Fooling Some of the People All of the Time, a Long Short (And Now Complete) Story, Updated With New by David Einhorn (tohfa e dulha read online TXT) 📕

Kerry’s campaign. ‘Just think what the SBA loan programs puts [sic] in our pockets!’ wrote Schuster, who lives in Kansas.” The Hill article continued:

Schuster also wrote that the head of Business Loan Express, Robert Tannenhauser, was a member of Kerry’s fundraising committee and was trying to raise more than $100,000 for the Democrat’s effort to defeat Bush.

“We would like to get at least the $100,000 mark, which would give the 7(a) industry incredible visibility with Mr. Kerry and his campaign committee,” Schuster wrote. “With Mr. Tannenhauser at the helm of this effort no group will receive more credit than the SBA lending industry.”

Schuster himself was a former SBA district and regional manager. I wondered whether the presence of a former senior SBA official at BLX impacted the agency’s oversight of the lender.

Once the SEC investigation of Allied started, Allied accelerated its political efforts. Starting in September 2004, Allied added the following to the corporate description it includes at the bottom of every press release: “In serving our shareholders, we help build U.S. companies and create and sustain jobs. The company’s private finance portfolio includes investments in over 100 companies with aggregate revenues of in excess of $11 billion, supporting more than 100,000 jobs.” The message to authorities and politicians couldn’t be clearer: If you put us out of business, 100,000 people will lose their jobs. Of course, that isn’t what would happen. The companies Allied invests in would carry on their work. Allied is not a large employer, with only 170 employees at the end of 2006.

Allied created a political action committee (PAC) in October 2004, four months after the company announced that the SEC was investigating it. By the end of 2005, the PAC had $116,000. The contributors were mostly Allied employees, including officers, directors, and their families. Joan Sweeney was in for $7,500 in 2004 and 2005, and Penni Roll and her husband contributed $10,000. Robert Long, the Allied executive who had lunch with me at the investor day meeting in 2002, contributed $12,500. Most of the PAC money was going to senators and members of Congress who oversaw the SBA, including Senator Olympia Snowe, the chairwoman of the Senate Committee on Small Business & Entrepreneurship.

Bill Walton also contributed $10,000 to the PAC during those two years. But he was also busy elsewhere. From 2000 to 2005, Walton made a total of $116,000 in political contributions. He gave money to President Bush, the Republican National Committee, and the National Republican Senatorial Committee, which received $35,000, the largest contribution of his that turned up in the records. Republicans got most of his money. Senator Mel Martinez of the Banking Committee got $3,000; Congressman Donald Manzullo, chairman of the House Committee on Small Business, got $1,000; Sue Kelly, another member of that committee, got $5,000; Senator Snowe received $1,000; Senator Jon Kyl of the Senate Finance Committee got $2,000; and Congressman Michael Oxley, chairman of the Committee on Financial Services, got $3,000. Seven members (six Republicans and one Democrat) of the Senate Committee on Small Business & Entrepreneurship received a total of $9,000, and a PAC set up for the possible 2008 presidential run of George Allen, a member of the committee, got $5,000. The lone Democrat was Evan Bayh, who received $2,000, with another $5,000 going to his PAC.

Separate from the PAC, Tannenhauser, his family and other Allied employees, including Sweeney, contributed to the campaign of Nydia Velázquez, the top-ranking Democrat of the House Small Business Committee and a member of the Financial Services Committee. She often complains that the SBA doesn’t initiate loans fast enough to help small businesses. Tannenhauser and his family, including a son and daughter, made more than $266,000 in political donations from 2000 to 2006. Most of it went to Democrats, including $20,000 to Velázquez. I’m sure the focused giving to elected officials who oversee the SBA is no coincidence.

In March 2005, after the U.S. attorney launched a criminal investigation, Allied added Marc Racicot to its board of directors. His resume: former head of the Republican National Committee; former chairman of the Bush/Cheney Reelection Committee; and former governor of Montana. In the spring of 2006, the company added Edwin L. Harper, another well-connected player, to its board. He presently is a senior vice president for public affairs and government relations at Assurant, a large specialty insurance company. Previously, he worked in the White House for Presidents Nixon and Reagan. Allied was obviously stacking the political deck to head off the investigations.

Remember the “bad cop” SEC lawyer Mark Braswell, who aggressively questioned me about the purpose of my speech and relationships with other fund managers? He left the SEC four months later, in September 2003, to become a partner with the Venable law firm in Washington. According to the Venable’s press release, he was to “concentrate on corporate investigations, white collar & securities litigation and compliance.” Braswell registered as a lobbyist for Allied in October 2004. Braswell was not generally a lobbyist. In fact, we couldn’t find a record of any other lobbying clients. How could it be proper, or even legal, for a lawyer who obtained confidential material from us, including e-mails, trading records and testimony about Allied, to leave the government and go work for Allied while our dispute was ongoing? (Allied was no stranger to lobbying. From 2001 to 2006, the company spent more than $1 million on lobbyists, including $60,000 to Venable.)

Greenlight’s lawyer sent a letter to the Office of Inspector General (OIG) of the SEC outlining the Braswell situation and explaining how it violated established ethics rules. In December 2006, the SEC’s OIG was heavily criticized for not investigating the accusation of former SEC enforcement attorney Gary Aguirre that the SEC impeded him from fully investigating possible insider trading by Pequot Capital Management based on possible tips from Morgan Stanley CEO John Mack. It doesn’t appear that they have done any better on the Braswell issue. To date, the SEC has taken no action.

I told Floyd Norris, the respected business