Bush Homeland Security Adviser's Company Fined $100 Million for Rogue Transfers

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Bush Homeland Security Adviser's Company Fined $100 Million for Rogue

Transfers

By: Thomas Maier

Newsday

 

The chairman of the nation's Homeland Security Advisory Council was

helping to guide America's security strategy at the same time he was a

top executive with an international banking firm that was investigated

and eventually fined more than $100 million for cash transfers to

rogue nations, including Iraq, Iran, Libya and Cuba, a Newsday

investigation has found.

 

Joseph Grano Jr., 56, said he did not inform Bush administration

officials, including Secretary of Homeland Security Tom Ridge, about

the problems of Swiss banking giant UBS, where he worked until June,

because he said it " is public record " and he wasn't required to do so.

 

He denied any wrongdoing and said he was unaware of the accusations

against UBS until the Federal Reserve's May announcement of one of its

largest fines ever -- for the bank's improper money transfers to

" rogue " nations under U.S. economic sanctions and its " deception " in

trying to cover it up.

 

Grano said he assumed Ridge and the administration already knew about

the federal investigation of UBS, where Grano worked as one of the

bank's senior-most executives after its $11 million merger with his

old firm PaineWebber in January 2001. He simultaneously served on the

advisory council and as an executive at UBS for two years.

 

" I didn't stop being American the day that UBS bought PaineWebber, "

Grano told Newsday this week. " PaineWebber was bought by this company,

and my job was to integrate these two firms and then I left. "

 

Grano, a major Bush-Cheney fund-raiser who is now a private business

consultant, said the accusations of dealing with terrorist- linked

nations " were never raised " while he was on the bank's six-member

executive board. " And if they were -- and if I thought that it would

be appropriate to consult Ridge about it -- I would have. But I'm

telling you they never came up. "

 

Homeland Security officials acknowledged Grano " did not " notify Ridge

about the UBS problems before Newsday contacted Grano this week. " I've

not heard this specific connection before being made, " said

spokesperson Valerie Smith. Agency rules do not require such

disclosure and Ridge believes Grano was under no obligation to do so,

according to spokesman Brian Roehrkasse.

 

" Joe Grano has done an excellent job as the first chairman of the

Homeland Security Advisory Council in exercising a leadership role in

guiding the council to fulfill its obligations under the Homeland

Security Act, " said Ridge in a statement released by his office.

 

The 18 unpaid appointees of the advisory council meet every three

months in private and public session, and receive briefings on

intelligence and other sensitive Homeland Security matters to provide

recommendations to Ridge. The members are subjected to extensive

background checks for conflicts with their individual finances as part

of a basic security clearance but are not required " to disclose

information about their employer, " Roehrkasse said.

 

Ridge has repeatedly emphasized the panel's importance in overseeing

the billions of dollars poured into the national infrastructure since

Sept. 11, 2001. With access to intelligence and other sensitive

security information, Grano's panel has been urged to analyze all of

the nation's Homeland Security efforts.

 

But security experts questioned how Grano could remain in such a

sensitive government post, given UBS' involvement with terrorist-

linked nations.

 

" I worry about people who have ties to companies dealing with nations

that threaten American interests and who are asked to have an

important role in advising our government, " said Frank Gaffney, former

assistant secretary of defense in the Reagan administration, now head

of the Center for Security Policy, an independent research group. " UBS

clearly pursues their interests that are at cross purposes with our own. "

 

Federal investigators are continuing their review of UBS's financial

dealings with nations under U.S. sanctions, and two House and Senate

committees are looking into how much the bank's senior management knew

of these activities.

 

After the merger, Grano continued to run the operation of PaineWebber,

which was later renamed UBS Wealth Management USA.

 

President George W. Bush appointed Grano, a decorated Vietnam War

veteran, to head the advisory council in June 2002. Prior to his

appointment, Grano had spent his entire career on Wall Street and

after he was named to the post told USA Today, " I didn't know George

Bush from Adam. "

 

While the advisory panel includes former FBI Director William Webster,

former CIA Director James Schlesinger and former Rep. Lee Hamilton,

some critics suggest that Grano was picked more for his political

ability than experience in fighting terrorism. After receiving a

Bronze Star in Vietnam, he became a prominent figure on Wall Street,

rising through Merrill Lynch and then PaineWebber. This year, in

addition to gathering $200,000 as a " Ranger " for the Bush-Cheney

campaign, Grano, New York Mayor Michael Bloomberg and retired

financier David Rockefeller reportedly were among the top group of 11

fund-raisers for this summer's Republican National Convention.

 

At the council's first meeting in June 2002, Bush sat next to Grano

and praised the government's efforts to stop international money

laundering to terror groups but said more needed to be done. " We could

all do a little bit better job of denying them [the terrorists] the

funds they need, " Bush explained.

 

In May 2003, the Treasury Department fined UBS $14,750 for allegedly

violating U.S. sanctions with improper fund transfers to Iraq and

another $5,000 fine for a second transfer to Cuba, both in 2001. The

fines were levied against UBS' New York offices.

 

A bank spokesman this week said the transfers took place " by accident "

and that UBS cooperated fully with American authorities.

 

Around the same time, the Federal Reserve of New York began

investigating the origins of more than $650 million discovered by U.S.

military forces in Baghdad in hideaways of Iraqi dictator Saddam

Hussein. Investigators soon learned through serial numbers that some

of the freshly minted $100 bills came from UBS. Authorities later

discovered phony records and a cover-up scheme by UBS officials in its

main Zurich office, concealing up to $5 billion that was sent from UBS

to Iran, Libya, Cuba and the former Yugoslavia from 1996 to 2003, when

all of those nations were under U.S. sanctions.

 

Eight shipments of U.S. cash had been sent by UBS through Iran and

into Iraq, according to Thomas C. Baxter Jr., lawyer for the Federal

Reserve of New York. " UBS personnel continued their efforts to conceal

these transactions even after the investigation was under way, " Baxter

testified before Congress. Baxter said the deception employed is the

reason such a large fine was levied.

 

" While we will never know the full extent of the damage, we do know

that our national security and economic interests were significantly

compromised by these despicable acts, " Sen. Richard Shelby, the

Republican chairman of the Senate banking committee, said in regard to

UBS's actions at a May hearing in Washington.

 

Grano said UBS was careful to avoid any financial ties related to

terrorism. " My feelings all along when I was on the ... [group

executive board] was an absolute indication on their part that they

were very supportive of the Patriot Act and of America's war on

terrorism, " he said.

 

UBS officials pointed out this week that they apologized for the

alleged violations, then disciplined and fired employees in Zurich who

were responsible. And in a formal statement, the bank insisted " there

is absolutely no evidence to suggest that any of UBS's activities have

ever been connected in any way with terrorist financing. " They made a

similar pledge in October 2001, after the terrorist attacks in the

United States.

 

And yet UBS has continued to deal as recently as this year with

bankers from Iran -- a nation the Treasury Department sanctions for

" sponsorship of international terrorism " and " active pursuit of

weapons of mass destruction. "

 

In January -- the month Grano stepped down from UBS' executive group

but six months before he left the company entirely -- UBS' senior

management hosted a Middle East seminar in Abu Dhabi in the United

Arab Emirates that was described on the company Web site as " an ideal

opportunity to present UBS as the partner of choice for financial

institutions in this important region. "

 

One person in attendance was the chairman of the Bank Saderat, which

is named on the economic sanctions list issued by the U.S. government

because it is " owned or controlled " by the Iranian government.

 

UBS spokesman Mark Arena confirmed the Abu Dhabi seminar and said the

bank would no longer have business dealings with Iranian financial

institutions. " It was a mistake, " Arena said. " That's the kind of

invitation that would not be made today. "

 

Grano said he knew nothing about this forum.