SEC: Government Destroyed Documents Regarding Pre-9/11 Put Options
On September 19, 2001, CBS
reported:
Sources tell CBS News that the afternoon before the
attack, alarm bells were sounding over unusual trading in the U.S.
stock options market.
An extraordinary number of trades were betting that American Airlines stock price would fall.
The trades are called “puts” and they involved at least 450,000
shares of American. But what raised the red flag is more than 80
percent of the orders were “puts”, far outnumbering “call” options,
those betting the stock would rise.
Sources say they have never seen that kind of imbalance before,
reports CBS News Correspondent Sharyl Attkisson. Normally the numbers
are fairly even.
After the terrorist attacks, American Airline stock price did fall
obviously by 39 percent, and according to sources, that translated into
well over $5 million total profit for the person or persons who bet
the stock would fall.
***
At least one Wall Street firm reported their suspicions about this activity to the SEC shortly after the attack.
The same thing happened with United Airlines on the Chicago Board
Options Exchange four days before the attack. An extremely unbalanced
number of trades betting United’s stock price would fall — also
transformed into huge profits when it did after the hijackings.
“We can directly work backwards from a trade on the floor of the
Chicago Board Options Exchange. The trader is linked to a brokerage
firm. The brokerage firm received the order to buy that ‘put’ option
from either someone within a brokerage firm speculating, or from one of
the customers,” said Randall Dodd of the Economic Strategy Institute.
U.S. investigators want to know whether Osama bin Laden was the
ultimate “inside trader” — profiting from a tragedy he’s suspected of
masterminding to finance his operation. Authorities are also
investigating possibly suspicious trading in Germany, Switzerland,
Italy and Japan.
On September 29, 2001, the San Francisco Chronicle
pointed out:
“Usually, if someone has a windfall like that, you take
the money and run,” said the source, who spoke on condition of
anonymity. “Whoever did this thought the exchange would not be closed
for four days.
“This smells real bad.”
***
There was an unusually large jump in purchases of put options on the
stocks of UAL Corp. and AMR Corp. in the three business days before
the attack on major options exchanges in the United States. On one
day, UAL put option purchases were 25 times greater than the
year-to-date average. In the month before the attacks, short sales
jumped by 40 percent for UAL and 20 percent for American.
***
Spokesmen for British securities regulators and the AXA Group also confirmed yesterday that investigations are continuing.
The source familiar with the United trades identified Deutsche Banc
Alex. Brown, the American investment banking arm of German giant
Deutsche Bank, as the investment bank used to purchase at least some
of the options.
***
Last weekend, German central bank president Ernst Welteke said a study pointed to “terrorism insider trading” in those stocks.
The Chronicle illustrated the story with the following chart:
On October 19, 2001, the Chronicle
wrote:
On Oct. 2, Canadian securities officials confirmed that
the SEC privately had asked North American investment firms to review
their records for evidence of trading activity in the shares of 38
companies, suggesting that some buyers and sellers might have had
advance knowledge of the attacks.
***
FMR Corp. spokeswoman Anne Crowley, said her firm — which owns the
giant Fidelity family of mutual funds in Boston — has already provided
“account and transaction” information to investigators, and had no
objection to the new procedures announced yesterday. Crowley declined
to describe the nature of the information previously shared with the
government.
So the effort to track down the source of the puts was certainly quite substantial.
What were the results and details of the investigation?
Apparently, we’ll never know.
Specifically, David Callahan – executive editor of SmartCEO –
submitted a Freedom of Information Act request to the SEC regarding the
pre-9/11 put options.
The SEC
responded:
This letter is in response to your request seeking
access to and copies of the documentary evidence referred to in footnote
130 of Chapter 5 of the September 11 (9/11) Commission Report.
***
We have been advised that the potentially responsive records have been destroyed.
If the SEC had responded by producing documents showing that the
pre-9/11 put options had an innocent explanation (such as a hedge made
by a smaller airline), that would be understandable.
If the SEC had responded by saying that the documents were classified
as somehow protecting proprietary financial information, I wouldn’t
like it, but I would at least understand the argument.
But
destroyed? Why? (See Afterword for additional details.)
Not the First Time
This is not the first destruction of documentary evidence related to 9/11.
I
wrote in March:
As I pointed out in 2007:
The 9/11 Commission Report was largely based on a third-hand account of what tortured detainees said, with two of the three parties in the communication being government employees.
The official 9/11 Commission Report states:
Chapters 5 and 7 rely heavily on information obtained
from captured al Qaeda members. A number of these “detainees” have
firsthand knowledge of the 9/11 plot. Assessing the truth of statements
by these witnesses-sworn enemies of the United States-is challenging.
Our access to them has been limited to the review of intelligence
reports based on communications received from the locations where the
actual interrogations take place. We submitted questions for use in the
interrogations, but had no control over whether, when, or how
questions of particular interest would be asked. Nor were we allowed to
talk to the interrogators so that we could better judge the
credibility of the detainees and clarify ambiguities in the reporting.
In other words, the 9/11 Commissioners were not allowed to speak
with the detainees, or even their interrogators. Instead, they got
their information third-hand.
The Commission didn’t really trust the interrogation testimony. For
example, one of the primary architects of the 9/11 Commission Report,
Ernest May, said in May 2005:
We never had full confidence in the interrogation reports as historical sources.
As I noted last May:
Newsweek is running an essay
by [New York Times investigative reporter] Philip Shenon saying [that
the 9/11 Commission Report was unreliable because most of the
information was based on the statements of tortured detainees]:
The commission appears to have ignored obvious clues
throughout 2003 and 2004 that its account of the 9/11 plot and Al
Qaeda’s history relied heavily on information obtained from detainees
who had been subjected to torture, or something not far from it.
The panel raised no public protest over the CIA’s interrogation
methods, even though news reports at the time suggested how brutal
those methods were. In fact, the commission demanded that the CIA carry
out new rounds of interrogations in 2004 to get answers to its
questions.
That has troubling implications for the credibility of the commission’s final report. In intelligence circles, testimony obtained through torture is typically discredited; research shows that people will say anything under threat of intense physical pain.
And yet it is a distinct possibility that Al Qaeda suspects who were
the exclusive source of information for long passages of the
commission’s report may have been subjected to “enhanced” interrogation
techniques, or at least threatened with them, because of the 9/11 Commission….
Information from CIA interrogations of two of the three—KSM
and Abu Zubaydah—is cited throughout two key chapters of the panel’s
report focusing on the planning and execution of the attacks and on the
history of Al Qaeda.
Footnotes in the panel’s report indicate when information was
obtained from detainees interrogated by the CIA. An analysis by NBC
News found that more than a quarter of the report’s footnotes—441 of
some 1,700—referred to detainees who were subjected to the CIA’s
“enhanced” interrogation program, including the trio who were
waterboarded.
Commission members note that they repeatedly pressed the Bush White
House and CIA for direct access to the detainees, but the
administration refused. So the commission forwarded questions to the
CIA, whose interrogators posed them on the panel’s behalf.
The commission’s report gave no hint that harsh interrogation
methods were used in gathering information, stating that the panel had
“no control” over how the CIA did its job; the authors also said they
had attempted to corroborate the information “with documents and
statements of others.”
But how could the commission corroborate information known only to a
handful of people in a shadowy terrorist network, most of whom were
either dead or still at large?
Former senator Bob Kerrey of Nebraska, a
Democrat on the commission, told me last year he had long feared that
the investigation depended too heavily on the accounts of Al Qaeda
detainees who were physically coerced into talking ….
Kerrey said it might take “a permanent 9/11 commission” to end the remaining mysteries of September 11.
Abu Zubaida was well-known to the FBI as being literally crazy. The Washington Post
quotes “FBI officials, including agents who questioned [alleged
Al-Qaeda member Abu Zubaida] after his capture or reviewed documents
seized from his home” as concluding that he was:
[L]argely a loudmouthed and mentally troubled hotelier
whose credibility dropped as the CIA subjected him to a simulated
drowning technique known as waterboarding and to other “enhanced
interrogation” measures.
For example:
Retired FBI agent Daniel Coleman, who led an examination of
documents after Abu Zubaida’s capture in early 2002 and worked on the
case, said the CIA’s harsh tactics cast doubt on the credibility of Abu
Zubaida’s information.
“I don’t have confidence in anything he says, because once you go
down that road, everything you say is tainted,” Coleman said, referring
to the harsh measures. “He was talking before they did that to him,
but they didn’t believe him. The problem is they didn’t realize he didn’t know all that much.”
***
“They said, ‘You’ve got to be kidding me,’ ” said Coleman, recalling
accounts from FBI employees who were there. ” ‘This guy’s a Muslim.
That’s not going to win his confidence. Are you trying to get information out of him or just belittle him?‘” Coleman helped lead the bureau’s efforts against Osama bin Laden for a decade, ending in 2004.
Coleman goes on to say:
Abu Zubaida … was a “safehouse keeper” with mental
problems who claimed to know more about al-Qaeda and its inner workings
than he really did.
***
Looking at other evidence, including a serious head injury that Abu
Zubaida had suffered years earlier, Coleman and others at the FBI
believed that he had severe mental problems that called his credibility into question. “They all knew he was crazy,
and they knew he was always on the damn phone,” Coleman said,
referring to al-Qaeda operatives. “You think they’re going to tell him
anything?”
ACLU, FireDogLake’s Marcy Wheeler and RawStory broke the story yesterday that (quoting RawStory):
Senior Bush
administration officials sternly cautioned the 9/11 Commission against
probing too deeply into the terrorist attacks of September 11, 2001, according to a document recently obtained by the ACLU.
The notification came in a letter dated January 6, 2004,
addressed by Attorney General John Ashcroft, Defense Secretary Donald
H. Rumsfeld and CIA Director George J. Tenet. The ACLU described it as a
fax sent by David Addington, then-counsel to former vice president
Dick Cheney.
In the message, the officials denied the bipartisan commission’s
request to question terrorist detainees, informing its two senior-most
members that doing so would “cross” a “line” and obstruct the
administration’s ability to protect the nation.
“In response to the Commission’s expansive requests for access to
secrets, the executive branch has provided such access in full
cooperation,” the letter read. “There is, however, a line that the
Commission should not cross — the line separating the Commission’s
proper inquiry into the September 11, 2001 attacks from interference
with the Government’s ability to safeguard the national security,
including protection of Americans from future terrorist attacks.”
***
“The Commission staff’s proposed participation in questioning of
detainees would cross that line,” the letter continued. “As the
officers of the United States responsible for the law enforcement,
defense and intelligence functions of the Government, we urge your
Commission not to further pursue the proposed request to participate in
the questioning of detainees.”
Destruction of Evidence
The interrogators made videotapes of the interrogations. The 9/11
Commission asked for all tapes, but the CIA lied and said there weren’t
any.
The CIA then destroyed the tapes.
Specifically, the New York Times confirms that the government swore that it had turned over all of the relevant material regarding the statements of the people being interrogated:
“The commission did formally request material of this
kind from all relevant agencies, and the commission was assured that we
had received all the material responsive to our request,” said Philip
D. Zelikow, who served as executive director of the Sept. 11 commission
….
“No tapes were acknowledged or turned over, nor was the commission
provided with any transcript prepared from recordings,” he said.
But is the destruction of the tapes — and hiding from the 9/11
Commission the fact that the tapes existed — a big deal? Yes, actually.
As the Times goes on to state:
Daniel Marcus, a law professor at American University who served as general counsel for the Sept. 11 commission
and was involved in the discussions about interviews with Al Qaeda
leaders, said he had heard nothing about any tapes being destroyed.
If tapes were destroyed, he said,
“it’s a big deal, it’s a very big deal,” because it could amount to
obstruction of justice to withhold evidence being sought in criminal or
fact-finding investigations.
Indeed, 9/11 Commission co-chairs Thomas Keane and Lee Hamilton wrote:
Those who knew about those videotapes — and did not tell us about them — obstructed our investigation.
The CIA also is refusing to release any transcripts from the interrogation sessions. As I wrote a year ago:
What does the fact that the CIA destroyed numerous videotapes of Guantanamo interrogations, but has 3,000 pages of transcripts from those tapes really mean?
Initially, it means that CIA’s claim that it destroyed the video
tapes to protect the interrogators’ identity is false. Why? Well, the
transcripts contain the identity of the interrogator. And the CIA is
refusing to produce the transcripts.
Obviously, the CIA could have “blurred” the face of the interrogator
and shifted his voice (like you’ve seen on investigative tv shows like
60 Minutes) to protect the interrogator’s identity. And since the CIA
is not releasing the transcripts, it similarly could have refused to
release the videos.
The fact that the CIA instead destroyed the videos shows that it has something to hide.
Trying to Create a False Linkage?
I have repeatedly pointed out that the top interrogation experts say that torture doesn’t work.
As I wrote last May:
The fact that people were tortured in order to justify the Iraq war by making a false linkage between Iraq and 9/11 is gaining attention.
Many people are starting to understand that top Bush administration
officials not only knowingly lied about a non-existent connection
between Al Qaida and Iraq, but they pushed and insisted that
interrogators use special torture methods aimed at extracting false confessions to attempt to create such a false linkage.
Indeed, the Senate Armed Services Committee found that the U.S. used torture techniques specifically aimed at extracting false confessions (and see this).
And as Paul Krugman wrote in the New York Times:
Let’s say this slowly: the Bush administration wanted to
use 9/11 as a pretext to invade Iraq, even though Iraq had nothing to do
with 9/11. So it tortured people to make them confess to the
nonexistent link.
[A]ccording to NBC news:
- Much of the 9/11 Commission Report was based upon the testimony of people who were tortured
- At least four of the people whose interrogation figured in the 9/11
Commission Report have claimed that they told interrogators information
as a way to stop being “tortured.”
- One of the Commission’s main sources of information was tortured until he agreed to sign a confession that he was NOT EVEN ALLOWED TO READ
- The 9/11 Commission itself doubted the accuracy of the torture confessions, and yet kept their doubts to themselves
In fact, the self-confessed “mastermind” of 9/11 also confessed to crimes which he could not have committed. He later said that he gave the interrogators a lot of false information – telling them what he thought they wanted to hear – in an attempt to stop the torture. We also know that he was heavily tortured specifically for the purpose of trying to obtain false information about 9/11 – specifically, that Iraq had something to do with it.
***
Remember, as discussed above, the torture techniques used by the Bush administration to try to link Iraq and 9/11 were specifically geared towards creating false confessions (they were techniques created by the communists to be used in show trials).
***
The above-linked NBC news report quotes a couple of legal experts to this effect:
Michael Ratner, president of the Center for
Constitutional Rights, says he is “shocked” that the Commission never
asked about extreme interrogation measures.
“If you’re sitting at the 9/11 Commission, with all the high-powered
lawyers on the Commission and on the staff, first you ask what happened
rather than guess,” said Ratner, whose center represents detainees at
Guantanamo. “Most people look at the 9/11 Commission Report as a trusted
historical document. If their conclusions were supported by information gained from torture, therefore their conclusions are suspect.“…
Karen Greenberg, director of the Center for Law and
Security at New York University’s School of Law, put it this way: “[I]t
should have relied on sources not tainted. It calls into question how we
were willing to use these interrogations to construct the narrative.”
The interrogations were “used” to “construct the narrative” which the 9/11 Commission decided to use.
Remember (as explored in the book The Commission by respected journalist Philip Shenon), that the Executive Director of the 9/11 Commission was an
administration insider whose area of expertise is the creation and
maintenance of “public myths” thought to be true, even if not actually
true. He wrote an outline of what he wanted the report to say very early in the process,
controlled what the Commission did and did not analyze, then limited
the scope of the Commission’s inquiry so that the overwhelming majority
of questions about 9/11 remained unasked (see this article and this article).
***
As constitutional law expert Jonathan Turley stated:
[The 9/11 Commission] was a commission that was really made for
Washington – a commission composed of political appointees of both
parties that ran interference for those parties – a commission that
insisted at the beginning it would not impose blame on individuals.
Other Obstructions of Justice
[Other examples of obstructions of justice include the following:]
- The chairs of both the 9/11 Commission and the Joint Inquiry of the House and Senate Intelligence Committees into 9/11 said that government “minders” obstructed the investigation into 9/11 by intimidating witnesses
- The 9/11 Commissioners concluded
that officials from the Pentagon lied to the Commission, and
considered recommending criminal charges for such false statements
- Investigators for the Congressional Joint Inquiry discovered
that an FBI informant had hosted and even rented a room to two
hijackers in 2000 and that, when the Inquiry sought to interview the
informant, the FBI refused outright, and then hid him in an unknown
location, and that a high-level FBI official stated these blocking
maneuvers were undertaken under orders from the White House. As the
New York Times notes:
Senator Bob Graham, the Florida Democrat who is a former
chairman of the Senate Intelligence Committee, accused the White House
on Tuesday of covering up evidence . . .
* * *
The accusation stems from the Federal Bureau of Investigation’s
refusal to allow investigators for a Congressional inquiry and the
independent Sept. 11 commission to interview an informant, Abdussattar Shaikh, who had been the landlord in San Diego of two Sept. 11 hijackers.
In his book “Intelligence Matters,” Mr. Graham, the co-chairman of
the Congressional inquiry with Representative Porter J. Goss,
Republican of Florida, said an F.B.I.
official wrote them in November 2002 and said “the administration would
not sanction a staff interview with the source.” On Tuesday, Mr. Graham called the letter “a smoking gun” and said, “The reason for this cover-up goes right to the White House.”
We don’t need to even discuss conspiracy theories about what happened on 9/11 to be incredibly disturbed about what happened
after: the government’s obstructions of justice.
Indeed, the 9/11 Commissioners
themselves are disturbed:
- The Commission’s co-chairs said that the CIA (and likely the White House) “obstructed our investigation”
- The Senior Counsel to the 9/11 Commission (John Farmer) – who led the 9/11 staff’s inquiry – said “At some level of the government, at some point in time…there was an agreement not to tell the truth about what happened“. He also said
“I was shocked at how different the truth was from the way it was
described …. The tapes told a radically different story from what had
been told to us and the public for two years…. This is not spin. This
is not true.”
Afterword: Footnote 130 to chapter 5 of the official 9/11 Commission Report
states:
Highly publicized allegations of insider trading in
advance of 9/11 generally rest on reports of unusual pre-9/11 trading
activity in companies whose stock plummeted after the attacks. Some
unusual trading did in fact occur, but each such trade proved to have an
innocuous explanation. For example, the volume of put options-
investments that pay off only when a stock drops in price-surged in the
parent companies of United Airlines on September 6 and American Airlines
on September 10-highly suspicious trading on its face. Yet, further
investigation has revealed that the trading had no connection with 9/11.
A single U.S.-based institutional investor with no conceivable ties to
al Qaeda purchased 95 percent of the UAL puts on September 6 as part of a
trading strategy that also included buying 115,000 shares of American
on September 10. Similarly, much of the seemingly suspicious trading in
American on September 10 was traced to a specific U.S.-based options
trading newsletter, faxed to its subscribers on Sunday, September 9,
which recommended these trades. These examples typify the evidence
examined by the investigation. The SEC and the FBI, aided by other
agencies and the securities industry, devoted enormous resources to
investigating this issue, including securing the cooperation of many
foreign governments. These investigators have found that the apparently
suspicious consistently proved innocuous. Joseph Cella interview (Sept.
16, 2003; May 7, 2004; May 10-11, 2004); FBI briefing (Aug. 15, 2003);
SEC memo, Division of Enforcement to SEC Chair and Commissioners,
“Pre-September 11, 2001 Trading Review,” May 15, 2002; Ken Breen
interview (Apr. 23, 2004); Ed G. interview (Feb. 3, 2004).
Did the Commission have full access to information regarding put
options? Was the Commission misled, as it was on other issues? Was
evidence destroyed or fabricated? We will never know, as the underlying
documents have – according to the SEC – been destroyed.
http://www.washingtonsblog.com/2010/06/sec-government-destroyed-documents-regarding-pre-911-put-options.html
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