Tuesday, May 4, 2010

Insider Trading before 9/11?

After 9/11 it turned out there extraordinarily suspicious stock transactions in airline stock in Chicago, and far more elsewhere. It was limited to two airlines. Some of them were traced back to Deutschbank and a man working for it who had once occupied a high CIA post. An examination of trades for the ten trading days before the event showed an extraordinarily large number of put options on firms that would be crippled: American Airlines, United Airlines, Morgan Stanley, and Dean Witter, the last two occupying 22 stories in the WTC. Trading in the Chicago Exchange on the two airlines hit record levels.

Dylan Ratigan of Bloomberg Business News said, "This is the worst case of insider trading ever." According to Herzliyah, the Interdisciplinary Policy Institute located in Israel, the Chicago Board of Trade on September 6 and 7 had the purchases of 4744 United Air Lines put options a and only 396 call options. These Israeli analysts think the illegal profits worldwide were in the neighborhood of $12 million dollars. Other put the potential profits in the tens of millions. CBS News put the number at $100,000,000. Either way, this means that individual intelligence agents were making the investments, not their agencies. On the other hand, Andreas Von Bulow, a former German parliament member who had experience overseeing the intelligence services, thought the profits could have run into the billions. That would mean that security services were involved. There is also speculation that Al Qaeda could have made some of the investments. A “put” is a promise to sell the stock at some future date. In these cases, people are selling at the current price, but selling short, meaning they do not have the stock on hand. “Call” options are another matter. There also was unusual trade in “call options” in stocks that could profit by a national security disaster, especially one that could result in deployment of the military.

On September 10, there were 4516 put options on American Air Lines –actually AMR, its parent-- and 748 call options on various markets. That was 85% of the whole day’s options activities. . The put contracts could be leveraged up to 450,000 shares. The volume of puts on the two airlines in New York was far greater. The level of trade on these two airlines was up 1200%. On September 29, the San Francisco Chronicle noted that $2.5 million worth of these profits had not been claimed.

Similar unusual trade patters occurred in the stocks of European reinsurance companies, such as AXA and RE of Germany and Switzerland, firms that were indirectly covering the airlines. Barons reported that 2500 puts were purchased through Deutsch Bank and split into 500 pieces and then multiply processed through exchanges around the world.

We know that Al Qaeda had $1,000,000 in ten accounts at Deutsch Bank. If this was the extent of Al Qaeda funds there, it would be hard to sustain the theory that it partly paid for its operation by selling short the two airlines. Another problem is that a terrorist operation of the scope of 9/11 would require a great deal of expensive preparatory activity.

Some theorize that Deutsch Bank itself could have been involved in the speculation to shore up weak divisions. Those who argue this note that its Bankers Trust division in the United States had been speculating with unclaimed accounts funds in the 1990s and that the parent bank and BT has strong ties to the intelligence community. They add to this the then recent conviction of former Deutsch Bank trader Kevin Iungram, who was convicted of money laundering in connection with his illicit arms trade deals with Pakistan and perhaps Al Qaeda.

The SEC report showed that a group of Israeli investors were selling short 38 stocks that would likely fall as a result of such an attack. But the great volume of short selling came from other places. European and Israeli investigators found that the UAL put options were largely held by Deutsche Bank-A.B. Brown. Until 1998, A.B. "Buzzy" Krongard , the third in command at the CIA ran A.B. Brown. Krongard was also tied to Blackwater, a firm that is playing a major role in buying up distressed assets in 2009 through a program devised by Secretary of the Treasury Timothy Geithner, a former Blackwater man.
Before Krongard, other CIA officials were go
ing back and forth between the agency and big investment banks. John Deutsch, former head of the agency, serves on the board of Citigroup or Citibanc. Nora Slatkin , James Wolsey’s Number Three is also with Citigroup and Maurice "Hank" Greenburg, then head of AIG, was almost appointed by Clinton to head the CIA. We don’t know what the CIA does with t hese banks, but the relationship is clear. The Church Committee in 1976 revealled that there are CIA owned companies, proprietaries, whose stock is traded on Wall Street. Another way to look at this is to note that CIA people are well enough embedded in the Wall Street community that they must have known about the unusual activity in airline stock. We also know that PROMIS software has long been used to monitor such unusual trading. A CIA official said the agency did not monitor transactions within the United States because that would be illegal. He said he could not say whether it monitored foreign transactions. It is known that major intelligence agencies use a government operation called ECHELON to have sister agencies do their domestic spying for them. A Toronto police officer told the Sun on November 1, 2001 that PROMIS could be used to pull up transactions by by a person’s name On October 17, 2001 Department of Justice and FBI spokespersons said that they had discontinued using PROMIS software. This is particularly interesting because their lawyers have repeatedly stated in court that they had never used PROMIS.

All major markets have computerized market surveillance systems that would immediately find and report unusual spikes and trading and put out their findings through what is called “blue sheeting.” This means that the investigators at the BCOT and elsewhere have long known exactly who engaged in the unusual trade. The only people who do do not know is the general public. The FBI, probably using this data, investrigated the suspicious trade patterns and found that no one taking out put options had any inside knowledge.

In July and August of 2001, there was an extraordinary surge in currency component of M1, the money supply outside the banks. The surge was $5 billion more than likely surges for a two month period. This could mean that some people withdrew money out of frear that some catastrophe would endanger their investments. This was the third largest surge since 1947. Perhaps some of this money was being moved by terrorists. Footnote 28 of the 9/11 Commission staff report on terrorist financing says that the National Money-laundering Strategy Report of 2001 does not mention terrorist money-laundering. In fact, the subject comes up 17 times in that 50 page document. This assertion se3ems to support the low budget terrorism story line and the notion that small transactions cannot be monitored.
On September 17, 2002, CBS’s “Sixty Minutes reported that several people close to George W. Bush sold their airline stock days before 9/11. The story was not followed-up in the mainstream press.

There is one final consideration that may or may not have relevance to putting together the big picture. Senator Carl Levin, in a Februrary 1, 2001 minority report, has shown that about $300 billion in drug revenue goes through the US banking system every year.

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