Inside Sources Prompt Questions about James Cole’s Record at AIG as Independent Monitor
Cole was nominated by the Obama administration last month to be second-in command at the Department of Justice. For years, Cole has served as the Independent Consultant (IC) stationed at insurance behemoth AIG as a result of two deferred prosecution agreements (DPAs) between the corporation, the SEC, and the Department of Justice in 2004 and 2006. The DPAs were put in place as part of a settlement when AIG previously faced massive fraud charges.
“The administration is trying to deflect attention from Cole’s poor record of oversight at AIG in the years leading up to the financial crisis by claiming he was not asked to monitor the troubled subsidiary,” said Bea Edwards, GAP’s International Program Director. But in fact, it was Cole’s own decision that exempted that subsidiary from his scrutiny.”
When rumors of Cole’s potential nomination began to emerge in April, GAP began receiving frequent and disturbing calls from AIG alumni and current staff about serious problems with Cole’s actions during his tenure. Since then, Edwards has been steadily posting blog entries about Cole based on the disclosures we have received.
In advance of this hearing, Edwards has produced a primer on Cole’s role at AIG, followed by five questions GAP believes should be asked at the hearing.
- Cole’s interaction with AIG-Financial Products (AIG-FP) CEO Joseph Cassano, who was in a position to oversee the AIG subsidiary that oversaw credit default swaps. According to our sources, this corporation, which primarily generated and traded these swaps, was exempted from compliance obligations and oversight at the corporate level
- The interactions between Cole and three AIG officials – General Counsel Anastasia Kelly, Chief Compliance Officer Kathleen Chagnon, and subsequent-Chief Compliance Officer Suzanne Folsom (of Paul Wolfowitz-World Bank infamy) – regarding their conduct, credentials and hiring.
- A September 2008 purge (one month after the meltdown) of AIG senior compliance attorneys, that was (according to sources) executed under the authority of Kelly and Folsom.
- The independence of Cole’s reports to the Department of Justice, and the SEC, as specified by the DPA.
- Cole’s involvement (or lack thereof) of oversight of AIG-FP, and his recommendation to not subject AIG-FP to a higher level of scrutiny and oversight, despite that subsidiary’s serious problems in the past (related to fraud). That subsidiary, in charge of the CDSs, became heavily involved in the future 2008 problems.
“Cole was the Justice Department’s and the SEC’s eyes and ears at AIG as the corporation assumed unmanageable risk. If, as the administration claims, he actually was completely unaware of what was happening at AIG-FP, that alone should raise serious questions about his suitability for the post of Deputy Attorney General,” said Edwards.
Government Accountability Project
The Government Accountability Project is the nation’s leading whistleblower protection organization. Through litigating whistleblower cases, publicizing concerns and developing legal reforms, GAP’s mission is to protect the public interest by promoting government and corporate accountability. Founded in 1977, GAP is a non-profit, non-partisan advocacy organization based in