EXPLOSIVE: AIG Bailout Flat-Out Illegal?
Courtesy of Karl Denninger at The Market Ticker
Big government has presented an explosive story related to AIG and The NY Fed in which the claim is made that the trust agreement that established AIG’s "grab" by The NY Fed was in fact outright unlawful:
This afternoon on Secure Freedom Radio we announced a breaking news story concerning the Administration’s ongoing cover-up of AIG financial wrong-doing. In an interview with David Yerushalmi, senior litigator on the Murray v. Geithner et al lawsuit, we expose possible fraud, money-laundering and criminal activity.
Money laundering?!
I looked at the source document folks – and while most of it looks ok, there’s one little line in the trust agreement that might be the problem referred to – specifically, here:
Section 1.03. Trust is Irrevocable. This Trust Agreement and the Trust shall be irrevocable and, except as provided in Section 5.01 hereof, unamendable except that the Board of Governors may terminate or amend its authorization pursuant to Section 13(3) of the Federal Reserve Act, thereby revoking or amending the Trust in accordance with Federal law, provided, however, that a Trustee’s rights to resign as a trustee hereunder and to compensation and indemnification with respect to acts or omissions occurring prior to any such revocation or amendment may not be modified without the written consent of that Trustee.
A trust of this sort, to be lawful, has to be irrevocable – you can’t reserve the ability to modify it later. The NY Fed knew they didn’t have the authority to take equity – thus, these "trust" agreements.
I’ll note for the peanut gallery that I’m not an attorney, but I do have a reasonable understanding of the requirements for an irrevocable trust of this general sort to be valid. A phone call with the plaintiff’s attorney, David Yerushalmi this morning confirmed that this indeed was the primary problem. Mr. Yerushalmi went on to assert that this establishes a prima-facie violation of the money laundering statute – an extremely serious allegation as that law, if violated, carries very heavy criminal penalties.
There is also apparently a second issue in that the beneficiary is named as The US Treasury, which is, effectively, a bank account and not a "person or entity." That’s a potential problem too although I can see the counter-claim being made that "The Treasury" is in fact The institution of The Treasury, not the account called "The US Treasury."
This is an explosive allegation – if the trust is defective then it is as if it never existed, and the entirety of the AIG bailout and everything related to it may be criminally unlawful. In addition the shareholders of AIG may have effectively had their equity interest improperly stripped!
A call to AIG’s corporate offices for comment was redirected to a media contact person by email (they apparently don’t take phone calls) and an inquiry to that office was not immediately returned.
Stay tuned -this has the potential to get rather interesting, as the admissions related to this agreement, if I read the transcript accurately, were revealed in a deposition – that is, with the folks doing the talking under oath.
