Jamie Gorelick's ties to Fannie Mae and What She's Doing Now--

In reading this article about Crony Capitalism at Fannie Mae (tip to Instapundit), I noticed that Jamie Gorelick was one of the Fannie executives who benefited from inflated bonuses based on Enron-style accounting. She was Vice Chairman of Fannie Mae from 1997 to 2003 (Fannie’s fraudulent accounting scheme was made public in 2004).

This is the same Jamie Gorelick who was Deputy Attorney General in the mid 1990s and was reported to have been the author of the Clinton Administration’s WALL against sharing intelligence data between foreign and domestic agencies. Without the policies instituted by Gorelick still in place in 2001, officials might have learned more about the 9/11 attacks before the planes hit the buildings.

The Wall Street Journal quoted Attorney General Ashcroft on the possible influence of Gorelick's wall:

"In the days before September 11, the wall specifically impeded the investigation into Zacarias Moussaoui, Khalid al-Midhar and Nawaf al-Hazmi. After the FBI arrested Moussaoui, agents became suspicious of his interest in commercial aircraft and sought approval for a criminal warrant to search his computer. The warrant was rejected because FBI officials feared breaching the wall.

"When the CIA finally told the FBI that al-Midhar and al-Hazmi were in the country in late August, agents in New York searched for the suspects. But because of the wall, FBI headquarters refused to allow criminal investigators who knew the most about the most recent al Qaeda attack to join the hunt for the suspected terrorists.

"At that time, a frustrated FBI investigator wrote headquarters, quote, 'Whatever has happened to this — someday someone will die — and wall or not — the public will not understand why we were not more effective and throwing every resource we had at certain 'problems.' "

So what’s Jamie Gorelick doing now? Do we have to fear for the health of any other major US institutions on her account?

Wikipedia tells us:

She is currently a law partner in the Washington office of WilmerHale and a non-executive director of the oilfield services provider Schlumberger Ltd.

I'm relieved to see that at least she’s only a “non-executive” director at Schlumberger.

[UPDATE: I updated the links, chiefly by using a more official site for Ashcroft's testimony.]

2D UPDATE:

1. The Gorelick Wall.

The idea that Jamie Gorelick was not responsible in any significant way for the Gorelick Wall has been exposed as nonsense. Gorelick’s March 4, 1995 memo explicitly provided:

“We believe that it is prudent to establish a set of instructions that will more clearly separate the counterintelligence investigation from the more limited, but continued, criminal investigations. These procedures, which go beyond what is legally required, will prevent any risk of creating an unwarranted appearance that FISA is being used to avoid procedural safeguards which would apply in a criminal investigation" (emphases added).

U.S. Attorney Mary Jo White, who was prosecuting the chief anti-terrorism case in NY, responded to Gorelick’s memo by writing to Gorelick, urging changes in her restrictive policy. The rejection of White’s recommendations was written by Michael Vatis, a conclusion endorsed in "Gorelick’s handwritten note to Attorney General Janet Reno. Ms. Gorelick wrote, 'I have reviewed and concur in the Vatis/Garland recommendations for the reasons set forth in the Vatis memo.'"

Sen. John Cornyn “said, the newly released memos raised apparent conflicts with statements Ms. Gorelick has made recently defending herself and her role in the Clinton Justice Department.

‘These documents show what we've said all along: Commissioner Gorelick has special knowledge of the facts and circumstances leading up to the erection and buttressing of 'that wall' that, before the enactment of the Patriot Act, was the primary obstacle to the sharing of communications between law enforcement and intelligence agencies,’ Mr. Cornyn said.”

Gorelick’s Wall was a prominent example of the role of lawyers hampering anti-terrorist activities before 9/11, a problem outlined by Michael Scheuer (former head of the Bin Laden desk and no friend of the Bush Administration):

SCHEUER: Well, we had—the question of whether or not we could have prevented the attacks is one you could debate forever. But we had at least eight to 10 chances to capture or kill Osama bin Laden in 1998 and 1999. And the government on all occasions decided that the information was not good enough to act. . . .

The U.S. intelligence community is palsied by lawyers.

When we were going to capture Osama bin Laden, for example, the lawyers were more concerned with bin Laden‘s safety and his comfort than they were with the officers charged with capturing him. We had to build an ergonomically designed chair to put him in, special comfort in terms of how he was shackled into the chair. They even worried about what kind of tape to gag him with so it wouldn‘t irritate his beard. The lawyers are the bane of the intelligence community. . . .

2. Financial Irregularities at Fannie Mae.

Perhaps some of you may not remember what Fannie Mae was caught doing after a whistleblower exposed the fraud (and was fired in retaliation). It was obvious that the books at Fannie Mae were being cooked:

The magnitude of Fannie's machinations is stunning, and in two key areas in particular they deserve to be better understood. By improperly delaying the recognition of income, it created a cookie jar of reserves. And by improperly classifying certain derivatives, it was able to spread out losses over many years instead of recognizing them immediately.

In the cookie-jar ploy, Fannie set aside an artificially large cash reserve. And — presto — in any quarter its managers could reach into that jar to compensate for poor results or add to it to dampen good ones. This ploy, according to Ofheo (Office of Federal Housing Enterprise Oversight), gave Fannie "inordinate flexibility" in reporting the amount of income or expenses over reporting periods.

This flexibility also gave Fannie the ability to manipulate earnings to hit — within pennies — target numbers for executive bonuses. Ofheo details an example from 1998, the year the Russian financial crisis sent interest rates tumbling. Lower rates caused a lot of mortgage holders to prepay their existing home mortgages. And Fannie was suddenly facing an estimated expense of $400 million.

Well, in its wisdom, Fannie decided to recognize only $200 million [of losses], deferring the other half. That allowed Fannie's executives — whose bonus plan is linked to earnings-per-share — to meet the target for maximum bonus payouts. The target EPS for maximum payout was $3.23 and Fannie reported exactly . . . $3.2309. This bull's-eye was worth $1.932 million to then-CEO James Johnson, $1.19 million to then-CEO-designate Franklin Raines, and $779,625 to then-Vice Chairman Jamie Gorelick.

As for other losses, they were routinely mischaracterized so that they could be amortized over years, not realized fully as they were supposed to be. By this method, the Fannie Mae management siphoned off millions of dollars in excess compensation to top management, including Gorelick.

It is certainly possible that the culture at Fannie Mae was so thoroughly corrupt that Jamie Gorelick did not know that cooking the books in this fashion was illegal, but it strains credulity to suppose that she did not know that the books were being cooked. I doubt that Gorelick was so stupid or incompetent not to notice that Fannie Mae profits were regularly reported in such a way as to maximize her bonuses.

And you would think that, as Vice Chairman and a lawyer, she would be one of the people who most clearly should have known that the fairly obvious cooking of the books was indeed improper.

3. Duke Hoax Lawsuit.

From the comments, I see that Jamie Gorelick is representing Duke in lawsuits filed by the Duke Lacrosse players. You can follow her exploits on that case at Durham in Wonderland.