TBR News October 20, 2018

Oct 20 2018

The voice of him that crieth in the wilderness, Isaiah 40:3-8

Washington, D.C. October 20, 2018: “While it is true that the reading comprehension level of many products of the American educational system is very low, the nonsense presented to the public via the media and cooperative bloggers is so bad at times that even a graduate, with a PhD, from Gorp Valley University in Florida, would balk at acceptance.

The most entertaining bit of official fiction is the story that a Russian government traitor and his daughter were attacked, on a park bench, by sinister, masked Kremlin agents with a nerve gas.

The second fiction is the new one that the Saudi reporter was indeed killed inside the Saudi consulate in Turkey but by an elderly widow who hit him in the eye with her umbrella.

The former gave the British, ever obedient to their American controllers, the opportunity of removing the Russian from American investigators looking into Trump’s Russian connections and the latter will give Trump and his many business friends the ability to continue doing business with a corrupt country and to line their deep pockets Washington style.

Justice is often portrayed as a woman wearing a blindfold and holding a sword in one hand and a scale in the other. If Justice were depicted realistically in the nation’s capitol, she would wear a gas mask in lieu of a blindfold.

And a statue of Justice in Saudi Arabia would be a male with a sword in one hand, a bloody severed head in the other and a bag of gold and jewels destined for the pockets of various heads of state slung over one shoulder.”

The Table of Contents

Donald Trump has said 2291 false things as U.S. president: No. 55
The CIA Confessions: The Crowley Conversations
Khashoggi case sends fresh chill through Saudi elite
A Giant Pile of Money
Caravan Puts Trump Legacy on the Line

Donald Trump has said 2291 false things as U.S. president: No. 55

August 8, 2018

by Daniel Dale, Washington Bureau Chief

The Toronto Star, Canada

The Star is keeping track of every false claim U.S. President Donald Trump has made since his inauguration on Jan. 20, 2017. Why? Historians say there has never been such a constant liar in the Oval Office. We think dishonesty should be challenged. We think inaccurate information should be corrected

If Trump is a serial liar, why call this a list of “false claims,” not lies? You can read our detailed explanation here. The short answer is that we can’t be sure that each and every one was intentional. In some cases, he may have been confused or ignorant. What we know, objectively, is that he was not teling the truth.

Last updated: Aug 8, 2018

Feb 22, 2018

“I never said ‘give teachers guns’ like was stated on Fake News @CNN & @NBC. What I said was to look at the possibility of giving ‘concealed guns to gun adept teachers with military or special training experience – only the best.”

Source: Twitter

in fact: This claim is self-refuting. After claiming he never said “give teachers guns,” Trump made clear he is proposing to give teachers guns; the reporting, in other words, was accurate.

Trump has repeated this claim 4 times

“A lot of things are happening. Attorney General Jeff Sessions. (Health) Secretary Alex Azar, who’s really setting the world on fire now with your lowering of prescription drug prices and a lot of other things you’re doing, and we appreciate it very much. A lot of people are seeing it, already, what’s happening.”

Source: Remarks at meeting with state and local officials on school safety

in fact: Trump administration’s Centers for Medicare and Medicaid Services announced that it expected prescription drug prices would keep rising rapidly in 2018 and beyond: “Prescription drug costs are expected to see the fastest annual growth among health care expenditures over the next decade, the Centers for Medicare and Medicaid Services (CMS) predicts, rising an average of 6.3% a year due to higher drug prices and more use of specialty drugs such as those for genetic disorders and cancer,” the health news website Managed Care reported. Centers for Medicare and Medicaid Services, Managed Care reported, also predicted a sharper increase in prescription drug prices in 2018 than in 2017: “Acceleration in prescription drug price growth (4.4% in 2018 from 2.1% in 2017) reflects the expectation that brand-name drug prices will more strongly influence growth in that year because the dollar value of drugs losing patents in 2018 is smaller than in prior years, the CMS said.” In addition, proposals introduced by Azar as part of the 2019 budget process have not yet been turned into law or regulations. “The only other major action HHS has taken during Azar’s short tenure is also still in the proposal stage, and it focuses on short-term health insurance plans, not drugs,” health news website Stat reported.

Trump has repeated this claim 3 times

“So they (MS-13) cut them up with knives. They don’t use guns; they use knives, because they want it to be a long, painful death to people that had no idea this was coming. And we’re getting them out by the thousands, putting them in jail and we’re getting them out by the thousands.” And: “”But we’re literally getting MS-13 out by the thousands.”

Source: Remarks at meeting with state and local officials on school safety

in fact: “By the thousands” is an exaggeration; it is more like “by the hundreds,” or “by the dozens.” The acting director of Immigration and Customs Enforcement, Thomas Homan, said in December that “a renewed focus on ID’ing & dismantling the ultra-violent MS-13 gang led to nearly 800 arrests in (fiscal year) 2017, for an 83 per cent increase over last year.” That figure is disputed, as some of the people arrested may not be actual members of the gang. Even if they are, though, that is far from “thousands.” In November, Attorney General Jeff Sessions claimed the U.S. had “worked with our partners in Central America to arrest and charge some 4,000 MS-13 members.” But those additional arrests were made abroad, so the people arrested were not “removed.”

Trump has repeated this claim 15 times

“One of the fake news networks, CNN, last night was saying I want teachers to have guns. I don’t want teachers to have guns. I want certain highly adept people, people that understand weaponry, guns — if they really have that aptitude. Because not everybody has an aptitude for a gun. But if they have the aptitude, I think a concealed permit for — having teachers and letting people know that there are people in the building with a gun — you won’t have — in my opinion, you won’t have these shootings.”

Source: Remarks at meeting with state and local officials on school safety

in fact: This claim is self-refuting. After criticizing CNN for reporting that he wants teachers to have guns, Trump made clear he wants teachers to have guns.

Trump has repeated this claim 4 times

“We had a case three years ago at a military base where five Marines, I believe, three of whom were world-class shots and experts at guns, they were told it was a gun-free area — within a military base, if you can believe that. If we can’t trust our military, who are we going to trust? You know what I’m saying. Five. They were putting away — they put away their guns. Their guns were in a different section, totally gun-free. Their guns were 250 yards away from them where they had to store them. And they went in for lunch, and a wacko came in and shot the five of them. He wouldn’t have lasted for one — three of these people were world-class marksmen.”

Source: Remarks at meeting with state and local officials on school safety

in fact: Trump did not identify the attack he was referring to, but the only one that fits the description, journalists covering the military and other observers agreed, was the 2015 shooting at a military facility in Chattanooga, Tennessee. Trump’s account contains several errors. The attack killed four Marines and one Navy sailor, not five Marines. They were killed not at a military base but at an off-base Navy Operational Support Center, also known as a reserve center. In addition, there is no public indication that three of the victims were world-class marksmen; one was an automotive technician, one a logistics specialist, and two worked in artillery. And there is no public indication that the five were killed after they “went in for lunch.” The attack occurred around 11 a.m. (Trump may know more about the victims and the circumstances than the public does, so it is possible he is correct on these latter two claims.)

“He (the 2015 Chattanooga attacker) wouldn’t have lasted for a second. But they stood there; there was nothing they could do. All five were killed.”

Source: Remarks at meeting with state and local officials on school safety

in fact: Trump was trying to make the point that unarmed members of the military could not defend themselves against the attacker without guns. That is fair enough. But it is false that the five people killed merely “stood there” during the attack. In 2017, two of them, Gunnery Sgt. Thomas Sullivan and Staff Sgt. David Wyatt, were posthumously awarded the Navy and Marine Corps Medal, the highest non-combat award, for their bravery during the incident. The military said on its website: “According to eyewitness statements and 911 transcripts during the event, Sullivan and Wyatt took charge in the evacuation of unit personnel and contacting authorities. They also returned to the scene of the incident when personnel were unaccounted for, risking their lives in the process.”

On his proposal to arm teachers: “You know, this isn’t so much about funding. This is more about common sense. I mean, the money we’re talking about — I mean, what I’m talking about is going to save money.”

Source: Remarks at meeting with state and local officials on school safety

in fact: We don’t usually fact-check predictions, but this one is transparently nonsensical. Giving teachers guns, as Trump wants, costs more money than not giving teachers guns. Mere seconds later, Trump acknowledged that there would be additional spending involved: “I’m talking about something where they’re there anyway, where they get a little extra money because they happen to carry, where they go for training every year.” He seemed to be arguing that his proposal would be cheaper than the idea of hiring numerous security guards for schools, but spending some extra money as opposed to spending a greater amount of extra money is not the same as saving money.

Feb 23, 2018

“For those of you who are still interested, the Democrats have totally forgotten about DACA. Not a lot of interest on this subject from them!”

Source: Twitter

in fact: This is transparently inaccurate. Trump, a Republican, cancelled the Democrat-created DACA (Deferred Action for Childhood Arrivals) program that gives young unauthorized immigrants brought to the U.S. as children, the “DREAMers,” work permits and protection from deportation. Democrats are now urging him to simply re-protect DACA enrollees without conditions. Conversely, Trump and other Republicans are demanding steep concessions — billions of dollars for a border wall, a reduction of one third or more in legal immigration — in exchange for protecting DACA enrollees, and some conservative Republicans continue to deride any permanent protection for enrollees as “amnesty.” Democrats have consented to billions in wall funding, but Trump has rejected even this deal on the grounds that he also wants the cuts to legal immigration. In short: Trump is free to argue, as some DREAMers are, that Democrats are not fighting hard enough for DACA enrollees, but there is no reasonable argument that they have forgotten about the subject.

Trump has repeated this claim 13 times

“MS-13 gang members are being removed by our Great ICE and Border Patrol Agents by the thousands, but these killers come back in from El Salvador, and through Mexico, like water.”

Source: Twitter

Trump has repeated this claim 15 times

“We just can’t let countries — as an example, Mexico. We have a $100 billion trade deficit with Mexico. What does that tell you? You know what it tells you? NAFTA is no good.”

Source: Speech to Conservative Political Action Conference

in fact: Trump is off by at least $29 billion, and almost certainly more. The U.S. trade deficit with Mexico was $71 billion in 2017 when counting goods alone. When data on trade in services is added, the net number will almost certainly be smaller.

Trump has repeated this claim 34 times

“And now, last year, we had almost a $500 billion trade deficit with China. We can’t have that. We can’t have that.”

Source: Speech to Conservative Political Action Conference

in fact: Trump is off by at least $125 billion. The U.S. trade deficit with China was $375 billion in 2017 when counting goods alone. When data on trade in services is added, the net number will almost certainly be smaller.

Trump has repeated this claim 51 times

“We’re renegotiating trade deals that are so bad, whether it’s NAFTA or whether it’s World Trade Organization, which created China — that created — if you look at China, it was going along like this” — makes a flat line with his hand — “then we opened, stupidly, this deal. And China has been like a rocket ship ever since” (makes diagonal line with his hand suggesting rapid growth).

Source: Speech to Conservative Political Action Conference

in fact: This is an exaggeration. While China’s entry into the WTO at the end of 2001 does appear to have helped its economy, it is not true that China’s growth was stagnant before its entry and then took off after its entry. Its GDP growth rates for 1992, 1993 and 1994 were all higher than its growth rates for 2002, 2003 and 2004, the years following its admittance to the WTO. As Nicholas Lardy of the Peterson Institute for International Economics wrote in 2008: “China has been the fastest growing economy in the world over almost three decades, expanding at 10 per cent per year in real terms.”

Trump has repeated this claim 4 times

“And Foxconn up in Wisconsin. They’re going to need 25,000 workers.”

Source: Speech to Conservative Political Action Conference

in fact: Foxconn has estimated that it will require 3,000 workers. Wisconsin Gov. Scott Walker’s office has estimated that an additional 22,000 jobs will be indirectly created because of Foxconn’s investment — from Foxconn suppliers and other companies setting up shop near Foxconn — but this is far from certain, and certainly not the same thing as Foxconn needing 25,000 workers.

“Wages are rising for the first time in many, many years.”

Source: Speech to Conservative Political Action Conference

in fact: Wages have been rising since 2014. As PolitiFact reported: “For much of the time between 2012 and 2014, median weekly earnings were lower than they were in 1979 — a frustrating disappearance of any wage growth for 35 years. But that began changing in 2014. After hitting a low of $330 a week in early 2014, wages have risen to $354 a week by early 2017. That’s an increase of 7.3 percent over a roughly three-year period.” FactCheck.org reported: “For all private workers, average weekly earnings (adjusted for inflation) rose 4% during Obama’s last four years in office.”

Trump has repeated this claim 25 times

“Hispanic unemployment has reached the lowest level in our history.”

Source: Speech to Conservative Political Action Conference

in fact: The Hispanic unemployment rate ticked up 0.1 percentage point in January, to a non-record 5 per cent. The record (since the government started measuring Hispanic unemployment separately in the early 1970s) is 4.8 per cent, achieved in 2006 and October and November 2017.

Trump has repeated this claim 3 times

“African-American unemployment has reached the lowest level in our history.”

Source: Speech to Conservative Political Action Conference

in fact: This claim was outdated at the time Trump used it. The African-American unemployment rate did hit an all-time low (for the period since the government began tracking Black unemployment separately in the early 1970s), 6.8 per cent, for December. But then, in January, it spiked to 7.7 per cent, a non-record. The government report showing the spike to 7.7 per cent had been out for three weeks when Trump posted this tweet. While his choice of tenses here — “has reached” — may make his claim technically correct, we aren’t willing to let Trump use tense-trickery to continue to make a not-currently-true claim for his entire time in office.

Trump has repeated this claim 7 times

“They say 22 people came in with him (Sayfullo Saipov, accused of an October 2017 terrorist attack in Manhattan). In other words, an aunt, an uncle, a grandfather, a mother, a father, whoever came in. But a lot of people came in. That’s chain migration. Let’s see how those people are doing, by the way.”

Source: Speech to Conservative Political Action Conference

in fact: We’ve let Trump get away with making this claim himself: while it is highly improbable, and many experts say impossible, that Saipov brought in 22 or more people through “chain migration” — Trump has sometimes said it was 23 people, sometimes 22 to 24 — we do not have hard evidence to disprove the claim. But it is false that “they say” 22 people came in. Trump is the person who has said this; other White House officials have been unwilling to back it up, and so have Trump’s appointees dealing with terrorrism and immigration.

Trump has repeated this claim 6 times

“Think of a lottery. You have a country. They put names in. You think they’re giving us their good people? Not too many of you people are going to be in a lottery. So we pick out people. Then they turn out to be horrendous, and we don’t understand why. They’re not giving us their best people, folks. They’re not giving us — I mean, use your heads. They’re giving us — it’s a lottery.”

Source: Speech to Conservative Political Action Conference

in fact: This is, as always, an inaccurate description of the Diversity Visa Lottery program. Contrary to Trump’s regular claim, foreign governments do not put the names of their problem citizens into the lottery to try to dump them on the United States. Would-be immigrants sign up on their own, as individuals, of their own free will; they are not “given” to the United States by nefarious foreign leaders.

Trump has repeated this claim 21 times

“And, by the way, the Senate Democrats and the House Democrats have totally abandoned DACA. They’ve total — they don’t even talk to me about it. They have totally abandoned. You know, we get the reputation — like DACA, it’s not Republican. We’ll let me tell you, it is Republican, because we want to do something about DACA, get it solved after all these years.” And: “The Democrats are being totally unresponsive. They don’t want to do anything about DACA, I’m telling you.”

Source: Speech to Conservative Political Action Conference

Trump has repeated this claim 13 times

“But as I’ve been talking about this idea — and I feel it’s a great idea, but some people that are good people are opposed to it; they don’t like the idea of teachers doing it. But I’m not talking about teachers. You know, CNN went on, they said, ‘Donald Trump wants all teachers.’ OK? Fake news, folks. Fake news. Fake news.”

Source: Speech to Conservative Political Action Conference

in fact: A search of closed-captioning archives does not turn up evidence of anyone on CNN saying Trump wants to arm “all teachers.” Regardless, Trump’s claim that he is “not talking about teachers” is transparently absurd: in this very same speech, he elaborated at length on his proposal to arm teachers. While he made clear that he was talking only about a minority of teachers, that is still talking about teachers.

Trump has repeated this claim 4 times

“You saw Apple just brought $350 billion in.”

Source: Speech to Conservative Political Action Conference

in fact: Apple did not announce that it was bringing $350 billion into the country. As Trump has occasionally noted correctly, it does appear that Apple is bringing back about $245 billion from overseas. While it did announce a “$350 billion” figure on the same January day as it announced that $245 billion repatriation, the company, unlike Trump, made a point of separating the $350 billion into two categories: new investment and pre-existing spending. Its press release made clear that the new investment is only a fraction of the $350 billion total. It said: “Combining new investments and Apple’s current pace of spending with domestic suppliers and manufacturers — an estimated $55 billion for 2018 — Apple’s direct contribution to the US economy will be more than $350 billion over the next five years.” In other words, Apple’s pre-existing 2018 spending would have put it on track for $275 billion in spending over five years if maintained.

Trump has repeated this claim 20 times

“Kerry may be the worst negotiator I’ve ever seen. How about this guy — how about — and Obama, of course — he’s the one. But how about $1.8 billion in cash? Did you ever see what, like, a million dollars in hundred-dollar bills? A lot of people do it as a promotion. It’s a lot. It’s big. It’s like big. Now, take that, go to $1.8 billion in cash. $1.8 billion.”

Source: Speech to Conservative Political Action Conference

in fact: The amount of cash was $1.7 billion, not $1.8 billion. Trump himself tweeted the correct figure (in an otherwise inaccurate tweet) five days prior: “Never gotten over the fact that Obama was able to send $1.7 Billion Dollars in CASH to Iran and nobody in Congress, the FBI or Justice called for an investigation!” (The U.S. agreed to pay Iran $400 million, plus $1.3 billion in interest, to settle a dispute over an aborted 1970s arms deal. The shah of Iran had paid the U.S. $400 million for military equipment that was never delivered because of the revolution that toppled the shah; Iran had filed a complaint to the Iran-U.S. Claims Tribunal at The Hague.)

“We declined to certify the terrible one-sided Iran nuclear deal. That was a horrible deal. Whoever heard you give $150 billion to a nation that has no respect for you whatsoever?”

Source: Speech to Conservative Political Action Conference

in fact: The “$150 billion” figure has no basis. Experts said Iran had about $100 billion in worldwide assets at the time; after the nuclear deal unfroze Iranian assets, Iran was able to access a percentage of that $100 billion, but not all of it. PolitiFact reported: “The actual amount available to Iran is about $60 billion, estimates Garbis Iradian, chief economist at the Institute of International Finance. U.S. Treasury Secretary Jack Lew pinned it at $56 billion, while Iranian officials say $35 billion, according to Richard Nephew, an expert on economic sanctions at Columbia University’s Center on Global Energy Policy.”

Trump has repeated this claim 19 times

“Companies are pouring back into this country. They’re pouring back. Not like — I mean, when did you hear about car companies coming back into Michigan and coming to Ohio and expanding? When did you hear — you never heard that. You hear they’re leaving. I’ve been talking about it for 20 years.”

Source: Speech to Conservative Political Action Conference

in fact: Trump is wrong to say that “you never heard” that car companies came back into Michigan and Ohio and expanded before he was president. Just 11 days before Trump’s inauguration, the Detroit News reported: “Fiat Chrysler Automobiles NV on Sunday announced it will add 2,000 new jobs and invest $1 billion in plants in Michigan and Ohio to produce new Jeep vehicles.” If Trump is tempted to take credit for that news, since he had already been elected and was about to take office, there are numerous additional examples from the Obama era. In 2015, Ford shifted production of the Ford F-650 and F-750 medium-duty trucks from Mexico to a plant in Avon Lake, Ohio. “As part of the production shift, Ford is investing $168 million to retool the Cleveland-area plant for the new medium-duty trucks,” the company announced in 2014. In 2015, the Detroit News reported: “General Motors Co. on Thursday said it will create 650 new jobs as it invests $5.4 billion into U.S. plants through 2017, including a total of $783.5 million at three Michigan sites.” The same year, Michigan’s Macomb Daily reported: “Ford Motor Co. recently announced plans to invest approximately $1 billion in two of its Sterling Heights (Michigan) facilities over the next four years as part of a larger agreement with the United Auto Workers union that calls for approximately $9 billion in investments at the company’s manufacturing facilities across the country.”

Trump has repeated this claim 7 times

“It’s like some of the environmental regulations that I cut — they have the most beautiful titles. And sometimes I’d say, ‘Look, I’m just going to close my eyes and sign this because, you know what, I’m going to get killed on this one.’ And I get so much thanks. The country knows what I’m doing. We couldn’t build. We couldn’t farm. If you had a puddle on your land, they called it a lake for the purposes of environmentals.”

Source: Speech to Conservative Political Action Conference

in fact: This claim about puddles was a common Republican talking point under Obama, but it was never accurate. The Environmental Protection Agency specifically excluded puddles from the regulation in question, known as Waters of the United States; a fact sheet about the regulation on the EPA website says, “THE CLEAN WATER RULE DOES NOT REGULATE PUDDLES.”

Trump has repeated this claim 5 times

“So what it (the Paris climate accord) does is it makes us uncompetitive with other countries. It’s not going to happen. I told them, it’s not going to happen. And, you know, China, their agreement didn’t kick in until 2030. Right? Our agreement kicks in immediately.”

Source: Speech to Conservative Political Action Conference

in fact: The agreement has already “kicked in” for China; contrary to Trump’s suggestion, it does not get a special delay. Rather, each participating country sets its own voluntary targets for cutting emissions, and one of China’s voluntary targets is to hit peak emissions around 2030. Obama’s U.S. target was to cut 26 to 28 per cent from 2005 levels by 2025 — so, if we are to use Trump’s standard for when an agreement kicks in, which we shouldn’t, the agreement hasn’t kicked in for the U.S. either.

Trump has repeated this claim 3 times

“And we announced our withdrawal from the totally disastrous, job-killing, wealth-knocking-out (Paris climate accord) — you know, it knocked out our wealth, or it would have. They basically wanted to take our wealth away…We have massive — just about the top in the world — we have massive energy reserves. We have coal. We have so much. And basically, they were saying, don’t use it, you can’t use it.”

Source: Speech to Conservative Political Action Conference

in fact: The Paris climate accord is not a global conspiracy to take away U.S. wealth, nor does it say the U.S. could not use its energy reserves or its coal. The agreement allows each participating country to set its own voluntary targets for cutting emissions of greenhouse gases. It does not tell countries they could no longer use any particular form of energy.

“I was in Vietnam, and the prime minister and the president of Vietnam were there. And we have a massive deficit with them, like we do with everybody else because these Presidents have just let it go to hell.”

Source: Speech to Conservative Political Action Conference

in fact: While the U.S. does have a trade deficit with Vietnam, it is not true that it has a deficit with “everybody else,” as Trump has repeatedly claimed. While the U.S. does have an overall trade deficit, the U.S. has surpluses with numerous countries. A U.S. Department of Commerce report noted this same month: “The 2017 figures show surpluses, in billions of dollars, with South and Central America ($34.3), Hong Kong ($32.5), Netherlands ($24.5), Belgium ($14.8), and Australia ($14.6).”

Trump has repeated this claim 21 times

“Obamacare is just being wiped out. The individual mandate, essentially, wipes it out.”

Source: Speech to Conservative Political Action Conference

in fact: The Obamacare “individual mandate,” a requirement that Americans obtain health insurance or pay a financial penalty, is a central part of the law, and Trump did succeed in repeal it. But this does not “essentially wipe out” Obamacare as a whole: all of its other components remain. Trump did not touch Obamacare’s expansion of the Medicaid insurance program for low-income people, the federal and state Obamacare marketplaces that allow other uninsured people to buy insurance, and the subsidies that help many of them make the purchases. Nor did he touch various Obamacare rules for the insurance market, like its prohibition on insurers denying coverage to people with pre-existing conditions.

Trump has repeated this claim 11 times

The CIA Confessions: The Crowley Conversations

October 20, 2018

by Dr. Peter Janney

On October 8th, 2000, Robert Trumbull Crowley, once a leader of the CIA’s Clandestine Operations Division, died in a Washington hospital of heart failure and the end effects of Alzheimer’s Disease. Before the late Assistant Director Crowley was cold, Joseph Trento, a writer of light-weight books on the CIA, descended on Crowley’s widow at her town house on Cathedral Hill Drive in Washington and hauled away over fifty boxes of Crowley’s CIA files.

Once Trento had his new find secure in his house in Front Royal, Virginia, he called a well-known Washington fix lawyer with the news of his success in securing what the CIA had always considered to be a potential major embarrassment.

Three months before, on July 20th of that year, retired Marine Corps colonel William R. Corson, and an associate of Crowley, died of emphysema and lung cancer at a hospital in Bethesda, Md.

After Corson’s death, Trento and the well-known Washington fix-lawyer went to Corson’s bank, got into his safe deposit box and removed a manuscript entitled ‘Zipper.’ This manuscript, which dealt with Crowley’s involvement in the assassination of President John F. Kennedy, vanished into a CIA burn-bag and the matter was considered to be closed forever.

The small group of CIA officials gathered at Trento’s house to search through the Crowley papers, looking for documents that must not become public. A few were found but, to their consternation, a significant number of files Crowley was known to have had in his possession had simply vanished.

When published material concerning the CIA’s actions against Kennedy became public in 2002, it was discovered to the CIA’s horror, that the missing documents had been sent by an increasingly erratic Crowley to another person and these missing papers included devastating material on the CIA’s activities in South East Asia to include drug running, money laundering and the maintenance of the notorious ‘Regional Interrogation Centers’ in Viet Nam and, worse still, the Zipper files proving the CIA’s active organization of the assassination of President John Kennedy..

A massive, preemptive disinformation campaign was readied, using government-friendly bloggers, CIA-paid “historians” and others, in the event that anything from this file ever surfaced. The best-laid plans often go astray and in this case, one of the compliant historians, a former government librarian who fancied himself a serious writer, began to tell his friends about the CIA plan to kill Kennedy and eventually, word of this began to leak out into the outside world.

The originals had vanished and an extensive search was conducted by the FBI and CIA operatives but without success. Crowley’s survivors, his aged wife and son, were interviewed extensively by the FBI and instructed to minimize any discussion of highly damaging CIA files that Crowley had, illegally, removed from Langley when he retired. Crowley had been a close friend of James Jesus Angleton, the CIA’s notorious head of Counterintelligence. When Angleton was sacked by DCI William Colby in December of 1974, Crowley and Angleton conspired to secretly remove Angleton’s most sensitive secret files out of the agency. Crowley did the same thing right before his own retirement, secretly removing thousands of pages of classified information that covered his entire agency career.

Known as “The Crow” within the agency, Robert T. Crowley joined the CIA at its inception and spent his entire career in the Directorate of Plans, also know as the “Department of Dirty Tricks,”: Crowley was one of the tallest man ever to work at the CIA. Born in 1924 and raised in Chicago, Crowley grew to six and a half feet when he entered the U.S. Military Academy at West Point in N.Y. as a cadet in 1943 in the class of 1946. He never graduated, having enlisted in the Army, serving in the Pacific during World War II. He retired from the Army Reserve in 1986 as a lieutenant colonel. According to a book he authored with his friend and colleague, William Corson, Crowley’s career included service in Military Intelligence and Naval Intelligence, before joining the CIA at its inception in 1947. His entire career at the agency was spent within the Directorate of Plans in covert operations. Before his retirement, Bob Crowley became assistant deputy director for operations, the second-in-command in the Clandestine Directorate of Operations.

Bob Crowley first contacted Gregory Douglas in 1993 when he found out from John Costello that Douglas was about to publish his first book on Heinrich Mueller, the former head of the Gestapo who had become a secret, long-time asset to the CIA. Crowley contacted Douglas and they began a series of long and often very informative telephone conversations that lasted for four years. In 1996, Crowley told Douglas that he believed him to be the person that should ultimately tell Crowley’s story but only after Crowley’s death. Douglas, for his part, became so entranced with some of the material that Crowley began to share with him that he secretly began to record their conversations, later transcribing them word for word, planning to incorporate some, or all, of the material in later publications.

Conversation No. 94

Date: Wednesday, July 30, 1997

Commenced: 11:05 AM CST

Concluded: 11:15 AM CST

GD: Good morning, Robert. Anything new to report?

RTC: Quiet here. Pleasant to have quiet after the constant uproar at the office but there are times when I really miss it.

GD: Noise and uproar never bothered me at all. Bad food does, however, I had a chicken paprikash last night and it did not sit well.

RTC: Paprikash?

GD: Hungarian chicken with paprika. Cook it in a pan with butter, onions and paprika. I developed a liking for it when I was living in Munich but this one was not good. Stringy chicken. Could have been cat but I won’t eat there again.

RTC: That’s right. You lived in Munich, didn’t you?

GD: Yes, for a long time, there or nearby.

RTC: We had a large base there. Dealt with the Czechs.

GD: I know about your operations there. Christ, you people were about as subtle as a fart in a space suit. You had Radio Free Liberty or whatever out at Holzkirchen and by the English Garden. And at Stachus….sorry, Karlsplatz, you had a export office that everyone from the whores to the cab drivers knew was the CIA office. Once paid a wino to crap on their doorstep. Oh, and the Hungarian fellow. I should tell you about that one. I knew this very nice, very old- family lady. I mean a real lady, old family. Anyway, she met this Hungarian who was selling gold coins and whatnot and the long and the short of it was the asshole stiffed her for a lot of money for fake gold coins and jewelry. She went to the police but they did nothing. I knew one or two very senior police people so I spoke very seriously with one of them. Told me they knew all about the swine but couldn’t touch him because he was a top CIA person. Maybe they couldn’t touch him but I certainly could. Critchlow…I think it was that one…anyway, I set out to get back the money. I met this slimy crud in a coin shop, not by accident, and struck up a nice conversation with him. I should tell you that I know more about gold than he ever could but I let him think I was a dumb, rich American. He was incorrect on two of the three impressions. Oh my, he did get interested in me. I also went to his apartment to deal with him and then, armed with my information, I went to see some Turkish friends. Turks, Robert, can be very mean and my friends were no exception. Details are not necessary here but I told the Turks this jerk was on to their smuggling operations and was going to have them arrested so they went after him. As I recall, though I was having dinner with my police official at the time, he was walking across the bridge down by the German Museum when some bad person came up behind him, cut his throat and chunked him over the parapet and down into the Isar. I should have added that it was winter and the river was frozen on the surface but the Budapest Kid went right through the ice. They found him in the spring, down by the dam. I must confess that after dining with the police gentleman, I spoke briefly with one of my really keen Turkish friends and we broke into the Hunky’s pad and stripped it. I got a lot of gold, some folders with interesting papers, a small radio, two silenced pistols and other things we really don ‘t need to discuss. The Turk got quite a bit of gold and some awful Japanese pornography. I don’t think ten year old Asian girls being banged by well-hung Negros is really nice but the others thought so and who can dispute tastes after all? He and his cousin came back later with a truck and took all the furniture and even the toilet and a washbasin. I know about this because later, my police friend asked me about the terrible vanishing of the CIA man and the rape of his apartment. Of course I knew nothing but I did give the lady all of her money back with a warning to her son, who was in their foreign office, to keep a good watch on his mother in future. I told him what happened and he and I had a good laugh I knew him for years and we used to go shooting together and I had no problem telling him about it. Such a fuss from your people. They thought the Russians had kidnapped him. But in the spring, they found him stuck in the dam grill, all mixed up with a few equally rotting dead pets and an aborted fetus or two. Closed coffin and a nice ceremony.

RTC: You mentioned finding some papers. I don’t care about the silenced pistols but the fate of the papers interests me. From a purely abstract but professional point of view, you understand.

GD: Oh, I understand your abstract interest. As an abstract answer, I sold them to interested parties. Kept me in rent and food money for a number of months, I must say. My lady friend was happy and so were my pleasant Turkish friends. The Hungarian was not happy but the Hungarian was a lying, thieving sack of shit and much better off dead and bobbing around deep in the cold river. The Turks found his bed very comfortable but I never enquired about the fate of the toilet. There are some things best left strictly alone. And so much for my Hungarian adventures.

(Concluded at 11;15 AM CST)

Khashoggi case sends fresh chill through Saudi elite

Months of repression had already convinced many they should think twice before speaking out

October 20, 2018

by Ruth Michaelson in Riyadh

The Guradian

As each new revelation about the disappearance of the Saudi Arabian journalist Jamal Khashoggi reverberated around the world, there were few outward signs in his homeland that anything was amiss. Outsized images of a smiling King Salman and his son Mohammed bin Salman, the crown prince, gazed down on passing motorists from Riyadh’s glass tower blocks as normal.

In the glittering lobby of the Ritz-Carlton hotel in Riyadh – previously the world’s most opulent prison during the detention of more than 30 of the kingdom’s most powerful princes and business leaders – guests chattered beneath a cluster of crystal globes that hung from the ceiling, their glow reflected in the polished marble floor. An eerie sense of a need for business as usual permeated throughout the capital and beyond.

Yet late on Friday night, the Saudi Press Agency said that Khashoggi was killed when a fight with 18 suspected individuals at the Saudi consulate in Istanbul “led to his death”. The statement added that the 18 arrested would be brought “to justice by referring them to the competent courts in the Kingdom of Saudi Arabia”. The Saudi public prosecutor’s office also announced the sacking of a top intelligence chief, an influential advisor to the crown prince and other top officials, in a purge following the incident.

In Riyadh and Jeddah, conversations about Khashoggi were conducted in hushed tones, often using only his first name to disguise the topic or mentioning only a “political crisis”. Some Saudis previously willing to offer cautious criticism of the political crackdown declined to speak at all.

Months of repression of critical voices, including the arrests of clerics, women who had opposed the driving ban, human rights activists and journalists, had convinced many that they should think twice before speaking out, even in private. But details of Khashoggi’s disappearance and alleged dismemberment inside the Saudi consulate in Istanbul have sent a fresh chill through the intellectual and elite Saudi circles that Khashoggi once mixed in.

A paranoid quiet offline was matched only by fierce online battles, notably on Twitter, where many Saudis decried developments in the case drip-fed by Ankara as “fake news” created by western media outlets and enemy powers.

“What they’re saying is ridiculous,” one woman who asked not to be identified for her own safety said of the denials. “But the majority believe it. Until very recently, I believed it … we are sheltered in various ways here,” she added.

“You know, really, I don’t want to know,” the woman said in reference to the truth about Khashoggi. “As this means a lot of things on a bigger scale. There’s a part of me that wants to believe it’s not true.”

As a political crisis raged abroad, the Saudi Arabian press repeatedly claimed foreign powers were threatening their country and cooking up rumours intended to tarnish the its carefully crafted image, often with fleeting mention of the basis for these alleged attacks save for a line concerning Khashoggi’s “disappearance”.

Several outlets published a reminder from Saudi Arabia’s public prosecution that “sharing or spreading rumours or fake news that might affect public order and security is considered cybercrime punishable by five-year imprisonment and a 3m riyal [£610,500] fine”.

The Saudi Gazette’s front-page headline on 14 October read “Lies and conspiracies”, followed underneath by the words “Enemies of kingdom behind Khashoggi’s abduction”. The next day its front page proclaimed “Enough is enough”, a headline that also topped an opinion piece on the Saudi-owned al-Arabiya website. The Gazette later denied that the Khashoggi family had called for an international investigation, adding: “Their confidence in the Saudi government is limitless.”

The arrival of the US secretary of state, Mike Pompeo, in Riyadh on Tuesday morning initially provoked a ripple of concern among Saudis who had been closely watching developments in the case. The visit appeared to be a sign that the world’s attention remained fixed on the kingdom and its lack of answers about Khashoggi’s whereabouts.

Khashoggi’s former newspaper al-Watan praised the “calm diplomacy” of the Saudi authorities and their handling of the case. One op-ed writer proposed the formation of a national public relations body to “strengthen the image of the kingdom”. Like most outlets, al-Watan printed only the official Saudi Press Agency’s coverage of Pompeo’s visit, which it said was a victory for relations between the “brotherly countries”. Okaz, one of Saudi Arabia’s most popular daily newspapers, ran the headline “Crown Prince: Riyadh and Washington are strong allies” on its front page.

This message resonated with some Saudis, including a recent graduate who studied in the US and who also cannot be named for her safety. “I think Saudi Arabia and America have a strong relationship,” she said. “What’s happening now is all about social media and television channels trying to break that relationship. Everyone is saying that the United States is protecting Saudi Arabia and this country should pay for that. But it’s a mutual relationship.”

Despite reassurances from the White House, tensions continued to affect the Future Investment Initiative conference, billed as “Davos in the desert” and scheduled to take place from 23 October in Riyadh. Attendees such as the International Monetary Fund chief, Christine Lagarde, the head of JPMorgan Chase, Jamie Dimon, and the president of the World Bank, Jim Yong Kim, all declared they would not attend the event.

The public refusal by Dara Khosrowshahi, the chief executive of Uber, to attend because of the Khashoggi case provoked an online campaign in the Gulf to boycott the ride-hailing app, later backed by the foreign minister of neighbouring Bahrain. The Saudi Arabian sovereign wealth fund is a major investor in Uber.

Bandar al-Toaimi, the head of communications for the Saudi Industrial Property Authority, which seeks to attract international firms to Saudi industrial parks, was unconcerned by the number of international attendees who had pulled out of the conference. “I think this is a political issue and I think the government is dealing with it,” he said. “For us, we’re looking for investors to come.”

A Giant Pile of Money

How Wall Street Drove Public Pensions Into Crisis and Pocketed Billions in Fees

October 20, 2018

by Gary Rivlin

The Intercept

Public Pensions for Sale

Part 1

Public pensions squander tens of billions of dollars each year on risky, poor-performing alternative investments like hedge funds.

A Wall Street Coup

Thousands of Kentucky public school teachers swarmed the state Capitol earlier this year, angry not about low salaries, but about their shrinking pensions. Among their concerns: the high portion of their money that has ended up in the hands of Wall Street in opaque, high-cost products that seem to benefit no one aside from the people who sold them. Rising pension costs helped to send teachers in Colorado into the streets in protest a few weeks later. In the last year, pension woes have also prompted teachers in Ohio and Oklahoma to march. And police, firefighters, and other public employees in Michigan have been staging protests since at least 2016 to preserve their public pensions, more than one-third of which is invested in “alternatives”: private equity, hedge funds, commodities, distressed debt, and other opaque Wall Street investment vehicles.

A “Wall Street coup” — that’s how pension expert Edward “Ted” Siedle describes it. Public pensions across the country now squander tens of billions of dollars each year on risky, often poor-performing alternative investments — money public pensions can ill afford to waste. For all the talk of insolvency, $4 trillion now sits in the coffers of the country’s public pensions. It’s a giant pile of money of intense interest to Wall Street — one generally overseen by boards stocked with laypeople, often political appointees. “Time and again,” Siedle has written, “hucksters successfully pull the wool over these boards’ eyes.”

In 1974, in the wake of the spectacular collapse of the Studebaker car company and its pension plan, Congress passed a piece of landmark legislation, the Employee Retirement Income Security Act. Under ERISA, companies are required to adequately fund their pensions and follow what was then called the “prudent man” rule, which barred those in charge from putting pension dollars into overly risky investments. The departments of Labor, Treasury, and Commerce were charged with overseeing the country’s pensions and a new body was created, called the Pension Benefit Guaranty Corporation, that would backstop pensions should a business default.

Except Congress left out public employees entirely — with a yawning loophole that granted an exemption to public pensions. ERISA expressly exempts public pensions operated by state and local governments — the plans that provide for the country’s teachers, firefighters, police officers, and librarians in their retirement. Forty-four years after the passage of ERISA, these public workers comprise the majority of active employees still contributing to pension plans. And they have been left largely unprotected.

Siedle calls it “the loophole that is swallowing America.”

The public pensions loophole helps explain why we read a lot more about underfunded state or municipal pensions teetering on the edge of default than we do dangerously underfunded pensions in the private sector. Thanks to ERISA, private pensions are better funded, and when they do face default, the federal benefit guaranty kicks in.

Because ERISA’s adequate funding requirement exempts governments, there are some half a dozen states with pension systems at the breaking point, including Illinois, where lawmakers are wrestling with unfunded pension liabilities of $129 billion, and Kentucky, where the state’s unfunded public pension liabilities top $27 billion.

That ERISA’s fiduciary oversight rule also exempts governments helps explain how Wall Street pulled off its coup, according to Siedle, a former Securities and Exchange Commission lawyer who for decades has been investigating public pensions. Instead of the strong protections imposed on the private sector by Congress, Siedle notes, “public pensions are regulated by a thin patchwork quilt of state and local laws,” and many don’t even submit to an annual audit. “No federal or state regulator, or law enforcement agency, is policing these plans for criminal activity,” according to Siedle. “No worries about the Department of Labor or FBI.”

Until the 21st century, public pensions generally invested in a standard blend of stocks and bonds. The more daring or community-minded among them may have invested a small fraction of their holdings in real estate projects or other exotic investments, yet alternatives averaged only 5 or 6 percent throughout the 1980s and 1990s. Yet as alternative investment structures grew in recent decades, and as pension funds sought desperately to make up for funding shortfalls, more and more of those trillions of dollars made their way to the country’s hedge funds and private equity managers. When, in 2017, the Pew Charitable Trusts looked at 73 of the country’s largest public pensions, researchers found that a full 25 percent of the pension money was invested in these high-fee alternatives.

The irony is that pensions don’t need to be 100 percent funded to be sound, as employees don’t all retire at once. Rating agencies and government monitors typically consider 70 to 80 percent to be adequate. And the country’s public pensions are generally hitting that mark, averaging 76 percent funding as of 2015, according to a survey by the National Conference on Public Employee Retirement Systems. “To suggest that there’s some nationwide crisis is simply not true,” says Bailey Childers, former director of the National Public Pension Coalition.

Yet public pensions continue to make desperate investments — and the competition for a piece of that action is so intense that it’s often involved outright fraud. It was in part a pension sting operation that helped take down Illinois Gov. Rod Blagojevich, who was back in the news earlier this year when President Donald Trump floated the idea of commuting the sentence of his former “Apprentice” star. In New York, Comptroller Alan Hevesi, who oversaw a $125 billion pension fund, confessed in court in 2010 that he had signed off on a $250 million pension investment in exchange for nearly $1 million in illegal gifts from a man named Elliott Broidy. Broidy, who ultimately pleaded guilty to a misdemeanor, is a major political donor with close ties to Trump; so close, in fact, that he resigned as deputy finance chair of the Republican National Committee this past April after it was revealed that Trump’s personal lawyer, Michael Cohen, arranged a $1.6 million payoff to a pregnant former Playboy model, allegedly on his behalf. Pension scandals have touched the Carlyle Group, a well-feathered landing spot for retired public officials (including former President George H. W. Bush and former British Prime Minister John Major), and also some of the biggest names in money management on Wall Street. In July 2018 alone, the SEC sanctioned private equity firms and other investment advisers for violating its “pay-to-play” rules — in Texas, Wisconsin, Indiana, Illinois, Rhode Island, and Los Angeles.

A scandal in California didn’t involve any high-profile elected officials but was, if anything, even more outrageous. There, the CEO of the country’s largest public pension was brought down by a pay-to-play scheme involving a former trustee and billions of dollars in public funds. Fred Buenrostro ran the California Public Employees’ Retirement System from 2002 to 2008. Alfred J.R. Villalobos, a former CalPERS trustee who became a placement agent, allegedly paid for Buenrostro’s wedding, took him on a trip around the world, and paid him hundreds of thousands of dollars stuffed in paper sacks and a shoebox. In exchange, prosecutors charged, Villalobos secured more than $3 billion in CalPERS investments for his client, Apollo Global Management, a giant of the private equity world. Over a five-year period, Villalobos earned around $50 million for helping his private equity clients win deals with CalPERS; he pleaded not guilty but took his own life before trial. Apollo’s punishment was the additional $550 million it received from CalPERS in 2017.

Yet much of what Siedle called the “looting” of the country’s public pensions takes place through perfectly legal investments with exorbitantly high fees. As an example, he brings up Rhode Island, where he spent time in 2013 after one of the big public employees’ unions, AFSCME, hired him to investigate the state pension there. Rarely was the wealth transfer from workers to Wall Street as vivid. The new state treasurer, whose campaign had been bankrolled by several New York hedge fund managers, championed a plan that cut employee benefits by roughly 3 percent several years back — and then gave most of the money the system saved to a trio of hedge funds to which it had entrusted a big chunk of its investments. “It wasn’t an austerity program,” Siedle said. “It wasn’t reformed. It was simply about paying lower benefits so Wall Street could get paid.”

The High Price of Hedge Funds

Hedge funds and other more exotic investments come at a steep price. A pension fund seeking to own a diverse basket of technology stocks, say, or invest in promising, mid-sized European companies may hire a stockbroker to handle that aspect of its portfolio for around 0.5 percent annually, or $500,000 a year for every $100 million invested. By comparison, hedge funds and private equity charge fees that work out closer to 5 percent annually, according to Howard Pohl, an investment consultant who has been advising public pension managers for more than four decades. Yves Smith, the pen name of management consultant Susan Webber, puts that figure closer to 7 percent a year on private equity investments. That’s $5 million to $7 million each year on every $100 million a pension invests with a firm. The deal has worked out well for some of Wall Street’s best-known billionaires, including Stephen Schwarzman, CEO of the Blackstone Group, who pocketed $787 million last year; Henry Kravis and George Roberts, the co-founders of Kohlberg Kravis Roberts, who took home a combined $343 million in 2017; and Steve Cohen, the disgraced hedge fund king worth an estimated $13 billion. All of them included public pension funds among their major clients.

The pensions haven’t fared nearly as well. The 2017 Pew study found that those funds that had recently and rapidly invested in alternatives reported the weakest 10-year returns. A 2018 report by the conservative Maryland Public Policy Institute put a price tag on those mediocre results. The group compared the actual performance of the $49 billion Maryland State Retirement and Pension System against a model with a straightforward “60-40” approach, in which 60 percent of a portfolio is invested in stocks and 40 percent in bonds. Despite the hundreds of millions of dollars in additional fees the pension system had paid to private equity firms and hedge funds, it would have earned an additional $5 billion over the prior 10 years had it adopted the more judicious 60-40 strategy. A 2015 study commissioned by the then-$15 billion Kentucky Retirement System found that overexposure to hedge funds contributed to more than $1 billion in lost returns over five years when compared to the returns earned by its more cautious peers. A study that same year by the liberal Roosevelt Institute and American Federation of Teachers found that poor returns on hedge fund investments had cost 11 of the country’s larger statewide public pensions $8 billion in lost revenue over the previous decade because most of the profits were eaten up by the steep fees hedge funds charge their investors.

“I could never figure out why somebody working at a hedge fund is worth 10 times more than the guy at Fidelity,” Pohl said.

Citizens United, the landmark Supreme Court decision that ushered in a boom in political dark money, also accelerated the siphoning off of billions of pension dollars into inappropriate investments. “Since Citizens United, investments in alternatives have absolutely exploded,” said Chris Tobe, a former trustee for the Kentucky Retirement System. Wall Street firms can now write big checks to a political or party committee to curry favor among elected officials who control pension fund appointments — completely out of the public view. A new SEC rule that year imposed tight restrictions on political contributions by hedge funds, private equity firms, and others to any public official who could have sway over an investment decision. Yet Citizens United effectively made the rule irrelevant, as money flooded in to proxies instead. Executives at firms managing state pension money gave $6.8 million to the Republican Governors Association in the 2014 election cycle, according to the nonprofit MapLight, and $151,000 to its Democratic equivalent.

Much of the overreliance on private equity and hedge funds boils down to what Ted Siedle sees as a mismatch between the civil servants, who work for the public pensions, and the salespeople, who show up with their sophisticated marketing materials and pitches that make it sound as if only a small elite is fortunate to get a piece of the hot, new fund they are peddling.

“You’ve got Wall Street marketers with virtually unlimited expense accounts, under orders by their bosses to do anything necessary to win over these government pension officials who control trillions,” Siedle said. “So people living these mundane lives are being flown to five-star hotels in Maui, in Honolulu, in Phoenix, in Puerto Rico, in Bermuda. They’re being flown to New York, where they see the hottest Broadway shows, or they’re in Las Vegas at Cirque du Soleil. I’ve seen everything from trips to strip clubs to helicopter rides over Maui to hot-air balloon rides in Albuquerque.”

Violations of Trust

Persuading a pension fund to invest requires a money manager to win over the two main groups guarding money promised to retirees. There’s the staff that makes the investment recommendations. “For the most part, these are very hardworking, good people who sometimes are in above their heads,” Pohl, the consultant, said. There’s also the boards appointed to oversee a fund.

Who sits on a board of trustees, and how well they’re positioned to oversee the staff, varies widely from jurisdiction to jurisdiction. Some boards are designed to be political. The body overseeing New York City’s Employees’ Retirement System, for instance, consists of 11 political players: the city’s five borough presidents, the city comptroller and public advocate, a mayoral appointee, and the heads of the three unions who represent the largest number of participating employees. New York state’s Common Retirement fund, the third-largest public pension in the country, with more than $200 billion under management, is overseen by a single individual: the state’s elected comptroller. In Chicago, the teachers run the show, with teachers and former teachers constituting a majority on the board overseeing the Chicago teachers’ pensions.

Technically, the trustees determine asset allocation: the portion of a fund’s money that is invested in stocks and bonds and alternative assets. But it’s typically the staff that recommends any changes, or proposes that a fund choose a new money manager or steer more money to an existing one.

In theory, the trustees serve as a check on staff. But only in rare circumstances do they aggressively exercise that authority. After major losses at the Chicago Teachers’ Pension Fund following the 2008 crash, an insurgent group of public school teachers ran for and won the two open board seats the following year. One of those insurgents, high school English teacher Jay Rehak, who today serves as board president, said, “Unfortunately, a lot of these people on boards are essentially bobbleheads” — built to nod their heads yes. The insurgents, who now run the city’s teachers union, removed the remaining bobbleheads in subsequent elections, according to Rehak. Though roughly 3 percent of the $10.1 billion is in the hands of private equity managers, he said, “we’re now 100 percent out of hedge funds.” But it wasn’t without pushback from staff.

“We’d fire fund X, Y, and Z,” Rehak said, and invariably someone on the pension staff would complain,“‘But they’re our friend.’ I tell them, ‘Don’t worry, they’ll land on their feet.’ It might sound crazy, but these people are very good at selling themselves.”

Pension investment staff typically earn dramatically more than the civil servants whose money they are investing. CalPERS, for instance, paid its chief investment officer $867,000 last year — while the state’s chief executive, its governor, earned a fraction of that, $190,000. The CIO of the Teacher Retirement System in Texas is paid $450,000 a year; four others on his staff (like him, all white men) are paid annual salaries exceeding $325,000 — more than twice that of the state’s governor. Idaho’s CIO was paid just over $300,000 last year — two-and-a-half times as much as the governor. “Some of these salaries are out of control,” said Tobe, who calculated, based on performance data from Boston College’s Center for Retirement Research, that there was no correlation between how well a CIO is paid and performance.

Tobe learned the hard way how conflicted pension fund staff can be during his four years as a trustee of the Kentucky Retirement System. The staff was particularly adept, Tobe said, at keeping secrets from their ostensible bosses, the trustees. Only near the end of his tenure did Tobe learn that one key staffer who helped push the state more aggressively into alternative investments sat on more than a half-dozen advisory committees created by the private equity partnerships and hedge funds he had been paid to assess. “Funds create advisory committees and then put staffers from the public pensions on them, along with union people and people from the endowments and foundations, whose money they also want,” according to Tobe, who added that committee members don’t typically receive a stipend, but rather extravagant perks, such as complimentary stays at $1,000-a-night hotels in exotic locales. “It’s basically a boondoggle,” he said. “They’ll take them offshore, show them a good time, buy them expensive meals.” The quid pro quo is that a pension fund will invest with that firm.

The third important players in pension decision-making are the consultants that pension funds hire to guide their decisions and vet the money managers seeking a piece of their business. Investment consultants, too, are often conflicted. While Siedle speaks approvingly of And Co, where consultants such as Pohl help pension funds “make sure they’re not a bunch of sheep at the mercy of the wolves,” in Pohl’s words, sometimes the investment consultant is the wolf. Recently, Siedle completed a job for Orange County, in Florida, whose comptroller hired him to evaluate seven investment consultants who had applied to advise the fund. “I concluded that six out of the seven were conflicted,” Siedle said. They were being paid on the side to help one money manager or another market its services to funds such as Orange County’s, if not earning a commission whenever a pension invests in funds they peddle. “Only one was not in the money-manager business,” Siedle said, noting, “that’s typically the case.”

Yet even those pension consultants without direct financial ties to a hedge fund or private equity firm have a troubling conflict of interest that not incidentally drives up the fees that pensions pay. Pension consultants advise funds on its optimal mix of assets and often recommend the best managers to handle those assets. A consultant taking into account a pensions’ best interests might steer clients into inexpensive options, such as index funds, which let investors own a diverse portfolio of stocks at a very low cost. (A Standard & Poor’s 500 index fund, for instance, follows the price movement of the country’s 500 largest publicly traded companies.) Index funds typically charge annual fees well below 0.5 percent, but don’t require much in the way of billable hours for the ambitious pension adviser. Helping a pension fund choose among the thousands of hedge funds peddling its services, however, could lead to hundreds of hours of charges. “In the consulting business, you’re not making much selling clients on low-fee index funds,” Siedle said. Suggesting that a pension hand over a portion of its cash to hedge funds and private equity is far more lucrative, he said. The consultant earns fees helping a pension navigate a complex world of options — and then potentially earns much more serving as the indispensable gatekeeper who gets them into a fund.

Even the most well-meaning consultant may have trouble protecting a pension fund from alternatives, Siedle said. “They have clients insisting on being in alternatives,” Siedle said — pension fund managers who are convinced that alternative investments add octane, despite the risks and the record. So the consultants “can’t be talking in the press about how pension managers are idiots if they own this shit.”

A Lucrative Source of Profits

It wasn’t that long ago that public pensions were cautious players almost afraid of the stock market, let alone the dice-rolling of investments in hedge funds. Teresa Ghilarducci was a labor economist at Notre Dame when, in 1997, Indiana’s governor named her to the state’s Public Employment Retirement Fund’s board of trustees. “The big debate then was whether we should go beyond bonds and invest in stocks,” said Ghilarducci, who now teaches at the New School in New York. “I was a detractor who thought we were moving too fast.”

By the time she left the board in 2002, the trustees were already considering hedge funds and private equity. Today, nearly 37 percent of Indiana Public Retirement System assets are invested in alternatives. According to Pew, it was the single worst-performing pension fund in the country over the decade ending in 2015.

The health of public pensions in the United States more or less peaked around 2000. On average, state and local pensions were 103 percent funded that year, according to Boston College’s Center for Retirement Research, with more money on hand than they even needed. At that point, only 3 percent of public pension dollars were invested in alternatives. But then the dotcom crash caused a steep fall in the stock market, with the Nasdaq index dropping by 77 percent and the S&P 500 by 43 percent. Pensions that had been more than fully funded in 2000 now had only 90 percent of the money they needed on hand. What happened next is what Ghilarducci describes as “chasing returns” — dialing up the risk to fill the gap. “I’ve seen it a lot: funds shooting for the moon because they’re trying to catch up” said Ghilarducci, co-author of a 2016 book, “Rescuing Retirement.”

As the hedge funds and private equity firms moved in, so did another actor: the placement agent. Pensions were such a potentially lucrative source of profits for any hedge fund or private equity firm — able to invest tens of millions, if not hundreds of millions of dollars, at a time — that money managers began to hire intermediaries to help convince pension funds to invest with them. At their most benign, placement agents are well-compensated salespeople, helping public pensions gain access to better investments. Time and again, though, “placement agents” have been shown to function more as political fixers who use their connections, campaign contributions, and even outright bribes to influence the staff, trustees, advisers, or elected officials who have the capacity to help steer pension dollars into the coffers of one of their clients

In fact, the federal wiretap that caught Blagojevich trying to sell Barack Obama’s soon-to-be-vacated Senate seat for $1.5 million had been put in place during an investigation of the influence of placement agents inside the Illinois teachers’ pension fund (as well as possible kickbacks related to state health facilities). Among those that Operation Board Games — as the U.S. Attorney’s Office and FBI dubbed their investigation — targeted was Tony Rezko, who was found guilty in 2008 of scheming with Teachers’ Retirement System trustee Stuart Levine to get kickbacks from a money management firm seeking some of the pension fund’s money. (Levine also went to jail.) Blagojevich aide Christopher Kelly killed himself after being indicted as part of a conspiracy to block a $220 million investment with Capri Capital already approved by the TRS board unless Capri donated to Blagojevich’s re-election campaign. A third man, William Cellini Sr., delivered the threat by giving Capri a choice: raise $1.5 million for Blagojevich or kiss the $220 million deal goodbye. Cellini was found guilty in 2011. The probe also uncovered evidence that the Carlyle Group had paid $4.5 million to a lobbyist to gain a share of the union’s retirement money as well. Carlyle was never charged with a crime.

By 2009, the problems with placement agents had become so visible that the SEC proposed a ban on them. But after intense lobbying by the likes of Blackstone and Morgan Stanley, both of which have placement agent divisions, the SEC backed down. New York, California, and New Mexico imposed restrictions on the use of placement agents that year. But a 2014 study found that placement agents were still being used by 41 percent of the North American-based private equity firms raising funds that year.

In the late 1990s, Siedle thought there was money to be made consolidating the pension consultant market and convinced Bruce Rauner, then a big-time private equity manager in Chicago, to commit up to $250 million to the idea. But the business never went anywhere. The small consultancies he imagined buying up with Rauner’s cash had no interest in selling, he said; many of them had devised their own pay-to-play schemes and were making too much money. It turned out that the fees they were paid for their guidance — the part of the business Siedle wanted to own — represented only a fraction of their earnings. Consultant after consultant told him how they were making more money on commissions by acting as a pension’s broker and hosting conferences for the pension’s money managers, who paid as much as $50,000, Siedle said, to “market their wares to the consultants and pensions in the crowd.” Others were making their money by doing dual duty as consultant and broker. Siedle figured that they stood to earn far more money charging brokerage fees than they earned for their advice. The Chattanooga Pension Fund in Tennessee accused a pension consultant of costing them $20 million from its fund through “churn”— buying and selling shares to produce higher trading commissions. A similar controversy in Nashville led to a $10.3 million settlement between the city and its consultant.

The 2008 financial crisis proved another accelerant for alternative investments. The crash caused the country’s public pensions to lose billions of dollars in value, due in part to their heavy exposure to mortgage-backed securities and other subprime-related products. By 2009, public pensions across the country were only 79 percent funded. In a later blog post, Siedle calculated that because of the subprime meltdown, $660 billion in state workers’ retirement savings “have been taken off the radar — swept into the highest-cost hedge, private equity, venture and real estate funds ever devised by Wall Street.” By his estimation, it was “a heist 40 times greater” than Bernie Madoff’s Ponzi scheme. A few years later, Siedle uncovered evidence that JPMorgan Chase had failed to disclose conflicts of interest to some of its wealth management clients, leading the bank to pay a $300 million fine — earning Siedle $78 million in whistleblower awards from the federal government.

One rationale reaction to 2008 would have been for pension fund managers to swear off exotic investments and go back to plain vanilla stocks and bonds. Instead, many doubled down, hoping higher returns would help make up for their severe losses. Siedle calls this the “Hail Mary,” the football term when a team that’s behind late in the game throws a desperation pass in the hope of a big score. It’s a vicious circle; the more some locales fall behind, the more its people gamble on alternatives — and it’s taxpayers who are on the hook for any shortfalls.

Gambling, Not Investing

Despite the steep fees, some financial experts believe that hedge funds and private equity are appropriate for a pension fund — in moderation. One is Ghilarducci, the former Indiana trustee who is now a trustee for two union funds. She said, “It would be a violation of my fiduciary duty if we did not invest in hedge funds or private equity.” But she cautions that only a small universe of money managers in those categories can be trusted with a pension’s money, and that even so, they are appropriate only for larger pensions with the requisite staff. “The evidence is showing that most hedge funds aren’t worth the risk or the high fees,” she said. “And most private equity isn’t, either.”

Mark Hoffman is another believer. As the head of alternative investments for PNC Asset Management, he advises wealthy individuals, as well as institutional investors like pension funds, on how they should invest their money. “Twenty years ago, you could get a 7.5 percent return investing in bonds,” Hoffman said. “Today, it’s almost impossible to achieve a 7.5 percent return without doing something in the alternative space.” But at PNC, he said, they hold to a hard-and-fast rule: no more than 30 percent in what Hoffman calls “private investments” — private equity, hedge funds, and real estate.

A partial list of states that have blasted through that cap is long and includes Illinois, Kentucky, Massachusetts, Michigan, Ohio, South Carolina, Texas, Utah, and Vermont, each of which recently had at least one-third of its portfolio in alternatives, according to the 2017 Pew study. Two states have large pension funds with more than half their money in alternatives: the Missouri State Employees’ Retirement System (51 percent) and the Arizona Public Safety Personnel Retirement System (56 percent). “At that point,” Siedle said, “that’s what I’d call gambling, not investing.” The consultant in charge of Arizona’s public safety pension released a statement declaring that the move into alternatives was about reducing the risk of an overreliance on stocks — even as he acknowledged that three-quarters of its peers had outperformed the fund.

The founders of hedge funds and private equity partnerships tend to be Wall Street refugees who were making millions a year working for a Goldman Sachs or Morgan Stanley, but figured out that they could make even more in alternatives. The key to that wealth is the “2 and 20,” as it is called within the industry. Hedge funds and private equity alike typically collect a 2 percent management fee ($2 million for every $100 million invested) and then take 20 percent of any profits before distributing them to investors. Double that $100 million over a 10-year period, and reward yourself with a $20 million performance fee. The beauty of the “2 and 20” is even if a $5 billion fund makes no money for its investors, it still walks away with $100 million in management fees.

Hedge funds and private equity are lumped together in the alternatives category for good reason. Both are giant pools of opaque money that are largely unregulated, precisely because they are open only to so-called qualified investors — the very rich or large institutional investors like pension funds.

Yet there are big differences between the two. Private equity buys companies, or large pieces of companies, and often requires investors to lock in their money for 10 years or more. Hedge funds, by contrast, basically do what they want. They can buy stocks or short stocks (that is, bet that a stock’s price will fall) or simply invest everything in a money market. They can make a $1 billion bet against the British pound, as George Soros famously did in 1992, or invest everything in collateralized debt obligations and other esoteric subprime-related products, as a pair of Bear Stearns hedge funds fatally chose to do before their collapse in 2007. Since hedge funds tend to invest in things bought and sold on the open market, a pension fund wanting out can usually extract its money within 30 to 90 days.

Of the two, private equity is the easier investment for a trustee to rationalize. Despite the steep fees, private equity has proven a good investment. Private equity firms have generally outperformed the stock market, even factoring in the enormous fees. Yet Siedle still questions their inclusion in a public pension portfolio, as they mean that a pension has no say over how its money is invested. Private equity might provide the needed capital to help a business grow and allow everyone to prosper. It might also hollow out a company and sell it off for parts, leading to the loss of thousands of jobs. At least 11 public pensions are helping to fund the Trump family as investors in the CIM Group, a private equity partnership that owns the Trump SoHo and pays the Trump Organization to run it. In August, the AFT released a report identifying 26 hedge funds that have billions of dollars invested in private prisons and urging public pension trustees to divest in order to avoid “rely[ing] on incarcerating people to turn a profit.”

Hedge funds, on the other hand, barely offer an upside. In 2008, famed investor Warren Buffett bet $1 million that a passive investment in an S&P 500 stock index fund would outperform hedge funds when factoring in fees and other expenses. Buffet collected his wager several months early, in the fall of 2017, because the contest wasn’t even close. The S&P 500 had generated a return of more than 7 percent a year since the start of 2008, compared to 2.2 percent earned by a basket of hedge funds.

The exposure of so many pensions to hedge funds is a tribute to the influence of marketing departments and placement agents — and the intense pressure that trustees and staff feel to rev up returns with the high-octane investments they crave.

Some pensions around the country have long bucked the alternatives trend. Oklahoma has no money in alternatives and yet has posted a 10-year return of 6.99 percent per year, according to Pew’s 2017 study of the country’s largest funds. Neither does the Georgia Employees’ Retirement System or its Teachers Retirement System, yet both show a 10-year return of nearly 7 percent. Both fared better than Arizona’s public safety fund, the state pension with the greatest exposure to alternatives, which earned only 5.2 percent a year.

A handful of other locales that were once heavy users of alternatives have recently cut back. One is the New York City pension system, which, at $192 billion, is the fourth-largest in the country. A 2015 study released by Scott Stringer, the city’s comptroller, found that the city had paid billions to those he called “Wall Street money managers” — and yet he found that those fees and underperformance had cost the pension system $2.5 billion over the previous decade. In 2016, trustees of the New York City Employees’ Retirement System voted to shed its hedge fund holdings. That followed a 2014 decision by CalPERS to liquidate its $4.1 billion hedge fund portfolio. (CalPERS has hardly sworn off its addition to alternatives. Earlier this year, Bloomberg reported that its trustees were reviewing proposals from six firms, including BlackRock, the giant investment management company, to oversee nontraditional investments. Smith, the financial blogger, points out that this approach “flies in the face of what every other major investor in private equity is doing, which is to do more in-house, both to reduce fees directly and, over time, to gain more leverage over private equity.”)

The pushback has also extended into North Carolina, where in 2017 Dale Folwell took over as state treasurer, the first Republican to hold the position in 140 years. Folwell ranked as one of the legislature’s most conservative members during his eight years in the North Carolina House, where he was a vocal opponent of same-sex marriage and civil unions. Yet as treasurer, he has been an outspoken critic of high-priced alternative investments and has sought to shift most of the state’s $96 billion pension fund to a mix of low-cost index funds. He found that the state had paid $600 million in fees in 2016 — seven times more per dollar under management than it had paid in 2000 when it had fewer alternative investments — yet had posted only a 5.1 percent return over the previous 10 years.

Folwell, as treasurer, has sole discretion over how the pension invests its money; the North Carolina pension system’s board of trustees has no authority to curb his instincts. But he’s found that change isn’t easy when it comes to private equity. His predecessors, he discovered, had signed long-term contracts that locked up the pension’s money. Though in 2017 the fund pledged to invest no new money in private equity, extracting the state from its prior private equity commitments would require selling in the secondary market at fire-sale prices. As a frustrated Folwell told the Wall Street Journal earlier this year, “It’s hard to come into a culture where no one thinks anything is wrong.”

This article was reported in partnership with The Investigative Fund at The Nation Institute.

Caravan Puts Trump Legacy on the Line

October 18, 2018

by Patrick J. Buchanan

The right-wing Alternative for Deutchland saw its support rise to 10 percent and has become a force in German politics. Some conservatives are urging the CDU to adopt the AfD hardline on illegal immigration.

The message sent by the Bavarian electorate is the message voters across Europe have been sending to their own capitals for years: You are failing in your first duty — defense of the homeland from foreign invasion. Mass migration of unassimilable peoples and cultures from a global South represents an existential threat to our Europe.

As Merkel’s chancellorship approaches its end, French President Emmanuel Macron, her progressive EU partner, has seen his approval fall to below 30 percent.

The U.S.-led NATO alliance may guard the Baltic and Black Sea regions against a Russian invasion from the east. But in Central, Southern and Western Europe, the more feared invaders are the peoples of Africa and the Muslim world, whose numbers are expected to triple or quadruple by this century’s end.

And as their numbers grow, so, too, does their desperation to escape, even at risk of their lives, the poverty, wars and repression of their homelands to cross the Med and fill the empty spaces left by a depopulating Europe.

It also now appears that the U.S. elections, not three weeks away, may be affected by another immigration crisis on the U.S. border.

As of Thursday, a caravan of 4,000 refugees without visas had crossed from Honduras into Guatemala and was heading toward Mexico. By Election Day, it will either have been stopped, or it will be here. And this caravan is a portent of things to come.

According to The Washington Post, during FY 2018, which ended last month, 107,212 members of “family units” crossed over into the U.S., “obliterating the previous record of 77,857 set in 2016.”

Citing DHS figures, the Post adds, “Border patrol agents arrested 16,658 family members in September alone, the highest one-month total on record and an 80 percent increase from July.”

When Trump, under intense political fire, ended his “zero tolerance” policy of separating refugees from their children, this message went out to Mexico and Central America:

Bring your kids with you when you cross the border. They will have to stay with you, and they cannot be held for more than 20 days. Thus, when they are released, you will be released to await a hearing on your claim of asylum. The odds are excellent that you can vanish into the U.S. population and never be sent back.

Enraged, Trump has threatened to cut off aid to El Salvador, Honduras and Guatemala if they do not stop the caravans and has warned Mexico he will use the U.S. military to secure our border.

Unwanted mass migration is the issue of our time, as there is no foreseeable end to it before it alters America irremediably.

As these migrants are almost all poor, not highly skilled, and do not speak English, most will join that segment of our population that pays no income taxes but qualifies for social welfare benefits like food stamps, medical care and free education in our public schools.

They are thus a net drain upon the resources of a nation that is already, at full employment, running a deficit of $779 billion a year.

These migrants, however, are a present and future benefit to the Democratic Party that built and maintains our mammoth welfare state, and which, in presidential elections, routinely wins 70 to 90 percent of the votes of people whose trace their ancestry to Asia, Africa and Latin America.

Not without reason, Democrats believe that if they can change the composition of the American electorate, they can control America forever.

If Donald Trump was elected on any one issue, it was immigration and his promises to secure the border, build the wall and halt the invasion.

How he deals with the impending crisis of the migrant caravan may affect both the fate of his party in November and his presidency in 2020.

Our mainstream media remain consumed with the grisly killing of Washington Post columnist Jamal Khashoggi in the Saudi consulate in Istanbul, and how President Donald Trump will deal with Crown Prince Mohammed bin Salman.

Understandably so, for this is the most riveting murder story since O.J. Simpson and has strategic implications across the Middle East.

Yet far more critical to the future of our civilization is the ongoing invasion of the West from the Third World.

Consider the impact of the decision by Chancellor Angela Merkel in 2015 to throw open Germany’s doors to 1 million refugees from Syria’s civil war.

Last weekend, in a crushing blow to Merkel, the Christian Social Union, the Bavarian sister party of her CDU, won its smallest share of the vote in half a century, 37 percent. Her coalition party, the SPD, saw its share of the Bavarian vote fall to a historic low of less than 10 percent.

No responses yet

TBR News October 20, 2018

Leave a Reply

Categories

Monthly

Pages