Commentary: What I learned about corruption on Capitol Hill from US intelligence officers

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Richard Lawless is a former senior banker who has specialized in evaluating and granting debt for over 25 years. He has a Master’s Degree in Finance from the University of San Diego and Bachelor’s Degree from Pepperdine University. He actively writes for many finance publications

By Richard Lawless

In 2015, I began an investigation into the Puerto Rico municipal bond default. This $70 billion default was the largest in US history. First, I looked at the financials of the municipalities, and that journey led to the conclusion that the municipalities were all technically bankrupt before they issued the bonds. To sell bonds, the municipalities need to secure good credit ratings. It is clear that the three largest bond rating agencies, Moody’s, Fitch and S&P were selling fraudulent bond ratings for a fee. An activity the agencies engaged in during the mortgage bond crisis of 2008.

I then learned through a Puerto Rico Senate committee investigation that the municipal executives claimed that the rating agencies knew them to be bankrupt before selling the excellent bond ratings. The executives also testified that the banks were also aware the municipalities were technically bankrupt. It was clear two years into this investigation that I was looking at a $70 billion theft. Money that was stolen from the 40 million American bond buyers.

The most damning information came two years into the investigation when I received a call from a US intelligence officer. After going to great lengths to verify the authenticity of the callers, I was sure they were whom they claimed. It appears that the intelligence agencies had been tracking large wire transfers of money from Puerto Rico to Venezuela and other countries. That money would then come back to Puerto Rico and the US, providing payoffs for senior political leaders and department of Justice and SEC personnel. In exchange, those individuals would provide protection from regulatory action, investigations and prosecutions. This happened for over 10 years and continues today.

The intelligence agencies have a warehouse of recorded phone conversations and documents. Most shocking of all, I was told that the conversations included senior politicians like Chuck Schumer, senior administration officials like Eric Holder, former attorney general and DOJ official, Preet Bharara, Southern District of New York. Allegedly, these parties were conspiring together to direct any criminal complaints regarding the Puerto Rico bonds to Bharara, who would promptly kill any investigations or pending prosecutions relating to the bonds. In exchange, huge cash contributions flowed into our senior politicians like Chuck Schumer, as payment for their services.

I was never given an opportunity to listen to the recorded conversations, but I can testify that the bonds were fraudulent, the credit ratings were fraudulent that the banks knew the bonds to be no good and that the DOJ and SEC refused to act on dozens of serious criminal complaints and tips.

This past year I have been working hard to share this information with our political leaders and the press. Unfortunately, there seems to be little interest in this seventy-billion-dollar fraud. I memorialised all the evidence I received and conversations I had in a newly released book, “Capitol Hill’s Criminal Underground.” It is my hope that the book will serve as a tool for future generations, providing insights to build a more honest government. In the meantime, the guilty prosper and walk free.

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