Was This Whistle-Blower Muzzled?

Statement by Phil Angelides 

Chairman of the Financial Crisis Inquiry Commission (2009-2011) 

Re: “Was This Whistle-Blower Muzzled?”

On Sunday, September 22, The New York Times printed “Was This Whistle-Blower Muzzled?”, an article by William Cohan alleging that the Financial Crisis Inquiry Commission (FCIC) caved in to pressure from Citigroup and suppressed allegations about Citigroup’s misconduct made by its former employee Richard Bowen.

Five years after our financial markets came to near collapse and more than two years since we concluded our investigation, the work of the FCIC has survived intense scrutiny and stands as a factual, historical accounting of the events that led to the financial crisis and of the crisis itself. So it was troubling that this article got it so wrong.

It was the FCIC that brought Mr. Bowen forward to testify under oath.  He was interviewed by our staff at length and appeared before the full Commission at a public hearing.

The FCIC prominently featured Mr. Bowen’s allegations about wrongdoing at Citigroup concerning the purchase and sale of mortgages on pages 19, 111, and 168 of the Commission’s final report.

The article states that Mr. Bowen was told by FCIC staff that he could not testify about “his concern that Citi may have materially misrepresented its certifications of internal controls.”  In fact, in Mr. Bowen’s public testimony before the FCIC on April 7, 2010, he stated, among other things, “I even requested a special investigation from the management that was in charge of internal controls. And that investigation confirmed that we had very serious problems.”

Attached to his written testimony – and included in the report and placed on the FCIC’s website – was Mr. Bowen’s November 3, 2007 e-mail to Robert Rubin, Chairman of the Executive Committee of Citigroup’s Board of Directors, stating that “the reason for this urgent email concerns breakdowns of internal controls and resulting significant but possibly unrecognized financial losses existing within our organization.” Furthermore, Mr. Bowen wrote in the email that he had continually identified internal control breakdowns, widely communicated them in reports, emails and discussions and that two special investigations had confirmed the breakdowns.

The statute creating the FCIC directed the Commission to refer potential violations of law to the Department of Justice.  Contrary to Mr. Cohan’s article, rather than cave in to pressure from anyone, the Commission referred  Mr. Bowen’s allegations of internal control violations and fraud at Citigroup to the Department of Justice for further investigation and, if warranted, prosecution.  The Commission, of course, included in the referral Mr. Bowen’s interview with the FCIC staff on February 27, 2010 cited in the article.

The article stated that I “conceded” that banks applied enormous pressure to discredit witnesses appearing before the FCIC, as if to imply that the pressure affected our quest for the facts.   I “conceded” nothing in this regard – instead I made the point that the FCIC did not let that pressure affect our work or the conclusions we reached, a point amply made by the Commission’s actions in the Bowen affair.

—Phil Angelides

Chairman, Financial Crisis Inquiry Commission, 2009 – 2011

pa@angelides.com | http://philangelides.com | @PhilAngelides

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