M G Levy: Larger CIA and DoD Privatization Scandal
Larger CIA and DoD Privatization Scandal Emerging from Walter Reed Story, US Attorneys Firing
by Mark G. Levy
Sat Mar 10, 2007
Rumsfeld and Top GOP Figures Profited from Privatization of VA Hospital, CIA Contractors
A large global hedge fund, Cerberus Capital Management (dba, Cerberus-Gabriel), is at the center of an emerging Pentagon and CIA contracting scandal that has the attention of three Congressional Committees.
In each case, the companies under investigation have links to prominent GOP figures, including Vice President Dick Cheney, former Vice President Dan Quayle, former Defense Secretary Donald Rumsfeld, and several Republican Congressmen indicted for corruption involving kickbacks from defense contractors. The Republican Congressional Campaign Commitee (RCCC) has also received substantial contributions from conservative fund managers running Cerberus, a virually unregulated $30 billion hedge fund, which owns the second largest bank in Israel.
This scandal involves the mismanagement of VA hospital facilities privatized during the Bush-Cheney Administration, as well as intelligence abuses by private CIA contractors.
The scandal involving Cerberus' holding, International American Products (IAP) Worldwide Services, awarded a $120 million contract to manage facilities at Walter Reed, is only the latest in a long line of serious problems involving the company and its officers. IAP’s President, Alfred V. Neffgen, was formerly Chief Operating Officer for KBR's government operations group, which was forced to repay tens of millions of dollars to the Defense Department for food and fuel overcharges in Iraq. IAP has other contracting connections with Dick Cheney’s Halliburton/KBR. Most recently, IAP bid on part of the Iraq oil reconstruction project as a partner with Halliburton/KBR. The Army Times reports about the Halliburton tie-in:
Walter Reed also awarded a five-year, $120-million contract to IAP Worldwide Services, which is run by Al Neffgen, a former senior Halliburton official.
They also found that more than 300 federal employees providing facilities management services at Walter Reed had drooped to fewer than 60 by Feb. 3, 2007, the day before IAP took over facilities management. IAP replaced the remaining 60 employees with only 50 private workers.
"The conditions that have been described at Walter Reed are disgraceful," the letter states. "Part of our mission on the Oversight Committee is to investigate what led to the breakdown in services. It would be reprehensible if the deplorable conditions were caused or aggravated by an ideological commitment to privatize government services regardless of the costs to taxpayers and the consequences for wounded soldiers."
The letter said the Defense Department "systemically" tried to replace federal workers at Walter Reed with private companies for facilities management, patient care and guard duty – a process that began in 2000.
Cerberus owns, or had a major interest in, a string of now-bankrupt companies that had contracts with U.S. defense and intelligence agencies that were found to have a common pattern of large-scale fraud, security problems, and financial scandals involving GOP lawmakers and lobbyists.
IAP is also tied-in with Halliburton/KBR on multi-billion dollar Iraq contracts. Halliburton is a major defense contractor once headed by Vice President Cheney, that has had its own history of problems with fraud and overcharges related to its management of sole-source projects in Iraq, particularly the multi-billion dollar LOGCAP contract to repair and maintain Iraq’s oil fields and pipelines.
Just months before the invasion, DoD designated Halliburton/KBR as the sole potential bidder for potential large-scale pipeline repair contracts. Four years after the initial invasion and occupation of those fields, Iraq is still not producing at its prewar levels, a threshold that would require termination of the LOGCAP contract.
On October 16, 2006, IAP Worldwide Services issued this press release: "IAP Worldwide Services, Inc. Team Submits Bid For LOGCAP IV Contract," which included this quote from former Halliburton/KBR executive Dave Swindle:
"The LOGCAP IV contract is a major challenge," said Dave Swindle, IAP President. "Supporting the warfighter and the Army is a responsibility that allows no compromise. IAP and its team members understand the magnitude of this program and the issues associated with its complexity. We place a high priority on using our proven Business Operating System (BOS) to provide effective oversight and tracking to responsibly meet the customer’s needs from Day One. Through BOS we will act as one team through a management and business system that is completely transparent to the customer."
Cerberus a Major Stockholder in Bankrupt MCI, Takes Over a Mismanaged $8.8B DoD Project to Create Secure Computer systems for the U.S. Navy and Marine Corps
By Matt Kelley
USA TODAY The fundraiser, which took place July 7, 2003, and the subsequent vote illustrate the kind of relationship between congressman and contributor that's under increased scrutiny in the nation's capital.
Both Lewis and the investment company, Cerberus Capital Management, benefited from the relationship. Eighteen months after the fundraiser and the House vote, Lewis won the chairmanship of the Appropriations Committee. He acknowledges that the fundraising efforts of Cerberus "played a very significant role" in winning the post. The ties between Cerberus and Lewis, a 14-term congressman from Redlands, Calif., have not been publicly examined before.
Created in 1992, Cerberus is a hedge fund, a type of private investment group that's not regulated by the Securities and Exchange Commission. ...
In 2003, Cerberus owned more than $140 million in stock and bonds of the bankrupt telecommunications giant WorldCom, financial records show. Its stake in the company, which had filed for bankruptcy protection the previous year, was large enough that a Cerberus executive joined the board of directors of MCI, the company's post-bankruptcy name. ... MCI has been a major subcontractor since 2000 on an $8.8 billion project to build a secure computer network for the Navy and Marines. ...The committee report noted the program's cost overruns, schedule delays and management foul-ups in its report accompanying the 2003 defense spending bill, also sponsored by Lewis. That report called for more and better testing of the program before more computers were added to the network.
(Rep. Jerry) Lewis (R-CA) himself had criticized the Navy-Marine computer project in October 2002, telling The Washington Post he was not satisfied with its progress. He also said he was concerned about MCI's involvement. "When you have a big piece of the pie in trouble, it just gums up a process that already has great difficulty," he said. ... Other members of Congress were pushing the federal government to ban MCI from any future contracts because of the $11 billion accounting scandal, which eventually landed former WorldCom CEO Bernie Ebbers a 25-year prison term. MCI now has about $2 billion in annual revenue from government contracts, and the Navy project remains one of its biggest.
On May 16, 2003, the House Armed Services Committee voted to cut 10% of the Navy project's $1.6 billion budget for the upcoming year. Federal lobbying records show that two months earlier, Cerberus hired its first lobbyist, the powerhouse firm Patton Boggs. ... The firm's lobbyists for Cerberus included Laurence Harris, a former FCC staffer who would join MCI's board of directors that August; retired Marine colonel John Garrett; and Marcus Dunn, a former aide to two members of the House Armed Services Committee. ...Cerberus paid Patton Boggs $1.1 million for lobbying from 2003 to the middle of 2005, the last date that records are available. Separately, Cerberus hired former senator Jake Garn, a Utah Republican, as a lobbyist for $410,000 over the same period, lobbying records show.
Cerberus donated $100,000 at a single fundraiser to Rep. Jerry Lewis, fmr. Chair of the House Appropriations Comm., who served as intermediary to distribute money to fellow GOP lawmakers favored by Cerberus
Lewis' Future Leaders PAC gave $407,000 to 69 House candidates in the 2004 election. The Cerberus-related money was equal to nearly a third of that amount. In 2003, the PAC collected $522,725 — a quarter of it connected to Cerberus.
Boustany's 2004 campaign got $15,000 in contributions from Lewis' Future Leaders PAC in three separate $5,000 contributions, according to Federal Election Commission records. Lewis also kicked in another $2,000 from his own campaign in two separate contributions to Boustany's 2004 campaign. Boustany picked up another $5,000 from Future Leaders PAC in the current election cycle.
But, Boustany also benefited from the Lewis/Cerberus relationship in another way: Lewis also got Cerberus to help with his fundraising for the National Republican Congressional Committee, the arm of the GOP that gives money to House candidates. Lewis said he invited Cerberus executives to an April 2004 NRCC fundraiser he chaired that included a speech by President Bush.
The NRCC got $70,000 in Cerberus-related donations during the first two weeks of April 2004, including $25,000 from Cerberus founder Stephen Feinberg, records show. "I had been doing this for over a dozen years, helping to raise money for our members," Lewis said. "Others (candidates for Appropriations chairman) began to be helpful with fundraising, but that had been a recent and newfound interest of theirs."
Federal Election Commission records show that the National Republican Congressional Committee spent $72,620 in coordinated spending on Boustany's 2004 campaign and another $96,593 on independent expenditures on behalf of Boustany's campaign. Now, of course, the national parties raised millions of dollars for congressional races, so Boustany's share of that Cerberus/Lewis effort might well have been small through this particular channel. In any event, it was no where near as large as Cerberus's impact on Future Leaders PAC dollars.
Wilkes employed a lobbyist named Bill Lowery who is unusually close with House Appropriations Committee Chairman Rep. Jerry Lewis. Copley News Service conducted a three month investigation of their relationship:
From powerful positions on the House Appropriations Committee, California Rep. Jerry Lewis has greenlighted hundreds of millions of dollars in federal projects for clients of one of his closest friends, lobbyist and former state Congressman Bill Lowery.
Meanwhile, Lowery, the partners at his firm and their clients have donated 37 percent of the $1.3 million that Lewis’ political action committee received in the past six years...The Lewis-Lowery relationship, however, is remarkable for the closeness and mutual dependence...They’ve even exchanged two key staff members, making their offices so intermingled that they seem to be extensions of each other.
Cerberus founder Stephen Feinberg is reported to have made particularly substantial donations to Republican organizations, with a 2004 contribution of $25,000 to the RCCC. Feinberg also contributed $2000 to the Senate campaign that year of Connecticut Senator Joseph Lieberman. http://www.fundrace.org/...
Both Cerberus and MZM were giving GOP House Appropriations Chairman Jerry Lewis large amounts of money for distribution to other GOP Congressmen through Lewis' PAC. Cerberus appears to have been the senior partner in the scheme. Lewis was being investigated by the US Attorney for the Southern District of CA, Debra Wong Yang, who resigned on Nov. 10 to go to work for the powerhouse LA law firm that's defending Lewis. USA Lam, who had the MZM case, meanwhile was fired along with six others in a January purge of the US Attorneys Office that is just now receiving considerable attention.
Laura Rozen speculates that Yang, upon learning of her impending firing last year, accepted a rather comfortable exit package rather than be fired as was here her colleague, USA Caroline Lam. See, http://www.tpmmuckraker.com/... /
In a plea agreement with prosecutors, Cunningham named four people who had conspired with him to commit the crimes. Although the plea agreement does not refer to the co-conspirators by name, they are widely believed to be Mitchell Wade, the former president of defense intelligence firm MZM Inc., Brent Wilkes, president of defense contractor ADCS Inc., Tom Kontogiannis, a New York real-estate developer, and an unnamed family member of Kontogiannis.
Wade and Wilkes gave heavily to congressional Republicans in recent years, and now lawmakers must decide whether to keep the campaign largesse.
Wade, Wilkes, Kontogiannis and others remain under investigation, according to a statement made by the lead federal prosecutor in the case, U.S. Attorney Carol Lam.
Congressional ethics experts predict that one or more of the co-conspirators would be charged, especially because Cunningham has agreed to continue to cooperate with the investigation.
"Given that they were both described as co-conspirators in the plea agreement and that the agreement calls for former Rep. Cunningham to cooperate in the investigation, it’s very likely that both Mitchell Wade and Brent Wilkes will be indicted," said Brett Kappel, an ethics lawyer at Vorys, Sater, Seymour and Pease LLP.
Sen. Jim Talent (R-Mo.) has returned money from lobbyist Jack Abramoff, the center of another congressional ethics scandal, while Republican Reps. Jeb Bradley (N.H.), Kenny Hulshof (Mo.), Heather Wilson (N.M.) and Steve LaTourette (Ohio) gave back contributions from DeLay after he was indicted in September.
Republican Reps. Tom DeLay (Texas), John Doolittle (Calif.) and Jerry Lewis (Calif.) all received at least $30,000 in donations — either through their campaign committee or their leadership PACs — from Wade, Wilkes, their family members and their companies’ PACs over the past four years. These totals do not include individual contributions from employees of these firms. Early this year, Lewis became the chairman of the powerful House Appropriations Committee. Before that, he headed the defense appropriations subcommittee. Because of these high-profile roles, Lewis often receives more donations than most House members. Doolittle also sits on the Appropriations Committee.
But Cunningham, who was simply a member of the defense appropriations subcommittee, received the most — at least $66,000 during the same period.
Rep. Duncan Hunter (R-Calif.), chairman of the Armed Services Committee, received just over $28,000, as did Rep. Virgil Goode (R-Va.). Rep. Jerry Weller (R-Ill.) was the recipient of $20,000.
Wilkes is a prominent Bush fundraiser, earning a designation as a "Bush pioneer" in 2004 for raising more than $100,000. If Wilkes is indicted, he will be the third Bush pioneer, after Abramoff and Ohio fundraiser Tom Noe, to be indicted this year.
Wade resigned from MZM earlier this year. The company was sold to a private equity firm in August.
Senate Judiciary Committee Goes Into Closed Hearings to Discuss Firing of U.S. Attorney Who Prosecuted CIA Contractor Case
On Tuesday, Judiciary Committee member Arlen Specter revealed publicly that the committee he used to Chair would be going behind closed doors to discuss still-classified details about the retaliatory firing of U.S. Attorney Caroline Lam, who had aggressively prosecuted the MZM Wade-Cunningham contracting case. (Source C-Span Radio, 03/05/2007, @ 7:20 pm).
According to Specter, the Senate Judiciary Committee went into closed session to talk about an ongoing TOP SECRET investigation that stems from the Cunningham case. Three Hill Committees reached an agreement with the Department of Justice to receive files compiled by the U.S. Attorney’s office in San Diego, and are just beginning to hold public hearings into the unlawful dismissal of Lam. (See, generally, http://thehill.com/... ; http://www.signonsandiego.com/... ; http://www.scoop.co.nz/...
These closed hearings are most likely related to contracts that MZM had with CIA, including one that led to the falsification of data about aluminum tubes shipped to Iraq that allegedly were going to be used to reconstitute Saddam's nuclear program. That's right, those aluminum tubes, the one's that were falsely used by White House and Vice President to justify the invasion of Iraq.
On background, it should be noted that Laura Rozen's WAR&PIECE column of December 11, 2005, "Wade, Wilkes and Bad Intelligence?" identified Mitchell Wade's MZM defense contracting firm as a culprit in faulty intelligence generation that led to the Iraq invasion. See, http://www.warandpiece.com/...
A source cited by Rozen identified MZM as the private contractor cited for support of an errant CIA Iraq WMD assessment used to justify the Bush Administration's argument for war. An MZM analysis erroneously concluded that aluminum tubes ordered by Saddam Hussein were intended for use in a clandestine nuclear fuel enrichment program that didn't exist. Rozen came up with the extraordinary finding that consultants working for MZM and other intelligence contractors staffed the Robb-Silberman Commission that investigated the faulty Iraq WMD findings.
During testimony in the Scooter Libby trial, we learned that Valerie Plame was involved in the aluminum tube issue within the CIA’s Counter-Proliferation Division (CPD), where she worked before being "outed" by Libby and others in the White House and Vice President’s office.
Dan Quayle is chair of new Leumi owner Cerberus-Gabriel, Interceded With SEC Head to Block Rules Governing Hedge Funds
Dan Quayle is chair of new Leumi owner Cerberus-Gabriel
Cerberus is chaired by former U.S. vice president Dan Quayle. — The Cerberus-Gabriel group was led by Gabriel president J. Ezra Merkin, assisted by CPA Avi Berger, the general manager of the Kesselman & Kesselman accounting firm, and attorney Yaakov Ne’eman. Stephen Feinberg, 45, a Jew from New York and the wunderkind of the hedge funds world who, within 20 years, turned a $10 million fund into a holding company whose companies have combined sales of $30 billion a year, is the founder and manager of Cerberus Global Investment.
Experts: Ultimate owners of Leumi unclear
Banking sources: US investor disclosure regulations will cause Cerberus-Gabriel problems.— Ministry of Finance officials have declared a great victory in the Bank Leumi (TASE: LUMI) tender, but banking specialists are not so enthusiastic. They say that the victory wasn’t so great: the buyers (Cerberus Capital Management LP and Gabriel Capital Management) are too anonymous, their business isn’t transparent enough, and, most of all, the saga is far from over...these owners have specific problems in connection with operating a bank in the US, and they are looking for indirect ways to operate there, perhaps without a banking license.
(Can't get that top link to work yet -- Globe link requires registration and installation of their software. Found these links from: http://22.214.171.124/... )
In 2004, met with then The SEC Chairman William Donaldson a month prior to Donaldson's vote on whether to open hedge funds to periodic inspections:
Former U.S. Vice President Dan Quayle, an adviser to Cerberus, met in June with Donaldson to discuss fund regulation. Craig Whitney, executive vice president of Quayle & Associates, denied that Quayle was lobbying Donaldson to weaken the SEC's hedge fund plan.
Hedge fund executives also say the SEC should focus its resources on better protecting the 91 million U.S. holders of mutual funds. The SEC's move to increase regulation of the private investment pools has gained pace since New York Attorney General Eliot Spitzer alleged 10 months ago that ``illegal trading schemes'' enabled some hedge funds to buy mutual fund shares at prices not available to most investors.
Canary Capital Partners LLC and its managing principal, Edward Stern, agreed on Sept. 3 to return $30 million in profits and pay a $10 million fine. Since then, regulators have imposed more than $2.3 billion in sanctions against about a dozen companies including Bank of America Corp. and Alliance Capital Management Holding LP. ~snip~
DONALD RUMSFELD - CERBERUS INVESTOR
During the tenure of former Secretary of Defense Donald Rumsfeld, the Pentagon awarded a large contract to the company at the center of the Walter Reed Army Hospital scandal. Rumsfeld may have financially benefited from it along with other major GOP figures, including former Vice President Dan Quayle also invested or were employed by, or received campaign contributions from the same Wall Street hedge fund that owns the company.
In his last financial disclosure before becoming Defense Secretary, Rumsfeld revealed that he held shares in Cerberus, a large NY Hedge Fund that acquired International American Products, Inc., the company awarded a Pentagon contract to privatize facilities management services at Walter Reed. http://www.businessweek.com/...
2005 - CERBERUS PURCHASES SECOND-LARGEST BANK IN ISRAEL, COMPLETING THE PRIVATIZATION OF THE ISRAELI BANKING SYSTEM
Cerberus group, which in 2005, acquired the second largest Israeli bank, Leumi Bank, completing a process of privatization of the Israeli financial sector pushed by the Right-wing Likud Party and its successor under the present Prime Minister, Ehud Olmert.
Cerberus holding Leumi Bank privatized Israeli banks - IAP privatized VA hospitals
Strange symmetry to this, isn't there? Perhaps, no coincidence to any of it. Here's why.
You have to read a seminal neocon document written in 1997 for then-Israeli PM Netanyahu by the guys who went on to run the Office of Special Plans (OSP), Feith, Wurmser, and Perle. That paper, "A CLEAN BREAK: A New Strategy for Securing the Realm" -- http://www.iasps.org/... -- lays out a battle plan for conquering the Mid-East, starting with Iraq and Lebanon as means to undermine and discourage Syria, and then, finally, a forced reorientation of the region’s enormous Shi’a population away from Iran and the elevation of the Heshemite Kingdom of Morocco’s King Hussein. The point of all this isn't just military conquest, and the elimination of regional threats, it's actually to set the preconditions for a PRIVATIZED Israeli economy, and the "clean break" is with Israeli's social-democratic past.
It is also meant to map out a profound shift in Israel’s relationship with the United States, away from a traditional client state that submits to bi-partsian Washington, with the an alliance with the ascendant GOP Right-wing, the authors planned to elevate Israel into a new regional Superpower.
A Clean Break is a daringly blunt statement of those commercial, ideological and strategic ambitions:
Israel has a large problem. Labor Zionism, which for 70 years has dominated the Zionist movement, has generated a stalled and shackled economy. Efforts to salvage Israel’s socialist institutions—which include pursuing supranational over national sovereignty and pursuing a peace process that embraces the slogan, "New Middle East"—undermine the legitimacy of the nation and lead Israel into strategic paralysis and the previous government’s "peace process." That peace process obscured the evidence of eroding national critical mass— including a palpable sense of national exhaustion—and forfeited strategic initiative.
Syria challenges Israel on Lebanese soil. An effective approach, and one with which American can sympathize, would be if Israel seized the strategic initiative along its northern borders by engaging Hizballah, Syria, and Iran, as the principal agents of aggression in Lebanon, including by:
• striking Syrian military targets in Lebanon, and should that prove insufficient, striking at select targets in Syria proper.
Israel can shape its strategic environment, in cooperation with Turkey and Jordan, by weakening, containing, and even rolling back Syria. This effort can focus on removing Saddam Hussein from power in Iraq — an important Israeli strategic objective in its own right . . . Since Iraq's future could affect the strategic balance in the Middle East profoundly, it would be understandable that Israel has an interest in supporting the Hashemites in their efforts to redefine Iraq.
King Hussein may have ideas for Israel in bringing its Lebanon problem under control. The predominantly Shia population of southern Lebanon has been tied for centuries to the Shia leadership in Najf, Iraq rather than Iran. Were the Hashemites to control Iraq, they could use their influence over Najf to help Israel wean the south Lebanese Shia away from Hizballah, Iran, and Syria. Shia retain strong ties to the Hashemites: the Shia venerate foremost the Prophet’s family, the direct descendants of which — and in whose veins the blood of the Prophet flows — is King Hussein.
Forging A New U.S.-Israeli Relationship
In recent years, Israel invited active U.S. intervention in Israel’s domestic and foreign policy for two reasons: to overcome domestic opposition to "land for peace" concessions the Israeli public could not digest, and to lure Arabs — through money, forgiveness of past sins, and access to U.S. weapons — to negotiate. This strategy, which required funneling American money to repressive and aggressive regimes, was risky, expensive, and very costly for both the U.S. and Israel, and placed the United States in roles is should neither have nor want.
Israel can make a clean break from the past and establish a new vision for the U.S.-Israeli partnership based on self-reliance, maturity and mutuality — not one focused narrowly on territorial disputes. Israel’s new strategy — based on a shared philosophy of peace through strength — reflects continuity with Western values by stressing that Israel is self-reliant, does not need U.S. troops in any capacity to defend it, including on the Golan Heights, and can manage its own affairs. Such self-reliance will grant Israel greater freedom of action and remove a significant lever of pressure used against it in the past.
To reinforce this point, the Prime Minister can use his forthcoming visit to announce that Israel is now mature enough to cut itself free immediately from at least U.S. economic aid and loan guarantees at least, which prevent economic reform. [Military aid is separated for the moment until adequate arrangements can be made to ensure that Israel will not encounter supply problems in the means to defend itself]. As outlined in another Institute report, Israel can become self-reliant only by, in a bold stroke rather than in increments, liberalizing its economy, cutting taxes, relegislating a free-processing zone, and selling-off public lands and enterprises — moves which will electrify and find support from a broad bipartisan spectrum of key pro-Israeli Congressional leaders, including Speaker of the House, Newt Gingrich.
Israel’s new agenda can signal a clean break by abandoning a policy which assumed exhaustion and allowed strategic retreat by reestablishing the principle of preemption
Israel’s new strategic agenda can shape the regional environment in ways that grant Israel the room to refocus its energies back to where they are most needed: to rejuvenate its national idea, which can only come through replacing Israel’s socialist foundations with a more sound footing; and to overcome its "exhaustion," which threatens the survival of the nation.
Ultimately, Israel can do more than simply manage the Arab-Israeli conflict though war.
The rush to privatize many of the functions of the Pentagon, including the VA system, is really the same strategy as that advocated by Feith, Perle and Wurmser in their strategic vision for Israel in 1997. Seize upon the opportunities created by a series of wars in the Mid-East that expand the military, and then privatize that economic engine. That is at heart a fascist vision. That, in short, is what has been going on in the United States during the Bush-Cheney era. It's military Keynesianism turned into a killing and maiming machine for profit.
So, this is the Israeli state they
ended up with, led by
Kadima’s Ehud Olmert, a Tool of Oligarchs ... Cerberus-Gabriel
Forbes Reinforces Claim That Kadima is Tool of Oligarchs
by Ezra HaLevi
According to the report, the business groups are controlled by the following families: Sami Ofer, Nochi Dankner, Shari Arison, the Cerberus-Gabriel consortium, Charles Bronfman, Yitzchak Tshuva, the Saban group, Lev Leviev, Matthew Bronfman, Tzadik Bino, the Borovich family, and Eliezer Fishman. The 12 families own 60 percent of the aggregate market value of all Israeli public companies (excluding the even larger Teva Pharmaceutical Industries), Forbes reported.
The report goes on to say that the families have constructed their empires, which consist of Israel's largest companies, using organizational structures that have long ago been done away with in the Western world.
The report explains that the groups have an inordinate amount of control over Israel's economy, political leaders and media due to the structuring of their holdings as pyramids – meaning several layers of companies each own others beneath them but are all beholden to the leading families. Such a phenomenon was eliminated in the US in the early 20th century through restrictions on ownership and the double taxation of dividends a company paid its owner company.
In that light, consider the article about the conflict surrounding the Serberus-Leumi group privatizing the Israeli banking system. Bear in mind that Israel’s banks, including Leumi, had been bailed out by the government in the disastrous year of 1983, after Ariel Sharon led the IDF into an ill-fated and incompetently led invasion of Lebanon. An "optional" war that resulted in the massive withdrawal of international capital, and a steep recession in Israel’s reputation and fortunes:
Leumi on the way to going global
By Nehemia Shtrasler
A historic decision will be made next week. The Bank of Israel will announce whether it approves the sale of Bank Leumi to the Cerberus-Gabriel consortium. This would mark the end of the long process of privatizing Israel's banking system.
As early as November 2005 a tender was issued for the bank's sale, and it was won by Cerberus-Gabriel. The consortium offered to pay NIS 4.62 billion for a controlling stake of 20 percent in the bank - a very high price indeed. But the consortium failed to close the deal because the Bank of Israel did not approve its becoming a controlling partner.
The decision will now be made by the Bank of Israel Governor, Professor Stanley Fischer, who has said in internal meetings that this is one of the most difficult decisions he has been asked to make. At those same meetings, Rony Hizkiyahu, the new Supervisor of Banks, said that he wished the problem with the New York branch of Bank Leumi were resolved because then there would be no obstacle to selling the bank to the consortium. Indeed, this is the only problem that is keeping Cerberus-Gabriel from Bank Leumi, the subsidiary in New York.
According to American law, the Cerberus-Gabriel consortium will not be able to hold the bank in New York because it is invested in non-financial sectors. According to American rules, it is not permitted to have industrial and real estate holdings and also a bank - out of concern for possible conflict of interest.
During those same internal meetings at the Bank of Israel a number of proposals were put forth for a solution to the problem. For example, to sell Leumi New York, and in its place set up a financial entity that could offer business loans but not be able to accept deposits or offer retail banking services. The problem is that such a financial firm will not operate under the supervision of the Federal Reserve (because it is not a bank). As for Israeli supervision, it will not be easy to keep an eye on a company that is situated so far away.
Indeed, the deal went through and the regulatory obstacles removed to the privatiziation that is pushed by Prime Minister Olmert, one of the leading proponents of the scheme, as this article makes clear:
December 13, 2005
Cerberus-Gabriel hedge fund buys stake in Leumi Bank
Israel is on its way to privatization. The banking sector is amongst the first ones to take a step in this direction. Bank Leumi was in the market recently and attracted bids from several players. Bidder names include strategic investors like Lev Leviev, IDB and Bill Davidson and also financial contenders like UBS, Deutsche Bank and Citibank. However the winner was an American Hedge fund, Cerberus-Gabriel.
Cerberus-Gabriel has purchased 9.9% of the shares of the bank. The purchase of this stake was for approximately $500 million. The fund also has the option of buying an additional 10.01% in the bank. This will bring the total shares quantum to 20% and is roughly valued at $1 billion. This option of additional purchase has to be utilized with in the next one and a half years.
Ehud Olmert, Finance Minister of Israel, is reportedly quite satisfied with the outcome. He feels that this is a positive development and will help the over all Israeli economy. He is amongst the top promoters of privatization move. In his statement he also mentioned that the purchase will ensure healthy competition between the banks and will definitely contribute a lot to the local market.
Another person quite happy with the development is Yaron Zelekha, the treasury's accountant-general, who led the tender. He sees it as fulfillment of the promise made to the people of Israel about privatization of the entire banking system in 2005.
Both the MZM-Cunningham and Jerry Lewis cases involve the funneling of foreign money to the GOP through a neocon controlled global hedge fund, Cerberus Capital Management, that was dispersing money to a number of key GOP figures and organizations in various ways, including Bush, Rumsfeld, a number of GOP Congressmen, and the RNC. The case is also tied up with the Walter Reed scandal, and the effort to privatize many Pentagon and CIA functions, which resulted in catastrophic failures at both. http://www.democraticunderground.com...
Let's recap: a corrupt Israeli PM - has a stake in a corrupt Israeli bank- owned by a corrupt Wall Street global hedge fund - which owns a corrupt US defense contractor - which contributes to corrupt GOP Congressmen - who also receive money from another corrupt defense contractor - that defense contractor produced faulty intel under contract to a corrupt CIA Assn't Director - that faulty intel was used to justify a corrupt US Administration's case for invading Iraq - that was planned and executed by corrupt neocons inside DoD who had written a proposal years earlier to wage wars to privatize the Israeli economy.
What a tangled web. One wishes Chairman Waxman’s staff and other Congressional investigators the strength of Hercules in taking down the Three-headed Dog, Cerberus, that guards the gates to Hell.
Mark G. Levey. Fair use applies. Acknowledgement: Some material compiled from a research thread at Democratic Underground.com, with particular thanks to "bobthedrummer" and "Emit", and other DU researchers: http://www.democraticunderground.com.... This item also posted on DailyKos & DemocraticUnderground