The War That Raged Within Wall Street for the White House

By Pam Martens: November 8, 2012

Top Five Contributors to Mitt Romney's Presidential Campaign As Reported by the Center for Responsive Politics. (Funds Are Not From Firms, But Rather Their PACs, Employees or Immediate Family.)

Wall Street was at war with itself over which presidential candidate received its financial backing. The Wall Street firms were funneling lopsided financial support to Mitt Romney, but the largest Wall Street law firms were doing just the opposite: they were pumping money into the Obama campaign, sometimes 10 times more than they bestowed on Romney. As the accompanying graphic illustrates, the top five contributors to Romney were all Wall Street firms. (See our reporting here for the lopsided support given to President Obama by the Wall Street law firms.)

Now that the election returns are in and President Obama has emerged the winner, the question remains: why would the largest Wall Street law firms risk alienating their largest Wall Street clients by financing the candidate that Wall Street wanted to unseat, along with his Dodd-Frank financial reform legislation.

The answer seems clear enough: Wall Street firms trade; Wall Street law firms must defend those trading practices, frequently to the U.S. Department of Justice to ward off criminal prosecution.  And, as the saying goes, the devil you know is better than the devil you don’t know.

Right now, the big Wall Street law firms know quite well three of the top men in the Department of Justice and they like what they see. Eric Holder, the U.S. Attorney General, Lanny Breuer, the Assistant Attorney General for the Criminal Division, and Dan Suleiman, deputy chief of staff and counselor to Lanny Breuer, all came from the corporate law firm, Covington & Burling.

Covington & Burling is the law firm that, according to an earlier U.S. Department of Justice, fronted for the illegal misdeeds of Big Tobacco for four decades.  Covington & Burling’s relationship with Big Tobacco went far beyond the typical attorney-client relationship.  The firm set up front groups to hide payments and to hide the coordination of Big Tobacco in promulgating fake science on the issue of second hand smoke.

In an August 17, 2006 decision against tobacco companies, Judge Gladys Kessler of the U.S. District Court for the District of Columbia found that “Cigarette smoking causes disease, suffering, and death. Despite internal recognition of this fact, Defendants have publicly denied, distorted, and minimized the hazards of smoking for decades.” The Court also found the following regarding the role of lawyers in the conspiracy:

“Finally, a word must be said about the role of lawyers in this fifty-year history of deceiving smokers, potential smokers, and the American public about the hazards of smoking and second hand smoke, and the addictiveness of nicotine. At every stage, lawyers played an absolutely central role in the creation and perpetuation of the Enterprise and the implementation of its fraudulent schemes. They devised and coordinated both national and international strategy; they directed scientists as to what research they should and should not undertake; they vetted scientific research papers and reports as well as public relations materials to ensure that the interests of the Enterprise would be protected; they identified ‘friendly’ scientific witnesses, subsidized them with grants from the Center for Tobacco Research and the Center for Indoor Air Research, paid them enormous fees, and often hid the relationship between those witnesses and the industry; and they devised and carried out document destruction policies and took shelter behind baseless assertions of the attorney client privilege.”

The Court stated in a footnote that “Despite the apparent conflict of interest, a few law firms, particularly Covington & Burling and Shook, Hardy & Bacon, represented the shared interests of all the Defendants and coordinated a significant part of the Enterprise’s activities.”

The Court made the following findings specific to Covington & Burling, the law firm that has three top posts in today’s U.S. Justice Department.

    • The Tobacco Institute Board of Directors held its first meeting on January 30, 1958. At the first meeting of its Board of Directors, Hill & Knowlton was appointed Tobacco Institute public relations counsel, and Covington & Burling was appointed Tobacco Institute legal counsel. Both were to play a major role in setting the priorities for and guiding the future operation of the Tobacco Institute.
    • The Tobacco Institute Committee of Counsel was comprised of the general counsels of the sponsoring companies of the Tobacco Institute — Philip Morris, Reynolds, Lorillard, Liggett, and B&W — as well as counsel for American…Representatives from Philip Morris Companies also were members of the Committee of Counsel, and some Committee of Counsel meetings were held at Philip Morris Companies headquarters in New York. Members of the Committee of Counsel also included attorneys from the outside law firms of Covington & Burling, Jacob Medinger & Finnegan, and Shook, Hardy & Bacon.
    • Covington & Burling was counsel for the Tobacco Institute and was also described as counsel for the “industry.” An attorney from Covington & Burling attended every meeting of the Committee of Counsel. Covington & Burling attorneys first reviewed agenda proposals for the Committee of Counsel meetings before they were sent to member companies. Covington & Burling also cleared press releases issued by the Tobacco Institute.
    • A proposal, which was ultimately adopted and implemented, recommended that: (1) the Literature Retrieval Division be removed to the custody of defense counsel into a new business corporation to be formed called LS, Inc., the stock of which would be owned by four law firms; (2) payments to LS, Inc. by the law firms would be on a per client market share basis for all functions; (3) the only users of the system would be the four law firms plus Covington & Burling, representing the Tobacco Institute; (4) the only use of the system would be for litigation, which would be defined to include administrative proceedings and legislative hearings, at which proceedings and hearings the law firms were representing their clients.
    • A February 14, 1973 research report distributed to Defendants and their outside law firms linked smoking to cancer. The report, titled “Cigarette Smoke Condensate Preparation and Dermal Application to Mice,” was prepared by Hazelton Laboratories and submitted to American, B&W, Liggett, Lorillard, Philip Morris, RJR, and the law firm of Covington & Burling. It reported that “97 of the 100 mice developed gross lesions in the skin in the area of dermal applications of benzo(a)pyrene.” Examination indicated that these were squamous cell carcinomas.
    • In the fall of 1987, Reynolds sent Peter Hutt, a Covington & Burling lawyer who had previously served as Chief Counsel of the United States Food and Drug Administration to meet with representatives of FDA and other government health officials. According to meeting minutes, Hutt refused to discuss “safety issues” with the FDA because the “tobacco industry” maintained that “conventional cigarettes are not unsafe, and that it would never reverse this position.”
    • Philip Morris Companies held its conference called “Operation Downunder,” to formulate a worldwide strategy on passive smoking. Covington & Burling’s John Rupp told the group that the industry was “in deep shit” as a result of the 1986 reports and the industry’s “serious credibility problem.”
    • In September 1984, the Committee of Counsel directed Donald Hoel to reconstitute and reconvene the committee he had helped coordinate in the 1970s to manage Defendants’ passive smoking efforts. This new group was called the Tobacco Institute ETS Advisory Group or ETSAG. The purpose of the TI-ETSAG was to generate data to resist smoking restrictions and conclusions that supported the industry’s public position that ETS posed no proven health risk to nonsmokers.
    • Numerous meeting minutes and summaries illustrate the extent to which ETSAG group members, particularly attorneys from Shook, Hardy & Bacon and Covington & Burling, designed, monitored, and carefully controlled projects initiated by the group.
    • In an October 8, 1987 memorandum from Helmut Gaisch, Director of FTR’s Science and Technology, to Lee Pollak, in-house counsel in New York, Gaisch advised that Operation Downunder was being implemented in Europe with other cigarette companies and Covington & Burling. Gaisch described the link between Downunder and the recruitment of scientific consultants, or “whitecoats” as they were called, who would work on behalf of the industry throughout the world. John Rupp of Covington & Burling was charged with coordinating the scientific experts.
    • On February 17, 1988, Philip Morris and Covington & Burling presented the Downunder recommendations in London to BATCo and other European cigarette manufacturers to bring them on board.
    • At a May 26, 1987 ETSAG meeting, members decided that a new ETS research coordinating organization for the tobacco companies should be called the Center for Indoor Air Research (“CIAR”) “in order to dissociate it and avoid confusion with the Tobacco Institute.”
    • ETSAG proposed “the formal organization of a research organization to deal with issues relating to indoor air quality,” which became CIAR. The proposal for CIAR, presented to the Tobacco Institute Executive Committee on December 10, 1987, called for the creation of an organization “with its own staff and an increased research budget” for the ongoing ETSAG projects.
    • The tobacco industry’s ETS consultants in the United Kingdom, along with Covington & Burling, formed a group called Association for Research on Indoor Air (“ARIA”) in 1988. Covington & Burling organized, monitored, and funded the ARIA organization.
    • In 1989, ARIA created an organization called Indoor Air International (IAI), a group to address scientific issues related to indoor air quality around the world. Covington & Burling managed the creation of IAI, publicly presented it as an “international learned society,” and drafted the organization’s bylaws. IAI was funded by Philip Morris and BATCo. All billing was processed through Covington & Burling to avoid any direct connection to the industry.
    • Covington & Burling’s John Rupp stated in his February 14, 1990 Asia consultancy program update that IAI intended to begin publishing a journal the next year. Rupp reported that Asia industry consultants were preparing to write articles for the journal, and several consultants were serving on the journal’s editorial board. IAI’s publications and newsletters omitted any connection to the tobacco industry or tobacco law firms. Instead, its publications stated that the organization was merely a “learned society” dedicated to “promoting indoor air quality.”
    • Healthy Buildings International (HBI) took the position that banning indoor smoking was unnecessary to improve indoor air quality and that the “sick building syndrome” was the real problem. Philip Morris, through Covington & Burling, reimbursed costs incurred by HBI. Expenses included hundreds of thousands of dollars associated with Healthy Buildings International Magazine.

President Obama is now four years wiser than when he initially settled in to the oval office. The American people are expecting a house cleaning in his administration of those who have failed to deliver the promised hope and change.  The public has waited long enough to see meaningful financial reform on Wall Street and full scale prosecutions against the top executives on Wall Street who were complicit in bringing the country to its knees.

This is the wrong leadership at the Department of Justice to instill trust and confidence.  We will have an immediate window into President Obama’s second term by what happens at DOJ. 

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