Saturday, October 20, 2012

The Miscreants’ Global Bust-Out (Chapter 16): The Deep Capture of America, and Some Clues as to the Once and Future Cataclysm

The Miscreants’ Global Bust-Out (Chapter 16): The Deep Capture of America, and Some Clues as to the Once and Future Cataclysm

Posted on 14 June 2011 by Mark Mitchell 

Ptech, the software firm that penetrated America’s largest financial institutions, was part of what FBI investigators once referred to as the SAAR Network (or sometimes the Safa Group) of companies, hedge funds, banks, and charities that financed Al Qaeda, Hamas, Palestinian Islamic Jihad and other jihadi terrorist outfits.

The FBI first began investigating this network in 1993, which is when the bureau recorded a secret meeting of Hamas leaders at a Marriott Hotel in Philadelphia. At that meeting, the Hamas leaders discussed ways in which to undermine the United States and Israel. They also plotted the release from prison of the Blind Sheikh, who had inspired the 1993 World Trade Center bombing and was now ranting about the jihadi imperative to wipe out the American economy.

The Hamas leaders at that meeting did not talk about violent terrorism. Rather, they stressed that their effort to undermine the United States must be conducted by stealth. “War is deception,” said Hamas operative Abu Baker at the meeting. “Deceive, camouflage…Deceive your enemy.”

An excellent weapon in any stealth war against the US would be market manipulation and the destruction of American companies and the prosperity they bring. So it seems to me that any financial operator who both a) manipulates markets; and b) has significant ties to this jihadi network; should c) be treated with at least a soupcon of suspicion.

I know this has been a complicated story to follow (as it has been to research and write), so I am going to take a moment to review and highlight a small fraction of what we have covered so far in earlier chapters.

First, this jihadi network has ties to organized crime, which has a massive presence on Wall Street and might be willing to collaborate with jihadis to sabotage the American economy for fun or profit. Especially in the case of Russian organized crime, we must consider the possibility that the criminals’ motivations are not just financial, but also political.

We have also seen that some of the Hamas leaders at that meeting in Philadelphia received considerable financial support from a number of famously destructive market manipulators–including Anthony Elgindy, Rafi Khan, Rene Hamouth, and others–with ties to both the jihad and organized crime.

One of the Hamas leaders at that meeting, Nihad Awad, later founded an Islamic TV station with Omar Amanat, one-time proprietor of Datek Securities, a brokerage linked in numerous ways to the 1999 scandal that saw the Russian government and the Russian Mafia manipulating the markets and laundering upwards of $7 billion through the Bank of New York.

Amanat, we know, also founded Lightspeed, a brokerage that has ties to some of the nation’s most destructive market manipulators.

Meanwhile, Omar Amanat and his brother, Irfan, founded or served as consultants to nearly all of the nation’s major electronic communications networks, or ECNs. These ECNs are notorious for enabling market manipulators to operate in anonymity.

Here is a compelling example: In September 2001, Irfan Amanat used one of his ECNs, MarketXT, to inflict serious damage on the markets, right at the time when Elgindy and Rafi Khan were helping destroy the nation’s largest clearing brokerage, MJK Clearing.

It might be worth stressing that MJK Clearing collapsed (as the result of Elgindy’s naked short selling) on September 28, 2001. Until recent amendments to the rules, the maximum time that stock could be (at last nominally) left undelivered was 13 trading days.

Thus, through the last decade, typical naked short selling schemes saw phantom stock being kited every 13 trading days, over and over, thereby rolling over the phantom stock for (in some noteworthy cases) as many as 900 trading days.

So as I said, the USA’s largest clearing brokerage, MJK Clearing, collapsed on September 28, 2001. If one finds a calender for the year 2001, and goes to September 28, 2001, and then counts backwards 13 trading days, one lands on…. September 11, 2001.

That is, the firehouse of naked short selling that wiped out MJK Clearing was opened up on September 11, suggesting that it was meant to coincide with Al Qaeda’s attacks on the World Trade Center and the Pentagon.

As we know, on September 10, 2001, Elgindy (who had multiple ties to Al Qaeda) told his broker to liquidate his (Elgindy’s) accounts because an imminent event was going to cause the market to lose two-thirds of its value. Elgindy also bragged to an FBI agent on his payroll that he had advance knowledge of the 9-11 attacks (as that FBI agent’s supervisor and Elgindy’s prosecutors later asserted).

In upcoming chapters, we will see in much greater detail how this network is connected to Penson Financial, which in 2008 suddenly went from being an obscure brokerage to the largest brokerage on the planet by virtue of volume that seems to have been largely manipulative short selling targeting the major banks that collapsed or almost collapsed that year, precipitating a financial crisis that almost wrecked the nation.

We will see, for example, that Irfan Amanat and Omar Amanat played a key role in building what would eventual become Penson Financial. We also will see that Penson Financial was constructed from the remains of Mafia brokerages linked to people like Rafi Khan and his associate Ali Nazerali, who was the hedge fund partner of Yasin al Qadi, one of the central figures in the SAAR Network of terrorist financiers.

In upcoming chapters, I will also point to this network’s involvement with Wedbush Morgan, which in 2008 suddenly became the second largest brokerage in the world, referring much of its manipulative trading (likewise targeting the big banks that wobbled or toppled in 2008) to Bernie Madoff’s criminal brokerage.

And we will see that people tied to SAAR Network entities and other jihadi outfits (with the likely support of financial operators with ties to organized crime) were engaged in other activities — everything from mortgage fraud to the creation of synthetic self-destruct CDOs–that helped bring the economy to its knees, beginning in 2007.

But before I delve into those details, let us take a brief look at the U.S. government’s record in cracking down on financial operators with ties to the Mafia and terrorism.

As we know from earlier chapters, the SEC’s short selling rules (full of loopholes that enabled brokerages to engage in naked short selling and similar manipulative schemes such as “married puts”) were written with the significant participation of Bernie Madoff, the Mafia-tied criminal who used a portion of his Ponzi funds to cover up liabilities that his brokerage had accrued as the result of engaging in short-side market manipulation.

We also know that Madoff’s clients included (among others) Sheikh Mahfouz, who set up the Muwafaq Foundation, which was run by market manipulator Yasin al Qadi. And according to the U.S. Treasury Department, the Muwafaq Foundation was “an Al Qaeda front.”

Yasin al Qadi was also tied to the Al Qaeda charity Mercy International, funded generously by destructive short seller Anthony Elgindy, who (as is evident from transcripts of his Hamas-hosted private internet chat site) had close relationships with not only the Russian Mafia and jihadi leaders, but also with some SEC officials who assisted his short selling attacks and (according to a later report from the Inspector General of the SEC) provided Elgindy with confidential information about SEC investigations of public companies.

So it is perhaps unsurprising to the reader that the SEC, when confronting short-side market manipulation by people tied to organized crime and the jihad, generally gives hall passes.

In the late 1990s up to around 2001, the Department of Justice conducted a large scale effort (sometimes referred to as the “Mob on Wall Street” campaign) to shut down brokerages with ties to organized crime. Since then, however, the DOJ has done little in this regard, and a large network of Mafia-tied brokerages (I will name many in upcoming chapters) are still in business.

Meanwhile, the DOJ has done almost nothing to prosecute financial operators linked to Al Qaeda and other jihadi outfits.

In 1996, FBI Special Agent Robert Wright launched Operation Vulgar Betrayal, the FBI’s first major effort to crack down on what would later be termed the “SAAR Network” of financial entities with links to Hamas, Al Qaeda, and other jihadi outfits. Among Agent Wright’s principal targets were the billionaire hedge fund manager Yasin al Qadi (who, as I say, was Osama bin Laden’s favorite financier) and his U.S.-based bagman, Yaqub Mirza.

But Wright (who referred to Yasin al Qadi as “Al Qaeda’s banker”) was removed from the investigation in 1999. Operation Vulgar Betrayal was shut down in 2000.

According to Wright, his team’s efforts were foiled by U.S. politicians and FBI higher-ups who were unnerved by the fact that he was investigating powerful people who had considerable influence in both Washington and Saudi Arabia (ostensibly a key U.S. ally).

Former Special Agent Wright said, in essence, that the U.S. Department of Justice had been captured by Al Qaeda’s most important financiers.

The capture apparently extends to the SEC, which has shown no signs of investigating the trading of people like the billionaires who comprise Al Qaeda’s Golden Chain and who funded the SAAR Network. (In fact, in the view of Deep Capture, the capture of the SEC by criminal financial operators is essentially total, unlike the DOJ.)

When Agent Wright blew the whistle on the political interference with his FBI investigation, he literally broke down in tears as he publicly apologized for the FBI’s failure to complete its mission.

After the September 11 attacks, Operation Green Quest, a multi-agency effort led by the Treasury Department, saw government agents raiding the offices of many SAAR Network entities, including most of the financial companies and charities tied to Yasin al Qadi’s U.S.-based bagman Yaqub Mirza. The FBI also raided the Northern Virginia home of Mr. Mirza and more than a dozen of his colleagues.

Soon after, the Treasury Department labeled Yasin al Qadi a “Specially Designated Global Terrorist.”

However, few indictments followed from these raids, and the SAAR Network remained mostly intact. Most of the hedge funds and other investment vehicles managed by Yaqub Mirza are still in business.

Meanwhile, the massive U.S. financial empire of ISNA is also still thriving. ISNA, recall, is a Muslim Brotherhood front that operates multiple SAAR Network investment funds with billions under management. It has been linked directly to Yaqub Mirza (who has served as chairman of ISNA’s Amana Trust). And one of its founding directors was Palestinian Islamic Jihad leader Sami al Arian, suspected by some FBI investigators of having provided support to the September 11 hijackers.

I will remind you that destructive short seller Anthony Elgindy’s family settled Sami al Arian in America. The Elgindy family paid for the Palestinian Islamic Jihad leader’s expenses for some time, and helped him find a seemingly innocuous job as a professor at the University of South Florida. While working as “professor”, Sami al Arian was taking directions from Iranian government agents stationed at the UN in New York, according to the DOJ.

Remember also that the Palestinian Islamic Jihad leader is an extremely close associate of other market manipulators, including Omar Amanat, Irfan Amanat, and a number of traders who in 2008 had accounts at that little Chicago brokerage, Tuco Trading, which transacted much of its trading over Omar Amanat’s Lightspeed trading platform and cleared its trades through Penson Financial.

In fact, Tuco Trading (which was not even registered with the authorities) accounted for well over 20 percent of the volume that suddenly made Penson the largest brokerage on the planet in early 2008.

That’s why I kept calling the jihadi Zuhair Karam, who had been a trader at Tuco, and who seemed to know something about an Iranian trader who was linked to two Tuco accounts (one with 2,000 sub-accounts based in China) that accounted for much of the brokerage’s massive volume.

I had learned from various sources that this Iranian’s family worked for the Revolutionary Guard in Tehran and was closely tied to Palestinian Islamic Jihad. By the fall of 2010, I had concluded that this might be the same Iranian whom I had identified as being a hedge fund partner of a fellow who was simultaneously a principal at a brokerage linked to Arik Kislin, former business partner of Bebeck Seroush, an Iranian arms dealer with ties to Russian intelligence and North Korea.

I will explain how I ultimately was able to confirm the identity of this Iranian with some help from Zuhair Karam, who was an associate of this Iranian, and also of Palestinian Islamic Jihad leader Sami al Arian.

But first, let me continue my commentary on the capture of America’s regulators by noting that in the fall of 2010, I was fairly certain that Tuco Trading and a network of closely affiliated brokerages (or their clients), all with ties to the Mafia or worse, had done some damage to the American economy. From all external appearances, however, nobody at the SEC or the DOJ was pursuing this possibility.

One of the brokerages in this network was Carlin Equities, financed in large part by Arik Kislin, the former business partner of the Iranian intelligence asset Bebeck Seroush. The government had named Kislin as being a “member” of the gang run by Vyacheslav Ivankov (also known as “Little Japanese” , the brutal Russian Mafia boss who was assassinated on a Moscow street in 2009 after revealing that he had long been employed by the Russian intelligence services).

How could it be that the U.S. government has identified a person as being a Mobster with ties to Russian and Iranian intelligence assets, but still allows that person to operate in the U.S. financial markets? And how could it have been that the SEC, which shut down Tuco Trading by “Emergency Order” just days before the collapse of Bear Stearns, did not follow up with an investigation?

I know the SEC did not investigate because it charged Tuco with nothing more than violating margin rules, and handed the case over to Tuco’s bankruptcy receiver, who was tasked with doing nothing more than sorting out what was owed to Tuco’s creditors.

Fortunately, the court appointed receiver did more than that, and immediately saw that there was something immensely strange about this brokerage. He noted in his initial reports, for example, that it was not entirely typical for a little unregistered brokerage in Chicago to be trading for 2,000 anonymous accounts in China.

But the receiver was left to investigate all by himself, without any assistance from the SEC. Then he had a stroke, and the world forgot about Tuco until a Wall Street veteran (and deeply positioned source for Deep Capture) alerted us to the suspiciously large volume of Tuco’s trading.

At which point I began investigating, not quite knowing why, since my work was unlikely to get much attention from the SEC, the same government agency that gave Sheikh DeLorenzo special permission to engage in what would otherwise be blatantly illegal naked short selling.

As you will recall, Sheikh DeLorenzo (another close associate of Palestinian Islamic Jihad leader Sami al Arian) got that special permission from the SEC by claiming (falsely) that shariah law states that Muslim short sellers cannot borrow stock, the implication being that Muslim short sellers must sell stock that does not exist (which creates artificial supply with which to torpedo affected companies’s stock prices).

Sheikh DeLorenzo’s phantom stock machine, which is called the Al Safi Trust, is connected to some powerful financiers, including many of the Saudi billionaires who comprise Al Qaeda’s Golden Chain, and the SEC swoons for anything that smells like money and power.

It swoons despite the fact that Sheikh DeLorenzo (who, in his designer pin-striped suits, certainly looks like the SEC’s kind of man) is a full-fledged jihadi who spent his formative years setting up madrassahs in Pakistan before going on to serve as a board member of multiple SAAR Network outfits that had ties to terrorism and were targeted by Operation Vulgar Betrayal and Operation Green Quest.

Sheikh DeLorezo, recall, helped run one outfit, GSISS, that was an affiliate of the American Muslim Council, described by the FBI leadership as the “most mainstream Muslim organization in America”.

That was before 2004, when it was learned that the GSISS and the AMC were inserting Al Qaeda spies into the U.S. military. That same year it was learned that Sheikh DeLorenzo’s GSISS partner, Abdurahman Alamoudi (who is now serving a 23 prison sentence), was a ranking Al Qaeda operative who had hatched a plot (with another Al Qaeda operative and Muammar Qaddafi) to assassinate the crown prince of Saudi Arabia.

I know some of this repeats what I have written in earlier chapters. But this is not a book. It’s an effort to get someone to pay attention to a serious problem, and that, unfortunately, means stating (or chanting, if you like) some things over and over again until the message is clear.

And, in this case, the message is one that I simply could not believe until recently, even having familiarized myself with this general subject for five years. It’s a message that seems so over-the-top and outlandish that I will probably do myself no favors by even uttering it, much less chanting it.

But it’s a message that is true, beyond any shadow of a doubt. So I’ll say it again.

The message is this: Some regulators and law enforcement officials overseeing our nation’s capital markets have been captured by destructive financial criminals with ties to Al Qaeda.

That perhaps explains why the U.S. government has also taken no action against the SAAR Network’s founder, Sheikh Sulaiman Abdul Aziz al-Rajhi (whose initials — S.A.A.R — give the network its name).

To many, I think, the simple fact that Sheikh Rajhi’s primary investment vehicle (the al-Rajhi Banking and Investment Corporation) is the tenth largest company in Saudi Arabia, with more than a dozen international subsidiaries, many of which participate in the U.S. markets, would be reason enough to expect the US government to pay attention to his activities.

There are other reasons, too. For one, Sheikh Rajhi’s company held all of the accounts of Al Qaeda’s European financial operative, Muhammad Zouyadi, who used the bank to transfer funds “directly to the perpetrators of September 11, 2001,” according to a civil suit filed by victims of the attacks.

In addition, one of the 9-11 hijackers, Abdulaziz al-Omari, held a secret account at another of Sheikh Rajhi’s companies, the al-Rajhi Islamic Bank.

There is also evidence that the bank wired money to operatives of Jemaah Islamiya, a jihadi outfit linked to Al Qaeda, and that this money was used to fund the 2002 bombing that killed more than 200 people, mostly Australians, at a bar and nightclub in Bali, Indonesia.

Earlier, when Al Qaeda blew up the U.S. embassy in Kenya, evidence found by police in the home of Osama bin Laden’s personal secretary suggested that a member of Sheikh Rajhi’s family, Saleh Abdulaziz al-Rajhi, was directly involved with (and perhaps even a full-fledged member of) Al Qaeda.

But the SAAR Network’s ties to Al Qaeda might be less worrying than its ties to organized crime and some prominent American financial operators. As we have seen, those ties go back to the days of BCCI, when people like Ali Nazerali (Yasin al Qadi’s one-time hedge fund partner) and future SAAR Network figure Sheikh Mahfouz (founder of an Al Qaeda front) were dealing with Michael Milken’s network of Mafia-tied market manipulators.

The ties remained evident in more recent years, when the SAAR Network’s Bank al Taqwa (which set up Al Qaeda’s main operating base, per the US Treasury) seemed to have a relationship with Sinex Securities, the outfit controlled by Michael Milken’s closest business associate, Gene Phillips.

That’s the same Sinex that was central to the scandal that saw the Russian government and the Mogilivech organization (which meanwhile tried to sell highly enriched uranium to Al Qaeda) manipulating the U.S. markets and laundering upwards of $7 billion into the Bank of New York. This, according to the DOJ, which nonetheless failed to indict Sinex.

That’s the same Gene Phillips whose illegal business dealings with the Mafia have been well documented by the Department of Justice, which indicted Phillips as part of Operation Uptick, then the biggest Mafia bust in FBI history. In that indictment, the DOJ noted that Phillips had been dealing with host of Mobsters, including a fellow named Anthony Joseph Mann.

Anthony Joseph Mann, we know, is also known as Andy Tripoli. Other times he’s Joseph Napoli. He escaped further DOJ scrutiny and Phillips did no jail time. So Anthony Andy Joseph Mann Napoli Tripoli later reappeared as the proprietor of his own DTCC in the Caribbean, much to the delight of the Mafia characters at the pool in Aruba who were visited by Ali Nazerali.

While all of these people were no doubt availing themselves of Tripoli Napoli’s DTCC and manipulating the markets, the DOJ occasionally investigated, but never filed another indictment. As far as we can tell, the DOJ never even asked the likes of Gene Phillips and Ali Nazerali to stop doing business with the Mafia.

Nor does the DOJ seem to concern itself with the relations between these people and jihadis. As we have seen, the Phillips and others in the Milken network have, in the past, participated in a number of death spiral schemes with Specially Designated Global Terrorist” Yasin al Qadi.

At the moment, Shiekh DeLorenzo’s Shariah Capital (of which the Al Safi Trust jihadi phantom stock machine is a subsidiary) has partnerships with multiple U.S. hedge funds (all run by associates of Milken) including: Tocqueville Asset Management, Lucas Capital, Zweig-DiMenna International Managers, and BlackRock Capital Management, Inc.

It is, of course, hard to believe that prominent American financiers would work in cahoots with jihadi financial terrorists or foreign governments (like, say, the ones in Iran or Russia, which have both done quite a lot of business with some of Milken’s closest associates; or the one in Pakistan, which formerly employed Sheikh DeLorenzo to work with its spy agency in setting up a network of jihadi madrassahs).

That is, it is almost impossible to believe that prominent American financiers could conspire with America’s adversaries to do serious harm to the American economy.

Indeed, let me be clear: I do not intend to suggest that there has been any such conspiracy. At least, it is probably not the case that Michael Milken, the dons of the Mafia, the leaders of Al Qaeda, Vladimir Putin, and the Ayatollah have gathered in a secret meeting hall to plot the end of the world.

However, as a prelude to my upcoming chapters on the massive bust-outs that nearly wiped out the financial system in 2008, let me reiterate a few things.

The first is that while Michael Milken is a prominent American, respected by many good people, he was also once convicted on 99-counts of securities fraud and market manipulation.

In addition, Milken sits at the center of a network of hedge funds that clearly (as previous chapters have shown) has ties to organized crime. It is thus unsurprising that these hedge funds are notorious for organizing crimes, such as brazen bust-outs of publicly-listed corporations. Bust-outs that do serious harm to the American economy, and might therefore be of interest to America’s adversaries.

Bust-outs come in many varieties, but the basic idea is to first load a company up with debt and toxic assets, and then do everything in one’s power to topple the company.

The debt might come in the form of death spiral finance or convertible bonds that serve the dual purpose of giving their holders access to shares that can be sold short.

The toxic assets might include fraudulent mortgages and all manner of derivatives, including collateralized debt obligations, which were innovated back in the 1980s by Drexel Burnham (Milken’s shop) , and which were later refined by hedge funds in the Milken network into “synthetic” collateralized debt obligations, that were synthesized by financiers who expected them to self-destruct.

Once the company has been weakened by the toxic assets and debt, the miscreants and their affiliates do everything in their power to take the company down. Their tactics include: publishing false financial research, spreading scurrilous rumors, exaggerating the company’s weaknesses, and planting negative stories with their stable of compliant journalists.

Other tactics include filing bogus lawsuits; getting the captured SEC or other regulators to launch damaging investigations of the company; scheming to cut off a company’s access to credit; and even hiring thugs to threaten or harass corporate executives to the point of distraction.

Meanwhile, of course, hedge funds in the network exploit loopholes in the clearing and settlement system to bombard the company with manipulative short selling that creates “failures to deliver” — artificial supply that can (especially if the other components of the bust out have been implemented) send a stock into a death spiral.

Once a stock is in a death spiral, the company is is no longer able to raise capital, and it is forced into bankruptcy.

As has been well documented by Deep Capture, hedge funds in the Milken network have refined many of these tactics to an art form. I encourage readers to review our archives, but I will mention briefly that by 2006 it had been well-documented that Milken network hedge funds conspired to take down Fairfax Financial, one of the largest financial services companies in Canada.

Among the hedge funds that participated in that scheme were Steve Cohen’s SAC Captial and Exis Capital, which is essentially a subsidiary of SAC Capital (“the most powerful hedge fund on the Street”). I have mentioned that Steve Cohen was once investigated for trading on inside information provided to him by Milken’s shop at Drexel.

I have also mentioned that Cohen used to help run the Milken-financed Mafia brokerage Gruntal & Co, where one of his trading partners was Felix Sater, the Russian Mafia boss with ties to the Russian intelligence services (and who told the U.S. government that his ties to Al Qaeda could be useful to the CIA, part of his successful effort to stay out of prison).

Felix now runs Bayrock, a real estate outfit that provides money laundering services to Steve Cohen.

Bayrock has several partnerships. One is with Leon Black’s Apollo Management (which employs Milken’s son, Lance). Another is with Tamir Sapir, a Russian Mafia boss who used to provide high-tech equipment to KGB operatives in New York in partnership with Semion Kislin, uncle of the above-mentioned Arik Kislin, tied to Russian and Iranian intelligence assets.

Exis Capital is run by Adam Sender. Recall that the FBI recorded Sender having a conversation with a former Genovese Mafia soldier who offered to make one of Sender’s enemies disappear in the Nevada desert.

In 2006, while that Genovese soldier was on trial for numerous crimes including a number of murder-for-hire plots, Sender’s Exis Capital deputy Andy Heller was writing an email about Fairfax Financial. In this email (which Deep Capture has obtained), Heller wrote that “the way to get this thing [Fairfax] down is to get them where they eat, like the credit analysts and holders. We’re taking this baby down for the count.”

That is, the hedge funds were scheming to cut off Fairfax’s access to credit as part of its larger effort to take Fairfax “down for the count.” The recipient of this email was Jonathan Kalikow, of Stanfield Capital.

Kalikow is the son of Peter Kalikow, who once the owned the New York Post. While Kalikow was in charge, the New York Post’s fleet of delivery trucks was handed over to La Cosa Nostra, which used the trucks to transport drugs and weaponry. Meanwhile, Post executives conspired with the Mob to inflate the paper’s circulation numbers.

Kalikow was also among the largest backers of the arbitrage fund run by Milken’s famous criminal co-conspirator Ivan Boesky. At the time, Boesky was doing business with the Iranian regime and working out of a New York building (650 Fifth Avenue) owned by the Alavi Foundation, the Iranian government outfit later indicted along with its subsidiary, the Assa Corporation, for espionage and funding Iran’s nuclear program.

The other largest investors in Boesky’s fund were: Marc Rich (indicted for trading with Iran during the Iran hostage crisis); Alan Patricof (closest U.S. associate of the Iranian Hassan Namazee, caught with $250 million worth of fake Treasuries); Michael Steinhardt (son of the biggest Mafia fence in America, once implicated by the government in a scheme to corner the U.S. Treasuries market); Rene-Thierry Magon de la Villechuchet (major feeder to the Madoff fraud, co-founder of Leon Black’s Apollo Management, found dead in December 2008, his blood neatly drained into a garbage can); and Jeffrey Picower (personally pocketed more than $5 billion from the Bernie Madoff criminal operation; found dead in October 2009, floating at the bottom of his swimming pool at his Palm Beach estate).

Sources tell me that Villehuchet and Leon Black played instrumental roles in developing relationships between investment bank Credit Suisse (whose most important client is Leon Black) and the regimes in Iran, Sudan, and Libya. This is how it came to be that in 2009 Credit Suisse was fined $536 million for, among other things, transferring more than $1 billion directly to the Atomic Energy Organization of Iran and the Aerospace Industries Organization, the entities responsible for Iran’s covert production of nuclear weapons and long-range missiles.

Credit Suisse, recall, also secretly transacted large volumes of illegal (and almost certainly manipulative) trading for Libya and Sudan. And a former official with the Manhattan District Attorney’s office is now investigating whether Credit Suisse did the same for the Assa Corporation, which provided Ivan Boesky and Marc Rich with office space and was later indicted for espionage and funding Iran’s nuclear program.

Jonathan Kalikow’s Stanfield Capital was among the bigger players in the world of self-destruct CDOs. Another perpetrator of the self-destruct CDO scam, we know, was Tricadia, run with help from Stuart Boesky, a relative (probably the brother, certainly a close look-alike) of Ivan Boesky.

As the Financial Crisis Inquiry Commission made clear in its 2011 report to Congress, there weren’t many perpetrators of the self-destruct CDO scam, but this scam was almost wholly to blame for the mortgage crisis that began in 2007. As we will see in a later chapter, nearly every one of the other perpetrators of this scam were part of this same tight-knight network.

We will also see that some financial operators created mountains of self-destruct CDOs while working for SAAR Network entities implicated in the financing of terrorism.

Those self-destruct CDOs were, of course, sold to big investment banks such as Bear Stearns. And the people who designed and sold them knew that they were going to self-destruct, crippling those banks.

That, indeed, was a subject of much discussion at meetings held in Costa Rica at various times in 2006. We know this because Deep Capture had a source monitoring those meetings.

And we know that one of the people at these meetings was Kevin Ingram, the former head of the Goldman Sachs mortgage-backed securities desk, who helped innovate the self-destruct CDO scam.

In addition, we know that in June 2001, Ingram was charged by the DOJ with laundering money for an Egyptian arms dealer who was suspected of having ties to Al Qaeda and was dealing with a mysterious Pakistani looking to buy components for nuclear weapons on the black market.

Another person at the Costa Rica meetings: Ali Nazerali, who was (at least for a time) a hedge fund partner of Yasin al Qadi (Osama bin Laden’s favorite financier). And Steven Roth, financial advisor to Imagis, the anti-terrorism company set up by Nazerali and Yasin al Qadi.

Former FBI counter-terrorism chief Buck Revell (chairman of Imagis) probably didn’t know that Yasin al Qadi was tied to terrorism. By 2006, though, he would have figured out that Yasin al Qadi had been named a “Specially Designated Global Terrorist.”

At any rate, in 2006, Revell told his Mafia-tied friend, Yank Barry a.k.a. Falovich to do businesses with Nazerali. And he became involved with Yank Barry a.k.a. Falovich’s scheme to extort money from tobacco companies with Sergei Chemezov, the former Russian intelligence operative who was meanwhile selling S-300 ground-to-air missiles to the regime in Iran.

This crowd has some distinctive characteristics, one of which is that people associated with it routinely drop dead under mysterious circumstances. And one dead guy is Rex Judd, the fellow who bailed Yank Barry a.k.a. Falovich out of jail.

Shortly after that party in Aruba, Rex Judd was lured to another party, this one in Pattaya, a seaside resort in Thailand whose population is comprised primarily of Thai bargirls and German men in microscopic bathing suits, though there are also Vietnam veterans, Israeli ecstasy dealers, some Middle Eastern sheikhs, a lot of meth addicts, and the Russian mobsters who essentially run the place.

Upon arriving in Pattaya, Rex Judd was invited to a girlie bar. Soon after, he disappeared, and was presumed dead.

When news of his death reached America, Rex Judd’s friend, Paul Combs, concluded that Judd had been killed by the Russian Mob at the direction of Egor Chernov, the friend of Ali Nazerali who had been the go-between for Rex Judd, Yank Barry a.k.a. Falovich, and the arms dealer Sergei Chemezov.

Paul Combs, who was also known as Michael Woods, and also known as Aleksander Stanslavvov Karanikolov, was an equities trader affiliated with DBS Securities, a brokerage that seems to do business with a lot of people who use multiple aliases.

Combs-Woods-Karanikolov had also been a key witness in the legendary “Danger Road” case, in which a Miami police officer turned Mafia hit man was charged with assassinating three narco-traffickers (who had obtained their narcotics from Paul Combs a.k.a. Woods a.k.a. Karanikolov) on a deserted stretch of highway, known as “Danger Road”, in the Florida Everglades.

When Rex Judd disappeared in Pattaya, Paul Combs was ticked off, apparently. So soon after the 2005 disappearance, Combs went to Chernov’s house in Salt Lake City, Utah with a can of spray-paint, and scrawled a message on Chernov’s garage door.

The message said: “Egor Chernov Murdered Rex Judd!! Russian Maggot!!”

Combs thought Chernov had killed Judd because word among Chernov’s associates was that Chernov had pulled a similar stunt with Peter Maron, the art dealer. Apparently, Maron had been lured to Thailand, drugged with Xanax, and then taken to a hotel room where some Thai bargirls were lying in wait, fully naked.

Chernov and his men then photographed Maron together with the naked girls, in all sorts of embarrassing positions, and later presented the pictures to Maron in an effort either to extort money from the art dealer, or to force him to participate in a money laundering scheme that involved precious works of art. According to Maron’s associates, Maron suffered brain damage from the Xanax, but later recovered.

I cannot say for certain that the Maron story is true, but other stories told to me by some of Chernov’s associates have proven to be entirely accurate, and the FBI certainly seemed to believe that Chernov did, in fact, murder Rex Judd. The bureau told the Moscow press that Chenov was the chief suspect.

One of Chernov’s associates has provided me with a copy of Chernov’s fake passport (posted at which says that his name is actually Vasko Svetlinov Aleksandrov. Another associate of Chernov provided me with a copy of the fake passport (also posted at that was used by Lori Judd, Rex Judd’s wife.

I do not know if former FBI counter-terrorism chief Buck Revell or his tobacco foundation partner Yank Barry a.k.a. Falovich (who bailed Rex Judd out of jail) are aware that their friends travel on fake passports.

But Revell’s former associates at the FBI said that Chernov had been manufacturing a lot of fake passports with his sister, Marina Gorbacheva, who was then a famous Moscow judge and the Russian judicial system’s closest ally of Russian prime minister Vladimir Putin.

That needs to be stressed: suspected murderer Egor Chernov, a member of the Mogilevich organization, was operating a fake passport ring with his sister, who was Vladimir Putin’s closest ally in the Russian judicial system. This alone sheds considerable light on the question of ties between the Mogilevich organization (an outfit that does business with Al Qaeda) and the Russian government.

At any rate, Gorbacheva received a lot of criticism when she squashed a lawsuit that had been filed by families of the people who died while being held hostage in a Moscow theater by Chechen separatists. Russian troops had filled the theater with an unidentified gas that killed both the separatists and a number of their hostages, and the family members of the hostages wanted to be compensated.

Gorbacheva, ever loyal to Vladimir Putin, dismissed the case without so much as allowing the families to question government officials.

Meanwhile, as we know, former KGB and FSB operative Alexander Litvinenko (who was later killed with radioactive polonium) was claiming that Putin had dealt with Al Qaeda and staged the hostage-taking in order to boost his popularity.

After that, the judge set up the fake passport racket with her Mafioso brother, Egor Chernov (or whatever his real name is). When Chernov was arrested, the FBI issued a statement saying that its investigation of the fake passport ring was “inextricably intertwined with the disappearance of Rex Judd.”

However, nobody was ever charged for the murder of Rex Judd. Chernov was briefly arrested for the passport fraud, but he was miraculously released. Or perhaps not so miraculously, given what we now know about the DOJ’s record of prosecuting financial operators tied to the Mafia and jihadis.

At any rate, Chernov moved back to Moscow, probably believing (correctly) that the Russian government would protect (or perhaps employ) him, just as the Russian government protected (and perhaps employed) his FBI #2 Most Wanted associate, Semion Mogilevich.

Mogilevich is Most Wanted by the FBI because he is a major league market manipulator who traffics in sex slaves, sophisticated weaponry, and radioactive materials. The FBI, however has not arrested him, and it doesn’t seem keen to pressure Russia to extradite him to the United States. Nor has the FBI jailed a single Mogilevich organization market manipulator, despite the fact that many of them (such as those involved with the massive Mogilevich scam YBM Magnex) are residing in the U.S.

Of course, Mogilevich has friends in the right places. As of 2007, he even had a man named William Sessions on his payroll. Sessions was Mogilevich’s registered lobbyist in Washington. Besides being an employee of Mogilevich, Sessions was also the former director of the FBI (the outfit that publishes those “Most Wanted” lists).

None of this pleased Charlie Flynn, a businessman who had done a deal with Chernov. Flynn told the Canadian press that he, too, had been lured to Thailand, where Chernov’s men shot him with a Taser gun and then tried to put him in a torture chamber.

According to one of Flynn’s associates, Chernov’s aim was to force Flynn to hand over $50 million worth of shares that Flynn owned in a company (Normex Steel) that Chernov had set up along with Yank Barry a.k.a. Falovich (pal to ex-FBI man Buck Revell).

Chernov’s release also displeased Paul Combs, the fellow who had called Chernov a “Russian Maggot.” Combs continued to implicate Chernov in Rex Judd’s murder, and as I was investigating this story, in June, 2010, Combs was found dead in his Florida home with a bullet hole in his head.

The death was ruled a suicide, but Combs didn’t seem depressed to his colleagues, who said as much to the FBI, which did not investigate.

Meanwhile, in 2010, I came to know more about DBS Securities, the brokerage that seems to have employed Combs on an unofficial basis (He had a DBS business card and worked for DBS, but DBS says neither he or any of his aliases were employees).

According to one official DBS employee, it was DBS’s chief operating officer in Singapore, Frank Wong, who (perhaps unintentionally) helped Chernov lure another victim to Thailand by sending a letter (which can be viewed at to the future victim. The letter is addressed to Egor Chernov and the victim.

In this letter, Wong invites the victim and Chernov (the Russian Mafioso) to meet him for brunch at his villa on a beach in southern Thailand. Wong says that others will be at the brunch – namely, their “close friends” Hsieh Fu Hua, CEO of the Singaporean Stock Exchange; Russian Minister of Natural Resources Vitaliy Kondrashov [who then presided over the Russia oil giant, Gazprom, which was looted by market manipulators Mr. Dvoskin-Kozin-Lozin-Etc, Martin Schlaff, Roman Abramovich and Mogilevich]; and Anatoly Chabak, Director General of the Russian financial behemoth Uralsib, which has close ties to the Putin government, and is especially close to Roman Abramovich.

Uralsib is, in fact, the biggest shareholder in Roman Abramovich’s Evraz Group. And according to Chernov’s associates, Mr. Wong, with the help of the Singapore Stock Exchange CEO who was at that meeting, made it possible, as of 2008, for Uralsib, Abramovich’s people, Chernov, and others in the Mogilevich organization, to engage in naked short selling through Singapore.

Meanwhile, we know, a group of Russians (including the top Evraz Group henchmen of Abramovich and some Mogilevich associates) had set up the Orange Diviner account at Tuco Trading, which cleared massive volumes through Penson Financial.

Now, as I mentioned, I do not believe there has necessarily been a grand conspiracy among all these people. But one has to wonder.

That is, it is not out of the question that the people who were creating self-destruct CDOs knew that these instruments would hobble some big banks and crater the markets. And as we shall see, there is no question whatsoever that people in this network — Leon Black, Steven Roth, and others — were meanwhile engaged in other activities that were intended to take some big banks “down for the count” (as one of their friends described it in that email).

Having gotten word of these machinations, it is not out of the question that others in this fairly small world of financial operators (including some whose motives might have been political, rather than financial) would seek to get in on the action, directing large volumes of manipulative short selling at the banks and the overall markets, hoping to induce death spirals.

Therefore, it is probably a good idea for us to know more about the clients of Penson Financial, which became the biggest brokerage on the planet in 2008 by transacting manipulative short selling, most of it targeted at the big banks and other pillars of the American economy.

Upcoming chapters will provide a more comprehensive list of the people most likely to have been Penson’s clients. But I’ll conclude for today by mentioning two of Penson’s bigger clients.

One client was named Sheikh Sulaiman Abdul Aziz al-Rajhi. That’s Shiekh S.A.A.R., founder of what the FBI used to call the “SAAR Network” of hedge funds, companies, and charities that financed Al Qaeda and affiliated outfits engaged in a Grand Jihad to eliminate our country.

Another client: Investcorp, owned by Shiekh Ahmad Turki Yamani, one-time founding shareholder in BCCI and crony of Michael Milken. Shiekh Yamani is also a member of Al Qaeda’s Golden Chain, and a financier within the SAAR Network.

Sheikh Yamani’s Investcorp was among the select few perpetrators of the self-destruct CDO scam that triggered the mortgage crisis and weakened the banks. Sheikh Yamani’s Investcorp also operates dozens of hedge funds in the United States.

And by extrapolating from the Penson data, we can confidently suggest that these hedge funds engaged in short selling that contributed to the death spirals of stocks in those weakened banks, thereby contributing to a financial crisis that did not eliminate our country, though some say it came pretty damn close.

To be continued…

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