Sunday, October 12, 2014

No. 71 – November 8, 2013 - 16 Million Americans Lost their Homes – A Short Explanation as the Whistle Blows

by Melinda Pillsbury-Foster

In October of 1993 a nattily dressed attorney, fresh from his judicial clerkship for Kenneth L. Ryskamp, U. S. District Judge, Southern District of Florida, started work at Cadwalader, Wickersham & Taft (CWT).

Hired on for litigation as an associate, Charles Lincoln, III had planned, coordinated, and framed the jury questions for a very large securities fraud trial in Palm Beach against Alan B. Levan’s Florida-based BankAtlantic Bancorp and Subsidiary Bank Atlantic Financial Company (BAFCO), which were heavily involved in Florida Real Estate from 1952-2011.

CWT had no litigation ongoing at the time. Celebrating its bicentennial, CWT was busy with a registration project for the very first IPO for securitized derivatives for Excel Mortgage, supported by the Bank of New York (BNY). All 350 attorneys, and hundreds of secretaries and paralegals were working like beavers piling up their billable hours for the project.

Lincoln logged 393 hours the first month, delighting the partners. But along with his assigned work Lincoln, with a J. D. from the University of Chicago, School of Law, PH.D. in History and Anthropology from Harvard, was researching discrepancies in how these investments were to work and for whom.

After six weeks he suspected it was a Ponzi Scheme. After another six weeks, he was sure. A touch naïve, it took a year for him to accept this was not a mistake or misunderstanding. After producing thousands of pages of proof, no doubt was possible.

The atmosphere cooled and turned threatening.

Working late into the night Charles often saw Bernard Madoff, who founded the NASDAQ when he was 33. Madoff was a prominent client of CWT, often there, walking the floors.

Talk of derivatives, their hot new investment product, was rising as preparations for presenting the registration to the SEC feverishly continued.

Not long before Lincoln resigned two other attorneys at the firm clarified what was planned. The economy of the Western World would be transformed, and partnerships at CWT obtained. In nearly the same words each man said, “ We do it because we get to charge everybody. This is how the whole world will be managed by 2020. We have a plan.” They were nearly panting with excitement.

So, debt became equity. Careful registeration of ownership became history. Unsecuritized individual debt would no longer exist.

And, in time, all of Lincoln's predictions as to what would happen became painfully real. You heard it here first.

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