UBS Tax Cheating Lesson: Whistleblower Pays

President Obama golfed with Robert Wolf, President of UBS Americas, a division of the giant Swiss Bank. The same UBS enticed over 50,000 Americans to establish illegal offshore accounts. Bradley Birkenfeld, a former UBS banker, turned whistle blower. WaPo reported on the impact of his cooperation:

UBS accepted a $780 million penalty and admitted to criminal wrongdoing for helping U.S. taxpayers hide accounts from the Internal Revenue Service.

And Birkenfeld's prize? A three year, four month prison term.

Birkenfeld himself had sought probation in light of his cooperation with the government, which itself had requested a prison term of 30 months.

On Monday, U.S. District Judge William Zloch in Fort Lauderdale, Florida, who imposed the 40-month sentence, rejected Birkenfeld's efforts to reduce and postpone the term.

Stephen Kohn, a lawyer for Birkenfeld, said the imprisonment would have a "chilling" effect on other bankers who might consider exposing tax fraud.

The "chilling effect" was compounded by a Swiss court decision. It said UBS should not have revealed any tax cheats, blaming the Swiss bank regulator for ordering any any names released.

No UBS executives have been charged in their admitted criminal wrongdoing. Not Phil Gramm, not Robert Wolf, nor any other executive. Apparently executives can buy their way out of investigations, something whistle blowers can't afford. Birkenfeld will pay with a chunk of his life.

Consider the pension "pay to play" investigations. The Carlyle Group and its joint energy venture, Riverstone Holdings, paid a combined $70 million to exit a New York state pension investigation. Some get to pay with money, others have to fork over pounds of flesh.

White House Dodges on Geithner, alias "Bankster's Delight"

While a posse rides hard in pursuit of Treasury Chief Tim Geithner, alias "Banksters' Delight," the White House rushed to his defense. CNNMoney stated:

"Secretary Geithner was not involved in any of these emails," Gibbs (White House Press Secretary) said. " These decisions did not raise to his level at the Fed."

Gibbs said the emails in question involved decisions made by two people, but not Geithner.

The buck stops at the top for the Nigerian underwear bomber, but not at the NY Fed in managing the AIG corpse revival?

As for the veracity of Gibbs statement, the public would need to hear from the e-mailing NY Fed staffer. The attorney's e-mail clearly refers to the Fed's desire to keep the information secret. Bloomberg reported:

The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”

While Tim formally withdrew from matters associated with AIG and bank bailouts upon his nomination (November 24), he remained President of the New York Fed. Informal direction could easily and likely came from above.

As the posse rides closer, wagons circle at the NY Fed and White House. Can Tim survive the onslaught? Will anyone with insider knowledge be intimidated, threatened with banishment to unguarded territory? The SEC has AIG's back:

It could take until November 2018 to get the full story behind the U.S. bailout of insurance giant American International Group because of an action taken last year by the Securities and Exchange Commission.

Stay tuned, for eight long years? So much for America's open & transparent government.

Changes in Carlyle Group's Brazilian Plans in Six Months

Bloomberg reported the Carlyle Group will invest up to $1.5 billion in Brazilian companies. It highlighted Carlyle's first purchase in that country, a majority stake in Latin America's largest tour operator. Brazil's garnering the 2014 World Cup and 2016 Summer Olympics should provide major demand for CVC.

Six months ago, Bloomberg ran a story that only stayed up a scant few hours. It said Carlyle would invest $1 billion. The good news for Carlyle is investors ponied up another $500 million. Did Bloomberg's yanking the story help Carlyle finish its sales pitch in relative anonymity? Did Carlyle ditch the young PEU who told Kuwaiti investors to lower their voices?

Carlyle bazillions are going Brazilian. Joint venture partner Robert L. Johnson got a piece of the action.

Ex-FCC Chair Kevin Martin: Now a PEU

Kevin Martin is the latest public servant to gain employment as a private equity underwriter (PEU). Martin and partner Brian Bailey started Charmichael Partners, based in Charlotte, NC. The firm will look for family owned and closely held private businesses.

Bailey worked for other PEU's, Carousel Capital, Forstmann Little & Co., The Carlyle Group and Credit Suisse First Boston.

Dorgan Wants to Focus on Energy Policy in the Private Sector

Senator Byron Dorgan announced he will not pursue another term in the Senate, a reversal of his stated plans. His letter stated a number of interests he wishes to pursue, including working in the private energy sector.

Which firm will land his talents? Will it be a lobbying group, trying to impact energy policy? Will it be an American branded multinational producer or a private equity firm with an energy focus?

The Carlyle Group has a history of landing red & blue branded ex-politicians. Might joint venture partner Riverstone Holdings seeks Dorgan's services? Or will it be Al Gore's Generation Investment Management or Kleiner Perkins Caufield & Byers? Lots of choices for an ex-Senator.

Government Bodies to Transfer Double Hit to Workers

While their manufacturing counterparts shed jobs and workplace benefits by the Chinese junkload in the new millenium, America's government workers felt somewhat secure in their status. That will change dramatically in the coming year. Two financial tsunamis bear down on government entities.

The first wave is an accounting standards change on retired employee health benefits. The Government Accounting Standards Board will treat retiree health insurance like pensions, requiring governments to project the benefit expense into the future. San Angelo city manager Harold Dominguez cited a spill over effect on non-retiree health insurance benefits. Besides not fulfilling prior commitments to retirees, Harold projected greater cost sharing with existing workers in a recent city council meeting.

The second wave is underfunded pensions. One expert says government entities have underfunded pensions by $2 trillion. This bodes well for private equity underwriters (PEU's), who claim high returns for investors, many of which are public pension funds. Never mind the recent PEU "pay to play" scandal. The Carlyle Group and its energy joint venture Riverstone Holdings paid a combined $70 million to steer a New York investigation away from their good name.

Local and state governments will imitate their business counterparts, shedding benefits and jobs under the rising tide of future liabilities. The jobs won't go to China. They'll disappear. Those lucky enough to remain gainfully employed will pay a greater portion of their health care premium and enjoy higher cost sharing. They will have a lesser pension benefit, if they have a pension at all. Many will follow their corporate counterparts who dumped pensions in favor of 401k's and 403b's.

The era of personal responsibility is coming. Government's picking up where corporations left off is good talk. The walk remains to be seen. Tapped out national, state and local governments can't fulfill promises already made, much less make new ones.

Who knew health care reform would result in 43.3 million people losing workplace health insurance? That's nearly the 46.3 million uninsured. Seismic shifts are underway and they are well crafted. It's a sad day when citizens can simply take the lofty words of politicians and safely assume the opposite will occur.

The Long Lists of 2009

The year closed with its usual proliferation of lists, with several surprise additions. Two were impossibly long, yet sparse with real information. They are the Clinton Global Initiative donor list and White House visitor logs.

December 30 saw the White House release 25,000 visitors, albeit some were double counted. I searched David M. Rubenstein, co-founder of The Carlyle Group, a huge private equity underwriter (PEU). He showed up six times, yet he only had three visits. The White House reclassified his 2-12 visit with POTUS from "Group Tour" to "Business Council Speech." One would expect the President of the Economic Club of Washington to warrant more than a group tour. Especially one with the foresight to call for the "mother of all economic stimulus packages" in October 2008.

Several Carlyle connections showed up on the Clinton Global Initiative donor list. Joint venture partner Robert L. Johnson gave between $1 million and $5 million. Further down the list was Bob's buddy Thomas F. "Mac" McLarty, Carlyle Senior Adviser. Mac's auto company kicked in as well. Carlyle affiliate Booz Allen Hamilton made the Clinton list.

Other CGI donors included a cornucopia of Wall Street firm, investment house, private equity underwriters, hedge funds and corporations living on the government tit, like AIG, Freddie Mac, CitiGroup and General Motors. Financial donors included Goldman Sachs, Lehman Brothers Holdings, JP Morgan Chase, Credit Suisse, Deutsche Bank, Merrill Lynch, Bloomberg LP, Chicago Climate Exchange, Apollo Management LP and UBS AG.

Other interesting names included Rahm Emanuel, Denise Rich, Erskine Bowles, Richard Holdbrooke, Vernon Jordan, Donna Shalala and Samuel Berger. Lobbying firms ponied up money for Clinton's Foundation, Ogilvy Public Relations Worldwide, DUTKO Group, APCO Worldwide,

Two groups used the CGI as a middleman for commodity purchases, UNITAID and Jamaica. I don't understand the benefit of running a food buy through CGI. Does CGI or another group match the money?

This leads back to the gathering of big philanthropists in May 2009. Bill Gates, Oprah Winfrey, Warren Buffet and company discussed leveraging their donations to improve world problems. The same Bill Gates donated over $25 million to CGI and showed up twice on the White House visitor list. He met with President Obama and Larry Summers. What did one of the richest men in America ask from the White House?

Secretary of State Hillary Clinton wants to shift U.S. foreign aid to private organizations, possibly matching funds for big philanthropists. The Clinton Global Initiative would be the beneficiary of such a change. Might CGI donor Benny Hinn benefit as well? Taxpayers will set up a $50 million endowment for Egypt.

As an aside, I noted the Bon Secours Health System gave to the CGI. Why would a regional nonprofit hospital system feel the need to donate $25,001 to $50,000 to Clinton's nonprofit? I smell the Government Industrial Monstrosity, Eisenhower's MIC on steroids. Health care, education, infrastructure and foreign aid are next for "modernization," the euphemism for Uncle Sam contracts out the work to a very profitable private sector.

On the openness front, the public should be grateful for the list release. The White House wouldn't confirm or deny the David M. Rubenstein on their list as a Carlyle Group co-founder. Surely they know David. Rahm Emanuel dined with Rubenstein at the Blue Duck Tavern?

Bill Clinton's Foundation listed a $10,001 to $25,000 donor as "T". Is that AT&T's ticker symbol or Mr. T. without the the "Mr."? The public is grateful for the information crumbs dropped from the rich man's table.

Update 4-27-15:  Five years later the public is now interested in the Clintons' slush fund