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The return of the colonial: Laor’s “The Myths of Liberal Zionism” reviewed

Max Ajl, The Electronic Intifada, 19 May 2010

The West has been sold a bill of goods. Burnished bronzed Jewish soldiery protecting settlers founding kibbutzim in a decadent, violent backwater in the Near East, terraforming the desert into farmland, steadfastly creating a cosmopolitan outpost in the center of Barbary — beautiful, innocent, pure, a perfect redemption for the West’s historical sins against European Jewry. Decent if saccharine and overwrought ad-copy for Zionism, and it’s gone over well for decades in Paris, New York, Brussels and Berlin. Like most ad-copy, it has been dishonest. Unlike most ad-copy, it is outright mendacious, something like 1940s cigarette ads advertising tobacco’s salubrious effects. And Zionist intellectuals are having increasing trouble covering up an increasingly evident truth: that Zionism should be slapped with a label reading: caution, settler-colonialism, type two — ethnic cleansing and extermination — this ideology may be harmful to the native population.

Earlier Zionists were not in the business of molly-coddling modern Western sensibilities. They were honest, unaware or indifferent to the fact that the archival record they left behind would be trouble. Take revisionist Vladimir Jabotinsky’s scorched forthrightness: “colonization must … proceed in defiance of the will of the native population … an external power has committed itself to creating such security conditions that the local population, however much it would have wanted to, would be unable to interfere, administratively or physically, with our colonization.” Ideology hasn’t changed much, but the West has. So Israeli new mandarins have to try to sell settler-colonialism to Western states with populations that increasingly regard Zionism’s spiritual core and physical reality as somewhere on the spectrum between mildly embarrassing and overtly revolting. It is those mandarins that anti-Zionist Israeli poet Yitzhak Laor meticulously vivisects in The Myths of Liberal Zionism.

Laor is not much for structure. He wanders and weaves. The book was originally published in Hebrew, and then translated to French; the myths referenced in the book’s title are intended to muck up the minds of a European audience. As Laor writes, “We are not really talking to the United States, maybe because we take its love for granted” (xii). Laor explores differences between the United States and Israel, the most important of which is the Holocaust, and its central role in communal binding for the American Jewish community, the bastion of ideological support for Israel.

Laor begins with an exegesis of the Zionist depiction of Israel — the national self-image as a vulnerable child. As the embodiment of Israeli nationalism, the Israeli soldier is imagined as utterly innocent: a naif. History happens to children. Adults make history happen. Israeli soldiers “ask for a different kind of adoration, love and warmth. They arouse, they are supposed to arouse, a desire to protect them, to defend them” (xvi). So the soldiers are children in need of a guardian, so too is Israel. This is the image Israel presents to the world, to America and to American Jews: we are all wards of an ascendant American Jewry, a responsible American Jewry, because it is Israelis that die to protect Jewry. As Laor continues, “The soldier, as a good grandson, is extremely important if we are to understand the Israeli manipulative narrative: we are the grandchildren that the United States and American Jews are often being called on to feel sorry for” (xvii).

This carefully crafted vulnerability is vital nonsense. Nonsense because Israel is a military titan with a nuclear trump card, vital because a vulnerable child demands succor and nursing. Precisely the correct image for a dependent client-garrison-state — the correct description, despite the analysis du jour in the solidarity movement that elides the materialist reasons for American and European materiel and diplomatic support for Israel.

The soldier is also a figure out of the Aryan imagination. Hebrew literature of the 1940s to 1970s is replete with blue-eyed blondes, at a time when the Israeli Jewish demographic, Ashkenazi and Mizrahim, was hazel to obsidian. Laor is quite clear: this Jew doesn’t exist. He is a stand-in for the real Jewry of Israel, the majority, Arabs, many of the Ashkenazi minority, descendants of refugees from the Shoah. This is particularly annoying for Zionist Arab Jews, who cannot relate to their past except as undispellable shame, as in the case of Israeli playwright and novelist A.B. Yehoshua, perpetually bummed at being a Sephardic Jew.

When oppression and dispossession map over ethnic lines, binding a community to a racially-conceived state requires racism, an abiding hatred of an “Other” — in this case the Palestinian Arab. This becomes even more important when that Other is closer to the Sephardic Jewish population than to the dominant population, the Ashkenazi Jewish elite, the true beneficiary of Israeli racism. Israel is the second most unequal advanced industrial economy in the world, with 40 percent of its stock market owned by a handful of families, overwhelmingly Ashkenazi. Racism glues together a national identity in lieu of cultural or class-based links which could bind Jewish Arabs to Palestinian Arabs in different and dangerous communities of identity.

This racism is codified in Zionist ideology, and so a consistent anti-racism is anti-Zionist. Such truisms don’t go over well much of anywhere. Laor quotes Ilan Greilsammer writing in Le Monde: “It is enough to be an anti-Zionist, a-Zionist, post-Zionist, or a new historian who describes the massacres perpetrated by the Jews during the war of 1948 to be welcomed everywhere with open arms.”

Laor continues: what “Greilsammer is really driving at is the following: in any other place in the (white) world, a state of all its citizens would be a reasonable democratic and republican solution, a legitimate political idea — but this does not apply to Arabs … it is the role of the Jew, within French racism, to articulate such disdain toward the Arabs. This is the return of the colonial” (56-57). The assault on anti-Zionism segues neatly into an assault on anti-Zionism’s moral groundings: anti-colonial universalism. In the neo-colonial present, radical equality threatens a radically unequal world. How to smuggle in colonial ideology? Easy: behind an anti-“anti-Semitic” discourse, from behind which anti-Arab racism can decorously emerge. And it is from this perspective that a Zionist Israeli acts as cipher for European bigotry, and explains the extent of the branding operation.

The core of the change in Jewish identity that Laor describes is “The metamorphosis of the Jew from non-Westerner to candidate-as-Westerner … the most central part of Israeli ideology” (xxiv). Through Zionism, Jewry is immured from its history: the perennial tax-collector and merchant, lingering far too obviously in the interstices of European culture. Through Zionism, the Jew becomes almost-European. Through the sabra, Israel becomes schizophrenically strong and weak: “the sabra … as a victim of circumstances, or a victim of the cruelty of the generation before him, or of the cruelty of Jewish history. In short, he was expected to be cruel, yet his cruelty was forgiven ‘in advance’ for he was the historical answer to the riddle of Jewish history” (xxii). How to solve the riddle? Simple. Though cleansing and renewing violence.

And the Jew-as-probationary-Westerner is doing excellent yeoman work in thrashing the natives. He is permitted and expected to be cruel, in response both to historical cruelty and because Israelis are not in Europe, where the natives are slightly more in line. “What our leaders asked for, it seems, was not the Rights of Man, but the right to belong to the elite. We can now participate in violating the rights of others” (35). Now that Israel is a grown-up nation-state, playing with the adults, its people can enjoy the privilege of at least border-Westerners: cluster-bombing brown folk. Laor knows that this is good work. Constant conflict is good money, good for scaring up oil prices, good for weapons sales. “Why disarm ourselves if the fences not only help us be safe, but also help us stay in ‘the West’? Or, in the words of the future historian: Why think of peace, if the price we will have to pay in return is a heterogeneous life?” (xxix). Future historians may be less demure about the way Israel has ideologically stabilized itself and its bigotry vis-a-vis the needs of its political economy and its insertion into mercantilist neo-liberalism.

Mass-murder in the global South is an organic part of European history, tied to the development of capitalism. But prattle about capitalism and death does no good for the defenders of European capitalism. Nor do narratives linking Victorian genocides to the genocides of the Third Reich. The European community would rather not see the Holocaust as a product of European civilization and its Romantic obsession with national purity, the output of colonialism and an endogenous process of violent state-formation. Instead, the Holocaust is outside history, for both Israel and Europe. As Laor explains, for Israel, this is convenient because it re-writes Jewish history in a floating arc of “national continuity which begins with the rise of Nazism, continues with the war and terminates in the construction of the memory of the (Jewish) victims” (23). For Europe, this is convenient because it places the Holocaust in a mausoleum marked “Human Suffering,” so ostentatiously elaborate that we are meant to not notice that the monument has walled off the Holocaust from the genocides the West perpetrated in the global South, privileging it, privileging Jewish suffering, now a sort of suffering of full human beings since the Jewish people — via Israel — are probationary Europeans.

Laor reserves a particular revulsion for the intellectual artisans toiling away within Israeli society. Like Viktor Klemperer, he highlights the treason of the intellectuals as the worst betrayal. He quotes Amos Oz as writing that the Israel-Palestine conflict is, “in other words a conflict between two causes where both are as just, one as the other.” What can Laor say? He says nothing. Or Claude Lanzmann, maker of the movie Shoah: “They have autonomous territories, an armed police force, weapons are everywhere” (37). While Israeli soldiers beat children to death, children with minds tortured by “memories of mothers screaming with fear, babies who never saw anything but armored trucks near home” (39). Or on Camp David, Laor highlights “the role played by the Zionist left in cementing the anti-Palestinian public perception so common today” (40). Here again is Oz: “he has incited his people against Israel and against the Jews. Finally, he has initiated this recent burst of hateful violence,” meant to wrack Jews with suffering. “The Palestinian people are suffocated and poisoned by blind hate” (42-43). Laor knows that Oz laid the symbolic ground for 5,500 Palestinian and 1,000 Israeli dead during the second Palestinian intifada. Oz scribbles away with the blood of the dead on his quill and Laor loathes him for it.

Laor detests Oz for another reason too. Judaism as a breathing culture has been suffocated by the new Zionist Israeli narrative. The old narrative of Eastern Europe Jewry has had to be decimated. This has meant the destruction of a special memory: Holocaust-surviving, the remnant of eastern European Jewry. Laor is the descendant of survivors of the Shoah, with a tincture of Maghrebi Jew. He is everything the Israeli imaginary attempts to erase or to spit upon. Livid, Laor absolutely refuses to condescend to the culture or the memories of Shoah Jewry. When Oz describes annihilated European Jewry as opera and ballet-viewing, poly-lingual cosmopolitans, Laor explodes: “This is simply the desecration of the memory of the victims of the Holocaust, most of whom never went to the opera, never read European poetry” (113).

As Laor writes, “The real people, those who never frequented operas or concerts, those who were deported en masse to the camps and to their deaths, were not ‘ideal’ in any sense. They loved their spoken language, their world which was burnt down; they were real” (114). Oz hates the real, because reality is intolerable to the Zionist, thief of Jewish history, abuser of the Holocaust. For the Israeli Zionist, Laor has many damning words. Maybe this is an attempt to heal the culture. For American Zionist Jews, who need this book so badly, who will react to its publication like a blind man to Medusa? “I can hardly find appropriate words for them,” for those who pay for the weapons that kill children, for those who will never live in their insurance-policy patch of land in the Levant (xxix). I can find appropriate words for Laor’s book: it is a gift, incredible and beautiful, so wonderful that I am sure that the American Zionist community will spurn it. No one wants to read the words that will be the epitaph on the gravestone marking the burial site of your communal imaginary.

Max Ajl is a writer living in Gaza. He has written for Adbusters! and The New Statesman, among others, and blogs on Israel-Palestine and ecological issues at www.maxajl.com.

May 19, 2010 Posted by | Deception, Ethnic Cleansing, Racism, Zionism | Leave a comment

Official: Israeli forces destroy pipelines in Hebron village

Ma’an – 19/05/2010

Hebron – Israeli army bulldozers reportedly destroyed several water pipes as they attempted to block the main road from the Adh-Dhahiriya village to Hebron on Wednesday, effectively cutting off the village’s water supply, an official said.

A representative from the Palestinian Authority Water Authority, Nabil Abu Aqel, said the bulldozers were in the process installing a road block near the adjacent Otni’el settlement, destroying a number of essential water pipelines in the process.

However, a spokesman for Israel’s Civil Administration said a pipe had burst in the area and that it was currently being repaired.

Two weeks prior, Israeli forces piled earth at the northern entrance of Adh-Dhahiriya, closing off the main road to Hebron in what town residents said at the time was an attempt to restrict access to roads near settlements.

In the process of digging, forces destroyed pipes to the town, again cutting off its water supply, Adh-Dhahiriya Mayor Sami Estanyur said at the time.

The Hebron-Dhahiriya road bypasses the Otni’el settlement was established on 150 dunums of private Palestinian land in 1983, and Eshtanyur said the road overlays the water network of the town.

At the time, Israel’s army said it was not familiar with the incident.

May 19, 2010 Posted by | Ethnic Cleansing, Racism, Zionism, Subjugation - Torture | 6 Comments

What explains the anti-establishment sentiment?

By Glenn Greenwald | May 19, 2010

After last night’s election results, there’s no doubt that the electorate has contempt for Washington incumbents and the political establishment.  Virtually every media account dutifully recites the same storyline — that these results reflect an “anti-incumbent” mood — but virtually none of these stories examines the reasons for that “mood.”  Why do Americans, seemingly regardless of party affiliation or geographic location, despise the political establishment?

One reason why media mavens seem reluctant, even unable, to grapple with this question is because it so plainly falls outside their familiar, comfortable narratives.  Contrary to efforts earlier this year to depict the problem as one aimed at Democratic incumbents due to the unpopular health care plan and the growing “tea party” movement, Republican voters — as demonstrated in Florida, Utah, and last night in Kentucky — clearly hate their own party’s leadership at least as much as the animosity directed toward Democratic incumbents.  The trend is plainly trans-partisan and trans-ideological, and the establishment political media has a very difficult time understanding or explaining dynamics about which that is true.

So extreme is the anger toward the political establishment that not even popular politicians have any impact on it.  Despite the fact that he remains quite popular with his state’s GOP voters, Mitch McConnell’s handpicked candidate was slaughtered in Kentucky by a highly unconventional and establishment-scorned Rand Paul.  And just as Massachusetts voters did in December when President Obama traveled there to plead with them to elect Martha Coakley, only for them to reject those pleas and send Scott Brown to the Senate, Democratic voters completely ignored Obama’s vigorous support for incumbent Senators Arlen Specter and Blanche Lincoln, sending the former to ignominious defeat after 30 years, and forcing the latter into an extremely difficult run-off with Bill Halter (who was recruited by Accountability Now, an organization I helped found and continue to run).

It makes perfect sense that the country loathes the political establishment.  Just look at its rancid fruits over the past decade:  a devastating war justified by weapons that did not exist; a financial crisis that our Nation’s Genuises failed to detect and which its elites caused with lawless and piggish greed; elections that seem increasingly irrelevant in terms of how the Government functions; grotesquely lavish rewards for the worst culprits juxtaposed with miserable unemployment and serious risks of having basic entitlements (Social Security) cut for ordinary Americans; and a Congress that continues to be owned, right out in the open, by the very interests that have caused so much damage.  The political establishment is rotten to its core, and the only thing that’s surprising is that the citizenry’s contempt isn’t even more intense than it is.  But precisely because that dynamic so clearly transcends Left/Right or Democratic/GOP dichotomies, little effort is expended to understand or explain it.

One of the most interesting and important questions is whether this trans-partisan, anti-establishment anger can bring about some cracks in the rigid partisan polarization that serves, more than anything else, to preserve the status quo.  Consider, for instance, that Rand Paul’s campaign included some serious questioning of the war in Afghanistan and that Sen. Tom Coburn recently threatened to filibuster the $33.5 billion war supplemental spending bill if it isn’t independently paid for, combined with the Democrats’ realization that they will be forced on their own to fund the endless — and increasingly ugly — war in Afghanistan.  Or consider the odd spectacle that numerous Republicans are beginning to take the lead in questioning and even objecting to the Obama administration’s efforts to further whittle away civil liberties and vest itself with greater unchecked power.

It’s possible that the pervasive, trans-partisan anger can muddle, even re-arrange, the rigid partisan divisions that prevent citizens of similar interests from working together against the factions that control Washington.  One saw that in the alliance between progressives (such as Alan Grayson and Bernie Sanders) and conservatives (such as Ron Paul) that led to the enactment of the Audit the Fed bill, as well as in similar alliances during the Bush years in opposition to the assaults on the Constitution (such as the one forged by Al Gore and Bob Barr).  This isn’t Broderian bipartisanship where the two parties’ mix their policies into a muddled, watered-down mish-mash of nothing for its own sake.  It’s far more substantive than that:  a refusal to allow ordinary citizens to be divided (and thus weakened) along artificial tribal lines, thereby enabling the establishment factions that feed at the Washington trough to maintain their same power in unchallenged form.

I’m not particularly optimistic about this possibility.  The reality is that the American Right is still the movement of Rush Limbaugh, Fox News, and Sarah Palin, really no different — despite its “tea party” re-branding — than what spawned the Bush/Cheney extremism of the last decade.  And even Rand Paul, who some are trying to depict as a crusading civil libertarian and anti-war advocate, ran on a platform (as Scott Brown did) of opposing the closing of Guantanamo, the use of civilian trials for accused Terrorists, and the granting of visas to people from numerous Muslim countries.  Many of the key ignorant and primitive orthodoxies of modern conservatism are as strong as ever.  Other than some (extremely hypocritical and opportunistic) war questioning and some anger over the growing corporate-Government overlap, I have a very hard time looking at the American Right and finding much cause for optimism about any of what’s taking place over there.

Still, it’s hard not to be encouraged by the disgust which the citizenry clearly has for the political establishment regardless of party, as well as the resulting (and increasing) fear and confusion on the part of the political class.  This sort of citizenry anger can re-arrange political alignments and explode political orthodoxies in fundamental and unpredictable ways.  There is, to be sure, a risk in that, but there is a far greater risk in simply allowing the destructive political status quo to linger in unchanged form for much longer.

May 19, 2010 Posted by | Aletho News | 10 Comments

Leaked Australian blacklist reveals banned sites

Asher Moses | Sydney Morning Herald | March 19, 2009

The Australian communications regulator’s top-secret blacklist of banned websites has been leaked on to the web and paints a harrowing picture of Australia’s forthcoming internet censorship regime.

Wikileaks, an anonymous document repository for whistleblowers, obtained the list, which has been seen by this website, and plans to publish it for public consumption on its website imminently.

Wikileaks has previously published the blacklists for Thailand, Denmark and Norway.

University of Sydney associate professor Bjorn Landfeldt said the leaked list “constitutes a condensed encyclopedia of depravity and potentially very dangerous material”.

He said the leaked list would become “the concerned parent’s worst nightmare” as curious children would inevitably seek it out.

But about half of the sites on the list are not related to child porn and include a slew of online poker sites, YouTube links, regular gay and straight porn sites, Wikipedia entries, euthanasia sites, websites of fringe religions such as satanic sites, fetish sites, Christian sites, the website of a tour operator and even a Queensland dentist.

“It seems to me as if just about anything can potentially get on the list,” Landfelt said.

The blacklist is maintained by ACMA and provided to makers of internet filtering software that parents can opt to install on their PCs.

However, if the Government proceeds with its mandatory internet filtering scheme, sites on the blacklist will be blocked for all Australians. The Government has flagged plans to expand the blacklist to 10,000 sites or more.

In a special report, written in conjunction with the Internet Industry Association and presented to the Government over a year ago, Landfeldt warned that “list leakage” was one of the main issues associated with maintaining a secret blacklist of prohibited sites.

Julian Assange, founder of Wikileaks, dug up the blacklist after ACMA added several Wikileaks pages to the list following the site’s publication of the Danish blacklist.

He said secret censorship systems were “invariably corrupted”, pointing to the Thailand censorship list, which was originally billed as a mechanism to prevent child pornography but contained more than 1200 sites classified as criticising the royal family.

“In January the Thai system was used to censor Australia reportage about the imprisoned Australian writer Harry Nicolaides,” he said.

“The Australian democracy must not be permitted to sleep with this loaded gun. This week saw Australia joining China and the United Arab Emirates as the only countries censoring Wikileaks.”

The leaked list, understood to have been obtained from an internet filtering software maker, contains 2395 sites. ACMA said its blacklist, as at November last year, contained 1370 sites.

Assange said the disparity in the reported figure is most likely due to the fact that the list contains several duplicates and variations of the same URL that stem from a single complaint. Alternatively, some sites may have been added to the list by the filter software maker.

ACMA said Australians caught distributing the list or accessing child pornography sites on the list could face criminal charges and up to 10 years in prison.

Opposition communications spokesman Nick Minchin said the leaking of the list was irresponsible but highlighted how this type of information could surface despite the efforts of ACMA to protect it, and could be used by those with a perverse interest in its content.

“The regrettable and unfortunate reality is there will always be explicit and illegal material on the web and – regardless of blacklists, filters and the like – those with the means and know-how will find ways of accessing it,” he said.

“Adult supervision is the most effective way of keeping children safe online and people shouldn’t be led into believing by Labor that expanded blacklists or mandatory filters are a substitute for that.”

Colin Jacobs, spokesman for the online users’ lobby group Electronic Frontiers Australia, said the leak was not surprising and would only get worse once the list was sent to hundreds of Australian ISPs as part of the Government’s mandatory internet filtering policy.

He said the Government could be considered a “promoter and disseminator of links to some pretty unsavoury material”.

“The list itself should concern every Australian – although plenty of the material is unsavoury or even illegal, the presence of sites like YouTube, MySpace, gambling or even Christian sites on the list raises a lot of questions,” he said.

“There is even a harmless tour operator on there, but there is no mechanism for a site operator to know they got on or request to be removed. The prospect of mandatory nation-wide filtering of this secret list is pretty concerning from a democratic point of view.”

The Communications Minister, Stephen Conroy, said the leak and publication of the ACMA blacklist would be “grossly irresponsible” and undermine efforts to improve cyber safety.

He said ACMA was investigating the matter and considering a range of possible actions including referral to the Australian Federal Police. Australians involved in making the content available would be at “serious risk of criminal prosecution”.

“Under existing laws the ACMA blacklist includes URLs relating to child sexual abuse, rape, incest, bestiality, sexual violence and detailed instruction in crime,” Senator Conroy said.

“No one interested in cyber safety would condone the leaking of this list.”

May 19, 2010 Posted by | Civil Liberties, Full Spectrum Dominance | Leave a comment

Conspiracy of Banks Rigged Bids, Local Governments Robbed

“That money is what we use to build schools”

By Martin Z. Braun and William Selway | Bloomberg | May 18, 2010

A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.

The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.

West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.

They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money.

California to Pennsylvania

The workings of the conspiracy — which stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits — can be pieced together from the Justice Department’s indictment of CDR, civil lawsuits by governments around the country, e-mails obtained by Bloomberg News and interviews with current and former bankers and public officials.

“The whole investment process was rigged across the board,” said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Service’s tax-exempt bond division. “It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded.”

Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars. Anderson said prosecutors are lining up conspirators to plead guilty and name names.

“This will go on for a long time and a lot of people will be indicted,” he said in a telephone interview.

Bidding Encouraged

The U.S. Treasury Department encourages public bidding for GIC contracts to ensure that localities are paid proper market rates. Banks that conspired in the bid rigging for GICs paid kickbacks to CDR ranging from $4,500 to $475,000 per deal in at least 10 different transactions, government court-filed documents say.

A GIC is similar to a certificate of deposit, but its rates aren’t advertised publicly. Instead, towns rely on advisory firms such as CDR to solicit competing offers.

In the bid-rigging deals, CDR gave false information to municipalities and fed information to bankers allowing them to win with lower interest rates than they were otherwise willing to pay, the indictment says. Banks took their illegal gains from the additional returns and paid CDR kickbacks, according to the indictment.

Not Guilty Plea

Wolmark, 54, who was indicted by a federal grand jury in Manhattan on antitrust, conspiracy and wire fraud charges, to which he pleaded not guilty, declined to comment when reached by telephone at CDR’s office. Goldberg, who hasn’t been charged, declined to comment, says his attorney, John Siffert.

Court records in the broadest-ever criminal investigation of public finance shed new light on how Wall Street’s biggest banks were cheating cities and towns during the same decade in which they were setting the stage for a global economic collapse.

As the banks were steering the world’s financial system to the brink of catastrophe by loading more than $1 trillion of subprime mortgage loans into opaque debt investments, they were also duping public officials across the U.S.

Many of the same bankers and advisers who sold public officials interest-rate swap deals that backfired for taxpayers are now subjects of the criminal antitrust investigation involving GICs.

The swaps are derivatives designed to keep monthly interest payments low as lending rates change. Municipal- derivative units of the largest U.S. banks also sold the contracts, public records across the nation show.

Key Witness

Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Options and futures are the most common types of derivatives.

A key witness in the government’s case is a former banker whom the government hasn’t named, according to a civil lawsuit filed by Baltimore, Maryland, and six other municipal borrowers against Bank of America, JPMorgan and nine other banks. The banker is providing evidence against his peers.

The witness, who was employed by Bank of America Corp. starting in 1999, has laid out the inner workings of the scheme in confidential meetings with investigators, according to the civil lawsuit.

Bank of America, based in Charlotte, North Carolina, has also been providing prosecutors with evidence since at least 2007. The bank voluntarily reported its own illegal activity and agreed to cooperate with the Justice Department’s antitrust division, according to a press release from the company.

Amnesty Agreement

In exchange, the government promised in an amnesty agreement not to prosecute the bank. Bank of America spokeswoman Shirley Norton in San Francisco said in an e-mail the firm is continuing to cooperate.

The banker who has been cooperating with the Justice Department said he overheard his colleagues change Bank of America’s bids after coaching from brokers or other banks bidding on the same deal, according to information that the firm provided to plaintiffs in the civil case filed by seven municipalities.

At least five former bankers with New York-based JPMorgan, the second-biggest U.S. bank by assets, conspired with CDR to rig bidding on investment deals sold to local governments, according to the Justice Department list now under seal.

At least three other former JPMorgan bankers are targets of the investigation, according to filings with the Financial Industry Regulatory Authority. Six bankers with Bank of America, the biggest U.S. lender, are also named in the sealed Justice Department list as participants.

16 Companies

Eighteen employees at 16 other companies, including units of General Electric Co., UBS AG and FSA, then a unit of Brussels lender Dexia SA, are also cited as co-conspirators by the Justice Department, according to the list under seal. None have been charged in the case.

Citigroup spokesman Alex Samuelson, Dexia spokesman Thierry Martiny, GE spokesman Ned Reynolds, JPMorgan spokesman Brian Marchiony, UBS spokesman Doug Morris, and Ferris Morrison, a spokeswoman for Wells Fargo & Co., which acquired Wachovia in 2008, declined to comment.

Former CDR employees Douglas Goldberg, Daniel Naeh and Matthew Rothman, pleaded guilty in federal court in Manhattan in February and March to wire fraud and conspiracy to rig bids.

In October, CDR was charged with criminal conspiracy and fraud, along with Chief Executive Officer David Rubin, 48, vice president Evan Zarefsky and Wolmark. They pleaded not guilty. Rubin, who was also charged with making fraudulent bank transactions, faces as much as $3 million in fines and more than 30 years in jail if convicted.

No Law Broken

Rubin declined to comment in a telephone call.

“Mr. Rubin doesn’t think that CDR broke the law in any of these transactions,” said Laura Hoguet, his attorney in New York.

Daniel Zelenko, a lawyer for Zarefsky in New York, said he was confident his client will prevail at trial.

“The government continues to show that it simply doesn’t understand how this market operated,” Zelenko said in an e- mail.

During more than three years of investigation, federal prosecutors amassed nearly 700,000 tape recordings and 125 million pages of documents and e-mails regarding public finance deals.

$400 Billion

Municipalities and states raise $400 billion a year by selling bonds. They invest much of those proceeds in GICs, sold by banks or insurance companies. Those accounts hold taxpayer money and earn interest before public agencies spend it.

Banks and advising firms illegally siphoned money from taxpayers by paying artificially low interest rates in the GICs, the CDR indictment says. The money was intended to build schools, hospitals, roads and sewers and refinance higher-cost debt.

The bid-rigging schemes were orchestrated by CDR and other advisory firms, according to the indictment and the civil suits. Advisers are unregulated private firms hired by local governments to consult on public finance deals — and are almost always paid by the banks that arrange the transactions or manage the GICs.

Wilshire Boulevard

CDR, which was located on Wilshire Boulevard in Beverly Hills, California, during the transactions under investigation, has provided advice on more than $158 billion in public transactions since it was founded in 1986, according to its website.

CDR helped arrange deals in which financial firms took millions of dollars in profits from GICs, Bloomberg News reported in October 2006. Almost all of the deals were shams: As much as $7 billion in bond-issue proceeds were invested in GICs but never spent for the intended purpose of providing services to taxpayers.

CDR signed off on interest-rate swaps to municipalities, as banks took hidden fees sometimes 10 times as much as they charged on fixed-rate bond deals, according to data compiled by Bloomberg. For the public, the swaps were fraught with risks.

In the past decade, banks have peddled swaps the world over, from Jefferson County, Alabama — which was forced to the brink of bankruptcy — to the hill towns of the Umbria region of Italy. Many of these swaps soured when the credit crisis began in 2007.

Getting Out

Dozens of municipalities have paid banks billions to get out of swap contracts. The agency that oversees the San Francisco-Oakland Bay Bridge said it spent $105 million to escape its deal in July 2009.

“They were gouging the municipalities,” said retired IRS investigator Anderson, 59. “Beside the excessive fees, some of the swap deals just didn’t work. It was just awful. The same people were involved in the GIC end of the market.”

Bid rigging not only cheated cities and towns, it also illegally denied the IRS required taxes from GIC income, Anderson said. The evidence is clear in telephone recordings made on GIC desks, he said. “We could hear people talking about how everyone knew who was going to win the bid. You could tell it was just everyday business.”

The Securities and Exchange Commission is conducting a probe of bid rigging from its Philadelphia office that’s parallel to the Justice Department investigation.

More Probes

State attorneys general in California, Connecticut and Florida are also investigating. Bank of America, JPMorgan, Fairfield, Connecticut-based GE, and Zurich-based UBS have disclosed in regulatory filings that they may be sued by the SEC.

The Federal Bureau of Investigation has raided at least two of CDR’s competitors, Pottstown, Pennsylvania-based Investment Management Advisory Group Inc., known as Image, and Eden Prairie, Minnesota-based Sound Capital Management. Neither has been charged.

Robert Jones, a managing director of Image, declined to comment, after answering a call to the firm’s office. Johan Rosenberg of Sound Capital didn’t return calls seeking comment.

Tape recordings cited in a letter by Justice Department prosecutor Rebecca Meiklejohn show how those deals worked. In two GIC bids for the Utah Housing Corp., CDR’s Zarefsky advised an unidentified trader that his firm could lower its offer by “a dime,” or 10 basis points (a basis point is 0.01 percentage point).

‘A Couple Bucks’

The West Valley City-based housing agency accepted contracts with GE’s FGIC Capital Market Services division for 5.15 percent and 3.41 percent in 2001, public records show. Zarefsky didn’t return calls seeking comment.

“I can actually probably save you a couple bucks here,” Zarefsky told the trader, according to the letter citing the tape recording.

The Utah agency, which finances mortgages for low-income residents, didn’t know that financial firms were cheating it out of money that could have been used to help home buyers, said Grant Whitaker, who runs the agency. “It sounds like somebody got a better deal than we did,” he said in a telephone interview.

Such deals could produce large illegal profits by banks, said Bartley Hildreth, public finance professor at the Andrew Young School of Policy Studies at Georgia State University in Atlanta.

A New Wrinkle

“Just a basis point on many of these deals is tens to hundreds of thousands of dollars,” he said.

This isn’t the first time Wall Street has faced accusations of reaping excessive fees on investment deals with public officials. Goldman Sachs Group Inc., Lehman Brothers, which filed for bankruptcy in 2008, Merrill Lynch & Co. and other securities firms agreed by 2000 to pay more than $170 million to settle SEC charges that they had sold overpriced Treasury bonds to municipalities.

The so-called yield burning drove down the returns that local governments earned and trimmed required payments to the IRS. The firms neither admitted nor denied wrongdoing.

Even as the banks were settling with regulators, they devised another way to burn yield, this time by skimming money from GICs, according to the indictment, which said the conspiracy went from 1998 to at least 2006.

In the lawsuit against Bank of America and JPMorgan filed in New York in June 2009, the city of Baltimore, two Mississippi universities and four other municipal borrowers say that bankers from those two companies colluded in bidding for GIC contracts in Pennsylvania.

Holiday Party

At a holiday party sponsored by advising firm Image at Sparks Steak House in Manhattan early in the past decade, the Pennsylvania deals were discussed by the Bank of America trader who is cooperating with prosecutors and Sam Gruer of JPMorgan, the civil antitrust lawsuit says.

The Bank of America trader told Gruer that he was happy that the two banks weren’t “kicking each other’s teeth out” on bidding for certificates of deposits for bond proceeds, the suit says. That information was provided by Bank of America to the plaintiffs.

Gruer, who was informed by prosecutors in 2007 that he was a target of the investigation, declined to comment.

Coaching a Bidder

The trader who is now a federal witness joined Bank of America after being recommended by Image, according to information that the bank turned over to the Baltimore-led plaintiffs. He was assigned by Phil Murphy, who headed the municipal trading desk, to be Bank of America’s point person for investment contracts bid by Image, the lawsuit says.

Image coached Bank of America in winning an investment contract in Pennsylvania, according to an internal e-mail exchange in May 2001 between Bank of America trader Dean Pinard and Image’s Peter Loughhead that was obtained by Bloomberg News. The e-mail was provided to Bloomberg by a person who got it from Bank of America and asked to remain unidentified.

Loughead, who ran bids for Image, advised Pinard on how much to offer for managing the cash fund for a $10 million bond issued by the sewer authority of Springfield Township, York County, 100 miles (161 kilometers) west of Philadelphia.

‘Don’t Fall on Any Swords’

Pinard said in the e-mail to Loughead that Bank of America was willing to pay the town as much as $40,000 upfront to win the deal. Loughead wrote that the bank didn’t need to pay that much.

“Don’t fall on any swords,” Loughead wrote to Pinard the day before bids were submitted. He suggested that the bank could win the contract with a bid of slightly more than $30,000. The next day, Bank of America offered $31,000. It won the bidding, authority records show.

Loughead didn’t return calls seeking comment. Pinard didn’t respond to telephone requests for an interview and no one responded to a knock on the door at his Charlotte home.

Image ensured that Bank of America would dominate GIC deals in Pennsylvania by soliciting sham bids from other banks to make the process look legitimate, according to testimony from the trader cooperating with the Justice Department.

Bank of America would return the favor to Image by submitting so-called courtesy bids at the adviser’s request, allowing JPMorgan to win some of the deals, according to information that Bank of America gave plaintiffs’ attorneys.

Switching Jobs

Bank of America has cooperated with the municipalities that were suing the bank as part of its 2007 amnesty agreement with the Justice Department.

Traders such as FSA’s Goldberg often had worked for several banks and insurance companies that had a role in GIC contracts, according to employment records with Finra, the self-regulator of U.S. securities firms. CDR employees went on to work in the derivative departments of Deutsche Bank AG and UBS, the records show.

Before joining Bank of America, Pinard, 40, worked at Wheat, First Securities Inc. in Philadelphia with two bankers who would later join Image, according to broker registration records.

“Few people understand this part of public finance,” Georgia State’s Hildreth said. “It is a very small band of brothers who know the market. So, of course, they are going to reap the benefits.”

34 States

For nearly a decade, CDR founder Rubin, Wolmark, and Zarefsky helped fix prices on investment deals that cheated taxpayers in at least 34 states, according to their indictments and records filed in the case.

FSA’s Goldberg, who received a bachelor’s degree in accounting from St. John’s University in Queens, New York, worked with CDR employees on GIC deals, according to the indictment and public records. Goldberg worked from 1999 to 2001 at GE, which gets 35 percent of its revenue from financial services.

Goldberg was referred to only as “Marketer A” in the CDR indictment. “Marketer A” was then later identified as FSA’s Steven Goldberg in the Justice Department list of co- conspirators.

At GE, Goldberg worked with Dominick Carollo, a senior investment officer for FGIC, and Peter Grimm, who worked there from 2000 until at least 2006, according to court documents and public records. GE sold FGIC in 2003 to a group led by mortgage insurer PMI Group Inc.

Funneling Kickbacks

Goldberg and Grimm worked with CDR to increase their gains on GIC deals, according to the CDR indictment and conspirator list. Carollo left GE in 2003, joining the derivatives unit of Royal Bank of Canada. Grimm and Carollo didn’t respond to telephone calls and e-mails seeking comment.

Goldberg continued to participate in the conspiracy after he left for FSA in 2001 and used swap deals with Toronto-based Royal Bank of Canada and UBS to funnel kickbacks to CDR, according to the indictments and the Justice Department list of conspirators. Royal spokesman Kevin Foster said the company is cooperating the government.

FSA, Royal Bank of Canada and UBS all worked on public finance deals in West Virginia that prosecutors say involved bid rigging.

At least three times, Goldberg conspired with CDR to pick up deals with West Virginia agencies, according to a guilty plea by former CDR employee Rothman and other records filed in federal court in Manhattan. Among them was a $147 million investment contract with the West Virginia School Building Authority.

‘Raw Greed’

That state’s schools need every penny they can get, said Mark Manchin, executive director of the school authority. With 17 percent of West Virginians below the poverty line in 2008, the state was 45th among the 50 U.S. states, according to a 2009 Census Bureau report. Manchin said some students study in dilapidated, century-old buildings.

“It’s just raw greed at the expense of the most vulnerable,” he said in a telephone interview. “With deteriorating facilities all over the state, that money is what we use to build schools.”

Bank of America’s municipal derivatives division, which was formed in 1998, worked on the 14th floor of the Hearst Tower in Charlotte. The space was so tight that the banker who’s cooperating with the Justice Department said he could hear others in the office change their bids when they got word from financial advisers, according to information Bank of America gave Baltimore.

Bank of America’s Murphy told the banker helping prosecutors that Image would use sham auctions to steer deals to Bank of America if the employee told Image that he “wanted to win” and “would work with” Image, according to the civil suit filed by Baltimore. Murphy declined to comment.

Verbal Cues

They would use verbal cues to communicate. The banker would ask whether the bid was a “good fit” to get information on competing bids from Image. Sometimes Image’s Martin Stallone said Bank of America’s bids were “aggressive,” or too high, and had to be reworked.

At other times, Stallone would ask the banker to bid a specific number, according to the civil suit.

Stallone didn’t respond to messages left for him at work or to a list of questions faxed and e-mailed to Image.

Like Financial Security Assurance, Bank of America also paid kickbacks to brokers for their help in getting deals, according to the Baltimore lawsuit, which based its allegations on information provided by Bank of America.

On June 28, 2002, Douglas Campbell, a former municipal derivatives salesman at Bank of America, wrote in an e-mail to his boss, then managing director Murphy, that he had paid $182,393 to banks and brokers not tied to any particular deals.

‘Better Relationship’

Three payments totaling $57,393 went to CDR, which played no role in any transaction connected to that amount. A copy of the e-mail was contained in a North Carolina lawsuit filed by Murphy against Bank of America in 2003.

“The CDR fees have been part of the ongoing attempt to develop a better relationship with our major brokers,” Campbell wrote.

The bid rigging in GIC contracts has reduced public funding for schools and housing across the U.S.

“If this was going on in a small state like West Virginia, it must have been huge elsewhere,” the state’s Assistant Attorney General Doug Davis said.

To contact the reporters on this story: William Selway in San Francisco at wselway@bloomberg.net; Martin Z. Braun in New York at mbraun6@bloomberg.net

May 19, 2010 Posted by | Corruption, Deception, Economics | 4 Comments

Brazil wants Iran sanctions dropped

Press TV – May 19, 2010
Brazilian Foreign Minister Celso Amorim

After Iran issued a declaration seeking to end the country’s nuclear dispute, Brazil says slapping a new round of UN Security Council sanctions against Tehran would jeopardize a peaceful solution to case.

Brazilian Foreign Minister Celso Amorim, whose country is a non-permanent member at the UNSC, warned against the approval of any draft resolution on Iran, saying the move would provoke a chain of reactions.

Referring to the fact that the newly-issued nuclear declaration would usher in a new era of talks on Iran’s nuclear activities, Amorim said that ignoring the statement would result in failure of all efforts aimed at achieving a peaceful solution.

“I think that ignoring this agreement would be despising a peaceful solution, so I believe there is no way of doing so,” Amorim said.

He added that the best way to guarantee a halt to the dispute over Iran’s nuclear standoff was to implement the nuclear declaration.

The remarks came as the US announced on Tuesday that an agreement was made among all veto-wielding permanent members of the Security Council on a draft sanctions resolution against Iran.

Meanwhile, Brazilian ambassador to the UN Maria Luiza Ribeiro Viotti told Brazil’s Globo News television that she would not take part in UNSC talks on the new draft resolution against Iran.

May 19, 2010 Posted by | Solidarity and Activism | 2 Comments