04.18.11

Tangled Webs: The Top 10 Revelations

In his new book Tangled Webs, writer James Stewart reveals shocking new stories of deception in the Scooter Libby, Martha Stewart, Barry Bonds, and Bernie Madoff cases. Tony Dokoupil on Stewart’s top 10 revelations—including Rove’s lies to Bush. Plus, Dokoupil reports in this week’s Newsweek on Tangled Webs and how America lost the truth.

Through three decades, eight books, and countless articles, James Stewart has made exposing liars the touchstone of his career. In Tangled Webs, he focuses on a particular type of lie—perjury—and blows open the stories of four blockbuster trials, with previously secret testimony, investigators notes, and a bevy of exclusive interviews.

All four of his subjects—Martha Stewart, I. Lewis “Scooter” Libby, Barry Bonds, and Bernie Madoff—have been convicted of some deception-related crime. What Stewart does is pinpoint the moment each person parted with the truth. The results (all 473 pages of them) are startling—and so is the backdrop. Stewart raises the specter of “a surge of concerted, deliberate lying” by the nation’s loftiest citizens, one that encourages lying by a wider circle of society and ultimately undermines “civilization itself.” Read on for this apocalyptic vision and delectable details on America’s royal rogues.

Rove lied to Bush…

Karl Rove leaked Valerie Plame’s identity on two occasions, Stewart finds. Then, according to previously secret testimony by President Bush, he lied about it—to the president. With all the rumors circulating about Rove, President Bush called his “dear friend” and confronted him about whether he had “any involvement” in the disclosure of Plame’s identity. Rove’s reply: No way, sir. President Bush was satisfied. “If Rove said he didn’t do it, then he didn’t do it,” the president said. “If he was involved, he’d tell me. I trust him.” [p. 201-202]

…And Bush Didn’t Do Anything About It

President Bush’s testimony about Karl Rove was awkward for investigators. They already knew Rove had leaked Plame’s identity. He had told the FBI as much. And Bush had promised “consequences” for the leaker, no matter who he or she was. Would he fire Karl Rove? Before official news broke of Libby’s indictment, prosecutor Patrick Fitzgerald delivered a cover letter to the president with all the information he would need to make a decision. To Fitzgerald, the fact that President Bush was employing someone who had divulged the name of a covert agent was a national-security concern, so he invoked a rarely used exception to grand jury secrecy and hand delivered the letter to Bush’s lawyer, who mordantly joked that his client “could use a new staff.” Bush never responded. Rove stayed on until 2007. [p. 223]

Liars’ Club

There are no data on white-collar perjury, because “there is simply too much of it, and too little is prosecuted to generate any meaningful statistics.” But consider a sampling (of convictions, confessions and indictments for perjury, false statements, and evasions) from recent years, in roughly chronological order, all involving prominent, successful people: President Bill Clinton, former North Carolina Senator John Edwards, Rapper Kimberly Jones (aka Lil’ Kim), Merrill Lynch executive James Brown, BP CEO John Browne, Detriot Mayor Kwame Kilpatrick, Die Hard director John McTiernan, former governor of New York David Paterson, and baseball legend Roger Clemens. “It’s nearing a crisis,” James Comey, the former deputy attorney general and U.S. Attorney who prosecuted Martha Stewart. (p. xiv – xvii)

Thanks, I’ll Pass

Martha Stewart publicly insists she’s innocent of insider trading and making false statements. Ahead of her trial in 2004, however, the one-woman conglomerate was privately on the brink of pleading guilty, according to her lawyer, who spent months negotiating the deal with federal prosecutors. “We’ll get there,” Stewart’s lead lawyer told the government, speaking of a plea, and sounding “ebullient” because Stewart had agreed to admit guilt. In exchange, there would be no trial, the judge wouldn’t sentence her to jail time, and the Securities & Exchange Commission would let her remain director of her company. But Stewart recanted. “Martha won’t do it,” her lawyer told prosecutors, because “her business and reputation [can’t] take any admission of guilt.” (p. 83-84)

book-cover---tangled-webs
Tangled Webs: How False Statements are Undermining America, from Martha Stewart to Bernie Madoff. By James B. Stewart. 496 pages. The Penguin Press. $29.95. ()

A Tax Cheat, too?

Stewart made her suspicious stock trades while on vacation at a lavish Mexican resort—a $17,000 trip complete with helicopter rides, private jets, and a yacht. She claimed it was all a business expense because she had bumped into financier Steve Schwartzman in the hotel lobby. Schwartzman claims the encounter was “accidental and purely social” and Stewart, it turns out, double-dipped: She had her travel companion, then so-called best friend Mariana Pasternak, “kick in” her “fair share” of the trip—money that went straight to Stewart’s own pocket, along with the reimbursement money for her “business” south of the border. (p. 25)

Band of Brothers

In George W. Bush’s recent memoir, Vice President Dick Cheney is angry after his boss opts not to pardon Scooter Libby. “I can’t believe that you’re going to leave a soldier on the battlefield,” Cheney reportedly growled. Could his discontent stem from the fact that he was responsible for Libby’s crimes, having told the senior adviser to leak the name of CIA agent Valerie Plame? Both Libby and Cheney told investigators that “it’s possible” that Libby had acted under orders from the vice president; neither could remember for sure, but according to previously undisclosed FBI notes, Libby said he “may” have asked Cheney, “Do you want me to get something out [on Plame]?” That’s why special prosecutor Patrick Fitzgerald told that court that there’s a “cloud over the vice president.” It’s also, according to Stewart, an explanation for Cheney’s forceful push for a pardon: a guilty state of mind. [p. 178 and p. 195-196]

Bonds Tips His Hand

In previously unreported testimony from his grand jury hearing, Bonds explains (with surprising candor) why he both hasn’t let his childhood friend and trainer testify, yet hasn’t rewarded the man for his secrecy. “With all the money you make,” a juror asked the home run king, “have you ever thought of maybe building him a mansion or something?” The assumption being: This guy has gone to jail to save your butt. “One, I’m black,” Bonds responds. “And I’m keeping my money. And there’s not too many rich black people in the world… And if my friends can help me, then I’ll use my friends.” [p. 301]

Madoff Snows the SEC

Bernie Madoff survived four SEC investigations by throwing up laughable facades. For example, according to SEC transcripts disclosed for the first time, he explained his perfect market timing in terms of “cooking a meal,” albeit one involving “a blender” and “carrots and oranges and a whole bunch of stuff.” Then he got more concrete: “Some guys have more guts than others. Some of them are just stupid. They don’t get frightened when they should be getting frightened. Some people feel the market.” [p. 407]

SEC Was One Question Away….

Somewhere in his ramblings, Madoff said that the Depository Trust and Clearing Corporation—the world’s largest holding company for equities trading—could verify his market activity. Since there was no trading, the right question from the SEC would have exposed the fraud. “I thought it was the end game,” Madoff later testified. But the SEC never asked for the volume, seeming “confused” by how the DTCC even worked. [p. 414]

…And Their Failures Cost Investors $45 billion

By 2006 the SEC had evidence of Madoff lying under oath. At the time, his scheme involved about $20 billion. When it collapsed two years later, it had tripled to $65 billion—a fact that leaves Stewart aghast at the SEC. “Failing to pursue his lies cost innocent victims another $45 billion.” [p. 440]

Tony Dokoupil is a staff writer and editor at Newsweek.