GM Bankruptcy Misrepresentations Prefaced Libya Attack Controversy
The 2012 election campaigns have seen accusations thrown about that both President Obama and Governor Romney have been less than honest at times. After Obama was soundly trounced in the first debate, the defense for the President's poor performance (other than Al Gore's theory that it was the high altitude) was that Mitt Romney lied. While that unsubstantiated charge might make Governor Romney an accused liar, the facts surrounding the General Motors bankruptcy process reveal that those in the Obama Administration are proven liars.
Although many in the media might choose to ignore the ethical shortcomings of the GM bankruptcy process, I believe the unprecedented, and mostly uncontested, nationalization of a major US industrial corporation that saw politically-favored groups rewarded emboldened our nation's president when it comes to being a bit lenient with the truth. The latest example of truth leniency by the Obama Administration came when misrepresentations were made about the terrorist attack in Libya, which was falsely blamed on protests over a silly film which insulted Muslims. OK, let's call it what it was; they lied.
The Administration should not get off as easy on the Libya attack as it did on the manipulated GM bankruptcy process. The State Department confirms that protests were not the reason for the attack that took American lives. Come on, were we to believe that a spontaneous protest included mortars and rocket-propelled grenades and coincidentally occurred on September 11th? Worse yet, evidence is mounting that shows the Libyan Embassy was denied requests for additional security as they feared for their safety. As NLPC has reported, this administration seems to believe that spending money on Chevy Volts and charging stations for embassies is more important than spending it on security. The response by the Obama team that the attack was not a terrorist act can only be seen as a deception to the American people or utter incompetence.
When we ignore unethical conduct by our leaders we run the risk of the behavior being repeated under more damaging scenarios that involve national security. The Obama Administration seems to think that it can get away with misrepresenting the facts, perhaps because the media seems to give the President a free pass. So, let's review how America was, and continues to be, deceived by the GM bailout.
The Auto Task Force was formed by the Obama Administration to oversee the auto bailouts. The first indicator of the direction the process was to take comes in the form of the leadership selected to head the team. An allegedly corrupt (for a NY "pay to play" scandal) hedge fund guy named Steve Rattner was initially given the job. Union guy, Ron Bloom, eventually replaced Rattner. Bloom was later quoted as saying, "We did it all for the unions."
The deception started as Rattner claimed that the Obama team's goal was to restructure GM (as well as Chrysler) outside of bankruptcy. That was the first lie. Rattner admits in his book, Overhaul, that the plan was formed early on to put Chrysler and GM in bankruptcy. Bankruptcy experts were the primary advisors as opposed to auto industry experts. Despite the current lambasting of Romney for wanting to "let Detroit go bankrupt," it was the goal of Obama to actually do so.
Now came the truly devious part. GM bondholders were set up to take the blame for the bankruptcy, even though the decision had been made by Obama's Task Force to file for bankruptcy. A bogus offer of 10% equity in GM was made to bondholders that required a 90% approval to avoid bankruptcy. As expected, the offer failed. The terms were so embarrassing that GM or the Task Force never made the result of the vote public. It was rumored to be about 5%.
While GM bondholders were offered 10% equity in GM for $27 billion of debt, the politically-favored UAW was offered 17.5% equity, $6.5 billion in preferred stock and $2.5 billion in cash for a $20 billion claim for its "VEBA" fund. Both claims should have had equal standing, but the offer blatantly favored the UAW. The spin from Rattner continued as he stated, "The UAW has been very constructive and very thoughtful. They don't want to be the only ones giving blood or even necessarily being the first ones giving blood." Maybe Rattner can be said to have an "etch-a-sketch" stance as he now claims that the UAW could have given more. The fact is that the UAW fared much better than they would have without the protection of the Obama Administration. If blood was shed, it was not by the much-favored UAW. The bankruptcy plan was set and GM insiders sold shares of Old GM about a month prior to filing for bankruptcy. Rattner also admits that most executives at GM knew of the plans, but the insider sales were never questioned.
Now the web of deceit was in full spin. A second "vote" was supposedly made with reports stating that over 50% of bondholders approved a bankruptcy process that only saw a slight improvement for creditors other than the UAW. The only problem was that the vote never actually occurred. To this date there has been no evidence of bondholders approving the plan. The media spread the false reports of a "vote" that later was called "an informal survey."
The bankruptcy plan was well-thought out. GM chose a debtor-friendly venue in NY for the process by starting a claim against itself there. GM-owned Saturn of Harlem began the process with Judge Gerber presiding.
The process went smoothly for GM, as expected. When my dissident group of bondholders contested the 363 filing and requested due process and equitable treatment, Treasury representative Harry Wilson testified that the government would pull out of the deal and allow GM to be liquidated if any more time was taken to ensure fair treatment to all creditors. Again, despite Obama's allegations that Romney wanted to liquidate GM, it was his Administration that threatened to do so. Judge Gerber ruled against bondholders as the threat was taken seriously.
There is now another lawsuit against GM that alleges that backroom deals were still being made at the time of GM's filing. As such, the whole bankruptcy deal may have to be readdressed. Judge Gerber exposes his position in his recent comments when he stated, "When I approved the sale agreement and entered the sale approval order I mistakenly thought that I was merely saving GM, the supply chain, and about a million jobs. It never once occurred to me, and nobody bothered to disclose, that amongst all of the assigned contracts was this lock-up agreement, if indeed it was assigned at all." "Saving" GM and "about a million jobs?" Any political bias there?
Let's also not forget the Delphi retirees who did not have the privilege to be in the UAW. Non-union retirees lost their pensions while the Obama Administration saw to it that UAW retirees kept theirs. Reports recently surfaced that there are emails confirming that Treasury representatives lied under oath when they denied having anything to do with the decision.
Another example of questionable behavior regarding Government Motors came to light when GM coordinated with the Obama Administration as then CEO, Ed Whitacre, ran an ad that made false claims that taxpayers were repaid in full. Some of the government loans were repaid with other TARP money received by GM but the claims of "taxpayers being repaid in full" were blatantly false and obviously political in nature. Again, the emboldened Administration arrogantly promoted deceptive claims for political gain.
We have seen the continued influence of the Obama Administration on GM as most news coming out of the company focuses on a green agenda (GM even went so far as to "create market" for the unwanted Volt) or new jobs created. I doubt that it is mere coincidence that recent reports of job creation are now touted by GM just a month before the presidential election. It is also likely that GM's earnings report (scheduled prior to Election Day) will have a positive spin.
My criticisms of the GM bankruptcy are not motivated by a political agenda. The media chooses to ignore what happened, but the public should be aware of the many deceptions that transpired. The most important debate that is being ignored is not whether or not the government should have been involved in the auto industry bankruptcy processes, but whether or not the process had to be manipulated in the manner it was, with the UAW receiving favored treatment from the Obama Administration as payback for their political support as the public was deceived on many fronts.
Perhaps the GM bankruptcy process is not of interest to most Americans, but people might be wise to review what transpired as evidence of an Obama Administration pattern of deceit surfaces. Whether it's a floor vote at the Democratic National Convention that was obviously misread to get the desired outcome or the misrepresentation of the Libya attack, this Administration is showing an alarming tendency to stretch the truth. It is no wonder that many question the validity of this month's jobs' report that suspiciously showed the unemployment rate dropping below 8%, despite the lack of new jobs created. Like the boy who cried wolf, those that have a history of being dishonest should rightfully be listened to with a skeptical ear.
Mark Modica is an NLPC Associate Fellow.