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3 out of 3 Known Americans Elect Funders made Fortunes off Duping the American People

Last week, we learned that after failing to attract enough actual voters to carry off the first-ever privatized presidential election, the 501c4 corporation called Americans Elect abandoned democracy and without a vote or democratic process of any kind started pouring money into the campaign to elect Angus King to a U.S. Senate seat in Maine. Americans Elect took $1.75 million in contributions from just three people and funnelled it in various ways into pro-King ads in Maine media markets. Those three people are:

  1. Private Capital investor Peter Ackerman
  2. Hedge Fund manager John Burbank the Third (through a check cut by hedge fund Passport Capital)
  3. Bloomberg LP owner Michael Bloomberg

We already knew that Peter Ackerman made hundreds of millions of dollars as the right-hand man of Junk Bond King Michael Milken, who earned his money hand-over-fist by engaging in insider trading. Insider trading is the practice of using fat-cat contacts to make trades early, before any other American knows a company is about to hit the big time or bite the dust. By selling to or buying from others before anyone else knows secret information about a corporation, an inside trader gets rich off of duping other people. Thanks to Milken’s various unethical practices, America’s savings and loan institutions crashed, further hurting the little guy in America. Peter Ackerman served as Milken’s assistant while Milken was doing this and walked away with hundreds of millions of dollars of personal wealth.

We already knew that Michael Bloomberg made billions of dollars selling high-priced infrastructure to Wall Street traders, allowing those gain unusually quick access to company information so they could make better trades and make more money than the average American — again by duping the less-wealthy American investors who couldn’t afford Bloomberg’s expensive product. Bloomberg became a multi-billionaire by helping already wealthy corporations get even wealthier by turning small investors into chumps.

Yesterday, AE Transparency completed the picture, unearthing the source of wealth of the Americans Elect funder #3, John Burbank the Third:

Burbank tends to keep a low profile — he may be one of the richest Americans about whom there isn’t enough to say to warrant a Wikipedia article. In 2000 the then-obscure Burbank decided to launch a hedge fund (initially bankrolled with $50,000 in credit card debt), which has become today’s $3 billion Passport Capital. Passport — and Burbank — rocketed to fame and fortune in 2007, when an unusual hedge position it had taken suddenly paid off royally. As bloomberg.com explains:

“Mortgage debt in the U.S. had ballooned about eightfold to $1.4 trillion in 2005 from $181 billion in 1995, according to the Federal Reserve. If a global credit crunch struck, Burbank was sure investors would cease buying subprime mortgages, bringing America’s housing party to an abrupt end [….] To profit from that possibility, Burbank invested in a funky instrument known as a subprime mortgage credit default swap — a CDS that insured the holder against a loss in a pool of high-risk mortgage bonds [….] In 2007, Passport’s swaps paid off when foreclosures on subprime mortgages soared. Burbank personally pocketed $370 million that year.”

In short, Burbank foresaw an impending threat to the American economy earlier than others, and did what any red-blooded American would do: he cashed in on it. This is how Wall Street legends are born in the post-industrial Wild West. Burbank and AECorp founder Peter Ackerman clearly have a lot to reminisce about over brandy and cigars. Ackerman made his own fortune in the junk-bond scandal which nearly destroyed the American savings and loan industry.

Passport Capital has since made untold additional fortunes betting on other harbingers of hard times, including shortages of depleted commodities such as oil, fertilizer, and copper, and on inflation of gold prices by tea-bagger panic. As Burbank told the SkyBridge Alternatives Conference in Las Vegas this year, “I believe the West is bankrupt and failing and it’s just a question of when.” And, presumably, when it does fail Burbank intends to be there to reap outsized rewards.

3 out of the 3 known Americans Elect Funders made huge fortunes duping the American People or, in Burbank’s case, profiting off working-class Americans’ despair. Then they got together to hold a closed-door three-person vote and start using their millions to prop up their own favored candidate for national office under the Americans Elect brand name. Are you an Americans Elect delegate, one of the people Americans Elect said would decide who Americans Elect would support? You weren’t included in the decision. You weren’t even informed.

The next time the people behind Americans Elect start using words like “grassroots,” “democratic,” and “the people’s voice” to describe their efforts, remember this.

9 comments to 3 out of 3 Known Americans Elect Funders made Fortunes off Duping the American People

  • Brad M.

    Strong language, but a bit disingenuous.

    Bloomberg selling infrastructure to financial institutions for decision making doesn’t “dupe” anyone. Where is the illegality?
    Sounds like Burbank made some good guesses on which way some of the markets were going to go, but nothing remotely similar to “duping” anyone. Where is the illegality?

    As for Ackerman, your accusation of his association with Milken sounds like a little bit of guilt by assocation. No criminal charges were ever leveled against Ackerman, but he did pay out a big fine on a civil case which does smell a bit admittedly. Where there is smoke there is fire? Don’t know.

    As for the support of Angus King by AE (via 3 folks contributions) it is curious. And for record I support Angus King. It will be interesting to see if any election campaign finance law prevents that AE contribution going forward.

    Are you aware of anything in AE’s bylaws that doesn’t allow AE to support a candidate? Are you aware of any bylaw requiring delegate approval of funds spending? If not, I’d say your comments above equate to unsubstantiated bellyaching.

    • Brad,

      You’re attributing more to me than I write.

      I didn’t say anything about illegality in the case of Michael Bloomberg. You don’t have to break the law to write software designed to allow well-endowed traders to dupe traders for the less-well-endowed.

      I don’t blame you for being ignorant of the Americans Elect bylaws, since Americans Elect has hidden them. However, here’s a mirrored copy of the last Rules, Bylaws and Charter made available by Americans Elect at the end of May 2012:

      Bylaw Section 2.3:

      “Section 2.3. Delegates. Delegates are Members who have submitted sufficient information to permit verification of their lawful status as registered voters and citizens of the United States, and who have been so verified by Americans Elect, and who have accepted the Delegate Pledge as provided by the Rules Committee. Upon receipt of verification for eligibility as a Delegate, Delegates shall have the authority to vote and participate in all aspects of online conventions and decisions in accordance with the convention rules and these Bylaws and may participate in such additional voting consistent with the purpose of Americans Elect as may from time to time be presented to the Delegates for decision. All Delegates and persons registered to vote in Americans Elect have a fundamental right to fully and meaningfully participate in the business and affairs of Americans Elect without any monetary encumbrance.”

      Furthermore, Bylaw 2.5:

      “Section 2.5. Power and Authority of Delegates. Americans Elect shall confer directly on the Delegates such functions as traditionally have been within the authority of the leadership of the major political parties. Delegates shall have exclusive power and authority to…determine, adopt, and ratify the rules of the online convention and platform of questions in accordance with these Bylaws; and with approval of the Board, certify or decertify other Delegates and candidates in accordance with these Bylaws.”

      Also, Rule 12.2 provides that delegates shall be able to reverse the decision of any committee or board of Americans Elect:

      “Any Delegate who wishes to reverse any decision of any Committee or Board may do so by sending a statement of 500 words or less by email to the Board within 72 hours after notice of any decision is posted on the Website. The Board shall then post the statement on the Website with instructions that any Delegate who agrees with reversal shall ‘Support Click’ the statement…. This process of Reversal Votes shall be the sole and exclusive remedy for any Delegate aggrieved by any action, conduct, or failure to act of Americans Elect.”

      And yet, in an action even more directly violating the rules and bylaws than before, the three Americans Elect major donors have unilaterally made a decision to endorse and fund a major political candidate without so much as informing the delegates.

      All this is substantiated in the Americans Elect thread of posts to which I linked in the main article.

    • Bill

      Brad, I suggest you ask your mother if “hey, it wasn’t illegal” is ever an adequate excuse for bad behavior.

  • Brad M.

    Well I guess it might be semantics, but to “dupe” means to cheat which can reasonably be thought of as illegal.

    Regarding AE’s (or at least 3 members) unilateral decision to contribute promote senatorial candidate King I don’t see a conflict in the AE’s by-laws since the focus was entirely on presidential candidates and no other office. AE’s by-laws are silent on this point in my mind. But then again, as a delegate of a now defunct(ish?) organization I am in a no-man’s land. I don’t agree with the unilateral use of AE’s name for the paid endorsement. Presumably somehow I still have my rights to fully participate and dispute the committee or board decision to allow AE’s name being used for the endorsement.

    Interestingly, and in support of your view, AE’s website still claims at the very bottom of the website that:
    “Americans Elect is a nonprofit that is not affiliated with any candidate or candidate committee. © 2012 Americans Elect”

    Well I gues the AE endorsement of King absolutely contradicts that statement.

    • If you want to get semantic about it:

      Dupe: “a person who unquestioningly or unwittingly serves a cause or another person: a dupe of the opponents.”
      Dupe: “to make a dupe of; deceive; delude; trick.”

      (Random House)

      Dupe: “a person who unwittingly serves as the tool of another person or power.”
      Dupe: “to deceive, esp by trickery; make a dupe or tool of; cheat; fool.”

      (Collins English Dictionary)

      I think in these contexts, the use of the word “dupe” is absolutely appropriate.

      On the bylaws and rules:

      A) The bylaws and rules aren’t only about the presidential election, but are about the actions of Americans Elect as a corporation.
      B) But hey, even if the bylaws and rules were only about the presidential election, then according to the bylaws and rules delegates have a right to play a role in any deviation from that.

  • While we don’t claim deep insight into the real sources of Bloomberg’s billions, based on the ‘official’ story alone we don’t place Bloomers in the same league as Ackerman and Burbank. Bloomberg saw an opportunity to produce and sell a real product which real (albeit wealthy) people really wanted to buy; more power to him. Ackerman, on the other hand, colluded in a notorious scam so malignant he had to pay a $75 million settlement to get off the hook. To the best of our knowledge he has never produced one real thing…valuable or otherwise…in his sordid career. He simply gamed the financial system and nearly destroyed the U.S economy in doing so, while pocketing a huge fortune. Similarly, Burbank chose to be just another enabler of the most recent financial crisis, and made hundreds of millions doing his small part to wreck the economy. Again, we’re unaware of any real thing he has ever produced in his career (at least since he stopped selling hotdogs). No doubt both Ackerman and Burbank would say that trying to earn a living making ‘real things’ is for chumps…the smart money is in gaming the system with no regard for the fate of your country.

    But while we can’t fault Bloomberg for the source of his fortune, we can certainly fault him for the company he keeps. By helping to enable Ackerman’s twisted schemes, and by doing so side-by-side with the likes of Burbank, he has tarred himself with their brush. As we have always said regarding Americans Elect’s fellow-travellers: “Fly with the crows, get shot with the crows.” We have no sympathy for the embarrassment Bloomberg causes himself by associating with the likes of Ackerman and Burbank.

  • Brad M.

    Jim,

    Can you cite a specific example of how you think Bloomberg or Burbank “deceived” or “tricked” anyone?

    • Jim

      No, because I don’t have access to the logs of the trading systems they use.

      What I describe are general categories of duping.

    • Benjamin Barber

      You should look into how high frequency trading systems work, they basically skim off the top of both buyers and sellers, by being able to make very fast offers and then cancelling them to find the largest spread, and act as the middle man in the purchase before they have the ability to find each other.

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