires, namely the brothers William Herbert Hunt and Nelson Bunker Hunt, and the Times reported that these billionaires and Sheikh Mahfouz proceeded to collaborate in an effort to corner the silver market.

However, the Times did not seem to think there was anything wrong with American oligarchs and a Saudi sheikh trying to corner the silver market. In addition, the Times reported that the attempt was “unsuccessful” because Sheikh Mahfouz had (according to the Sheikh Mahfouz) “lost money” in the effort. Moreover, readers of this story in the Times were left to believe that this was the full extent of Sheikh Mahfouz’s business in the United States: the purchase, with a “Washington insider,” of Main Bank, and an “unsuccessful” attempt to corner the silver market.

But there was more to this story—news that the Times didn’t see “Fit to Print.”

For example, the Times did not report that Sheikh Mahfouz was (in the 1980s) a key player in a network of financial operators who were systematically plundering not just Main Bank, but also more than 100 other savings and loan banks. In addition, the Times failed to report that the “attempt” to corner the silver market was more than an attempt, and was, in fact, entirely successful in that Sheikh Mahfouz and his partners (for a time) fully controlled the price of silver. From the perspective of a Muslim Brotherhood oligarch like Sheikh Mahfouz (see earlier chapters of this series for more on what Muslim Brotherhood leaders call “The Financial Jihad”) the cornering of the silver market was all the more successful in that it wrought havoc in the broader markets, and nearly caused the collapse of  Bache & Co., which was then one of America’s largest investment banks.

As for that “Washington insider,” John Connally, the Times seemed to believe that it was par for the course and even commendable for Sheikh Mahfouz (who was then perpetrating the “biggest banking fraud in world financial history” in partnership with the chief of Saudi intelligence and other BCCI figures) to seek favor with a “Washington insider,” and the Times failed to report that this particular insider, Connally, had recently served as Secretary of Treasury, in which capacity he had convinced President Nixon to devalue the dollar and abandon the gold standard (which helped Sheikh Mahfouz corner the silver market).  Moreover, at the time when he went into business with Sheikh Mahfouz, Connally had announced his intention to run for president of the United States, though the Times didn’t mention that.

The Times also failed to report that Sheikh Mahfouz went into business with many other “Washington insiders” besides Connally. For example, Sheikh Mahfouz and BCCI purchased National Georgia Bank, the principal financiers of then President Jimmy Carter’s family peanut business, and Sheikh Mahfouz had extensive business with future President George Bush, Jr.  Indeed, Sheikh Mahfouz and other key figures in the BCCI enterprise effectively owned Washington, and they still owned Washington at the time of Sheikh Mahfouz’s death in 2009, but this was neither newsworthy nor problematic so far as The New York Times was concerned.

In addition, the Times failed to report that Main Bank, the outfit that Sheikh Mahfouz acquired with a Washington insider, was a key component of a larger scheme—namely, a scheme to “bust out” the U.S.A. and the global economy—that Sheikh Mahfouz and BCCI were perpetrating in league with other “Washington insiders” and American oligarchs, among them, of course, Michael Milken, who was, at the time, the most powerful man on Wall Street and one of history’s most destructive financial criminals (worthy of our respect and admiration,, according to The New York Times).

One of the few journalists who has reported extensively on the savings and loan scam is Pete Brewton, formerly of various of newspapers in Texas, and indeed Brewton (who has been scorned by others in the mainstream media for failing to toe the party line) is one of the world’s reigning experts on the savings and loan scandal. In addition, Brewton (see his book on the Mafia and savings and loans) has reported that Main Bank (owned by Sheikh Mahfouz and Washington insiders)  was part of a network of affiliated savings and loan banks that raised (with help from Khashoggi’s organized crime partner Mario Renda) a steady stream of brokered deposits, with the banks lending the cash back and forth to each other.

This daisy chain of lending served a purpose similar to Milken’s junk bond merry-go-round, temporarily creating the appearance that the banks were functioning and liquid financial institutions, but, of course, the goal of the people in the network was ultimately to “bust-out” (i.e. loot and destroy) all of the savings and loan banks in the network, including Main Bank. It might also be noted (though it is not “News That’s Fit to Print”) that Sheikh Mahfouz and other BCCI figures controlled or partially controlled numerous other banks in the network, among them an outfit called MBank and its parent, MCorp.

The two biggest clients of MBank (i.e. two people who helped loot the bank, as they were not expected to repay their loans) were major organized crime figure Herman Beebe and Carlos Marcello, who was then the top Mafia boss in the city of New Orleans (and the chief of La Cosa Nostra operations throughout Texas and other southern states). Another outfit in the network was Mainland Bank, which was “busted out” with help from Adnan Khashoggi, who, of course, was financed by Sheikh Mahfouz. Mainland’s top client, meanwhile, was Leonard Capaldi, whom the DOJ would later identify as a major organized crime figure and close associate of Detroit Mafia capo Tony Tocco.

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Yet another bank in the network was San Jacinto Savings and Loan, which was a subsidiary of an outfit called Southmark Corporation, operated by Gene Phillips, the single most important business partner of Michael Milken, and a central player in the Milken-BCCI scheme to “bust out” the national economy.

Southmark was the largest recipient of Milken junk bonds in the 1980s, and it was the lynchpin of the junk bond merry-go-round. Its subsidiary, San Jacinto, was one of the largest savings and loan banks in the nation, and, of course, it was “busted out” (i.e. looted and destroyed) with much of the loot going to a familiar cast of coconspirators, including Adnan Khashoggi; Sheikh Mahfouz; New Orleans Mafia boss Carlos Marcello; and the notorious mobster-oligarch Herman Beebe, who was linked to the “bust-outs” of no less than two dozen other saving and loan banks across the nation.

The man whom Gene Phillips appointed as the chief loan officer of San Jacinto Saving and Loan was named Joseph Grosz. Aside from being a banker, Grosz was a leading mobster, affiliated with the Chicago Syndicate. As Brewton reported, San Jacinto’s parent, Southmark, was  “used as a mob dumping ground to buy the investments of mobsters,” including not only Herman Beebe and Carlos Marcello, but also organized crime figure Harry Wood, and Morris Shenker, a former lieutenant of Meyer Lansky, who was the most powerful mobster in the nation until he was replaced by Alvin Malnik. Meanwhile, in the 1980s, Malnik (the nation’s most powerful mobster) managed investments in the United States for Saudi princes involved with the BCCI enterprise (as was reported by People magazine, but not by The New York Times).

The “bust out” of San Jacinto cost American taxpayers another two billion in bailouts, and a Department of Justice investigation determined that San Jacinto and its parent, Southmark, were key components of the nationwide network that coordinated the “bust outs” of many other savings and loan banks—namely the network that is the subject of this story, and which precipitated the savings and loan crisis that ultimately cost more than $2 trillion in taxpayer-funded bailouts. However, Lloyd Monroe, the man who led the DOJ investigation into Southmark and San Jacinto, was forced to resign from his job after complaining that top officials at the DOJ had thwarted his investigation, and neither Phillips nor any other Southmark executive was charged for their role in the savings and loan scandal.

Presently, Phillips is still the most important business partner of Michael Milken, and most major U.S. news organizations seem to regard Phillips in the same way they regard Milken—i.e. as something of a Wall Street hero and a “prominent” fixture of the American establishment. The only exceptions are a few journalists (including Brewton) who have covered Phillips closely, and who managed to report on his activities in prominent publications in Texas, where Phillips is based. For example, the Dallas Business Journal reported in 2000 that Phillips “allegedly met with two associates of New York’s legendary Bonanno organized crime family to discuss a plan to bilk a couple of ‘very friendly’ union pension funds through the sale of inflated stock.”

That same year, 2000, Phillips was arrested and charged with manipulating stock prices in league with other leading figures in La Cosa Nostra. More specifically, Phillips was arrested as part of Operation Uptick, which, of course, was described by FBI spokesmen as the largest Mafia bust in U.S. history. More than 120 people (including, recall, those five brokers who had worked for Gilford Securities), all with ties to organized crime, were arrested in Operation Uptick, and FBI officials described them as being part of a nationwide “network” of stock manipulators, some of whom had committed various other crimes, which included (according to an FBI statement):  “controlling and infiltrating broker-dealers…and employing tactics of violence, including threats, extortion, physical intimidation, and the solicitation of murder…”

Some of the 120 people arrested in Operation Uptick were members of Russian organized crime syndicates, while others were, variously, described by the FBI as having ties to each of La Cosa Nostra’s five major Mafia families—Genovese, Colombo, Gambino, Bonanno, and Lucchese.  Among the 120 defendants, aside from Phillips (and aside from the five former Gilford brokers), were:  Robert “Little Robert” Lino, a capo in the Bonanno crime family; Anthony Stropoli, a soldier in the Colombo crime family; Frank “Frankie” Persico, a Colombo Mafia capo; Sebastian “Sebbie” Rametta, an associate of the Colombo crime family; Robert Gallo, an associate of the Genovese crime family; and John Black, an associate of the Lucchese crime family.

The DOJ charged that Phillips, in league with various members of La Cosa Nostra, had manipulated the stock of one of his companies, an outfit called Transcontinental. Aside from Phillips, the largest shareholder in that company was Michael Milken, who, of course, was Phillips’ most important business partner, known to readers of The New York Times only as a “prominent” fixture of the American establishment who was (at this time in 2000, according to the Times) focused principally on “philanthropic” activities. (See my book “The Dendreon Effect” if you wish to learn how Milken uses his “philanthropy” to manipulate stocks of pharmaceutical companies and to suppress promising medical treatments developed by companies that he and others with ties to organized crime are trying to destroy for profit.)

The New York Times has yet to report that Phillips was arrested as part of the largest Mafia bust in FBI history, and nor has The New York Times ever reported that the Mafia has a large presence on Wall Street.

The Wall Street Journal did report that Phillips had been arrested, but The Journal provided nothing at all in the way of detail about the ties between Phillips and the Mafia, much less about his earlier central role, along with leading mobsters and BCCI, in the savings and loan scandal (i.e. in the “bust out” of the American economy). Instead, The Journal simply noted that Phillips had been arrested “in a sweeping case alleging organized crime influence on Wall Street,” and then described some Phillips businesses in relatively benign terms. However, the author of The Wall Street Journal article did note that when he tried to interview Phillips, he not only found Phillips uncooperative, but was told by Phillips: “You’re not supposed to be talking to me. You’re going to get buried.”

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A few weeks after the Wall Street Journal story was published, Phillips was acquitted on all counts. Most of the mobsters arrested in Operation Uptick also did not do jail time, and as I noted earlier, most of them remain in business today. More specifically, they are involved with a nationwide network of brokerages, and as we will see, this network of brokerages (though the brokerages have changed their names, and there are some new editions) is essentially the reincarnation of the network that BCCI and leading organized crime figures established in the 1980s.

As we know, the global network of brokerages linked to BCCI in the 1980s specialized in “busting out” small and medium-sized public companies. It should be added, though, that the establishment of this global network of brokerages was not unrelated to BCCI’s other ventures, including its involvement in the schemes to “bust out” savings and loan banks. Some of the brokerages in the global network were established as subsidiaries of the savings and loan banks that had been seized by BCCI and/or BCCI’s confederates, the most prominent confederate being, of course, Michael Milken (then the most powerful man on Wall Street).

Later chapters of this series will discuss the global network of brokerages in more detail, but to cite just one more example, a BCCI affiliate called the Saudi European Corp. and Michael Milken, among others, including Sheikh Mahfouz, gained control over a savings and loan operation called MDC Holdings. The ultimate goal, of course, was to “bust out” MDC Holdings, and, of course, that is ultimately what happened. But like the other savings loan banks in the network, MDC Holdings was, for a time, made to appear like a healthy and going concern, utilizing all of the methods that we have already discussed.

In other words, MDC Holding was a key component of Milken’s junk bond merry-go-round; it was a key recipient of the “brokered deposits” delivered by the organized crime figure and Khashoggi partner Mario Renda; and it was a key link in the “daisy chain” that saw all of the banks and miscreants in the network lending money back and forth to each other.

In addition, MDC Holdings counted among its subsidiaries a brokerage called Blinder Robinson, which was so notorious that it was known on the Street as “Blind’em and Rob’em.”

The eponymous head of Blinder Robinson was Meyer Blinder, whose diamond-encrusted pinky ring and thick, gold chains marked him as one among the new breed of financial operators who had descended upon Wall Street. Blinder was indicted in 1989, but he did only 39 months in prison, and was back in business upon his release. And, of course, Blinder was treated generously by the major U.S. news organizations, including our favorite, The New York Times, which published a 2004 obituary marking the death of Meyer Blinder—an obituary that we should briefly review because its omissions are related to the omissions in the Sheikh Mahfouz obituary, to which we will return momentarily.

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Upon the death of Meyer Blinder, The New York Times reported that Blinder had been the “King of Penny Stocks,” and the Times described Blinder’s “penny stock” business as follows:  “Keep pushing the stock up, moving it from hand to hand at higher prices until the ‘story’ behind the stock wears thin. Then just walk away from it.”  The Times added that Blinder had been charged with nothing worse than selling stock at “markups that were above the allowed 10 percent.” In addition, The Times reported that Blinder had always warned that “everybody who gambled on penny stocks knew the risk,” and The Times seemed to agree with that statement (the suggestion being that the investors in penny stocks were suckers who deserved what they got when Blinder and his confederates stole all their money).

It was not, of course, the case that Blinder’s outfit simply kept “pushing the stock up” until it came time to “just walk away from it.”  Nor was it the case that ordinary investors were fully aware of the risk. Blinder’s brokerage, like others in the network, perpetrated “pump and dump” frauds, the most important component of which was not the “pump,” but rather than “dump” and the accompanying manipulative short selling that sent stocks into death spirals, with the stocks hitting zero before ordinary investors could become even remotely aware that they were being fleeced. That is why the operation was called “Blind’em and Rob’em,” though The New York Times did not report that, and The Times did not report that the “Blind’em and Rob’em” schemes had “busted out” (i.e. destroyed) at least a hundred publicly listed companies over the course of its amazing crime spree.

Among the miscreants who manipulated stocks in league with Blinder Robinson were (according to various indictments) Thomas Quinn and Arnold Kimmes who (as we know) had operated a number of other BCCI-linked brokerages. Quinn, recall, was an associate of the Genovese Mafia family, while Kimmes had been identified in a 1973 FBI report as a “major organized crime figure.” When Kimmes was indicted, he escaped prison by ratting on Meyer Blinder. In 2000, Richard Walker, then the SEC’s director of enforcement (who had failed, for the most part, to take any enforcement actions in this regard), gave testimony to Congress in which he described Blinder Robinson as being part of a network of brokerages that were tied to organized crime. The New York Times, of course, reported none of this.

The Times, did, however, report (approvingly) that Blinder had “raised more than $200 million for starting and nurturing businesses.”  More specifically, he raised $200 million to seize control of businesses that he and others subsequently “busted out,” but the Times left that part out, and concluded its story by informing its readers that Blinder’s “generosity to charities like the Denver’s Children’s Hospital was well known.”  And that was it. All the news that was fit to print, according to the Times, which did not see fit to print anything close to quantifying the damage that Blinder Robinson had inflicted on the global financial system, much less the fact that it had done so in league with BCCI and a host of mobsters and terrorist financiers who were involved with the larger BCCI enterprise.

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One of Blinder Robinson’s key principals in the 1980s was a fellow named Amr Ibrahim Elgindy, and later chapters of this series will be devoted entirely to discussing Amr Ibrahim (a.k.a. Anthony) Elgindy because he later established a short selling syndicate that remains in operation today, though Elgindy himself was, in 2005, sentenced to 11 years in prison on charges of securities fraud and bribing FBI agents to provide him with confidential information about government investigations into companies that his short selling crew had targeted for destruction.

During his 2004-2005 trial, prosecutors stated that Anthony Elgindy had ties to Al Qaeda, and that he might have traded ahead of his advance knowledge of the September 11 conspiracy.

In support of their contention that Elgindy had ties to Al Qaeda, the prosecutors began by noting that Elgindy had delivered large sums of money to an outfit called Mercy International, but at this point the judge cut off the prosecutors and forbade them from any further discussion of Elgindy’s ties to terrorism. According to the judge, linking Elgindy to terrorists would bias the jury, which was a bit like saying that it would be unfair to discuss a criminal’s ties to the Mafia, but the major U.S. news organizations seemed to agree with the judge. The New York Times published a story casting doubt on the prosecution’s contention that Elgindy had ties to terrorism, and The Wall Street Journal not only reported that the prosecution had unfairly biased the jury by mentioning terrorism, but published a long story strongly suggesting that it would be unfortunate if Elgindy were to be sentenced to prison at all.

Again, later chapters of this series will be devoted entirely to the true story of Anthony Elgindy and his short selling syndicate, but for the purposes of this chapter it is enough to know that Elgindy did, in fact, have ties to terrorists, and it is possible that he developed these relationships while working for the BCCI-linked Blinder Robinson. It is also possible that prosecutors were cut off by the judge when they began to discuss Elgindy’s ties to Mercy International because at that time the Department of Justice and other U.S. government agencies were not keen for the public to know about Mercy International’s ties to terrorism. Indeed, officials in Washington were going to some lengths to cover-up Mercy International’s ties to terrorism, and though it is not clear why they were doing so, it is noteworthy that Mercy International was co-founded by people who had formerly been involved with the BCCI enterprise.

One of Mercy International’s co-founders was Sheikh Mahfouz, who, of course, was one of the most “prominent” bankers on the planet and a business partner of numerous “Washington insiders.” Another of Mercy International’s co-founders was a man named Abdurrahman Alamoudi, who was the scion of one of Saudi Arabia’s wealthiest families, a resident of the United States, and an honorary member of the American establishment. Mr. Alamoudi had contacts at the highest levels in Washington, and for a time during the 1990s, he worked in the White House as an advisor (on Middle Eastern affairs, terrorism, etc.) for President Bill Clinton.

In addition, Mr. Alamoudi (Elgindy’s close associate) was one of the most important figures in Osama bin Laden’s organized crime (and terrorism) syndicate. (Osama bin Laden’s outfit, of course, is usually referred to as “Al Qaeda,” and I will continue to use that term in contexts where it has been used by U.S. officials, but it should be recalled that Osama bin Laden himself never used the term “Al Qaeda” until long after U.S. officials invented the name and inserted it into the public lexicon. As we know from earlier chapters of this series, Osama bin Laden was, prior to September 11, 2001, better known as a leading figure in the Muslim Brotherhood and chairman of a Muslim Brotherhood outfit called the Islamist International).

In 2003, Mr. Alamoudi (co-founder of Mercy International, and one of Elgindy’s closest associates) was arrested at London’s Heathrow airport when customs officials found that he was carrying a suitcase with a secret compartment containing $350,000 in American cash. At this point, U.S. officials went to lengths to cover-up Mr. Alamoudi’s ties to Osama bin Laden, and in 2004 (the same year when the judge prohibited prosecutors in the Elgindy trial from elaborating on Mercy International and Elgindy’s ties to terrorism), the Department of Justice issued a press release stating that Mr. Alamoudi was a Saudi “dissident” who had been indicted for illegal financial transactions with the government of Libya, and who had been involved in a conspiracy to assassinate the crown prince of Saudi Arabia, described by the DOJ press release as “an important ally in the war on terror.”

Subsequently, many news organizations (citing U.S. officials who wished to remain anonymous, perhaps because no U.S. official wished for his name to be attached to this outlandish story) reported that the conspiracy to assassinate the crown prince of Saudi Arabia had been hatched by Moammar Qadaffi, then leader of Libya, and that it was Qadaffi himself who had delivered the suitcase full of cash to Mr. Alamoudi, who was to use the cash to finance the assassination plot. Like the DOJ, the major news organizations reported that Mr. Alamoudi was a Saudi “dissident,” and that other unnamed Saudi “dissidents” in London were involved in the conspiracy (hatched by Qadaffi) to assassinate the crown prince. Since the major U.S. news organizations had rarely reported on “dissidence” in the context of Saudi Arabia, the implication of this big story about Mr. Alamoudi and Qadaffi was that Saudi dissidents were, as general rule, undesirables who hatched assassination plots with tyrants.

Meanwhile, in 2004, the major U.S. news organization were reporting that the Qaddaffi regime was a leading state sponsor of terrorist organizations, including Al Qaeda, and that same year, 2004, The New York Times broke the big news that Qadaffi was developing a nuclear weapons program. Not long before, of course, the major U.S. news organizations (most notoriously, The New York Times) had reported that the regime of Saddam Hussein was a leading sponsor of Al Qaeda, and that Saddam was developing a nuclear weapons program, possibly with plans to deliver a nuke to Osama bin Laden.

Meanwhile, every major U.S. news organization, including the New York Times, reported that the war on terror was necessary to defend our freedoms and democracy, and that our important ally in the war on terror was the government of Saudi Arabia (i.e. the most totalitarian state on the planet).

It was soon learned that most everything reported by the major U.S. news organization concerning Saddam Hussein was patently false, but this did not result in much introspection on the part of the major U.S. news organizations, including The New York Times, whose star reporter, Judith Miller, it was revealed, had done nothing more than take dictation for the White House. And after the stories about Saddam Hussein were shown to be false, the major U.S. news organizations continued to report essentially the same party line, which was that U.S. troops in Iraq were fighting an alliance of Al Qaeda and Saddam Hussein loyalists, and that this was a war in the name of freedom and democracy.

Some years later, in 2011, The New York Times and other major U.S. news organizations reported that President Barrack Obama had ordered the U.S. military to go to war in support of “Arab Spring” rebels who were fighting for freedom and democracy in Libya. At this time, one important story still circulating was the story that Qadaffi had hatched a conspiracy to assassinate the crown prince of Saudi Arabia, and had delivered a suitcase full of cash to Mr. Alamoudi, a Saudi “dissident” who was to carry out the plot. In addition, nobody had forgotten that the Qaddaffi regime was a state sponsor of terrorist organization, or that Saudi Arabia was American’s “important ally in the war in on terror.”

Moreover, it was reported that the Arab Spring rebels in Libya had received their sophisticated weaponry from Washington’s close allies, namely the governments of Saudi Arabia and Qatar (i.e. totalitarian states that apparently supported freedom and democracy in Libya).

It is not the purpose of this story to provide all of the facts concerning the “Arab Spring” and the war on terror, but there are some facts that need to be clarified because, as we will see, these facts pertain to the present state of the global financial system. It is also necessary for us to come to terms with the fact that reporting by the major U.S. news organizations, and most notoriously The New York Times, has been not just false (as in containing errors) but precisely the opposite of the truth, and quite deliberately so. It has, indeed, become apparent that outfits like The New York Times have done nothing other than publish the eminently creepy sort of black is white, up is down, doublethink propaganda that was portrayed by Orwell in books that were, until now, presumed to be fiction. Therefore, we need to clarify the following:

1)       Saudi Arabia is not “an important ally in the war on terror.” Saudi Arabia is the leading state sponsor of terrorist organizations, including the one called Al Qaeda.

2)      Terrorists do not hate our freedoms. To the contrary, terrorists led the “Arab Spring” campaign for freedom and democracy. Nearly all of the “Arab Spring” rebels in Libya were members of the Libyan Islamic Fighting Group, which was the name of the Al Qaeda franchise in Libya.

3)      As of 2004, the Qadaffi regime, like Saddam’s regime, was not a sponsor of Al Qaeda. To the contrary, Al Qaeda (i.e. the Libyan Islamic Fighting Group) was preparing to overthrow the Qaddaffi regime (with support for the regime in Washington and its totalitarian allies).

4)      Court documents produced during the trial of Mr. Alamoudi make clear that Mr. Alamoudi did not receive his suitcase full of cash from Qadaffi, and that Qadaffi was not involved in any conspiracy to assassinate the crown prince of Saudi Arabia. Rather, Mr. Alamoudi received the suitcase full of cash from an outfit called the World Islamic Call Society. Previously, the World Islamic Call Society had been sponsored by Qadaffi, but as of 2004, when it was delivering suitcases full of cash to Mr. Alamoudi, the World Islamic Call Society was sponsored by the Saudi government, and it was (in partnership with Al Qaeda and the regime in Washington) leading the opposition to overthrow the Qadaffi regime.

5)      After Qadaffi was deposed, Secretary of State Hillary Clinton traveled to Libya, where she spent most of her time in the offices of the World Islamic Call Society. Clinton congratulated the World Islamic Call Society for leading the opposition against Qadaffi, but she did not repeat the fact that the World Islamic Call Society also delivered suitcases of full of cash to Mr. Alamoudi, an Al Qaeda operative who formerly worked in the White House for Clinton’s husband, then President Bill Clinton. In addition, Clinton said nothing more about the fabricated story about Mr. Alamoudi being a “dissident” but nor did she correct the fabricated story about Qaddafi’s supposed involvement in a conspiracy to assassinate the crown prince of Saudi Arabia.

6)      Mr. Alamoudi was not a Saudi “dissident.” To the contrary, he was among the co-founders of numerous financial institutions, Islamic organizations, and charities (including Mercy International) all of which were sponsored by the Saudi royal family, and some of which were also sponsored by the regime in Washington. In addition, of course, Mr. Alamoudi (who had, at various times, been employed not only by the White House, but also by other U.S. government agencies) was one of the most important figures in Osama bin Laden’s terrorist organization (whose leading sponsor was the Saudi royal family).

7)      U.S. officials had known that Mr. Alamoudi had ties to Osama bin Laden since at least 1993 (while Mr. Alamoudi was working in the White House), and U.S. officials covered up this information long after Mr. Alamoudi was caught at Heathrow with his suitcase full of cash. It was not until 2005, when earnest U.S. government whistleblowers had already gone public with the information, that the U.S. Treasury Department (quietly) issued a press release (ignored by the media) reporting that Mr. Alamoudi was, in fact, one of the most important funders of Al Qaeda. Even then, the DOJ declined to charge Mr. Alamoudi with any crime related to terrorism, and instead moved ahead with the false charge that Mr. Alamoudi had received his suitcase full of cash from the government of Libya. (Mr. Alamoudi is now serving a 29 year prison sentence, but some U.S. officials say that he will be released on short order, because, after all, he is innocent of the crime for which he was charged).

8)      Neither Qadaffi nor Saddam had any intention to provide Osama bin Laden with nuclear or other weapons of mass destruction. However, in 2001, earnest FBI agents announced that at outfit in Chicago called Benevolence International (described by the earnest FBI agents as an “Al Qaeda front”) had worked with a Chechen organized crime (and terrorism) syndicate to obtain a nuclear bomb for Osama bin Laden. One of the Chechens in that syndicate, Shamil Basaev, had once planted radioactive materials in a Moscow park and informed the Russian police that he had done so, promising that next time it would be exploded as a so-called “dirty” nuclear device.

9)      Benevolence International was co-founded by prominent Saudi billionaires, some of whom, including Sheikh Mahfouz and Mr. Alamoudi, had formerly been involved with the BCCI enterprise. Its overseas offices, including its office in Chechnya, were managed by top Al Qaeda operatives. However, neither Benevolence International nor any of its principals were ever charged with any crime related to terrorism or trying to obtain nukes for Osama bin Laden. Benevolence International remains open for business today. It is headquartered in Chicago, and partly funded by the U.S. government.

10)   The U.S. government also sponsored the leaders of that same Chechen organized crime syndicate, which was (in addition to being an organized crime syndicate) a terrorist organization trained by Osama bin Laden & Co, though the New York Times reported that those same Chechens were freedom fighters interested only in obtaining Chechen independence from Russia.

All of which brings us back to Anthony Elgindy.

* * * * * * * * *

As we know, Elgindy’s prosecutors began to argue that Elgindy had ties to terrorism and advance knowledge of the September 11 conspiracy, but the judge forbade the prosecutors from further discussion of Elgindy’s ties to terrorism soon after the prosecutors mentioned that Elgindy had delivered a large sum of money to an outfit called Mercy International. We also know that Mercy International was co-founded by prominent Saudi billionaires, among them Sheikh Mahfouz and Mr. Alamoudi, some of whom were previously involved with the BCCI enterprise. At the time of Elgindy’s trial in 2004, U.S. officials were not keen for the public to know much about Mercy International, and, of course, U.S. officials were covering up the fact that Mr. Alamoudi was a key figure in Osama bin Laden’s terrorist organization.

Meanwhile, earnest U.S. government investigators had learned that another of Mercy International’s co-founders had been none other than Osama bin Laden. In addition, earnest U.S. government investigators had linked Mercy International to the following: 1) Ramzi Yousef, said by U.S. officials to have been the “mastermind” of the 1993 World Trade Center bombing; 2) the terrorists who carried out the simultaneous 1998 bombings of two U.S. embassies in Africa; 3) Khalid Sheikh Mohammed, alleged “mastermind” of the September 11 conspiracy (and uncle of Ramzi Yousef).

The top official in Mercy International’s Pakistan office was Zaid Sheikh Mohammed (brother of Khalid and uncle of Ramzi). Back in 1998, meanwhile, earnest FBI agents also linked Mercy International (and the Chicago based Benevolence International) to a Chicago company called Global Chemical, which was (according to the earnest FBI agents) in the business of manufacturing explosives and chemical weapons for Osama bin Laden.

However, neither Mercy International nor any of its principals has ever been charged with any crime related to terrorism, and Mercy International remains in business to this day. In addition, Mercy International has tax-free status as a “charity.” But we, the people, do not have tax-free status. We pay taxes, and the regime in Washington uses some of our taxes to fund…Mercy International. I will repeat: the government of the United States has for many years been funding an outfit—Mercy International—that was co-founded by Osama bin Laden.

Global Chemical is still doing business in Chicago as well, though it is unclear whether it is still manufacturing chemical weapons for terrorists.

Anthony Elgindy, as I mentioned, is presently serving an 11 year sentence on charges of securities fraud and bribing FBI agents (he is expected to be released from prison this year, 2013, having served only eight years). However, Elgindy is in prison thanks only to the perseverance of a few honest FBI agents, his prosecutors (who were lambasted for linking Elgindy to terrorism), and most of all, a businessman whose company was destroyed by Elgindy’s short selling syndicate. After his company was destroyed, the businessman (who would later do work for DeepCapture, the website you are now reading) discovered that Elgindy operated a private internet chat site on which he, Elgindy, and other short sellers plotted and coordinated their short selling attacks on public companies.

Having made this discovery, the businessman secretly gained access to Elgindy’s private internet chat site and hired a secretary to work full-time printing out transcripts of the conversations that Elgindy and his short selling crew were having on that chat site. Soon enough, these transcripts were so numerous that they filled the businessman’s garage. In addition, the transcripts provided clear evidence of multiple crimes in progress, and so the businessman handed the transcripts over to some earnest FBI agents, who discovered not only that Elgindy had at least two FBI agents on his payroll, but also that Elgindy and his short selling crew had “busted out” (i.e. destroyed) at least two hundred publicly listed companies. If it were not for those transcripts, it is doubtful that Elgindy would ever have been indicted.

In addition, as I noted, few of the other people involved with Elgindy’s short selling syndicate were ever charged with any crime. It is unclear why they were not charged with any crime, but it is worth recalling that a few top FBI and DOJ officials were responsible for covering up the BCCI scandal and related scandals, such as Iran-Contra and the employment as U.S. government agents of various global terrorists (e.g. Abu Nidal and Monzer al-Kassar) who had involvement with the BCCI enterprise. As we will see, some of those same officials (including the FBI’s chief of counter-terrorism; the chief of the FBI’s organized crime task force; and the director of the FBI) subsequently became employed by people who were key figures in Anthony Elgindy’s short selling syndicate.

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It is also worth recalling that soon after BCCI collapsed in 1991, a Muslim Brotherhood leader (and Sudanese government official) named Hasan al Turabi established the Islamist International, appointing Osama bin Laden to serve as chairman. Recall also that Osama bin Laden’s first order of business as chairman of the Islamist International was to assist a Muslim Brotherhood initiative—known as “The Financial Jihad”—to replace the BCCI enterprise with a global financial network that would exceed the BCCI enterprise in scope and destructive power.

Yossef Bodansky, then director of the House Task Force on Terrorism, reported (in a 2000 book on Osama bin Laden): “The collapse of BCCI…could not have come at a worse time…. Turabi [and the Islamist International] urgently needed an expert to salvage whatever was possible and rebuild a global financial system [to replace the BCCI enterprise]. By then Osama bin Laden was the most qualified individual in Khartoum to untangle this financial mess. In late summer 1991, Turabi approached bin Laden and asked for help.”

Osama bin Laden agreed to help—and he pursued his task with enthusiasm. By 2000, he had successfully rebuilt “a global financial system,” and he had done more than merely replace the BCCI enterprise. He and other Muslim Brotherhood oligarchs more important than him had built what was, without doubt, one of the greatest financial empires the world had ever known. And it was not only one of the most powerful financial empires on the planet, but also one the world’s leading transnational organized crime syndicates, involved in all of the activities—from narco trafficking and the smuggling of radioactive materials, to terrorism and the perpetration of destructive financial crime—that characterized the BCCI enterprise of the 1980s.

Linked to this financial empire was Anthony Elgindy’s short selling syndicate.

Elgindy’s private internet chat site for short sellers was hosted by a company called Infocom, which had been founded by a man named Mousa Abu Marzook. Although Marzook was best known as the political chief of Hamas, responsible for the notorious Hamas death squads, he was also a key figure in the Islamist International, the chairman of which was, of course, Osama bin Laden. In 1993, earnest FBI agents had linked Marzook to the bombing that year of the World Trade Center, and in 2000, the director of the House Task Force on Terrorism reported that Marzook was among the terrorists who were, along with Osama bin Laden and other key figures in the Islamist International, planning to perpetrate a “spectacular” terrorist attack inside the United States.

However, Marzook remained a free man, traveling often to the United States.

In addition to being a global terrorist, Marzook was a prominent banker and the co-founder of numerous financial institutions. For example, Marzook co-founded an outfit called Al Aqsa Bank, which operated a joint venture in the United States with Citibank until 2011, when Al Aqsa Bank collapsed. Marzook was also a co-founder of a major financial institution in Geneva called Bank al Taqwa and its U.S. affiliate, an outfit called BMI, Inc., which was itself a sizeable financial institution (and an investor in Global Chemical, the outfit in Chicago that was manufacturing chemical weapons for Osama bin Laden).

Among the other co-founders of Bank al Taqwa and BMI, Inc. were Mr. Alamoudi (a key figure in Osama bin Laden’s organization), the Blind Sheikh (a global terrorist and banker who was linked to the 1993 bombing of the World Trade Center, and who also co-founded Faisal Islamic Bank, formerly the most important affiliate of BCCI), a Muslim Brotherhood oligarch and Islamist International banker named Yasin al Qadi (later described by the U.S. Treasury Dept. as a “Specially Designated Global Terrorist”),  several of Osama bin Laden’s family members (all of them members of “Al Qaeda”), and multiple other  global terrorists.

In 1999, Bank al Taqwa established the Islamic Cultural Center, later said by the U.S. Treasury Department to be “Al Qaeda’s main operating base for the movement of men, weapons, and money around the world.” That same year, 1999, Bank al Taqwa was linked to the Bank of New York scandal, which saw the Bank of New York (and Bank al Taqwa) laundering upwards of $10 billion for (among others) Russian organized crime syndicates. Numerous people linked to the Bank of New York scandal (e.g. Marc Rich, Gene Phillips, Michael Milken, Abbas Gokal, Adnan Khashoggi, and several of Bank al Taqwa’s co-founders, among others to be discussed) were formerly involved with the BCCI enterprise. In addition, that money laundering involved pump and dump schemes, with much of the manipulative short selling on the “dump” end of the schemes perpetrated by Anthony Elgindy’s short selling syndicate.

See Chapter 1 of this series for a fuller description of how pump and dump schemes and manipulative short selling are deployed for the purpose of money laundering, but the short version is that dirty money is invested in target companies , and comes out partially clean in the form of short selling profits, which are delivered onwards to cooperative financial institutions (such as Bank al Taqwa and the Bank of New York). In a variation on the same theme, money is invested in a company as “death spiral” finance (see chapter 1 of this series), which causes the company’s stock price to fall, at which point affiliated short sellers attack the stock, triggering a “death spiral.”

In both scenarios, the target companies are destroyed (i.e. busted out), and again, Elgindy’s short selling crew “busted out” at least 200 publicly listed companies in the United States.

Lawyers for some of these victim companies have assembled evidence that Elgindy and his short selling syndicate perpetrated a number of “bust outs” in league not only with Bank al Taqwa, but also with a major investment fund called Faisal Finance, which provided the victim companies with death spiral finance. Faisal Finance was a subsidiary of a Muslim Brotherhood outfit in Geneva called Dar al Maal al-Islami, which was (and is) one of the largest financial institutions on the planet, boasting partnerships with some of Wall Street’s most notorious brokerages and investment houses.

One person who helped build Dar al Maal al-Islami into one of the largest financial institutions on the planet was none other than Osama bin Laden. In addition, Osama bin Laden founded at least one of Dar al Maal al-Islami’s subsidiaries, a bank in Sudan called al Shamal, and he had involvement with Faisal Finance, the outfit that was dealing with Elgindy’s short selling syndicate.

The most important of Faisal Finance’s principals (and a board member of both Faisal Finance and Dar al Maal al-Islami) was Yasin al Qadi, the Muslim Brotherhood (and Islamist International) figure who was among the co-founders of Bank al Taqwa. After the September 11 attacks of 2001, the U.S. Treasury Department reported that Yasin al Qadi had funded Osama bin Laden through Faisal Finance. In addition, Yasin al Qadi became one of only a few dozen people (another being Marzook, owner of the company that hosted Elgindy’s private internet chat site for short sellers) whom the Treasury Department labeled as “Specially Designated Global Terrorists.”

In explaining why Yasin al Qadi had been named a “Specially Designated Global Terrorist,” the Treasury Department noted not only that he had co-founded Bank al Taqwa (which established “Al Qaeda’s main operating base in Europe”), and not only that Osama bin Laden had dealings with Yasin al Qadi through Faisal Finance, but also that Yasin al Qadi had operated an “Al Qaeda front” called the Muwafaq Foundation. The man who founded the Muwafaq Foundation was Sheikh Mahfouz, who had been one of Yasin al Qadi’s most important business  partners since BCCI days. In addition, of course, Sheikh Mahfouz co-founded Mercy International and other “Al Qaeda fronts.”

However, Sheikh Mahfouz was never charged with any crime related to terrorism. Nor was Yasin al Qadi charged with any crime related to terrorism, and nor were any of three dozen or so other bankers labeled as “Specially Designated Global Terrorists” ever charged with any crime related to their banking or their status as “Global Terrorists.” Meanwhile, neither Faisal Finance nor Bank al Taqwa nor BMI Inc. nor Dar al Maal al-Islami nor any of their other principals nor any other bank has ever been charged for doing business with Osama bin Laden, and nobody has ever been charged for establishing an “Al Qaeda front” or establishing chemical weapons factories for terrorists, or establishing “Al Qaeda’s main operating base in Europe for the movement of men, weapons, and money around the world.” (that operating base is still in business, though most of the men are now Arab Spring freedom fighters).

In addition, with the exception of Anthony Elgindy, no terrorist financier has ever been charged with any crime related to their perpetration (in partnership with prominent American oligarchs) of destructive financial schemes that have wrought havoc on the American markets.

* * * * * * * * *

Earnest Treasury officials and FBI agents exposed numerous “Al Qaeda fronts” and named a select number of bankers as “Specially Designated Global Terrorists” as part of Operation Green Quest, which was billed by FBI Director Robert Mueller as the largest law enforcement effort ever undertaken by any nation or combination of nations in the entire history of the world. As of 2002, thousands of earnest U.S. government investigators were employed by Operation Green Quest, which was led by the Treasury Department, with important supporting roles played by the FBI and other government agencies.

Operation Green Quest was focused largely on what earnest government investigators described at the time (see Chapter 2 of this series) as the “Safa Group,” or sometimes the “SAAR Network”—a global network of interconnected Islamic organizations, “charities” (e.g. Mercy International, Benevolence International, and many others), investment funds, brokerages, and financial institutions, all of which were linked to Osama bin Laden and other terrorists. In fact, U.S. officials had been aware of this global network for many years, and information about some components of the global network had long been part of the public record.

In his 2000 book on Osama bin Laden, Bodansky (then director of the House Task Force on Terrorism) had, of course, noted that Osama bin Laden had played a key role in building global network—and the network described by Bodanksy was essentially the same thing as the “SAAR Network” that would later become a principal focus of Operation Green Quest. Bodansky also reported (in 2000) that the financial network organized by Osama bin Laden and his billionaire associates, along with other Muslim Brotherhood leaders and terrorists who were key figures in the Islamist International, stretched from the Middle East, Pakistan, and Sudan to Geneva, Antwerp, the Bahamas—and onwards to Wall Street.

Meanwhile, as noted by the director of the House Task Force on Terrorism in 2000, the Muslim Brotherhood, working with Osama bin Laden, had  “gained control and influence over several major Islamic financial institutions operating in the West, such as the Islamic Holding Company, the Jordanian Islamic Bank, the Dubai Islamic Bank, the Taqwa Bank (a.k.a. Bank al Taqwa, which had established “Al Qaeda’s main operating base Europe”), and Faysal Islamic Bank.”

Faysal [a.k.a. Faisal] Islamic Bank, we know, had formerly been the most important affiliate of the BCCI enterprise. It was, recall, co-founded by the Blind Sheikh (a key figure in the Islamist International, linked to the 1993 World Trade Center bombing) and a Saudi prince named Mohammed bin al-Faisal. After BCCI collapsed in 1991, Faisal Islamic Bank was folded into Dar al Maal al-Islami, which, we know, soon became one of the largest financial institutions on the planet, and which counted among its subsidiaries a  bank that was founded by Osama bin Laden, and other financial firms that did extensive business with Osama bin Laden. Also involved with Dar al Maal al-Islami, of course, was Prince Mohammed and other members of the Saudi royal family, including Prince Mohammed’s brother, Prince Turki bin al-Faisal, who served as the chief of Saudi intelligence from 1977 until 2001, when he resigned just a few weeks before the September 11 attacks. (Prince Turki subsequently became Saudi ambassador to Washington).

The party line put forth by the New York Times and other major U.S. news organizations maintains that the Saudi government disowned Osama bin Laden and stripped the terrorist leader of his Saudi citizenship in the mid-1990s, which was when Osama bin Laden began issuing manifestos denouncing the corruption of the Saudi royal family. That might be true, so far as it goes, and it is certainly true that Osama bin Laden often railed against the corruption of the Saudi royal family, but it also true that Osama bin Laden had eminently close (and corrupt) relationships with at least one faction of the Saudi royal family, and more particularly with the faction of the royal family (including Prince Turki, chief of Saudi intelligence) that had previously been involved with the BCCI enterprise.

Moreover, the party line fails to take into account that while these Saudi princes denounced Osama bin Laden’s violent terrorism, they fully sponsored his more important mission—the mission to build a global financial network.  Indeed, these Saudi princes were, of course, business partners of Osama bin Laden. In addition, Prince Turki, chief of Saudi intelligence, was fully supportive of Osama bin Laden’s business dealings with a close knit group of Saudi billionaires, including Sheikh Mahfouz, who regarded themselves as servants of the Saudi royal family. We might also consider that Washington regarded these business relationships as being kosher, or so it would seem given that Osama bin Laden’s business partners continued to receive VIP treatment in Washington long after earnest U.S. government officials exposed the relationships.

Meanwhile, as the director of the House Task Force on Terrorism noted in 2000, the Pakistani government had “agreed to expand the use of Karachi as a center for the clandestine financing of the international Islamist movement. To be managed by Osama bin Laden, the new financial system would be based on a wide network…to conceal the flow of cash to the various terrorist networks in the West.” Towards this end, and with the endorsement of the Pakistani government, “the Karachi center linked up with numerous Pakistani landowners, financial companies, and business people close to narcotics circles to utilize their international financial relations and contacts…”

Most of those “business people close to narcotics circles” had previously been involved with the BCCI enterprise, and though we will meet all of them in due course, it is, for now, enough to know that the most important of them was a man named Dawood Ibrahim who was (and is) much more than just your average businessman close to narcotics circles. He has regularly featured on Forbes magazine’s list of the “50 Most Powerful” people in the world, and he is the single largest trader on the Karachi stock exchange. In addition, he is one of the biggest (and most destructive) traders on U.S.  stock exchanges, and we will see that he continues to this day to have extensive business with Wall Street brokerages and investment houses. In addition, Ibrahim is dangerous mobster, a global terrorist, and a Pakistani intelligence asset who operates an organized crime (and terrorism) syndicate called D-Company (which is, in turn, closely intertwined with others of the world’s organized crime and terrorism syndicates).

Dawood Ibrahim and D-Company have been linked to multiple terrorist atrocities, including the 2008 assault that saw terrorists storming luxury hotels and a synagogue in Mumbai, and then systematically murdering 175 people, seven of them Americans, one a girl only 13 years old. For a time in 2002, Dawood Ibrahim was the only person in the world listed by the U.S. government as both a “Global Narcotics Kingpin” and a “Specially Designated Global Terrorist” though he was hardly the only person who deserved both those appellations, and the U.S. government no longer applies them to Dawood Ibrahim. Presently, Ibrahim resides quite openly in Karachi, with the protection of Pakistan’s intelligence service, and he travels often to the United States, where he conducts his business unmolested by the homeland security apparatus (which is apparently more interested in harassing law-abiding Americans).

In addition, of course, the U.S. government knew long before September 11, 2001, that Osama bin Laden had, with the help of Dawood Ibrahim and others, established the “Karachi center.” Meanwhile, Prince Turki and other Saudi royals were fully on board with the plan for Osama bin Laden and prominent narco-oligarchs to establish a financial network in Karachi. In addition, the chief of Saudi intelligence, though he publicly denounced violent terrorism, informed the Pakistani government that the Karachi financial network (which was, in turn, linked to the global network that had been established earlier) could use Saudi financial institutions to finance terrorist operations, including operations inside the United States.

Bodansky (then director of the House Task Force on Terrorism) wrote in 2000 that Prince Turki was not initially aware that Osama bin Laden had been assigned to run the Karachi-based financial network, but “when Riyadh was later informed of bin Laden’s role in the Karachi center, Prince Turki ignored the information and continued to allow the use of Saudi financial institutions [to support the Islamist International’s terror network].”

As the director of the House Task Force on Terrorism also reported in 2000, Osama bin Laden, in assembling a global financial network, collaborated closely with what he and others in the Islamist International referred to as “The Brotherhood Group,” a close-knit network of no less than 130 extremely wealthy financial operators in the Persian Gulf states. The director of the House Task Force reported further that: “The key members of the Brotherhood Group have a well-known and established financial presence in the West—sixty five of them have major companies and businesses in the United States.”

One of the most important people in “The Brotherhood Group” was Sheikh Mahfouz, who, of course, was also one of the billionaires (see Chapter 2 of this series for the names of others) whom Osama bin Laden referred to as his “Golden Chain.” Other people in the “Brotherhood Group” were prominent bankers who had, like Sheikh Mahfouz, previously been involved with the BCCI enterprise. Among them were key BCCI figures Adnan Khashoggi, Sheikh Abdullah Taha Baksh, Gaith Pharoan, Yasin al Qadi, Mr. Alamoudi and others who were, like Sheikh Mahfouz, important business partners of “Washington insiders.” It should be noted further that U.S. officials had been well aware that these billionaires were building a global financial network with Osama bin Laden since the 1980s, but they (with help from a cooperative media) sought to keep the information hidden from the American public (though the information can, with some effort, now be found in the public record).

* * * * * * * * *

To the extent that some of the facts have reached the public, the facts have been distorted by what seem to have been carefully orchestrated disinformation campaigns. Typically, these disinformation campaigns see prominent American pundits with ties to the regime in Washington coming forward with some pertinent facts, but presenting the facts in such as way as to distort the larger picture.

For example, there has been much discussion among American pundits about a report that French intelligence had monitored a meeting that Osama bin Laden’s chief financial officer held with Prince Turki (chief of Saudi intelligence) and leading Saudi billionaires at the Royal Manceau hotel in Paris. This meeting took place in 1996, two years after the Saudis had ostensibly requested Osama bin Laden’s extradition from London (yes, Osama bin Laden resided for a time in London), and the same year that the Saudis had ostensibly requested the government of Sudan to “expel” Osama bin Laden (with “expel” being something altogether different from “arrest” or “prosecute”).

One of the billionaires in attendance at this meeting was Sheikh Mahfouz. Other billionaires who attended the 1996 meeting with Osama bin Laden’s chief financial officer (according to the French intelligence report) were Adnan Khashoggi, Abdullah Taha Baksh, and Gaith Pharoan, all of whom, we know, had been key figures in the BCCI enterprise during the 1980s. Which is important information, except that the information was delivered in such a way as to obscure the truth.

In other words, it was widely reported that the meeting in Paris was monitored by French intelligence, and that a French intelligence report concluded that the Saudi billionaires and Prince Turki attended this meeting only “to determine who would pay how much to Osama bin Laden.”  In addition, the French intelligence report stated that the payments to Osama bin Laden were “not so much an act of support but protection—a payoff to keep the mad bomber away from Saudi Arabia.”  And thanks to this report, that has remained the official party line: any payments by Saudi billionaires to Osama bin Laden were nothing more than protection money paid by people worried that the “mad bomber” would attack them.

But, of course, the party line is pure nonsense.

All of the billionaires who attended that meeting (and no doubt many similar meetings besides) did not merely deliver protection money to Osama bin Laden. They were also important business partners of Osama bin Laden. And they were business partners of Osama bin Laden not because he was a “mad bomber,” but because he was sophisticated financial operator who was fully capable of helping those billionaires carry out the mission (i.e. “The Financial Jihad”) to replace the BCCI enterprise with something bigger and better. Former BCCI figure Adnan Khashoggi, for one, played a key role, along with Osama bin Laden, in establishing the “Karachi center.”

Former BCCI figure Abdullah Taha Baksh was a principal with multiple financial institutions (e.g. Middle East Capital Group, Beirut Ryad Bank) that had extensive business with Osama bin Laden, according to U.S. government investigators (though not official U.S. government spokesmen). Sheikh Baksh also had extensive involvement with Dar al Maal al-Islami, the major financial institution that was built with help from Osama bin Laden. Sheikh Mahfouz, meanwhile, operated numerous financial firms—e.g. Al Khaleejia, Saudi Sudanese Bank, and others to be discussed–that did business directly with companies that had been founded by Osama bin Laden, and which were operated by Osama bin Laden.

National Commercial Bank (one of the largest financial institutions on the planet, founded by Sheikh Mahfouz and his family) also had business with Osama bin Laden.

In addition, these billionaires and others were, of course, among the principal sponsors of the Islamic organizations, charities, and other financial entities that were part of the “SAAR Network.”  Sheikh Mahfouz, we know, founded the Muwafaq Foundation, said by the U.S. Treasury Department to be an “Al Qaeda” front. He was a co-founder of Benevolence International, said by earnest FBI agents to be an “Al Qaeda front.” And he was among the co-founders of Mercy International, which was an Al Qaeda front, albeit one that was also funded by the regime in Washington.

Sheikh Mahfouz and other billionaires (e.g. Khashoggi, Sheikh Baksh, Yasin al Qadi, Mr. Alamoudi, and others to discussed in Chapter 2 of this series) were also the principal sponsors of numerous other SAAR Network entities—i.e. the entities that were, as of 2002, the principal targets of Operation Green Quest, the largest law enforcement in history.

To cite just one more example, all of the above-mentioned billionaires were involved with an outfit called the International Islamic Relief Organization (IIRO), a “SAAR Network” entity based in the suburbs of Washington, D.C.  Among the board members of the IIRO were Mr. Alamoudi (a key figure in Osama bin Laden’s organization) and Khalid Elgindy (brother of short seller Anthony Elgindy). Meanwhile, the IIRO’s offices in Macedonia, Kosovo, the Philippines, and Pakistan were all “Al Qaeda fronts” managed by top “Al Qaeda” operatives, according to earnest Operation Green Quest investigators and the United Nations officials, some of whom have reported that Osama bin Laden himself was an IIRO co-founder.

As of 1999, the IIRO office in Macedonia was operated by Osama bin Laden and his deputy, Aymen al Zawahiri, who were, at the time, training the Kosovo Liberation Army from bases in Macedonia. Also in Macedonia as of 1999, working with the Kosovo Liberation Army, was Anthony Elgindy, who had taken a break from his career as a destructive short seller. Upon his return from Macedonia, Elgindy posted a letter from a Kosovo Liberation Army leader thanking him, Elgindy, for sponsoring his travels to the United States.  At the time, of course, President Bill Clinton (who then employed multiple IIRO officials, including not only Mr. Alamoudi, but also Elgindy’s brother, Khalid, in the White House) had ordered the U.S. military to go to war in support of the Kosovo Liberation Army (a terrorist organization trained by Osama bin Laden), and the IIRO was sponsored not only by the Saudis, but also by Washington.

Two years later, of course, the September 11 attacks occurred, and Saudi Arabia became Washington’s “important ally in the war on terror.” That same year, 2001, we know, Robert Mueller (who had been appointed director of the FBI just weeks prior to the September 11 attacks) announced that Operation Green Quest was the largest law enforcement effort in history, and that its sole mission was to prosecute terrorists and the people who sponsor them. By 2002, Operation Green Quest investigators, we know,  were focused largely on the SAAR Network entities and associated billionaires, but that same year, 2002, there occurred several strange events that we should discuss because they have not been discussed by The New York Times or any other organ of state propaganda.

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In 2002, while the director of the FBI was still calling Operation Green Quest the largest law enforcement effort in the history of the world, an FBI special agent named Robert Wright held a press conference to announce the results of his investigations into terrorist organizations. There were not many journalists from the major U.S. news organizations at this press conference, as they were all busy writing whatever the director of the FBI had told them to write, but those who bothered to attend the press conference learned that Special Agent Wright had led some of the FBI’s most important investigations into terrorism, and concerning these investigations, Agent Wright had some important—and sad—news to report.

Indeed, agent Wright literally broke down in tears as he announced that he and his team of FBI investigators had, in all their year of investigating terrorism, failed to apprehend or secure the prosecution of even one of the people whom they had deemed to be key figures in Osama bin Laden’s organization. And in explaining why he and the others in his FBI team had failed to apprehend any terrorists or their sponsors, agent Wright stated (and others in his FBI team would later confirm it to be true) that FBI management and the Department of Justice had  “intentionally and repeatedly thwarted and obstructed my attempts to launch a comprehensive investigation to identify and neutralize terrorists.”

It might be worth recalling that Manhattan District Attorney Robert Morgenthau had previously alleged that FBI and DOJ management had intentionally and repeatedly “thwarted” his efforts to prosecute the BCCI enterprise. It might also be worth recalling that the DOJ official who had done most to thwart the DA’s investigation of BCCI was Robert Mueller. It was this same Robert Muller who had “intentionally and repeatedly thwarted” special agent Wright’s investigation, only to assume the directorship of the FBI just a few weeks prior to the September 11 attacks in 2001. And many of the terrorists whom Special Agent Wright and his FBI team were investigating had formerly been involved with the BCCI enterprise.

One person whom agent Wright investigated was “Specially Designated Global Terrorist” Yasin al Qadi, whom agent Wright described as “Al Qaeda’s banker.” As agent Wright knew, Yasin al Qadi was operating an “Al Qaeda front” (the Muwafaq Foundation) that had been founded by Sheikh Mahfouz. In addition, agent Wright had investigated Bank al Taqwa and BMI Inc., the financial institutions that had been co-founded by (among others) Yasin al Qadi, the Blind Sheikh, “Specially Designated Global Terrorist” Mousa Abu Marzook (host of Elgindy’s short selling chat site), and Mr. Alamoudi (formerly White House employee and key figure in Osama bin Laden’s organization).

As we know from earlier chapters of this series, earnest FBI agents learned in 1998 that BMI Inc. not only had partly funded the “Al Qaeda” terrorist attacks on two U.S. embassies in Africa, but also was financing Global Chemical, the outfit deemed to have ties to Osama bin Laden, and which was in the business of manufacturing explosives and chemical weapons. But, of course, neither BMI Inc. nor Bank al Taqwa (which established “Al Qaeda’s main operating base in Europe”) nor any of their principals were charged with any crime. To the contrary, FBI management deliberately “thwarted” efforts to investigate the bankers, many of whom were also terrorists.

Meanwhile, of course, both Bank al Taqwa and BMI Inc. perpetrated a host of financial schemes that did extensive damage to the U.S. economy. We will discuss the financial schemes in greater detail, but for the purposes of our present discussion it should first be noted that BMI, Inc. was also in the mortgage business, and it had provided mortgages (at steep discounts to market price) to some of the top officials at the FBI and other government agencies in Washington. Numerous politicians on Capitol Hill were also recipients of BMI, Inc.’s discount mortgages, as was Thomas Kean, then Governor of New Jersey, and later chairman of the September 11 Commission.

Governor Kean also sat on the boards of several companies (e.g. Hess Corp.) that had business with Sheikh Mahfouz and Mr. Alamoudi. When the September 11 Commission issued its report in 2004, the report (purportedly the product of a thorough investigation into Osama bin Laden’s terrorist organization) did not name BMI Inc. or any of its principals, including Mr. Alamoudi. In fact, the report did not identify any of Osama bin Laden’s banking partners or funders, and the report concluded that identifying the financiers of terrorism was “a matter of no importance.”

* * * * * * * * *

At his press conference, agent Wright, of course, noted that FBI management had deliberately “thwarted” his efforts to prosecute terrorists and their banking partners, but he also expressed some optimism. After all, Yasin al Qadi and Mousa Abu Marzook, among other banking oligarchs whom agent Wright had investigated, were, as of 2002, listed by the U.S. Treasury Department as “Specially Designated Global Terrorists” and agent Wright had reason to believe that FBI management would heed his advice to begin more vigorously to investigate the bankers/global terrorists who were key figures in Osama bin Laden’s terrorist organization. The day after agent Wright gave his press conference, however, the FBI management instead initiated a major investigation into…agent Wright.

More specifically, FBI management initiated a so-called “Office of Professional Responsibility Investigation” into Wright. FBI management did not inform Wright what rules of professional responsibility he had violated but this investigation effectively ended Wright’s career.  As Judicial Watch, a prominent public interest group, reported at the time: “FBI Special Agent Robert G. Wright, Jr., is facing retaliatory treatment from FBI management for telling the truth about dereliction of duty and negligence within the FBI.”

Meanwhile, a former FBI special agent named Nancy Floyd had come forward with a story about her own investigation into terrorists. Floyd, in the course of carrying out her duties as an FBI special agent, had, back in 1992, placed a mole inside the Blind Sheikh’s terrorist cell. The mole, a former Egyptian army officer name Ehud Salem, had, meanwhile, been instructed by FBI management to help the terrorists in the Blind Sheikh’s cell build a bomb. Ostensibly, this was part of a sting operation, and the FBI was to arrest the Blind Sheikh and the other terrorists before they could use the bomb. But when the mole and agent Nancy Floyd informed FBI management that the terrorists were preparing to explode the bomb under the World Trade Center, FBI management initiated a full-scale investigation into…agent Floyd.

More specifically, FBI management launched a so-called “Office of Professional Responsibility Investigation” into agent Floyd. Management did not inform Floyd what rules of professional responsibility she had violated, but the investigation effectively brought Floyd’s career as an earnest FBI agent to a grinding halt. FBI management also promptly fired the mole. Meanwhile, FBI management shut down all other investigations into the Blind Sheikh (co-founder of Faisal Islamic Finance, Bank al Taqwa, BMI, Inc., and other prominent financial institutions) and his terrorist cell.

A few weeks later, and on the day predicted by the mole, the conspiracy to bomb the World Trade Center was successfully carried out. Six people were killed, and more than 1,000 were injured. In addition, the heart of the New York financial district was paralyzed for a week, the stock market nosedived, and massive damage was inflicted on the U.S. economy. Of course, during the years immediately prior to the 1993 bombing of the WTC, the BCCI enterprise had inflicted massive damage on the U.S. economy, and there is more we need to know about the WTC bombing.

There is also more we need to learn about other strange occurrences in the weeks after the director of the FBI described Operation Green Quest as the largest law enforcement effort in history because, as we shall see, this is directly pertinent to the present and deteriorating state of the global financial system.

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After the 1993 bombing of the WTC was carried out, earnest FBI agents secretly monitored a meeting that was held at a Marriot Hotel in Philadelphia. All of the people at this meeting were leaders of the Muslim Brotherhood, and many of them were prominent bankers. One person at the meeting, Omar Ahmad, was, at the time, providing housing to the Blind Sheikh. The man who was expected to chair the meeting, meanwhile, was Mousa Abu Marzook.

As we know, Marzook was also the co-founder of several financial institutions, including BMI Inc. and Bank al Taqwa, and he founded Infocom, the outfit that hosted Elgindy’s private internet chat site for short sellers. In addition, Marzook was a leader of the Muslim Brotherhood, political chief of Hamas, and a key figure in the Islamist International, the chairman of which was, of course, Osama bin Laden.

As it happened, Marzook did not appear at the meeting in Philadelphia, but he was represented at the meeting by his deputy, Mohammad Saleh, and phone records showed that Saleh had been in regular contact with the terrorists who had parked the bomb under the World Trade Center. Naturally, the earnest FBI agents suspected Saleh and others at the meeting in Philadelphia of having been involved in the 1993 bombing of the World Trade Center. They also suspected Marzook.

As the earnest FBI agents discovered, one purpose of the meeting at the Marriot in Philadelphia was to discuss ways in which to keep the terrorists who had perpetrated the bombing out of prison. Another purpose of the meeting was to discuss additional measures that could be undertaken to sabotage the United States. Abu Baker, one of the Muslim Brotherhood (and Hamas) operatives in attendance summarized the strategy as follows:  “War is deception…Deceive, camouflage…Deceive your enemy.”

Another purpose of the meeting of the 1993 meeting at the Marriot Hotel in Philadelphia was to discuss ways in which to undermine the Oslo Peace Accords that had been signed that year by the Israeli government and the Palestinian Liberation Organization (PLO). As we know from earlier chapters of this series, Israeli politicians were also hoping to undermine the Oslo Peace Accords because they, the Israelis, believed that the Accords granted too much legitimacy to the PLO. So, at the time, the Israeli government was sponsoring Marzook and other Hamas leaders reckoning (correctly as it would turn out) that Hamas would suck support away from the PLO.

For the same reasons, the Israelis were sponsoring a PLO splinter group called Fatah-Revolutionary Guard (or sometimes Black September), the leader  of which was a notorious terrorist named Abu Nidal, who was an avowed enemy of PLO leader Yassir Arafat. Abu Nidal and the leaders of other PLO splinter groups, recall, were formerly involved with the BCCI enterprise and aside from being terrorists, they were sophisticated financial operators and criminals whose operations were closely intertwined with  the organized crime (and terrorism) syndicate operated by prominent oligarch (and global terrorist) Monzer al Kassar, formerly a key figure in the larger BCCI enterprise. In addition, as of 1993, Abu Nidal and the other leaders of the PLO splinter groups were, like Marzook and other leaders of Hamas, key figures in the Islamist International, the chairman of which was, of course, Osama bin Laden.

After the September 11 attacks in 2001, anonymous U.S. officials fed to the media a story that Abu Nidal was running an Al Qaeda terrorist training camp in Iraq. This story maintained further that Abu Nidal was running the terrorist training camp in cahoots with Saddam Hussein, then leader of Iraq, and that Abu Nidal had personally overseen the training of Mohammad Atta, leader of the terrorist cell that  had allegedly carried out the September 11 attack. According to U.S. officials, Atta had been the pilot of the first airplane the crashed into the World Trade Center.

That story could not possibly have been true because at the time (see earlier chapters of this series) Abu Nidal was employed as an agent of not just the Israelis, but also the U.S. government, as was later reported by Robert Fisk of The Independent, a prominent newspaper in Britain, and by Janes, a prominent publication that covers national security issues. However, it was true that Abu Nidal had previously dispatched one of his deputies, Ahmed Ajaj, to help carry out the 1993 bombing of the World Trade Center.

Ajaj flew to the United States with a Muslim Brotherhood terrorist named Ramzi Yousef.  Upon landing at JFK airport in New York, customs officials noticed that Ajaj’s passport was blatantly fake (his photograph was peeling off of the passport, and there was a photograph of another person easily visible below it). Customs officials also discovered that Ajaj had in his possession a terrorist training  manual and instructions on how to build a bomb. Ajaj was taken into custody and charged with illegally entering the country, but for some reason his traveling companion, Ramzi Yousef, was allowed to enter the country, and soon after, he was among the perpetrators of the WTC bombing.

Presently, U.S. officials describe Yousef as the “mastermind” of the 1993 World Trade Center bombing, and he is serving a life sentence at the SuperMax prison in Colorado. However, after carrying out the WTC bombing, Yousef was able easily to leave the country, and he operated for several years under the auspices of Mercy International and the IIRO, both of which were co-founded by Osama bin Laden and (for reasons that are not clear) funded by the U.S. government. That’s the same U.S. government, of course, that had (because, we must assume, the U.S. government is incompetent, supplied Yousef and his terrorist associates with the bomb that they had exploded under the World Trade Center).

Yousef’s traveling companion, Ajaj, meanwhile, was released from detention and it remains unclear what came of him.

In 1993, Robert Friedman, one of the nation’s best journalists, reported in the Village Voice that Ajaj had been employed as an agent of the Israeli government. Meanwhile, the FBI arrested a man named Mohammed Salameh, who had rented the Ryder truck that was used to park the bomb under the World Trade Center, and which, along with the bomb, had exploded. Salameh (who played just a bit part in the terrorist attack) was arrested when he returned to Ryder to report that the truck was stolen and to ask Ryder to return his $400 deposit. The International Herald Tribune reported that the telephone number and apartment address listed on the rental agreement for the truck belonged to man named Josie Hadas, who had been identified as an agent of the Mossad, Israel’s intelligence agency.

None of this is evidence that Israel had a hand in the 1993 WTC bombing, but it is notable that none of the people whom earnest FBI agents regarded as the masterminds of the WTC bombing were immediately arrested. Yousef was arrested only three years later. More specifically, he was arrested at a Mercy International guest house in Pakistan, and when he was arrested, his uncle, Khalid Sheikh Mohammed, who was staying in the same guest house, emerged from his room and gave a speech protesting the arrest. Khalid also gave an interview to a Time magazine reporter who was on hand for the arrest.

However, Khalid himself was not arrested, though there was already at that time evidence (possibly  manufactured) that linked him to a conspiracy to fly airplanes into tall buildings, including the World Trade Center. In addition, Yousef was arrested not by the FBI, but by Pakistani police  working with U.S. embassy State officials who received considerable resistance from FBI management and from Pakistani intelligence. Neither Marzook nor any of the others who had attended that meeting at the Marriot Hotel in Philadelphia were ever arrested. In addition, FBI management went to great lengths to protect the Blind Sheikh from prosecution.

That the Blind Sheikh was protected was noted by Nancy Floyd (the FBI special agent who had planted the mole in the Blind Sheikh’s terrorist cell), and even after the 1993 WTC bombing had been successfully carried out, FBI management still refused to arrest the Blind Sheikh. As a result, Floyd and the mole threatened to go to the press with their story that they had provided FBI management advance warning about the Blind Sheik’s involvement in the conspiracy to bomb the WTC.

FBI management responded to this threat in two ways. First, FBI management paid the mole a lump sum of $1 million cash. And second, FBI management leaked to the press an outlandish story alleging that Nancy Floyd, the earnest FBI agent, had been having an illicit sexual affair with a man named Ehud Salem (who was, of course, the mole whom the FBI had just paid $1 million, probably as hush money, but in the story that FBI management told the media, Salem was a terrorist). Amazingly (or unsurprisingly), major U.S. news organizations, including the New York Post, published the salacious story about the seedy FBI agent, Floyd, who had been having a salacious affair with Salem.

Fortunately, the mole had tape recorded the conversations during which he had explicitly warned FBI management of the conspiracy to bomb the WTC. It was also apparent from these taped conversations that FBI management not only knew about the conspiracy, but had instructed Salem to help build the bomb for the terrorists who were plotting to blow up the WTC. And despite the $1 million he had received in hush money, the mole threatened to deliver the tapes to the press. At this point, FBI management paid the mole still more cash, and once again deployed him to investigate the Blind Sheikh.

By now, though, FBI management had already insisted that the Blind Sheikh was not involved in the WTC bombing, and at the same time, FBI management knew that it would be necessary to arrest the Blind Sheikh to prevent the mole from delivering his tapes to the media. So FBI management hatched a plan, instructing the mole to volunteer to the Blind Sheikh his help in carrying out a new plot (a plot hatched by FBI management) to blow up multiple New York landmarks, including FBI headquarters. The mole took the plan to the Blind Sheikh, and the Blind Sheikh said he had no interest.

Nonetheless, FBI management announced to the press that the Blind Sheikh had now been linked to a new terrorist plot—namely, the one (hatched by FBI management) to bomb multiple New York landmarks and FBI headquarters. FBI management gave this new terrorist plot a catchy name—“The Day of Terror”—and meanwhile assured the media that the Blind Sheikh had not been linked to the bombing of the World Trade Center. For the time being, the mole kept his tapes to himself, and the major U.S. news organizations reported extensively on FBI management’s heroics in not only apprehending all of the people linked to the World Trade Center, but also foiling the even worse “Day of Terror” plot.

But, of course, the “Day of Terror” plot was not a real plot, and most of the terrorists and bankers linked to the 1993 WTC bombing had not been arrested.

The Blind Sheikh, meanwhile, had been arrested only because FBI management was worried that the mole would go public with his tapes. As it turned out the mole went public with the tapes anyway, and the Blind Sheikh was eventually charged for his role in the World Trade Center bombing. Later, U.S. officials acknowledged that the Blind Sheikh was, as of 1993, on the payroll of the U.S. government, though U.S. officials say the Blind Sheikh was on the payroll only because he had helped America fight the Soviets in Afghanistan during the 1980s.  Meanwhile, Marzook and other terrorists linked to the 1993 WTC bombing continued to live openly in the United States.

In 1996, the FBI briefly arrested Marzook at his home in Texas (location also of Infocom, host of Elgindy’s private internet chat site for short sellers), but Marzook was immediately released at the request of the Israeli government, which issued a statement saying that Marzook was “important to the peace process.”  The truth, of course, was that Marzook and other Hamas leaders in the United States had undertaken a major initiative to sabotage the peace process, and more specifically to undermine the 1993 Oslo Peace Accords that the Israeli government had signed with the PLO.

Presently, Marzook resides in Qatar, where he has the full protection of the Qatari ruling family (one of Washington’s closest allies). That’s the same ruling family that formerly employed Ramzi Yousef’s uncle, Khalid Sheikh Mohammed, now said to be the “mastermind” of the September 11 conspiracy. Marzook is also helping direct the  “Arab Spring” rebellion in Syria. The “Arab Spring” rebels in Syria, of course, have ties to not only Hamas (i.e. the Muslim Brotherhood) but also Al Qaeda (i.e. the Muslim Brotherhood) and other jihadi outfits (i.e. the Muslim Brotherhood), but they are now regarded as “freedom fighters,” sponsored by Washington and its totalitarian allies (e.g. Qatar, Saudi Arabia, the UAE, all of them the leading state sponsors of terrorism).

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Back in 2002, Marzook was a key target of Operation Green Quest, partly because he had co-founded BMI Inc. and Bank al Taqwa, both of which were considered to be key components of the SAAR Network. The other co-founders of those financial institutions, including Mr. Alamoudi and Yasin al Qadi, were, of course, also key targets of Operation Green Quest. Marzook (though he was most famous as political chief of Hamas) had, recall, been among those who, along with Osama bin Laden and other key figures in the Islamist International, were (as of 2000) planning to perpetrate a “spectacular” terrorist attack inside the United States. Naturally, Marzook was therefore suspected of involvement in the September 11 conspiracy, just as he had previously been suspected of involvement in the 1993 WTC bombing.

In the course of carrying out their Operation Green Quest duties, earnest U.S. Treasury officials named not only Marzook and Yasin al Qadi, but also several other co-founders of Bank al Taqwa and its U.S. affiliate, BMI, Inc., as “Specially Designated Global Terrorists.”  Meanwhile, we know, the Treasury Department  announced that Bank al Taqwa had established “Al Qaeda’s main operating base in Europe for the movement of men, weapons, and money around the world.” In addition, Operation Green Quest investigators targeted a major financial institution called Al Aqsa Bank.

The Operation Green Quest investigators determined that Al Aqsa Bank had extensive ties to  Osama bin Laden, and the Treasury Department noted that Al Aqsa Bank was controlled by prominent bankers who were also global terrorists. Al Aqsa Bank’s most important principal was Marzook, who was, of course, a “Specially Designated Global Terrorist.”

Al Aqsa Bank had a massive presence in the United States, and as mentioned earlier, it operated in this country as a joint venture with Citibank.  Earnest Treasury officials, in the course of carrying out their Operation Green Quest duties, informed Citibank executives that they were operating a joint venture with a “Specially Designated Global Terrorist,” and Treasury officials notified Citibank that Citibank’s joint venture partner had direct ties to Osama bin Laden himself. The earnest Treasury officials even advised Citibank that Citibank might like to disband its joint venture with a bank that was operated by a “Specially Designated Global Terrorist” who was a suspect in both the 1993 WTC bombing and the September 11 conspiracy.

Citibank, however, ignored the advice.

Citibank maintained its joint venture with Al Aqsa Bank until 2011, when the bank was “busted out” (i.e. looted and destroyed) by its owners, including “Global Terrorist” Mousa Abu Marzook and others who had been linked to Osama bin Laden’s organization. This, incidentally, was the same Mousa Abu Marzook who, in his capacity as political chief of Hamas, had reacted with glee when the American financial system melted down in 2008, declaring that the economic cataclysm marked “The End of the American Empire.”  However, by that time, Marzook was no longer described as a “Global Terrorist.” He was working for the “Empire” and preparing for his new career as an “Arab Spring” freedom fighter.

Back in 2001, of course, Marzook’s company Infocom was hosting Anthony Elgindy’s private internet chat site for short sellers, and as earnest FBI agents knew, Elgindy’s short selling syndicate had been involved in a scheme that resulted in the September 18, 2001 collapse of MJK Clearing, then the largest clearing brokerage in America. A later chapter of this series will discuss this scheme in greater detail, but for now it is enough to know that the collapse of MJK Clearing necessitated the largest ever bailout by the Securities Investors Protection Corp. and contributed mightily to the damage that had been caused to the global financial system by the September 11 terrorist attack just a  few days prior.

Others linked to the collapse of MJK Clearing (according to the SEC, which leveled small fines) were former BCCI figure Adnan Khashoggi; a notorious financial operator named Rafi Khan (the son of a Pakistani intelligence official and a principal at a brokerage called J.B. Oxford, operated by former BCCI figure Irving Kott); a man named Rami al Betrawi (formerly involved, along with BCCI and Khashoggi in the Iran-Contra affair); Carl Icahn (who rose to prominence with finance from Michael Milken); a woman named Valerie Red Horse (formerly Milken’s office manager at Drexel Burnham Lambert); and multiple others with ties to organized crime.

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The Treasury Department no longer describes Marzook as a “Global Terrorist,” and all of the other people formerly identified as “Specially Designated Global Terrorists” are no longer called “Global Terrorists.” Most of them continue to have extensive business in the United States. Same goes for the “Golden Chain” billionaires and all of the other people who were targeted by Operation Green Quest, and who were (as of 2002) regarded as key figures in the SAAR Network. Most of those people were (and are) sophisticated financial operators, many of them are among history’s most destructive financial criminals (previously involved with the BCCI enterprise), and most of them not only continue to have involvement in the U.S. markets, but also presently boast partnership with some of Wall Street’s leading brokerages and investment houses.

This is owing to some other strange events that occurred in 2002, one year after the director of the FBI pronounced Operation Green Quest to be the largest law enforcement effort ever undertaken by any nation, or combination of nations, in the entire history of the world—a law enforcement effort whose only purpose was to prosecute terrorists and the people who sponsored them.

One of the other strange things that occurred in 2002 was that a United States congressional committee issued a report outlining the results of its investigation into Osama bin Laden’s terrorist organization. This investigation had, of course, been assisted by earnest U.S. government investigators tasked to Operation Green Quest, and so, of course, the report contained 28 pages containing the names of all the billionaires who were key figures in the SAAR Network, members of the “Golden Chain,” and “Specially Designated Global Terrorists.” However, those 28 pages were completely blacked out—censored, so that nobody could read them.

Fortunately, earnest Operation Green Quest investigators subsequently went public with the names of the billionaires, and so we are able now to report their names, though their names (see chapter 2 of this series for a fuller list of billionaires with ties to Osama bin Laden) have never been reported in connection with Osama bin Laden by The New York Times, which seems happy enough to censor itself, and we cannot hope that Operation Green Quest investigators will capture any of the sophisticated financial operators who were the key targets of Operation Green Quest. We cannot hope that they will be captured owing to some other strange events that occurred in 2002, not long after the FBI director described Operation Green Quest as the largest law enforcement effort in the history of the world.

One strange occurrence in 2002 was the decision of the FBI director and other top officials to call an end to Operation Green Quest.

That is to say, Operation Green Quest lasted for a total of one year before it was completely dismantled. It was completely shut down, and as a result of Operation Green Quest (the largest law enforcement effort ever undertaken, according to the director of the FBI, who stressed that the sole objective of this massive law enforcement effort was to prosecute terrorists and their sponsors) the number of terrorists and major terrorist financiers who were, in fact, prosecuted came to a grand total of…ZERO.

Since then, there have been no other major “Operations” aimed at prosecuting terrorists and their bankers (or bankers who are also terrorists).

* * * * * * * *

Soon after shutting down Operation Green Quest, the director of the FBI appeared as the guest of honor at the 2002 annual convention of an outfit called the American Muslim Council. In the speech that he gave at this annual convention, the FBI director described the American Muslim Council as “the most mainstream Muslim organization in America.” Which was a surprising way to describe an outfit founded by the terrorist organization that had (according to the director of the FBI) recently massacred close to 3,000 mainstream Americans by crashing airplanes into the World Trade Center, the Pentagon, and a field in rural Pennsylvania.

Indeed, earnest FBI agents had known about the American Muslim Council’s ties to Osama bin Laden since at least 1993, when they received information from an informant that Osama bin Laden was using the American Muslim Council to funnel money to the Blind Sheikh (the terrorist and banker who had co-founded numerous financial institutions, including BCCI’s most important affiliate). As of 2002, the director of the FBI was also aware that the American Muslim Council had been an important target of the aborted Operation Green Quest, partly because the founder of the American Muslim Council was Mr. Alamoudi (who was a top operative in Osama bin Laden’s terrorist organization).

In addition, the director of the FBI was aware that the American Muslim Council’s top officials included former White House official Khalid Elgindy (brother of Anthony Elgindy, the short seller who had advance knowledge of the September 11 conspiracy) and a terrorist named Sami al Arian, who had been settled in the United States by the Elgindy family. At the time in 2002 when the FBI director was Sami al Arian’s guest of honor at the 2002 annual convention of the American Muslim Council, it was widely known that Sami al Arian and a man named  Ramadan Shalleh (both Shalleh and Sami al Arian worked for a time as professors at the University of South Florida) were the top leaders of a terrorist organization called Palestinian Islamic Jihad, which was a key component of the Islamist International, the chairman of which was, of course, Osama bin Laden.

In 2000, the director of the House Task Force on Terrorism had reported (publicly) that Palestinian Islamic Jihad was a key component of the Islamist International, the chairman of which was, of course, Osama bin Laden. At that time in 2000 (and in the years that followed), Sami al Arian (widely known to  be co-leader of Palestinian Islamic Jihad) was highly regarded in Washington and held regular meetings with top U.S. officials, including multiple FBI directors. Meanwhile, according to the director of the House Task Force on Terrorism, Ramadan Shalleh (the other co-leader of Palestinian Islamic Jihad) was (in 2000) among the terrorists who were, along with Osama bin Laden and other key figures in the Islamist International, including Marzook (host of Elgindy’s private internet chat site for short sellers) planning to perpetrate a “spectacular” terrorist attack inside the United States.

After such a terrorist attack occurred on September 11, 2001, earnest U.S. government investigators learned that Sami al Arian (settled in the United States by the Elgindy family) had incorporated a financial firm called Baraka Exchange, which had funded some of the terrorist-hijackers who had (according to the director of the FBI) carried out the September 11 attack. In addition, Sami al Arian was involved with numerous other SAAR Network entities, and he had been a principal target of Operation Green Quest. However, Operation Green Quest had, of course, been shuttered with no prosecutions, and Sami al Arian was never charged with any crime related to the September 11 attacks or  ties to “Al Qaeda.” To the contrary, he was invited to the White House to meet with the president.

Some years later, after a former DOJ prosecutor named John Loftus had filed a lawsuit against the U.S. government, accusing U.S. officials of thwarting investigations into Sami al Arian, the DOJ did indict Sami al Arian for funding a terrorist attack in Palestine, but he spent only a few months in prison, and he now resides in a mansion located in the suburbs of Washington, D.C. Meanwhile, Judicial Watch, the public watchdog group, has filed a lawsuit seeking information on the continuing and apparently warm relationships between the director of the FBI (still Robert Mueller) and multiple people (including not only Sami al Arian, but also some of those who attended that meeting at a Marriot Hotel way back in 1993) with ties to terrorism.

In 2002, when the FBI director was the guest of honor of not only Sami al Arian, but also Mr. Alamoudi, at the 2002 annual convention of the American Muslim Council (“the most mainstream Muslim organization in America”), the FBI director was well aware that not only Sami al Arian, but also Mr. Alamoudi (founder of the American Muslim Council) were key figures in Osama bin Laden’s organization, and the FBI director knew that both Mr. Alamoudi and the American Muslim Council had been among the most important targets of Operation Green Quest (the largest law enforcement effort ever aborted without any prosecutions). In addition, the FBI director knew that Mr. Alamoudi had founded the American Muslim Council in partnership with Osama bin Laden.

Court documents also show that the FBI director knew that the vehicle which Mr. Alamoudi used to found the American Muslim Council was an important financial firm called SEDCO, which operated several  joint venture businesses in partnership with Osama bin Laden (a famous terrorist and fringe fanatic who was also a prominent banker, oligarch, and co-founder of “the most mainstream Muslim organization in America”). Perhaps more important, the FBI director knew that SEDCO was principally controlled by Sheikh Mahfouz, formerly the largest shareholder (and executive director) of BCCI.

Sheikh Mahfouz, of course, was one of history’s most destructive financial criminals, and he was Osama bin Laden’s most important business partner. In addition, we know, Sheikh Mahfouz was a prominent oligarch and an important business partner of Washington insiders. Indeed, he had captured many of America’s leading politicians, including every politician who served as president of the U.S.A. between the year of 1972, when BCCI was founded, and the year 2009, when Sheikh Mahfouz passed away.

* * * * * * * *

Which brings us back to The New York Times obituary commemorating the life of Sheikh Mahfouz. In that otherwise flattering obituary, the Times was obliged to report that Sheikh Mahfouz had faced a “barrage of accusations” that he had ties to terrorist organizations These accusations did not, however, conform to the party line that  Sheikh Mahfouz was nothing more than a prominent banker and a legitimate partner of “Washington insiders,” so the Times, of course, was quick to assure its readers that the accusations of Sheikh Mahfouz’s ties to terrorism had no merit whosoever.

The Times also noted with approval that Sheikh Mahfouz had filed lawsuits against journalists who had written of Sheikh Mahfouz’s ties to terrorism. The New York Times  gloated with further approval that Sheikh Mahfouz had filed his lawsuits in London to take “advantage of Britain’s pro-plaintiff libel laws.”  Those libel laws, for those who do not know, are the most repressive libel laws anywhere in the Western world. They not only make a mockery of the notion that Britain has a free press, but they amount to a regime of censorship that makes it difficult for British journalists to report stories that powerful people or the British government deem to be harmful to their interests. And, of course, the British government (like the regime in Washington) is not interested in exposing the ties between prominent billionaires and terrorism, because such billionaires also have ties to the Anglo-American establishment.

Some of the journalists whom Sheikh Mahfouz attacked with libel lawsuits, however, were not British—they were American citizens. Indeed, there has developed a disturbing trend (known to advocates for press freedoms as “libel tourism”) that sees powerful people (a surprising number of them actually former BCCI figures) filing lawsuits against American journalists in the British courts, which almost always rule in favor of the plaintiffs.

As for The New York Times—well, that newspaper is not exactly what the founding fathers had in mind when they made freedom of the press a cornerstone of the new republic. There are some excellent and honest journalists at The New York Times, but we might be justified in asking whether The Times as an institution considers it to be its mission to prevent the voting public from being fully educated. This, after all, is the essential meaning of the famous slogan—“All the News That’s Fit to Print”—with its implication that there cannot possibly be any other news that is fit to print, and that there must be no diversity of opinion, nor debate about the facts. It might be that there really is just one Truth, and one Truth only, but are we to believe that the one and only Truth is the party line of The New York Times?

The New York Times believes that is so, and a large segment of the population believes it, too. It is the segment of the population that is preternaturally inclined to trust authority—even to revere authority–and it is the segment of the population that is ever prepared to accept authoritative diktats as to what constitutes right-belief. It is the segment of the population, like so many of history’s tragic populations, that marches in lockstep with the party line–and in present day America, it is this segment of the population that defines polite society, while everyone else has been relegated to the fringes.

As a result, we now live in a nation where one must be careful with his words, for to deviate in any way from the party line is to be cast aside, scorned and ridiculed. Indeed, one must say nothing at all unless it has been approved by The New York Times.

If you doubt that this is true—if you doubt that it has a profound effect on our nation and our democracy—try this simple experiment: at your next dinner party, introduce an idea, a commentary, a story or a new set of facts. If what you have said did not come from The Times, or has been disputed by The Times, witness the reaction of your friends and interlocutors—your fellow citizens.

Try, for example, to discuss with a group of ten people the story of BCCI and Sheikh Mahfouz. Try to challenge the final word on Sheikh Mahfouz, as it was published in 2009 by The New York Times—which noted with approval bordering on glee that Sheikh Mahfouz had (as a result of one of his London lawsuits) won a default judgment ordering one American writer, a woman named Rachel Ehrenfeld, to apologize for linking Sheikh Mahfouz to terrorism. The Times did not mention this, but Rachel Ehrenfeld is no slouch. She is the director of the Economic Warfare Institute. She has also worked as a visiting scholar at the Columbia University Institute of War and Peace Studies; a research scholar at New York University School of Law; and as a fellow at John’s Hopkins School of Advanced International Studies (SAIS).

In addition, Ehrenfeld (author of the book, “Funding Evil,” which provoked the lawsuit) is one of the world’s reigning experts on billionaires who have ties to terrorism, and who are themselves terrorists—financial terrorists who have, with much success (and in partnership with the American elite) waged economic warfare against the United States and other nations. But that is not a subject for polite society. In polite society, one must toe the party line, which is that all terrorists are “fringe” fanatics who occupy their every moment conceiving new and inventive ways to hide bombs in their underpants, desiring nothing more than to blow themselves to Kingdom Come and its harem of vestal virgins.

According to the party line, there are no billionaire terrorists. In polite society, all billionaires are, by definition, themselves members of polite society, deserving of our respect and admiration. Anyone who says otherwise must be expelled from polite society, and if the dissident has credentials that threaten to lend her credibility, she must be excoriated or at least subtly discredited by The New York Times.

So it was with Rachel Ehrenfeld, whom Sheikh Mahfouz  sued with the help of London’s oppressive libel laws. The New York Times reported: “Mrs. Ehrenfeld has called his [Sheikh Mahfouz’s] legal actions ‘financial jihad.’ But Sheikh Mahfouz’s criticisms were sometimes irrefutable. He was widely referred to as the brother-in-law of Osama bin Laden, which he was not. Sheikh Mahfouz did acknowledge contributing $270,000 to Mr. bin Laden’s forces when they were fighting the Soviets in Afghanistan. At the time, the United States also supported the insurgents there.”

And that was the end of the story, so far as the Times was concerned. Clearly, we are left to conclude that Sheikh Mahfouz was innocent of all charges linking him to terrorism.

We are also left to conclude that people, including Ehrenfeld, who have linked Sheikh Mahfouz to terrorism are a little bit nutty. After all, these people, including Ehrenfeld (or so it was suggested by The New York Times) went so far as to report the outlandish falsehood that Sheikh Mahfouz was Osama bin Laden’s brother-in-law. In fact, Ehrenfeld never reported any such thing. It was the director of the CIA, then George Tenet, who first stated that Sheikh Mahfouz was Osama bin Laden’s brother-in-law, at which point official U.S. government spokesmen quickly issued a “correction,” saying that it had not yet been confirmed that Sheikh Mahfouz had married off his sister to Osama bin Laden.

The spokesmen did not explicitly deny that the CIA director’s information was correct, and since then, the official spokesmen have not been forthcoming with confirmation one way or another, so we do not know the truth of the matter. Either way, the former CIA director’s supposed error served the interests of Sheikh Mahfouz and his friends in Washington, as they and cooperative media outlets such as The New York Times seized upon this one supposed falsehood, suggesting that since this one fact has ostensibly been proven to be false, it must necessarily be the case that all of the other facts (see above) linking Sheikh Mahfouz to Osama bin Laden are equally false. This, of course, is twisted logic, made all the more twisted by the fact that the Times failed to address all of the other facts (see above) linking to Sheikh Mahfouz to terrorism.

We can see the twisted logic because we are examining it with care, but most readers of The New York Times conduct no such examination. And make no mistake: the twisted logic of The New York Times is not evidence merely of faulty thinking or lazy reporting. The New York Times was, without doubt, aware of the other facts linking Sheikh Mahfouz to terrorism. The omission of these facts—and the twisted logic suggesting that one supposed falsehood justifies the omission of all the other facts—was not accidental. It was twisted logic by design—and such twisted logic works as it is intended. Indeed, twisted logic is the most effective all propaganda. It is the essence of the twisted dystopia about which we have been warned by Orwell, Huxley, H.G. Wells, and so many others.

Consider further that while the New York Times reported that Sheikh Mahfouz had won (in a British kangaroo court) a “default” judgment ordering Ehrenfeld to apologize for linking Sheikh Mahfouz to terrorism, the Times failed to report that Ehrenfeld had made no such apology and indeed Ehrenfeld had refused to acknowledge the jurisdiction of the British court over her case, which is why the judgment was a “default” judgment. In addition, though there was not a word about this in The New York Times, Ehrenfeld had preemptively countersued Sheikh Mahfouz in New York to obtain a declaration that the British judgment would not be enforced in the United States.

Ehrenfeld also maintained that her book was not defamatory under United States defamation law. The New York courts ruled that they lacked jurisdiction over Sheikh Mahfouz, but immediately thereafter, the New York State legislature unanimously passed the Libel Terrorism Protection Act, and the legislature even named the new Act after Rachel Ehrenfeld herself.

It is called “Rachel’s Law.”

In 2008, when Rachel’s Law was enacted, New York Governor David Paterson stated that Rachel’s Law “offers New Yorkers greater protection against libel judgments in countries whose laws are inconsistent with the freedom of speech granted by the United States constitution.” In other words, this was a victory for both Ehrenfeld and free speech, but The New York Times (supposed guardian of our freedoms and “All The News That’s Fit to Print”) failed to mention a word about it in its story gloating that Ehrenfeld had been asked to apologize for linking Sheikh Mahfouz to terrorism.

Meanwhile, billionaires with ties to terrorist organizations continue to this day to wage a “Financial Jihad” in partnership with some of Wall Street’s most notorious (or “prominent,” in the vernacular of The New York Times) brokerages and investment houses–and with the apparent approval of officials in Washington, who have shown zero inclination to stop them. None of which, of course, is regarded by The New York Times as news that is “Fit to Print,” but there is, nonetheless, hope for the republic, for at least some among the citizenry have come to know that if it’s fit to print–then it probably isn’t true.

To be continued…Click here to read Chapter 7

Mark Mitchell is a journalist who spent most of his career working as a correspondent for mainstream media publications before joining DeepCapture.com. He is the author of the book entitled “The Dendreon Effect: How Felons, Con-Men and Wall Street Insiders Manipulate High-Tech Stocks”.

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Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 12 of 15)

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Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 12 of 15)



What follows is PART 12 of a 15-PART series. The remaining installments will appear on Deep Capture in the coming days, after which point the story will be published in its entirety.

Click here to read PART 1

Click here to read PART 2

Click here to read PART 3

Click here to read PART 4

Click here to read PART 5

Click here to read PART 6

Click here to read PART 7

Click here to read PART 8

Click here to read PART 9

Click here to read PART 10

Click here to read PART 11

Where we left off, we had learned that on March 29, 2007, an FDA advisory panel voted overwhelmingly to recommend approval of Provenge, Dendreon’s promising new treatment for prostate cancer. As a result, most financial analysts and investors expected that Dendreon would have  a promising future. However, ten hedge funds (out of a universe of 11,500 hedge funds) held large numbers of Dendreon put options (bets against the company), suggesting they expected Dendreon would be derailed.  At least seven of those hedge funds can be tied to Michael Milken or his close associates.

We had also learned that Milken himself stood to profit if Dendreon were to experience problems receiving FDA approval. This is because Milken was the early financier and principal deal maker for ProQuest Investments, a fund that (along with an affiliate) controlled a company called Novacea, which was one of Dendreon’s competitors in the race to produce a new treatment for prostate cancer. Meanwhile, Lindsay Rosenwald (a Milken crony who once helped run a Mafia-linked brokerage called D.H. Blair, which specialized in pumping and dumping fake biotech companies) controlled Cougar Biotechnology, which was Dendreon’s second competitor in the race to develop a new treatment for prostate cancer.

We had learned further that Milken’s “philanthropic” outfit, the Prostate Cancer Foundation, seems largely to be an extension of Milken’s investment fund, ProQuest. This might explain why the Prostate Cancer Foundation endorsed and provided financial support to Novacea and Cougar, neither of which had shown that their treatments were safe or effective, while snubbing its nose at Dendreon.

In addition, we had learned that in April, 2007, an FDA-contracted physician, Dr. Howard Scher, who was also an executive and director of Milken’s ProQuest Investments, and the chairman of Milken’s Prostate Cancer Foundation “Therapeutic Consortium”, spearheaded an unprecedented lobbying effort to undermine the prescribed regulatory process and convince the FDA to deny approval to Dendreon — the first time in history that the FDA went against an advisory panel’s recommendation to approve a drug destined for dying patients.

In the days before and after the lobbying effort, Dendreon was subjected to a blistering attack by naked short sellers who illegally flooded the market with millions of phantom shares to help drive down the company’s stock price. This criminal naked short selling continued intermittently for much of the next two years, while other events conspired to hobble Dendreon, a company that had completed multiple clinical trials that strongly suggested that its product, Provenge, was capable of lengthening the lives of tens of thousands of men with prostate cancer….

* * * * * * * *

“Black Wednesday at the FDA.”

That is how Dr. Mark Thornton, a former medical officer in the FDA’s Office of Oncology Products, described the FDA’s decision not to approve Dendreon’s Provenge.  In an op-ed for the Wall Street Journal, Dr. Thornton described vaccines such as Provenge as the “Holy Grail of cancer treatment.”  Without directly referring to anyone by name, Dr. Thorton described Dr. Scher’s lobbying effort as “arrogant” and “unprecedented.”

Dr. Thornton added that when the FDA succumbed  to that lobbying, “the dawn of a new era in cancer immunotherapy was driven back into the night. It will be years before we know the full impact of these decisions and how many cancer patients…have had their lives cut short as a result.”

This scandal infuriated many other physicians and patient advocates (with  the exception of those affiliated with Milken’s Prostate Cancer Foundation). Some Dendreon supporters took to the streets.

On June 2, 2007, there was a protest in front of the American Society of Clinical Oncology. Two days later, several prostate cancer advocacy groups rallied in Washington. On June 6, there was yet another protest, this one attended by still more physicians who demanded to know why the FDA had failed to approve Dendreon’s treatment.

“I’d like to explain in the most basic of terms,” said Dr. Mark Moyad of the University of Michigan medical school, at the June 6 rally. “We think a mistake has been made. We are here in a friendly way to start the process of correcting that mistake.”

That word — “friendly” – seems to me to perfectly describe Dendreon’s supporters. I might add  “intelligent,” and “fair,” and “engaged.”  But the mainstream media played its customary role by portraying such advocates as vexatious wackos (notwithstanding the fact that many of Dendreon’s supporters were respected physicians).

“Oncologists do not usually need bodyguards…” began a story in the Washington Post, which was all about the Dendreon “controversy.”  The gist of this story was that people advocating for prostate cancer patients might somehow be dangerous – that it was strange how vocal they were, it was strange that they used the Internet to get the word out – and Dr. Scher (the physician who helped derail Dendreon) feared for his safety. He had even received some “threats.”

Nowhere in the story was it suggested that a great many prominent doctors were saying that the FDA had made a “mistake” in failing to approve Dendreon’s application. Nowhere was it mentioned that Dr. Scher played a significant role in engineering this “mistake.”  And nowhere was it mentioned that Dr. Scher was egregiously conflicted due to his financial ties to Michael Milken’s investment fund and Dendreon’s competitors, Novacea and Cougar Biotechnology.

Essentially identical stories appeared in the Philadelphia Inquirer, the New York Times, the Boston Globe, the Seattle Times, and on CNBC. Every one of these media outfits portrayed Dendreon’s supporters as potentially dangerous lunatics. Every one of them stated unequivocally that Dr. Scher had been “threatened.”  Yet, not one of them specifically described the threats, and as far as I can ascertain, there were no “threats.”

Clearly, there was a new party line – Dr. Scher was the victim. Given the near verbatim repetition of this party line in so many newspapers, and given my experience working in the mainstream media, I can say with near certainty that this was the work of an orchestrated public relations campaign – a campaign to distract attention from what was really happening to Dendreon.

Meanwhile, Dendreon remained one of the most manipulated stocks on Nasdaq. On the day that the Washington Post story appeared, SEC data showed that criminal naked short sellers had sold, and failed to deliver, more than 13 million Dendreon shares. Following the mainstream media’s standard operating procedures, no mention was made of this phantom stock in any of the stories on Dendreon’s troubles.

* * * * * * * *

By June of 2007, Dendreon’s stock price was averaging around $7 – down from its early April high of $25. There was no way the company could raise more money on the stock market, and so it had to significantly scale back its work on Neuvenge, a promising treatment that fought breast cancer in the same way that Provenge fought prostate cancer. In order to get enough cash to continue work on Provenge, Dendreon issued over $100 million worth of convertible bonds.

Sometimes, hedge funds that buy a company’s convertible bonds are well-intentioned – they want the company to succeed so that the company can repay the loan.

But, often, hedge funds that buy convertible bonds do not have the company’s best interests at heart. Indeed, Deep Capture has obtained an internal client presentation given by a well-known investment bank that states that the single largest segment of investors in convertible bonds are hedge funds that actually intend to increase their bets against the companies that they are financing.

A convertible bond is debt that can be “converted” into stock. A hedge fund lends a company, say, $100 million. As repayment, the hedge fund can either receive the $100 million plus interest at maturity, or instead it can receive, say, 10 million shares in the company.

If the share price is $8 at the time of the loan, those 10 million shares would be worth $80 million. But if the share price rises to $20, the hedge fund can convert his $100 million loan into $200 million worth of stock. If the hedge fund manager is a value investor who wishes the company well, he will make his loan and wait for the stock to rise.

But there are various ways that convertible bonds can be put to malevolent use. Suppose a group of hedge funds have launched a full scale short selling attack against a company, but the hedge funds want to short sell even more stock.  To do that legally, the hedge funds must first locate more stock to borrow, and then sell it. But sometimes there is simply no more stock available for short sellers to borrow.

Now, suppose the share price has already been significantly hammered, so the company can no longer raise money through the stock market. The hedge funds know this. And the hedge funds are important clients of an investment bank. So the hedge funds and the investment bank hatch a plan.

It works like this: the investment bank tells the victim company that it can resolve the company’s cash problems by brokering a convertible bond offering. If the company agrees, the investment bank says, “great, but there’s just one hitch – you, the company, have to lend us, the investment bank, the shares that the company would normally keep on hand in case the bond holders convert.

To assuage any fears, the investment bank might promise the company that it will not re-lend those shares to short sellers, but will merely sell them to long buyers – people who want to invest in the company. The company says, “fine,” and issues, say, $100 million worth of debt convertible to 10 million shares. The company also agrees to that “hitch” — so now the investment bank has wangled a “stock loan” agreement that gives it exclusive rights to borrow those 10 million shares until such time as the bond holders convert.

Meanwhile, the investment bank returns to that group of hedge funds, who agree to buy the convertible bonds as a means to extricating those 10 million shares from the company. Once the investment bank is in possession of those shares, it cannot (at least according to its agreement with the company) lend them to the hedge funds for purposes of short selling. But it can do one better. It can broker swap contracts that oblige counterparties to pay the hedge funds a certain amount of money in the event that the company’s stock price decreases in value.

Then, the investment bank dumps those 10 million shares into the market all at once, causing the stock price to further collapse. Meanwhile, the hedge funds and the investment bank might be engaging in naked short selling – selling stock that has never been borrowed by anybody (i.e. stock that does not exist).

If anyone asks about this illegal naked short selling, the hedge funds say they thought they had “a locate” on stock that they could borrow and deliver. If anyone asks the hedge funds to be more specific, the hedge funds say that they had “located” and planned to borrow those 10 million shares that the investment bank had borrowed from the victim company. If the SEC notes that the investment bank had an agreement not to lend those shares to short sellers, the hedge funds say they didn’t know about that.

Of course, the SEC rarely asks any of these questions, but the convertible bonds provide some immunity, just in case.

As the stock price hits rock bottom, the company depletes the cash it raised from the bond offering. And the only way for the company to receive new funding is to issue more convertible bonds to the hedge funds, or do one of those dreaded “death sprial” PIPE deals.

If this were a game of chess, it would now be “check” for the hedge funds. The company knows that its stock price and its financing depend entirely on the hedge funds, which are put in the position of being able to drive (and trade ahead of) the company’s business decisions. This scheme might even allow a set of hedge funds to take control of, say, a $700 million company, for a $100 million loan.

With the exception of the naked short selling, most of this scheme’s elements can be found in the standard PowerPoint presentations that some banks deliver to their hedge fund clients behind closed doors. The investment banks market the scheme as a way to profit from volatility in the stock. When the stock crashes, the hedge funds make money from the swaps and their short selling. If the stock subsequently increases in value, the hedge funds can convert their bonds and use some of the proceeds to pay the counterparties to the swaps.

But sometimes the hedge funds intend to fully destroy the company. They make plenty on their short positions and swaps, and their bonds pull in some money during the bankruptcy proceedings. Sometimes, during bankruptcy, the hedge fund lenders get their hands on company assets (such as blockbuster medical treatments) that are actually worth considerably more than what they spent on their bonds.

At other times, the ultimate goal is not to destroy the company outright, but to crash the stock, and then accumulate shares, giving the hedge funds still more influence over company decisions, and perhaps paving the way for a hostile takeover.

I do not know for certain the motivations of the hedge funds that bought Dendreon’s convertible bonds. I do not know if they engaged in naked short selling. After all, the identities of the naked short sellers and the real amount of failed trades they are generating are, as far as the SEC is concerned, still a big secret. Remember that the SEC says that releasing information about (illegal) naked short sales would reveal the (criminal) hedge funds’ “proprietary trading strategies.” And the SEC cannot have that.

I do know, however, that nearly every one of Dendreon’s convertible bond holders are connected in important ways to Michael Milken or the seven affiliated hedge fund managers who held large numbers of put options in Dendreon prior to the strange occurrences of March 2007. This raises the suspicion that the convertible bond holders were not typical investors (that is, investors who put in capital hoping that the company would prosper).

Instead, the fact that the buyers of the converts were part of the same network that was placing large bets against Dendreon (and taking steps, with help from Milken’s “philanthropy”, to derail Dendreon’s treatment for prostate cancer) raises the possibility that these bond investments were made as part of a strategy to manipulate Dendreon’s stock price down,  during which time members of this network would (with help from Milken’s Prostate Cancer Foundation) pump up the stock prices of Dendreon’s “competitors” – the companies controlled by Milken and his friends.

In the two years that these shenanigans were going on, 60,000 American men died of prostate cancer, which seemed to be of no concern to this particular network of miscreants. But once the competing, Milken-connected companies had been thoroughly pumped, and then dumped (on the news that their treatments were worthless), it would perhaps be time to exert greater control over the one company–Dendreon–that actually had a treatment that could extend lives.

As we will see, members of the Milken network – some of the hedge funds that bought the convertible bonds, and some of the seven hedge funds that were betting big against Dendreon in 2007 – have, as a group, recently become the company’s largest shareholders. Their precise intentions, however, remain a mystery.

While we do not have photo-perfect pictures of what was going on behind the scenes of Dendreon’s bizarre trading (the SEC does not let that get public), we do know that this paradoxical play of participating in a convertible bond in order to further a manipulative scheme against a company, is in fact a standard play on Wall Street. Given this, we would be remiss  not to name the colorful hedge funds that bought Dendreon’s convertible bonds.

* * * * * * * *

As we have covered, Milken crony Carl Icahn founded the options department at Gruntal & Company, which owed its existence to Michael Milken and was one of the more disreputable trading houses on the Street. Ultimately, Gruntal was found to have employed several traders with ties to the Mafia, and soon after, it was charged with a massive fraud and forced to pay what was then one of the largest fines in Wall Street history.

Many of Gruntal’s former employees ended up working for White Rock Capital, which was run by the alleged Russian mobster, Felix Sater, the fellow who was allegedly behind the threat to have Deep Capture reporter Patrick Byrne murdered if he did not end his crusade against naked short selling and the “deep capture” of important institutions.

As we also know, when Icahn left Gruntal, he handed over direction of the options department to Milken crony Ron Aizer. The first trader Aizer hired was Steve Cohen, who was reportedly investigated by the SEC for trading on inside information provided by Milken’s shop, and later became “the most powerful trader on Wall Street” — the fourth of those seven hedge fund managers prescient enough to bet big against Dendreon before Milken’s other cronies derailed the company in 2007.

The second trader hired by Aizer was a man named Andrew Redleaf, who later went on to co-found two hedge funds — Deephaven Capital Management and Whitebox Advisors.  According to a media account posted on Whitebox’s website, Redleaf’s family kept its investment accounts at Drexel Burnham Lambert, where Michael Milken was then running his stock manipulation and junk bond empire. Redleaf was recommended to Aizer by Andy Stillman, who was then managing Drexel’s propriety options trading.

In later years, Redleaf became well-known for investing in Sun Country Airlines in partnership with Tom Petters, who was recently arrested at gunpoint amid allegations that he had orchestrated a massive Ponzi fraud in cahoots with a fellow named Michael Catain. Catain’s father, Jack Catain, was a Genovese Mafia enforcer and loan shark who had been involved, along with Michael Milken, in ZZZZ Best, a fraudulent carpet cleaning company run by Barry Minkow.

Minkow was eventually imprisoned for the ZZZZ Best fraud, and when he was released, he began a career as a self-described “fraud investigator.” He works in partnership with Sam Antar, the convicted felon who masterminded a massive fraud in the 1980s at an appliance retailer called Crazy Eddie. Antar, who is close to Milken and his network (members of which once tried to help Antar seize control of Crazy Eddie) now spends most of his time on the Internet, smearing and threatening people who work to expose the crime of naked short selling.

For example, Antar once posted on the Internet the names and address of Deep Capture reporter Judd Bagley’s young children. Antar writes with almost daily regularity that Deep Capture reporter Patrick Byrne is running a fraudulent company (Overstock.com), though he has produced nothing to support his claims, and every reputable person who has examined his arguments has concluded that they are absurd.

Meanwhile, Antar has littered the Internet with all manner of falsehoods about me—stating, for example, that I’m a drug addict and was fired from my last job. Ever the charmer, Antar has also let it be known that he is friendly with violent people, including those who once ambushed me, punched me in the face, and suggested that I should stop working with Patrick Byrne.

It is interesting to note that, these facts notwithstanding, in 2008 Fortune magazine saw fit to grace its pages with a highly flattering 2,738 word profile of Antar (“It Takes One to Know One”). Fortune did this even as it acknowledged that, “As would-be fraudbuster, Sam E. [Antar] has yet to notch his first kill. (Although in fairness he doesn’t hold himself out to be a full-time 10-Q detective. ‘I don’t have 40 people working for me like the SEC,’ he says.) He hasn’t brought any companies down or caused any regulators to open any investigations.”

That is, concerning a notorious swindler and convicted felon who threatens little girls, smears other journalists, is denounced by public officials, and who has not actually been the source of any credible investigation that Fortune can cite, Fortune published a perfectly complimentary puff piece.

As for the above-mentioned Andrew Redleaf, I noted that he is a founding partner in Deephaven Capital Management. In 2006, Deephaven was sanctioned by the SEC for short selling 19 public companies (almost all biotech firms) on inside information that his hedge fund colleagues were giving the companies “death spiral” PIPEs finance.

As you will recall, similar schemes have involved Milken crony Carl Icahn (the founder of Gruntal’s options department); Jeffrey Thorp (son of the Mafia-linked card counter who was the most important figure in Milken’s stock manipulation network during the 1980s); Milken crony Lindsay Rosenwald (who used to run the Mafia-linked D.H. Blair, the president of which was Milken’s former national sales manager); and Gryphon Partners (which was tied to the Mafia-linked, nine-fingered Anthony Elgindy, a naked short seller who is now serving an 11 year sentence for stock manipulation schemes and bribing two FBI agents).

My apologies for the repetition, but there are some who are new to this, and it is difficult for even the well initiated to keep track of so many miscreants, so permit me to remind the reader that Gryphon’s founder and Lindsay Rosenwald were among the seven colorful hedge fund managers who bet big against Dendreon in March 2007, just before the company was derailed by strange occurences engineered by Milken’s cronies. Also among those seven hedge fund managers was Steve Cohen, who was, earlier in his career, investigated for trading on inside information provided by Milken’s shop, and was the first trader hired at Gruntal by Milken-crony Ron Aizer.

Andrew Redleaf, the second trader hired by Aizer at Gruntal, is, remember, not just a co-founder of Deephaven Capital (sanctioned for short selling on inside information that companies were to receive dubious financing), but also the proprietor of Whitebox Advisors.

And Whitebox Advisors is among those hedge funds that bought convertible bonds issued by Dendreon, a company that suffered a two-year, sustained naked short selling attack while trying to bring to market a treatment for dying cancer patients.

* * * * * * * *

A hedge fund called DKR Management also bought convertible bonds issued by Dendreon. DKR was founded by Barry L. Klein and Gary S. Davis. Previously, Klein worked for Michael Milken as the President of Drexel Burnham Lambert Trading. Davis also worked for Milken at Drexel.

In later years, Klein and Davis founded the predecessor to AIG Trading Group, a unit of American International Group. AIG Trading Group was later run by Joseph Cassano, who had also been a Milken employee at Drexel.

While at AIG, Cassano sold tens of billions of dollars worth of credit default swaps (contracts that pay out if a company defaults on its debt) to hedge funds and investment banks.

Rolling Stone magazine’s Matthew Taibbi, who is one of the mainstream media’s finest journalists, was among the first to establish that AIG Trading Group and Milken crony Cassano destroyed AIG, which ultimately had to be nationalized by the U.S. government – greatly contributing to the collapse of the financial system last fall. Since then, several reports have also implicated Cassano’s Milken-tied predecessors, Klein and Davis.

Meanwhile, various government investigations are seeking to know whether short sellers acquired and manipulated the prices of AIG’s credit default swaps as a way to weaken their target companies – including Lehman Brothers and Bear Stearns.  The question that remains unanswered is whether the short sellers that bought credit default swaps from Milken cronies Cassano, Klein and Davis were also members of the Milken network (which would mean that some members of the Milken network wrecked the world while the other members of the network bet that they would).

Another highly significant factor in the collapse of the financial system – as can be discerned from statements by countless officials and by reports in virtually every newspaper in the land, though the newspapers seem content not to investigate the matter or state this explicitly – was the naked short selling of AIG, Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, and hundreds of other companies.

In the years leading up to the financial cataclysm (and during the time when Dendreon was under attack by naked short sellers), certain hedge funds orchestrated an effective public relations campaign aimed at covering up the crime of naked short selling. As part of this public relations campaign, the hedge funds would regularly trot out a certain Yale professor, who would do his utmost to defend the criminals.

This professor’s favorite stratagem was to divert discussion away from illegal naked short selling, and repeat, over and over, that legal short selling was good for the markets–a fact that was never in dispute. The professor’s capacity for obfuscation was unmatched, but he nonetheless became a favorite source for some members of the media. He appeared regularly on CNBC and was quoted in dozens upon dozens of articles – all of which communicated the non sequitor that illegal naked short selling is not bad for the markets because legal short selling is good for the markets. Of course, this is like arguing that sexual harassment is not bad because sex is good.

The name of this professor is Owen Lamont. To this day, the professor is still sought out by the press, which dutifully regurgitates his baloney. But the professor does not work for Yale anymore.

Now he works for the above-mentioned DKR Management, one of the Milken-connected hedge funds that bought Dendreon’s convertible bonds while Dendreon was brutally attacked by criminal naked short sellers.

* * * * * * * *

There are interesting stories to be told about most every hedge fund that bought Dendreon’s convertible bonds. One of them, Eagle Rock Capital, run by an Iranian fellow named Nadir Tavakoli, was once a controlling investor in the International Fight League, a promoter of ultimate fighting matches. The other controlling investor in the International Fight League (which went bankrupt amidst allegations of ultimate fighting’s connections to the Japanese Yakuza and stories that fighters were committing suicides and murders at alarming rates) was a “Russian whiz kid” (according to the media) named Dmitry Balyasny.

The first things to know about Dmitry Balyasny are that he is closely affiliated with Steve Cohen and he is the seventh of those seven hedge fund managers who were betting big against Dendreon by holding put options on the company’s stock, after the FDA advisory panel had recommended that Provenge be approved, and before Milken’s cronies successfully lobbied the FDA to ignore that recommendation. So I will return to Balyasny soon.

But first, let’s continue with our list of hedge funds that held Dendreon’s convertible bonds.

One was GLG Partners. As we know from emails acquired in a lawsuit, GLG Partners received updates on Steve Cohen’s attack on Canadian insurer Fairfax Financial, so it would be unsurprising if GLG was also clued in to Cohen’s attack on Dendreon.

Recall also that (shortly before GLG bought Dendreon’s convertible bonds) French authorities fined GLG  for being part of an insider trading ring that included UBS O’Conner (a unit of UBS investment bank, which, until March, 2007, was led by former Milken employee Ken Moelis) and Meditor Capital, a hedge fund (also, of course, with ties to Steve Cohen) that had just made a large investment in Novacea, the prostate cancer company that was then being promoted (by Milken’s fund and Milken’s “philanthropy”) as a competitor to Dendreon. In short, GLG was “in the mix.”

Another outfit that bought lots of Dendreon’s convertible bonds (shortly after it was caught running an insider trading ring with Meditor and GLG Partners) was…UBS O’Conner.

Then there was Quattro Partners, which bought Dendreon bonds convertible into a more than a million Dendreon shares. The founding partner of Quattro is named Michael Baldock. He had a long career in biotech investing after spending time as an investment banker at Michael Milken’s Drexel Burnham Lambert.

* * * * * * * *

Another of the big investors  in Dendreon’s convertible bonds was Forest Investment Management, a hedge fund controlled by a man named Michael Boyd. Prior to founding Forest, Boyd was a partner in an outfit called Forum Capital Markets. Boyd’s co-founder in Forum was C. Keith Hartley, yet another of Milken’s disciples from Drexel, Burnham Lambert.

Boyd was also the co-founder of a brokerage called McMahan Securities. One of his partners in that operation was Santo Maggio, who later became chief executive officer of Refco Securities, the brokerage that was allegedly processing the phantom stock sales of Rhino Advisors, which illegally naked shorted companies after providing them with finance brokered by Milken crony Carl Icahn’s Ladenburg Thalmann. When Refco was found to be fraudulently hiding $400 million worth of liabilities (liabilities that many believe were related to naked short selling), Maggio pled guilty to two counts of securities fraud, one count of conspiracy, and one count of wire fraud.

Another of Michael Boyd’s many accomplishments is his son, Roddy. Refco employed Roddy as a trader, perhaps as a favor to his father’s former partner, the criminal Santo Maggio.

But Roddy soon abandoned the securities business to become a business journalist – first at the New York Post and now at Fortune magazine. Roddy Boyd is a key figure among the small coterie of journalists who turn up repeatedly in Deep Capture‘s analyses.

Like all members of the coterie, Roddy has spent several years trying to cover up the naked short selling scandal, ridiculing anyone who mentions the crime or the remarkable coincidence of companies appearing on the Reg Sho list (the SEC’s list of companies suffering from naked short selling) when those companies are the targets of a select group of hedge funds whose names will be familiar to the reader who has made it this far.

In addition to covering up naked short selling crimes, Roddy writes hatchet jobs on the public companies targeted by this same select group of short selling hedge funds. The sources of the information in Roddy’s stories are, of course, the short sellers themselves, and most of the short sellers are, as has been explained over and over, tied to Michael Milken or his close associates.

For example, Roddy spent a great deal of time working with a soon-to-be arrested criminal named Spyro Contogouris, who had been hired by a subsidiary of Steve Cohen’s SAC Capital, to sabotage, harass, and trash Fairfax Financial.

As mentioned, we have obtained a great number of emails between Cohen, Jim Chanos of Kynikos Associates, and others in the network that was attacking Fairfax. In one email, hedge fund manager Chanos writes to journalist Roddy Boyd, “your courtesy was a boon to me. Thank you!”

With the exception of Roddy’s particular clique of journalists, it is not typical for reporters to receive thank you notes for the “courtesies” that they have extended to help hedge funds make money.

Another holder of Dendreon’s convertible bonds was CNH Partners, run by Todd Pulvino, who used to work for Grosvenor Capital. Grosvenor is managed by Scott Lederman, who was the grad school roommate of Steve Cohen and later the chief operating officer of Cohen’s SAC Capital. While Pulvino was presenting himself as a legitimate investor in Dendreon’s debt, was he in touch with Steve Cohen, who had bet big against Dendreon right before Provenge was derailed by the unprecedented lobbying effort of Milken’s other cronies?

We can’t say. And we can’t say who was illegally naked short selling Dendreon’s stock. That, remember, is a big secret – “proprietary trading strategies.”

* * * * * * * *

On October 12, 2007, Dendreon, still desperate for capital to continue clinical trials that might eventually help its cancer treatment receive FDA approval, signed the paperwork on its first PIPE deal. A dreaded PIPE – the sort of deal that dilutes equity and tends to attract naked short selling that sends a company’s stock into a “death spiral.”

The provider of this PIPE finance was the Azimuth Opportunity Fund, managed by an outfit called Acqua Wellington Asset Management.

Acqua Wellington is controlled by a “prominent” investor named Isser Elishis. In an otherwise flattering article, Herb Greenberg – a journalist whose entire career was devoted to granting “courtesies” to hedge funds in the Milken network – described Elishis as the “banker of last resort.”

Herb, who disappeared from public sight after he was exposed by Deep Capture,  now owns a company that ostensibly sells financial research to hedge funds in the Milken network (or, arguably, merely receives payment from them for the extensive string of “courtesies” that Herb extended while working as a journalist).

Among Azimuth’s first forays into the markets was an investment in a company called SulphCo, which claimed to have a method for turning sulphrous crude into clean-burning oil. Elishis collaborated on this deal with SulphCo’s principal investor, Zev Wolfson, who, you will recall, was the investor who financed Milken cronies Carl Icahn, Saul Steinberg, John Mulheren, and various brokerages tied to the Mafia, naked short selling, or both.

SEC data shows that on the day that Dendreon signed its PIPE deal with Azimuth, naked short sellers flooded the market with more than 2 million phantom shares. During the following week, more than a million Dendreon shares “failed to deliver” every day, despite (or perhaps because of) the news that Dendreon had enrolled 500 patients in a trial to confirm its earlier positive results, putting Provenge back on the track to FDA approval.

* * * * * * * *

In the late 1980s, a fellow named Jeffrey Yass and his two friends, Eric Brooks and Kenneth Brodie, set up a partnership to place bets at horse racing tracks across the country. On one single day at Sportsman Park in Chicago they pulled in winnings of more than $600,000. This seemed somewhat excessive, so Sportsman Park banned the three friends from its premises. The punters filed a lawsuit claiming that Sportsman Park had violated their rights to visit a public facility.

At any rate, Jeffrey Yass and Eric Brooks eventually abandoned the business of betting on horse races and instead pursued careers on Wall Street. Now they are “prominent” investors, the proprietors of a mid-sized investment and trading house called Susquehanna International.

In the spring of 2008, Susquehanna was introduced to Dendreon by a placement agent, Lazard Capital Markets. It is not clear why Dendreon would want to do business with Lazard. After all, Lazard was home to the singing Joel Sendek, who had been busily trashing Dendreon in his research reports.

Sendek had also been trumpeting Dendreon’s competitor, Cougar Biotechnology, as the next big thing in cancer treatment. In turn, Cougar Biotechnology (the company then controlled by Milken crony Lindsay Rosenwald, formerly of the Mafia-affiliated pump-and-dump shop D.H. Blair) had been quoting Sendek in its SEC filings.

Sendek’s endorsement, Cougar seemed to be suggesting, was evidence that the company was making progress toward bringing its prostate cancer treatment to market. This was odd, because most pharmaceutical companies use data collected from clinical trials to demonstrate this, not quotes from singing Wall Street analysts.

Meanwhile, it was widely understood that Lazard’s stock loan department was one of the go-to shops for hedge funds looking to short sell Dendreon’s shares. We cannot say that Lazard was loaning phantom stock to the short sellers (if it were, that would be a big secret), but Lazard’s coziness with short sellers ought to have given Dendreon pause.

There was also the fact that Lazard Capital had only recently been spun off from Lazard Ltd. Given that the two operations remained closely affiliated (sharing business and so forth), it might have been of some concern that the chairman of Lazard Ltd. was Bruce Wasserstein, a close associate of Michael Milken.

In “Den of Thieves,” James Stewart, the Pulitzer Prize winning author, quotes a criminal named Denis Levine as saying that Wasserstein was “owned” by Milken’s famous co-conspirator, Ivan Boesky. Given that Denis Levine was indicted for participating in Boesky’s insider trading schemes, one would think he knew of what he spoke, but there is no hard evidence to support his allegation.

In any case, Dendreon followed Lazard’s advice, and did a “registered direct offering” with Capital Ventures International, an affiliate of Susquehanna, the firm founded by Yass and Brooks. A “registered direct offering” is similar to a PIPE, the difference being that the securities sold to the investor are registered with the SEC and immediately tradable.

For most of March 2008, naked short sellers were failing to deliver less than 500,000 shares per day. As negotiations for the “registered direct offering” were underway, the amount of phantom stock gradually increased. And on the day the deal was signed, April 3, at least 1.6 million phantom shares had been sold into the market and remained undelivered.

For the next two months, more than one million Dendreon shares remained “failed to deliver” every day. This despite (or perhaps because of) the fantastic news, on March 12, 2008, that the FDA had agreed to an amended “Special Protocol Assessment,” which would enable the company to release, one year ahead of schedule, the results of an “IMPACT” trial that seemed likely to confirm the company’s Phase 3 trials showing substantial evidence that Provenge was safe and effective.

As Dendreon’s enemies must have known, it would soon be impossible to stymie the company with arguments about data, but stock manipulators were not yet ready to end their campaign against the company.

* * * * * * * *

To be continued….Click here for Chapter 13.

If this article concerns you, and you wish to help, then:
1) email it to a dozen friends;
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Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 6 of 15)

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Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 6 of 15)



What follows is PART 6 of a 15-PART series. The remaining installments will appear on Deep Capture in the coming days, after which point the story will be published in its entirety.

Click here to read PART 1

Click here to read PART 2

Click here to read PART 3

Click here to read PART 4

Click here to read PART 5

Where we left off, we had learned that CNBC’s Jim Cramer had declared Dendreon to be a “battleground stock.” And we had learned that Dendreon subsequently came under attack by criminal naked short sellers, right at the time that its promising treatment for prostate cancer had been endorsed by an FDA expert advisory panel, and right before that treatment was to be derailed by some strange occurrences.

While it is impossible to know who was responsible for the illegal naked short selling (the SEC keeps that a big secret), we know that the people who orchestrated those strange occurrences (which I will describe in due course) and at least seven of the ten hedge fund managers who held large numbers of Dendreon put options (bets against the company) are tied to Michael Milken, the famous criminal who is now considered to be a “prominent philanthropist” with a special focus on prostate cancer.

Now we learn a bit more about this network and the attack on Dendreon, a company with a promising treatment for prostate cancer…

* * * * * * * *

When the FDA’s advisory panel voted in favor of Provenge, most Wall Street research analysts were predicting a bright future for Dendreon. But as naked short sellers piled on with ever increasing gusto, hedge fund managers continued to whisper in reporters’ ears. And two Wall Street analysts did more than whisper – they shouted, day after day, that Dendreon’s treatment for prostate cancer was doomed.

One of these analysts is named Jonathan Aschoff, and he works for a financial research outfit called Brean Murray Carret & Co.  The day after the advisory panel vote, in an interview with Reuters, Aschoff made the long-shot prediction that the FDA would not approve Provenge, but would instead ask Dendreon to supply additional data showing that the treatment was safe and effective–a process that could take years. Soon after, Aschoff told other media outlets that the FDA would set a “dangerous double standard” by approving Provenge because the treatment “did not meet its primary goal in two Phase III trials.”

During the first days of April 2007, Aschoff was everywhere, continuously repeating this notion that the FDA would set a “dangerous double standard” by approving Provenge.  On April 9, Aschoff reiterated his “sell” rating for Dendreon, setting a target for the stock at a mere $1.50, which implied that the stock would lose more than 90 percent of its value by the end of the year. Reuters, Associated Press, CNBC and other media dutifully reported Aschoff’s comments as though they shed  light on the merits of Dendreon’s prostate cancer treatment.

Aschoff’s performance raises a few basic questions. The first is, how did a Wall Street analyst know that it would be “dangerous” to approve a medical treatment? It is an odd day, indeed, when the media turns to Wall Street for wisdom on matters of science and health.

The second question is, why was Aschoff so confident that the FDA would not approve Provenge? Given that the FDA had followed its advisory panels’ decisions in 97% of cases, and in 100% of cases involving drugs for dying patients, Aschoff’s prediction seemed rather far out. What did he know that the rest of the world did not know?

The third question is, who is Jonathan Aschoff?

* * * * * * * *

In 2003 – back when journalists still occasionally investigated stories, rather than parroting whatever hedge funds and Wall Street analysts whispered in their ears – The Wall Street Journal won a Pulitzer Prize for a story that nailed Jonathan Aschoff for being a fraud.

According to the Journal, Aschoff often impersonated doctors in order to acquire inside information on the status of drug trials underway at his target companies. A certain Dr. Cunningham, who worked at a cancer center in Dallas, told the Journal that he initially believed that Aschoff was a doctor. But he discovered that he was dealing with a fraud when he mentioned to Aschoff that an experimental treatment had caused some reduction of the “lymphadenopathy.”

“What’s that?” asked Aschoff.  He didn’t have a clue, even though “lymphadenopathy” is a  common medical term. It means, “swollen lymph nodes.”

Nonetheless, some years later, the Associated Press, Reuters, and other media outfits were willing to believe that Aschoff knew enough about medicine to be quoted as a reliable source – a source who had, for some reason, concluded that Dendreon’s treatment for prostate cancer was “dangerous.”

What reason did Aschoff have for reaching that conclusion?

* * * * * * * *

One more question: Which hedge funds were paying Aschoff’s bills?

There is one particular network of hedge fund managers that is known to pay “independent” financial research shops to publish biased or false negative reports on companies that they are selling short.

Former employees of “independent” financial research firm Gradient Analytics have provided sworn affidavits that hedge fund manager David Rocker–once the largest outside shareholder of TheStreet.com; former employee of  Milken-Boesky crony Michael Steinhardt (who is the son of “the biggest Mafia fence in America) and Steve Cohen–now “the most powerful trader on Wall Street;” reportedly once investigated by the SEC for trading on inside information provided to him by Milken’s shop Drexel Burnham–heavily influenced, edited, dictated, and in some cases actually wrote Gradient’s false, negative research about public companies. That means, of course, that Cohen and Rocker had copies of “Gradient’s” research before it was published, which is also highly improper.

And emails acquired by Deep Capture show that Cohen and hedge fund manager Jim Chanos, among others in their network, received and traded ahead of biased reports published by a research outfit called Morgan Keegan. After Deep Capture reporter Judd Bagley broke this story, the SEC began (but will probably never conclude) an investigation into the matter.

Were hedge funds in this network dictating Aschoff’s research, too? I don’t know the answer to that question, but it is worth noting that after the SEC sanctioned Aschoff for impersonating doctors, he went to work for an outfit called Sturza’s Institutional Research, which was owned by a fellow named Evan Sturza.

The SEC has launched (but of course never completed) multiple investigations of Sturza’s companies, which catered to a particular network of short sellers by publishing negative commentary on biotech companies. For example, in 1996, the SEC began (but has never completed) an investigation into whether Sturza conspired with the above-mentioned Michael Steinhardt and a firm called Gilford Securities to take down the stock of a biotech company called Organogenesis.

In the 1980s, Gilford Securities employed Jim Chanos (the above-mentioned fellow who is now under SEC investigation for trading ahead of biased research reports). Chanos manages a few hedge funds, the most famous of which is called Kynikos Associates. He is also the head of the short seller lobby in Washington, and a much favored source of information for the New York financial press.

In 1985 – back when Chanos was still at Gilford; back when journalists did investigations rather than parrot whatever Jim Chanos whispered in their ears – way back then is when The Wall Street Journal published a front page story about a “network” of short sellers said to include Jim Chanos and Michael Steinhardt. The story suggested that this network destroyed public companies for profit and described some of the more egregious tactics – espionage; impersonating journalists to get inside information; conspiring to cut off companies’ access to credit; spreading dubious information – that were employed by Chanos and others in his network.

At the time, Chanos made some effort to publicly distance himself from Michael Milken. And he recently told one reporter that lawyers threatened him in the 1980s because he was selling short companies that had been financed by Milken’s junk bonds. However, the truth is that Chanos’s short selling in the 1980s tended to support Milken’s machinations, and in later years Chanos remained very much a part of the old Milken network.

Chanos got his big break in the 1980s by short selling and ultimately destroying a company called Baldwin United. As part of this effort, Chanos and his colleagues at Gilford Securities went so far as to meet with Baldwin United’s bankers, and (through all manner of horror stories) convinced the bankers to cut off Baldwin’s access to credit. Soon enough, the company went bankrupt, and Michael Milken quickly got himself hired as advisor to the bankruptcy.

According to a well-known businessman who was involved in the bankruptcy proceedings, Milken abused his advisory position, handing out confidential information to his network, which ended up owning much of Baldwin’s assets.

As the story goes, Chanos’s take down of Baldwin impressed Michael Steinhardt (the short-seller whose father was the “biggest Mafia fence in America”) and Steinhardt introduced Chanos to his key limited partners – including Ivan Boesky (later indicted for manipulating stocks with Milken) and Marty Peretz (a Milken and Boesky crony who would later co-found TheStreet.com, along with Boesky crony Jim Cramer and a few hedge funds in this network).

Peretz, an aristocrat who has long been a part-time professor at Harvard, introduced Chanos to one of his former students, Dirk Ziff, who manages a hedge fund called Ziff Brothers Investments. The emails cited above show that Ziff Brothers, like Chanos and Steve Cohen, was receiving advance copies of those Morgan Keegan reports.

Dirk Ziff is part of the network of which I write. Indeed, Chanos launched his first hedge fund out of Dirk Ziff’s offices. This was a few years after Chanos left his position at Gilford Securities, which had a few key clients, one of whom was Michael Steinhardt, son of “the biggest Mafia fence in America.”

In the 1990s, five Gilford Securities traders–Chester Chicosky, Todd M. Nejaime, Lawrence Choiniere, Kevin P. Radigan, and William P. Burke – were arrested as part of Operation Uptick, the biggest Mafia bust in FBI history. Although some of these traders had left Gilford by the time they were indicted, they were charged with crimes allegedly committed while they were still working for Gilford. Specifically, the Gilford traders were charged with accepting bribes from a Mob-run brokerage called DMN Capital, and for helping to manipulate stocks with a cast of characters that included ten Mafia soldiers and a former New York police detective.

I asked H. Robert Holmes, who was Chanos’s boss at Gilford, whether he had any comment on the  Mafia’s infiltration of his firm. He said, “I don’t know what you’re talking about? This is bullshit.” He also said he was completely unaware that any Gilford traders had been arrested for accepting bribes and manipulating stocks with a large cast of Mafia goons and Mafia associates. That is, he claimed to be unaware of an event in his company that had been vigorously publicized by the FBI and the SEC.

By the time of Operation Uptick, of course, Chanos was no longer with Gilford. He was then a “prominent investor” – a member of the world’s most powerful network of financial operators, a network whose members are portrayed by the press as geniuses and heroes, never mind that this is the very network that has been destroying companies since 1980s – the very network that is (as should by now be apparent) comprised of the criminal mastermind Michael Milken and his Mafia-connected cronies.

As a member of this network, Chanos is, of course, on close terms with Jim Cramer, the CNBC personality who once planned to run his hedge fund out of Milken co-conspirator Ivan Boesky’s offices. It was owing to Cramer that Chanos became the largest donor to the political campaigns of New York Governor Eliot Spitzer, who was Cramer’s best friend and former college roommate. When Spitzer was caught with a hooker and forced to resign, it emerged that the hooker, “Ashlee Dupre”, had been living rent-free in Chanos’s beachside villa. Ashlee called Chanos “Uncle Jim.”

I tell you all this only to show the relationships that bind some particularly destructive short sellers and miscreants. It is this network that attacked the big banks last year, helping trigger the collapse of the financial system. And members of this network are the most “prominent” players in the biotech space.

One of those players is Jonathan Aschoff, the doctor-impersonating fraud who was, in the Spring of 2007, making the long-shot prediction that the FDA would not approve Dendreon’s “dangerous” treatment for prostate cancer. As we know, Aschoff previously worked for Sturza’s Institutional Research, run by a fellow who faced multiple SEC investigations (none of which led to any action) for allegedly publishing false information to help short sellers (such as Michael Steinhardt) manipulate stocks.

Under the strain of those investigations, Sturza shut his operation down. Now Sturza helps manage a hedge fund called Ursus. Ursus is owned by Jim Chanos, the Steinhardt protégé who housed the hooker of Cramer’s former college roommate, Eliot Spitzer.

Ursus specializes in shorting biotech stocks. There are Wall Street brokers who say that Ursus was short selling Dendreon while Sturza’s disciple, Jonathan Aschoff, was bashing the company and others in this network were looking to cash in.

But it is difficult to know for sure whether Ursus was selling short. It is difficult to know who was responsible for flooding the market with at least 9 million (and maybe tens of millions of) phantom Dendreon shares. It is difficult to know because the SEC does not require hedge funds to disclose their short positions, and does not release information on who is selling stock and failing to deliver it.

As far as the SEC is concerned, it’s all a big secret.

But we do know that Aschoff was predicting that Dendreon’s stock would sink to $1.50 right after Dendreon received an overwhelmingly positive vote from the FDA’s advisory panel, and right before Dendreon was derailed by some singularly strange occurrences. In addition, we know that at this time only ten hedge funds on the planet held large numbers of Dendreon put options (bets against the company), and that at least seven of those hedge funds can be tied to the famous criminal Michael Milken or his close associates.

Michael Milken, of course, is not just a criminal, but also a “prominent philanthropist” whose Prostate Cancer Foundation has received much acclaim from the world at large. But, as we will see, it was not just those seven hedge funds, but Michael Milken himself, who stood to earn a tidy profit from the strange occurrences that were to derail Dendreon, a company with a promising treatment for prostate cancer.

* * * * * * * *

To be continued…Click here for Chapter 7.

If this article concerns you, and you wish to help, then:
1) email it to a dozen friends;
2) go here for additional suggestions: “So You Say You Want a Revolution?

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Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 5 of 15)

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Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 5 of 15)



What follows is PART 5 of a 15-PART series. The remaining installments will appear on Deep Capture in the coming days, after which point the story will be published in its entirety.

Click here to read PART 1

Click here to read PART 2

Click here to read PART 3

Click here to read PART 4

Where we left off, we had learned that CNBC’s Jim Cramer had declared Dendreon to be a “battleground stock.” We had also learned that Dendreon was later attacked by naked short sellers who illegally flooded the market with phantom stock, right at the time when the FDA’s advisory panel delivered the fantastic news that it had voted in favor of approving Dendreon’s prostate cancer treatment.

We had learned further that at the end of March, 2007 – right after the FDA’s vote, and right before Dendreon was to be derailed by some strange occurrences — only ten hedge funds on the planet held significant numbers of Dendreon put options (bets against the company). At least seven of those hedge funds are quite “colorful.”

We have learned the identities of four of the seven “colorful” hedge funds. Now we hear more from Jim Cramer, and discover the identity of the fifth hedge fund that stood to profit from the demise of Dendreon and its promising treatment for prostate cancer…

* * * * * * * *

“SELL! SELL! SELL!” shouted Jim Cramer on March 28, 2007.

The CNBC “journalist” assured his viewers that the FDA advisory panel would vote that Dendreon’s treatment for prostate cancer was neither safe nor effective (notwithstanding the fact that the FDA had given the treatment “priority review” status because Provenge had shown strong trial results and was destined for critically ill patients).

On the following day, when the FDA advisory panel voted unanimously that Provenge was safe and overwhelmingly that it was effective, Cramer said, once again, that he had made “a mistake.” By way of explanation, Cramer said that he had mixed up Dendreon’s treatment, Provenge, with Provaisic, the fictional drug from the 1993 Hollywood movie “The Fugitive,” in which Harrison Ford plays a doctor trying to expose an evil pharmaceutical company called Devlin MacGreggor.

But Cramer, again drawing upon his vast medical expertise, continued to insist that Provenge remained unlikely to gain FDA approval.

By this time, a number of bloggers and stock market observers had noted that Cramer, a former hedge fund manager, had recently made a video available to a limited number of high-paying subscribers to his financial news website, TheStreet.com. In this video, Cramer advised his viewers – mostly Wall Street operators — to illegally drive down stock prices.

“Maybe you need $10 million capital to knock [a stock] down,” Cramer had said. “It’s a fun game and it’s a lucrative game…By the way, no one else in the world would ever admit that, but I don’t care…Now, you can’t foment…You can’t create yourself an impression that a stock’s down. But you do it anyway because the SEC doesn’t understand it…This is just actually blatantly illegal…But I think it’s really important to foment…You get [the CNBC reporter]…talking about it as if there’s something wrong [with the stock]…Then you would call The Wall Street Journal and get the bozo reporter…if you’re not doing it maybe you shouldn’t be in the game.”

The bloggers and observers who pointed to this video as evidence of Cramer’s skulduggery also noted that Cramer had once planned to run his hedge fund out of the offices of Ivan Boesky, the famous co-conspirator of the criminal stock manipulator Michael Milken. When Boesky was indicted, Cramer instead went to work with Michael Steinhardt, the Boesky-Milken crony and “prominent” hedge fund manager whose father was the “biggest Mafia fence in America” and who was financier for the fugitive billionaire Marc Rich, for whom Steinhardt later arranged a pardon from Bill Clinton.

By 2007, I had (while working as an editor for the Columbia Journalism Review) spent close to a year  studying the work of Cramer and a clique of influential journalists, most of whom had previously worked in high-level positions for Cramer’s website, TheStreet.com. I had discovered that the existence of short-side stock manipulation was denied by these journalists  (including Cramer, when he was communicating to general audiences, as opposed to when he was explaining to select groups of Wall Street operators how to do the thing he was publicly saying does not exist).

The journalists were especially keen to whitewash the crime of naked short selling, and given the threat that this crime posed to so many companies and the very stability of the financial system, it seemed to me that these journalists were engaged in a cover-up of immense proportions.

I had also discovered that these journalists routinely reported negative stories that contained bias, falsehoods, and well-timed “mistakes.” The vast majority of these stories were sourced from one particular network of hedge fund managers and miscreants. Invariably, these stories were about public companies that the hedge fund managers had sold short. And, invariably, these stories were aired right at the time that the target companies were getting bombarded with phantom stock.

Moreover, most of the hedge funds and miscreants in this network seemed, like Jim Cramer, to be connected in important ways to the criminals Michael Milken and Ivan Boesky, or their close associates. One of them was David Rocker.

Last year, Rocker’s hedge fund, Copper River (previously known as Rocker Partners), was shut down. Soon after, Carol Remond, a Dow Jones Newswires journalist who had close ties to Rocker, revealed that Rocker’s most important trading strategy had been to abuse the SEC exemption allowing market makers to engage in naked short selling (see “Carol Remond Tells a Joke She Doesn’t Get” for details) .

According to Remond, when the SEC closed this loophole, making it more difficult for Rocker Partners/Copper River to work with option market makers to manufacture phantom stock, the hedge fund went out of business. What she left unexplained, however, was that such exploitation was illegal. Therefore, Dow Jones reporter Carol Remond was in fact bemoaning the tragedy that a hedge fund had to close because it was not able to break the law anymore.

Rocker had previously worked as a top trader for Michael Steinhardt, the Boesky and Genovese Mafia crony whose offices had also housed Jim Cramer’s hedge fund. In later years, Rocker became the largest outside shareholder in Cramer’s financial news website, TheStreet.com.

In 2006, staff at the Securities and Exchange Commission suspected that Rocker and other hedge funds in his network were working with an “independent” financial research shop called Gradient Analytics and a select group of journalists to disseminate false information in order to drive down stock prices. The SEC issued subpoenas to Rocker, Gradient, TheStreet.com, Jim Cramer, Herb Greenberg (a founding editor of TheStreet.com who was then working for MarketWatch.com and CNBC), and that Dow Jones reporter, Carol Remond.

cramersubpoena2photo Michael Milken, 60,000 Deaths, and the Story of Dendreon (Chapter 5 of 15)In response, Cramer famously vandalized his subpoena on live television. Other journalists (most of them tied to Cramer) went berserk, claiming that Rocker had done no wrong and the SEC’s subpoenas had violated the media’s first amendment right to free speech. Soon after, the SEC said it would not enforce the subpoenas it had issued to journalists. And a year later, the commission dropped its investigation of Gradient and Rocker.

In May of 2006, shortly after the SEC announced that it would not enforce its subpoenas, a recently dismissed SEC attorney named Gary Aguirre wrote an eye-popping letter to the United States Congress in which he stated that he had led an SEC investigation into allegations of rampant naked short selling and insider trading at a hedge fund called Pequot Capital.

Aguirre said that his rank-and-file colleagues at the SEC believed that Pequot’s naked short selling had the potential to “seriously injure the financial markets,” but before he could complete his investigation, Aguirre’s superiors at the SEC, captured by powerful Wall Street interests, had fired him for political reasons.

Since then, a U.S. Congressional Committee has investigated and issued a lengthy report noting that there seemed to be evidence that Pequot was indeed engaged in “stock manipulation” (naked short selling). As for the SEC’s failure to fully investigate Aguirre’s allegations, the Congressional Committee concluded that the “picture is colored with overtones of a possible cover-up.”

The SEC inspector general also issued a report that backed up all of Aguirre’s claims.

Late in 2008, the SEC re-opened its investigation into Pequot Capital. And in May, 2009, Pequot manager Art Samberg shut down the fund, noting that the investigations had made the “situation increasingly untenable for the firm and for me.”

But from what is known publicly, the SEC is only looking into insider trading at Pequot. As for Aguirre’s investigation into Pequot’s alleged naked short selling – the crime that had the potential to “seriously injure the financial markets”—the SEC has said nothing.

Remember, as far as the SEC is concerned, illegal naked short selling is a big secret – “proprietary trading strategies.”

At any rate, it is worth noting that Cramer’s financial news website, TheStreet.com, had several founding partners. One was Cramer. Another was Marty Peretz, a Milken-Boesky crony who was–along with Marc Rich, Boesky, and the Genovese Mafia—a key limited partner of Michael Steinhardt (the hedge fund manager who gave Rocker his start and also incubated Cramer’s hedge fund).

A third founding partner of TheStreet.com was famously alleged to have engaged in rampant illegal naked short selling, just as David Rocker, once the largest outside shareholder of TheStreet.com, was reported (by Dow Jones reporter Carol Remond, unwittingly) to have engaged in rampant illegal naked short selling in cahoots with options market makers.

The name of this third founding partner of Cramer’s website, TheStreet.com, was…Pequot Capital, the hedge fund whose alleged naked short selling and insider trading were the targets of Gary Aguirre’s SEC investigation — the investigation that got quashed, leading to one of the greatest scandals in SEC history.

So it goes almost without saying that Pequot Capital was the fifth of seven “colorful” hedge funds that held large numbers of put options in Dendreon at the end of March, 2007 – right at the time when Cramer was shouting “SELL! SELL! SELL!” and criminal naked short sellers were flooding the market with at least 9 million phantom Dendreon shares.

* * * * * * * *

In addition to Cramer’s rants, there were other indications that Dendreon might be in the sights of some powerful players, and might therefore be in trouble – despite the fact that its treatment for prostate cancer seemed to be on the fast track to FDA approval.

On March 22, 2007, CNBC’s Mike Huckman wrote in a blog that he remembered “sitting at a table at a rare Dendreon analyst meeting a few years ago and someone from a Connecticut hedge fund leaned over and whispered in my ear, ‘It [Provenge] doesn’t work.’” Huckman made no indication of questioning whether the hedge fund might have had a motive for saying that.

There were odd mutterings from other quarters as well. On the day before the FDA’s advisory panel met to vote on Provenge, Matthew Herper of Forbes magazine published an article casting doubts on Dendreon’s prospects. He wrote that “researchers, statisticians and Wall Street analysts are fiercely debating whether there is enough data about [Dendreon’s] radical new treatment.”

In fact, there was no “fierce” debate at all. For most Wall Street analysts, the calculation was rather simple. Given that Dendreon’s trials had shown that Provenge was safe, and given that the treatment was destined for end-stage patients (hence its “priority review” status), the advisory panel was likely to vote in its favor. In 97% of all cases, the FDA had followed the recommendations of its advisory panels. And when FDA advisory panels recommended approval for drugs destined for dying patients, the FDA had accepted its panels’ recommendations 100% of the time.

When the FDA approved treatments, the companies that developed them almost always saw their stock prices go up. So from the perspective of most Wall Street analysts, the future for Dendreon looked bright.

As for those “researchers and statisticians,” most agreed that Provenge was not only safe, but also effective. However, a small number of researchers and statisticians were, along with the hedge funds, whispering in reporters’ ears. They were saying that Provenge doesn’t work.

But there were excellent reasons to doubt the words of the researchers who were critical of Provenge. And, as we will see, the most prominent of them were preparing (with the possible connivance of a criminal “philanthropist” named Michael Milken and seven “colorful” hedge fund managers) to cash in on one of the stranger occurrences in the FDA’s 80 years of existence.

* * * * * * * *

To be continued….Click here for Chapter 6

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Strange Occurrences, and a Story about Naked Short Selling


Evidence suggests that Bernard Madoff, the “prominent” Wall Street operator and former chairman of the NASDAQ stock market, had ties to the Russian Mafia, Moscow-based oligarchs, and the Genovese organized crime family.

And, as reported by Deep Capture and Reuters, Madoff did not just orchestrate a $50 billion Ponzi scheme. He was also the principal architect of SEC rules that made it easier for “naked” short sellers to manufacture phantom stock and destroy public companies – a factor in the near total collapse of the American financial system.

* * * * * * * *

I don’t know why, but this seems like a good time to tell you a little about my personal history. Along the way, I’ll mention a murder, two suicides (or “suicides”), a punch in the face, a generous bribe, three Armani suits in bar, and a “prominent” billionaire who might know something about a death threat and a Russian matryoshka doll.

But actually, this story isn’t about me. It’s about Patrick Byrne, the fellow who got me into this mess.

* * * * * * * *

The story, like so many others, begins on August 12, 2005 – the day that Patrick Byrne, the CEO of Overstock.com and future reporter for Deep Capture (a leading investigative news outfit), delivered a famous conference call presentation entitled, “The Miscreants Ball.”

To the 500 Wall Street honchos who listened in to this conference call, Patrick said that a network of miscreants was using a variety of tactics – including naked short selling (phantom stock) – to destroy public companies for profit. He said this scheme had the potential to crash the financial markets, but that the SEC did nothing because the SEC had been compromised – or “captured” – by unsavory operators on Wall Street.

Patrick added that he believed the scheme’s mastermind — “just call him the Sith Lord” — was a “famous criminal from the 1980s.”

In January 2006, I was working as an editor for the Columbia Journalism Review, a well-respected ( if somewhat dowdy) magazine devoted to media criticism. Patrick had claimed that some prominent journalists were “corrupt” and were working with prominent hedge funds to cover up the naked short selling scandal, so I called to discuss.

Patrick picked up the phone and said: “Chasing this story will take you down a rabbit hole with no end.” He said that the story had it all – diabolical billionaires, phantom stock, dishonest journalists, crooked lawyers, black box organizations on Wall Street, and a crime that could very well cause a meltdown of our financial system.

Not only that, Patrick said, but “the Mafia is involved, too.”

Well, Patrick seemed basically sane. I decided to write a story about the basically sane CEO who was fighting the media on an important financial issue while harboring some eccentric notions about the Mafia.

I figured it would take a week.

* * * * * * * *

Months later, my desk was buried under evidence of short seller miscreancy, I had done nothing but investigate this story since the day I first called Patrick, and I had just gone to a topless club to meet a self-professed mobster who told me all about a stockbroker who had peddled phantom shares for the Russian Mafia and the Genovese organized crime family.

The stockbroker had taken a bullet to the head – execution-style. And the mobster said he knew who did it.

* * * * * * * *

By this time, Patrick had long-since amended his “Sith Lord” analogy to say that the short selling schemes probably had multiple masterminds with a shared ideology – “like Al Queda.”

Be that as it may, my investigation now had two areas of focus. The first was the Mafia. The second was a network of crooked journalists, investors, short sellers, and scoundrels – a great many of whom were connected in important ways to two famous criminals or their associates.

The famous criminals were Michael Milken and Ivan Boesky.

In the 1980s, Milken and Boesky were among the most “prominent” investors in America. They were also the main protagonists in what James B. Stewart, a Pulitzer Prize winning reporter for The Wall Street Journal, later called “the greatest criminal conspiracy the financial world has ever known.”

In 1989, Milken was indicted on 98 counts of securities fraud and racketeering. He did some time in prison. Upon his release, he revved up a public relations machine that was as effective as it was ruthless (Milken’s detractors had their reputations torn to shreds).

Nowadays, the press generally refers to Milken as a “prominent philanthropist.” Often, he is hailed as the “junk bond king” – a financial “genius” who “fueled economic growth” and “built great companies” by “revolutionizing” the market for high-yield debt (junk bonds).

Boesky, who helped Milken destroy great companies, was indicted on several counts of securities fraud and stock manipulation. After his release from prison, in the early 1990s, he reportedly went to Moscow to build relationships with the Russian oligarchs who were then looting the former Soviet Union.

After that, nobody heard much from Boesky.

* * * * * * * *

In the spring of 2006, I doubted that Milken or Boesky had committed any wrong-doing since the 1980s. But it was clear that many of the people in their network were up to their same old tricks – destroying public companies for profit.

I did not think that Milken or Boesky worked for the Mafia – that would be crazy. But it was clear that the Mafia was destroying public companies for profit. And it was clear that a surprising number of people in the Milken-Boesky network did have ties to the Mafia.

At any rate, the “prominent investors” in this network seemed to have many schemes.

Sometimes they seized a public company, fattened it with debt, stripped out its assets, pocketed its cash, and then killed the company off. This is what mobsters used to call a “bust-out.” In the old days, it was neighborhood wiseguys taking over local restaurants. In the 1980s, Milken and his crowd introduced the technique to the world of high-finance.

Other times, the “prominent investor” thugs acquired large stakes in a company. Then the thugs suggested to the company that they would go away only if the company were to buy back its shares at a hefty premium. In the 1980s, the Milken crowd referred to this as “greenmail.” Mobsters called it “blackmail” or “protection money.”

In still other cases, the “prominent investors” attacked the companies from the outside, employing tactics – threats, harassment, extortion – that seem straight from the Mafia playbook.

Whatever the specifics of the scheme, it was often the case that “prominent” short sellers who were tied to the “prominent investors” would eventually converged on the target companies and use a variety of equally abusive tactics either to destroy the companies or put them on the defensive.

While I do not have SEC data going back to the 1980s, the data for more recent years shows that most of the companies attacked by this network were also victimized by abusive naked short selling.

That is, somebody sold massive amounts of the companies’ stock and “failed to deliver” it for days, weeks, months – or even years – at a time.

* * * * * * * *

So back in 2006, I had begun to ask a lot of questions.

That’s when I had a strange encounter with three dudes in Armani suits.

The encounter occurred on a Thursday evening in a quiet, neighborhood dive bar, around the corner from my apartment, near Columbia University in New York – a neighborhood that does not often attract men in Armani suits. I was alone, having a beer and reading a book about Wall Street.

The Armani suits entered the bar and sat down next to me.

“Whatcha reading?” one said.

When I told him, he asked: “Anything in there about Ivan Boesky?”

“Yes,” I said, “he’s mentioned”

“Haven’t read it,” the man said.

He was silent for a few minutes. Then he laughed and announced that, by the way, he used to work for Ivan Boesky’s family. He said Boesky “is a real asshole – thinks he has so much money he can do what he wants. Hell, he might have killed people, for all I know…Heh.”

Armani shook his head. Then he said, “Hey, I got to tell you a funny story.”

This turned out to be a long and convoluted tale, the gist being that a fellow had wandered into the ladies underwear department at Saks Fifth Avenue. Apparently, this fellow thought it would be a good idea to peek into a dressing room where a lady was trying on a new pair of panties. But the lady’s husband caught the fellow and the husband happened to be packing some high-caliber weaponry, so he blew the fellow’s brains out, and now there was a big mess in the ladies underwear department.

“The guy was a pervert,” said Armani. “You know what I mean? There are some things you keep your nose out of. I would have killed the guy, too.”

With that, Armani stood up and said he was pleased to have met me.

I asked for his name. He said, “It’s John — John from Saks Fifth Avenue.”

And then he and his friends were out the door. The other two guys hadn’t said a word. None of them had bought drinks or shown any other reason for having entered the bar.

This occurred shortly after I began asking my first serious questions about Boesky. I had just met with a CNBC public relations man and I had told him that I was conducting a full-scale investigation of Boesky, and was interested in knowing more about Boesky’s ties to CNBC reporter Jim Cramer. I had determined that most of the journalists who were deliberately blowing smoke over the naked short selling issue were connected to Cramer. These included four of the five founding editors of TheStreet.com, Cramer’s online financial news publication.

Cramer, a former hedge fund manager, had planned to work out of Boesky’s offices in the 1980s. When Boesky was indicted, Cramer worked instead with Michael Steinhardt, whose biggest initial investors were Boesky, Marc Rich (later charged with tax evasion and illegal trading with Iran), Marty Peretz (co-founder, with Cramer, of TheStreet.com) and the Genovese organized crime family.

Steinhardt’s father, Sol “Red” Steinhardt, spent several years in Sing-Sing prison after he was a convicted by a New York prosecutor who described him as “the biggest Mafia fence in America.”

Also at this time, a central target of my investigation was a hedge fund called SAC Capital, colloquially known as “Sak.” That, of course, is somewhat different from “Saks Fifth Avenue.” It seemed doubtful to me that either Boesky or SAC Capital had sent the Armani-suits to threaten me.

Possibly, I thought, Armani had misrepresented his relationship with Boesky and Saks Fifth Avenue. Perhaps Armani worked for people who were concerned that I had begun investigating that execution-style murder.

Either that, or this was just one of those weird coincidences and there really was a former Boesky employee who’d found work in the brain-splattered ladies underwear department at Saks Fifth Avenue.

* * * * * * * *

My investigation continued and sometime later – on Halloween, 2006 – a guy sat down next to me at a book store. He said he’d seen me with one of my closest relatives (he was specific, but I’d rather not name the relative) and he thought I needed to be more concerned about the safety of this relative.

He said he didn’t mean to be intrusive, but he knew how hard it was to take care of relatives and he just wanted everyone to be safe.

Then another guy sat down at a nearby table, and slammed down a book. On the front cover of this book, in big bold letters, it said: “MAFIA.”

I became paranoid enough to retreat to the back of the book store. I told one of the clerks about the two guys, and I called some colleagues, who offered to send the police.

As soon as I hung up, one of the guys came up to me, smiled, and said he hoped that he hadn’t upset me. Then he left.

I told my friends not to call the police. It was probably just a strange coincidence.

Two years later, as my investigation deepened, I began receiving Internet messages from Sam Antar, a convicted felon who orchestrated the famous fraud at Crazy Eddie, the electronics retailer. In an upcoming story, I will describe Antar’s relationship with Michael Milken. I will also tell you more about the $250,000 in cash that Antar delivered to a Milken-funded entrepreneur who orchestrated a massive fraud with the Genovese organized crime family.

For now, though, I’ll just say that Antar’s messages to me have not been friendly.

In one, he wrote, “Mitchell: Do you remember what happened last Halloween?”

I had spent the previous Halloween interviewing Rotarians in Oklahoma about their Halloween canned food drive. The Halloween before that, I was in a book store where there was either a strange coincidence or a veiled death threat.

I sent Antar an email, asking what he meant. He did not reply.

* * * * * * * *

In November 2006, one of the hedge fund managers I was investigating appeared in my office and announced that he had become the primary financial backer of my department at the Columbia Journalism Review. Traditionally, the Columbia Journalism Review (a not-for-profit magazine) had been funded by large philanthropic foundations – not by hedge fund managers who were under investigation by the Columbia Journalism Review.

But now my salary would depend entirely on the beneficence of this hedge fund.

The hedge fund was called Kingsford Capital, and in upcoming stories, I will tell you more about this hedge fund.

I’ll tell you about Kingsford’s ties to naked short sellers.

I will tell you about the large sums of money that were offered to other journalists who had been working the naked short selling story.

I will tell you why it is significant that one of Kingsford Capital’s managers was Cory Johnson – a founding editor, along with Jim Cramer and the other dishonest journalists I was investigating, of TheStreet.com.

I will publish emails that shed light on Kingsford’s relationship with hedge funds that are tied to both SAC Capital and Michael Steinhardt, Cramer’s former office-mate.

In still other stories, I’ll tell you more about Steinhardt and his partners’ ties to the Genovese Mafia, Ivan Boesky, an angry Russian hooker, and a man who wanted the world to believe that he was dead.

I will also tell you about the former Genovese Mafia soldier who told a former manager of SAC Capital that he could make one of the manager’s business associates disappear in the Nevada desert. And I’ll tell you that the man who volunteered to commit this murder had once been hired to put a dead fish and a bullet hole in the car of a journalist who was investigating one of Michael Milken’s closest friends.

I’ll tell you all about it in upcoming stories.

But let me stress that I have no idea who was responsible for the strange things that occurred in 2006. That is to say, I know that Kingsford bribed the Columbia Journalism Review.

But as for the other strange occurrences – all I can say is that they were strange.

* * * * * * * *

Two days after I learned that Kingsford Capital and its cronies would be paying my salary while I finished my exposé on Kingsford Capital and its cronies, I had dinner with an economist who was exploring the naked short selling problem.

On my way home, I stopped in a café around the corner from my apartment. As I was putting on my coat to leave the cafe, a man grabbed me from behind and forcefully escorted me to the sidewalk. Outside, there were two more guys – not big guys, just regular looking fellows. They grabbed me, and the first guy delivered a single powerful punch to my eye.

I was stunned. When I finally held up my fists, the three men laughed and embraced me in a bear hug. Then they virtually carried me to the front stoop of my apartment, which was a block away. It seemed as if they knew that I lived there.

After brushing off my lapel, they said they were very sorry. They said they hoped I wasn’t offended, it wouldn’t happen again, but they were there for my own good – and, please, just “stay away from your Irish Mafia friend.”

Then they were gone. It all happened in about three minutes.

It occurred to me that this might have been just a random act of violence. It also occurred to me that the thugs might have bungled the message – that they had meant to say, “Just stay away from the Mafia and your Irish friend.”

Patrick Byrne (full name: Patrick Michael Xavier Byrne), with whom I was working extensively on the naked short selling story, is Irish. In interviews I had conducted for the story, many people had commented on Patrick’s Irishness. (In some Wall Street circles, it seems to be common for people to refer to others’ ethnicity – “Byrne, he’s an Irish guy, right?” or “The stock loan business, that’s the Italians.”)

In any case, I went to work the next day with a black eye. I said it was “just a bar fight.”

A woman in my office told me she thought it was “really cool” that I had been in a bar fight.

Later, Sam Antar, the convicted felon, posted an Internet message asking whether I “had ever been forcefully escorted out of a public building.”

As this had happened only once, I sent Antar an email asking if he was referring to the thugs who’d ambushed me in a café.

Antar did not answer my question. Instead, he quickly proceeded to write a blog saying that he had just received information that I had been “forcefully escorted out of the Columbia Journalism Review.”

* * * * * * * *

During the fall of 2006, Patrick Byrne had some strange experiences as well.

Somebody broke into Patrick’s home, and soon after, somebody broke into the home of a woman who was Patrick’s girlfriend at the time. Then somebody threw a pair of metal gardening shears through the window of the girlfriend’s restaurant.

Around the same time, Patrick’s then-girlfriend discovered that for some mysterious reason, her phone records were being sent to the home of a Russian man working for Goldman Sachs Execution and Clearing (formerly Spear, Leeds, and Kellogg – in its day, one of the most egregious naked short selling outfits on the Street).

I asked Goldman Sachs about this. I was told that the bank had investigated thoroughly and found no reason to believe that the Russian man, Elliot Faivinov, had obtained the phone records. (For anyone interested, the phone company can confirm that he did receive the phone records.)

At any rate, I have since learned that Goldman Sachs became a large donor to the Columbia Journalism Review sometime not long after Kingsford Capital announced that it would be paying my salary. Wall Street has never been so devoted to the dowdy world of media criticism.

As if all of this were not enough, one day in the fall of 2006, U.S. Senator Orrin Hatch invited Patrick to his home. As soon as Patrick entered the lobby of the apartment building, the Senator pulled him aside and said that he had credible information that Patrick’s life was in danger.

“You are up against some really nasty, vicious people,” the Senator said, “They will not hesitate to kill you.”

* * * * * * * *

Patrick kept on fighting.

As for me, I’d been investigating the Mafia, there’d been an execution-style murder, now there were these strange incidents, which might have been nothing, but getting beat up kind of freaked me out, and now I was staying up all night, squinting at my computer through my punched-in eye (which was black and blue, full of puss and swollen shut), trying to finish a story about a scandal involving the people who would now be directly paying my salary.

And so, maybe it isn’t all that surprising what happened next, which is that I snapped.

I couldn’t work anymore. I checked-out.

In the middle of November, a week or so after getting the Kingsford news, but still on perfectly good terms with my editors, I quit my job, and walked out the door.

Within a few days, I had shut down my New York apartment, and was on a plane to Chicago, where I planned to take some time off.

I had told my editor that I thought I might be killed. But I never specified, and I didn’t make an issue of the Kingsford Capital bribe until later. So I am hopeful that the good people at the Columbia Journalism Review never really knew that they were taking tainted money.

That said, my questions about this have gone unanswered.

* * * * * * * *

A few weeks later, Patrick accepted an invitation to meet an offshore investor in a greasy spoon diner in Long Island. They had never met, but over the previous year the man had fed Patrick bits and pieces of information about the workings of the phantom stock scam. The hope was that the man might have something more to say in person.

But that day at the diner, all he had was a message.

“I’ll make this quick,” the businessman said, with two other witnesses present. “I have a message for you from Russia. The message is, ‘We are about to kill you. We are about to kill you.’ Patrick, they are going to kill you. If you do not stop this crusade, they will kill you. Normally they’d have already hurt someone close to you as a warning, but you’re so weird, they don’t know how you’d react.”

In a later phone conversation with an associate of Patrick’s the man described how he received this message. He said he returned home one night and his wife told him there was a package on his desk. “And there was a beautiful little box, and inside was a matryoshka.”

Matryoshkas are those lacquered Russian dolls – the kind with multiple dolls of decreasing size inside of them.

“And I opened up the last matryoshka,” said the man, “and inside is an `F’ with a cross on it — which is from Felix…”

* * * * * * * *

A year later, I was working for a charitable service organization. Patrick called me to catch up. Pretty quickly, he was suggesting to me that I quit my job and return to the naked short selling story.

I thought about shopping the story around to magazines, but I never did. There was no way that the story could be told in a few magazine pages.

Moreover, the story represented the joint efforts of myself, Patrick, reporter Judd Bagley and many independent, volunteer researchers. This was an unprecedented collaboration, and it occurred to me that if this collaboration were to continue — as Deep Capture, the website — it could put the major news organizations to shame.

So I wrote the story – our story, filled with hard facts about a scandal.

The story that I wrote was not a magazine story. It was not a news story. It was 69 pages long, and it was “The Story of Deep Capture.”

But that was only half the story. There is much more.

For example, you do not yet know the name of the famous billionaire who might be able to tell us more about Felix, his matryoshka doll, the Russian Mafia, and the Genovese organized crime family.

* * * * * * * *

To be continued….

* * * * * * * *

Mark Mitchell is a reporter for DeepCapture.com. He has previously held writing and editing positions with the Wall Street Journal editorial page, Time Magazine in Asia, the Far Eastern Economic Review, and the Columbia Journalism Review. Email: mitch0033@gmail.com

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Was the United States Attacked By Financial Terrorists?
   2.The “Money Weapon” and a Jihad Bigger than Bin Laden
   3.Michael Milken and the BCCI Criminal Enterprise
   4.Michael Milken, the Mafia, and Some Powerful Hedge Funds
   5.The Russians, their Friends, and Bernie Madoff’s Bear Markets
   6.Man Financial and Al Qaeda’s Wash Trades
   7.The Bernie Madoff Cover-Up, the Blind Sheikh, and the RLevi2 Algorithmic Market Manipulation Machine
   8.Al Qaeda, Iran, and Some Mafia-tied Agents of Economic Sabotage
   9.The Collapse of MJK Clearing, a Few Loose Nukes, and a Lot of Self-Destruct CDOs
   10.The Mafia, the Markets, and a Message from Russia
   11.Michael Milken’s Market Manipulation Club and Al Qaeda’s Big Bank
   12.Russian Spies, Rogue States, and the Manipulation of the American Markets
   13.The Collapse of Refco; the Take-down of National Heritage Life; and the Day the Mafia-Jihadi Nexus Discovered Penson Financial
   14.How the Russian Mafia Captured the DTCC — and the American Financial System
   15.Ali Nazerali in Aruba, and an Al Qaeda Financial Weapon Called PTech
   16.The Deep Capture of America, and Some Clues as to the Once and Future Cataclysm
   17.A Brief Note on the Unimaginable
   18.Penson Financial’s Strange Clientele
   19.How the Mafia-Jihadi Nexus Made Penson Financial the Biggest Brokerage on the Planet
   20.Uhm, Mr. President, We Might Have a Problem…
   21.How a Small Gang of Organized Criminals Wrecked the World
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