TBR News October 18, 2010

Oct 18 2010

The Voice of the White House


            Washington, D.C., October 15, 2010: “A we have been pounding away at the enormous and deliberate mortgage fraud, it is not unpleasing to see that the timid American media is finally talking about it. Obama’s people do  not like this because the bigger banks have been so generous to him in the past. Here is a list of his top benefactors:

University of California             $1,591,395

Goldman Sachs                              $994,795

Harvard University                     $854,747

Microsoft Corp                         $833,617

Google Inc                               $803,436

Citigroup Inc                            $701,290

JPMorgan Chase & Co             $695,132

Time Warner                            $590,084

Sidley Austin LLP                 $588,598

Stanford University                     $586,557

National Amusements Inc             $551,683

UBS AG                                  $543,219

Wilmerhale Llp                         $542,618

Skadden, Arps et al                  $530,839

IBM Corp                                $528,822

Columbia University                     $528,302

Morgan Stanley                         $514,881

General Electric                         $499,130

US Government                  $494,820

Latham & Watkins                        $493,835

                Now that we can see why the President is so shy of even talking about the huge swindle, let us  go on to part of a very clear report someone just sent me. This is the best, and most accurate, compilation I have yet seen.”

Homeowners can only be foreclosed and evicted from their homes by the person or institution who actually has the loan paper—only the note-holder has legal standing to ask a court to foreclose and evict. Not the mortgage—the note, which is the actual IOU that people sign, promising to pay back the mortgage loan. 
            Before Mortgage Backed Securities,(MERS) most mortgage loans were issued by the local Savings & Loan. So the note usually didn’t go anywhere: It stayed in the offices of the S&L down the street. 
            But once mortgage loan securitization happened, things got sloppy—they got sloppy by the very nature of Mortgage Backed Securities. 
            The whole purpose of MBS’s was for different investors to have their different risk appetites satiated with different bonds. Some bond customers wanted super-safe bonds with low returns, some others wanted riskier bonds with therefore higher rates of return. 

             Therefore, as everyone knows, the loans were “bundled” into REMIC’s (Real-Estate Mortgage Investment Conduits, a special vehicle designed to hold the loans for tax purposes), and then “sliced and diced”—split up and put into tranches, according to their likelihood of default, their interest rates, and other characteristics. 

            This slicing and dicing created “senior tranches”, where the loans would likely be paid in full, if past history of mortgage loan statistics was to be believed. And it also created “junior tranches”, where the loans might well default, again according to past history and statistics. (A whole range of tranches were created, of course, but for purposes of this discussion, we can ignore all those countless other variations.)

            These various tranches were sold to different investors, according to their risk appetite. That’s why some of the MBS bonds were rated as safe as Treasury bonds, and others were rated by the ratings agencies as risky as junk bonds. 

            But here’s the key issue: When an MBS was first created, all the mortgages were pristine—none had defaulted yet, because they were all brand new loans. Statistically, some would default and some others would be paid back in full—but which ones specifically would default? No one knew, of course. However, that having been said, there is another aspect to this part of the Great Mortgage Collapse now in progress. Angelo Mosilo’s ‘Countrywide Mortgage’ company had been dealing on the very shady side for some time. What Mozilo was doing was to actively recruit people with bad or no credit, deliberately supply faked credit applications, grant expensive home mortgages solely on these faked reports as interest only loans  and then, having settled their patsies in new homes, sell the mortgages based on fake information to banks. Mozilo’s people knew that after a passage of time, all interest only loans would raise their rates and that as they were well aware that their clients could never afford the increased payments, they sold these faulty papers as quickly as they could.

   `        Same with mortgages. 

            So in fact, it wasn’t that the riskier loans were in junior tranches and the safer mortgage loans were in the senior tranches: Rather, all the loans were in all the tranches, and if and when a mortgage in a given bundle of mortgages defaulted, the junior tranche holders would take the losses first, and the senior tranche holder take the loss last. 

            But who was the owner of the junior tranche bond and the senior tranche bond? Two different people. Therefore, the mortgage note was not actually signed over to the bond holder. In fact, it couldn’t be signed over. Because, again, since no one knew which mortgage would default first, it was impossible to assign a specific mortgage to a specific bond. 

             Therefore, the question became as to how to make sure the safe mortgage loan stayed with the safe MBS tranche, and the risky and/or defaulting mortgage went to the riskier MBS tranche? 

            Now appeared on the scene, a government-sponsored MERS—the Mortgage Electronic Registration System. 
            MERS was the repository of these digitized mortgage notes that the banks originated from the actual mortgage loans signed by homebuyers. MERS was jointly owned by Fannie Mae and Freddie Mac , like MERS, a U.S Government-sponsored and controlled entity
            The purpose of MERS was to help in the securitization process. Basically, MERS directed defaulting mortgages to the appropriate tranches of mortgage bonds. MERS was essentially the operating table where the digitized mortgage notes were sliced and diced and rearranged so as to create the Mortgage Backed Securities.  

             However, legally—and this is the important part—MERS didn’t hold any mortgage note: The true owner of the mortgage notes should have been the REMIC’s. 

            But the REMIC’s didn’t own the note either, because of a fluke of the ratings agencies: The REMIC’s had to be “bankruptcy remote”, in order to get the precious ratings needed to peddle Mortgage Backed Securities to insitutional investors. 

            So somewhere between the REMIC’s and the MERS, the chain of title was broken

            Now, what does “broken chain of title” mean? Simple: When a homebuyer signs a mortgage, the key document is the note which is the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a Mortgage Backed Security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the “chain of title”. 

            You can endorse the note as many times as you please—but you have to have a clear chain of title right on the actual note:  The original, and all future holders and sellers had to have their notarized signatures on this note, by law.

            If for whatever reason, any of these signatures is skipped, then the chain of title is legally considered to be broken. Therefore, missing, or forged, signatures and notary attestations mean that  legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay. 

            To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan

            This sentence is the entire crux of the issue.
            The broken chain of title wouldn’t have been an issue if there hadn’t been an unusual number of foreclosures. Before the housing bubble collapse, the people who defaulted on their mortgages wouldn’t have bothered to check to see that the paperwork was in order. 

            But as everyone knows, following the housing collapse of 2007–which is still in progress, there’s been an enormous number of foreclosures—and foreclosures on a lot of people who weren’t part of the Mozilla-scam wherein people with little or now credit were given, by crooked mortgage brokers, false credit reports in order to obtain “interest only” loand, which they could never begin to pay when the full payments kicked in.were in the same position as smart and cautious people who got squeezed by circumstances. 

             Unfortunately for the crooked banks, mortgage companies and their many friends in the government, to include the White House the latter group started contesting their foreclosures and evictions, and so started the process of investigating  the chain of title issue . . . and that’s when the paperwork became important. So at that point, it was evident to the crooks that the chain of title became important and the botched paperwork became a non-trivial issue. 
            Now, the banks had hired “foreclosure mills”—law firms that specialized in foreclosures—in order to handle the massive volume of foreclosures and evictions that occurred because of the collapse of the rigged housing bubble. These foreclosure mills, as one would expect, were the first to spot the broken chain of titles. 
            Not, it has become painfully evident that these foreclosure mills faked and falsified documentation, so as to fraudulently repair the chain-of-title issue, thereby “proving” that the banks had judicial standing to foreclose on a delinquent mortgage. In many, proven, cases, these foreclosure mills even forged the loan note itself..

            Yes, to repeat  The foreclosure mills actually, deliberately and categorically faked and falsified documents, in order to expedite these foreclosures and evictions. 

            So in other words, a massive fraud has been, and still is beingcarried out, with the inevitable innocent bystander getting caught up in this fraud: One can site here the appalling example of the man who got foreclosed and evicted from his home in Florida, even though he didn’t actually have a mortgage, and in fact owned his house free-and-clear. That family that was foreclosed and evicted, even though they had a perfect mortgage payment record.

            The sole reason why these criminal frauds began to get into the generally obedient American media is not because the banks suddenly discovered “procedural errors” but when the title insurance companies, well aware of the frauds refused to insure the title for the pragmatic, not idealistic, reason that they would have been considered liable in the eyes of the law had they furthered the frauds. 

            In every sale, a title insurance company insures that the title is free and clear:; that the prospective buyer is in fact buying a properly reviewed and verified piece of legal property, and that all of the title issues on this specific property are legally in order and correct.  Title insurance companies, fully aware of the frauds, stopped providing their service because—of course—they didn’t want to expose themselves to the risk that the chain-of-title had been broken, and that the bank had illegally foreclosed on the previous owner. In the final analysis, the title companies were in the position of guaranteeing something they could not do and, faced with the certainty of lawsuits, they rebelled and refused further participation in what was an obvious fraud.


            When the title companies refused to cooperate in the frauds, the Attorneys General of all the states started criminal investigations into the frauds.

            The fact that Ally Financial (formerly GMAC), JP Morgan Chase, and Bank of America suspended foreclosures, feigning shock and horror, is a certain sign that the mortgage problem was a mega-problem for at least 60 million American home and business owners. Banks that size, with that much exposure to foreclosed properties, simply do not suspend foreclosures because they are  good corporate citizens who want to do the right thing, with all the paperwork in strict order—they’re halting their foreclosures for a reason. 
            The furtive and pathetic move by the United States Congress to sneak by the Interstate Recognition of Notarizations Act was a blatant attempt to help out their financial friends but unfortunately, Congress can pass no ex post facto (after the fact) laws and even the bank-friendly President Obama refused to sign this into law. In sum, the all-powerful banking lobby wanted to force through that law so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. It is entertaining to note that the cowardly Senators who jammed this bill through, did so by a voice vote—so that there would be no registry of who had voted for it, and therefore no personal accountability to outraged and defrauded Americans.
            And just as soon as the White House announced the pocket veto—the very next day!—the Bank of America halted all foreclosures, nationwide. It is interesting to note that the same Bank of America had bought out mortgage-swindler Mozila’s ‘Countrywide Mortgage’ and was continuing his fraudulent practices.

            It is really delightful to relate that the corrupt and all-powerful American banks have come a cropper is because if they have been foreclosing on people they didn’t have the legal right to foreclose on, then those people have the absolute right to get their property back. And the people who purchased  those foreclosed houses from the bank did not actually own the houses they paid for.  And should these bargain-hunters find that they themselves can be evicted, they can only file lawsuits in the hopes of recovering any fees paid in the purchase of what is, in most cases, property no one can legally own because the records are defective.

            But this is not a moral issue for the banks. When banking institutions become so powerful they are the de facto rulers of the county, morality is not an issue. After all, ethics and morals are excellent norms but not effective techniques. It is a matter of legal liability and the enormously rich banks have put themselves in the position of being sued, massively at that, for their fraudulent and often criminal actions.

            The fraud committed by the foreclosure mills casts enough doubt that now, all foreclosures come into question. Not only that, all mortgages now come into question. 
             Although the great mass of the defrauded Americans have not yet realized it, the current situation is such that there is a strong possibility, if not to say probability that  mortgage-paying homeowners may be able to get out of their mortgage loan and keep their house, without any further payment.

            All any victim has to do is to demand, in writing, that the banks and lending agencies produce legal proof (which because of the slicing and dicing of mortgages and the resale of these bits and pieces far and wide is totally impossible) of title ownership, no one can legally evict them and should this happen, all of the parties involved would become instant targets for successful and destructive law suits.

              Although the victimized American public is only just beginning to realize it, this all-pervasive, government assisted fraud is becoming a major national and world economic disaster. Not only will the value of any American mortgage-backed security vanish worldwide but there will be pure hell to pay, both when the swindled go into court and when the rest of the citizenry realize they don’t need to pay their debts!

            But if the American public expects that the banker-bought Obama administration will take any kind of strong action against the enormous scam, they will be badly mistaken. Public faith in government integrity is at an all-time low and the waffling and weakness of the White House bodes ill for the future.

            Instead of firm leadership and equally firm statements from them about not only ending the growing crisis but punishing the transgressors, we are getting mumbling ,soft speech and   non-sequesters  from a President, and Congress who are in debt to the generous banking community and, with national elections looming, pray for the public and the media, to find other, safer topics to discuss.

            In an interview on C-Span, the chairwoman of the Federal Deposit Insurance Corporation, Sheila C. Bair, suggested the fallout from this issue “ might not be as severe as many now predict. If it turns out this is just a process issue, then I don’t anticipate the exposures to be significant,” she said  New York Times,  October 17, 2010

            The full extent of the foreclosure/fake mortgage scandal is finally emerging from behind carefully cultivated concealing underbrush, and an alarmed Congress is now calling for a “hearing” on the subject and throughout the country, the housing market has virtually gone into hibernation. 

Mortgage Documents for Bank of America, Wells Fargo, U.S. Bank and Dozens of Other Lenders and Shells

October 15, 2010

Washington’s Blog

The Washington Post notes:

In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America , Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits. In many cases, her signature appeared to be forged by different employees.

Green worked for a foreclosure document company owned by Lender Processing Services. The company is being investigated by a U.S. attorney in Florida for allegedly using improper documentation to speed foreclosures.

Lenders have already started to withdraw foreclosures that had Green’s name on them.

Green also submitted to courts documents that listed “Bogus Assignee” as the owner of a mortgage instead of the real name. In another case, she signed as the vice president of “Bad Bene,” a made-up company.


“There are procedures to be followed in order to get a foreclosure, and you either get it right or not. Either you’re pregnant or not. There’s no in-between,” [Arthur M. Schack, a Kings County Supreme Court judge in Brooklyn,] said

            Beth Ann Cottrell said in a sworn deposition in May that she signed off on thousands of foreclosures a month for JPMorgan Chase even though she did not verify the accuracy of the information.

            In one instance in Palm Beach, Fla., Cottrell signed off on two documents that stated conflicting amounts of mortgage, the court testimony states. Cottrell claimed that both were signed by the borrower at closing. But the homeowner recognized that her signature had been forged, her attorney Christopher Immel said. The attorney added that such forgeries are common among the cases he’s seen. JPMorgan Chase declined to comment.

            In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America, Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits. In many cases, her signature appeared to be forged by different employees.

            Green worked for a foreclosure document company owned by Lender Processing Services. The company is being investigated by a U.S. attorney in Florida for allegedly using improper documentation to speed foreclosures.

            Lenders have already started to withdraw foreclosures that had Green’s name on them.
             Washington Post  September 23, 2010

Szymoniak pointed out in July:

There are examples of the many different Linda Green signatures/forgeries. Green’s “signature” appears on HUNDREDS OF THOUSANDS of mortgage assignments – as an officer of at least 20 different banks and mortgage companies.Doing the Math

The total mortgage loan amount on 500 “Linda Green” Mortgage Assignments is $126,956,912, or approximately $125 million for each 500 Assignments. The average output of Assignments from the Docx office in Alpharetta [Green’s actual employer], Georgia in 2009 was 2,000 Assignments per day.

This would be equivalent to (4 x $125 million) or $500 million each day. Assuming that Docx operated 5 days a week for 51 weeks (allowing for holidays), the office was open, producing Assignments, 255 days. It is likely that the Linda Green/Docx crew prepared and filed Mortgage Assignments showing One Hundred Twenty-Seven Billion, Five Hundred Million ($127,500,000,000) in mortgages were Assigned in 2009.

             Remember also that Mortgage Electronic Registration Systems – MERS – which Green repeatedly signed for – is itself a shell company which holds 60% of all American residential mortgages.

            DocX is also the company which published price lists for forging documents, including such gems as:

“Create Missing Intervening Assignment” $35

“Cure Defective Assignment” $12.95

“Recreate Entire Collateral File” $95

Given the above, it is clear why the Florida Attorney General has issued a subpoena to Linda Green’s real employer – DocX – requesting the following documents:

2. Copies of any and all underlying documentation that allows for your employee or ex-employee, Linda Green to sign documents in the following capacities:

a. Vice President of Loan Documentation, Wells Fargo Bank, N.A. successor by merger to Wells Fargo Home Mortgage, Inc.;

b. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for American Home Mortgage Acceptance, Inc.;

c. Vice President, American Home Mortgage Servicing as successor-in-interest to Option One Mortgage Corporation;

d. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for American Brokers Conduit;

e. Vice President & Asst. Secretary, American Home Mortgage Servicing, Inc., as servicer for Ameriquest Mortgage Corporation;

f. Vice President, Option One Mortgage Corporation;

g. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for HLB Mortgage;

h. Vice President, American Home Mortgage Servicing, Inc.;

1. Vice President, Mortgage Electronic Registration Systems, Inc. as nominee for Family Lending Services, Inc.;

J. Vice President, American Home Mortgage Servicing, Inc. as Successor -ininterest to Option One Mortgage Corporation;

k. Vice President, Argent Mortgage Company, LLC by Citi Residential Lending, Inc., attorney-in-fact;

1. . Vice President, Sand Canyon Corporation f/kJal Option One Mortgage Corporation;

m. Vice President, Amtrust Funsing (sic) Services, Inc., by American Home Mortgage Servicing, Inc., as Attorney-in -fact;

n. Vice President, Seattle Mortgage Company.

3. Copies of every document signed in any capacity by Linda Green.

Of course, its not just Linda Green.

As Szymoniak points out:

  • The offices of Lender Processing Services in Mendota Heights, Minnesota, seems likely to also have produced 2,000 Assignments each working day.Jeffrey Stephan from the GMAC offices in Montgomery County, Pennsylvania also is likely to have produced 2,000 Assignments each day.
  • Bryan Bly of Nationwide Title Clearing also is likely to have produced 2,000 Mortgage Assignments each day.
  • Scott Anderson of Ocwen Loan Servicing in West Palm Beach, Florida, almost certainly produced an average of 2,000 Assignments a day.
  • Herman John Kennerty of America’s Servicing Company in Ft. Mill, South Carolina, also is likely to have produced 2,000 Assignments each day.
  • Erica Johnson-Seck was almost certainly producing Assignments at this same level for IndyMac.
  • Christina Trowbridge, Whitney Cook, and Stacy Spohn of Chase Home Finance in Franklin, Ohio likely had the same output.
  • Keri Selman and Renee Hertzler of BAC Home Loan Servicing (formerly Countrywide) in Texas almost certainly produced an average of 2,000 Assignments a day.


             If these nine offices each produced 2,000 Assignments a day, the value of the Mortgage Assignments filed by all nine offices in 2009 was One Trillion, One Hundred Forty Seven Billion, Five Hundred Million ($1,147,500,000,000).

            Why the large forgery program? Why very simply, no one: the banks, the mortgage companies or any of their employees knows, or can locate, the actual owners of the mortgages to be foreclosed. No one will ever be able to locate these owners so the logical process is to fake the court papers. Of course, submitting fraudulent paper to the court is a crime but to banks now in control of American economy and Washington, what is a little fraud between friends? And when these fraudulently submitted documents result in evictions, why our friendly banks quickly sell the foreclosed property to another sucker. This one is going to take it in the shorts because those homeowners that were evicted from their property by means of deliberately forged papers can then reclaim the house and the new owner will themselves be evicted and can never, ever, recover the money he paid for the foreclosed house without long and very expensive legal action against the bank or agency from which they purchased the home. Lawyers will be in a state of ecstasy and the courts will be jammed with millions of civil actions for years to come.

How Countrywide Covered the Cracks

October 16, 2010

by Gretchen Morgenson

New York Times

            On June 27, 2006, Countrywide Financial, the nation’s largest mortgage lender, was about to close its books on a record-breaking six-month run. The housing market was on fire and Countrywide’s earnings were soaring. Despite all the euphoria inside the company, some executives noticed that Angelo R. Mozilo, the company’s brash and imperious chief executive, seemed subdued.

At a town hall meeting that day with 110 of the company’s highest-ranking executives in Calabasas, Calif., Mr. Mozilo sat alone on a stage, fielding questions and offering rosy predictions about his company’s prospects. But then he struck a sober note in response to a question from one of his colleagues.

The questioner wanted to know what, if anything, worried Mr. Mozilo, according to a participant.

“I wake up every day frightened that something is going to happen to Countrywide,” Mr. Mozilo said.

A year and a half later, that day arrived. In January 2008, Countrywide, the company he had built from a two-man mortgage operation into a lending behemoth, had to sell itself to Bank of America at a bargain price because it was being smothered by losses tied to a mountain of sketchy loans.

Yet almost until the moment Countrywide was taken over, Mr. Mozilo was publicly buoyant about its ability to ride out the mortgage crisis. Privately, however, he occasionally offered a gloomier assessment of Countrywide’s prospects and practices, according to e-mail and interviews.

What Mr. Mozilo, now 71, knew about Countrywide’s problems, and precisely when he knew it, was what eventually led the Securities and Exchange Commission to file civil securities fraud charges against him last year. And on Friday, in the Los Angeles courtroom of John F. Walter, a federal District Court judge, representatives for Mr. Mozilo and for two of his top lieutenants — David Sambol, Countrywide’s former president, and Eric Sieracki, the company’s former chief financial officer — settled those charges.

As part of the settlement, Mr. Mozilo and his co-defendants didn’t admit to any wrongdoing. But Mr. Mozilo agreed to pay $67.5 million in a penalty and reparations to investors and is permanently banned from serving as an officer or a director of a public company. Mr. Sambol is paying $5.52 million in a penalty and reparations and agreed to a three-year ban from serving as an officer or director of a public company. Mr. Sieracki agreed to pay a $130,000 penalty.

The settlement is a signal event in the credit crisis and its aftermath, including the foreclosure debacle that is now rattling the mortgage market and upending the lives of average homeowners. Although Goldman Sachs settled securities fraud charges earlier this year, Mr. Mozilo is the first prominent chief executive to be held personally accountable for questionable business practices that contributed to the housing bubble, the dizzying financial machinations that surrounded it, and a ruinous lending spree that ultimately threatened to undermine the nation’s economy.

Mr. Mozilo and his two former colleagues were accused of misrepresenting the company’s declining lending standards during 2006 and 2007 and portraying themselves publicly as underwriters of high-quality mortgages even as they learned that the company’s loans were becoming increasingly risky.

The government also contended that Mr. Mozilo and Mr. Sambol improperly profited on inside information about the company’s problematic loans when they sold Countrywide shares. From May 2005 to the end of 2007, Mr. Mozilo generated $260 million from his stock sales, while Mr. Sambol’s sales produced $40 million, the government says.

Lawyers for Mr. Mozilo declined to comment. Mr. Sambol’s lawyer said his client had “put the matter behind him for the benefit of his family and loved ones.” Mr. Sieracki’s lawyer noted that the S.E.C. had decided not to pursue fraud charges against his client and that his client had not been barred from serving at a public company. Bank of America is paying Mr. Mozilo’s legal bills. Countrywide is paying $5 million toward Mr. Sambol’s repayment to investors and $20 million of Mr. Mozilo’s reparations.

The S.E.C.’s legal team, led by John M. McCoy III, associate regional director of the enforcement division, said the settlement amounted to a hard-won victory.

In a statement on Friday, Mr. McCoy said: “This settlement will provide affected shareholders significant financial relief, and reinforces the message that corporate officers have a personal responsibility to provide investors with an accurate and complete picture of known risks and uncertainties facing a company.”

Battered by widespread criticism that it failed to corral scam artists like Bernard L. Madoff and to effectively police Wall Street as a whole during the years leading up to the credit crisis, the S.E.C. may now regain some stature as a successful litigator and investor advocate from its settlement with Mr. Mozilo.

“As is the case with most settlements, this is a compromise where nobody comes out a complete winner,” said Lewis D. Lowenfels, an authority on securities law at Tolins & Lowenfels. “The S.E.C. gets a substantial monetary settlement and a bar with respect to Mozilo serving as an officer or director. On Mozilo’s side, he is probably satisfied to have this behind him. He suffers a considerable stain on his reputation, has to pay a substantial amount of money but retains significant wealth and at the age of 71 may find the possibility of being an officer or director of another public company less enticing.”

             Countrywide Financial  began operations in 1969, when Mr. Mozilo and his mentor, David Loeb, refugees from an established mortgage lender, decided to start their own loan originator. The company grew slowly at first, but by 2004, Countrywide was the nation’s largest home lender, generating annual revenue of $8.6 billion. Mr. Mozilo ran the company alone after Mr. Loeb retired in 2000. (Mr. Loeb died in 2003.)

An up-by-the-bootstraps entrepreneur — his father was a butcher in the Bronx — Mr. Mozilo was obsessed with wresting market share away from his buttoned-down rivals in the staid world of banking.

“I run into these guys on Wall Street all the time who think they’re something special because they went to Ivy League schools,” he told The New York Times in 2005. “We’re always underestimated. And we still are. I am. I must say, it bothered me when I was younger — their snobbery and their looking down on us.”

In an industry that favored low-key behavior and conservative dress, Mr. Mozilo stood apart. He offered blunt opinions about banking and was open about his corporate aspirations. To complement his ever-present tan, he wore flashy clothes and drove expensive cars like Rolls-Royces that were often painted in a shade of gold.

Still, he managed his business for most of its history with a tight focus on the bottom line and on vigilant lending practices.

For years, Countrywide specialized in plain-vanilla, fixed-rate loans. As recently as 2003, such mortgages accounted for 95 percent of the company’s loans, according to regulatory filings. Countrywide was the biggest supplier of mortgage loans to Fannie Mae, the federally backed mortgage finance giant that was also hobbled in the credit crisis.

In 2004, Countrywide’s sober-minded lending style changed significantly. It began aggressively offering loans to first-time home buyers and to borrowers with modest incomes. These mortgages were known in the industry as “affordability products,” but that ho-hum designation belied the potential financial dangers embedded in the loans if borrowers — particularly low-income borrowers — wound up unable to pay their debts.

Even so, Countrywide embraced such loans with gusto. For example, adjustable-rate mortgages — those with a low introductory rate that could ratchet up in later years — accounted for about 18 percent of Countrywide’s business in 2003. But a year later, they made up 49 percent of its loans.

Subprime loans also grew in 2004, to 11 percent of its originations, up from 4.6 percent in 2003. These loans often required no down payments and very little documentation of borrowers’ incomes, assets or employment; they generated immense profits to Countrywide but, again, presented a bevy of risks. And even when the going got rough for some homeowners, Countrywide didn’t hesitate to take a hard line with borrowers who fell behind.

A born salesman, Mr. Mozilo promoted his company’s prospects wherever he went. In front of a crowd of investors or analysts, he would predict what Countrywide would generate in profits five years down the road and how many of its competitors the company would vanquish. No matter what, Countrywide would survive, he vowed.

“Over the entire history of this country, housing prices have never gone down nationally. They have gone down in some local areas, but never nationally,” he told an interviewer for CNBC in early 2005. “Secondly, any homeownership over the 10 years has proved to be the best investment that you could ever make. Over any 10-year period, housing prices go up.”

Later that year, he was equally optimistic when he again visited CNBC’s studios.

“From our perspective — and we’ve been doing this for 38 years — we’re still in a terrific mortgage market,” he said. “So the road ahead to us appears to be extremely vibrant, very sound.”

Even as the wheels were coming off of the Countrywide cart in 2007, Mr. Mozilo’s upbeat public pronouncements continued.

“I think you have to keep things in perspective. You know, there’s an old saying that you don’t know who’s swimming naked until the tide goes out, and obviously the tide’s gone out,” he told CNBC in March 2007, when a number of once-successful subprime lenders were plunging toward bankruptcy. “I think it’s a mistake to apply what’s happening to them to the more diversified financial services companies such as Countrywide.”

When Bank of America invested $2 billion in Countrywide in August 2007 — a move that caused many analysts to question Countrywide’s financial wherewithal and its ability to remain independent — Mr. Mozilo again struck an optimistic note.

“Countrywide’s future’s going to be great. You know, it’s always been great,” he told CNBC at the time. “So I think, down the line, this is going to be a better company, a more profitable company and a company that’s going to be a great investment for shareholders as we continue down the line. Because the market ultimately will come to us. This is America. People want to own homes.”

Privately, however, Mr. Mozilo had long been worried about some of the loans his company favored, as indicated by e-mails he sent to his deputies. And this gulf between Mr. Mozilo’s private views and his public proclamations went to the heart of the S.E.C.’s case against him.

Beginning in 2005, for example, he fretted about lending practices at Countrywide, e-mail messages show. One target of his ire was the “pay-option adjustable-rate mortgage,” a loan that let borrowers pay a fraction of the interest owed and none of the principal during an introductory period. These loans put homes within many borrowers’ financial grasp — at least initially.

When a borrower made only modest payments, the shortfall was added to the principal balance on the loan, meaning that the mortgage would grow in size. Given this arithmetic, borrowers could wind up owing more than their homes were worth.

In 2004, pay-option A.R.M.’s accounted for 6 percent of Countrywide’s originations. Two years later, they accounted for 21 percent of its loans. The loans were moneymakers for Countrywide; internal company documents show that the company made gross profit margins of more than 4 percent on such loans, double the 2 percent generated on standard loans backed by the Federal Housing Administration.

Countrywide pushed the lucrative loans hard. A sales document called “Pay Option A.R.M.’s Made Simple” asked rhetorically what kinds of customers would be interested in these loans. “Anyone who wants the lowest possible payment!” was one of the answers.

But these loans unnerved Mr. Mozilo, as his e-mails indicate. In April 2006, for example, he learned that almost three-quarters of the company’s pay-option customers had chosen to make the minimum payment the prior February, up from 60 percent the previous August, according to the S.E.C.’s complaint. In an e-mail to Mr. Sambol, Mr. Mozilo wrote: “Since over 70 percent have opted to make the lower payment it appears that it is just a matter of time that we will be faced with much higher resets and therefore much higher delinquencies.”

Two months later, and just one day after he talked up his company’s pay-option A.R.M.’s to investors at a Wall Street conference, Mr. Mozilo wrote an e-mail to Mr. Sambol predicting trouble ahead for many borrowers in these mortgages. They “are going to experience a payment shock which is going to be difficult if not impossible for them to manage,” he said.

And in September 2006, Mr. Mozilo wrote an e-mail saying the company had no way to assess the risks of holding pay-option A.R.M.’s on its balance sheet. “The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales,” he wrote.

Another Countrywide product that concerned Mr. Mozilo was its so-called 80/20 loan, named for the fact that the combination allowed a borrower to receive money covering 100 percent of a home’s purchase price.

Mr. Mozilo had become worried about these loans in the first quarter of 2006, when HSBC Bank, a buyer of Countrywide’s 80-20 loans, began forcing the lender to repurchase some that HSBC contended were defective.

“In all my years in the business, I have never seen a more toxic product,” he wrote to Mr. Sambol in an April 17, 2006, e-mail cited by the S.E.C. “With real estate values coming down … the product will become increasingly worse.”

Such e-mails suggest that by mid-2006, Mr. Mozilo had recognized how reckless some of his company’s lending had become. And just three months later, according to the S.E.C. complaint, he met with his financial adviser to increase the amount of Countrywide shares he could cash in under a planned executive stock-sale program.

Mr. Mozilo had always been a big seller, and rarely a buyer, of the Countrywide shares he was granted as a part of his compensation. The timing of some of his sales, however, has drawn the scrutiny of the S.E.C.

For example, on Sept. 25, a day before writing the e-mail about how Countrywide was “flying blind” on pay-option A.R.M.’s, he set up a new planned stock-selling program for himself, known as a 10b-5 plan, the S.E.C. said.

Such plans allow executives to sell stock regularly, without running afoul of regulations governing the sale of stock around significant corporate announcements. Mr. Mozilo also set up plans enabling a family foundation and a trust he oversaw to sell shares.

Altogether, the S.E.C. said, from November 2006 to October 2007, he sold more than five million Countrywide shares under his personal plan. His gains were $140 million, the S.E.C. said.

Mr. Mozilo has long maintained that his stock sales were not unusual, and in the past Countrywide has said that it and Mr. Mozilo were battered by economic forces beyond their control.

“No one, including Mr. Mozilo, could have foreseen the unprecedented combination of events that led to the problems borrowers, lenders and investors face with many of these loans today,” a Countrywide spokesman told The Times in 2007. “Countrywide is proud of its role in making homeownership affordable to lower-income households.”

But lawyers and analysts say Friday’s settlement means that Mr. Mozilo’s legacy is likely to be something quite different from that of a banker who brought homeownership to the masses.

“Mozilo is agreeing to a permanent ban on serving as an officer or director of a public company,” said James A. Fanto, a professor at Brooklyn Law School and a specialist in corporate and securities law. “That is a significant punishment and does not look good for his legacy.”


Angelo Mozilo, other former Countrywide execs settle fraud charges

Angelo Mozilo and two others who led the lender make a $73-million deal with the SEC to avoid trial on allegations of fraud and insider trading.


October 16, 2010

by Walter Hamilton and E. Scott Reckard,

Los Angeles Times

Angelo R. Mozilo, who as head of home-loan giant Countrywide was at the center of the housing boom and bust, agreed Friday to pay a record fine as part of a $73-million settlement of a government fraud lawsuit over the lender’s near-collapse.

The deal with the Securities and Exchange Commission requires Mozilo, the highest-profile figure to be accused of wrongdoing in the mortgage meltdown, to personally pay a $22.5-million fine. The government said it would be the largest penalty ever paid by a senior executive of a public company in an SEC settlement.

Mozilo, 71, also agreed to pay $45 million in “ill-gotten gains” to former Countrywide Financial Corp. shareholders, who lost billions when the company’s stock price plunged as defaults on home loans surged. But Bank of America Corp., which bought Countrywide in 2008, and Countrywide’s insurers will pay that amount under terms of Mozilo’s employment contract.

Countrywide’s former president, David Sambol, agreed to pay $520,000 in fines and $5 million in restitution. Bank of America will reimburse him for the latter. Eric P. Sieracki, former Countrywide chief financial officer, agreed to pay $130,000 in fines.

The deal allowed Mozilo, Sambol and Sieracki to avoid going to trial next week on allegations that they misled investors about the risky loan portfolio and deteriorating financial condition of the Calabasas company, once the nation’s top originator of home loans.

The sting of the penalty, however, was dramatically reduced because Bank of America and insurance will foot much of the bill, said John Coffee, a securities-law professor at Columbia University.

“Both sides are engaging in the usual game of making this settlement look better than it appears,” he said. “Both sides have an interest in putting the most positive spin on a settlement.”

Mozilo also was barred from ever serving as an officer or director of public companies. Sambol agreed to a three-year prohibition on holding such positions.

The defendants, who were not in court Friday, neither admitted nor denied wrongdoing.

U.S. District Judge John F. Walter approved the settlement in Los Angeles federal court Friday, calling it “fair, adequate, reasonable and in the public interest.”

Mozilo is still the subject of a criminal investigation by the Justice Department, according to people with knowledge of the probe who are not authorized to speak publicly. The settlement of the SEC civil case, however, deprives federal prosecutors of the opportunity to see how the testimony and other evidence play out before a jury.

“The defendants, particularly Mozilo, get closure of the SEC case without there being any adverse findings against them,” said Jacob Frenkel, a partner at Shulman Rogers Gandal Pordy & Ecker in Rockville, Md.

The settlement closes a chapter in one of the highest-profile dramas to emerge from the housing-market meltdown.

During his nearly 40 years atop the company, Mozilo built it into the nation’s No. 1 mortgage originator and a highly visible symbol of the nation’s love affair with the housing market.

Known as brash and relentless, the Countrywide chairman and chief executive stood out in the staid and conservative mortgage industry. The son of a Bronx butcher with an up-from-the-bootstraps personal story, the 71-year-old cut a dashing figure with his custom-tailored suits and perpetual tan.

Countrywide specialized for many years in relatively low-risk loans that were insured or guaranteed by government-sponsored agencies. But Countrywide branched out in its later years into subprime and other high-risk mortgages that helped fuel the housing bubble. The company suffered huge losses, including $1.6 billion in the second half of 2007.

The SEC suit, filed against the men in June 2009, alleged that they misrepresented Countrywide’s exposure to risky loans. The defendants contended that they fully disclosed the risks and financial condition of the company to investors.

The agency also accused Mozilo of insider trading, alleging that he sped up his sales of Countrywide stock options to cash out $140 million even as the company’s condition was weakening.

At the heart of the insider-trading allegations was a so-called stock trading plan, a formal document laying out a pre-planned timetable for executives to sell stock. Trading plans came about a decade ago as a way for executives to insulate themselves from allegations that they sold shares based on their inside knowledge of their company’s woes.

But The Times disclosed in 2007 that Mozilo repeatedly changed his trading plan in late 2006 and early 2007, which allowed him to unload hundreds of thousands of additional shares in advance of Countrywide’s demise.

Mozilo claimed he did nothing wrong and was simply preparing the personal finances of his large family.

In its suit, the SEC was seeking to recover allegedly inflated profits of $141.7 million from Mozilo and $18.3million from Sambol.

“Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite — a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model,” said Robert Khuzami, the SEC enforcement chief.

All of the $73-million settlement will go to former Countrywide shareholders, including $25 million that Bank of America has agreed to pay as part of a $600-million settlement with investors.



Times staff writer Stuart Pfeifer contributed to this report.


Avoid Foreclosure Market Until the Dust Settles

October 15, 2010

by Ron Lieber
New York Times
Are you out of your mind to even consider buying a foreclosed property right now?

Todd Phelps and Paul Whitehead didn’t think they were last month when they were the winning bidders in a foreclosure auction on the steps of the main Riverside, Calif., county courthouse. They thought they had won the lottery.

For years, they had been living in a rent-controlled apartment in Santa Monica and waiting out the housing bubble in hopes of buying a weekend getaway in the Palm Springs area. And on Sept. 10, they thought they had finally done it, getting a house for $137,000.

Several days later, however, they realized that what they had really bought was a second mortgage from Wachovia on a house that still had an enormous, unpaid primary loan. In other words, they did not own the home free and clear, and the auction company wouldn’t give back their $137,000 check.

The tale is certainly enough to give anyone pause, especially as several banks slow or halt their foreclosure proceedings amid questions about how they cut corners to speed up the process. Still, roughly half the recent home sales in hard-hit states like California, Arizona and Nevada have been foreclosures or short sales, according to RealtyTrac. Anyone wanting to buy homes in those and other states hit hard by the housing crisis will probably encounter these sorts of properties.

And the houses will be tempting for scores of first-time homebuyers, second-home seekers and people looking to get an early jump on buying a retirement home while prices and interest rates are low.

So given the pitfalls, are they crazy? The answer is no, not always. But it’s important to keep something in mind.

“The whole foreclosure process is adversarial, even though it’s nonjudicial in many areas,” said Tom Cahraman, the presiding judge in Riverside County. “One person is losing their home, and another person is trying to get a new home at a discount price.”

He’s absolutely right. Strap on the body armor, and think hard about the following five factors if you find foreclosed homes even remotely enticing.

The Loan

First of all, many banks that own foreclosed properties would prefer that you stay far away from their listings. In fact, they may sell a property for less money to an investor who can pay all cash.

You, on the other hand, will probably need a mortgage, and your need for bank approval can delay the sales process because your lender may hesitate when you say you’re interested in a foreclosed property.

“Lenders will usually only give you a loan on homes that are pretty ready to be lived in,” said Andy Tolbert of Oneir HD Realty in Longwood, Fla., who represents buyers shopping for foreclosed and other homes and invests in distressed property herself. “If the carpet is ripped out and the toilets are missing, they are not going to give the loan.”

This is especially important to consider if you’re using a Federal Housing Administration or Veterans Administration loan, where there may be particularly stringent requirements. “I have seen V.A. lenders require torn carpet to be repaired or replaced because they see it as a hazard to the new occupants,” said Mike Goblet, a mortgage broker with United Mortgage Financial Group in Mesa, Ariz.

There are some exceptions. The F.H.A. offers a mortgage called a 203(k) that may allow you to borrow money to buy and substantially rehabilitate a foreclosed property. But it could take a while to find a bank that offers the loan and to get your project approved. Some sellers, meanwhile, won’t let you buy with F.H.A. loans.

The Auction Process

Foreclosure auctions can be a dangerous place for people who don’t know what they’re doing or are relying on help from people who are sloppy or negligent.

Mr. Phelps and Mr. Whitehead had a real estate broker who was supposed to be checking the records of the home they wanted to buy at auction. But the broker did not discover, or did not report to them, the fact that the property had several claims against it.

They considered suing the broker, but first turned to the auction company, Executive Trustee Services, a unit of GMAC Mortgage (one of the companies that suspended many foreclosures in recent weeks). At the company’s Burbank, Calif., office, a representative told Mr. Phelps that all sales were final and that Executive Trustee was merely a middleman. Mr. Phelps asked for further documentation and was told that he could have it when he returned with a subpoena. Classy, no? Gina Proia, a spokeswoman for the company, did not respond to requests for comment.

The couple also wrote plaintive letters to executives at Wachovia, now part of Wells Fargo, because both defaulted loans attached to the home they were trying to buy came from that bank. (The auction company was working on the bank’s behalf.)

After a couple of rounds of e-mail and phone inquiries on my part, the bank decided to give Mr. Phelps and Mr. Whitehead their money back. “Given the circumstances, we have decided to rescind the sale on the property and return the funds to the buyers,” Vickee J. Adams, a Wells Fargo spokeswoman, wrote in an e-mail on Friday.

              Meanwhile, the couple, having nearly lost most of their life savings, now realize that they were in way over their heads bidding for homes at auction and were lucky to get their money back. “Trust no one,” Mr. Phelps said. “We didn’t get involved when the market was going crazy and everyone was getting subprime mortgages, and we felt like we were smart and that this was our reward for sitting on the sidelines. But there are enough bargains to be had on a straight sale.”

The Inspection

Let’s say you do manage to get a loan, resist the auctions and take the straight sale approach, shopping through a real estate agent. You’ll want to make any bid for a home contingent on a thorough inspection from someone familiar with foreclosed properties.

Mold may be your first concern, especially in more humid climates, given that many foreclosed homes have been uninhabited for months.

Then there’s sabotage. You should arrange (or have the real estate agent arrange) to have the power and water turned back on before the inspection if possible. Why? The previous owner (or vandals who have been in the home since) may have cut wires behind walls or poked holes in pipes in various places. Having running water and power can make these things easier to detect.

The pour-concrete-down-the-toilet trick is one that most good inspectors know to look for. But Jon Bolton of The Inspectagator in Oviedo, Fla., recently ran into a bit of destructive ingenuity he’d never encountered.

“Someone went on the roof with a bag of cement and dropped it down the chimney,” he recalled. “It rained, and now you have a solid block of concrete somewhere where it’s extremely difficult to get in to break it up. That’s just wrong.”

Also, don’t forget to inspect the minutes of the condominium board or homeowners’ association, if there is one. It may be in deep financial trouble if other foreclosures have occurred. Ms. Tolbert says that a good title insurer may be able to help with contacts if you have no luck finding the manager or treasurer on your own.

The Title Insurance

Speaking of which, title insurance is a must, particularly now. In the unlikely event that a former owner somehow wins back rights to the foreclosed home you end up buying and then tries to kick you out, you will need to make a title insurance claim.

And if you plan to put a lot of money into fixing up the home, you’ll want to ask about a rider on the insurance policy that can cover you for more than what you paid to buy the property.

The Waiting Game

Still worried about the prospect of former owners showing up someday and asking for their home back? Cyd Weeks, a real estate agent with Palmcoasting.com in Palm Coast, Fla., suggests waiting a few months before trying to buy a foreclosed home. Now that all eyes are on the foreclosure process, he said, homes coming on the market early next year will probably have been foreclosed upon with much more care and precision.

Indeed, Ms. Weeks’s tip suggests a larger point. Given the foreclosure moratorium that some banks have put in place and the lengthy investigations and lawsuits that are sure to follow, there is no rush to buy as long as you don’t have to move or if renting is an option.

Take your time. Assemble a panel of experts and apprentice yourself to them. And watch the listings carefully. For better or for worse, foreclosed properties are going to be available for a very, very long time.

The attitude of the Clinton administration was that they did not want to disturb the American Muslim population and in the end, viewed the attack as an aberration  that was unlikely to be repeated. The terrorists were viewed as a group of rank amateurs and the matter was not pursued. We have good rapport with the Central Intelligence Agency and have many of our people employed there but this is a domestic matter and these internal matters are addressed by the Federal Bureau of Investigation which is not as friendly with us as other agencies. They have been instructed to cooperate with our people on such things but are very sparing in this cooperation.  In summation, the Americans did not learn from this attack and this will be dealt with later in this report.

 Muslim extremists in US: A Secret Israeli Report

September 11, 2010

by Dr. Phillip L. Kushner

Editor’s note: Dr. Kushner, who specializes in antii-Muslim counterintelligence, has written before on Israeli intelligence activities inside the United States. An Ebook is reported to be forthcoming. The following précis comes directly from an Israeli internal intelligence report now in the author’s hands.

             Because of very lax, almost incompetent, enforcement of American immigration laws, many Muslim terrorists were able to go to America to conduct their plotting, secure in the knowledge that unless they committed a crime, no one in authority would  bother with them. They were free to enter, overstay their short-term visas and go to ground without fear of detection. Because many of these individuals and groups were, and are ,a distinct threat to us, we have sought and obtained permission from the American authorities to send our counter intelligence people into their country and keep these potential terrorists under close surveillance.

            Part of the agreement permitting this is that we were to keep the FBI fully appraised of anything we might find. They also agreed to supply us with information. This was rarely fully forthcoming so we set up our own surveillance, using telephonic systems we controlled. Also, we have been able to track bank records without any difficulty and can immediately locate funds coming into the United States from suspect foreign banks, known to act as conduits for terrorist funding. Because the FBI is often not particularly responsive or cooperative, we, in turn, only inform them of matters of common interest when absolutely necessary.

Mossad Observations

            Due to our investigations, we early on learned that known Muslim terrorists and suspected terror cells were primarily located in Phoenix, Arizona, as well as in both the Miami and Hollywood, Florida  areas and once this had been ascertained, these groups were kept under close local surveillance from December 2000 to April 2001. The terrorists were watched daily and all telephone usage was closely observed. They often used codes when talking both inside the United States and overseas but these were fairly easily broken.

Specific Activities of Mossad in US against terrorists

            We were aware that several terrorist cells were operating in Germany, thanks to cooperation with the German BND and another agency.  In 1996 and 1997, we were watching a number of suspected terrorists, specifically one Mohammed Atta and his lieutenant, Marwan al=Shehi were located at 54 Marienstrasse in Hamburg  We learned from telephone intercepts and one of our undercover people, a Yemeni , that the Muslims were planning to attack American naval units ported in Yemen. This was the attack on the USS Cole on October 12, 2000.

             Our informant said that the Hamburg people were talking about the idea of launching a “massive and impressive” attack on American territory that would be planned to achieve the maximum public relations effect. In 2000, we learned that Atta and others had left Germany for the United States and that they were specifically preparing to launch a spectacular terrorist attack somewhere inside the United States. We had notified the FBI headquarters about this and then learned from them that Atta and others were now resident in Hollywood, Florida.

            We sent a team of Arab-speakers led by Hanan Serfati, into the area and they were able to lease apartments had rented several dwellings near the corner of 701st St. and 21st St. in Hollywood,  in direct proximity to the terrorist cell. Initially, we kept them under constant surveillance and when they had left their residence, conducted a break-in and planted listening devices.  Also, one of our people, speaking perfect Arabic, made personal contact with the Atta people. The team leader himself kept a residence in proximity to the American Postal Service office where it had been determined that they had a drop box. At this point, we had kept both the FBI and the CIA fully informed of our actions and they, in turn, were able to help us with mail covers and other information. .

            We observed that several of the terrorists began to take flight training.  Mohammed Atta and Marwan Alshehhi took jet flying lessons at  Huffman Aviation, a flight school in nearby Venice. Again, we notified the FBI and CIA of this training because it indicated a probable aerial assault but neither agency expressed any genuine interest in the information.

            The Arab extremist plot that led to the attacks of September 11 was hatched in Hamburg, Germany.

            The main movers in this plot, Mohammed Atta, Ramzi bin al Shibh and Said Bahaji, moved into an apartment at 54 Marienstrasse in the German port city. In 1999 these men, and others, went to an al Quaeda camp in Afghanistan for training purposes. In 2000, they were back in Hamburg, boasting about planned attacks against American targets. In the same year, a number of the Hamburg Arab plotters went to the United States to attend flight training schools.

            From this time onwards, until the date of the actual attacks, the Hamburg terrorist cell was in constant telephonic and fax communication with their members in America.

            Shortly before the attacks, most of the Hamburg terrorists left Germany for Afghanistan and Pakistan. [Source: New York Times, August 30, 2002]

The Actual Terrorist Plan revealed

            Our undercover agent with the Atta group had proven to be of great value to them by giving them information we supplied him. As they grew more confident of him, they confided to him, and we had made tapes of these conversations, that they planned to launch a massive aerial attack against targets inside the United States. The USS Cole incident, they felt, had had very little impact on the American public. It was then that an enlargement of the 1993 car bomb attack on the World Trade Center in New York was put forward They developed the idea that if they crashed their planes into both buildings, the results would be far more dramatic than the initial attack. Later, our man also suggested a possible attack on other targets in Washington. They discussed attacks on the White House, the Capitol building and the Pentagon. 

            The number of terrorists to fly commercial planes into targets was limited by the number of men who were available and could be trained. It was then decided to rule out the White House because it was such a small target and concentrate on the Pentagon and the Capitol building. Once that had been settled, the actual planning began in earnest. Our man kept us advised at all times of the progress and we, in turn, immediately notified the (Israeli) Embassy in Washington and our own agency, both in Tel Aviv and the United States.

Reports to Department of Justice (FBI)  and CIA to White House in re coming attacks: The President notified.

            As it appeared that there would be such attacks for a certainty., our Embassy first of all contacted both the American Justice Department and the Central Intelligence Agency and appraised them of the seriousness of the situation. Eventually, the office of the Ambassador made contact with top aides of the Vice President Cheney.

            It was felt at the time that Mr. Cheney would understand this matter and be able to make a presentation to the President. In a number of substantive talks with Mr. Cheney, it was mutually decided that the attacks should proceed. The reasons agreed upon were that it would at once give the President the opportunity of securing great domestic power with the legislature and the public. It would also permit, and most important, that the  U.S. could attack Saddam Hussein. He was then one of our top enemies and had, in fact, bombarded us with missiles during the Gulf War.

            It was felt strongly that if Hussein were removed, the country invaded by American troops and occupied, not only would the United States have secure rights to the huge Iraqi oil reserves but could set up a large, permanent military base in Iraq. This would act as a buffer for Israel  and a constant threat to other Arab states plus set up a vital block between Iran, who has threatened Israel many times, and our state. Mr. Cheney, who has excellent connections with the American oil business, was entirely in favor of this on both counts.

            He then made a presentation, with our people present, to the President who at once accepted all the aspects of it. The decision was made not to interdict the attack in any way and allow it to happen as it would and to await the outcome. Both the CIA and FBI were to be listened to but forbidden to act “until informed to do so.”

            Mr. Cheney remarked that he did not want an attack on the Pentagon to emasculate its military leadership so he suggested that since a part of the building was empty due to interior renovations, that our man with the Atta group  inform them that this empty side was where the important people worked.

            When the subject came up of the air attack on the Capitol building, an enormous and easily hit target, the President remarked that if the Congress was sitting at the time of the attack, the death or injury of many of its members would not only add to national outrage but also strengthen his powers as a President during a wartime. There was at this point in time, no doubt that a subsequent American military attack on Iraq with ground troops would be made as discussed above.

Influx of Foreign Intelligence Warnings

            Since well before the target date, a number of high-level warnings were received by American governmental agencies concerning news of a pending terrorist attack. Because, at the highest level, it was wished not to interfere with the probability of such an attack, all such information was sent to either the Vice President or the President himself. Of course, nothing was done in fact but there were many worried conversations back and forth. The most persistent were the Germans who had developed inside information and on a number of occasions sent their finding on to the Americans. All were ignored.

            In mid-August, 2001, President Vladimir Putin of Russia made a report about possible Arab attacks against domestic American targets..

            On August 20, 2001, the French government made a similar report.

            On August 24, 2001, the head of the Israeli Mossad reported the imminence of an Arab attack against American targets and a similar report was made by the same agency on September 7, 2001.

            Domestically, the picture is not as clear but it is known that:

            On June 26, 2001, the CIA informed the White House that they had intercepted foreign intelligence traffic concerning possible al-Qaeda strikes in America on July 4.

            On July 1, 2001, Senator Dianne Feinstein (D-California) a member of the Senate Intelligence Committee stated that her staff had advised her that there was a “major probability of a terrorist incident within the next three months.” (emphasis added)

            On July 2, 2001, the FBI reported to the White House that al-Qaeda terrorist attacks outside the United States were very possible and that domestic attacks could not be discounted.

            On July 5, 2001, the CIA informed the President that al-Qaeda attacks against American targets were entirely possible during the summer of that year.

            On July 28, 2001, authorities in Dubai arrested one Djamel Beghal who revealed information about a planned al-Qaeda explosive attack on the U.S. Embassy in Paris

               On August 6, 2001, the CIA also presented a warning to the President, explicitly concerned with terrorism inside the United States. The actual content of this message has been the subject of considerable debate, with White House officials understandably downplaying its significance.[Sources: Time May 27, 2002]

Mossad agrees to provide special services to US in addition to updates on Atta people

            After many discussions, it was determined that the American authorities could not be seen to have had real knowledge and specific information on this attack. It was also reasoned that for the attack to achieve its geo-political goals, the targets would have to be destroyed. Of course they could not destroy the Pentagon nor would this be wished. As stated above, the damage was to be in a so-called “safe” area. Our man in Florida did give to the Atta people his ‘inside” information as to which part of the building to attack and thereby save the lives of top military officials. Because the main public relations targets were the two tall buildings, it was imperative that they be either badly damaged or destroyed in full view of the cameras and the American public. Heavy loss of life was expected but mention was made of an air accident previously in which an American bomber got lost in the clouds and rammed into the Empire State building. Damage to the building was not great. It was finally agreed that we would supply certain technical assistance to absolutely insure the very visual and dramatic damage.

            The Americans would have no provable connection with this. To achieve this, first a study of both buildings was made that showed they were very cheaply erected and that it would be very possible to “assist” the terrorists in their work. To do this, three teams of our people were selected with the idea that they would leave the country right away and that no one would attempt to interdict or block their exit.

            The actual plan was to enter the big buildings at night as maintenance people, to proceed to the part of the buildings most likely to be struck. We knew approximately where this would happen but not certainly. Then, entering the office spaces, quick access through the false ceilings allowed the team to use locally-made thermite bombs with magnetic attachments which  would  easily and quickly be placed against a strategic number of the horizontal steel beams that held up each floor.

            They were to be triggered by a specific rise in heat and were placed against each beam at an angle so as to insure burring the beam through sufficiently to materially weaken it. Our engineers calculated that first the plane would strike the building and start big fires. The fires would weaken the beams and when the heat had reached a certain point, the thermite hidden up above the false ceilings would ignite and burn through the beam. The weight of the building above would press down below and it was then hoped that everything would crash down.

            As we did not know just on what floor the plane would strike, these heat bombs were placed, five to a floor, for five floors, up and down. These bombs were small enough, and safe enough, to conceal in maintenance equipment. And, in the event that the attacks were aborted for any reason, our people could easily return to the buildings afterwards and retrieve the bombs without leaving a trace. The thermite would certainly eat into the steel but would not explode and reveal its presence.

The attack

            About three weeks prior to the actual attack, the special code words were developed by Atta. In that case, the Pentagon was called  ‘The Faculty of  Fine Arts”, the Capitol was termed “The Faculity of Law;” and the Trade Building tower was termed, as “The Faculty of Town Planning.”  This, of course was part of the cover story that Atta and his people were students, following an educational career in America and used these for international telephone calls to their superiors in Saudi Arabia.

            As soon as the date was fixed for the attack, the White House warned very senior American officials like the Attorney General and the Secretary of Defense and his staff, not to fly on commercial aircraft because of “rumors of possible hijackings” . No one outside of a very small circle was told the truth. And because of the possibility that the White House might still be a target of opportunity, the President went in early October, well before the projected attack date, to Texas and then later went to Florida where he and his staff remained in safety until after the attack was over.

            July 26, 2001: Attorney General Ashcroft stops flying commercial airlines due to a threat assessment but “neither the FBI nor the Justice Department … would identify [to CBS] what the threat was, when it was detected or who made it.”. [Source: CBS, 7/26/01]  He later walks out of his office rather than answer questions about this. [Source: Associated Press, 5/16/02]

August 4-30, 2001: President Bush spends most of August 2001 at his Crawford, Texas, ranch, nearly setting a record for the longest presidential vacation. While it is billed a “working vacation,” ABC reports Bush is doing “nothing much” aside from his regular daily intelligence briefings. [ABC 8/3/01; Washington Post 8/7/01; Salon 8/29/01] One such unusually long briefing at the start of his trip is a warning that bin Laden is planning to attack in the US, but Bush spends the rest of that day fishing (see August 6, 2001). By the end of his trip, Bush has spent 42 percent of his presidency at vacation spots or en route. [Washington Post 8/7/01] At the time, a poll shows that 55 percent of Americans say Bush is taking too much time off. [USA Today, 8/7/01] Vice President Cheney also spends the entire month in a remote location in Wyoming. [Jackson Hole News and Guide 8/15/01]

            September 6-7, 2001: 4,744 put options (a speculation that the stock will go down) are purchased on United Air Lines stock as opposed to only 396 call options (speculation that the stock will go up). This is a dramatic and abnormal increase in sales of put options. Many of the UAL puts are purchased through Deutschebank/AB Brown, a firm managed until 1998 by the current Executive Director of the CIA, A.B. “Buzzy” Krongard. [New York Times; Wall Street Journal]

             September 10, 2001: 4,516 put options are purchased on American Airlines as compared to 748 call options. [New York Times; Wall Street Journal.]


             September 6-11, 2001: No other airlines show any similar trading patterns to those experienced by UAL and American. The put option purchases on both airlines were 600% above normal. This at a time when Reuters (September 10) issues a business report stating “airline stocks may be poised to take off.”

             September 6-10, 2001: Highly abnormal levels of put options are purchased in Merrill Lynch, Morgan Stanley, AXA Re (insurance) which owns 25% of American Airlines, and Munich Re. All of these companies are directly impacted by the September 11 attacks.

            On September 10, 2001, the NSA intercepted two messages in Arabic. One message read:

             “Tomorrow is zero hour” and the second “The match begins tomorrow.” [Source: New York Times, August 10, 2002] On June 19, 2002, CNN reported the contents of these two National Security Agency intercepts. Other news outlets, including The Washington Post, also reported on the intercepts.  [Source: New York Times, August 10, 2002]

             September 10, 2001: Bush flew to Florida from Texas to visit with his brother Governor Jeb Bush. Attorney General Ashcroft rejects a proposed $58 million increase in financing for the bureau’s counter-terrorism programs. On the same day, he sends a request for budget increases to the White House. It covers 68 programs, but none of them relate to counter-terrorism. He also sends a memorandum to his heads of departments, stating his seven priorities—none of them relating to counter-terrorism. This is more than a little strange, since Ashcroft stopped flying public airplanes in July due to terrorist threats (see July 26, 2001) and he told a Senate committee in May that counter-terrorism was his “highest priority.” [New York Times, 6/1/02, Guardian, 5/21/02]

Final Observations

            The final attack varied very little from the last planning stage. One of the hijacked planes, the one intended to hit the Capitol building, was crashed by action of its passengers but the other three struck their targets as anticipated. The flames, smoke and general confusion were indeed a public spectacle, seen by all of America and the buildings, beams severed when the heat reached a certain point, did collapse in great clouds. A third building was tended to from the inside, not struck by an aircraft, and because great tanks of fuel were ignited, burned until it collapsed some time later.

            The carnage was not to believe and everyone involved in this felt is was a most profitable operation. As we know, the President was acclaimed as a great leader and he was then able to marshal national support into his attack on Iraq. The military campaign, as foreseen, has proven to be quick and decisive, Hussein and his henchmen were swept away and now the American military and civilian forces are in complete control of Iraq. Iran has been put on notice and we expect a large, permanent American military base in the area to act as a deterrent to any future manifestation of Arab nationalism. All of our technicians, as opposed to our intelligence people, were immediately evacuated and aside from several who were temporarily detained by American authorities, eventually all were released and returned safe home.

            Now, we have moved from a defensive to an offensive posture and, with American support and a large military presence, the ever-present fears of attacks have been neutralized, hopefully for a very long time.”

Conversations with the Crow


            When the CIA discovered that their former Deputy Director of Clandestine Affairs, Robert  T. Crowley, had been talking with author Gregory Douglas, they became fearful (because of what Crowley knew) and outraged (because they knew Douglas would publish eventually) and made many efforts to silence Crowley, mostly by having dozens of FBI agents call or visit him at his Washington home and try to convince him to stop talking to Douglas, whom they considered to be an evil, loose cannon.

             Crowley did not listen to them (no one else ever does, either) and Douglas made through shorthand notes of each and every one of their many conversation. TBR News published most of these (some of the really vile ones were left out of the book but will be included on this site as a later addendum ) and the entire collection was later produced as an Ebook.

            Now, we reliably learn, various Washington alphabet agencies are trying to find a way to block the circulation of this highly negative, entertaining and dangerous work, so to show our solidarity with our beloved leaders and protectors, and our sincere appreciation for their corrupt and coercive actions, we are going to reprint the entire work, chapter by chapter. (The complete book can be obtained by going to:



Here is the thirty-seventh  chapter


Conversation No. 37

Date:  Tuesday, September 17, 1996

Commenced: 11:35 AM CST

Concluded: 11:55 AM CST

GD: Good afternoon to you, Robert.

RTC: The same, Gregory. How is your son?

GD: Hiding out from his last girlfriend. Apparently, he was careless and now she’s in a family way, as they used to say. This is a constantly recurring theme here.

RTC: Children are either a great pleasure or a great trial.

GD: Yes, I know. My oldest son is the former and my younger one is the latter. Knocked-up brainless females whimpering on the front porch while he hides in the loo or bill collectors sending death threats. I pay his for his car payment, he spends it and then wants more.

RTC: It’s none of my business, Gregory, but do you give it to him?
GD: Usually.

RTC: And the women?

GD: Well, I don’t give it to them. He’s already beaten me to it. He prefers them to be single mothers, desperate, rather ugly and always very stupid. One was deaf, one had an idiot child and another one used drugs. He wouldn’t dare bring them home so I know nothing about the latest one until she turns up on the porch, whining. I do feel sorry for them but I refuse to pay for abortions because I am opposed to abortions. They weep and he whines. I told him that we needed to fix him to stop this but nothing will stop the lies, stories, and spending of my money. He makes plenty of money of his own but always seems to run out of it. The oldest one runs a huge computer service in Germany and always wants to send me money instead of the other way around. Three lovely grandchildren. I would hate to see what the youngest one would produce. Swift would have been in transports of delight and the Yahoos would have been replaced.

RTC: How ever do you deal with pregnant and abandoned girl friends?

GD: With patience, Robert, with patience. I convince them that they would not have been happy with them. I imply he is gay or that he really liked to boff sheep. Things like that. I convince them that they could do better trolling a homeless shelter. I do not let them in the house, ever. Fortunately, all of them are well over twenty-one so I don’t have to worry about a visit from the police and DNA tests. He seems to like single mothers pushing thirty and  very desperate. Oh, yes, and he loves to take them to look at houses and visit furniture stores. Builds up the hopes and then into the sack, unprotected and eager. He hates children and they tell me how much little this or that just loves him. Cruel to both of them.  When my father died, we found a thick stack of high-quality credit cards hidden in his shaving kit. My God, nearly a hundred thousands of dollars on them. His wife was in a nursing home and before that, was very rich. He died before he could get to them but I wasn’t so unfortunate. My God, he went crazy. Of course I had to sign them but off we went to Hawaii, Mexico, the Caribbean and everywhere but Canada. They would arrest me over that counterfeiting business if they caught me in Canada. And clothes. Jesus, he has enough in his closets to clothe the homeless of three states.

RTC: And yourself? Not that I mean to pry….

GD: No, I am aware. I have a huge library, a great collection of classical music and some nice china, silver and other things. He goes for what he can eat, drink or screw but I have other goals.

RTC: Ah, when we get old…

GD: No, it isn’t that. I never was one for whoring around. Long after the memories of that messy night in the phone booth or the drunken dinner at some Mexican bistro, I have some Lully to come back to or perhaps return to Gibbons. Well, some day, he’ll find someone more vicious and desperate than he is and legions of the gulled will have their revenge.

RTC: Any grandchildren by him?
GD: No, thank God. He always manages to find money for an abortion. You know, I do get rather tired of the tear jerkers on the porch but I really do feel sorry for them. Frankly, he was the last chance before gravity takes hold of their chubby bodies and the best they can do is to chase after the plumbers or the gardeners. I feel sorry for the children, Robert, I really do, but I dare not get too involved with his messes. I told him once that God would punish him but he only laughed, A good vasectomy can cure a lot of evils but maybe they should start at one ear and run around to the other. Ah well, his mother doesn’t want him back but the dog likes him.

RTC: Why don’t you marry him off to some vicious little Filipino bitch and she’ll make his life hell. A friend of mine was in the Navy and made that error.

GD: The Pubic Bay Beauties? Oh yes. I used to live in San Francisco and saw some of them, purple eye shadow and green nail polish and all, right up close. As angry as I get with him, I don’t think I would wish that fate on him. You know, one of those sluts winds up and you can hear her ten blocks away with the window closed. Wants to move all the family in with you and starts looking like a reject from Mustang Ranch. Well, if I’m lucky, he’ll meet up with one with a well-muscled brother.

RTC: Is he gay?
GD: No, I meant a brother that would beat the crap out of him. Of course, he might like that but then I’d have to pay to have his back stitched up. You can’t win, Robert. We all have our crosses to bear but why is mine made of concrete? By the way, do you know what Jesus’ companion at the crucifixion said to him?
RTC: No but perhaps you’ll enlighten me.

GD: ‘Hey, Jesus, I can see your house from up here!’ 

RTC: Not nice, Gregory,  But entertaining.  How’s your girl friend?
GD: I sent you pictures, didn’t I? Very well. My son hates her. She’s makes his punchboards look like the south end of north bound horses and she’s much smarter than he is. I intend to put her through college and then I suppose she’ll find something better to do but hanging around me won’t do her any good. Of course I told her about some of my little games and she howled with laughter. Someone in town saw us walking along and later told me that my daughter was a real looker. I said it was my granddaughter. Of course that’s closer to the truth. If youth knew, Robert but if age could.

RTC: Very cruel.

GD: Yes, today I am cruel. I’ll put some cayenne pepper is someone’s eye drops and tell them its acid.

RTC: My God.

GD: Well, I had some jerk stealing my really good brandy so I emptied out a bottle of the best, filled it with Old Mr. Boston swill and a good dose of croton oil.

RTC: Pardon?
GD: Croton oil. The strongest laxative known to man. One drop will move a man for a week.

RTC: How much did you spike it with?

GD: A tablespoon.

RTC: You could have killed them.

GD: No, but they had to carry around one of those little round life rings for months. They had a prolapsed rectum and other problems but they never touched any of my brandy again. I told the police that I never drank and the mark used to hang around the playground down the street, eyeing the tender tinies. Enough of that. It was a lot better than rat poison.

RTC: Probably.  I take it he did not pass on?

GD: No, he didn’t. He walked with care for a long time, however Looked like Hopalong Cassidy after a very long ride.

(Concluded at 11:55 CST)

Dramatis personae:


James Jesus Angleton: Once head of the CIA’s Counterintelligence division, later fired because of his obsessive and illegal behavior, tapping the phones of many important government officials in search of elusive Soviet spies. A good friend of Robert Crowley and a co-conspirator with him in the assassination of President Kennedy


James P. Atwood: (April 16, 1930-April 20, 1997) A CIA employee, located in Berlin, Atwood had a most interesting career. He worked for any other intelligence agency, domestic or foreign, that would pay him, was involved in selling surplus Russian atomic artillery shells to the Pakistan government and was also most successful in the manufacturing of counterfeit German dress daggers. Too talkative, Atwood eventually had a sudden, and fatal, “seizure” while lunching with CIA associates.


William Corson: A Marine Corps Colonel and President Carter’s representative to the CIA. A friend of Crowley and Kimmel, Corson was an intelligent man whose main failing was a frantic desire to be seen as an important person. This led to his making fictional or highly exaggerated claims.


John Costello: A British historian who was popular with revisionist circles. Died of AIDS on a trans-Atlantic flight to the United States.


James Critchfield: Former U.S. Army Colonel who worked for the CIA and organizaed the Cehlen Org. at Pullach, Germany. This organization was filled to the Plimsoll line with former Gestapo and SD personnel, many of whom were wanted for various purported crimes. He hired Heinrich Müller in 1948 and went on to represent the CIA in the Persian Gulf.


Robert T. Crowley: Once the deputy director of Clandestine Operations and head of the group that interacted with corporate America. A former West Point football player who was one of the founders of the original CIA. Crowley was involved at a very high level with many of the machinations of the CIA.


Gregory Douglas: A retired newspaperman, onetime friend of Heinrich Müller and latterly, of Robert Crowley. Inherited stacks of files from the former (along with many interesting works of art acquired during the war and even more papers from Robert Crowley.) Lives comfortably in a nice house overlooking the Mediterranean.


Reinhard Gehlen: A retired German general who had once been in charge of the intelligence for the German high command on Russian military activities. Fired by Hitler for incompetence, he was therefore naturally hired by first, the U.S. Army and then, as his level of incompetence rose, with the CIA. His Nazi-stuffed organizaion eventually became the current German Bundes Nachrichten Dienst.


Thomas K. Kimmel, Jr: A grandson of Admiral Husband Kimmel, Naval commander at Pearl Harbor who was scapegoated after the Japanese attack. Kimmel was a senior FBI official who knew both Gregory Douglas and Robert Crowley and made a number of  attempts to discourage Crowley from talking with Douglas. He was singularly unsuccessful. Kimmel subsequently retired and lives in retirement in Florida


Willi Krichbaum: A Senior Colonel (Oberführer) in the SS, head of the wartime Secret Field Police of the German Army and Heinrich Müller’s standing deputy in the Gestapo. After the war, Krichbaum went to work for the Critchfield organization and was their chief recruiter and hired many of his former SS friends. Krichbaum put Critchfield in touch with Müller in 1948.


Heinrich Müller: A former military pilot in the Bavarian Army in WWI, Müller  became a political police officer in Munich and was later made the head of the Secret State Police or Gestapo. After the war, Müller escaped to Switzerland where he worked for Swiss intelligence as a specialist on Communist espionage and was hired by James Critchfield, head of the Gehlen Organization, in 1948. Müller subsequently was moved to Washington where he worked for the CIA until he retired.


Joseph Trento: A writer on intelligence subjects, Trento and his wife “assisted” both Crowley and Corson in writing a book on the Russian KGB. Trento believed that he would inherit all of Crowley’s extensive files but after Crowley’s death, he discovered that the files had been gutted and the most important, and sensitive, ones given to Gregory Douglas. Trento was not happy about this. Neither were his employers.


Frank Wisner: A Founding Father of the CIA who promised much to the Hungarian and then failed them. First, a raging lunatic who was removed from Langley, screaming, in a strait jacket and later, blowing off the top of his head with a shotgun.

Robert Wolfe: A retired librarian from the National Archives who worked closely with the CIA on covering up embarrassing historical material in the files of the Archives. A strong supporter of holocaust writers.

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