As Fraud History Emerges for Bales, US Pushes FISA Court as Ideal for Afghan Night Raid Approval

The background for Staff Sergeant Robert Bales, the suspect in the mass killing of civilians in Afghanistan last week, became much murkier with the revelation that his career as an investment manager ended in a judgment of $1.4 million against him for fraud. He was accused of “churning” a client’s retirement account, selling off holdings in safer investments to purchase more volatile penny stocks. In the meantime, the fallout from the attack continues, as the US continues its effort to reach a SOFA agreement with Afghanistan ahead of the NATO summit in Chicago scheduled for May. The latest offering appears to be establishment of a system in which Afghan judges would be put into position to approve “warrants” before night raids take place. Deputy National Security Adviser Denis McDonough took to the airwaves on NPR this morning to hold up the US FISA court as the shining example on which the Afghan system should be modeled.

In this morning’s Washington Post, we get quite a few details on the fraud case against Bales. The former client, Gary Liebschner, had employed the firm Bales worked for to manage his retirement account:

That is not the man that Liebschner said he dealt with when Bales was much younger and listed as the “investment executive” on his retirement account. The fund held stock that Liebschner had inherited and earned during his AT&T days, as well as other investments.

/snip/

A severe reaction to medication left Liebschner hospitalized and in a rehabilitation center from November 1998 until June 1999. At the time, his wife, Janet, who took time off from her nursing job, was pressed for money to cover car and mortgage payments, as well as the cost of renovations to their home to make it wheelchair-accessible, she said.

She hadn’t previously been in charge of the couple’s finances, she said, but after she began to examine account statements, she realized that the fund had been severely depleted.

Her husband’s retirement account had nearly $700,000 in 1998, his statements show. By early 2000, the fund had about $30,000 in it.

That is an appallingly bad job of investment management, and it is easy to see how a finding of fraud was found against Bales and the firm for which he worked. A big caveat here, though, is whether Janet Liebschner withdrew funds to cover the home renovation and other expenses listed, and if so, how much was withdrawn. We don’t have the exact dates of when the account sat at about $700,000 or when it was found to be depleted, but the period of 1998 through 2000 was fairly robust for investments. Below is a chart of the Dow Jones Industrial Average from the beginning of 1998 through the end of 2000. There was a dip in mid-1998 that gave up the gains from earlier that year, but then from the fall of 1998 through the end of 2000, the market advanced by roughly 33%, from about 7500 to about 10,000:

Google Charts plot of Dow Jones Industrial Average, 1998-2000.

In order to deplete the account so completely during a period in which the market was doing so well, it appears that the churning had to consist of selling the original holdings only to buy stocks that underperformed the market by a very large amount. Considering the reports on Bales’ current financial difficulties, it does not appear that he stole the money outright, so the accusation that the churning took place primarily to generate brokers’ fees seems to fit.

Meanwhile, we learn from Reuters that the US is continuing its quest to somehow extend the practice of night raids even though they are the primary point of friction between the US and Afghan governments. The latest effort now appears to center on the creation of Afghan courts to review “warrants” for the raids:

With Karzai demanding a stop to night raids hated by Afghans, but seen by NATO as one of their most effective anti-insurgent tactics, a U.S. official said the United States was looking at modifying them and giving Afghans more oversight.

That would help seal agreement on a strategic pact with Karzai’s government for a long-term U.S. presence in Afghanistan beyond a 2014 deadline for most NATO combat forces to withdraw, allowing advisers and possibly some special forces to stay on.

The Obama government was discussing options with the Afghans including a warrant-based approach or possibly allowing Afghan judges to review raids before they took place, the U.S. official said on Monday, speaking on condition of anonymity because of the sensitivity of the negotiations.

To help push this concept, the Obama administration sent Deputy National Security Adviser Denis McDonough to speak with NPR this morning. The interview can be heard here. McDonough holds up the FISA court system in the US as the example he thinks a court for reviewing night raid warrants in Afghanistan should emulate.

To me, suggesting the FISA court as an example for the night raid court system is just one more inept move by the Obama administration. The FISA court, operating in secret, approves every warrant submitted and the government is quite effective in covering up errors that the court makes by invoking state secrets whenever challenged. When a night raid goes wrong, however, the damage done will still be entirely public and incontrovertible. There simply is no way to cover up a mistake in approving a raid that turns out to be improperly targeted and so this Aghan court system will be held to a level of accountability far beyond the total lack of accountability for the FISA courts.

Many years ago, Jim got a BA in Radiation Biophysics from the University of Kansas. He then got a PhD in Molecular Biology from UCLA and did postdoctoral research in yeast genetics at UC Berkeley and mouse retroviruses at Stanford. He joined biosys in Palo Alto, producing insect parasitic nematodes for pest control. In the early 1990’s, he moved to Gainesville, FL and founded a company that eventually became Entomos. He left the firm as it reorganized into Pasteuria Biosciences and chose not to found a new firm due a clash of values with venture capital investors, who generally lack all values. Upon leaving, he chose to be a stay at home dad, gentleman farmer, cook and horse wrangler. He discovered the online world through commenting at Glenn Greenwald’s blog in the Salon days and was involved in the briefly successful Chris Dodd move to block the bill to renew FISA. He then went on to blog at Firedoglake and served a brief stint as evening editor there. When the Emptywheel blog moved out of Firedoglake back to standalone status, Jim tagged along and blogged on anthrax, viruses, John Galt, Pakistan and Afghanistan. He is now a mostly lapsed blogger looking for a work-around to the depressing realization that pointing out the details of government malfeasance and elite immunity has approximately zero effect.
7 replies
  1. MadDog says:

    Shorter Deputy National Security Adviser Denis McDonough: “We love secret law so much that we think all governments should operate that way!”

  2. orionATL says:

    an afghan court will approve night raids?

    that is a truly inane idea; there would not be a raid conducted that would not be known about beforehand.

  3. orionATL says:

    @orionATL:

    what afghan judge, knowing the americans are on their way out the door, would be foolish enough to agree to authorize night raids against the folks who will likely take power shortly after the amers are gone?

    that would be delayed suicide in that country.

  4. lysias says:

    @orionATL: I’ve always wondered how officials in Nazi Germany could just continue to go about their daily routines at work in 1944 and early 1945.

  5. liberalrob says:

    That would help seal agreement on a strategic pact with Karzai’s government for a long-term U.S. presence in Afghanistan beyond a 2014 deadline for most NATO combat forces to withdraw, allowing advisers and possibly some special forces to stay on.

    I’m so old I remember when Obama promised to end our Afghanistan occupation by the end of 2011…

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