"My conscience is clear," said Donald Rumsfeld at Cafe Milano last Thursday, as Paul Wolfowitz and Dick Cheney held court nearby. Maureen Dowd claimed that she "zigged and zagged" to avoid contact with the neocon troika. They didn't even "have the decency to leave the scene," wrote Dowd. Bob Woodward said that he was "stunned," and "speechless" at Rumsfeld's abdication of personal responsibility.
Who are Dowd and Woodward kidding? You don't go to a whorehouse hoping to find a virgin, and you don't go to a media event honoring Brit Hume expecting to hear deviance from the Bush party line.
Dowd and Woodward were joined by their peers, media types who, at least till now, coveted celebrity and insider status in Republican Washington. They included Judith Miller, George Will, Fred Barnes, Andrea Mitchell, David Ignatius, Bill O'Reilly, Geraldo Rivera, Laura Ingraham, Oliver North, Greta Van Susteren and Howard Kurtz. Gwen Ifill, Bill Plante, Rita Braver and Ted Koppel also showed up. Three anchormen - Brian Williams, Charlie Gibson, and Bob Schieffer - also stopped by to pay tribute to a guy who spent the last decade trashing the case for global warming. "Brit is universally respected by people on the right, in the middle and people who pretend they're in the middle," said Roger Ailes, in a preemptive dig at his critics.
The media types had the opportunity to mingle with Mitch McConnell, Alan Greenspan, Fred Thompson, Boyden Gray, Bob and Elizabeth Dole, and Joe Lieberman. No doubt these esteemed public servants would have echoed Rumsfeld's "My conscience is clear," comment. Not that anyone in the room - certainly not Dowd or Woodward - felt inclined to speak truth to Republican power.
The Fox News gala was part of a grander conspiracy of silence, a collective legacy project designed to whitewash everyone's role in abetting the Bush disasters of the past eight years. No one suggests that George Will was in over his head and had no idea what he was talking about when he advocated the Iraq invasion. No one reminds Brit Hume, Judy Miller, Fred Barnes, Andrea Mitchell, or Bob Woodward, all of whom maligned Joe and Valerie Wilson, that they were promoting Dick Cheney's dirty work.
Instead of zigging and zagging, Frank Rich connected the dots. In his column, published the same day as Dowd's, Rich pointed out that there are countless Washington analogs to the Madoff scandal. The common thread running through all these scandals is that the due diligence process, or fact checking, was a sham. Simple due diligence would have discerned that Madoff ran a Ponzi scheme, that the WMD intelligence was bogus, that NINA mortgages were extended to unqualified borrowers, and that the Iraq surge required an expansion of the back-door draft.
Put another way, the scandals always involve two conspiracies: a conspiracy to defraud and a conspiracy of silence. The failure to perform due diligence is part of the conspiracy of silence. As for the Iraq war, Cheney was part of the conspiracy to defraud, Woodward was part of the conspiracy of silence. Bernie Madoff was part of the conspiracy to defraud (trust me, it was physically impossible for him to have acted alone), whereas feeder fund mogul Walter Noel was part of the conspiracy of silence.
In this respect, Bob Woodward and Walter Noel were cut from the same cloth, bigwigs who traded on their insider status to access special information kept from the public rabble, and who ignored the incriminating evidence hiding in plain sight. Noel, no doubt, was "stunned" and "speechless" at the news of Bernie Madoff's Ponzi scheme.
Here's how Woodward and Noel each engaged in a sham due diligence process.
Woodward and the Narrative of Good Faith Reliance on CIA Intelligence
Bush's reelection in 2004 relied on a false narrative, marketed and promoted by Bob Woodward, that the decision to invade Iraq was made in good faith, in reliance on George Tenet's assessment that, "It's a slam dunk." The Tenet anecdote was the centerpiece of the April 2004 marketing campaign for Plan of Attack, Woodward's blockbuster bestseller. The rollout began on 60 Minutes :
Says Woodward: "George Tenet's sitting on the couch, stands up, and says," 'Don't worry, it's a slam dunk case.'" And the president challenges him again and Tenet says," 'The case, it's a slam dunk.' ...I asked the president about this and he said it was very important to have the CIA director -" 'Slam-dunk is as I interpreted is a sure thing, guaranteed. No possibility it won't go through the hoop.' Others present, Cheney, very impressed."
What did Woodward think of Tenet's statement? "It's a mistake," he says. "Now the significance of that mistake - that was the key rationale for war."
It was just two weeks later when the president decided to go to war.
Tenet's statement "was the key rationale for war." Hmm. Given that Bush and Cheney each offered up a self-serving version of events, an honest journalist would have confirmed the quote with the man who made it. Woodward did not, and later Tenet claimed that his remarks were taken out of context. Woodward also skirted the normal rules for multiple sourcing; he submitted written questions to Cheney ahead of time, so that all the interview subjects could coordinate their talking points. Woodward's due diligence was a sham.
As for the decision to invade Iraq, Tenet's remark was virtually irrelevant, given that the inspectors, led by Hans Blix and Mohamed ElBaradei, had publicly eviscerated the CIA case in early 2003, while the Administration offered no substantive response. Woodward, along with Bush, overlooked this inconvenient truth, and in that respect Woodward participated in the conspiracy of silence.
Making a further mockery of the idea of independent analysis, Bob Woodward critiqued George Tenet's memoir in The Washington Post.
Noel, the Absence of a Separate Custodian, and the Mom and Pop Auditor
Walter Noel is not as famous as Bob Woodward, at least outside of the more exalted social circles of Greenwich, Connecticut, where schadenfreude is more popular than it is in Washington. Walter and Monica Noel, along with their five beautiful daughters and the sons-in-law who worked in Walter's firm, were devoted climbers of the heights of Greenwich society. Their downfall of the was Topic A of almost every holiday party in December, according to well-connected friends. Their appearance at the Christmas dance at the Round Hill Club was met with ridicule in the press, and their foibles are tracked regularly, Perez Hilton style, on The Business Sheet.
The Noels earned hundreds of millions of dollars from their feeder funds at the Fairfield Greenwich Group, which skimmed fees off the top of the Madoff's phantom profits. Jane Bryant Quinn put it best:
"[F]eeder funds are a racket. They collect the money, extract a large fee, and pass it on to another manager who does the work. By the time both levels of fees are paid, your principal probably will decline, even if the fund itself makes gains. The general partners in feeder funds have only one job: to be rich, mingle with the rich, and make the rich want to surrender their money, at any price. Not bad work, if you can get it."
Putting aside the Noels' understanding of Madoff's purported investment strategy, which others found "statistically impossible to replicate," there were two due diligence red flags that, when considered together, make it impossible to believe that Noel was acting in good faith.
These red flags pointed to the essential and necessary elements of Madoff's scam. Remember, in a scam like this, every check, every wire transfer, issued over the years is an act of bank fraud. Investors expected that their money was pooled, invested, and proportionately allocated and distributed over the years. Investors' proportionate shares of income and principal would be tracked precisely, for generating 1099 Forms issued each year to individuals and the IRS. In reality, the cash came in and was siphoned off to wherever, and investors received distributions so long as the new cash coming in exceeded the total cash going out.
The cash and investments in Madoff's funds were not kept by a separate custodian. As a red flag, that's huge, because it's so obviously reckless. In a fund where securities or investment contracts are traded, especially over the counter, you want to be absolutely sure that you have good and unencumbered title to the securities before you let cash out the door. And if you are in the business of trading options, a simple recordkeeping error could be disastrous, since options expire abruptly.
By the same token, a mom-and-pop accounting firm like Friehling & Horowitz, Madoff's "auditor," is simply incapable of adequately auditing the risk controls of a company performing custodial services for a $17 billion investment fund that actively trades options. Period. Again, that's a huge red flag. It's like using Joe the Plumber to assess the safety of New York's water supply.
As a rule, actual due diligence is performed by junior people who get pushed around by people further up the food chain. So when the disaster becomes apparent, the higher ups can deflect the blame on to others. The rich, powerful and famous can act "stunned," and "speechless." Or as Bob Woodward might say, "My conscience is clear."