In the Florida deal, a little-known government body called the Capital Trust Agency turned the work over to its advisers: Anchor National Life Insurance Co., a subsidiary of AIG; CDR Financial Products Inc., a Beverly Hills, California-based financial advisory firm; and underwriter JPMorgan. These companies and other middlemen extracted $12 million in fees from the bond issue; the rest of the money went unused.
The AIG unit and CDR had an agreement the agency says it didn’t know about that allowed CDR to increase its fees as long as the money wasn’t spent for its intended purpose, according to a Nov. 18, 1999, letter from CDR President David Rubin to AIG’s Anchor National Vice President J. Franklin Grey.
The less money that was used to acquire and renovate apartments, the more money CDR stood to make, and the less risk AIG’s affiliate faced as an insurer since all of the money stayed in a safe account.
…CDR President Rubin says his firm has helped people acquire affordable housing.
Black box bond deals do more than deprive local taxpayers of promised spending on homes, schools and hospitals: They also rob the U.S. Treasury of about $100 million a year in revenue, Anderson, 55, says.
The 46 Blogs Jan. 7, 2009:
1. The use of altruism be it low income housing or Alzheimer patients seems to be a standard tactic of exploitation.
2. God bless local government, but in reality they simply weren’t prepared or were simply bedazzled by fast talking salesmen representing "reputable companies". These deals are complicated and opaque by design.
3. Is it any wonder AIG went under, if this was the standard business practice its clear this was not a viable company.
4. CDR and David Rubin who are inextricably linked to the Democratic party have managed to make millions off the exploitation of groups it was looking out for.
5. Bloomberg Markets and reporters William Seway, Martin Z. Braun, and David Dietz have written one of the finest pieces of reporting I have read.(They were honored for their achievement in 2007.)
6. When you see talk of local bond issues and you just don’t care, get involved and get information.
7. I truly believe that by pulling the threads on this scandal we could see the unraveling of a significant portion of the Democratic party.
7. If the integrity of the municipal bond market is destroyed, what happens to the country?
