Emails obtained by The Daily Caller show that former senior Treasury Department officials who orchestrated the 2009 auto industry bailout enriched their former employers and likely made personal financial gains from parts of the deal they negotiated. At issue is the termination of pension plans belonging to 20,000 non-union salaried retirees from Delphi Corporation.
Such self-dealing while an appointed member of a White House task force would violate federal law as well as an Ethics Pledge that an executive order from President Barack Obama said would apply to all appointees in the executive branch of the federal government from the date of his inauguration.
During the auto bailout, now former Treasury official Matt Feldman, Obama Auto Task Force adviser Harry Wilson and other administration officials drove the Delphi pension cutoffs for non-union retirees. Their actions violated a federal statute that identified the quasi-independent Pension Benefit Guarantee Corporation (PBGC) as the only government entity legally empowered to initiate termination of a pension or make official movements toward doing so.
Since the bailout began, those officials have contradicted themselves in court filings, congressional testimony and press reports by claiming the PBGC, not they themselves, made the Delphi-related decisions. Internal emails TheDC published recently, however, indicate otherwise. (RELATED: Emails: Geithner, Treasury drove cutoff of non-union Delphi workers’ pensions)
Financial gain is one possible motivation for the actions of Feldman, Wilson and others.
“Politics appears to have played a role, but now we see a financial bias that could have played a role in the decision-making that could have benefitted their current and future business partners,” Ohio Republican Rep. Mike Turner told The Daily Caller in a phone interview.
“The more information we get about who was involved and who made these decisions, it’s clearer that bias was involved both politically and financially. This was just wrong. If the Delphi pensions had been made whole, it would have been a less financially attractive transaction for Wilson’s and Feldman’s past and future business and law partners.”
The New York Post has reported that the hedge funds Silver Point Capital and Elliott Capital Management earned a combined $1.3 billion on the Delphi deal. Those profits came in late 2011 when Delphi emerged from government-mandated bankruptcy and launched its initial public offering.
Silver Point Capital’s ties to Wilson and Feldman may indicate something beyond a successful hedge fund investment.
Wilson, a Republican, was a Silver Point partner until August 2008 and later joined Obama’s Treasury Department. He was cited as a conservative who approved of the auto bailout process in an effort to give it a bipartisan feel.
He ran in 2010, as a Republican, for the office of New York state comptroller. His Democratic opponent, Tom DiNapoli, accused him of having “stand[ing] to personally benefit” from his role in the auto bailout.
“It certainly appears that Mr. Wilson steered the bailout to ensure that his former firm will make billions off his inside job at the Auto Bailout Task Force,” DiNapoli told the Buffalo News.
“Harry Wilson must explain his role in this deal. He must disclose how much he’s going to profit directly or indirectly from the taxpayer-funded bailout he negotiated. New Yorkers have the right to know just how much more money he’s going to make from the restructuring of GM. What Harry Wilson did is tantamount to self-dealing.” (RELATED: Private emails detail Obama admin involvement in cutting non-union worker pensions post-GM bailout)
Despite his August 2008 departure from Silver Point, personal financial disclosure forms Wilson filed with the New York Public Integrity Commission show the firm paid him at least $250,000 in 2009. The Buffalo News reported that he was on track to earn still more from Silver Point in 2010 and in 2011.
Feldman came to the Treasury Department from Willkie Farr & Gallagher — the law firm that represented Silver Point Capital as it angled for a cut of the bankrupt Delphi’s debt load.
He returned to the same law firm after leaving the Obama administration and remains there. Silver Point is presently among his clients.
The Ethics Pledge Obama issued as an executive order requires of “all appointees entering government” that they must agree to “not for a period of 2 years from the date of my appointment participate in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts.”
The emails obtained by TheDC show that on July 16, 2009, those senior Obama administration officials were informed about Silver Point Capital’s role in the auto bailout process.
Early that morning Maurice Lefkort, of Willkie Farr & Gallagher, emailed Rick Westenberg of General Motors and several others. That email, with the subject “Term Sheet,” read:
“Enclosed at the request of Elliott and Silverpoint is a term sheet reflecting the discussions this evening, both clean and marked to show changes from GM’s last draft. Please note that although we have discussed the enclosed with our client [Silver Point Capital] and Elliott at length, and they reviewed earlier drafts, this final draft has not been reviewed by them, and remains subject to further comment.”
Without hours, Jeffrey Tanenbaum of the firm Weil, Gotshal & Manges LLP forwarded Lefkort’s email to Wilson and Feldman, among others.
Feldman forwarded the email later the same day to Bradley Robins, the Head of Financing Advisory and Restructuring for North America at the finance restructuring firm Greenhill & Co.
In September 2011 TheDC published emails showing that these same senior Obama officials were aware their involvement in decisions affecting Silver Point’s business opportunities was a violation of ethics. (RELATED: Prior to political appointment, Obama official angled for gains from GM bailout)
“Know you folks are busy, but hope you and/or another non-conflicted person will agree to hear proposals for Delphi from the lenders, who are potential acquirors as well as holder of the traditional DIP lender rights,” then Blue Wolf Capital Management operating partner Josh Gotbaum emailed White House auto czar Ron Bloom on July 9, 2009.
“Bernie Knight, Treasury’s Ethics Counsel, told us that we could not communicate with Messrs Feldman or Wilson, but that we could meet with others without a conflict.”
President Obama later made a “recess appointment” of Gotbaum to become director of the PBGC, over the objection of Ohio Democratic Sen. Sherrod Brown.
Despite Gotbaum’s emailed warning that Feldman and Wilson were ethically prohibited from dealing with this situation, Bloom forwarded it to Wilson, Feldman and Steve Rattner within five minutes of receiving it.
Rep. Turner added that he thinks this new information raises yet more questions about the administration officials’ “outrageous behavior.”
“This is definitely crony capitalism,” Turner said. “It makes you wonder what sorts of back door deals were going on.”
“While Delphi pensioners were having their pensions slashed, these guys had apparently ongoing relationships that could absolutely affect the way in which they handled their responsibilities on the Auto Task Force. It’s hard to have a fiduciary obligation to the taxpayers, and to pensioners, when you have ongoing questionable ties to your business partners or law firms.”
UPDATE — A representative for Harry Wilson responds:
“Upon joining the Treasury Department, Mr. Wilson divested himself of all auto-related investments – these included auto-related investments in his own accounts as well as any such investments through his former firm. His divestment took place by March 1, 2009, near the market lows and before he joined the auto task force. As a result, Mr. Wilson did not earn a single penny of profit from his work on the auto task force; on the contrary, because of his government service, he knowingly and willingly forewent opportunities for substantial gains that later materialized as a result of the rescue.
“Mr. Wilson had no material involvement in the PBGC’s discussions with Delphi and General Motors. This fact was substantiated by internal emails at the time the relevant discussions took place as well as by sworn testimony subsequent to those discussions.
“Finally, all of Mr. Wilson’s dealings with Delphi were governed by Treasury ethics counsel from the outset. When Delphi became involved in the pending General Motors restructuring, Mr. Wilson appropriately notified Treasury ethics counsel that his previous firm was among Delphi’s lenders. Treasury ethics counsel established proper guidelines governing Mr. Wilson’s interactions with Delphi.
“Those guidelines included a prohibition on Mr. Wilson speaking directly with his former firm, its fellow lenders or their advisors, and Mr. Wilson followed those guidelines throughout the entirety of his work for the auto task force.”