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‘Clinton Cash’ Author Launches Wildly Inaccurate Attack On Warren

Reprinted with permission from MediaMatters

In his new book, conservative author Peter Schweizer argued that Sen. Elizabeth Warren (D-MA) is responsible for federal bankruptcy laws that big businesses have used to their advantage. But Schweizer’s Warren criticism is based on a fabricated and wildly inaccurate history of bankruptcy law, and one expert in the field told Media Matters that Schweizer has a “fundamental misunderstanding of what bankruptcy is about.”

Schweizer, a Breitbart senior editor-at-large and president of the right-wing think tank Government Accountability Institute, is best-known for his 2015 book Clinton Cash, which was riddled with errors, fabrications, and distortions. Despite his sloppy work, Schweizer was aided in promoting his claims by a compliant mainstream press that failed to rigorously investigate his work or needlessly gave his allegations oxygen, as The Washington Post and The New York Times did when they made “exclusive agreements” with Schweizer to promote his work.

Now, as the 2020 presidential election approaches, Schweizer has released another book, Profiles in Corruption: Abuse of Power by America’s Progressive Elite, that levels corruption allegations against several Democrats running for president and other progressive politicians. In a chapter about Warren — who before being elected a U.S. senator in 2012 was a professor at Harvard Law School specializing in bankruptcy legal issues — Schweizer claims that during the 1990s, she was responsible for Congress’ adoption of pro-corporate bankruptcy laws. The claim, which is false, would be contrary to Warren’s presidential campaign platform. 

In his book, Schweizer seizes on the fact that between 1995 and 1997 Warren was the reporter for the National Bankruptcy Review Commission (NBRC), a bipartisan task force created by Congress to suggest changes to the U.S. Bankruptcy Code. As Schweizer relates, Warren’s work on the commission included issues relating to mass torts, which involve many people bringing a lawsuit against one or more corporations. Bankruptcy law is sometimes relevant to the resolution of these lawsuits. 

Schweizer claimed that “Warren was at ground zero in rewriting corporate bankruptcy laws” because of her work with the commission and that “the new laws allowed financially healthy corporations to start using bankruptcies as a way to avoid liability from legal suits.” Schweizer also claimed that “as the New York Times explained, the legislation pushed by Warren led ‘Fortune 500 companies with otherwise solid balance sheets’ to use ‘the bankruptcy courts as part of a broad strategy to resolve potentially ruinous legal woes’” and that “the new bankruptcy laws were a big win for large corporations, from asbestos producers to manufacturers of breast implants.”

Nothing Schweizer wrote here is true — except for the fact that Warren was the reporter for the NBRC commission. Efforts to change bankruptcy laws in the 1990s and 2000s are a complicated subject, but Schweizer’s claim of a connection between Warren’s work on the commission and “new laws” that benefited big businesses is false for one simple reason: There were no “new laws” as a result of the NBRC final report. Congress ignored the recommendations and set its own course, eventually making broad changes to the bankruptcy laws in 2005 (which Warren opposed).

The NBRC delivered its final report to Congress in 1997. As conservative legal scholar Todd Zywicki explained in a 2003 law review article, the NBRC’s “idiosyncratic ideological orientation guaranteed that its recommendations would be dead on arrival” in Congress.  Zywicki, a professor specializing in bankruptcy at the Antonin Scalia Law School at George Mason University, criticized the commission’s recommendations as overly friendly to judges and trial lawyers in his article and explained that they were unappealing to Congress because of ideological disagreements about the personal responsibility people who file for bankruptcy bear.

So instead of adopting the commission’s recommendations, Congress set its own course, which was laid out in a 2006 Department of Justice report that chronicles the history of the NBRC commission through when Congress actually overhauled bankruptcy laws in 2005. Before the final NRBC report was delivered in 1997, legislation that was “in sharp disagreement with the Reports’ consumer provisions was introduced.” That bill failed the following year, but as the DOJ report author Judith Benderson explained, it “rose repeatedly from the ashes in some curiously creative ways.”

In 2000, another version of the bill was passed by Congress, but then it was pocket vetoed by President Bill Clinton. Warren was actually involved in sinking the legislation. In a 2004 appearance on PBS program Now with Bill Moyers, Warren recounted that in the late 1990s she was invited by then-first lady Hillary Clinton to educate her on bankruptcy issues and the bill, which Bill Clinton was considering signing. Warren recalled that Clinton “went back to White House, and I heard later from someone who is a White House staffer that there were skid marks in the hallways when Mrs. Clinton got back as people reversed direction on that bankruptcy bill.” As Warren explained, President Clinton had been considering signing the bill to show “another way that he could be helpful to business”:

ELIZABETH WARREN: President Clinton had been showing that this is another way that he could be helpful to business. It wasn’t a very high visibility bill. And when Mrs. Clinton came back with a little better understanding of how it all worked, they reversed course, and they reversed course fast. And indeed, the proof is in the pudding.

The last bill that came before President Clinton was that bankruptcy bill that was passed by the House and the Senate in 2000 and he vetoed it. And in her autobiography, Mrs. Clinton took credit for that veto and she rightly should. She turned around a whole administration on the subject of bankruptcy. She got it.

As the DOJ report explains, a modified version of the bill was again introduced in 2005. That bill, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), became law after it was passed by Congress and enacted by President George W. Bush. As Vox explained, “Warren opposed the bill so vehemently that its passage inspired her transition from a Harvard bankruptcy law professor, who studied middle-class economics, to a senator and now a presidential hopeful.” 

According to legal publication Lexology, “between 1997 and 2005, numerous bills intended to address consumer bankruptcy abuse were presented to the house or senate floors. Consumer lending businesses are widely reported to have been the dominant lobby behind these bills,” and BAPCPA became the largest change in bankruptcy laws in 35 years. The primary purpose of the law was to make it more difficult for individuals to file for bankruptcy.

Reached by phone, bankruptcy expert and University of Chicago Law School professor Douglas Baird said the notion that Warren supported or helped enact pro-corporate bankruptcy laws was “ridiculous” and “baffling.” Baird emphasized that he is “not a supporter of Warren” and that the two have had significant public disagreements about bankruptcy policy, jokingly referring to himself as a “conservative force of darkness” compared to Warren. Still, Baird said he wanted to explain what Warren’s views were when they were traveling in the same circles during the 1990s, such as when they were both members of the National Bankruptcy Conference.  

Baird said that during the late 1990s and early 2000s, Warren “took positions that were so pro-consumer” on bankruptcy that they were repudiated by large financial institutions, and that “the idea she was taking positions that made her the tool of large organizations is ridiculous.” Baird described Warren’s role as reporter for the NBRC commision as something like an “executive director” or even a “cat herder.” While offering some criticism of how Warren used that role, Baird emphasized that she was not the “policymaker” and mentioned, as others have, that Congress didn’t take up the commission report’s findings anyway. 

Reached for comment by Media Matters about Schweizer’s claims, Seton Hall Law professor Stephen Lubben wrote by email that “the 2005 bankruptcy amendments did very little to change corporate bankruptcy law (it was mostly about personal bankruptcy)” and “that, combined with the fact that the Commission’s work had little to no impact on the 2005 amendments, would seem to massively undercut [Schweizer’s] claims.”

Schweizer inserts more misrepresentations in his book, making claims about Warren and Section 524(g) of the Bankruptcy Code in order her paint her as having pushed corporate interests. The provision was added by Congress in 1994, and is relevant to companies facing legal claims over asbestos exposure. Relying on a legal declaration issued by Warren in 2002 about her consulting work with Congress during the 1990s, Schweizer wrote that “she was also a key advisor on an obscure but profoundly important section of the bankruptcy law called U.S.C. 524(g)” and claimed the law benefits big corporations. 

The 524(g) provision of the Bankruptcy Code is a codification of a process used by a federal bankruptcy court to resolve the Johns Manville asbestos bankruptcy case. According to Warren’s 2002 legal declaration, some members of Congress “hoped that the [NBRC] Commission would develop a more comprehensive approach to replace” 524(g) and that in its final 1997 report the commission did make further recommendations (which Congress ignored). In his book, Schweizer characterizes 524(g) as legislation “pushed by Warren” and claims it was a way for corporations to “avoid liability.”

But according to Baird, describing what Warren did on 524(g) issues as pushing corporate interests is a conclusion that someone who “doesn’t understand the law” would reach, as in Baird’s view, 524(g) is not an anti-consumer law. Baird added that “nothing that Warren was doing was contrary to the interests of tort victims” in that litigation area and that she was “involved in coming up with a sensible mechanism” to resolve certain legal disputes.

Overall, Baird said that Schweizer’s characterizations of Warren’s work with Congress on bankruptcy laws and the conclusions that he drew from them show a “fundamental misunderstanding of what bankruptcy is about.” 

Schweizer has been touting his smear of Warren across conservative news outlets, appearing on Fox News shows Special Report and Fox & Friends and on Fox News contributor Mark Levin’s radio show and claiming that Warren helped rewrite bankruptcy laws — sometimes while also falsely saying that she did so to benefit corporate interests.

More reputable outlets would be wise to give Schewizer’s false claims attention only when they’re debunking them.

Photo Credit: Gage Skidmore

#EndorseThis: Clinton Takes On Trump’s Business Record

Campaign speechwriters and researchers rarely get shout-outs in major addresses. But today, in a surgical take-down of Donald Trump’s business record, Hillary Clinton seemed obliged to thank her staff.

“You know, when I was working on this speech, I had the same experience I had when I was working on the speech I gave about foreign policy and national security,” she said, before talking about Trump’s tax plan. “I’d have my researchers and my speechwriters send me information, and then I’d say, ‘Really? He really said that?’ And they’d send me all the background and the video clip… So here it goes.”

Clinton went on to dissect Trump’s tax plan, and the egregious burden it would put on the American economy. It didn’t seem like a very difficult speech to assemble or deliver, frankly: The analyses of Trump’s tax plan have been around for months, and they have been unanimous: What Donald Trump is proposing is not only unreasonable, it’s not even grounded in economic realities. It would be a disaster.

Clinton also drilled Trump on his failure to release his tax returns, saying it could mean any number of things: That Trump hadn’t paid any taxes, that he didn’t give to charity, or that his net worth wasn’t nearly as large as he says it is.

If you want a recap on what economists and investigative reporters (including David Cay Johnston, on this site) have been saying about Trump for months, the entire speech is a fairly efficient summary of the juiciest opposition research.

Video: FOX 10 Phoenix

#EndorseThis: John Oliver Forgives $15 Million Of Medical Debt On Air

John Oliver’s weekly 20-minute rants have a knack for seeping into the mainstream. The Consumer Financial Protection Bureau recently announced new, stronger regulations on the payday loan industry, nearly two years after Oliver called them out for their predatory business model. At Oliver’s urging, viewers sent 45,000 emails to the Federal Communications Commission urging them to protect net neutrality from corporate influence — they did.

And, notably, John Oliver had perhaps the most vicious takedown of corruption in FIFA on all of American television, six months before the Justice Department announced an investigation into the international soccer organization.

Yesterday, Oliver set his sights even higher, staging what he called “the largest one-time giveaway in television history” by repaying $15 million worth of medical debt on his show, to highlight the perverse incentives on which the debt collection industry operates.

Oliver and his shell company bought the debt, he said, for half a cent on the dollar, the result of the long and circuitous path of bundling and revaluing that debt undergoes as a traded commodity — the same process that makes aggressive collection of debt so profitable, and often, so disruptive in the lives of debtors.

The Art Of The Inside Deal: How Regulators Rescued Trump

Published with permission from The Washington Spectator

Americans wouldn’t be imagining today what a Trump presidency might be like were it not for a crucial moment more than 25 years ago when government saved Donald Trump from his own profligate spending. In fact, it was one carefully calculated response by one of his attorneys that saved Trump from financial collapse—just two years after Trump had proposed himself as a vice-presidential running mate for George H. W. Bush.

That moment, when New Jersey’s Casino Control Commission decided that Trump was too big to fail, was rich with lessons not just about Trump, but about how government can favor some people over others—and about how lots of journalists, then and now, don’t understand Trump.

From 1985 until 1990 Trump was awash in greenbacks. Over those four and a half years profits at his enterprises flowed into his pockets at the rate of $10,000 an hour in cash, around the clock.

At the time, Trump told me and everybody else that he was worth $3 billion. It was a dubious claim for a simple reason. If he was that rich, why was he unable to pay his bills as they came due?

In February 1990 Trump quit paying many of his personal bills. Reporting then for the Philadelphia Inquirer, I got his personal financial statement, which showed that he expected his income to fall to $748,000 in 1992 and to $296,000 the year after. That’s a lot of money to most people, but not to a “billionaire” with a personal 727 jet to maintain.

In April casino regulators made public a document showing Trump was down to his last $1.6 million.

Payments on more than a billion dollars of bonds on his three Atlantic City casinos came due every 90 days, but as the next payments loomed Trump lacked the money to make them.

About 100 vendors at the newly opened Trump Taj Mahal casino had not been paid. Many contractors took legal action to protect their interests. And the Trump Shuttle, equipped with what Trump said were gold sinks, was down to $1 million cash, not enough to pay employees and keep the fleet of Boeing 727s fueled, or to pay for constant repairs, since almost all the planes were more than 20 years old.

As April ended, I broke the story that Trump’s own personal financial statement showed he was worth far less than he claimed.

All this and more forced the New Jersey Division of Gaming Enforcement (DGE) to do something it had failed to do for years—examine Trump’s finances, to see if he met a critical legal requirement to own a casino, namely that he was financially stable.

The basic standard was simple: the ability to pay bills as they came due. If you had to roll over old debt into new, that was fine with casino regulators, so long as you did not miss payments. The law put the onus on Trump to establish his financial stability by “clear and convincing evidence.”

As the DGE moved in, Trump’s bankers had an accounting firm go over his finances. I summarized their report showing he had a negative net worth of $295 million this way: You may well be worth more than Donald Trump. That story ran above the masthead of the Inquirer’s front page with the headline “Bankers Say Trump May Be Worth Less than Zero.”

The morning that story ran was the critical moment for Trump. Near Trenton, the Casino Control Commission listened to testimony about whether Trump was financially stable. If it ruled he was not, his casino license would be rescinded.

The case that Trump should keep his licenses was made not so much by Trump’s own lawyers as by state employees at the DGE, who asked questions shaped to gloss over the growing gap between the revenue Trump was taking in and the bills he had coming due. It was a curious proceeding, as the DGE was supposed to investigate casino owners, workers, and the games themselves to ensure integrity and financial stability, not defend the owners.

A report by the Kenneth Leventhal accounting firm showed that Trump’s financial situation was deteriorating rapidly. Instead of ending the year with $24 million in cash, the accountants’ revised estimate showed he would run dry before the year’s end.

DGE’s own 111-page report noted that of the $3.2 billion Trump owed (not owned, but owed) he had personally guaranteed $833.5 million. Absent an agreement by all creditors, Trump faced an uncontrolled domino-effect chain of bankruptcies in which if one creditor moved against one Trump property the others would follow.

More than 1,000 lawyers working for Trump and his creditors (who already billed almost $11 million) had worked out a “fragile” deal to keep Trump going, hoping to minimize losses on the loans they had extended without checking his finances carefully.

The deal required approval by at least four of the five Casino Control Commission members. After two commissioners asked skeptical questions, Trump attorney Nick Ribis called for a break.

The dozen reporters in the front row stood up, a few looking bewildered. “They’re rehearsing the answer to the next question,” I advised my colleagues. “When they come back, they’ll have the witness say Trump will be torn apart by the bankers unless the commission votes immediate approval of his deal with them.”

Minutes later, Thomas Cerabino, a Trump lawyer at the center of the private bankruptcy negotiations, took the stand. The next question came not from Trump’s lawyers, but from DGE’s Thomas Auriemma.

What would happen, Auriemma asked, if the commission delayed approving the deal?

Unless the commission acted immediately, Cerabino testified in slow deliberate words, “the banks will move apart and take whatever steps they think are appropriate to protect their interests.”

With that warning from one of his lawyers, Trump avoided the B word, but it was made clear to commissioners that an uncontrolled bankruptcy was one day away. Only two other reporters wrote stories explaining what Cerabino had said—how he managed to convey, without saying it directly, that Trump was on the verge of ruin. That’s because most reporters merely quote people accurately, often with little understanding of the issues.

Before the hearings resumed the next day, several reporters rushed up to me, one clutching my big front-page headline, asking when I would retract my story. They said that Ribis, Trump’s casino lawyer, had just told them my story was wrong. I marched over to Ribis, asked a series of short questions whose answers established that my story was correct, and got him to confirm to my peers that no retraction of even correction would be requested.

When the commissioners entered the room they faced a choice. They could approve the “fragile deal” with the banks or go with the evidence showing that Trump was financially unstable and rescind his license.

That’s when four of the five political appointees used their power to take Trump’s side. The commission told the bankers they were free to foreclose on Trump. However, while they would be in possession of three large seaside hotels, there would be no gambling because the banks lacked casino licenses.

The commission’s action was extraordinary because state law provided for such a circumstance, allowing the commission to seize financially unstable casinos and keep them going with the existing staff until a new buyer could be found. Instead, the state of New Jersey took sides, favoring Trump over the interests of his bankers and the people who had put their money in those banks.

Four months later, as Christmas 1990 approached, Trump was again running out of cash. “Donald will need $180 million more from the banks to make it,” a source intimately familiar with the details of Trump’s finances told me back then.

It was the beginning of Trump having to relinquish his stakes in a host of enterprises—and by 1991 the Trump Taj Mahal was in Chapter 11 bankruptcy, the first of what would become four business bankruptcies. He later sold stock in his casinos, where investors not only lost their shirts, but during the fourth bankruptcy case creditors successfully demanded that Trump get lost. These days Trump licenses his name for much of his revenue.

Today Trump shrugs off the four bankruptcies, saying it’s a standard business tactic to restructure debt. But back in 1990 he was as afraid of that word as he is today of taking another tough question from Hugh Hewitt or Megyn Kelly. And but for government saving Trump by taking his side against his bankers, his business would have been tied up in years of litigation and we almost certainly would not be imagining the prospect of Donald Trump living at 1600 Pennsylvania Avenue. Because Trump would have been sunk beneath a sea of red ink.

David Cay Johnston is a Pulitzer Prize-winning investigative reporter. His most recent book is an anthology, Divided: The Perils of Our Growing Inequality.

Photo: U.S. Republican presidential candidate Donald Trump reacts as he is introduced during a campaign event in Concord, North Carolina March 7, 2016. REUTERS/Chris Keane