Greed Queen of Disaster: Jamie Gorelick

Jamie Gorelick, attorney with Wilmer Hale, had a role in two disasters, Fannie Mae and BP.  As Vice Chair of Fannie Mae, Gorelick served as #2 during a time of accounting shenanigans.  Those machinations were personally profitable for Jamie.  Her bonuses, based on fraudulent numbers, were:

2002--$911.250
2001--$1,083,109
2000--$859,609

According to the same SEC report, she held nearly 300,000 stock options.

A federal investigation found regarding Fannie Mae's improper accounting (Haggerty, et. al..):

1.  Applying accounting methods and practices that did not comply with the Generally Accepted Accounting Principles (GAAP) to the company's derivatives transactions and hedging.
2.  Using a “cookie jar” of reserves to improperly delay recognizing income so that it can be used to enhance results in later periods.
3.  Tolerating what it called “internal control deficiencies”.
4.  Maintaining a corporate culture that emphasized stable earnings at the expense of accurate financial disclosures.
5. The existence of an arrogant and unethical culture. 

Jamie established that corporate culture as Senior Executive and Vice Chair of the Board.  Her tenure, 1997-2003, mirrored the accounting scandal which ran from 1998-2004.  The investigation revealed Gorelick was paid more than $26 million during her time at Fannie.  Were any of her ill begotten gains returned?

Gorelick left Fannie, joining Wilmer Hale in June 2003.  Her role is described as follows:

Ms. Gorelick represents companies on regulatory, compliance, governance and enforcement issues.

Jamie went on to serve on BPAmerica's External Advisory Council.  Their 2008 description of her states:

One of the longest-serving Deputy Attorneys General, Gorelick is a member of numerous boards, and lectures on corporate governance and business ethics.

BP's "longest serving" equals three years, April 1994 to April 1997.  However, it's not Jamie's first time representing BP on an oil spill:

Gorelick is only reprising a role for BP that she played in 2007, when the company was scrambling to deal with yet another oil spill, off the coast of Alaska. Then, the company was fined $50 million. 

Jamie Gorelick worked magic in the White House.  BP avoided responsibility for unemployed oil field workers, while setting the company up to continue operating in the Gulf of Mexico.

Gorelick currently provides board leadership for public companies, United Technologies and Schlumberger.  She serves on compensation and audit committees.  Did she learn any lessons from Fannie Mae's distorting pay for performance?

It's hard to see the water when you're a fish.  Jamie Gorelick is the model for greed.

Gorelick Keeps BP Producing in the Gulf?

BP's $20 billion victims' fund will be paid for by U.S. oil production. WSJ stated:

The (White House) agreement does specify that the fund may be backed by BP's U.S. production wells. The pact says BP may also use other property as collateral so long as the Obama administration agrees to it.

BP gave $3 billion to start, promising $5 billion a year. The U.S. has incentive to keep BP producing in the Gulf of Mexico, their cash cow zone.

The Gulf is home to about 25 of the 40 production projects BP plans by 2015.

WilmerHale's Jamie Gorelick is good. BP won on unemployed oil workers. They look to have the upper hand on future U.S. production. How about animal carcass testing, counting and destruction? The slow leak of details indicates Gorelick may have hit the trifecta for BP. Next up, refuting charges of gross negligence.

Will she get two checks for her hard work, one for her role as BP attorney and the other for her staunch support as a member of BPAmerica's External Advisory Council?

Supporting BP's Hayward

A raft of American politicians stand ready to support BP CEO Tony Hayward. The list includes:

Independent:
Michael Bloomberg, Mayor of New York

Red:
Josh Bolten, former Bush Chief of Staff
Ken Duberstein, BP lobbyist

Blue:
Tom Daschle, BP America advisory board
Tony Podesta, BP lobbyist

Additional Members of BP External Advisory Council (2007 report):

Jamie Gorelick - also on the board of Schlumberger and United Technologies

Warren Rudman - formerly on the board of Boston Scientific

Alan Simpson - co-chair of President Obama's Deficit Commission

Christine Todd Whitman - also on the board of United Technologies, Texas Instruments & S.C. Johnson & Sons

Admiral Frank "Skip" Bowman - Member of the James Baker's BP Independent Safety Review Panel, on Morgan Stanley board of directors

Leon Panetta - now CIA Chief

BP hired The Brunswick Group for public relations advice. Brunswick packages access to the Obama White House through Business Forward. BP employed Brunswick's Ann Womack-Kolton as head of U.S. media relations.

Much is happening behind the scenes. These folks count on the public's apathy and short attention span. Yet, oil will spew until August at the earliest. Tony Hayward will get by with help from his friends.

Update: Jamie Gorelick will represent BP in the White House scolding. She is the only outsider invited.

Update 2: Alan Simpson didn't fare well in his interview on Social Security as a member of Obama's Deficit Commission. His framing sounded a bit like BP, i.e. nobody expected & who knew? Was it his BPAmerica External Advisory Council coming through?

Update 3: WaPo ran a piece on BP's lobbyists/consultants.

BP's Early Lies Help it Tell Another

Attorney Jamie Gorelick continued her risk management crusade on behalf of BP, the world's best polluter.  Chron reported:

BP is challenging the government's estimate that its damaged Macondo well gushed 4.9 million barrels of oil into the Gulf of Mexico last summer, adopting a strategy that could save it billions of dollars in federal fines for the offshore spill.

The London-based oil giant, contending that the government's numbers are "highly unreliable," is poised to argue that as little as half that amount ultimately flowed into the Gulf.

The government estimates "rely on incomplete or inaccurate information, rest in large part on assumptions that have not been validated and are subject to far greater uncertainties than have been acknowledged," BP said in a white paper delivered to the presidential commission investigating the Deepwater Horizon disaster. "BP is confident that a complete, comprehensive and rigorous analysis of the flow issue will show that less — and possibly far less — oil was discharged from the Macondo well."

The government and BP worked hand in hand to manipulate the public on spill size.  BP's early risk management, along with government compliance, set the stage for BP's latest risk management move.  It's Disaster Queen Jamie Gorelick's chess game.  Someone call Tony Hayward to the stand.  That's if he's willing to testify and can fly out of frozen European airports.

Tom Donilon's Fannie Chapter

President Obama's new National Security Adviser has a dark past.  Tom Donilon worked for Fannie Mae from 1999 to 2005 as a senior executive.  Fannie's leadership committed accounting fraud to maximize executive incentive pay.  A federal investigative report concluded Fannie Mae had an "arrogant and unethical" culture.

This dark group included CEO Franklin Raines and deputies Jamie Gorelick and Tom Donilon.  The asleep at the switch board included Ken Duberstein, James A. Johnson, Stephen Friedman and Fred Malek.

Tom Donilon's lobbying division played hardball with Fannie's regulator.  The report summarized Donilon's e-mail on Feb. 19, 2004:

Do you have any sense of the basis on which the agency believes that it has the authority to mandate practices in this area, hard to believe they have a safety and soundness rationale …There is a huge issue as to multiple enforcement regimes. We should speed up our work on the interaction between bank regulators and the SEC … When does Russ [Bruemmer, of WilmerHale] think that we should go into OMB? …Should we start working with the BRT [the Business Roundtable], Chamber [the U.S. Chamber of Commerce], ABA [the American Bankers Association] etc. now? Tom."

The WilmerHale link is interesting, given Jamie Gorelick's leaving Fannie for a spot with the law firm.  Donilon went on to secure the obscene consulting agreement with James A. Johnson.  Tom also wrote scripts for the Board's Compensation Committee meetings.

Tom Donilon's division engineered an effort to discredit the investigative agency prior to release of a damaging report.  Fannie was successful in getting the undermining report posted on a Congressional website for an hour.  Fannie Mae downloaded and distributed what they hoped would be a "face saving" document.

Now that the deficit is America's greatest threat, will National Security focus on white collar criminals, who steal for personal enrichment from shareholders, customers and sometimes the taxpayer?  While the best computer security person may be an ex-hacker, the prospect of Tom Donilon's public service makes me nervous.

BP to Get White House Licks

AFP reported on the expected White House scolding of BP:

BP also brought along legal advisors, including general counsel Rupert Bondy, and litigator Jamie Gorelick from top US law firm WilmerHale.

Jamie Gorelick is also serves on BP America's external advisory council, alongside Tom Daschle. Obama's White House worked hand in hand with BP on spill response. This meeting is theater for public consumption, much like last night's Oval Office speech.

Obama provided no details on the disaster. He didn't address the new estimate of 35,000 to 60,000 barrels per day, released hours before his talk. He still hasn't answered the supertanker question, posed weeks ago in a press conference.

The White House scolding of BP is intended to disperse public anger. It's not clear they have a plan for anything else.

BP's New "Culture of Complacency"

Oil Spew Commission Counsel Fred Barlit helped BP's risk management case with his comment:

"to date, we have not seen a single instance where a human being made a conscious decision to favor dollars over safety." 

Did WilmerHale's Jamie Gorelick give Fred that line?   If not, she had to be pleased with its delivery.  Fred noted the Commission did not have subpoena power.  Many refused to testify or plead the Fifth on incriminating questions.  BP CEO Tony Hayward didn't show, much less say how cutting 5,000 jobs and $4 billion in costs impacted safety.

This wasn't BP's first deadly accident.  After BP's Texas City refinery explosion, which killed 15 people, the company put together a list of approved terms for employees to use. Did WilmerHale advise them on language?  BP's internal report on Texas City stated it:

“found no evidence of anyone consciously or intentionally taking actions or decisions that put others at risk.”

That sounds like Fred Barlit's statement.  Ironically, WilmerHale helped set up The Baker investigation.

Assisted BP in establishing and supporting the Independent Panel headed by former Secretary of State James Baker to review the safety systems at BP's US refineries.

The Baker report concluded BP had a "misplaced culture of safety," by focusing on personal safety and ignoring process safety.  CEO Lord John Browne, cost cutter extraordinaire,  knew little about his company, when he was deposed three years after the explosion.  Oddly, WilmerHale shares the Lord's cost cutting bent.  Heaven help British higher education survive Browne's slashing.

BP went from "safety challenged" to "complacent"  between April 2005 and April 2010.  What degree of indifference does that represent?  Where was BP's focus is not on safety?  Greed.  BP's Libya machinations are sure to turn one's stomach.

In the midst of asset sales post-blowout, BP invested in Azerbaijan.  Their quandary is where to send their gas, in short supply in Europe.  Recall BP needs to continue drilling in the Gulf of Mexico to fund the $20 billion compensation fund. That's another WilmerHale mantra.

While the final report is yet to be written, early signs favor BP risk management.  Covering for corporate friends, that's a familiar refrain in Washington, D.C.

BP Probes

The list of investigations into the BP Deepwater Horizon catastrophe includes:

BP Internal Investigation

BP has 70 people in its investigative team. In the 2005 Texas City refinery accident, which killed 15 people, BP had a list of terms internal investigators were not to use.

Justice Department

The Justice Department launched a criminal investigation into the accident. Defending BP are Jamie Gorelick and Mark Filip, prior Deputy Attorney Generals.

Coast Guard-Homeland Security & Minerals Management-Interior Department

This is a joint investigation. Interior Secretary Ken Salazar's 30 day report bailed on investigating causes of the blowout. Testimony under this investigation could have criminal implications. However, it's not clear how the various investigations will collaborate or overlap.

U.S. Chemical Safety Board

This independent commission investigates industrial accidents involving chemicals. It investigated BP's Texas City refinery explosion without ever interviewing BP President Lord John Browne.

President's National Oil Spew Commission
The charge for this commission continues evolving in the media. President Obama started off with a thorough investigation of causes. The White House shifted to focusing on government's cozy relationship with the oil industry. Bloomberg cited it would "review safety procedures." Two Oil Spew Commissioners, William Reilly and Fran Ulmer, have significant organizational ties to BP.

Congressional Investigations

Congressional hearings can be good political theater, but frequently push critical information off stage. CEO Tony Hayward's testimony reflected BP's corporate risk management priorities. I expect that to continue.

Let's hope the lot is better than conflicted Interior Secretary Ken Salazar's 30 day report. Which group is studying the impact of toxins?

Update: Transocean is conducting an internal investigation and civil lawsuits will eventually serve an investigative function. Civil suits in the BP Texas City refinery explosion took years. BP CEO Lord John Browne was deposed three years after the accident. He noted the deposition was his first interview with authorities on the accident.

BP's WilmerHale & Rig Worker Fund

The AP reported:

BP says it has picked a charitable foundation in Louisiana to administer a $100 million fund for oil workers struggling because of a federal moratorium on deepwater drilling.

The Rig Worker Assistance Fund will be administered through the Gulf Coast Restoration and Protection Foundation, an affiliate of the Baton Rouge Area Foundation.

The American Bar Association Journal noted WilmerHale's helping BP with White House negotiations. It included assistance for rig workers, unemployed due to the drilling moratorium.

BP was able to structure the deal to limit claims attributable to the moratorium after successfully arguing that it shouldn’t be liable for a decision of the president, the Wall Street Journal says. It also was successful in rebuffing demands that it pay to restore the Gulf to conditions better than before the oil spill.

Jamie Gorelick earned her fee.

Steve Rinehart, a BP spokesman, said in a statement earlier this week that BP is not legally liable to compensate for job losses caused by the moratorium, though it did set up the $100 million fund as a goodwill gesture.

The rig worker fund is as clear as the Unified Command's use of dispersants. Public comments don't jibe with back room deals.

White House Unveils BP Deal

A White House agreement has BP setting aside $5 billion a year for four years. The first $5 billion is due in 2010. BP will set aside $20 billion in U.S. assets as assurance.

Oddly, a 2007 report cited BP America's $20 billion investment into Gulf of Mexico deepwater fields (see page 6). Simply coincidence, or will BP be out of the Gulf of Mexico?

The future $20 billion in escrow funds will be used to "pay claims adjudicated by the independent claims facility, as well as judgments and settlements, natural resource damage costs, and state and local response costs." It didn't say what would happen to any remainder, but it would likely revert to BP.

Jamie Gorelick attended the deal making session, as BP's lawyer.



She also sits on BP America's External Advisory Council.

Three BP Monkeys: Tony, Ken & Joe

The BP oil spew has its version of see no evil, hear no evil and speak no evil. BP CEO Tony Hayward told a congressional hearing on Thursday it was too early in the investigations to draw conclusions. See no evil.

Interior Secretary Ken Salazar was charged with an initial investigation into the accident. He bailed on that charge. Speak no evil.

Representative Joe Barton (R-TX) apologized to BP for the White House shakedown. He later retracted his apology, but for his initial act Joe is Hear no evil.

Meanwhile a partner in the gushing well eviscerated BP. The TelegraphUK reported:

Jim Hackett, chief executive of Anadarko Petroleum, launched a scathing attack, saying he was "shocked" by the details emerging from initial investigations into events leading to the explosion of the Deepwater Horizon rig in April, which killed 11 oil workers.

This information "indicates BP operated unsafely and failed to monitor and react to several critical warning signs during the drilling of the well," he said.

Tony, Ken & Joe won't say it. The pressure is now on President Obama's Oil Spew Commission.

Two of its seven members have significant BP ties. Co-chair William Reilly controls over $2 million in stock in ConocoPhillips, a joint venture partner with BP in the massive Tiber field in the Gulf of Mexico. Fran Ulmer is Chancellor for the University of Alaska Anchorage. The University received over $30 million in gifts from BP and ConocoPhillips in the last decade.

How might BP's external advisory council come to BP's aid? Surely, Tom Daschle, Alan Simpson, Jamie Gorelick, Skip Bowman, Christine Todd Whitman and Mark Hamilton, President of the University of Alaska, can influence the outcome.

Transocean Says BP Is Withholding Data

BP's risk management machine continues churning. WSJ reported:

Transocean Ltd. is accusing BP PLC of withholding valuable information about the Deepwater Horizon oil spill, saying the U.K. oil giant is crippling Transocean's ability to conduct its own investigation into the disaster.

In an Aug. 18 letter to BP America lawyers, Transocean said BP has refused to hand over logs, operational reports and seismic data that will shed light on why and how the Deepwater Horizon rig caught fire and sank, leading to the worst offshore oil spill in U.S. history.

"It appears that BP is withholding evidence in an attempt to prevent any entity other than BP from investigating the cause of the April 20th incident and the resulting spill," Transocean attorney Steven Roberts said in the letter.

BPAmerica's lawyer is Jamie Gorelick of WilmerHale. She provided BP with numerous wins in negotiations with the White House.

Given BP's defensive behavior Cameron should be very worried about access to information. The blow out preventer (BOP) will be removed before the relief well conducts final cementing. The BOP will end up in the government's hands given the DOJ subpoena. Jamie's D.C. connections could help BP once again.

Oil Comes Up

Thad Allen admitted the government purposefully transferred toxicity to the water column in his August 9 conference call. McClatchy reported:

Thad Allen: The reason dispersants were used; they were not in a position where we could actually effectuate in situ burning or skimming. And of all the means out there, sometimes use of dispersants was the only means available to us, and dispersants are less toxic than the oil themselves, and EPA, after having completed testing on actually mixing dispersants with the Macondo well crude oil, have no increased levels of toxicity or no areas for concern, so I don't think it's an issue of harm.

It's an issue of what's the most effective way to deal with oil in the water so it doesn't ultimately end up on the beaches or in the marshes.

It is an issue of harm, given oil-dispersant mixture is as toxic as oil itself. Dispersant combines with oil and ends up in the water column. The government decision could explain the secrecy over disposal of dead sea creatures.

In the White House meeting BP successfully argued Obama decided the oil drilling moratorium, thus it wasn't financially responsible for paying unemployed oil workers. Did Obama make the dispersant call, relieving BP of responsibility for an accurate death count? If so, Jamie Gorelick is good, very good.

The owner of Dean Blanchard's Seafood in Grand Isle, Louisiana spoke to James Fox. He said:

Every time we go in the boat, if we hit the bottom with your prop, the oil comes up. If you throw your anchor, when you pick it up, you got oil on the anchor, oil on the chain. We know it's on the bottom.

All of our seafood is a bottom feeder. And the plankton and the nutrients that feed our seafood, the small fish, the shrimp and the crabs, is on the bottom. If they go to eat and there's big clumps of oil on top of the food, I think you gonna have, if the food dies, the plankton and all dies, we don't know what the effects going to be. BP's not cleaning up the oil. Their job is to clean up the oil. It looks like the Coast Guard is helping them by trying to cover it up, too.

They don't want to pick up the oil, because it's more effective to sink it.

We know they're illegally spraying inside the three mile line. They're doing it at night.

Out of sight, out of mind. That goes for animal carcasses, EPA toxicity tests and the oil itself. America gets platitudes, "red tide" red herrings and the message to move on.

Update: Dean Blanchard is quoted in an AFP article as saying:

"It sucks. They're not paying. They're basically doing what an insurance company does, send you the first adjuster who says we should pay you, then they fire that adjuster and hire another one until they find an adjuster who thinks they shouldn't pay you."

"They need to give us two or three shrimp seasons to see whether they all die off," he said. "If that oil sinks to the bottom of the ocean like they're planning, then what are next year's baby shrimp going to eat? They need to give us more time to decide what to do."

BP's Fannie

A corporate executive noted, we were "engulfed by an unprecedented _______ that was catastrophic and unforeseeable." Is it:

a. decline in home prices (Fannie Mae)
b. oil well blowout (BP)

The answer is a, Fannie Mae.

It turns out BP has a Fannie fractal. BP executives showed their backsides with inane public comments and Congressional non-answers, but there's more. The coterie who brought Fannie Mae to its knees is defending BP. Consider the cast of characters:

Jamie Gorelick
Vice Chairman Fannie Mae from 1997-2003
BPAmerica External Advisory Council
BP lawyer

Ken Duberstein
Fannie Mae board 1998-2007, member of the Assets and Liabilities Policy Committee. That committee was responsible for oversight of management’s interest rate risk, credit risk, and capital management activities.
Regulatory consultant for Fannie, earning over $1.8 million
BP Lobbyist
ConocoPhillips Board member (like Oil Spew Commission co-chair William Reilly)

Warren Rudman
BPAmerica External Advisory Council
Represented Fannie Mae in a $9 billion accounting scandal. From 2001-2004 the firm failed to properly account for derivatives. The Independent Commission report went soft on CEO Franklin Raines.

The Financial Crisis Commission recently interviewed Fannie Mae executives, who defended the firm. Former EVP Robert Levin offered:

Fannie Mae had independent risk-management board committees, a chief risk officer and others that sought to update their economic models, but were unable to "catch up with the reality."

Unable to catch up with reality? How BP'ish of Fannie. Which will be the bigger loss? Fannie and Freddie could cost taxpayers $1 trillion.

For those worried about BP, it has a stable of political insiders working on its behalf.