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James Cole’s Confirmation Hearing: Senate Judiciary Committee Silent about AIG

Bea Edwards, June 16, 2010
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Deputy Attorney General Nominee James Cole

The Senate Judiciary Committee held James Cole’s confirmation hearing yesterday morning for the post of Deputy Attorney General. It was not exactly an aggressive interrogation. Democratic members of the committee sought Cole’s commitment to continuing the reforms at the heretofore highly politicized Justice Department (DOJ), and Republican committee members wanted assurances that Cole, as the new Deputy Attorney General, would not guarantee Miranda rights to suspected terrorists. There were three or four allusions to Cole's role as an independent monitor at AIG in the years leading up to the financial crisis that brought the company down and wrecked the US economy, but no specific questions were forthcoming. Not from anyone.

In fact, the entire proceeding had the feel of a pro forma procedure along the way to confirming James Cole to be the second-in-command at DOJ. There were various ironic moments, however. For one thing, a number of senators sought assurances from Cole that he would hold BP accountable for the damage now being sustained by states along the Gulf coast as a result of the ongoing oil spill. For his part, Cole guaranteed that, if confirmed, he would make every effort to extract compensation from BP for those whose livelihoods were endangered by the thickening and widening slick of scum.

Asking Cole about corporate accountability in the BP case is like asking “Brownie” how he would handle another hurricane in New Orleans. It’s beside the point. Cole has a five-year record of responsibility for corporate oversight and compliance at AIG, where he failed to hold either individual managers or the corporation itself accountable for the catastrophe they visited upon US credit markets. In throw-away comments at yesterday’s hearing, Cole assured the committee that as Deputy Attorney General he would dedicate himself to combating mortgage fraud and financial fraud. When he made this statement, neither he nor his questioner (Senator Ted Kauffman, D-De.) made any reference to his recent past at AIG, where the Financial Products Corporation encumbered the corporate balance sheet with tens of billions of dollars in worthless real estate bonds as Cole looked the other way.

In answer to a question from Senator Jeff Sessions about the criminal prosecution of large corporations and their senior managers when evidence of fraud is compelling, Cole responded that he believed such prosecution was often unwarranted. In his view, it could unjustly penalize employees and investors who had nothing to do with the malfeasance. Cole also did not mention how repeated deferred prosecution agreements – through which AIG and its senior managers avoided criminal charges for securities fraud – allowed culpable managers to escalate the losses at AIG to such a point that the corporation had to be ‘rescued’ by US taxpayers. This leaves taxpayers, who had absolutely nothing to do with AIG, still paying over $180 billion in penalties instead of the parties at the company directly responsible.

In the end, Senator Sheldon Whitehouse (D-Rhode Island) took the microphone to ask Cole to be vigilant at DOJ on the issue of “regulatory capture,” a situation in which a government agency is co-opted by the corporate interests it is supposed to monitor. In a spectacular display of hypocrisy, Cole assured the senator that he would be especially alert in watching for such unethical collaboration. No one apparently saw fit to ask him how it felt to be an AIG captive for five years. That might have been because, strictly speaking, he wasn’t a captive; he was a willing companion there and a partner in the firm paid over $20 million for its non-oversight services.

While we respect the responsibility of U.S. senators to ask questions about Cole’s views of terrorism suspects and their right to remain silent, we do not believe that the senators themselves should have remained silent about what this particular nominee knows regarding misconduct at AIG. The hearing record remains open for a week, during which time Senators Grassley and Sessions will be posing written questions about AIG. We remain interested in the answers.

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Beatrice Edwards is International Program Director of the Government Accountability Project, the nation's leading whistleblower advocacy organization.