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Are we living through a sustained bull market for well-heeled liars?
How False Statements Are Undermining America:
From Martha Stewart to Bernie Madoff
By James B. Stewart
Penguin Press; 496 pp; $29.95
Eight years ago, before he became a senator and full-time serious person, Al Franken published a book called Lies and the Lying Liars Who Tell Them. This would actually make a better title for James B. Stewart's engrossing new book than the drab, finger-wagging one it's been assigned. For what Stewart has put together is less a fretful rumination on this country's moral failings than it is an extraordinary forensic analysis of the high-stakes American liar.
Stewart's CV already includes two masterworks about executive-suite hubris: Disney War and Den of Thieves, the latter an appraisal of the Boesky-Milken era of insider trading. Here, Stewart takes four oppressively familiar news stories from the last decade—Martha Stewart's ImClone (IMCL) stock caper; I. Lewis "Scooter" Libby's complicity in blowing the cover of the CIA operative Valerie Plame; Barry Bonds's involvement with Balco, a Bay Area business that distributed steroids; and Bernard Madoff's epic Ponzi scheme—and reconstructs them afresh by reporting the dickens out of them.
In Stewart's view, these stories are proof that we're living through a sustained bull market for liars, and "that the broad public commitment to telling the truth under oath has been breaking down, eroding over recent decades." Current headlines suggest he's on to something. Both Bonds, the former slugger, and Raj Rajaratnam, the former hedge-fund guru, have just stood trial for alleged untruth-related misdeeds: Bonds for perjury and Rajaratnam for insider trading. Even Warren Buffett, the conscientious grandpa of American investing, has been saying things lately that strain the bounds of credulity, if not legality. Can he be serious that the resignation of his putative Berkshire Hathaway (BRK.A) heir apparent, David Sokol, came as "a total surprise"? This, after it came to light that Sokol had in January purchased a $10 million stake in a company that Berkshire bought outright just weeks later?
Much will be made of the bombshells contained within Tangled Webs—particularly Stewart's contention that Karl Rove lied to President George W. Bush when asked if he was a source for the Robert Novak column that outed Plame. Stewart further reveals that State Dept. official Richard Armitage was as culpable as Libby in leaking Plame's name, and, like Rove, only narrowly avoided indictment. On the Madoff front, Stewart documents how a young Securities and Exchange Commission lawyer came within one phone call of uncovering the Ponzi scheme in 2006. Alas, between the lawyer's inexperience and her supervisors' indifference, she wasn't prepped to ask the right questions of the body she was calling—the Depository Trust Co., which Madoff said cleared his "trades"—and the matter was let go.
The book is most impressive, however, on the granular level. Drawing upon transcripts of grand jury testimony and notes taken by FBI agents and other federal investigators—information unsealed in the course of judicial proceedings or through the author's own Freedom of Information Act requests—Stewart is able to get up close to his protagonists to provide, he says, "a rare look at the very moment these people made the fateful choice to lie."
This is tweezer journalism at its finest. The Martha Stewart segment is especially magnificent, with author Stewart carefully assembling a tapestry of facts that allows us to witness, hour by hour, almost minute by minute, the actions that ultimately landed the domestic diva in jail. We see Peter Bacanovic, Martha's broker at Merrill Lynch, ordering his young assistant, Douglas Faneuil, to convey to Martha the news that another Bacanovic client, Sam Waksal, was trying to sell all the shares in the company he runs, ImClone. (It is Dec. 27, 2001, and Waksal knows that the Food & Drug Administration is not going to approve the cancer drug upon which he has staked ImClone's fortunes.) We see Martha calling Bacanovic's office from San Antonio, where her private plane is refueling en route to a post-Christmas vacation in Mexico. We hear her order Faneuil to sell all her shares in ImClone.
By the time the SEC is on her trail, Martha and Bacanovic have put together a story that the sale was the result of a preexisting agreement to unload her ImClone shares if the stock price ever dipped below $60. Martha tells this story in a January 2002 interview with lawyers from the Justice Dept. and the SEC, adding that she, Bacanovic, and one of her bookkeepers concur that they all have the same recollection of the $60 agreement. But this is after she has already said she's had just one conversation with Bacanovic about ImClone since the sale—and that the stock trade never came up. After a lawyer pounces on the gaffe, Martha grows huffy, saying "Can I go now? I have a business to run." And the plot thickens.
Throughout Tangled Webs, the protagonists determinedly dig themselves in deeper. Had Martha Stewart and Bacanovic owned up to the ImClone share-dump, both might have avoided jail. Bonds was granted full immunity in exchange for truthful testimony by federal prosecutors in 2003; their quarry was not him but his trainer, Greg Anderson, and Balco executives Victor Conte and James Valente. Had Bonds admitted to steroid use in his grand jury testimony, as his fellow ballplayer Jason Giambi did, he might still be playing, as Giambi is, rather than spending his days awaiting sentencing.
The one component of Tangled Webs that doesn't quite persuade is its argumentative framework. Stewart avers, rather melodramatically, that "we appear to be on the brink of becoming a society where perjury is the norm." That's a bit much. Isn't it entirely possible that lying under oath is not so much on the upswing, but, like autism and food allergies in children, just more frequently diagnosed than it used to be? (Which isn't to equate autism or food allergies with perjury, by the way.) There were no SEC investigations prior to 1934 because there was no SEC. The paper trails were shorter, the electronic trails nonexistent. Who's to say that the high-profile defendants of the gaslight era weren't bigger liars than those we see today?
The better case that Stewart makes is that perjury, as fundamentally serious a crime as it is, isn't treated like one. There's a telling moment in the Libby segment in which all of Washington knows his perjury indictment is about to be handed down, and Senator Kay Bailey Hutchison (R-Tex.) goes on Meet the Press to vent to Tim Russert. "I certainly hope," she says, "that if there is going to be an indictment that says something happened, that it is an indictment on a crime and not some perjury technicality."
The meager consequences of perjury reinforce this "technicality" mentality. Martha Stewart was sentenced to five months in prison and five months of house arrest. Libby got 30 months and a fine of $250,000, but President Bush commuted the prison part of the sentence. The SEC knew Madoff was lying to them under oath in 2006 about the nature of some of his supposed trades—a felony offense in and of itself—but because they didn't uncover a heavier underlying crime, they closed their investigation.
The eight-years-in-the-making Bonds case, a hangover from the juiceball era, is, in Stewart's view, an indication of how flummoxing perjury and false statements are to our legal system. "They essentially paralyze it and render it dysfunctional," he says. Indeed, we still have Roger Clemens's perjury trial coming up in July. And anyone who says he's looking forward to that is a liar.