Posts Tagged ‘James M. Cole’
Monday, June 14th, 2010

If James Cole is confirmed as Deputy Attorney General, he will help lead the Justice Department’s national security team, which has struggled over how to prosecute terrorism defendants — in civilian courts or military tribunals.

Cole is not known as a terrorism expert, having spent most of his career as a white collar crime prosecutor or defense lawyer, but in an eight-year-old op-ed, he expressed confidence that the civilian criminal courts could adequately handle even the most extreme terrorist cases, including the Sept. 11, 2001 attacks.

That view may not sit well with some Republicans on the Senate Judiciary Committee, which begins hearings on Cole’s nomination on Tuesday. Some Republicans have advocated wide use of military proceedings to try terrorism suspects.

In a Sept. 9, 2002, opinion piece for Legal Times, Cole wrote:

[T]he attorney general is not a member of the military fighting a war — he is a prosecutor fighting crime. For all the rhetoric about war, the Sept. 11 attacks were criminal acts of terrorism against a civilian population, much like the terrorist acts of Timothy McVeigh in blowing up the federal building in Oklahoma City, or of Omar Abdel-Rahman in the first effort to blow up the World Trade Center. The criminals responsible for these horrible acts were successfully tried and convicted under our criminal justice system, without the need for special procedures that altered traditional due process rights.

Our country has faced many forms of devastating crime, including the scourge of the drug trade, the reign of organized crime, and countless acts of rape, child abuse, and murder. The acts of Sept. 11 were horrible, but so are these other things.

Cole, writing at a time when John Ashcroft was Attorney General, added that “the attorney general justifies much of his agenda by pointing to the ‘war on terrorism’ and saying that it is an extreme situation that calls for extreme actions. But too much danger lies down the road. The protections built into our criminal justice system are there not merely to protect the guilty, but, more importantly, to protect the innocent. They must be applied to everyone to be effective. What are we fighting for if, in the name of protecting the principles that have raised this nation to the pinnacle of civilization, we abandon those very principles?”

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Tuesday, June 8th, 2010

This post has been corrected.

Deputy Attorney General nominee James Cole has a net worth of more than $7 million, according to a financial disclosure form he provided to the Senate Judiciary Committee.

Cole reported that his assets include $1.2 million in securities and $4.4 million in real estate, including his $1.13 million residence and $3.3 million summer home (which includes both a house and three other lots). He has $426,224 in cash on hand, he reported.

His client list between 2008 until this year included:

An earlier version of this post incorrectly stated that Cole’s net worth was $7.2 million. His net worth is $7 million.

The full financial disclosure form is embedded below.


Tuesday, June 8th, 2010

The Senate Judiciary Committee will hold hearings on Deputy Attorney General nominee James Cole on June 15, less than a month after he was nominated, Chairman Patrick Leahy (D-Vt.) announced Tuesday.

James Cole, a former public corruption prosecutor who in the 1990s investigated House Speaker Newt Gingrich (Bryan Cave).

Cole, a longtime friend of Attorney General Eric Holder, was nominated by President Barack Obama on May 24. Republicans are expected to raise issues with his work as a government-imposed monitor at insurance giant AIG.

In responses on  his Senate Judiciary Committee questionnaire, Cole said in notes for a speech that he was “not received as a member of the family” when he began his work as a monitor at AIG in 2005.

“As I began to talk to people, some were quite anxious to have me do my review, but many didn’t want me to interfere with the ‘entrepreneurial culture’ at AIG,” wrote Cole.

In his answers on the questionnaire, Cole wrote that he represented a senior Enron officer during government investigations into CEO Kenneth Lay. He also wrote that from 2003 to 2007, he represented Prince Nayef bin Abdel Aziz, the Minister of the Interior of Saudi Arabia, in litigation brought by victims of the Sept. 11, 2001 attacks, a case which was dismissed. Cole said that he has performed no lobbying activities.

A Justice Department spokeswoman had no immediate comment on the scheduled hearing.


In the midst of preparations for the hearing next week, Cole visited the Justice Department on Tuesday afternoon. Cole was headed to Capitol Hill for meetings with senators and is scheduled to be back on the Hill Wednesday.

Wednesday, June 2nd, 2010

Senate Judiciary Ranking Republican Jeff Sessions of Alabama and Deputy Attorney General nominee James Cole.

When Deputy Attorney General nominee James Cole appears before the Senate Judiciary Committee for his confirmation hearing, Republicans plan to question him on his work monitoring insurance giant American International Group (AIG).

“How he performed at that job is directly relevant to his qualifications and will need to be closely examined,” Sen. Jeff Sessions (R-Ala.), Judiciary’s ranking Republican, said in a statement sent out shortly after Cole was nominated on May 21.

Cole’s work as a monitor began in 2005 - a full three years ahead of the company’s near collapse in 2008 - and he was still on the job as of last week. The Justice Department has not discussed his work at AIG, but several Cole allies said it was unfair to blame him for the company’s problems.

But what exactly was Cole’s role at AIG, which received $180 billion in federal bail-out assistance and became a symbol of the excess and recklessness behind the financial meltdown?

In 2004, the Justice Department’s Fraud Section chose Cole from a pool of three candidates selected by AIG to be an independent monitor as part of a deferred prosecution agreement. Under the terms of the agreement, DOJ agreed to hold off on prosecuting AIG for selling financial products that companies used to create the appearance of financial strength. Prosecutors agreed not to pursue criminal charges against the company if it complied with reforms and paid millions in fines.

Cole, a former deputy chief of the DOJ’s Public Integrity Section and special counsel to the House ethics committee that investigated then-Speaker Newt Gingrich (R-Ga.) for misuse of tax exempt organizations, was, by the time of the deferred-prosecution arrangement, working at the law firm of Bryan Cave LLP.

In January 2005, he took on a senior role in overseeing AIG’s dealings, investigating financial transactions dating back to 2000 that allegedly allowed AIG to manipulate earnings statements. His role was expanded in 2006, when AIG reached a separate agreement with the Securities and Exchange Commission to settle an inquiry into accounting irregularities and allegations of bid rigging. Cole was assigned to oversee corporate governance and take a look at their controls on financial reporting.

Cole’s firm earned fees of about $20 million for its work as a compliance monitor, according to The Wall Street Journal. Some of the transactions Cole examined had been structured by AIG’s Financial Products group, the same unit that would later write billions of dollars worth of credit default swaps that almost destroyed the company and forced the government into a costly rescue deal fearing the potential damage to the overall economy.

As a monitor, Cole regularly attended AIG Board of Directors committee meetings, including at least two February 2008 meetings where board members were told of findings of “material weakness” in the company’s accounting systems that were uncovered by auditors at PricewaterhouseCoopers LLP, the Journal reported.

A Bryan Cave representative declined to comment on Cole. Calls to Cole were referred to the White House. A Justice Department spokeswoman also declined to comment. Sessions’ office did not return calls seeking comment. Cole told The Wall Street Journal in 2009 that an agreement with AIG prohibits him from making any public comment on his work.

Recently, AIG has been back in the news with reports that the Justice Department has decided not to bring criminal charges after a two-year inquiry into AIG’s senior executives, including Joseph Cassano, the former CEO of the AIG Financial Products unit. Prosecutors were examining whether Cassano misled investors in 2007 when he said the group’s obligations on the mortgage securities it backed were unlikely to produce losses. Justice Department officials have so far said nothing publicly about the investigation.

Now that his nomination has been announced, a person familiar with Cole’s current activities said “he’s in [the] process of transitioning [out of his law] practice.”

It will likely be several months before Cole’s hearing, though no time frame has been set. That long lead time may work against him, giving his critics plenty of time to closely examine his record overseeing AIG.

Critics say Cole, who has been picked for a critical DOJ job that requires a kind of radar to detect issues might prove troublesome, should have been more attentive to possible financial misdeeds and highly risky deals.

“It’s as though Cole were spackling cracks in the compliance walls and never noticed that AIG’s financial foundation was crumbling beneath his feet,” wrote Corporate Counsel in July 2009.

The Government Accountability Project, a nonprofit watchdog group, also has said that Cole didn’t ask enough questions leading up to the financial meltdown that nearly consumed AIG.

“Cole came into AIG as the independent monitor like an anti-fraud typhoon, meeting with the relevant people and overseeing about 35 different work streams,” Beatrice Edwards, GAP’s International Reform Director, wrote in a blog post criticizing his nomination. “But gradually… he seemed to weaken and adapt,” Edwards said sources told her. “Cole failed to detect an atmosphere of, shall we say, laissez faire compliance at the company.”

But Cole’s defenders are quietly mounting a defense of his work for AIG, saying privately that he isn’t to blame for what happened at the insurance giant. Few Cole allies were willing to publicly discuss the specifics of his role. Several people familiar with Cole’s oversight of AIG said that though Cole was assigned to monitor accounting driven investment practices, his work did not specifically include the major issue that nearly led to the company’s demise — namely credit default swaps.

A credit default swap (CDS) is a type of financial transaction that acts as a form of insurance in case of default. For example, AIG sold thousands of credit default swaps to banks and investment firms on real estate bonds. For a fixed quarterly payment, AIG guaranteed that if a bond issuer defaulted, AIG would pay the CDS buyer the face value of the bond.

Supporters of Cole have suggested that since many financial experts missed the underlying problem of credit default swaps in the years leading up to the financial crisis, a lawyer like Cole — who was broadly overseeing the complex conglomerate’s transactions — could not have been expected to have foreseen the problem, either.

Thomas Hanusik, a partner at Crowell & Moring LLP, who had been the lead prosecutor on an AIG investigation before he left the Justice Department in January 2006, said he had the “utmost respect” for Cole and that he was “incredibly thorough” in his oversight work.

A White House official agreed that Cole’s work as a monitor would not have covered the issue of credit default swaps.

Others in the legal community from both sides of the docket praised Cole as professional, ethical, credible, and a skilled advocate and highly regarded.

But on Capitol Hill, his reputation can only get him so far, particularly when Republicans seem prepared to contest many of the president’s nominees. Cole was well paid as the government’s cop on the beat at AIG, and his job was to impose tough managerial controls and financial discipline at the company. But instead of achieving stability, AIG nearly buckled under the weight of its high-risk financial practices that continued while Cole was its monitor.

Republicans appear ready to attack his association with the much-vilified AIG, and could demand to see the full reports he issued to AIG, which have so far been kept from public view.

The Justice Department has already send Cole’s reports on AIG to the House Oversight Committee, according to committee spokesman Adam Hodge. The documents were requested in a letter last April by House Oversight and Government Reform Committee Chairman Edolphus Towns (D-N.Y.) and Ranking Republican Darrell Issa of California to Attorney General Eric Holder. The reports were only handed over under the threat of a congressional subpoena, and the committee has not made the documents publicly available.

A Democratic Judiciary Committee aide said Democrats weren’t sure whether Cole would be required to disclose the full AIG monitoring reports as part of the hearing for his nomination.

Congress has taken a look at Cole’s work on AIG before in the form of a 2009 Congressional Research Service report issued at the request of the House Oversight Committee. His mission as independent consultant, notes the report, “did not include investigation of past misconduct.”

Three reports issued during Cole’s tenure as monitor in August and September of 2007, “are entirely forward looking; they set out a range of best practices that encompass virtually all of the company’s compliance and reporting obligations” the CRS report said. “It is almost as though the Independent Consultant assumed that AIG had no internal compliance or accounting systems whatsoever and proceeded to draw them on a blank slate,” according to the report.

As of April 2008, just months ahead of the near collapse, AIG had accepted virtually all of Cole’s recommendations with just minor modifications, according to the CRS report. In a May 15, 2022 report, Cole wrote that “AIG had worked diligently and deserves commendation for its efforts to date,” according to CRS. Cole’s Aug. 15, 2008 report was not in general critical of AIG’s implementation efforts, but the report graded its compliance in the area of records keeping as “off-track.”

After the September 2008 financial crisis, Cole’s Nov. 15, 2008 report began by noting that “AIG has entered into what can only be described as a crisis scenario.” The recommendations he made for AIG were placed on hold, and Cole said he intended to meet with AIG every two months to determine whether the company were stable enough to continue implementation of his recommendations.

Cole’s role at AIG was narrowed after the government bailout in 2008, but he issued a report in March 2009 that concluded the failure to treat credit default swaps as “significant” or “non-standard” transactions created “a gap that we recommend be closed,” according to the CRS report.