From: "Catherine Austin Fitts" <[EMAIL PROTECTED]> PURPOSE OF POSTING Several days ago I posted a general background piece on HUD. This posting--the first on HUD financial fraud and covert operations---is part two of HUD background. Once I have posted the next one on financial fraud and covert operations all the background information will posted, and I will turn to what Hillary Clinton and Andrew Cuomo are doing in New York and how that may intersect with the drug and money laundering markets in New York City and State and along the east coast. SOME THOUGHTS ON HUD FINANCIAL FRAUD During the 1980's, profits from HUD financial fraud were extraordinary. When I got to HUD, FHA alone was losing several billion dollars a year in the Texas/Louisiana region (essentially, Carlos Marcellos old turf and location of the most significant S&L real estate fraud). A cursory review of the fact patterns made it clear that a lot of people were able to exit the real estate market at prices substantially above market during the 80's (this is now happening in the stock market---same game with a new face) thanks to HUD and S&L financing and a lot of transactions were happening that made no sense other than when you looked at who got the fees or who ran off with the principal (like the Iran Contra loan brokering described in Rodney Stich books). During 1989 and 1990, as FHA Commissioner, I designed and implemented a series of systemic disclosure reforms that tempered the fraud operations (independent audits, independent actuarial reports, lan networks and database access, place based financial information, time budgets and accessible business plans). These reforms started to work well enough to get me fired, and to make sure that placed based financials were cancelled shortly after I was fired. However, the reforms that were legislated stuck or caused fraud to require more assistance from inside government, typically from the Secretary, OMB, appropriations committees, DOJ, the Inspector General, ad/or the accounting and information systems areas. When Henry Cisneros arrived with a legitimate team of people to run FHA, those reforms and additional efforts he made at reengineering (including loan sales) continued to diminish financial fraud at HUD. My guess is that by early 1995, the gross fraud out of HUD was down to about half of what it had been at its peak during Iran-Contra in 1984-86. Neither organized crime or the enforcement areas were happy. As far as the enforcement teams were concerned, this was not a welcome development. It was cutting into their turf, let alone cutting into the potential cash recoveries they could get in pursuing fraud cases. If there was no fraud, there star would diminish in power and budgets. Hence the alliance of people like Andrew Cuomo with organized crime interests. This drop off in the organized crime market share presented two problems to the industry. One was lower profits and cash flow to the operations for several reasons: stopping illegal activities, causing illegal activities to be more expensive or in causing these and related operations to lose control of "legal" businesses as program investments were allocated based on merit and performance. The second was that the reforms were resulting in increased disclosure in a manner that would illuminate the activities of numerous parties and their networks in a way that would not only expose their HUD fraud, but a much wider network of financial fraud and money laundering. What is alleged to be the largest money laundering operation for the Bush network out of Denver (Leonard Millman, MDC Holdings, M&L Business Machines, a variety of activities connected with the construction and operation of the Denver airport and other related companies and investments) is said to have been one of the principal laundering and "comptroller" operations for Mena, Arkansas drug and arms operations. Consequently, exposure of the Denver networks criminal and legal (albeit often won for political rather than meritorious reasons) activities at HUD could activate a closer look and wider knowledge of their money laundering activities at Mena and during Iran Contra with S&L's, First American (BCCI), etc, as well as elsewhere. It would also raise questions as to how systemic financial fraud could be so large and so sustainable in this country without significant air cover and support from one or more parts of the Department of Justice and the other parts of Washington. (It can't). It appears that both the Bush and Clinton crime interests had two compelling reasons to move Cisneros out and replace him with a Secretary and team that could clean house of the good government types, shut down the pro taxpayer programs, ensure that disclosure harmful to them stop and that HUD return to a state of "let the good times roll". A special prosecutor was appointed for Henry that was an attorney, David Barrett, who had been involved in HUD financial fraud in the 1980's and was close to Frank Keating, Governor of Oklahoma. Keating had been moved into HUD to be general counsel under Kemp in 1989. His job was to make sure all scandal was directed away from anything that would illuminate Iran-Contra activities at HUD. One of the things he did while at HUD was substantially increase enforcement activities and the relationships with DOJ that these activities inspire. Barrett apparently agreed to do the special prosecution job on Cisneros for $50 an hour and eventually got the President to resign him after the 1996 election. This was a great triumph for Keating's efforts on behalf of George W. Bush. In 1995 Cisneros polled as the most popular Hispanic politician in America and was from Texas. A strong Cisneros backing a Democrat ticket in 1998 and 2000 could have dampened Bush's popularity with Hispanic and women voters and cut into his Texas/SE fundraising juggernaut. The political feasibility of moving Cisneros and his team out and moving in someone who would return financial fraud to or above its historical highs was bolstered tremendously by the desire of the larger HUD portfolio managers to want to exit from their holdings, particularly through the stock market. The two largest HUD/FHA apartment portfolios in 1995 were NHP (Harvard Endowment, Winokaur Investments, & Roderick Heller III) and Insignia (Andrew Farkas). As the loan sales program liquidated HUD's conventional mortgage portfolio, HUD appeared likely to apply the same reengineering techniques to its subsidized portfolio. The alternative was to delay any reengineering long enough for NHP and Insignia to do a fair amount of acquisitions, do their IPO's into the stock market and then sell the companies to companies like AIMCO (which is said to be part of the Millman/Denver group. I hope to start researching this piece shortly). Essentially, it appears that the more legitimate players cut a deal with organized crime to exit their holdings above market, and then left the new owners to cash out their investment through taking some properties out of HUD programs, selling others to not-for-profits and in between soaking HUD subsidies and refinancing to make the numbers work. A variety of techniques would make the portfolio pay for itself, and one of them would be "washing" the records. All the records and files on properties that had been part of any Iran Contra or such schemes, or had interesting tax histories fixed, etc, could be destroyed, lost, cleansed or seasoned beyond the statute of limitations. These various techniques for cleansing the records were well understood by players like Frank Keating. One of the reasons that it was so important during the 1980's and early 1990's for S&L's and HUD coinsurers to fail in fairly chaotic ways and to have the assets transferred and sold by organizations like the RTC is that this ensured that records and institutional memories were lost. This ensured that it was difficult to understand or document the fraud that had occurred, let alone to hold anyone responsible or try and seize money back. Chaos was the ultimate air cover for everyone who had lined their pockets during the 1980's and the regulators who had let them, even in cases helped them. This technique of document destruction reached new heights in the Oklahoma City bombing, where Waco, Gulf War syndrome, and HUD loan files (due to go to loan sales due diligence contractors shortly and said to contain files related to Iran-Contra loan brokering and money laundering)all managed to be blown up in one swift operation in a state governed by Frank Keating. Our intelligence indicates that Cuomo cut a deal with the appropriate parties to be the new Secretary and indeed has done an excellent job of gutting the line management of remaining internal controls and honest career staff and taking both financial fraud and related easy credit up to or surpassing historical levels. Part of this required getting rid of me and my companies and canceling loan sales and reengineering efforts. The key to this was creating a "good government, pro-taxpayer" myth that supports doing so. The remaining uncertainty for me is understanding his actions in this respect on his targeting of Hamilton. In a nutshell, Cuomo and DOJ appear to have done everything possible during early 1998 to make possible an insider trading charge against Hamilton and Goldman Sachs, the single largest contributor to the DNC and Clinton's 1996 Presidential campaign. If they had managed to create sufficient probable cause to effect a large seizure of HUD loan sales at that time, it would have led to---on top of the Lewinsky story-the resignation of Clinton and the appointment of a special prosecutor on Gore and DNC fundraising. Stu Webb, the Denver whistleblower behind numerous HUD investigation, claims that Cuomo had cut a deal with the investment networks that the Denver financial fraud group is a part of to do just that. Stu says that the plan was that Gore would have appointed Hillary Clinton to the VP spot and then she would have moved up to the Presidency when Gore resigned. This is the plot outlined in the mystery novel Gideon which I have mentioned earlier. This theory has always struck me as far fetched and yet increasingly as we keep bumping into Mena money laundering related to the mortgage market and HUD, I keep feeling like our sunshine and disclosure was moving through the financial flows right back into the Rose law firm and Mena money laundering. The financial side appears to have been Hillary Clinton. Another other piece of HUD financial fraud worth mentioning is tax shelters and tax benefits. For many years when I was on Wall Street, all the partners at the Wall Street law firms and investment banks would get calls from our accounting firms offering Section 8 HUD partnership interests (they were syndicating the limited partnership interests that would wipe out our year end tax liabilities on our bonuses. They sounded great. With the proper leverage, you cancel out your tax liability almost for "free." I would never participate. I always believed that the potential liabilities (tax, financial, enforcement, political) would be great for someone with my mission. It as clear to me over time that the potential tax recapture liabilities of the NY wealthy, including NY law firms, on HUD partnerships was significant. In addition, HUD grants were often combined with tax credits or tax benefits to create highly lucrative "payoffs" in deal in which rich no risk fees could be had for patronage purposes. The Mod Rehab/tax credit deals done by the Denver group (Norman Philip Brownstein, Phil Winn)in the 1980's and financed through the Boston Financial Group in Boston are a good example of the type of waste that occurs when subsidies are allocated on a non-performance based basis. I have never looked closely at the empowerment zone tax benefits and subsidies that are being used by Cuomo but I suspect that a close look will show a similar level of waste and politics. I also suspect that Cuomo has been much more savvy than most Secretaries about engineering all efforts within a place: empowerment zones, drug elimination grants, community block grants, enforcement & audits, FHA, public housing, Section 8 workouts, and so forth. This is one of the reasons that our efforts on GIS software to build money maps on all HUD money in a place was contradictory to his political strategy (which includes a HUD GIS software package which does not illuminate most of the real money and is not--as ours was being developed---to be web accessible for free and combinable with other federal place based disclosure (like the consolidated reports). THE SWARM OF SECRET SOCIETIES America is run by networks of secret societies. The core organizing power of these secret societies is their easy access to knowledge of how money and power works by both function (railroads, oil, arms, banking, etc) and by place (from the neighborhood level of 63,000 neighborhoods, through county and regional levels, to the federal level). This power is maintained and enforced by this knowledge not being accessible in an easy and dynamic way to average citizens, particularly by place (so I can read the President's budget and see how all the health care money is spent nationally, but I can not see how all the money works in my neighborhood). This is one of the reasons that we have developed an expert society where the 20% of lawyers, accountants and other folks the top 1% use to run things are encouraged to know a great deal about a narrow area and nothing about how the world works whole. Without a person having place based "money maps" of how all the energy works within a boundary that conforms with the physical world they experience day to day, they are flying blind. They have no way of understanding or optimizing their abstract world in an integrated fashion with their concrete world. For this condition to be maintained, it is essential that government bureaucracies ensure that "money maps" that show how government money works and how government money impacts all money are not accessible. That way secret societies remain the only guys with maps and if you want to get anywhere you have to play ball with the guys who have the maps. So government must practice OMISSION---not making information accessible. It must also practice COMMISSION---that means that if someone like Hamilton is making such knowledge accessible, government bureaucracies will spend $35 million to destroy Hamilton. Some of the best descriptions I have ever read of secret societies is in William Bramley's The Gods of Eden. I do not understand or accept Bramley's premise as to ultimately who the top of the hierarchy is or who they report to or are inspired by, but I do think that critical part aside and the fact that I am not qualified to know if his history is accurate, he has the done a good job of describing the dynamics that I have experienced: "The personality of....... reveals that when we discuss "behind the scenes" influences, we are not necessarily talking about eerie characters who skulk about in shadows doing incomprehensible things. We are usually discussing people who are as lively and colorful as the rest of us. They succeed and they fail. They have their charms and their quirks like everyone else. They exercise influence over people, but not puppetlike control. They are affected by the same things that everyone else is affected by. These observations lead to an important point. When some writers describe the influence on the Brotherhood network in history, and when some readers read about it, they envision strange subterranean "occult" forces at work. This is an illusion generated by the mysticism and secrecy of the Brotherhood itself. Changes in society, whether for good or bad, are caused by people doing things. The Brotherhood network has simply been an effective channel to get people to act, and to keep much of what they do secret. The influence of the network only appears mysterious and "occult" because so many actions have gone unrecorded and unknown to outsiders. The corrupted network does not have today, nor has it ever had, effective "occult" powers. The world can therefore be remade for the better by people simply acting and doing. No magic wand is needed. Just some elbow grease." I would add some notes of my own to this. First, the thing that is most noticeable about secret societies is that they not only shut others off from knowledge but they are often badly shut off from knowledge themselves. They are secretive within the network in a manner that results in numerous unintended consequences, particularly in knowledge or actions overlapping multiple places. In addition they are often very homogenous (middle through upper class men) who tend to reaffirm their own world or ethnic/cultural view in a manner that can send them wildly off course relative to their own best interests without them even knowing it. In my experience a successful hetrogeneous--in both technical speciality and cultural/ethnic background-- high performance culture such as the one I created at Hamilton can beat the pants off of them in terms of productivity and learning speed) Third, their network is far more spotty and swarmy or fractured if you will than most writers understand. Most of the people in secret societies think they are pretty good people, even doing good and certainly harmles. Fourth, these various conditions tend to create reinforcing negative loops between them and outsiders, where they understand many problems because they have the knowledge but they lose faith in others to take responsibility, not realizing that they can not see it let alone do anything if they have the knowledge. Hence, those in the know and those out of the know end up putting each other in a series of double binds. (Curtis Mayfield in his New World Order album has some wonderful lines about double binds in the system, "Seems like there's one way in and no way out"). Lastly, I would note that the dysfunction builds up and becomes reinforcing. Those out of the know increasingly don't want to know (the gap becomes dangerously wide) and worse yet get vested in making money by the gap continuing. And so folks of integrity at the top see themselves as prisoners of a system in which the "masses" refuse to look at or deal with real issues of evil or hard choices. That boxes the secret society guys into a system where trying to be open substantially increases their risk. They too forget how we got there or how it can be. Jim and others on this list have done a wonderful job of describing elite deviance and some of its symptoms. Bramley has a good description of how this environment can evolve government in very negative directions and provides a description that appears based on my experience to fit Andrew Cuomo to a tee : " Books, movies, and other art forms tend to give a romantic twist to..spies, assassination conspiracies, and so on. As we are perhaps beginning to realize, behind the "romance" there lie some cruel and brutal psychoses. A significant problem in any society geared for overt and covert warfare is that sociopathic personalities tend to find a home in government. Sociopaths are not affected by qualms of conscience and often delight in harming others. They are frequently promoted to high positions within agencies engaged in warfare (in this case, read enforcement...catherine) because such personalities are able to attack and harm others repeatedly without it adversely affecting them emotionally. Sociopaths with high IQ's can be quite clever in how they harm others; this deviousness is often valuable to intelligence agencies. As history has shown, the more that a nation is oriented towards war, the more it will become dominated by sociopathic personalities. This domination, in turn, leads to a rapid decay of a nation and will eventually cause its ruin. This is one of the great dangers any nation faces when it becomes involved in long-term conflict, not matter how democratic, and humane that nation might otherwise be." The specifics of how the secret societies and networks work truly is a swarm. First there are a lot of groups from Knights of Malta to Freemasons to the Mossad and an endless number of intelligence agencies, to overseas Russians or Chinese to the Mafia or various organized crime syndicates. With globalization it seems to me the number of networks is exploding. That is part of why the pain of government omission and comission is going up. There are more and more competing societies interested in swinging things this way or that for good or for bad, there is more need for continuous reengineering that requires transparency and integrity and the corruption of government and the legal and accounting professions is significant. Second, who is significant and how they interact in a place varies from place to place. Technology has traditionally shifted the control mechanisms within society. The key technology to watch is information processing technology as this is a crosscutting technology which impacts the learning metabolism in all areas of a society. Power and control is pretty much determined by gaps in the learning metabolism of different groups. When a technology powershifts access to knowledge, relative learning speeds change. This causes friction and change. Digital technology is the biggest shift since the printing press made possible accounting, banking and liquid paper currency. Bramley gives a good hint of how important this kind of technological shift can be, describing how control shifted from a more visible monarch/nobility system, to a banking and currency system made possible by the printing press and the related inventions of accounting and fractional reserve banking. "The newly-weakened monarchies and parliamentary governments allowed for greater power to be assumed by a new institution being installed by the revolutionaries: a new banking and monetary system. This new monetary system was a major element of the revolutions of the 16th, 17th and 18th centuries, yet this fact is only minimally discussed in he majority of history books. Those who ran, and still run, the new monetary system have been aptly labeled by one author, Howard Katz, "the paper aristocracy." the revolutions which began to sweep the world after the Reformation heralded the diminishment of powerful political aristocracies in favor of the less visible, but in many ways equally potent, "monetary aristocracies." This happened because, during the Reformation, banking and money lending, which were once viewed as lowly occupations, were being forged into a renewed power due to a clever new science of money. This new money was a type of paper currency that could have its value deliberately and systematically diminished through a process known as "inflation." It is the type of money still in use today. This new money, and the institutions which arose from it, have had an enormous impact n our modern civilization. We cannot fully appreciate the effects of Protestantism and the revolutions which arose out of it without comprehending just how the new money system works." ................... "The privately owned Bank of Amsterdam operated on the inflatable paper money system described above. it was run by a group of financiers who pooled some of their precious metals to form the asset base of the Bank. By prior agreement with the new Dutch government, the Bank helped Dutch forces resume the wars against Spain by issuing notes four times in excess of the Bank's asset base. The Dutch magistrates were then able to draw on three quarters of the "created out of nothing" money to finance the conflict. This reveals the primary reason why the inflatable paper money system was created: It enables nations to fight and prolong their wars. It also make the human struggle for physical existence in a modern economy more difficult due to the massive debt and parasitic absorption of wealth that the system causes. Furthermore, steady inflation reduces the value of people's money so that their accumulated wealth is gradually eroded. The Custodial aims expressed in the Garden of Eden and Tower of Babel stories were greatly furthered by the new paper money system. The initial success of the Bank of Amsterdam encouraged similar banking arrangements in other nations. The most notable offspring was the Bank of England, founded in 1694. The Bank of England established the pattern for our modern-day central banks by refining the inflatable paper money system of Holland. The Bank of England system was subsequently spread from nation to nation, often on the backs of revolutions led by prominent Brotherhood network members. The worldwide reformation announced in the Fama Fraternitis was well underway by the end of the 17th century, and the "new money" was a big part of the it, as we shall see more of later." A topic for a post after the material on HUD may be the essence of what I was trying to invent with my prototyping at HUD which was the Solari Investment Model. In essence, digital technology shifts all the systems by which resources and risks are disclosed, tracked and optimized. We are facing a redo of power and money that is more radical than occurred with the printing press and the Medeci's. That is why those who believe in open systems and access to tools and knowledge are being called at this time. There is a significant shift underway and we can not afford to leave the field to the control of secret societies when a little elbow grease can shift things in a healthier direction. SO WHAT DOES HUD HAVE TO DO WITH SECRET SOCIETIES? A history of the Freemasons in America really helps to understand the point of view of some of the traditional leadership of America. There were many voices in the Constitutional Convention that wanted voting rights to vest completely in property owners. So the way that democracy and the constitution would work would be that the top group of white men would be property owners whose affairs and relations would be conducted according to the Constitution and the Bill of Rights and the system of law and performance outlined there in. Everyone else would be their property---slaves, sharecroppers, servants, wives or children. The patriarchal system is about property, not about people. Places are controlled by controlling property. The control of property makes it possible to view and manage the majority of people in that place also as property (my tennants, my workforce, my taxpayers). My take on most freemason secret society types is that they view places and people as property and themselves as property or asset managers. Remember, freemasonry grew out of building construction and urban planning, they were the architects and masons. They started out as an ancient variation of the National Association of Homebuilders. This world view can only happen where control begins with the ownership, management and manipulation of the real estate in a place. Increasingly, in an information society, the value of the economy is not in the real estate,it is in intellectual capital. However, the people who control the land and have the coercive power to back up that control will inevitably control the databases, particularly if they can be a part of a successful one world government elite that will play ball on protecting elite intellectual and financial property rights from local political issues (offshore accounts, offshore databanks, etc). Databases to have any value have to be integrated into delivery in the real world. That gets back one way or another back to who controls the land. To control the land the way secret societes have in America requires a lot of illegal and unethical behavior by the private sector and government working together. Go back and rent Chinatown with Jack Nicholson. The story is an old one and has been told again and again. After spending many years and millions of dollars on databases on HUD investment flows what I discovered was that HUD provides a birdseye view on the game, particularly in the poorest neighborhoods, but in a way that leads back to the classiest folks in the country, particularly in cities like New York and Philadelphia. They tend not to be the ones to do the deals, but if you look at all the flows and who controls the land and how HUD fits in, it never ceased to amaze me as to where this stuff went. At first, I was sceptical. Over time as I saw how much air cover the more sordid players had, the truth of what was going on became steadily more apparent. If I had any doubts, the federal government spending four years and $35million to make sure those databases were destroyed and not made accessible through the web helped me appreciate the vulnerability that a full sunshine on HUD's money and properties place by place during Iran Contra and forward entails. And I am not quite sure why I believe this, but the kind of real estate manipulation that was happening at HUD was so sordid, that somehow I feel that it exposes the system in a way that other parts of the real estate and mortgage market do not. Maybe because they are killing us in a manner that is extraordinarily expensive to not only all the taxpayers but many of the lower level members of the secret socities. It shows the top guys riding the bread and butter members in a particularly venal and sordid way. In part it is because at HUD you have to lose $10 to get one guy $1 in fees. The expense of the control is so huge. For the shadow government to control, it has to control places physically. HUD is a one stop shopping center to effect control in every urban and suburban neighborhood in America whether you want to do it by writing a check that will get buried in the system and never be visible or making an arrest. It is also a source of data on all the property and housing and mortgage flows in the country. Again, knowledge about all resources in a place is the key to controlling all the resources in a place. Elite control is about being able to control 63,000 places without having to spend a lot of time there. In that world, HUD is an invaluable tool to ensure control of communities by people outside those communities. And so, illumination of how HUD has been used can illuminate back into the shadow government is suprising ad unexpected ways. NEXT In my next piece I will map out the different areas of HUD that are important to HUD financial fraud and touch on how they may connect to covert operations. Some of the title areas are listed below. FHA/GNMAE COUNTERFEIT SECURITIES/MORTGAGES COINSURANCE SECTION 8 RECISSIONS PLACE BASED INVESTMENT/HOPE 6 PLACE BASED IMPACT MOD REHAB/TAXCREDITS LOAN SALES MORTGAGE PREMIUMS PORTFOLIO REENGINEERING/M2M DOCUMENT DESTRUCTION TECHNIQUES: ENFORCEMENT/CONVENTION CENTER DEALS HEADLINES TO GO CONTRACTING SINGLE FAMILY ASSET MANAGEMENT MULTIFAMILY ASSET MANAGEMENT PUBLIC HOUSING Again, for those of you who are interested in serious research I have recorded my memories of HUD during the Bush Administration on 6 cassettes and would be delighted to share if you can use them to help connect the dots. --------------------------- ONElist Sponsor ---------------------------- GRAB THE GATOR! FREE SOFTWARE DOES ALL THE TYPING FOR YOU! Tired of filling out forms and remembering passwords? 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