Showing posts with label Madoff. Show all posts
Showing posts with label Madoff. Show all posts

Friday, May 6, 2011

Warnings Unheeded, Disasters Incurred - A Warning From Omni Magazine, Circa 1989

In cleaning out a closet recently I came across and old issue of Omni magazine. Omni's writing and articles were a combination of scientific fact, technology and science fiction and it was in print from 1978 until 1995. An article from its January, 1989 issue caught my eye. It was entitled, "Near Future Potential For Massive Terrorism on U.S. Soil" and was written by G. Gordon Liddy, a character infamous for his Watergate shenanigans. The article is written as a memo to the President of the United States, summarizing the cause and impact of a multifaceted terror campaign on U.S. soil.

Given that the article was written about twelve years before the 9-11 attacks, I thought it might be interesting to see how Liddy saw the future unfolding. While he vastly overestimated the impact that the Soviet Union and South American influences would have in a terror filled future, he was pretty accurate in many respects:

- "As it is, we have had to ground the U.S. civil commercial aviation fleet for an indefinite time." Just as Bin Laden saw it, the country's aviation system could be used not only to kill Americans but also be used to disrupt the economy. Although it did not last as long as Liddy predicts, the entire U.S. aviation system was grounded for several days after the 9-11 attacks, inflicting further economic damage on the country beyond the actual attacks themselves.

- "Unfortunately, all major north-south railroad traffic in the United States funnels through two choke points: a single strategic railroad bridge over the Potomac River between Washington D.C. and Virginia and the rail complex at Cincinnati. On the night of August 2nd, terrorist-planted pressure mines took out the Potomac Bridge and the Cincinnati choke point was severed by the use of an expert combination of low order and high order explosives." Given some of the early information being learned form the computers and data taken in the Bin Laden raid, it is clear the Bin Laden also had the same thoughts as Liddy as far as terror attacks on the nation's rail systems.

- "While there are different estimates of the number of international terrorist groups, here we are including the PLO, the IRA, the Japanese Red Army, and French Action Directe, and Islamic Jihad."  Although 9-11 was still twelve years away, Liddy did correctly identify a type of Islamic jihad that carried out the attacks on 9-11.

- "The entire Louisiana attacking force (of terrorists) was recruited citizens of Communist African nations...and that groups of blacks could pass unnoticed in Louisiana. This led to the white commanding officers ignoring the input of competent black police in the South, who detected the presence  of black aliens immediately and submitted their field intelligence reports on this matter...but when they reported them to their white superiors  they were either ridiculed or ignored." 

Much like 9-11, in Liddy's view, FBI field law enforcement officers correctly recognized various threats and reported their findings and theories which were ignored by their superiors. If I recall properly, the Phoenix FBI office, among other offices, reported numerous accounts of suspicious activity by people that eventually ended up hijacking the planes on 9-11, accounts that were never acted on by their superiors.

"The how is relatively simple. The terrorists were outfitted with appropriate clothing, alias documentation, and pocket money and infiltrated into the nation with the most porous border on earth." Looks like our border security was just as bad back in 1989 as it is now.

"Even without resorting to such high tech weapons, it is relatively straightforward to get a standard-construction gun through the airport magnetometers and roentgen machines, which are a joke." Given that the 9-11 terrorists also used low tech weaponry (box cutters) and easily got them through airport security, it appears that Liddy foresaw this possibility also.

"The people expect their government to do something about it: to fix the problem and punish those responsible. And the American people are not patient. Their faith in what the Founding Fathers wrought is ebbing fast." Sounds like this applies today, not only to terror attacks but to the overall incompetency of government and the political class to fix any problem, not just terrorism. Another good prediction from Liddy.

"Gradually, over the past few administrations, as Congress passed law after law for the people and the executive branch to follow but excepted Congress itself (the civil rights acts, the Fair Labor Standards Act, the minimum wage laws, etc.) and as Congress continued to act as if the rest of the laws of the land did not apply to them..." Sound familiar, 22 years after Liddy made his prediction?

I think Liddy got most of the general concepts right relative to terrorism and 9-11 even if he was a little off on some of the details. He also predicts terror attacks on the country's electrical power grid and the country's natural gas distribution network, all of which, when combined with a grounded aviation system and a crippled rail system, results in all types of other crises including food shortages and spoilage, sanitation problems, martial law, etc.

I would take a bet that says the political class has not made any of these other catastrophes less likely since 1989, that our power grid, transportation networks, our gas and oil pipelines , etc. are just as vulnerable today as when Liddy made these predictions.

A related side article by Peter Kornbluh also has some pretty accurate quotes and predictions:
  • The enemy no longer wears a uniform, drives a tank, or man's a battleship.
  • He is a terrorist who takes hostages in the Middle East and plots attacks inside the United States.
  • The evolution from conventional to unconventional warfare does not mean that the world will be a safer place.
  • "We can expect that CIA covert paramilitary and political operations...will continue in every country where U.S. policy makers arrogantly believe they can shape events.
  • The proliferation of U.S. intervention in low-level conflicts  around the globe will not advance U.S. national interests in peace and security.
Looks like both Liddy and Kornbluh got the future right. Too bad that the political class and the government it runs did not get it right and make the proper anti-terror defensive plans,  based on their insights. Maybe if they had read the article, 3,000 Americans would not have died on 9-11. Maybe we would not find our selves having fought a useless war in Iraq and are fighting a probably losing war in Afghanistan.

But should we expect anything different from these career politicians? Michael Lewis, a typical Wall Street type, foresaw the coming Great Recession, driven by bad securities from the real estate industry, and made a lot of money off of his insights besides writing a successful book describing what he foresaw. However, no one in the political class or the agencies responsible for economic oversight  (e.g. SEC, Treasury Department, Federal Reserve, Congressional committees) saw the coming economic collapse.

In 1999, Wall Street trader Harry Markopolos wrote to the SEC and stated: "Madoff Securities is the world's largest Ponzi scheme." However, the scheme went on for many more years and robbed many more Americans of their life savings before the political class and the government ever got around to doing what Markopolos did many years before.

The list goes on and on. There are many smart Americans in this country but it seems like their input never gets appreciated and used. Whether it is preventing terror attacks or financial crises, the political class always seems to be late, always coming up with an ineffective, expensive solution. Heck, Liddy gave them the terror blueprint for 9-11 twelve years before it happened and they still could not get it right. Lewis and Markopolos gave them the financial scandal and economic collapse blueprint years before they actually appreciated what they were being told. Liddy told them in 1989 that our borders were insecure and 22 years later they are still unsecure. The list goes on and on.

That is why we need to make substantial changes to our political processes so that we finally get people into office that can anticipate crises and problems and then have the problem solving skills to attack would-be problems before they become crises. As proposed in "Love My Country, Loathe My Government," whether it is campaign finance reform, term limits, Congressional committee accountability, primary election reforms, etc., the current way we do things politically in this country is not working. Even with ample warning, disasters still hit us constantly because of our politicians' incompetency.

We need to get to a point where warnings are heeded and disasters are averted. Until then, we will continue to be amazed that 22 year old magazines are more accurate and timely than today's politicians in Washington D.C.




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Saturday, August 22, 2009

SEC = Shallow Exposure Capability

Step 34 in "Love My Country, Loathe My Government" is one of the most important steps in the whole book. Given that the political class has rigged the political processes via gerrymandering Congressional districts, opposing term limits, controlling primary processes, and controlling election money sources, it is virtually impossible to defeat an incumbent once they are in office. Step 34 would help stem the tide of incompetence in Congress by removing them from committee and subcommittee posts for failure to do their job to at least minimal standards of performance. For example, under Step 34, all of the politicians sitting on both the House and Senate Intelligence committees would have been replaced after the 9-11 attacks killed almost 3,000 Americans and those committee members failed to protect those 3,000.

The SEC is the title of this post and would almost certainly be affected by Step 34. Anyone sitting on the Congressional committees that oversee and advise the SEC would have been replaced for any number of events in the past 10-15 years. It was the SEC and their Congressional committees that somehow missed some of the biggest corporate frauds in history in the 1990s when they allowed companies such as Worldcom and Enron to perpetuate accounting fraud for years, destroying the careers, pay checks and retirement funds of thousands of Americans.

More recently, it was the SEC and their Congressional committees that somehow missed probably the biggest Ponzi scheme ever, the scheme Bernard Madoff had run for so long. Hundreds of people lost untold millions of savings over a long period of time. Thus, it appears that the SEC has had some pretty "shallow exposure capability" for a long period of time, running at least as far back as the Clinton adminstration for the 1990s accounting scandals through the Bush adminstration and Madoff.

The most frustrating thing about this government incompetence in exposing Madoff's fraud is 1) it went on for so long, 2) it was so far reaching, 3) we paid for this incompetence with our tax dollars and 4) how hard could it have been to expose these schemes? A February 4, 2009 online CNN article (and reported in other news sources) covered the Congressional testimony of Harry Markopolos, an independent financial fraud investigator. According to his testimony, Mr. Markopolos did a detailed Madoff scheme analysis over nine years ago and he "sent detailed memos, listing dozens of red flags, laying out a road map of instructions for SEC investigators to follow, even listing contacts and phone numbers of Wall Street experts whom he said would confirm his findings." In this case the SEC did not even have to do the legwork and analysis, it was already done for them! Unfortunately, the SEC did nothing with his work and the fraud went on for another eight years or so.

The really sad aspect about this case and the ineffectiveness of the SEC is that Mr. Markopolos claimed that it only took him about four hours of analysis work to prove his case of fraud. He did what the entire SEC and at least two Congressional committees could not do. What does that say about the political class sitting on those committees? Under Step 34, they would be the poster kids for getting kicked off their respective committees for incompetence.