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Wall Street Mafia & Why You’re Busted…

In my first year in the federal Bureau of Prisons (BOP; 1990-91) I lucked out. Thru a fellow prisoner who was leaving, I got his position as admin clerk at the Unicor factory.

Most federal prisons (118) average some 1200 souls and there’s only jobs for maybe 200 in the prison factory.  Most prisoners labor at 12¢/hr.  Unicor, pays 23¢/hr. up to $1.15. With premium pay you can even earn $1.45. All overtime and weekends are double-pay.

After a few months at that first prison—FCI Ray Brook, Lake Placid, NY—I moved up to Accounts Payable clerk. Short of being the warden’s butt-boy, I guess that’s about as high as one can go.

As part of my job I would handle the Treasury Department paperwork for private contractors at Ray Brook.  One contract was for $900,000 (for new roofing). Most certainly an overbid of at least $300,000. I’d guess the other two bidders got $50,000 each, and the BOP liaison…well, they’re cheap, maybe $20,000-or-so.

When I brought my findings and suspicions up to the Business Office manager, I found myself on a bus being transferred to another prison beaucoup didi mau. Lesson learned…

Fast forwarding 20 years to my last job in federal prison, I was running a parts warehouse at the Pensacola Naval Air Station, FL.  Just shy of my release, my supervisor (a retired senior chief petty officer) brought my replacement around.

New Orleans...

Rocky was a general contractor out of New Orleans who was serving 14 months involving kickbacks of federal recovery moneys regarding Katrina. The contracts involved some $23 million.

Mostly, Rocky and I would just sit in the office, sipping sodas and trading war stories. Eventually, he got around to talking about his case. I asked him how long he’s been a general contractor? “Fourteen years.”

How was he caught? “The state rep was greedy—demanded twice the usual kickback and failing to share it with his fellow politicos he got ratted out. The feds offered us good deals for our testimony.”

Are the bids rigged? “Of course, why do you think we pay kickbacks?” 

Have you ever participated in a bidding process that was totally honest? He laughed and said, “Never. Fixed bidding works both ways. The contractors get together to fix the bids on the high side and take turns ‘winning contracts.‘  The disbursing agent almost always gets a standard 7% kickback. It’s just business…it’s how the system works.”

Matt Taibbi has written an article in the current Rolling Stone that dwarfs most financial frauds. It’s entitled, “The Scam Wall Street Learned From the Mafia: How America’s biggest banks took part in a nationwide bid-rigging conspiracy—until they were caught on tape.”

Personally, I think the Mafia, observing “private enterprise” in practice, followed the example of capitalism.  In any event, the significance of this case is how it stands as a model of Wall Street across the board.

I suppose it’s little surprise that the corporate media, even the NY Times, have totally blacked out the story to date.  It’s only a chip off the glacial block of the 1%, but it’s a clear window into the practices of the banksters and financial managers of America, Inc.

The case, USA v. Carollo, Goldberg & Grimm (NY, 2011), took some ten years to investigate and bring to trial and exposed “the astonishing inner workings of the reigning American crime syndicate, which now operates…out of Wall Street.”

The defendants worked for GE Capital (General Electric’s finance division). We’ve all heard of how the Mafia rigs bids on city contracts, such as garbage hauling, etc. This particular capitalist scheme works precisely the same way, only it’s far more extensive and involves $billions.

The two month trial presented evidence and testimony with some 570,000 recorded phone conversations. Practically every major bank and finance company on Wall Street was involved.  These included JP Morgan-Chase, Bank of America, Lehman Brothers, Bear Sterns and Wachovia.

Norman Rockwell would have had an orgasm to paint the court scene in his Americana series…a mass of $5,000 suits falling all over each other to testify and get a deal. A vision of the future?

Perhaps, at the end of it all, we can molten some gold and pour it down their throats… Why invoke Monsieur Guillotine when we can have a permanent tableau vivant of Pompeian statuary. Now that should leave an historical impression.

In return for their cooperation and a mountain of recorded phone conversations, the compliant firms were only assessed restitution of $673 million, not nearly what they had amassed thru the scheme. No major executive was ever prosecuted.

The scam itself was simple: One of the ways that municipalities raise money for public services (roads, sewerage, schools, etc.) is by authorizing the issuance of a bond. For that they go to Wall Street.

In a nutshell, the city or town manager would go to a major bank or finance company (Wall Street) to issue the bond for investors to purchase. Let’s say $100 million for a new school. Wall Street places that money into a tax-exempt account for the city, which then pays contractors as needed.

In the meantime, the town seeks out another finance company to invest the money not yet being disbursed. They seek and find a financial broker/middleman in order to set up a public auction at which banks compete for the town’s business as required by law.

The broker, an employee of a major corporation (in the above case it was GE), gets three other corps to bid, but in actuality the selection process is rigged from top to bottom. The scam is so common that none of the players even bother to disguise it.

The “winning” bank may bid 5.5% to reinvest the money. The broker weans him down to, say, 5% and in return the winner rewards the broker thru kickbacks disguised as “fees.” All along the line–as in the Mafia–players get a cut of the pie (and you wondered how municipalities and pension funds, etc., ended up busted?).

“The banks pay brokers to rig the auctions, the brokers bribe politicians to win business, then the politicians choose the brokers to run the auctions, leading right back to the banks bribing the broker to rig the bids.”

Unlike Reagan’s goofy-voodoo “trickle down” economics, all finance flows UP, not down.

The three now-convicted brokers? They’re facing up to 5 years in a cushy camp. Not bad for all the loot they made and essentially keep (dope dealers have their proceeds and property forfeited). And when they get out? Oh, they’ll manage…they got a lot friends who owe them.

Make no mistake. If nothing else, given the culture of high finance and self-entitlement exhibited throughout this trial–ALL the participants KNEW the conversations were routinely recorded–you can count on the fact that fraud pervades throughout the system.

The current conservative double-speak of deficits is simply what the major banks and Wall Street have looted. Austerity, is their concept of how the public needs to refill the kapitalist kitty (so they can continue the con).

Meanwhile, maybe Carollo, Goldberg and Grimm will get my old job at Pensacola… I was only paid 12¢/hr. but it had some benefits.

Dr. Publico

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