The nation's attention has been riveted in recent days on an economic crisis that largely was caused by the deregulation favored by George W. Bush and other conservatives.
But the Bush administration has visited another kind of financial calamity upon Americans, one that has mostly floated under the media radar--at least until now.
While grotesque greed and mismanagement created the need for the recent $700 billion bailout, another kind of mess has occurred on the Bush watch. We are talking about criminal behavior by financial kingpins, and some of it has been actively covered up by the Bush administration.
Is there reason to think these financial crimes might someday come to light? Perhaps. And the first clue might come with an obscure news story that made the rounds yesterday.
It's a story that, in a roundabout way, even has connections to my termination at UAB. More on that in a bit.
But first, here are the basics: Associated Press reported that Charles "Chuck" Rosenberg, U.S. attorney for the Eastern District of Virginia, is stepping down after two years in his post. Rosenberg informed President Bush of his decision in a letter dated September 30, and the U.S. attorney's last day will be October 22.
Why would Rosenberg step down with just a little more than two months left in the Bush administration? That remains a mystery; Rosenberg doesn't even mention that he wants to "spend time with his family."
But let me take a crack at explaining what might be going on and why it could be important.
Who is Chuck Rosenberg? He played a central role in dropping an investigation of a massive fraud case, one of the worst financial crimes of the past eight years. David Maguire, the veteran federal prosecutor who uncovered the case, described crimes that were "far worse" than those of Arthur Andersen, the accounting giant that collapsed in the wake of the Enron scandal.
And the case involved big names and even bigger money. At the heart of the investigation was General Reinsurance, a subsidiary of Berkshire Hathaway, the investment empire overseen by billionaire Warren Buffett. Joining Buffett on the Berkshire Hathaway board of directors is Microsoft founder Bill Gates.
General Reinsurance, known as "Gen Re," had become entangled in a mess that could become a headache for the world's two richest men. But evidence suggests the Bush administration did not want that to happen. And Chuck Rosenberg is the guy it chose to make the problem go away.
What was at stake in the Gen Re investigation and why did the Bush administration want to shut it down? Marisa Taylor, a reporter for McClatchy Newspapers, has written an excellent account of the case. The U.S. House Judiciary Committee has looked into the matter, and Corporate Crime Reporter has a strong overview of that angle.
Here are the basics of the case: It starts with Reciprocal of America (ROA), an insurer based in Richmond, Virginia. ROA was supposed to avoid insolvency by socking away vast surpluses collected from policyholders' premiums and passing risk to giant reinsurance firms such as Gen Re.
But ROA did not accumulate the surplus required by law. And regulators discovered the company was $450 million in the hole.
How did this happen? ROA's surplus began to erode in the late 1990s when medical-malpractice awards shot up. Under duress, company executives asked Gen Re to assume millions more in risk.
Gen Re agreed to the deal but treated it as a "side" or "unenforceable" transaction. Prosecutors allege that the two companies conspired to falsely inflate ROA's surplus and hide its losses from regulators.
What was the fallout? More than 80,000 lawyers, doctors, and hospitals lost their malpractice coverage. Many of them faced bankruptcy.
How did the Bush administration ensure that the Gen Re case would be covered up? Follow this game of musical chairs:
* Paul McNulty, the U.S. attorney who had overseen the case, was "promoted" in November 2005 to become deputy attorney general under Alberto Gonzalez;
* The Bush administration brought Rosenberg from Texas (where else?) to replace McNulty;
* Rosenberg pulled Maguire off the case and replaced him with Michael Gill, who was imported from--guess where?--Texas;
* Gill pulled the plug on the Gen Re investigation.
What does Rosenberg's resignation mean? That remains unclear. But it could signal that, in the wake of our worst economic crisis since the Great Depression, federal officials might begin to take a closer look at financial crimes. It might even mean that someone is prepared to take a closer look at the reinsurance industry in general and the Gen Re case in particular.
How could this have any connection to my termination at UAB? More on that coming soon.