Politicizing the DoJ, Bush/Obama Tag Team Edition

Morgen at Verum Serum took the opportunity presented by the Supreme Court’s halt of the sale of Chrysler to Fiat to do some digging — and he came up with an interesting tidbit.  While the Treasury and the White House does its best to force a marriage between the rump of Chrysler and Fiat, the Department of Justice had its own interest in Fiat, too.  That interest suddenly disappeared in December of last year, as Chrysler circled the drain:

This struck me as a little odd given the definitive nature of this statement, which seems to clearly contradict the sense of urgency that has been fostered by Chrysler and it’s benefactors in the Administration. Perhaps it can be explained by the fact that Fiat is receiving a 20% equity stake in a restructured Chrysler while contributing nothing (that’s right – $0). But I wondered whether there still might be more to this. Especially in light of a report in the Wall Street Journal over the weekend that claimed that the Obama Administration had forced the Fiat deal on Chrysler. Despite reservations on the part of Chrysler management regarding Fiat’s financial condition, and Fiat’s failure to disclose information that had been requested. According to the WSJ report, an unnamed Chrysler advisor even went so far as to express concern that the perception might ultimately be that they “were in bed with a shady partner”, meaning Fiat.

There is more truth to this statement than perhaps he knew, and it apparently applies not only to Fiat but to those in the Administration behind this deal as well. It turns out that back on December 22, right before Christmas, the U.S. Justice Department reached a settlement of sorts with Fiat and a group of affiliated companies. Fiat apparently had been under DOJ investigation for their participation in the UN “Oil for Food” scandal dating back to the early to mid 90’s. I called this a “settlement of sorts” because in actuality it is a deferred prosecution agreement, where the DOJ filed but deferred prosecution against Fiat on charges including wire fraud, falsification of books and records, and conspiracy to commit said crimes.

In exchange for Fiat signing a “Statement of Facts” admitting to and accepting responsibility for these crimes, and remitting a penalty of $7 million to the U.S. Treasury, the DOJ agreed to defer any further prosecution for a period of 3 years. Importantly, during this 3 year period Fiat is required to “cooperate fully with the Department and any other authority or agency, domestic or foreign, designated by the Department” in allowing the U.S government full access to their books and other financial records to verify that no further corrupt or fraudulent activity has taken place. If, and only if, they are deemed to have been in full cooperation with no additional violations has the DOJ agreed to move to actually dismiss the underlying charges.

By December, the outgoing administration had already given Chrysler $4 billion it knew the US would never see again.  Unlike GM, which had a chance of surviving a bankruptcy, Chrysler would have been liquidated by a bankruptcy court — unless a buyer could be found for the crippled car company.  But who would buy it, even at nothing down?  How about a company about to get reamed by the US for its role in propping up Saddam Hussein through the UN Oil-for-Food program?

But how could either the Bush or Obama administration make that work, especially if Fiat was liable for hundreds of millions in damages and criminal penalties?  Simple — cut a deal to get the Fiat issue off the table at a relatively low cost to Fiat, and then push Chrysler into Fiat’s arms.

Be sure to read all of Morgen’s post.  We need more information, but this doesn’t look coincidental — and it indicts both administrations, if true.

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