Dillon Read & Co. Inc.
And the Aristocracy of Stock Profits
http://www.scoop.co.nz/stories/HL0708/S00302.htm#2 Chapter 14: Enforcement Terrorism — 1997
By the time Bill Clinton and Al Gore were sworn in for their second term in January 1997, the first wave of
investigation and smear campaign had failed to do anything other than affirm that The Hamilton Securities Group was
doing a great job for the government and the government team at FHA was doing a great job for citizens. Consequently,
1997 settled into the first of eight grinding years of enforcement terrorism — the inexhaustible resources and often
invisible weaponry that the “Sheriff of Nottingham” uses to exhaust the target's resources and to turn over
investigation personnel, judges and false witnesses who failed to frame the target while throwing more “mud” up on the
judicial, whisper campaign and media “wall” looking for anything that might stick.
To get a sense of the level of professionalism involved, the HUD OIG started to interview all of Hamilton’s employees
and HUD staff, with many interviews starting off with questions regarding my personal sexual habits. This is a technique
used to start false rumors and destroy businesses when the absence of evidence gives enforcement teams nothing to go on.
As described by one member of the HUD OIG staff, when there is no evidence of any wrongdoing, the intimation of certain
sex practices can still get an indictment from a Washington, DC grand jury. My feedback indicated that the Hamilton
employees overwhelmed them with facts and did not fall prey to the smear tactics.
The turnover started at the top. Secretary of HUD Henry Cisneros left HUD to face charges tried before Judge Stanley
Sporkin that he had lied to the FBI regarding how much money he had given his mistress. I had worked at HUD when the
allegations regarding pedophilia at the White House and the so-called “Franklin Cover Up” had exploded onto the front
page of the Washington Times. One of my deputies had taken me aside when I was being pressured by Kemp to do illegal
funding awards to warn me that Kemp was involved in sexual activities this scandalous.[65] The notion of Cisneros facing criminal charges for legal financial transactions between consenting adults while Kemp
had been chosen by the Republicans to run for Vice President seemed a bit upside down. When you considered that Hamilton
was being run out for ensuring that the government got fair market value for its assets, poor people had an opportunity
to earn money legally without government subsidies or engaging in narcotics trafficking and street crime and communities
had access to government financial information, things made more sense.
If anything, the wave of investigatory assaults on Hamilton and the team at FHA seemed to be a pretext for Cuomo to take
over the agency and convert it to the service of enforcement, gentrification and housing bubbles. Cuomo had many ties to
the enforcement community. His father had been Governor of New York, his ex-wife Kerry (they were separated in 2003 and
subsequently divorced) was a Kennedy, whose father Bobby Kennedy had been Attorney General and whose uncle, Senator Ted
Kennedy from Massachusetts, home of Harvard University, was a senior member of the Senate Judiciary Committee.
If Cuomo was going to rise to higher political office and help his close ally Al Gore become President, he needed to get
credit for being a leader in re-engineering government. He needed to do it in a way that attracted the support of $500
billion–$1 trillion of annual money laundering flowing through the U.S. financial system. If the Bush sons as Governors
could be expected to have Texas and Florida sewn up, that meant Al Gore, Hillary Clinton and the Democrats would need to
win the money and votes in California and New York during the 2000 campaign. It turns out, this meant getting rid of the
people who were leading authentic re-engineering. In April 1997, Hamilton received notice that our ongoing contract
would be rebid — a process expected to take some time. In the meantime, Cuomo was competing with the HUD OIG to see who
could integrate more revenue generating enforcement goals, War on Drug activities and DOJ partnerships into HUD programs
and budgets faster.
Jamie Gorelick left the Department of Justice in January and then moved to Fannie Mae as a Vice Chair — a title held by Franklin Raines who had joined the Administration as head of the Office of Management & Budget (OMB) in the fall of 1996. Gorelick at Fannie Mae and Raines at OMB (later to return to Fannie Mae as Chairman) were to play leading roles with former Goldman Sachs partner Robert Rubin, Larry Summers and former (and subsequent) Arnold & Porter partner Jerry Hawke (whose son, Dan Hawke, was Ervin's attorney) at the U.S. Treasury, Alan Greenspan at the Federal Reserve, and Andrew Cuomo at HUD in engineering the largest housing and mortgage bubble in history. They shared a mutual silence as $4 trillion went missing from HUD, DOD and other government accounts for which the U.S. Treasury and New York Federal Reserve Bank and its member banks — as depository for the U.S. Treasury — were responsible. [84] Gorelick would later leave Fannie Mae to become a partner of Wilmer, Cutler & Pickering, then led by Lloyd Cutler who had served as White House Counsel in the Clinton Administration after the death of Vince Foster. Cutler had been a board member of NHP, Harvard's HUD property management company.
Given the efforts underway with numerous legislation and treaties designed to intentionally shift American jobs abroad,
the simultaneous effort by the same governmental and financial system leadership to encourage Americans to take on
increasing amounts of debt without warning them that their income was likely to fall brought new meaning to the old
expressions “fraudulent inducement” and “predatory lending.” As a result, Americans lived beyond their means. With many
using their home equity to maintain their standards of living, equity slowly and invisibly drained out of moderate and
middle income communities into private hands through Fannie Mae and other large financial institutions that led the
explosion in the mortgage and mortgage securities markets.
In October 1996, Jeffrey H. Smith rejoined Arnold and Porter after serving as General Counsel of the Central
Intelligence Agency from May 1995 to September 1996. Director of the CIA John Deutch resigned in December 1996 after his
embarrassing confrontation with Mike Ruppert regarding CIA drug dealing in the now infamous town hall meeting in Los
Angeles.[66] At the meeting, Deutch committed publicly to an investigation by the CIA’s Inspector General, Frederick Hitz, of the
"Dark Alliance" allegations regarding CIA complicity in narcotics trafficking. The publication of this report in two
volumes was to have an impact on the course of events in 1998.[67]For her service to the U.S. intelligence community, Jamie Gorelick received a Director of Central Intelligence Award
from the CIA in 1997.[68]
The most significant turnover impacting The Hamilton Securities Group was behind closed doors. It was the transfer of
the qui tam lawsuit (still filed in secret and unknown to us) from Judge Charles Richey who had warned that he was
reluctant to give DOJ extensions of the seal (which kept the lawsuit secret) without evidence of wrongdoing. According
to press reports, Judge Richey contracted a fast-acting cancer and died. Ervin’s qui tam was turned over in early 1997
to Judge Stanley Sporkin, the former General Counsel of the CIA when the Memorandum of Understanding between DOJ and CIA
had been crafted.[69]
The dirty tricks employed by Judge Sporkin, DOJ, HUD OIG and Ervin’s attorneys throughout the qui tam have been
described in more details in other articles. [70]
Highlights include:
Sporkin insisted that he had never received filings by The Hamilton Securities Group, even though my attorneys reported
to me that they had a receipt of delivery signed by his office.
The allegations in the qui tam lawsuit tracked allegations made in a separate filing by Ervin against HUD that was
filed before another judge in Federal District Court. In sealed hearings in the qui tam, DOJ attorneys for years argued
that there was real merit to the allegations, which justified more time for them to investigate. In open court in the
other action, DOJ attorneys took the position that the allegations were baseless. Hence, DOJ attorneys took opposite
positions in the two courts — one open and one in secret — and Sporkin supported these actions. The transcripts show the
DOJ attorneys reminded him that they could not consolidate the case under one judge because that would prevent them from
taking opposite positions in the two cases.
The public document was used by HUD OIG and private parties to lobby Congress and the media to smear Hamilton. One
reporter from the Washington Post told me that the HUD Inspector General had personally assured them that Hamilton was
guilty of criminal violations and that John Ervin had mailed documents to them that could fill up half an office, floor
to ceiling. She said that she believed that the Washington Post was only one of many publications and she only one of
many, many reporters who had been the target of such a mailing campaign. She reported that in late 1997, Ervin had a
staff of 17 people at Ervin & Associates working full time on the litigation.
Despite no evidence of any wrongdoing brought forward by Ervin as well as after multiple investigations and full access
to all the parties and documents needed for years by the government, Sporkin nonetheless extended the seal (by law a qui
tam authorizes only a 60 day investigation) into a four-year fishing expedition. This ended only when my colleagues and
I launched a website in 2000 with the story of what was happening and made hundreds of supporting documents accessible
through the Internet. When, after five years, transcripts of Sporkin’s hearings were unsealed, critical transcripts were
mysteriously missing.
Under the qui tam statute, if the party accused of wrongdoing is subpoenaed, they are required to be informed that they
are a target of a qui tam, even though the complaint is still under seal. In our case, DOJ and Sporkin took the position
that DOJ could circumvent this disclosure provision by delegating the subpoena issuance to HUD OIG.
My favorite Sporkin quote was his retort from the bench when one of our attorneys pointed out that the law and a recent
Supreme Court case clearly indicated that a filing we had made in Superior Court could not be moved over to Sporkin’s
court and control in Federal District Court — that Sporkin had no legal right or basis to do what he was doing. Sporkin
said something to the effect of “I disagree with the law and if you have a problem with that, take it up with Congress.”
When it comes to describing the treatment of The Hamilton Securities Group and myself by Judge Sporkin and DOJ and HUD attorneys, it is essential to underscore how lucky I have been. I had the knowledge and control to ensure that Hamilton was run according to very high standards. Hamilton had been blessed with a very strong team — starting with an outstanding Chief Financial Officer and excellent contract leadership for our work at HUD. I had an excellent reputation in the marketplace. I had personal wealth and family support to ensure that I had attorneys, food, clothing and shelter. With the presence of a strong legal team and resources over a long period, many private and public witnesses and honest officials in government and the judicial system were able to help — often at great risk to themselves. I had a wonderful church and tremendous spiritual support. And over time I connected with thousands of people around the world trying to illuminate corruption and build community. So I am alive, I am fully intact and I am not alone. That is more than I can say about the millions of children and innocent adults worldwide who have been destroyed, killed and incarcerated by the drug running, weapons trading and cover ups made possible with the help of the same type of extraordinary legal and harassment skills I faced. Among them was Gary Webb, who died in December 2004 from gunshot wounds to the head — ruled a suicide.
With Jamie Gorelick gone from DOJ, much of the work at DOJ continued under the jurisdiction of Frank Hunger, Al Gore’s
brother-in-law, who was head of the civil division, and the new Deputy Attorney General, Eric Holder. Holder had come
over from the Washington, D.C. U.S. Attorney’s office which was the lead office with the day-to-day lead responsibility
for DOJ on Ervin’s qui tam. Holder continued the policies of support for Operation Safe Home, the War on Drugs and
prison privatization and helped arrange Marc Rich's pardon at the end of the Clinton Administration before joining
Covington & Burling. Frank Hunger was also to join Covington & Burling after helping run Al Gore's unsuccessful presidential campaign in 2000.
Al Gore’s former chief of staff Jack Quinn resigned as White House Counsel at the end of 1996 and returned to his old
law firm, Arnold & Porter. He was replaced by former (and later) Covington & Burling partner Charles Ruff in early 1997. (Quinn was later to return to visibility when he assisted the Gore campaign
in 2000 and helped to engineer Arnold & Porter client Marc Rich’s White House pardon.) [71] Ruff, a former Watergate prosecutor and top Justice Department official was the Washington D.C. Corporation Counsel who
had critical background to help the Clinton Administration engineer the federal takeover of many aspects of the
Washington, D.C. government, including the local courts and prison system. The former Assistant U.S. Attorney, Judith
Hetherton, who was leading the Hamilton investigation as HUD OIG General Counsel had worked for Ruff. Ruff, like
Gorelick, had served as President of the D.C. Bar Association. After her efforts to frame The Hamilton Securities Group
failed, Heatherton became staff to the Ethics Committee at the D.C. Bar Association.
The federal takeover of the District of Columbia began in August 1997 with the Balanced Budget Act and the National Capital Revitalization and Self Government Improvement Act of 1997. This was the beginning of a wave of gentrification in the District, with easy mortgage finance encouraging people to move back in from the suburbs or young people and immigrants to buy new homes. The law also provided for private prison capacity that would result in, among other things, a request for proposal by the Federal Bureau of Prisons in February 1998 that Cornell would win in 1999 for 1,000 people for ten years, or a total award of $342 million. In a significant leadership position was Senator Lauch Faircloth, a Republican retired hog farmer from RJR's home base of North Carolina, who as chair of the DC appropriations subcommittee had taken a significant interest in demanding investigations of Hamilton Securities and the HUD loan sales. The Federal takeover was a pork fest for HUD real estate developers under Andrew Cuomo’s leadership. The flood of developers cashing in on HUD Hope VI projects, with Scott Nordheimer in a leading position was well underway.[72]
While the HUD Operation Safe Home swat team round ups continued to create the need for private prison capacity at
taxpayer expense,[73] and government officials and Wall Street board members played musical chairs, inventing new ways of handing out
contracts and financing the housing bubble, private companies were cashing in on their resulting good fortune:
Cornell Corrections increased their revenues and capacity thanks to DOJ’s Federal Bureau of Prison and several state
governments.[74]
Dillon Read exercised their options to purchase additional shares in Cornell Corrections.
In the summer of 1997, Dillon Read’s partners and investors, led by John Birkelund, sold Dillon Read to the Swiss Bank
Corporation, which merged the following year with UBS, the largest Swiss bank.
With HUD policies reversed by Cuomo to those in favor of traditional private and not-for-profit real estate
constituencies, Harvard Endowment and Pug Winokur’s Capricorn Investment sold NHP, the large HUD property manager to
AIMCO, a large Denver HUD property manager.
Pug Winokur’s firm Capricorn Holdings, an investor with Harvard in NHP, a leading HUD property management company, sold
a significant portion of their controlling position in DynCorp, an important HUD and DOJ contractor, with Pug stepping
down from Chairman of the Board of DynCorp to remain a member of the board and Chairman of the Compensation Committee,
the board committee that recommends compensation for senior management as well as compensation policies for the
corporation.[75]
*****# # #*****
Dyncorp
A few words are appropriate to describe DynCorp and it’s former Chairman and lead investor, Herbert S. “Pug” Winokur.
Pug and his investment operation Capricorn Holdings were later to come under scrutiny when Pug resigned from the Harvard
Corporation board at a time of controversy regarding his role as board member and chairman of the Finance Committee of
Enron. Pug was serving on the board when Enron went bankrupt, after a period in which Harvard Endowment (where Pug was
also on the board) was aggressively and profitably selling the stock. This raised questions as to whether the Endowment
had the benefit of “insider information.”
Pug’s company Capricorn Holdings was based in Greenwich Connecticut. He and John Birkelund were long time board members
of NacRe, a reinsurance company based in the Greenwich area that Dillon had been instrumental in helping to start.
Breaking with the pattern of Dillon leaders being from New Jersey, John Birkelund lived in Connecticut and seemed very
much part of the group in and around Greenwich. This group included Robert G. Stone, Jr., considered a leading light for
many years behind the Harvard Endowment, particularly its oil and gas portfolio that invested in Harken Energy, a
company made famous by George W. Bush's role and stock profits. Like many other people in this story, both Birkelund and
Winokur shared membership in the Council on Foreign Relations.
When Capricorn Holdings reduced its investment position in 1997, DynCorp appeared to be doing well. In addition to
significant information systems contracts and subcontracts for DOJ and HUD, including lead contractor with a $60 million
per year contract on the DOJ Asset Forfeiture Fund (working with the U.S. Marshals who manage forfeited assets for DOJ’s
Asset Forfeiture Fund), DynCorp won new systems and litigation support contracts from DOJ in 1995 and 1996. This
included the Justice Consolidated Network (J-Con) contract to run the consolidated network systems for parts of Justice.
According to Inslaw President Bill Hamilton, DynCorp had been one of the successor contractors on managing the PROMIS
system after DOJ had stolen it from Inslaw.
One of the contractors chosen with DynCorp to provide litigation support to DOJ was CACI, the leading provider of
Geographic Information Systems to the federal government. Richard Armitage, a high-ranking official at Defense during
the Reagan Administration and at the State Department during the Bush II Administration, was a consultant and member of
CACI’s board from 1999 to 2001.
After DynCorp personnel were later the subject of several lawsuits related to pedophilia and sex slave trafficking in
partnership with local mafia in Eastern Europe,[76] Armitage as a senior official at the U.S. State Department would write a letter in support of large new sole source
contracts to DynCorp based on the theory that a company should not lose contracts as a result of the conduct of a few
employees. In short, sex slave trafficking and pedophilia in its ranks did not prevent DynCorp from winning significant
new contracts, including a $500 million sole-source contract to run police, enforcement, courts and prisons in Iraq.
I came to look into DynCorp when I was contacted years later by a retired member of CIA covert operations who alleged
that:
(i.) DynCorp was helping to manage the PROMIS software system through its J-Con System at DOJ; and
(ii) the project manager for DynCorp on the J-Con contract had falsified evidence against me using the PROMIS system and
that is what got the investigation against The Hamilton Securities Group and me going. I e-mailed the project manager at
DynCorp, however he never responded.
It is hard to find reliable information on the PROMIS software system and alleged successor systems. However, I believe
that understanding the use of such digital information weaponry and its ability to compromise private and public
financial and banking systems (including transactions such as the HUD loan sales) as well as governmental enforcement
and military systems is integral to understanding the manipulation of the US federal credit and financial markets and
the centralization of political and economic power.
*****# # #*****
In the meantime, Gary Webb had problems of his own. After extraordinary efforts by the corporate media to try to
discredit his story,[77] he was demoted by the San Jose Mercury News in the summer of 1997 and then left the paper in December 1997 to work on
his book, Dark Alliance, which was published the following year.
The fall of 1997 was an intense time in Washington, D.C. given fundraising and Whitewater investigations that would
continue to distract from Mena and South Central LA narcotics trafficking allegations and use sex between consenting
adults in the Oval Office to blossom the following year into the Clinton impeachment proceedings. On September 18th,
Cornell Corrections announced its next public offering with Dillon Read (renamed SBC Warburg Dillon Read since its
purchase by the Swiss Bank Corporation) as the lead senior manager. The offering proceeded on October 10th, raising
$57.3 million at a price of $19 5/8 per share, a 64% increase from the first offering in October 1996, a year before.
This implied a value of $25,962 per person in Cornell’s jails and facilities – a significant portion derived from the
Federal Bureau of Prisons and U.S. Marshals, both at DOJ.
On October 14th, then-HUD Secretary Andrew Cuomo fired Hamilton with no notice, seized monies owed to The Hamilton
Securities Group for work already performed and launched a concerted smear campaign. At the same time, a variety of
dirty tricks, including through Hamilton’s bank, auditor and insurance companies, drained our resources. In November, an
amount equivalent to our remaining contract authority – approximately $10 million – was awarded to HUD OIG’s Operation
Safe Home by special appropriation by the Senate HUD appropriation subcommittee. Legal action to try to stop HUD’s
seizure of Hamilton’s monies and illegal investigatory leaks ended up in Stanley Sporkin’s court – giving the former
general counsel of the CIA another chance to use his skills to protect criminal enterprise. As a result, all of
Hamilton’s efforts to support responsible management of HUD’s programs or to create tools and jobs for communities came
to an end.
I had to smile when we ended up with new attorneys the following year. One assured me that Sporkin would love what we
were doing for community transparency and job creation. They had heard him in the meetings of attorneys speaking about
the inner city. They insisted he very much cared about young people in the inner city. By then I had learned to just
smile and not try to explain about how it was that despite everyone caring so much in conversation about the Popsicle
Index going up, for some mysterious and inexplicable reason it just kept going down.
*************
FOOTNOTES
[65] See introduction to The Kemp Tapes recorded by Catherine Austin Fitts (http://www.solariactionnetwork.com/phpBB2/viewtopic.php?t=269).
[66] See Transcript of the Meeting and links for video excerpts at (http://www.solariactionnetwork.com/phpBB2/viewtopic.php?p=9516#9516)
[67] See articles on the CIA Inspector General reports and the House investigation in the CIA & Drugs archives at From the Wilderness (http://www.fromthewilderness.com/free/ciadrugs/index.html).
[68] See the list of honors and awards in Jamie Gorelick’s resume at Wilmer Cutler (http://www.wilmerhale.com/jamie_gorelick/).
[69] See the Stanley Sporkin Hotseat (http://whereisthemoney.org/hotseat/stanleysporkin.htm).
[70] See Hamilton Litigation section at (http://www.solari.com/gideon/).
[71] See materials on Jack Quinn’s role in Marc Rich’s pardon at (http://www.solariactionnetwork.com/phpBB2/viewtopic.php?p=9521#9521).
[72] Katharine Graham, owner of the Washington Post published her autobiography, Personal History in June 1997. On page
623 she writes,
“Along with a very able, inspiring, and determined younger partner, Terry Golden, I have helped launch an
early-childhood education project in the Anacostia section of Washington, D.C. Though the project has grown larger than
I had envisioned, it concentrates on two housing projects, Frederick Douglass Community Homes and Stanton Dwellings, and
aims at helping mostly single and unemployed partners be involved in the education of their children. We have raised
enough money to help create a community service center for parents, with a small daycare unit for up to fifteen infants,
a new school for one hundred Head Start children from the ages of two to four. Our hope is that this is a public/private
endeavor that can be replicated in other areas of the district as well as elsewhere.”
Terry Golden is a Marriot executive who is the head of the Federal City Council and is chair of the board of the
Convention Center. The two projects mentioned are managed by Gene Ford who puts Scott Nordheimer in the lead to
redevelop them under the Hope VI program. Several years later, Nordheimer reported to Fitts that he has over 70 people
working for him on HUD development projects. Among other projects, he is got the services contract on the Washington
Convention Center. The Convention Centers remaining neighborhood residence was overcome with an Operation Safe Home raid
of the community with over 200 personnel and press that was Washington Times and aol.com front headlines. Graham also
mentions how well the Washington Post stock has done. She does not describe where all the money comes from—and does
describe Warren Buffet’s investment.
[73] See HUD Inspector General Semi-Annual Reports to Congress for performance reports and statistics on Operation Safe
Home arrests, cash seizures and civil money penalties (http://www.hud.gov/offices/oig/reports/index.cfm).
[74] Growth came from a 516-person expansion at the Big Spring facilities acquired in 1996 as well as several state
governments. Between May and September 1997, Cornell acquired Abraxas, a provider of juvenile services, which gave
Cornell an additional aggregate capacity of 1,400 children detainees in Pennsylvania, Ohio, Delaware and the District of
Columbia.
[75] See Pug Winokur Data Dump (http://www.newsmakingnews.com/catharvardpugdd.htm).
[76] See links for DynCorp Disgrace and other stories by Kelly Patricia O’Meara on allegations against DynCorp employees
regarding sex slavery and human trafficking, see CSC DynCorp and the Economics of Lawlessness (http://www.scoop.co.nz/stories/HL0304/S00158.htm).
[77] For a complete description of the efforts to discredit Webb, see Alexander Cockburn and Jeffrey St. Clair’s,
Whiteout: The CIA, Drugs and the Press, Verso, 1999 (http://www.powells.com/s?kw=Whiteout %3A+The+CIA%2C+Drugs=63=12).
[84] See Missing Money—Articles and Documents (http://www.solari.com/learn/articles_missingmoney.htm).
*************
Mapping The Real Deal is a column on Scoop supervised by Catherine Austin Fitts. Ms Fitts is the President of Solari, Inc. http://www.solari.com/. Ms. Fitts is the former Assistant Secretary of Housing-Federal Housing Commissioner during the first Bush Administration, a former managing director and member of the board of directors of Dillon Read & Co. Inc. and President of The Hamilton Securities Group, Inc.
****ENDS*****