Black 9/11: A Walk on the Dark Side
By Mark H. Gaffney /

In his important 2006 book, Nemesis, the Last Days of the American Republic, the third and concluding part of a trilogy, the late Chalmers Johnson, who was an expert on Japan and US foreign policy, writes that as much as 40% of the Pentagon budget is “black,” meaning hidden from public scrutiny.[1] If the figure is even approximately correct, and I believe it is, the number is alarming because it suggests that democratic oversight of US military research and development has broken down. In which case our democratic values and way of life are presently at risk; not from without, as there is no foreign enemy that can destroy the US Constitution, but from within.

I would argue that Chalmers Johnson’s estimate was corroborated on September 10, 2001, on the eve of the worst terrorist attack in US history, when Secretary of Defense Donald Rumsfeld acknowledged during a press conference that the Department of Defense (DoD) could not account for $2.3 trillion of the massive Pentagon budget, a number so large as to be incomprehensible.[2] Any remaining hope that the US military might still get its budgetary house in order were dashed at 9:38 am the next morning, when the west wing of the Pentagon exploded in flames and smoke, the target of a terrorist strike. Incredibly, the exact point of impact was the DoD’s accounting offices on the first floor. The surgical destruction of its records and staff, nearly all of whom died in the attack, raises important questions about who benefited from 9/11. Given the Pentagon’s vast size, the statistical odds against this being a coincidence prompted skeptics of the official story to read a dark design into the attack. As Deep Throat said: “Follow the money.”

Was the Pentagon accounting office destroyed because diabolical individuals planned it that way? No question, the west wing presented a much more challenging target than the east wing. Targeting the west wing required a difficult approach over the Arlington skyline. The final approach was especially dicey and amounted to a downhill obstacle course, skirting apartments and a large building complex about a quarter-mile from the Pentagon known as the Naval Annex; which sits atop a hill that rises from the flat ground along the Potomac River. In April 2008, I interviewed Army Brigadier General Clyde Vaughn, a credible witness to the events of that morning. Vaughn explained over the telephone that on 9/11 he was on his way to work at the Pentagon via Shirley Highway (I-395) when the strike occurred. The general told me the hijacked aircraft (presumably AA 77) just missed the Naval Annex and would have hit the US Air Force memorial that presently occupies the site, had the 270 feet-tall monument existed on 9/11.[3] The new memorial was constructed in 2006 and dedicated the same year.

Why did the terrorists not take the easy approach up the Potomac River? The river approach would have afforded a reasonably good chance to crash the offices of Secretary of Defense Rumsfeld and the Joint Chiefs of Staff, which were located on the opposite side of the building, in the middle of the outer “E” ring. The location of their offices was no secret. Surely terrorists would have been more interested in decapitating the command structure of the US war machine than going after a bunch of accounting clerks.

That morning, there were other striking anomalies. The crash of AA 11 into the North Tower at 8:46 am should also have raised red flags, because the point of impact at the 95th and 96th floors was too remarkable to be happenstance. Both floors were occupied by Marsh & McLennan, one of the world’s largest insurance brokerages, with family ties to the private intelligence firm, Kroll Associates, which held the security contract at the World Trade Center. Indeed, the network of corporate ties is so entangled that were I to trace all of the links, they would easily fill a book. Here, I will sketch out only the most salient connections.

The CEO of Marsh & McLennan on 9/11 was Jeffry Greenberg, son of Maurice “Hank” Greenberg, owner of AIG, the world’s largest insurance conglomerate (or second largest, depending on the source). Greenberg’s other son, Evan, was CEO of Ace Limited, another large insurance company. Maurice Greenberg had been a director of the New York Federal Reserve Bank for many years, and in 1994-95 served as its chairman. Greenberg was also vice-chairman of the Council on Foreign Relations (CFR), which in 1996 published his report, “Making Intelligence Smarter: The future of U.S. Intelligence”; as a result of which, Senator Arlen Specter floated Greenberg’s name as a candidate for the directorship of the CIA.[4] Although George Tenet eventually got the job, the mere fact that Greenberg was in the running shows the extent of his influence. In 1993, Greenberg’s huge insurance conglomerate AIG reportedly bankrolled the Wall Street spy firm, Kroll Associates, saving it from bankruptcy. Thereafter, Kroll became an AIG subsidiary. After the 1993 World Trade Center bombing, Kroll acquired the contract from the Port Authority of New York to upgrade security at the World Trade Center, in the process beating out two other firms.[5] Kroll continued with the WTC security contract through the period leading up to the September 11 attacks. One of Kroll’s directors, Jerome Hauer, also managed New York mayor Rudolph Giuliani’s Office of Emergency Management, which was located on the 23rd floor of WTC 7.[6]

Notice this means Kroll had unfettered access to all three of the buildings destroyed on 9/11. This startling coincidence should have been reason enough for the 9/11 Commission to investigate Kroll’s shady background as well as its relations with AIG, Ace, and Marsh & McClennan. The commission was armed with subpoena authority and might have probed deeply enough to learn the truth. Unfortunately, the official investigators were not interested in connecting the dots. Although Kroll was based in New York City, it served (and still serves) an international clientele through 60 offices in some 27 countries. Over the years, the firm has repeatedly been accused of, and/or formally charged with, conspiracy. In 1995 the French government expelled several Americans from the country, including a Kroll employee named William Lee, for allegedly spying on French industry. Lee’s involvement with Kroll made French authorities suspicious that his Paris operation might be a CIA front.[7] The French were surely aware of Kroll’s longstanding practice of hiring former CIA, FBI, and British Intelligence agents. Kroll/AIG made no effort to conceal the fact that between 1997-2003 the AIG board of directors included Frank G. Wisner, Jr., son of one of the founders of the CIA.[8] Wisner Jr. is also a member of the Council on Foreign Relations. Wisner Jr. also served as US ambassador to several nations, including Egypt, and is a member of the Council on Foreign Relations.[9] As I write, Wisner’s name surfaced in the news. Last week, President Obama dispatched Wisner as his personal envoy to confer with the embattled Egyptian dictator Hosni Mubarak.[10]Even as popular pressure continued to build for Mubarak to step down, Wisner embarrassed Obama by publicly encouraging Mubarak to ride out the crisis and hang onto power. No doubt, his action reflects the view from Langley, which would much prefer to see Mubarak remain in power. The CIA has long supported the Mubarak regime and in return was allowed to use Egypt as a haven for renditions and torture. Wisner’s thumbing his nose at his own president, no doubt, is also an accurate measure of the US national security state’s low opinion of Obama. It certainly exposes Obama’s weakness as president.[11]

Did the French government over-react in 1995 when it expelled a Kroll employee for suspected industrial espionage? Possibly, but the French had good reason to be wary of CIA meddling in their country. It is a safe bet the French have not forgotten Operation Gladio, the rogue intelligence network secretly organized in Europe by the CIA, NATO and British MI-6, after World War II.[12] “Gladio” means “sword” in Italian and is the root of the word “gladiator.” Known as the “stay behind armies,” they were in every NATO country, and totaled thousands of paramilitary soldiers. Their ranks included known underworld criminals and drug traffickers; and crucially, the CIA kept the whole operation secret for nearly forty years.

Although the stay-behind armies were supposed to form the nucleus of an armed resistance movement in the event of a Soviet invasion of western Europe, the invasion never materialized, and the CIA-trained forces were sometimes used for other less savory purposes. These included smear and disinformation campaigns, mass bombings, kidnappings, assassinations and attempted coup d’etats; all of which was blamed on the communists. Before it was over, the CIA-staged terror campaign added up to hundreds of incidents in Italy, France, Greece, Belgium, and other European nations.

The news about Gladio first broke in the Italian press, in August 1990, at the time of Saddam Hussein’s invasion of Kuwait; and immediately touched off a political earthquake on the continent. As they say, bad news travels fast. Shock turned to outrage as Europeans learned that for decades the CIA and NATO had been sponsoring terrorist attacks in the democratic nations of Europe. All of which, as noted, was blamed on the communists. The purpose of Gladio had been to strike fear into the population of Europe, and thus, to weaken the left-wing parties.

If this sounds like fantasy to the reader, it is only because the US media, to this day, has never informed the American people about the CIA’s long and ugly history of staging international terrorism. Here in the US, it is euphemistically known as “counter-terrorism.” Although the average American is ignorant of the fact, most Frenchmen probably also know that under Gladio, the CIA lent support to an attempted putsch against French President Charles de Gaulle in 1958 by reactionary elements of the French army. The renegade French forces were opposed to de Gaulle’s controversial decision to end to the French military occupation of Algeria. Most of the people of France probably also know about the CIA’s involvement in at least one other conspiracy to assassinate de Gaulle in the mid-1960s; but which fortunately failed.[13] De Gaulle survived some thirty assassination attempts. At the time, the CIA’s involvement caused a near rupture in US-French relations. De Gaulle reacted angrily by pulling France out of NATO, and ordered US military forces out of France. The US was compelled to move NATO headquarters from Paris to Mons, in Belgium. Nor did the American people hear the truth about what really happened. In fact, they still do not know, because the US press has never informed them.

Given this brief background, one must ask: Were the French trying to send a wake-up signal to the American people when they leaked the following shocker about 9/11 to the world press? In October 2001 the prestigious French paper Le Figaro reported that in July 2001, just two months before 9/11, Osama bin Laden received dialysis treatments and other medical care for a serious kidney ailment at the American Hospital in Dubai, one of the Arab emirates in the Persian Gulf.[14] At the time, bin Laden was a wanted man, and had been indicted by the US Department of Justice for the 1998 bombing of US embassies in Nairobi and Dar es Salaam. Yet, according to the detailed report in Le Figaro, the Americans treated bin Laden as a VIP guest. The Al Qaeda leader arrived with a retinue that included his personal physician, a nurse, four bodyguards, and at least one of his lieutenants. Bin Laden reportedly held court in his hospital suite, welcoming members of his large family, Saudi officials, and even the local CIA station chief, who evidently was a well-known figure in the tiny country. The CIA official was evidently seen entering bin Laden’s room. Immediately after leaving, he caught a flight back to the US. The article in Le Figaro was closely followed by a story in The Guardian (UK), which added more details. It noted that bin Laden’s Saudi guests had included Prince Turki al Faisal, then head of Saudi intelligence. The story also named French intelligence as the source of the story in Le Figaro, and added that the information was leaked because the French were “keen to reveal the ambiguous role of the CIA and to restrain Washington from extending the war to Iraq and elsewhere.”[15] If the story is accurate, it means Osama bin Laden was a US intelligence asset right up until the morning of 9/11. There is no other possible interpretation. In which case, the American people have been seriously misled, indeed, have been fed a pack of lies, about the events of that horrible day. I would add: there were no retractions. Le Figaro stood by its story. Meanwhile, the US media played dumb and never even reported it.

But I digress. Back to AIG/Kroll. In 2005, the government of Brazil formally indicted Kroll’s chief Brazilian executive Eduardo Sampaio and five other Kroll employees on criminal charges, including bribery and various breaches of Brazil’s data privacy laws. Sampaio reportedly escaped arrest by fleeing the country.[16]

In 2006 another Kroll affiliate made the news for “unacceptable billing practices” while representing the failed energy giant Enron in court.[17] The Enron Corporation had collapsed in late 2001 amidst allegations of fraudulent accounting; then, in January 2002, hired Kroll Zolfo Cooper to handle its chapter 11 proceedings. The US Trustee Program, which administers bankruptcy cases, uncovered the billing irregularities after Kroll sought an additional fee of $25 million for its services. The firm had already received a cool $100 million for scavenging the Enron corpse but wanted more, even as stockholders received nothing. Evidently, the folks at Kroll thought no one would notice a mere $25 million, which is chump change compared with the $30 billion in inflated energy costs that Enron gouged from the state of California in 2000-2001. All of which must be good: because Enron got away with it. According to economist Paul Krugman, emails confirmed that Enron had rigged the markets.[18] The heavily Democratic golden state has yet to recover from what must be viewed as a partisan attack.

Also in 2006: a whistleblower named Richard A. Grove went public with stunning testimony about his involvement with the Greenberg empire, an up-close-and-personal experience, Grove says, that nearly cost him his life.[19]During the period leading up to 9/11, Grove worked as a salesman for Silverstream Software, an enterprise company which marketed designer solutions to a number of Wall Street firms, including Merrill Lynch, Deutsche Bank, Banker’s Trust, Alex Brown, and Morgan Stanley. According to Grove, Silverstream “built internet transactional and trading platforms,” designed “to web-enable the critical business functions of Fortune 500 companies, basically integrating and making available on the web the disparate legacy applications and mainframes while simultaneously streamlining workflow and traditional paper processes.” The “end result [was] a lower cost of operation and more efficient transactions because inefficiencies such as people were being taken out of the loop.”[20]

Grove was so successful as a salesman that (he claims) he became a millionaire before the age of thirty. He only realized, later, that the software he sold might have enabled fraudulent trading in the hours before and possibly during the 9/11 attacks. The most advanced software of all went to Marsh & McClennan, which, he says, placed an order in 2000 for a technological solution “beyond what we had done for any of the above-named companies; insofar as it would be used to electronically connect Marsh to its major business partners via internet portals, for the purpose of creating ‘paperless transactions’ and expediting revenue and renewal cycles.” Grove inked the software deal with Marsh & McClennan in October 2000. After which, his employer Silverstream stationed a team of 30-40 technicians in the client’s offices in WTC 1, led by several software developers who proceeded to design and build the software package “from the ground up.” During this period, Grove served as liaison between Silverstream & Marsh to insure that the software would perform as specified. The team worked around-the-clock, seven days a week, to meet Marsh’s pre-September 11, 2001 deadline. The end result was “a specific type of connectivity that was used to link AIG and Marsh & McLennan, the first two commercial companies on the planet to employ this type of transaction.”[21]

Grove says he first noticed fiscal irregularities in October 2000 when he and a colleague helped “identify about $10,000,000 in suspicious purchase orders.” Marsh’s chief information officer, Gary Lasko, later confirmed that “certain vendors were deceiving Marsh … selling … large quantities of hardware that were [sic] not necessary” for the project. But Grove did not worry too much about this at the time; nor did he run into personal trouble until the spring of 2001, when he learned, while negotiating a license renewal contract with Lasko, that his own employer, Silverstream, was over-billing Marsh “to the tune of $7 million, or more.” Grove brought the matter to the attention of Silverstream executives, but was told to keep quiet and mind his own business. A Marsh executive advised him to do the same. By this point, a number of Marsh employees had earned Grove’s trust and when he shared his concerns with them, they agreed that “something untoward was going on.” Grove names these honest employees in his testimonial: Kathryn Lee, Ken Rice, Richard Breuhardt, John Ueltzhoeffer, in addition to Gary Lasko, all of whom perished on 9/11.[22] Incidentally, a simple check confirmed that these names do indeed appear on the fatality list of World Trade Center victims.[23]

The proverbial schtick hit the fan on June 5th, 2001, the day after Grove sent an email to his sales team informing them that “Silverstream was billing Marsh millions above and beyond the numbers we were being paid commissions on….” There were only two possibilities: either the members of his team were being cheated out of their rightful commissions, or Silverstream was defrauding Marsh & McClennan. Later that day, Grove received word from Gary Lasko that Marsh had decided to retain Silverstream for the next phase of the project. The extension was good news and he immediately informed his boss. Grove was personally delighted because his rightful commission “would have been a payday worth well over a million dollars.” He never collected it, however; because the next morning, Grove was summoned to his boss’s office and abruptly terminated.

This is not the end of the story. Several weeks later, Grove suffered a medical emergency that required surgery and weeks of hospitalization. In August 2001, while still bedridden, a Silverstream company official visited him at the hospital and offered him $9,999 in cash, plus an extension of his medical benefits, if he would agree never to talk about the work he did for Silverstream. Grove needed the continuing medical coverage and agreed to the terms. However, after his convalescence he became suspicious about the secrecy agreement and decided that, at very least, he should maintain contact with the honest employees at Marsh, several of whom were now close friends. Shortly thereafter, one of them arranged for Grove to attend a meeting at the offices of Marsh & McClennan, at which the honest employees planned to “openly question the suspiciously unconcerned executive who seemed to be at the center of the controversial secrecy.” The executive had agreed to participate via a video conference link from his apartment in uptown Manhattan. This was the same individual who, months before, had warned Grove to look the other way. Grove was in possession of documents proving illicit activity, and he planned to produce them at the meeting. However, on the day of the showdown, he ran late, having been delayed by heavy Manhattan traffic. Grove says he was within 2-3 blocks of the World Trade Center when UAL 175 hit the South Tower. By then, all or most of his friends in the North Tower were already dead, or trapped on the upper floors. All told, some 300 or more Marsh employees perished that morning. None of whom had any idea what was in store for them.

Part 2 Below the Notes...


[1] Chalmers Johnson, Nemesis: The Final Days of the American Republic, Henry Holt & Co., New York, 2006, pp. 9 and 115.


[3] Vaughn’s testimony is intriguing because it does not conform in all respects to the official narrative. Vaughn told CNN: “There wasn’t anything in the air, except for one airplane, and it looked like it was loitering over Georgetown, in a high, left-hand bank,” he said. “That may have been the plane. I have never seen one on that (flight) pattern.” The aircraft described by Vaughn has never been identified. Ian Christopher McCaleb, “Three-star general may be among Pentagon dead,” CNN, September 13, 2001. Posted at


[5] Douglas Frantz, “A Midlife Crisis at Kroll Associates,” New York Times, September 1, 1994, posted at


[7] David Ignatius, “The French, the CIA and the Man Who Sued Too Much,” Washington Post, January 8, 1996.



[10] Vijay Prashad, “The Empire’s Bagman,” Counterpunch, February 2, 2011. Posted at

[11] Robert Fisk, “US Envoy’s business link to Egypt,” The Independent (UK), February 7, 2011. Posted at

[12] Daniele Ganser, NATO’s Secret Armies. Operation Gladio and Terrorism in Western Europe, Frank Cass, London, 2005.

[13] William Blum, Killing Hope: US Military and CIA Interventions Since World War II, Common Courage Press, Monroe, ME, 1995, pp, 148-152.

[14] Alexandra Richard, “The CIA met bin Laden while undergoing treatment at an American Hospital last July in Dubai, Le Figaro, October 11, 2001. (translated by Tiphaine Dickson)

[15] Anthony Sampson, “CIA agent alleged to haveb met Bin Laden in July,” Guardian (UK), November 1, 2001. Posted at

[16] The Brazilian connection, June 25, 2005, posted at

[17] Mark Sherman, “Justice Department finds billing irregularities by former interim Enron CEO,” Associated Press, March 27, 2006. Posted at

[18] Paul Krugman, The Great Unraveling, Norton & Co, 2005, pp. 318-320.


[20] Ibid.

[21] Ibid.

[22] Ibid.



Part 2

This paper will review the evidence for informed, or insider, trading in the days and hours before the 9/11 attacks. From the very first, the phenomenon appeared to be world-wide.  One consultant, Jonathan Winer, told ABC: “it’s absolutely unprecedented to see cases of insider trading covering the entire world from Japan to the US to North America to Europe.”[1] The list of affected nations was long, and included the US, Germany, Japan, France Luxembourg, Hong Kong, the UK, Switzerland and Spain.[2] Soon, independent investigations were underway on three continents in the belief that the paper trail would lead to the terrorists.

Press statements by leading figures in the international banking community left little doubt that the evidence was compelling. Ernst Welteke, President of the German Deutsche Bundesbank, told reporters that “a preliminary review by German regulators and bank researchers showed there were highly suspicious sales of shares in airlines and insurance companies, along with major trades in gold and oil markets, before September 11 that suggest….advance knowledge of the attacks. Welteke said that his researchers came across….almost irrefutable proof of insider trading.”  Welteke was blunt: “What we found makes us sure that people connected to the terrorists must have been trying to profit from this tragedy.”[3]

In the U.K., London City regulators investigated a flurry of suspicious sales processed just before the attack.[4] “The Financial Services Authority (FSA), a stock market watchdog, was drawn into the investigation because it had a transaction monitoring department that checks suspicious share movements.” An FSA spokesperson confirmed that market regulators in Germany, Japan and the U.S. had received information about short selling of insurance company shares and airline stocks, which fell sharply as a result of the attacks. Among the WTC tenants were dozens of banks and insurance companies, including several that were now going to have to pay out billions to cover heavy losses from the attacks.[5]

Assuming nefarious individuals were armed with foreknowledge, they stood to make a windfall by dumping stock and selling competitors short, not to mention the vast potential profits from last-minute electronic money laundering via computers which, the perpetrators had to know, would be destroyed within hours. Richard Crossley, a London analyst, stated that he had tracked suspicious short selling and share dumping in a swath of stocks. CBS likewise reported a sharp upsurge in purchases of put options on both United and American Airlines.[6] The uptick had occurred in the days prior to 9/11. A put option is a contract that allows the holder to sell a stock at a specified price, within a certain time period. Sources on Wall Street told CBS that before 9/11 they had never seen that kind of trading imbalance. The only airlines affected were United and American, the two involved in the attack. American Airlines stock reportedly fell 39% in a single day. United Airlines stock dropped even more, by a whopping 44%.

Although many stocks tumbled, there were also big winners, especially in the military sector. Contractors like L-3 Communications, Allied Techsystems and Northrop Grumman all reported large gains.[7] The biggest winner, though, was Raytheon, which manufactures Tomahawk missiles. During the week following the 9/11 attacks, Raytheon stock climbed by an astounding 37%.[8] Prior to 9/11, the purchase of call options (a contract to buy a stock at a certain price) for Raytheon had suspiciously surged by 600%.

The sale of five-year U.S. Treasury Notes also spiked just before 9/11, as reported by the Wall Street Journal.[9] Among the purchases was a single $5 billion transaction, which pointed to large investors. The Journal explained that “Treasury notes are among the best investments in the event of a world crisis, especially one that hits the US. The notes are prized for their safety and their backing by the U.S. government, and usually rally when investors flee riskier investments, such as stocks.” Michael Shamosh, a bond-market strategist for Tucker Anthony Inc., told the Journal:  “If they were going to do something like this they would do it in the five-year part of the market. [Because] It’s extremely liquid, and the tracks would be hard to spot.” The article added that “The value of these notes has risen sharply since the events of September 11.”

The Securities and Exchange Commission (SEC) launched its own probe into allegations of insider trading. For weeks, the SEC remained close-mouthed about the scope of its investigation, then, in mid-October, sent out a request to securities firms around the world for more information regarding a list of 38 different stocks.[10] SEC Chairman Harvey Pitt told the House Financial Services Committee that “We will do everything in our power to track those people down and bring them to justice.”[11] By this time, however, the fix was in.

The San Francisco Chronicle reported that the SEC took the unprecedented step of deputizing “hundreds, if not thousands, of key players in the private sector.”[12] Wrote the Chronicle: “In a two-page statement issued to ‘all securities-related entities’ nationwide, the SEC asked companies to designate senior personnel who appreciate ‘the sensitive nature’ of the case and can be relied upon to ‘exercise appropriate discretion’ as ‘point’ people linking government investigators and the industry.” The requested information was to be held in strictest confidence. The SEC statement included the following passage (emphasis added): “We ask that you disseminate the information within your institution only on a need-to-know basis.”

In his book “Crossing the Rubicon”, former LAPD detective Mike Ruppert explains the SEC’s unprecedented move to deputize:

What happens when you deputize someone in a national security or criminal investigation is that you make it illegal for them to disclose publicly what they know…. In effect, they become government agents and are controlled by government regulations rather than their own conscience. In fact, they can be thrown in jail without a hearing if they talk publicly. I have seen this implied threat time and again with federal investigations, intelligence agents, and even members of the United States Congress who are bound so tightly by secrecy oaths and agreements that they are not even able to disclose criminal activities inside the government for fear of incarceration.[13]

Notice, this surely means that Al Qaeda had nothing to do with the insider trading.[14] When the evidentiary trail led back to Wall Street, the SEC moved quickly to control the evidence and muzzle potential witnesses. Despite the best efforts of the SEC, a few details did leak to the world press. In mid-October 2001, The Independent (UK) reported that, “To the embarrassment of investigators, it has….emerged that the firm used to buy many of the ‘put’ options (where a trader, in effect, bets on a share price fall) on United Airlines stock was headed until 1998 by Alvin ‘Buzzy’ Krongard, now executive director of the CIA.”[15] The evidence was all the more incriminating, because in at least one case the purchaser failed to collect a reported $2.5 million in profits made from the collapsing share price of UAL stock. The only plausible explanation was that someone at the purchasing bank feared exposure and subsequent arrest.

For the most part, the U.S. press failed to pick up the story, which clearly linked Wall Street and the U.S. intelligence community to the 9/11 attacks. Indeed, the New York Times cooperated with the cover-up.[16] George Tenet writes in his memoirs that he recruited Buzzy Krongard in 1998 to become his deputy at CIA, probably to serve as Tenet’s personal liaison to Wall Street.[17]Until 1997, Krongard was chairman of Alex Brown Inc., America’s oldest investment banking firm. Alex Brown was acquired by Bankers Trust in 1997, which, in turn, was purchased by Deutsche Bank in 1999. In the mid-1990s, Krongard had served as a consultant to CIA director James Woolsey.

In 1998, Banker’s Trust-Alex Brown refused to cooperate with a Senate subcommittee which, at the time, was conducting hearings on the involvement of U.S. banks in money laundering activities.[18] At the time, Banker’s Trust, like other large U.S. banks, was in the business of private banking. This means that Banker’s Trust catered to unnamed wealthy clients for the purpose of setting up shell companies in foreign jurisdictions, such as on the Isle of Jersey, where effective bank regulation and oversight are nonexistent. According to Ruppert, Krongard’s last job at Alex Brown was to oversee “private client relations.”[19] This means that Krongard personally arranged confidential transactions and transfers for the bank’s unnamed wealthy clientele.

Private banks typically offer a range of services to their clients for the purpose of shielding them from oversight. Private banks set up multiple offshore accounts in multiple locations under multiple names. They also facilitate the quick, confidential and hard-to-trace transfer of money across jurisdictional boundaries. In many such cases, the private banks do not even know who owns the account; which, of course, means that not even the bankers can follow the transactions with “due diligence.” Many private banks do not even try, for fear of scaring away business, especially from foreign clients. Even though private bankers are responsible for enforcing legal controls against money laundering, where such laws exist, in practice, oversight is typically weak or nonexistent. I was shocked to learn that although it is illegal for U.S. banks to launder ill-gotten money that originates within the United States, it is not illegal for them to accept dirty money from elsewhere. No surprise then, that many U.S. banks openly solicit business from Central American drug lords, arms merchants, and other shady entities.

For these reasons, it is little wonder that over the last several decades, law enforcement has failed to stem the growing international flood of laundered drug money and other illicit assets. Their failure has been spectacular. In 1999, a consensus of experts in Germany, Switzerland and at the U.S. Treasury agreed that 99.9% of laundered money routinely escapes detection. The experts estimated that the annual total was between $500 billion and a trillion dollars, a mind-boggling number, about half of which is washed into the U.S. economy, the rest into Europe.[20]

After “Buzzy” Krongard’s departure to the CIA, his successor at Alex Brown was his former deputy Mayo Shattuck III, who had worked at the bank for many years. In 1997, Shattuck helped Krongard engineer the merger with Banker’s Trust, and he stayed on after Deutsche Bank acquired Bankers Trust – Alex Brown in 1999.[21]

According to the New York Times, Bankers Trust was “one of the most loosely managed [banks] on Wall Street,” and during the 1990s was repeatedly rocked by scandal. In 1994, clients and regulators accused the bank “of misleading customers about its risky derivative products.” The case went viral when tape recordings were made public that showed bank salesmen snickering about ripping off naive customers. In 1999, Banker’s Trust pled guilty to criminal conspiracy charges, after it was revealed that top-level executives had created a slush fund out of at least $20 million in unclaimed funds.[22] Bankers Trust had to pay a $63 million fine and would have been forced to close it doors but for the fact it was acquired, just at this time, by Deutsche Bank, Europe’s largest bank.

According to the New York Times, Mayo Shattuck III “was made co-head of investment banking in January [2001], overseeing Deutsche Bank’s 400 brokers who cater to wealthy clients.”[23] It is curious that Shattuck resigned immediately after the 9/11 attacks.

In a footnote buried on page 499, the 9/11 Commission Report alludes to Mayo Shattuck III’s likely role in purchasing the United Airlines put options just prior to 9/11. The note fails to mention Shattuck and Deutsche Bank by name, but attempts to explain away the charges of insider trading, as follows:

A single US-based institutional investor with no conceivable ties to al Qaeda purchased 95% of the UAL puts on September 6 [2001] as part of a strategy that also included buying 115,000 shares of American on September 10. Similarly, much of the seemingly suspicious trading on September 10 was traced to a specific US-based options trading newsletter….which recommended these trades.[24]

Evidently, we are supposed to conclude that “American” means American Airlines. But here it could just as easily refer to American Express. If Deutsche Bank’s pre-9/11 trading was truly hedged, as the 9/11 Commission Report contends in the footnote, then it would not meet the definition of informed or insider trading. However, without more information, it is not possible to confirm or refute the facts in this particular case. Still, the commission’s token explanation is not convincing. Two statistical studies since published reported an unusual volume in options trading for both United and American airlines in the days before 9/11. The author of the first study wrote that the results are “consistent with investors trading on advance knowledge of the attacks.”[25] The second paper, by the Swiss Banking Institute, reached the same conclusion.[26] A third study looked at the Standard & Poor’s 500 Index (SPX index options) and found “abnormal trading volumes in September 2001 OTM, ATM and ITM SPX index put options, and September 2001 ITM SPX index call options.” The authors concluded that there is “credible circumstantial evidence to support the insider trading claim.”[27]

Notice also, the commission makes no mention in its footnote of the 36 other companies identified by the SEC in its insider trading probe. What about the pre-9/11 surge in call options for Raytheon, for instance, or the spike in put options for the behemoth Morgan Stanley, which had offices in WTC 2? The 9/11 Commission Report offers not one word of explanation about any of this. The truth, we must conclude, is to be found between the lines in the report’s conspicuous avoidance of the lion’s share of the insider trading issue. Indeed, if the trading was truly “innocuous,” as the report states, then why did the SEC muzzle potential whistleblowers by deputizing everyone involved with its investigation? The likely answer is that so many players on Wall Street were involved that the SEC could not risk an open process, for fear of exposing the unthinkable. This would explain why the SEC limited the flow of information to those with a “need to know,” which, of course, means that very few participants in the SEC investigation had the full picture. It would also explain why the SEC ultimately named no names. All of which hints at the true and frightening extent of criminal activity on Wall Street in the days and hours before 9/11. The SEC was like a surgeon who opens a patient on the operating room table to remove a tumor, only to sew him back up again after finding that the cancer has metastasized through the system.

At an early stage of its investigation, perhaps before SEC officials were fully aware of the implications, the SEC did recommend that the FBI investigate two suspicious transactions. We know about this thanks to a 9/11 Commission memorandum declassified in May 2009 which summarizes an August 2003 meeting at which FBI agents briefed the commission on the insider trading issue. The document indicates that the SEC passed the information about the suspicious trading to the FBI on September 21, 2001, just ten days after the 9/11 attacks.[28]

Although the names in both cases are censored from the declassified document, thanks to some nice detective work by Kevin Ryan we know whom (in one case) the SEC was referring to.[29] The identity of the suspicious trader is a stunner that should have become prime-time news on every network, world-wide. Kevin Ryan was able to fill in the blanks because, fortunately, the censor left enough details in the document to identify the suspicious party who, as it turns out, was none other than Wirt Walker III, a distant cousin to then-President G.W. Bush. Several days before 9/11, Walker and his wife Sally purchased 56,000 shares of stock in Stratesec, one of the companies that provided security at the World Trade Center up until the day of the attacks. Notably, Stratesec also provided security at Dulles International Airport, where AA 77 took off on 9/11, and also security for United Airlines, which owned two of the other three allegedly hijacked aircraft. At the time, Walker was a director of Stratesec. Amazingly, Bush’s brother Marvin was also on the board. Walker’s investment paid off handsomely, gaining $50,000 in value in a matter of a few days. Given the links to the World Trade Center and the Bush family, the SEC lead should have sparked an intensive FBI investigation. Yet, incredibly, in a mind-boggling example of criminal malfeasance, the FBI concluded that because Walker and his wife had “no ties to terrorism … there was no reason to pursue the investigation.” The FBI did not conduct a single interview.

The 9/11 Commission Report also fails to mention the other compelling evidence for insider trading that I have not yet discussed, namely, the approximately 400 computer hard drives found by workmen in the ruins of the WTC. According to Reuters and CNN, in the period after 9/11, U.S. credit card, telecommunications and accounting firms hired a German company named Convar to recoup data from the damaged hard drives.[30] Convar got the contract because, two years before, it had developed a proprietary method for recovering data using a cutting edge laser scanning technology. Peter Wagner, a Convar spokesman, told CNN that the new laser process makes it “possible to read the individual drive surfaces and then create a virtual drive.” As of December 2001, Convar had examined 39 hard drives and in most cases succeeded in recovering 100% of the data. The company was specifically searching for encryption keys, indicating a financial record. Convar found evidence stored on the drives of “an unexplained surge in transactions prior to the attacks.” Convar director Peter Henschel told CNN that “unusually large sums of money, perhaps more than $100 million, were rushed through the computers as the disaster unfolded. Said Henschel: “The suspicion is that insider information about the attack was used to send financial transaction commands and authorizations in the belief that amidst all the chaos the criminals would have a good head start…..Of course it’s possible that Americans went on an absolute shopping binge, that Tuesday morning. But at this point there are many transactions that cannot be accounted for.” After the initial story by CNN and Reuters, the issue of the WTC hard drives disappeared from the news, and nothing has been heard since. Although reports on the Internet that Kroll purchased Convar remain unsubstantiated, it is nonetheless clear that someone made the story (and the evidence) go away.[31] But what reason would they possibly have for doing so? Unless the initial indications from Convar that insider trading had occurred were correct.

The above CNN quote by Peter Henschel that “unusually large sums of money, perhaps more than $100 million, were rushed through the computers as the disaster unfolded,” was later confirmed in truly chilling fashion by a Deutsche Bank New York branch employee who survived the attacks. The whistleblower, who insists on remaining anonymous for his own protection, told Mike Ruppert that “about five minutes before the attack the entire Deutsche Bank computer system had been taken over by something external that no one in the office recognized, and every file was downloaded at lightning speed to an unknown location” (emphasis added).[32] Here, the important phrase is “five minutes before the attack.” Chilling indeed.

Part 3 is below the notes....


[1] World News Tonight, 20 September 2001.

[2] Dave Eberhart, “Still Silence From 9-11 Stock Speculation Probe”, NewsMax, June 3, 2002,

[3] William Drozdiak, “‘Insider trading’ by terrorists is suspected in Europe”, Miami Herald, September 24, 2001,

[4] James Doran, “Insider Trading Apparently Based on Foreknowledge of 9/11 Attacks,” London Times, September 18, 2001. Archived at

[5] Christian Berthelsen, Scott Winokur, “Suspicious profits sit uncollected,” San Francisco Chronicle, September 29, 2001. Archived at

[6] “Profiting from Disaster,” CBS Evening News, September 19, 2001. Archived at

[7] Michelle Ciarrocca, “Post-9/11 Economic Windfalls for Arms Manufacturers,” Foreign Policy in Focus, September 2002. Posted at

[8] Bank of America among 38 stocks in SEC’s attack probe,” Bloomberg News, October 3, 2001. Archived at

[9] Cited by Barry Grey, “Suspicious trading points to advance knowledge by big investors of September 11 attacks,” World Socialist Web Site, October 5, 2001. Posted at

[10] Bloomberg News, October 3, 2001. The list included stocks of American, United, Continental, Northwest, Southwest and US Airways airlines, as well as Martin, Boeing, Lockheed Martin Corp., AIG, American Express Corp, American International Group, AMR Corporation, Axa SA, Bank of America Corp, Bank of New York Corp, Bank One Corp, Cigna Group, CNA Financial, Carnival Corp, Chubb Group, John Hancock Financial Services, Hercules Inc, L-3 Communications Holdings, Inc., LTV Corporation, Marsh & McLennan Cos. Inc., MetLife, Progressive Corp., General Motors, Raytheon, W.R. Grace, Royal Caribbean Cruises, Ltd., Lone Star Technologies, American Express, the Citigroup Inc. ,Royal & Sun Alliance, Lehman Brothers Holdings, Inc., Vornado Reality Trust, Morgan Stanley, Dean Witter & Co., XL Capital Ltd., and Bear Stearns.

[11] Erin E. Arvedlund, “Follow The Money: Terrorist Conspirators Could Have Profited More From Fall Of Entire Market Than Single Stocks,” Barron’s (Dow Jones and Company), 6 October 2001.

[12] Scott Winokur, “SEC wants data-sharing system,” San Francisco Chronicle, October 19, 2001. Posted at

[13] Michael Ruppert, Crossing the Rubicon,(New Society Publishers, 2004), p. 243.

[14] Bloomberg reportedly acknowledged the fact in a September 2003 newswire. Although the wire has since disappeared from the Internet, the text is archived at

[15] Chris Blackhurst, “Mystery of terror ‘insider dealers’,” The Independent, October 14, 2001, posted at

[16] “Whether advance knowledge of U.S. attacks was used for profit,” New York Times, October 1, 2001. Archived at

[17] George Tenet, At the Center of the Storm, Harper Collins, New York,  2007, p. 19.

[18] Hearings before the Permanent Subcommittee on Investigations, 106th Congress, November 9 and 10, 1999, p.879. Posted at

[20] Raymond W. Baker, “The Biggest Loophole in the Free Market System,” The Washington Quarterly, Autumn 1999, p. 29. Posted at (see p. 1061)

[21] “Chief Steps Down At Alex Brown,” New York Times, September 15, 2001.

[22] Timothy L. O’Brien, “The Deep Slush at Bankers Trust,” The New York Times, May 30, 1999. Posted at

[23] “Chief Steps Down At Alex Brown,” New York Times, September 15, 2001.

[24] 9/11 Commission Report, W.W. Norton, 2004, p. 499.

[25] Allen M. Poteshman, “Unusual Option Market Activity and the Terrorist Attacks of September 11, 2001,” The Journal of Business, 2006, vol. 79, no. 4,

[26] Marc Chesney, et al, “Detecting Informed Trading Activities in the Options Markets,” Social Sciences Research Network, 13 January 2010,

[27] Wing-Keung Wong, et al, “Was there Abnormal Trading in the S&P 500 Index Options Prior to the September 11 Attacks?,” Social Sciences Research Network, April 2010,

[28] 9/11 Commission memorandum entitled “FBI Briefing on Trading”, prepared by Doug Greenburg, 18 August 2003, p. 4-5. Posted at

[29] Kevin Ryan, “Evidence for Informed Trading on the Attacks of September 11,” Foreign Policy Journal, November 18, 2010. Posted at

[30] “German firm probes final World Trade Center deals,” Reuters, December 17, 2001. Posted at

Rick Perera, “Computer disk drives from WTC could yield clues,” CNN, December 20, 2001. Posted at

[31] Michael Fury, “The Ghost in the Machines: Evidence of Foreknowledge in the WTC Hard Drive Recoveries,” Journal of 9/11 Studies, December 2008. Posted at

[32] Crossing the Rubicon, p. 244.



Part 3: AIG and the Linkage to the Drug Trade


The more one studies the dark history of the US national security state, the more transparent the CIA – Wall Street connections become. The links to the international drug trade are less obvious, but have existed from the beginning, that is, from the days of the Office of Strategic Services (OSS), the forerunner of the CIA. Time and again, the same pattern has played out: US military interventions in Southeast Asia, Central America and, since 2001, Afghanistan and Iraq, have been accompanied by a sharp increase in narco-trafficking, with all of the attendant evils. These include the plague of drug addiction, drug-related crime, the devastation of the family and as I hope to show, the corrupting of democratic institutions at home and abroad.

The morally bankrupt policies that are responsible for all of the above have had another deleterious effect: They have crippled our nation’s capacity to play a positive role on the world stage. It is no wonder that foreigners no longer view the United States with admiration and respect, but increasingly with fear and loathing. But US elites are oblivious to such concerns. They do not care, and are quite candid about what they view as the CIA’s pragmatic “need” to associate with unsavory individuals and criminals in the interest of furthering US foreign policy goals. Their realpolitik can be read between the lines of the policy papers. Take, for instance, the 1996 intelligence report, already noted, prepared by Maurice “Hank” Greenberg for the Council on Foreign Relations (CFR), and for which Greenberg was nominated to replace John Deutch as director of the CIA. In the paper Greenberg affirms that “the capability to undertake [covert operations]….constitutes an important national security tool.” Later, in the section titled “Intelligence and Law Enforcement” he insists that

foreign policy ought to take precedence over law enforcement when it comes to overseas operations. The bulk of U.S. intelligence efforts overseas is devoted to traditional national security concerns; as a result, law enforcement must ordinarily be a secondary concern. FBI and Drug Enforcement Agency (DEA) agents operating abroad should not be allowed to act independently of either the ambassador or the CIA lest pursuit of evidence or individuals for prosecution cause major foreign policy problems or complicate ongoing intelligence and diplomatic activities.

This means, over and above diplomacy, that when criminals are judged to be intelligence assets, they are granted protection from prosecution for narco-trafficking, money laundering, extortion, rape, even terrorism and murder. In 1982, the CIA and the US Department of Justice actually worked out a secret agreement to this effect.[1] The deal exempted the CIA from having to report drug trafficking by CIA assets, which, notice, made a mockery of then presidential wife Nancy Reagan’s much ballyhooed “just say no” anti-drug campaign. At the time, most Americans trusted Ronald Reagan and believed that his administration was serious about the so-called war on drugs. But hindsight shows that the Reagan White House badly abused the public’s good faith.

The foreign policy advocated by Maurice Greenberg, above, is in large part responsible for the drug-related violence on the streets of our cities, and for the epidemic of narcotic addiction among our children, who have been sacrificed to the false god of national security. But the social carnage is not limited to the United States. Drug addiction in Muslim Iraq was almost unknown prior to the US invasion in 2003; but has since become a major problem. A similar recent explosion of heroin use has occurred in Iran, which, notice, is right next door to Afghanistan, where the poppies are grown with the blessing of the CIA. Such foreign policies are evil, a scourge upon the planet, yet, are intimately associated with US empire building. Quite simply, the US power elite has followed in the footsteps of the British and French who, in their day, also exploited the immensely profitable opium and heroin trade. The writer Chalmers Johnson has termed this descent into darkness the sorrow of empire.

The CIA’s secret collusion with the Department of Justice [sic] gave the CIA veto over law enforcement, effectively blunting the capacity of US drug enforcement agencies to interdict the flow of illegal drugs into the US. The timing was no accident. The deal coincided with the start of the CIA’s Contra war in Central America. This explains why, the next year, the Drug Enforcement Agency (DEA), under pressure from the Pentagon, closed its office in Tegucigalpa, Honduras.[2] The flow of drugs through Honduras had not diminished; in fact, just the opposite. For years, the country had been a transfer point for illegal drug smuggling into the US, a reality that Contra leaders readily exploited to finance their war against the Nicaraguan Sandinistas; and they did so with the full knowledge and approval of the CIA. For many years after, Langley’s veto blocked legitimate efforts by US law enforcement to curb the drug trade.

I must emphasize that, meanwhile, the American people were kept in the dark about the policy and its effects, at every point in the chain: from the formulation of the policy to its implementation to the phony packaging of the policy for mass consumption. In fact, we only know about it, today, thanks to a courageous journalist named Gary Webb, who published a groundbreaking series of articles in 1996 in the San Jose Mercury News, exposing Contra links and CIA complicity in the crack cocaine epidemic that ravaged the black communities of Los Angeles in the 1980s.[3] The series, appropriately titled “Dark Alliance”, was one of the first big stories to be carried on the Internet; and later, Webb expanded it into an important book by the same name, in which he lays out the voluminous evidence in stark detail. But it was Webb’s series of articles in 1996 that initially focused media attention on the drug issue; and which compelled CIA director John Deutch to announce an internal investigation. Meanwhile, the agency simultaneously launched a disinformation campaign to discredit Webb, whom it viewed as a serious threat.

The campaign against Gary Webb has been called “one of the most venomous and factually inane assaults on a professional journalist’s competence in living memory.”[4] The fawning mainstream press, always eager to do the CIA’s bidding, appeared to take pleasure in savaging the messenger, even while tacitly conceding that his facts were basically correct. One of the low points occurred on live TV, on November 15, 1996, when NBC’s Andrea Mitchell, wife of Federal Reserve chairman Alan Greenspan, referred to Webb’s exhaustively documented expose as “a conspiracy theory,” the kiss of death for any serious journalist.[5] At this same time, as we know, Greenspan was busily engineering the deregulation of Wall Street, setting the stage for the 2008 financial meltdown of the global economy.

CIA Inspector General Frederick Hitz led the internal probe, and even though his conclusions later confirmed Webb’s main thesis, the CIA suppressed Hitz’s report, even while leaking a denial of the allegations. The CIA’s minions in the press corps did the rest. On December 19, 1998, an article by Tim Weiner in the New York Times and another by Walter Pincus in the Washington Postcited “unnamed sources” who insisted that Hitz had found no “direct or indirect” links between the CIA and cocaine traffickers. This was a blatant lie; indeed, a breathtaking example of deception. But it had its intended effect. Neither reporter bothered to ask why Hitz’s report was still under wraps.

How could the mainstream press fumble the ball so badly? There are a number of reasons, but probably the main one is that, in the 1990s, the issue of CIA complicity in the drug trade was politically out of bounds, simply unthinkable, beyond the realm of the possible. Today, things are a little different. In 2011, the CIA’s support for Afghan drug lords is out of the closet. Even the major US papers have reported it.[6] However, in the 1990s, the political climate simply would not allow an honest airing of the issue (much as 9/11 is taboo, today). Webb’s publisher ultimately caved under pressure and threw his Pulitzer Prize winning reporter under the bus, even as Webb was turning up fresh confirmatory evidence which indicated that, if anything, he had under-stated the case against the CIA.[7]

When CIA Inspector General Fred Hitz finally testified before the House Intelligence Committee, in March, 1998, he admitted it was all true. Said Hitz: “Let me be frank about what we are finding. There are instances where CIA did not, in an expeditious or consistent fashion, cut off relationships with individuals supporting the Contra program who were alleged to have engaged in drug trafficking activity…”[8] On hearing this, Congressman Norman Dicks of Washington button-holed Hitz with the obvious next question: “Did any of these allegations involve trafficking in the United States?” “Yes,” Hitz replied, and went on to explain about the CIA’s secret arrangement with the Department of Justice. According to Webb, who was in attendance, at that point, a murmur swept through the hearing room as the meaning of Hitz’s testimony sank in.[9]

Of course, by this time, Webb’s career as a journalist was over, destroyed. The CIA’s vilification campaign had produced the intended result; and, next day, the Washington Post buried its story about Hitz’s testimony deep in the paper, along with its own culpability for helping to trash the reputation of one of America’s bravest muckraking writers. And why? Quite simply: for the crime of telling the truth.

We need to ask: How can such a miscarriage happen in a nation that prides itself on being a free and open society? I suspect the reader is not prepared for my answer, which I will present on the following pages. I must admit I was not prepared for it myself. The truth, as the reader is about to learn, is that complicity with narco-trafficking is both insidious and inexorable. It affects a corrupting influence on government at all levels, for government officials are not immune to the temptations of the drug trade, which, after all, is the most profitable business on the planet by a wide margin. Arms smuggling comes in a distant second. As with derivatives and insider trading, the possibilities for abuse are as unlimited as the human imagination. The outcome of a secret policy of complicity was entirely predictable. I must admit, though, I was shocked to learn just how far up the food chain the rot extends.


Background of American Insurance Group (AIG)

AIG has always been an American-owned company, though it had its origins in China. Cornelius V. Starr founded AIG in Shanghai, in 1919, the first western insurance firm in the Far East. From the start, AIG’s international focus was made-to-order for intelligence operations. In 1939, the Japanese invasion of China compelled Starr to relocate to New York, where, in 1943, he joined with OSS chief William “Wild Bill” Donovan to form a special insurance unit to gather war-time intelligence about Nazi Germany and Japan. During the war, the OSS actually shared Starr’s offices in New York City. The special unit used Starr’s connections in China, including his Shanghai newspaper, as a spy network. Meanwhile, the special agents at the New York office sifted through mountains of insurance documents for blueprints of enemy bomb plants, the design of the Tokyo water supply, timetables for tide changes, and other details about shipping and manufacturing which aided the allied war effort. As World War II drew to a close, the special unit investigated how the Nazis might seek to launder their assets via phony insurance policies.[10]

In 1962, Cornelius Starr picked Maurice Greenberg to manage AIG’s holdings in the US, which were floundering at the time. Greenberg administered a quick turnaround and, in 1968, succeeded Starr as head of AIG.[11] The next year, he issued a public stock offering and began to expand the company. According to various reports, Greenberg was a long-time confidant of Ronald Reagan’s CIA Director William Casey, who had headed the Securities and Exchange Commission under Nixon. Casey attempted to recruit Greenberg to be his deputy at CIA, but Greenberg declined, preferring to remain at AIG.[12] Once, during a New York Times interview, Casey mentioned Greenberg as one of the few individuals outside of government whom he relied on for advice.[13] Henry Kissinger was another close friend and client. In 1987, Greenberg appointed Kissinger as chairman of AIG’s advisory board.[14] For years, both men lobbied China’s leaders to open the country to western investment, though Kissinger’s role is more widely known. In 1980, the Chinese finally granted Greenberg a license to sell insurance in Beijing, and in 1996 AIG reoccupied the same Shanghai offices originally used by C.V. Starr.[15]

For years, AIG generated profits at a rate that blew away the competition. Over a ten-year period, from 1988-1998, AIG’s earnings compounded at an average rate of 14%, an impressive figure in a business that tends to be cyclical.[16] While the rest of the insurance industry suffered periodic ups and downs, AIG behaved more like a “growth” company. Its consistently high earnings wowed investors. Some compared AIG to a perpetual money-making machine. In a column, David Schiff, publisher of an insurance industry newsletter, wrote that “AIG is to the insurance business what the Yankees are to baseball.” The comparison was based on more than whimsy. Rumor had it that Maurice “Hank” Greenberg drew his nickname from the first Jewish superstar of baseball, Hammerin’ Hank Greenberg, whom the Yankees recruited in 1929 (but who played first base, most of his career, for the Detroit Tigers).

How did AIG beat the trends? Writing in 1998, Schiff acknowledged that “No one quite knows the answer. Some who follow AIG have told us they can’t really analyze it.”[17] Many investors did not bother to try. They simply accepted the fact that Greenberg was brilliant, and that AIG was somehow unique. The view expressed in 2002 by Morgan Stanley analyst Alice Shroeder was typical: “What investors really want is for Hank to become immortal.”[18] Some probably felt the same way about Bernie Madoff, but there were significant differences. AIG was no Ponzi scheme. Whereas other large insurance firms like State Farm were fairly simple to understand, AIG, by comparison, was “fabulously complex,” virtually impenetrable from the outside. The reason: AIG had hundreds of affiliates in 130 countries and did most of its business offshore, in other words, beyond the scrutiny of US regulators. The Wall Street Journal once referred to AIG as a “black box.” (The same op-ed also mentioned Enron.) This helps to explain why Greenberg and AIG remained untouchable for so long.

AIG was not solely an insurance firm. By the 1990s, Greenberg had diversified into other areas, such as derivatives trading, private banking, financial services, and asset management. Another division boasted the world’s largest airline rental company. But AIG achieved its lofty reputation by succeeding where others failed. I was surprised to read that most traditional insurance companies lose money underwriting policies. They turn a profit by shrewdly investing the premiums. AIG was different. It had a reputation for actually making money writing insurance policies; or so people thought. However, in the spring of 2005 when the dust finally settled, it was clear that AIG also lost money in the insurance business but obscured the fact through a myriad of creative accounting schemes that transformed AIG’s underwriting (business) losses to investment (capital) losses, a slick way to enhance AIG’s corporate balance sheets. One of Greenberg’s favorite expressions was: “All I want in life is an unfair advantage…”

After 9/11, it gradually became clear that not even AIG insiders were privy to the decisions being made at the top. In 2002, an internal audit committee reported that AIG’s financial accounting was suspect.[19] Later that same year, the Securities and Exchange Commission (SEC) uncovered evidence of securities fraud. In 2000, AIG marketed an insurance product that enabled a company named Brightpoint Inc to conceal $11.9 million in losses.[20] When the case was settled, the SEC doubled the fine to $10 million because AIG’s CEO Maurice Greenberg refused to cooperate. One of Hank’s tactics was to stall the investigation by delaying to hand over subpoenaed documents, including one internal white paper that “completely contradicted everything they’d been saying about how this was just the fault of one guy who wasn’t getting supervised.”[21] It turned out that scamming the system was company policy. In subsequent weeks, even as AIG sought to portray the Brightpoint case as an isolated incident, federal investigators uncovered another phony transaction that enabled a subsidiary of PNC Financial Services to remove problem loans and assets from its balance sheet, thus enhancing its financial position. AIG paid a $115 million fine. The shady transactions were reminiscent of Enron.

But it was only the beginning. Soon, AIG and Marsh & McLennan were in the cross-hairs of a state probe launched by New York attorney general Elliot Spitzer. In October 2004 Spitzer sued Marsh for bid-rigging and numerous other fraudulent accounting practices. As the investigation widened, Ace (run by Greenberg’s other son Evan), AIG, Hartford, and several other insurance companies were also named.[22] Spitzer refused to negotiate with Jeffry Greenberg, Marsh’s CEO, whom the attorney general accused of stonewalling. The apple, as they say, falls close to the tree. In the end, the younger Greenberg was forced to step down and Marsh paid $850 million in restitution. Two AIG executives pled guilty to criminal charges.

It is notable that Marsh & McLennan purchased Kroll from AIG for $1.9 billion in July 2004, several months before Spitzer’s lawsuit. At the time, Kroll’s CEO was Michael Cherkasky who, years earlier, had been Spitzer’s boss at the Manhattan District Attorney’s office.[23] Cherkasky joined Kroll in 1994, became CEO in 2001, and replaced Jeffrey Greenberg as CEO when the younger Greenberg was forced out in late 2004.[24] Thus, it was Cherkasky who negotiated the final settlement with Spitzer. Did AIG pass Kroll on to Marsh to better shield the spy firm from Spitzer’s investigation, as Richard Grove has suggested? Possibly. It certainly does appear that Cherkasky was named to lead Marsh because of his previous relationship with Spitzer.

By early 2005, separate SEC and Department of Justice investigations were closing in on the elder Hank. By this point, the AIG board was also pressuring Greenberg to name a successor and step down. But Greenberg, who was approaching his 80th birthday, had no intention of relinquishing control of the company he had dominated for 37 years. Maurice Greenberg had always viewed regulators with disdain, and he had generally succeeded in intimidating them, one way or another. In 1996, for instance, when the state of Delaware launched an investigation of AIG’s bizarre relationship with a Barbados-based reinsurance company named Coral Re, instead of cooperating Greenberg rang up the Delaware insurance commissioner and gave her a tongue-lashing over the telephone. Greenberg also sent Kroll detectives to harass the state regulators. The get-tough strategy produced the intended result. Even though state laws had been broken Delaware had no stomach for a fight. The regulators drew back. In the end, the state “whipped AIG with a feather.” AIG got off with a mildly-worded reprimand, and was not even required to pay a fine. No sooner had Coral Re been dissolved, as per the settlement, than AIG shifted its business to several new shell companies modeled in its image and likeness. The case of Coral Re is important because of possible links to the drug trade and to Arkansas Governor Bill Clinton, as the reader will shortly learn.

Greenberg also resorted to Kroll after AIG’s general counsel Michael Joye resigned in 1992 to protest fraudulent accounting practices. Joye kept the facts secret for many years. But here is the gist: In the early 1990s, Joye was shocked to learn that AIG was cheating several states, including New York, out of tens of millions in workers’ compensation funds; and it was happening with the full knowledge and consent of CEO Greenberg. After conducting his own internal investigation, Joye sent Greenberg a bluntly worded memo informing him that AIG’s “intentional violations” could lead to “criminal fraud and racketeering charges,” in addition to exposing the company to astronomical civil penalties.[25] Joye determined that for AIG to become legal the company “would have to hire about 40 new people to do filings properly. It would also have to charge clients more and pay ‘much higher’ assessment frees.” But according to the New York Times, Greenberg was not interested. When the issue came up in a meeting, Greenberg famously asked “Are we legal?” An employee responded: “If we were legal we wouldn’t be in business.” Hearing this, “M.R.G. [Greenberg] began laughing and that was the end of it.”[26] After Joye tended his resignation, Greenberg sent Kroll a copy of Joye’s personnel file. It is not known what Kroll detectives did with it, but the case illustrates Greenberg’s temperament and autocratic style.

By early 2005, AIG’s directors were pursuing their own internal investigation which eventually led offshore to several Greenberg-controlled corporations that were a part of the AIG empire. One was the Starr Investment Corporation (SICO), a mysterious holding company which dated to AIG’s original founding by Cornelius Starr. The other firm, C.V. Starr (also named after the founder), was no less mysterious. Both were based in Bermuda, which is famous for having no corporate income tax. The island also attracts insurance companies because of the welcome absence of regulation. Both SICO and C.V. Starr held substantial amounts of AIG stock, and were used by Greenberg to reward top AIG executives. But C.V. Starr was also reserved for an inner circle who received lavish compensation.[27] The inner group included Howard Smith, AIG’s chief financial officer, and Mike Murphy, SICO’s treasurer. It is curious that Smith had previously worked for PricewaterhouseCoopers, the company that, for many years, conducted AIG’s annual audits. How convenient.

The final showdown began on March 23, 2005 when a team of AIG lawyers arrived in Bermuda to examine SICO records and conduct interviews. The same facility housed both SICO and AIG employees. Martin Sullivan had already replaced Greenberg as AIG’s CEO. Greenberg still remained as chairman. However, by this point, a rift was developing between Greenberg’s supporters and the rest of the board, all of whom wanted the public relations disaster simply to end. The plot thickened when the directors issued a company-wide order to cooperate with regulators. The next day, AIG employees in the company’s Dublin office seized a SICO computer and placed it under lock and key. (Both firms also shared the Dublin office.) Things quickly escalated. Mike Murphy, a Greenberg loyalist, led a group of SICO employees into the Bermuda office, under cover of night, using a passkey, and hustled 82 boxes of SICO documents out of the building to a separate location. SICO was incorporated in Panama, a major center of money laundering, and there was concern that Murphy might attempt to move evidence beyond the reach of US law enforcement. The next day, an SEC official in New York received a message: “Looks like they’re destroying documents in Bermuda.”[28] It was the last straw.

When word reached Spitzer he issued a stern warning to Sullivan, and also subpoenaed the SICO and AIG records. Sullivan personally flew to Bermuda, summarily fired Mike Murphy, and took possession of the documents. The AIG board, now under threat of criminal prosecution, had no choice but to demand Greenberg’s immediate resignation.

In subsequent months, the court proceedings played out in the press. The details gradually emerged about Greenberg’s largest deception: a $500 million deal “in which various AIG insiders staged an elaborate artificial transaction with the Gen Re Corporation,” a major reinsurer owned by Warren Buffet. AIG ostensibly bought $600 million in reinsurance from Gen Re for a $500 premium, indicating a risk of $100 million.[29] However, because Greenberg wanted zero risk exposure, the deal’s “purported terms were all undone” by his staff “in undisclosed side agreements” that rendered the transaction “a sham,” according to the SEC. Papers were altered to distort the nature of the transaction.[30] Buffet’s subsidiary provided records to Spitzer documenting everything. The records showed that AIG’s purpose had been to generate a large tax write-off, in order to make the company look more prosperous than it was. The documents also proved Greenberg’s personal involvement.[31] One of the investigators told the New York Timesthat the intent may have been “to mask the the activities of murky offshore entities that AIG used extensively during Mr. Greenberg’s tenure at the company.”

In 2006, AIG reached a $1.6 billion settlement with state and federal authorities: the largest ever paid by any financial services company, in US history.[32] In February 2008, four former executives of Gen Re and one from AIG were convicted of conspiracy, securities fraud, mail fraud, and making false statements to the SEC.[33]

It is important to remember that Maurice Greenberg is not some run-of-the-mill hoodlum. As noted, he served as chairman of the Federal Reserve Bank of New York, is a director of the New York Stock Exchange, is the vice-chairman of the Council on Foreign Relations, and is a member of the Trilateral Commission. He also served as vice-chairman of the Center for Strategic and International Studies, and is the Director of the Institute for International Economics, is the Director of the US-China Business Council, the vice-chairman of the US-ASEAN Business Council, the Director of Project Hope, founding chairman of the US-Philippine Business Committee, and, until his forced retirement, was a Trustee of the Asia Society. While this is not a comprehensive list of Greenberg’s credits, it should suffice to lend new meaning to the old adage that scum rises to the top.

After Hank’s departure from AIG, the new CEO Martin Sullivan told the press that the insurance giant would now prosper “with the right controls and checks and balances in place, and the right level of compliance.”[34] However, as we know, things turned out rather differently. By 2008, AIG was in dire financial straits, largely because of the company’s exposure to the sub-prime mortgage market (the outcome of zero regulation of derivatives). By September 16, 2008, AIG stock had fallen by more than 95% to just $1.25/share, from a one-year high of $70.13. For the year, AIG reported a $99 billion loss, and received a controversial $85 billion bailout.[35] Greenberg pointed an accusatory finger at the current directors, and told the press that AIG’s sales of credit default swaps had exploded after he left. Sullivan denied this, insisting that AIG actually stopped writing credit default stops in 2005. By March 2009, AIG’s federal bailout had expanded to $150 billion, making it the largest single bailout by far in US history. AIG also set another dubious record when it posted a $61.7 billion loss for the final three months of 2008, the largest quarterly loss in corporate history.[36] That same month, AIG announced that it would disperse $1.2 billion in bonus packages to its employees, 73 of whom would receive checks of at least $1 million.[37]

The bonus announcement stirred understandable outrage. But the press failed to ask the really important questions. The investigations of the Greenberg empire showed that AIG was no different than the rest of the industry: AIG also lost money, at times, in the insurance business. Given that AIG managed its risks by ceding as much as 70% of its premiums to various reinsurers, this means that most of AIG’s insurance revenue was unavailable for investment. Nor can the remaining 30% account for AIG’s impressive earnings, over many years.[38] The question, therefore, is: how did Maurice Greenberg manage for so long to produce a silk purse from a sow’s ear? Did Greenberg succumb to the temptations of the powerful, and step over the line? What is clear is that AIG’s offshore dealings were key to the company’s profitability, even during the downturns that affected the rest of the industry but to which AIG seemed largely immune. David Schiff, a Greenberg admirer, put it this way: “AIG’s unique global franchise obscured the reality of the company’s financial condition.”[39]

Former LAPD narcotics detective Michael Ruppert arrived at a different conclusion. In August 2001, just weeks before 9/11, Ruppert posted an article exploring possible AIG involvement in the drug trade.[40] Ruppert was astounded to learn that Coral Talavera Baca, the wife (or girlfriend, it is not clear which) of Medellin drug lord Carlos Lehder was, at the time, employed at AIG’s San Francisco office, ostensibly as AIG’s office manager, a position for which Talavera had neither the requisite training nor the credentials. What was she doing there?

Amazingly, as it turns out, Coral Talavera Baca was the very same woman who in 1995 supplied investigative reporter Gary Webb with the initial lead that resulted in his groundbreaking series of articles in the San Jose Mercury News about CIA links to Latin American drug traffickers.[41] Talavera’s husband, Carlos Lehder, was one of the central figures in the notorious Medellin drug cartel, led by Pablo Escobar, which in the mid-1980s grew into the world’s largest cocaine smuggling ring. At the time of Lehder’s 1987 arrest in a Columbian jungle, he reportedly cut a deal with US officials and was allowed to keep much of his estimated $2.5 billion fortune amassed from the drug trade.[42] Lehder was extradited to the US, where he entered a witness protection program. But why would the US government negotiate with a man who had been public enemy number one? Lehder and his cohorts in Medellin are believed to have ordered the assassination of numerous Columbian officials, newspaper editors, journalists, informants, as well as 600 policemen; but are probably best known for their involvement in the grisly attack on the country’s Palace of Justice in November 1985 that left nearly 100 people dead, including eleven of Columbia’s supreme court justices. Lehder was a bad apple.

According to the Pittsburgh Post-Gazette, it was none other than Vice President George H.W. Bush who negotiated the deal with Lehder.[43] I was shocked to read this, until I recalled that Ronald Reagan named Bush in 1982 to head up his so called war on drugs. As we will discover, this explains many things.

Although Lehder testified for US prosecutors at the 1992 trial of Manuel Noriega, his testimony proved of little value to the prosecution. According to knowledgeable observers, Noriega’s conviction was a foregone conclusion, with or without Lehder’s testimony. Some wondered why the US was so interested in Noriega, in the first place, since Lehder was a much bigger fish in the drug world. Narcotics expert Alfred McCoy may have provided the answer when he speculated that the US prosecution of Noriega probably had nothing to do with curbing the drug trade and everything to do with projecting US power in Central America. Noriega’s crime was that he turned nationalist, developed his own power base, and sought to chart an independent path, much like his predecessor, General Omar Torrijos, who died in a mysterious plane crash, probably orchestrated by the CIA.[44]

Three years after the Noriega trial, Lehder complained in a letter to U.S. District Judge William Hoeveler of Miami that he had been double-crossed by the US government. Weeks later, according to eyewitnesses, Lehder was whisked into the night from the witness protection center at Mesa, Arizona. He was not seen again for ten years, until 2005, when Lehder appeared in a Florida courtroom to appeal his life-in-prison-sentence-plus-135-years. The judge dismissed the appeal out of hand. No mystery there. But what about the $2.5 billion in assets that Lehder reportedly retained? I had hoped to interview Coral Talavera Baca who, no doubt, has the answers. Unfortunately, I was not successful in contacting her. In 2011, the questions raised a decade ago by Mike Ruppert about Baca’s connections with AIG, and AIG’s possible involvement in the drug trade, remain unresolved.

Yet, it is curious that Maurice Greenberg chose to expand into the financial services sector in 1987, the year of Lehder’s arrest in Columbia. Not only does the timing correspond with the sharp upsurge in the volume of revenues from the international drug trade, which by the late 1980s exceeded an estimated trillion dollars a year,[45] that same year, AIG also entered into a bizarre relationship with a Barbados-based reinsurance company named Coral Re. The details, as I have noted, came to light in the mid-1990s when Delaware state regulators discovered that AIG secretly controlled Coral Re. In the insurance world, companies often reduce their exposure to underwriting losses by passing on a percentage of the risk to insurance wholesalers, also known as reinsurance companies. As payment, the reinsurance companies receive a percentage of the premiums. Wholesalers are generally based offshore in places like Bermuda, Barbados, the Caymans, and Luxembourg, where taxes are minimal or nonexistent and accounting records can legally be kept secret. Although US state laws require insurance companies to keep a certain amount of capital in reserve to cover losses, the amount is less if a company has reinsurance. AIG was a major user of reinsurance because it specialized in high-risk policies. For regulatory reasons, however, both parties to such a transaction, i.e., the insurer and reinsurer, must be independent of one another, for obvious reasons. If the two are affiliated, then there is no true risk reduction. This was the issue with Coral Re, and what attracted state regulators in the first place, because, despite persistent denials by AIG, Coral Re turned out to be a shell company created by AIG for reasons that have never been made clear. At the time Coral Re was established, the broker Goldman Sachs sent around a confidential memo which cautioned that the whole business must be kept secret. Indeed, the memo stipulated that all copies of the memo were to be returned to Goldman Sachs. When Delaware state regulators nevertheless managed to obtain a copy, they were incredulous.[46] The dozen or so investors who lent their names put up no money of their own, yet were guaranteed a profit, a sweet deal if there ever was one. Within days of its creation, Coral Re recorded $475 million in losses, which soon topped $1 billion. Between 1987 and 1993, AIG ceded $1.6 billion of insurance premiums to the new reinsurer. Yet, Coral Re’s total equity capital never exceeded $52 million.[47] In addition to being severely under-capitalized, the new company had no actual offices of its own. In fact, it was managed by a subsidiary of AIG. Coral Re’s board of directors made no decisions and conducted no business. At the time, the chief operating officer at Goldman Sachs was Robert Rubin, who later served as President Bill Clinton’s Treasury Secretary.

Rubin’s main “achievement” during his tenure at Treasury was persuading Clinton to support repeal of the 1933 Glass-Steagall Act, a key part of Franklin Delano Roosevelt’s New Deal program. Glass-Steagall had created a regulatory firewall between commercial and investment banking, for the soundest of reasons: to prevent conflicts of interest and other abuses within the banking system. But Robert Rubin, Alan Greenspan, and others on Wall Street viewed the New Deal as an aberration, and by 1999, they brought Clinton around.[48] In 1998, Rubin also joined with Greenspan in blocking attempts by Brooksley Born, chairman of the Commodities Futures Trading Commission, to regulate derivatives, which Born and others correctly saw as a threat to the stability of financial markets.[49] The result was the disaster we have witnessed in recent years. The defeat of every attempt to regulate derivatives, together with the repeal of Glass-Steagall, opened the floodgates to the wild speculation that characterized the G.W. Bush years, and is responsible for the derivative schemes, real estate bubble, collateral debt obligations, sub-primes, credit default swaps, legalized skimming rackets and, ultimately, the global financial meltdown in 2008. In short, we have suffered a replay of the roaring twenties when bankers showed they were incapable of regulating themselves.

After Rubin’s departure from Treasury he joined the board of Citigroup, the largest US bank, which had recently been rocked by several huge money laundering scandals, one involving Mexican President Salinas. In 2001, the pattern repeated itself when Citigroup paid $12 billion to acquire the second largest bank in Mexico, Banamex, whose owner Roberto Hernandez Ramirez was known to be deeply involved in the international drug trade. In December 1998, the daily Por Esto!, Mexico’s third largest newspaper, reported that Ramirez’s estate on the coast of Yucatan was a regular transshipment point for tons of South American cocaine. According to local fishermen, the coke arrived by boat during the night and, after being offloaded, was sent to the US via small planes operating out of a private airstrip on Ramirez’s sizable estate. The property is located on the tip of Punta Pajaros, which in English means Bird Point.[50] So flagrant was the trafficking that local people dubbed it “la peninsula de la coca,” i.e., the cocaine peninsula. When Ramirez sued Por Esto! for libel, a Mexican court threw out the case after finding that the evidence for narco-trafficking was genuine.[51] A succession of Mexican presidents, including Ernesto Zedillo and Vicente Fox, reportedly vacationed with the drug lord banker at his lavish estate, as did President Bill Clinton in February 1999.

No question, Citigroup acquired Banamex to gain easy access to drug money, which many US banks now depend on for liquidity. In 2009, Antonia Maria Costa, head of the UN Office on Drugs and Crime, told the press that billions of dollars of laundered drug money had saved the financial system during the 2008 meltdown on Wall Street.[52] But not even laundered drug money could save Citigroup. The bank suffered enormous losses due to its sub-prime exposure, and at the height of the crisis received a $45 billion transfusion from the Federal Reserve, the second largest bailout after AIG’s. By December 2008 Citigroup’s stock had plummeted to $8/share from a high of $55 in 2006. Angry shareholders filed a lawsuit charging that Robert Rubin and other insiders not only lied to them about the bank’s losses, but had also cashed in their own inflated stock options before the collapse. Later, the SEC agreed with shareholders that Rubin and other bank officials knew about the losses. Which, of course, means that they are guilty of both defrauding investors and insider trading.[53] At last report, however, none had been indicted, although one bank officer was fined $100,000. But the hand-slap is laughable given Rubin’s reported earnings of $120 million while at Citigroup.[54]

Citigroup may be the largest, but it is not the only big US bank involved in narco-trafficking. Others include Bank of America, American Express Bank, Wells Fargo and Wachovia, none of which has ever been criminally prosecuted in a US court for their participation in the drug trade. Recently, Bloomberg reporter Michael Smith learned the answer to the question why when he interviewed Jack Blum, a long-time US Senate investigator and banking industry consultant. Said Blum: “There’s no capacity to regulate or punish them [the big banks] because they are too big to be threatened with failure.” This explains why “they seem….willing to do anything that improves their bottom line, until they’re caught.” Blum called their too-big-to-fail status “a get-out-of-jail-free-card for big banks.”[55]

That is certainly how it played out when Wachovia was caught red-handed in “the biggest money-laundering scandal of our time.” [56] The plot began to thicken in 2006 when Mexican authorities discovered 5.7 tons of cocaine packed in 128 black suitcases (estimated street value: $100 million) in a DC-9 at the international airport of Ciudad del Carmen, located 500 miles east of Mexico City. Authorities later learned that narco-traffickers had purchased the plane with funds laundered through Wachovia Corp. and Bank of America. It was no isolated incident. A 22-month federal investigation disclosed that during a three-year period alone, from May 2003 to May 2007, Wachovia had processed $378 billion in questionable transfers from Mexican currency exchange houses, in the form of wire transfers, traveler’s checks and cash shipments. The whopping figure is the equivalent of roughly one-third of Mexico’s gross domestic product.

The noose began to tighten on May 16, 2007, when DEA agents raided Wachovia’s international offices in Miami, seizing bank records. A “back look” at the transactions confirmed that drug cartels had used Wachovia’s correspondent banking services to launder a minimum of $110 million in drug profits. Doubtless, this was only the tip of the iceberg, but was still the largest violation of US money-laundering laws in history.[57] The cartels had used the laundered cash to purchase weapons, safe-houses, and aircraft for the narcotics trade. During the investigation, authorities also seized 22 tons of cocaine. According to Jeffrey Sloman, a federal prosecutor involved in the case, “Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations.”[58]

When Wachovia’s own anti money-laundering officer, Martin Woods, attempted to bring the problem to the attention of bank officials, the same officials told him to keep quiet. Woods persisted, to his credit, and became the target of internal harassment and bullying by bank officials. He lost his job and, even though later vindicated by the federal probe, ultimately, had to bring suit against the bank to get restitution. In the end, Wachovia refused to curb its lucrative dealings with the dubious Mexican currency houses, that is, until the financial media began to report the ongoing federal investigation.[59] But then, Wachovia has a long history of caring more about the almighty dollar than the people it serves. Founded in Charlotte, North Carolina in 1879, Wachovia foreclosed on so many farms and businesses during the Great Depression that the bank became known in the Southeast as Walk-over-ya.[60]

Although federal authorities threatened Wachovia with criminal prosecution, the case never went to court. Despite its profits from money laundering, Wachovia suffered huge losses in 2008 as a result of the sub-prime fiasco, and was rescued by Wells Fargo for a reported $12.7 billion. The merger happened within days of Wells Fargo’s $25 billion federal bailout—which, notice, means that the US taxpayer footed the bill for the acquisition (and then some). In 2010, Wells Fargo settled with the US government on behalf of Wachovia by paying $160 million in fines and penalties. Wells Fargo agreed to upgrade its money laundering detection efforts; and, after a year’s probation, the federal government dropped all charges in March 2011.  Although the $160 million fine was a hefty sum, it was still less than 2% of Wells Fargo’s reported earnings in 2009. Indeed, bank officials probably viewed the fine as just another cost of doing business.


[1] Gary Webb, Dark Alliance, Seven Stories Press, New York, 1998, p. 482.

[2] Peter Dale Scott and Jonathan Marshall, Cocaine Politics, University of California Press, Berkeley, 1991, p 57.

[3] Gary Webb, “Dark Alliance: The Story Behind the Crack Explosion,” San Jose Mercury News, August 1996. Series archived at

[4] Alexander Cockburn and Jeffrey St. Clair, Whiteout, Verso, New York, 1998, p 29.

[5] Ibid., p. 31.

[6] Dexter Filkins, Mark Mazetti and James Risen, “Brother of Afghan Leader Said to Be Paid by C.I.A.,” New York Times, October 27, 2009. Posted at

[7] Dark Alliance, p. 471-472.

[8] Statement of Frederick P. Hitz, Inspector General CIA before the Permanent Select Committee on Intelligence, US House of Representatives, regarding investigation of allegations of connections between CIA and the Contras in drug trafficking to the US, March 16, 1998. Posted at

[9] Dark Alliance, p 482.

[10] Mark Fritz, “The Secret (Insurance) Agent Men,” Los Angeles Times, September 22, 2000.

[11] David Schiff, “AIG’s Relationship with Three Starr Entities,” Schiff’s Insurance Observer, March 30, 2005.

[13] Ronald Shelp, Fallen Giant, John Wiley & Sons, Hoboken, 2006, p.10.

[14] Walter Isaacson, Kissinger: A Biography, New York, Simon & Schuster, 2005, pp. 739-40.

[16] David Schiff, “A Darkness on the Edge of Town,” Schiff’s Insurance Observer, October 1998.

[17] Ibid.

[18] Devon Leonard, “All I Want In LIfe is an Unfair Advantage,” Fortune, August 8, 2005, posted at

[19] David Schiff, “AIG, Audit Committees, Legends, and P/E Ratios,” Schiff’s Insurance Observer, July 25, 2002; also see Carrie Johnson and Dean Starkman, “Accountants Missed AIG Group’s Red Flags,” Washington Post, May 26, 2005.

[20] Kurt Eichenwald and Jenny Anderson, “How a Titan of Insurance Ran Afoul of the Government,” The New York Times, April 4, 2005.

[21] “All I want in LIfe is an Unfair Advantage.”

[22] David Schiff, “Spitzer sues Marsh: Bid Rigging, Fraud, Collusion,” Schiff’s Insurance Observer, October 15, 2004. Also see Spitzer’s press release, posted at

[23] Peter Lattman and Anupreeta Das, “Marsh & McLennan Sells Kroll for $1.3 Billion,” Wall Street Journal, June 8, 2010.

[25] “All I want in LIfe is an Unfair Advantage.”

[26] “Excerpts From Complaint Against A.I.G. by New York,” New York Times, May 27, 2005. Posted at

[27] Ibid.

[28] Ibid.

[30] Timothy O’Brien and Jenny Anderson, “AIG Documents Said to be Altered,” New York Times, April 8, 2005.

[31] “All I want in LIfe is an Unfair Advantage.”

[32] Ron Shelp, Fallen Giant, John Wiley & Sons, Hoboken, 2006, p.173.


[34] “All I want in LIfe is an Unfair Advantage.”

[35] Andrew Simpson, “Greenberg: AIG’s Risky Subprime Activity ‘Exploded’ After He Left,” Insurance Journal, October 10, 2008.

[37] Elizabeth MacDonald, “American Inconscionable Group,” FOX Business, March 17, 2009. Posted at

[38] “All I want in LIfe is an Unfair Advantage.”

[39] David Schiff, “AIG and the Art of Financial Prestidigitation,” Schiff’s Insurance Observer, April 4, 2005, p.3.


[41] Gary Webb, Dark Alliance, Seven Stories Press, New York, 1998.

[42] Bill Moushey, “Protected Witness,” Pittsburgh Post-Gazette, June 15, 1996. Posted at

[43] Ibid.

[44] McCoy also pointed out in the same interview that Panama, once part of Columbia, is home to a miniature version of Wall Street. Panama City has a number of large banks, whose primary purpose is to launder money for Columbia drug lords. In short, the replacement of Noriega was an administrative move. The flow of drugs and drug money through Panama hardly paused, and may even have increased.

An Interview with Alfred McCoy by David Barsamian, conducted at University of Wisconsin-Madison, February 17,1990. Posted at

[45] William Engdahl, Gods of Money, Engdahl Press, Wiesbaden, 2009, p. 272.

[46] To view a copy of the memo go to David Schiff, “Have We Got a Deal for You,” Emerson, Reid’s, March 1996, p. 7. Posted at

[47] David Schiff, “Coral Re: AIG’s $1-Billion Secret,” Emerson, Reid’s, July 1996, pp. 10-13.

[48] The 1999 repeal legislation was known as the Gramm-Leach-Bliley Act.

[49] Matthew Leising and Roger Runningen, “Brooksley Born `Vindicated’ as Swap Rules Take Shape,” Bloomberg, November 13, 2008. Posted at

[51] Mike Ruppert, Crossing the Rubicon, New Society Publishers, 2004, p.79.

[52] Rajeev Syal, “Drug money saved banks in global crisis, claims UN advisor,” Guardian (UK),  December 13, 2009. Posted at

[53] Joshua Gallu and Donal Griffin, “SEC Says Prince, Rubin Knew of Losses on Assets at Suit’s Focus,” Bloomberg, September 9, 2008. Posted at

[54] Martha Graybow, “Investors accuse Citi execs of ‘suspicious’ trades,” Reuters, December 3, 2008. Posted at

Also see Zach Carter, “Why Robert Rubin and Citibank Execs Should Be in Deep Trouble,” Alternet, September 9, 2010.

[55] Michael Smith, “Banks Financing Mexico Gangs Admitted in Wells Fargo Deal,” Bloomberg, June 28, 2010. Posted at

[56] Ed Vulliamy, “How a big US bank laundered billions from Mexico’s murderous drug gangs,” The Observer, April 3, 2011. Posted at

[57] Banks Financing Mexico Gangs Admitted in Wells Fargo Deal.”

[58] “How a big US bank laundered billions from Mexico’s murderous drug gangs,”

[59] Ibid.

[60] “Banks Financing Mexico Gangs Admitted in Wells Fargo Deal,”


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