Research Briefing

Obama’s Mismanagement Of Trust And Taxpayer Money Is Fueling The Flames Of Two Growing Scandals

OBAMA’S OWN “WALL STREET GUY” HAS MISPLACED HUNDREDS OF MILLIONS OF DOLLARS

President Obama: Jon Corzine Is “Our Wall Street Guy.” “The rollout also provided a showcase for Corzine, the former Goldman Sachs CEO whom Obama referred to as ‘our Wall Street guy’ at a meeting of Democratic governors in Chicago on Friday.”(Claire Heininger, “Corzine Profile Rises In Obama Camp,” The Star-Ledger (NJ), 6/23/08)

• Corzine Played A “Central Role” In Obama’s Wall Street Fundraising Efforts. “His new legal troubles, sparked by the bankruptcy filing of his investment firm, MF Global, could complicate the president’s efforts to raise money from the financial community given Corzine’s central role in those efforts.” (Michael Isikoff, “Corzine, Top Obama Fundraiser, Under FBI Investigation,” MSNBC, 11/2/11)
• Corzine Has Bundled Over $500,000 For Obama’s Reelection Campaign. (Center For Responsive Politics, Opensecrets.Org, Accessed 10/31/11)
• “Corzine Has Already Held A High-End Fundraiser And Organized A Secret Meet-And-Greet Between Finance Executives And Obama’s New Chief Of Staff.” (Peter Stone, Elizabeth Lucas, John Aloysius Farrell, Paul Abowd and Rachael Marcus, “Obama Campaign Reports More Than 350 Big Bundlers, Including Solyndra Figures,” Iwatch News, 10/14/11)

Jon Corzine’s Wall Street Firm, MF Global Has Filed For Bankruptcy. “Broker-dealer MF Global, headed by former New Jersey governor and Goldman Sachs chairman John Corzine, has filed for bankruptcy protection, apparently because of holdings of European debt.” (“Broker-Dealer MF Global Files For Bankruptcy,” USA Today, 10/31/11)

• MF Global’s Bankruptcy “Will Likely Be One Of The Ten Largest Bankruptcies Ever.” “Brokerage firm MF Global filed for bankruptcy earlier this week, in what will likely be one of the ten largest bankruptcies ever, the Wall Street Journal reported.” (Seth Cline, “MF Global Employees Gave Big To Democrats Until The End,” Open Secrets, 11/3/11)

Corzine, One Of Obama’s “Leading Wall Street Fundraisers,” Is Now “The Center Of An FBI Investigation.” “Jon Corzine, now the center of an FBI investigation into the handling of hundreds of millions of dollars invested in his securities firm, was one of the leading Wall Street fundraisers for President Obama’s campaign and suggested to investors that he might take a top administration post if the president were re-elected.” (Michael Isikoff, “Corzine, Top Obama Fundraiser, Under FBI Investigation,” MSNBC, 11/2/11)

Hundreds Of Millions Of Dollars In Customer Money Has Gone Missing From Corzine’s Firm. “Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.” (Ben Protess, Michael J. De La Merced And Susanne Craig, “Regulators Investigating Mf Global For Missing Money,” The New York Times’ “Dealbook,” 10/31/11)

• Almost $600 Million Is Still Unaccounted For. “About $593 million of customer funds are unaccounted for, according to a person with knowledge of regulatory probes into the firm’s collapse.” (Tiffany Kary, “JPM, Wilmington Trust On MF Creditor Panel,” Bloomberg, 11/8/11)

Corzine Enjoyed A Cozy Relationship With The Regulators He Battled

Regulators Tried To Rein In MF Global, But Corzine Opposed Their Efforts. “Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm.” (Azam Ahmed And Ben Protess, “As Regulators Pressed Changes, Corzine Pushed Back, And Won,” The New York Times’ “Dealbook,” 11/3/11)

• Corzine’s Firm Urged Regulators To Allow Firms To Invest Their Customers’ Funds In Foreign Debt. “Late last year MF Global -- the failed investment firm headed by Democratic heavyweight Jon S. Corzine that can't account for as much as $900 million of its clients' money -- urged a federal agency to allow futures firms to invest funds from their customer segregated accounts in foreign sovereign debt.” (Nancy Watsman, “Corzine’s MF Global Pushed Regulators To Use Client Funds,” The Huffington Post, 11/4/11)

MF Global Had “Numerous Communications” With The Federal Government Over The Implementation Of Obama’s Financial Reform Bill. “MF Global's comment letter is just one of numerous communications the firm had with federal agencies over implementation of the Dodd-Frank financial reform law, according to meeting logs maintained by federal agencies combined and posted on the Sunlight Foundation's Dodd-Frank Meeting Log tracker.” (Nancy Watsman, “Corzine’s MF Global Pushed Regulators To Use Client Funds,” The Huffington Post, 11/4/11)

• Corzine Met Personally With Agency Staff At Least Four Times. “Corzine, a leading Wall Street fundraiser for President Barack Obama's 2012 reelection campaign, met personally with agency staff on at least four occasions, one of those a conference call that included CFTC chairman Gary Gensler.” (Nancy Watsman, “Corzine’s MF Global Pushed Regulators To Use Client Funds,” The Huffington Post, 11/4/11)

• “Overall, MF Global Staff, Including Corzine, Met With Agency Officials Ten Times, All But One Of Those Meetings With The CFTC.” (Nancy Watsman, “Corzine’s MF Global Pushed Regulators To Use Client Funds,” The Huffington Post, 11/4/11)

The Chairman Of The Commodity Futures Trading Commission Recused Himself From Investigating Corzine’s Firm. “A regulator says he withdrew from an investigation of Jon Corzine's collapsed securities firm to avoid being a ‘distraction.’ Gary Gensler, chairman of the Commodity Futures Trading Commission, said Monday that the CFTC has ‘excellent career staff’ to handle such cases.” (Eileen AJj Connelly And Daniel Wagner, “Geensler Explains Recusal From Mf Global Probe,” The Associated Press, 11/7/11)

• The CFTC’s Chairman Is Gary Gensler, Who Worked For Corzine When They Worked At Goldman Sachs. “Leading the government’s effort to curtail these arcane practices was Gary Gensler, the chairman of C.F.T.C., who had worked for Mr. Corzine at Goldman Sachs. Mr. Gensler pushed for the proposed change in October 2010, and planned to bring it to a vote this summer.” (Azam Ahmed And Ben Protess, “As Regulators Pressed Changes, Corzine Pushed Back, And Won,” The New York Times’ “Dealbook,” 11/3/11)
• “When Corzine Ran For New Jersey Governor, Gary Gensler Gave $10,000 To The State Democratic Party, Which Was Trying To Get Corzine Elected.” (Daniel Wagner, “MF Global’s Regulator Has Ties To Company’s Leader,” The Associated Press, 11/3/11)

• “Both Men Are Active Democrats, And Served On Financial Panels Together Recently.” (Azam Ahmed And Ben Protess, “As Regulators Pressed Changes, Corzine Pushed Back, And Won,” The New York Times’ “Dealbook,” 11/3/11)

BUT THAT’S NOTHING COMPARED TO HOW MUCH TAXPAYER MONEY OBAMA HAS BLOWN THROUGH

Obama’s Department Of Energy Has Wasted Billions Of Dollars

Obama’s $38 Billion Green Energy Stimulus Program Only Has A Few Thousand Jobs To Show For It. “A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show. The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.” (Carol D. Leonnig and Steven Mufson, “Obama Green-Tech Program That Backed Solyndra Struggles To Create Jobs,” The Washington Post, 9/14/11)

“The Jobs Record Is Even More Dismal When You Consider That Many Of The Jobs Classified As Green Aren't Even New Jobs, Much Less Green.” “The jobs record is even more dismal when you consider that many of the jobs classified as green aren't even new jobs, much less green, according to a report from the House Committee on Oversight and Government Reform. They include positions that have been ‘relabeled as green jobs by the BLS [Bureau of Labor Statistics].’” (Editorial, “Green Jobs Brown Out,” The Wall Street Journal, 10/11/11)

• The Cost Of Each Green Job Is $157,000. “This means that bus drivers, Environmental Protection Agency regulators, university professors teaching ecology, and even the Washington lobbyists who secure energy loan guarantees count as green employees for the purposes of government counting. The Oversight Committee finds that even a charitable assessment of the Labor program puts the cost of each green job at $157,000.” (Editorial, “Green Jobs Brown Out,” The Wall Street Journal, 10/11/11)

And Has Been Actively Outsourcing Taxpayer Money

In October 2009, It Was Reported That More Than 80 Percent Of The First $1 Billion In Wind Energy Grants Went To Foreign Firms. “The Workshop was the first to report last October that more than 80 percent of the first $1 billion in grants to wind energy companies went to foreign firms.” (Russ Choma, “Renewable Energy Money Still Going Abroad, Despite Criticism From Congress,” Investigating Reporting Workshop/ABC’s World News Tonight/Watchdog Institute, 2/8/10)

Since Then, The Obama Administration Has Doled Out Another $1 Billion, Bringing The Total To $2.1 Billion And The Total That Went To Foreign Companies To More Than 79 Percent. “Since then, the administration has stopped making announcements of new grants to wind, solar and geothermal companies, but has handed out another $1 billion, bringing the total given out to $2.1 billion and the total that went to companies based overseas to more than 79 percent.” (Russ Choma, “Renewable Energy Money Still Going Abroad, Despite Criticism From Congress,” Investigating Reporting Workshop/ABC’s World News Tonight/Watchdog Institute, 2/8/10)

Nearly $2 Billion In Stimulus Funds Has Gone To Foreign Manufacturers Of Wind Turbines. “Nearly $2 billion in money from the American Recovery and Reinvestment Act has been spent on wind power, funding the creation of enough new wind farms to power 2.4 million homes over the past year. But the study found that nearly 80 percent of that money has gone to foreign manufacturers of wind turbines.” (Jonathan Karl, “New Wind Farms In The U.S. Do Not Bring Jobs,” ABC News, 2/9/10)

The EPA Sent $27 Million Of Stimulus Funds To China To Help Them Comply With International Air Pollution Treaties.“China and other foreign interests have been significant beneficiaries of stimulus money through the Environmental Protection Agency, to the tune of some $27 million, since the law passed in February 2009. Congressional investigators with the House Energy and Commerce Committee found that the EPA engaged in practices such as giving a $718,000 grant to the China State Environment Protection Administration to help it comply with the Stockholm and Long Range Transport of Air Pollutants Convention among others.” (John Rossomando, “EPA Stimulating Environmental Regulations Abroad,” The Daily Caller, 7/7/11)

Other DOE Spending Has Come With Possible Criminal Implications

Over 100 Criminal Investigations Have Been Launched By The Energy Department’s Inspector General Into The Way Stimulus Money Was Spent. “The Energy Department's inspector general has launched more than 100 criminal investigations related to 2009 economic stimulus spending. In written testimony prepared for delivery to the House Oversight and Government Reform Committee today, Inspector General Gregory Friedman said the investigations have involved ‘various schemes, including the submission of false information, claims for unallowable or unauthorized expenses, and other improper uses of Recovery Act funds.’” (Darius Dixon, “DOE IG: 100+ Stimulus-Related Criminal Probes,” Politico, 11/2/11)

• Including Five Criminal Prosecutions Which Have Recovered $2.3 Million. “So far, the investigations have led to five criminal prosecutions and brought in ‘over $2.3 million in monetary recoveries,’ Friedman said. ‘This includes a series of cases involving fictitious claims for travel per diem resulting in the recovery of $1 million alone in Recovery Act funds,’ he added.” (Darius Dixon, “DOE IG: 100+ Stimulus-Related Criminal Probes,” Politico, 11/2/11)

Energy Department Inspector General Gregory Friedman: The Energy Department’s Loan Program Was Not Monitored Well Enough To Mitigate Risky Investments. “‘The Loan Guarantee Program had not [been] properly documented and as such could not always readily demonstrate how it resolved or mitigated relevant risks prior to granting loan guarantees,’ Friedman said.” (Darius Dixon, “DOE IG: 100+ Stimulus-Related Criminal Probes,” Politico, 11/2/11)

• More Effective Oversight Could Have Prevented Taxpayer Money Being Wasted On Solyndra. “In his testimony, Friedman notes that the department failed to properly document and couldn’t always demonstrate how it resolved or mitigated risks prior to granting loan guarantees. Critics have said that such steps might have prevented the Solyndra scandal.” (Ed O’Keefe, “Energy Department Couldn’t Manage Stimulus Money, Watchdog Says,” The Washington Post's "Federal Eye,", 11/2/11)

The Obama Administration Lost $535 Million Of Taxpayer Money With Solyndra

Obama’s Energy Department Knew In August Of 2009 That Solyndra Would Run Out Of Money In September 2011, Leaving Taxpayers On The Hook. “On August 20, 2009, an Energy Department staffer examining a pending loan to a California clean energy start-up came to a startling conclusion: The company would run out of money by September 2011. The government would, in effect, be placing taxpayers on the hook for a business likely to founder.” (Ronnie Greene And Matthew Mosk, “Obama Administration Agreed To Solyndra Loan Days After Insiders Foresaw Firm's Failure,” iWatch News, 9/14/11)

January 2011: Federal Reviewers Said It Would Be “Far Cheaper” To Not Restructure The Loan. “New records obtained by The Washington Post show that some federal reviewers warned internally earlier this year that it would be far cheaper for the government to allow Solyndra to shut down and sell off its assets, rather than to restructure the deal and bet on the company recovering.” (Carol D. Leonning And Joe Stephens, “Lawmakers Question Solyndra Loan Decision,” The Washington Post, 9/14/11)

• “A Preliminary Estimate By The Office Of Management And Budget In January Showed That Restructuring Solyndra Could Cost Taxpayers Up To $168 Million More Than Liquidation.”(Carol D. Leonning And Joe Stephens, “Lawmakers Question Solyndra Loan Decision,” The Washington Post, 9/14/11)

OMB Staffers Warned That Restructuring Solyndra’s Loan Would Be “Throwing Good Money After Bad.” “OMB staff members had warned that the Energy Department’s restructuring of Solyndra’s loan might be throwing good money after bad, other e-mails show, and could cost taxpayers $168 million more than if Solyndra had liquidated in January.” (Carol D. Leonnig & Joe Stephens, “Obama Administration Emails: Giving More Taxpayer Money To Solyndra Was Risky,” The Washington Post, 9/15/11)

But In February, Obama’s Department Of Energy Made The Decision To “Waive Its Privilege As First Creditor” In Solyndra Loan. “That decision in February gave Solyndra a temporary reprieve and a chance to survive, but it also forced the government to waive its privilege as first creditor in the event of a bankruptcy — which then occurred at the end of August.” (Matthew L. Wald, “Questions Raised Over Letting Another Lender Help A Failing Solar Company,” The New York Times, 9/16/11)

• And Allowed Taxpayers To Take A Backseat To Private Investors When It Came To Recouping Their Losses. “And as part of the deal, the Energy Department agreed that if the company went bust, private investors could recoup their losses before the government.” (Ronnie Greene And Matthew Mosk, “Obama Officials Sat In On Solyndra Meetings,” iWatch And ABC News, 9/9/11)

And Other DOE Loan Guarantees May Be Headed Down The Same Path

 “‘What’s Terrifying Is That After Looking At Some Of The Ones That Came Next, This One [Solyndra] Started To Look Better,’ Another OMB E-Mail Exchange Said Of Solyndra. ‘Bad Days Are Coming.’”(Amy Harder, “E-Mails Show Obama Was Warned; Bitter OMB, DOE Divide Over Solyndra,” National Journal,10/3/11)

Government Accountability Office:  “The Administration Didn’t Do Its Due Diligence” When Celebrating The $535 Million In Stimulus Funds For Solyndra. “It's not his statements the administration will regret; it's the loan guarantees. The President was celebrating $535 million in federal promises from the Department of Energy to the solar startup. The administration didn't do its due diligence, says the Government Accountability Office. ‘There's a consequence if you don't follow a rigorous process that's transparent,’ Franklin Rusco of GAO told the website iWatch News.” (Scott McGrew, “Solyndra Filing A Disaster For Obama,“ NBC Bay Area News, 8/31/11)

Solyndra Was One Of Five Companies The Energy Department Failed To Properly Assess, Leaving The GAO “Greatly Concerned.” “Government auditors are questioning whether the administration may have made other bad bets on clean energy. Frank Rusco, a Government Accountability Office director who helped lead a review of the Solyndra loan and the Energy Department’s loan guarantee program, said GAO remains ‘greatly concerned’ by its 2010 finding that the agency agreed to back with loans five companies without properly assessing their failure risks. The companies were not identified in the report, but the agency has since acknowledged that Solyndra was one.”  (Carol Leonnig, “After Solyndra Failure, Auditors Wonder What Other Bad Bets Obama Officials Made, The Washington Post, 9/1/11)

GAO Investigation Revealed Obama’s Department Of Energy Favored Some Loan Applicants And Disadvantaged Others. “That's when the Government Accountability Office issued an unusually blunt assessment of the Energy Department's loan program in general, concluding that the department had ‘treated applicants inconsistently, favoring some and disadvantaging others.’” (Matthew Mosk, Brian Ross, And Ronnie Greene, “Solyndra Collapse A ‘Waste’ Of Half A Billion By Obama, GOP Critics Say,” ABC News , 9/1/11)