SEC: Government Destroyed Documents Regarding Pre-9/11 Put Options

George Washington's picture



On September 19, 2001, CBS reported:

tell CBS News that the afternoon before the attack, alarm bells were
sounding over unusual trading in the U.S. stock options market.

extraordinary number of trades were betting that American Airlines
stock price would fall.

The trades are called "puts" and they
involved at least 450,000 shares of American. But what raised the red
flag is more than 80 percent of the orders were "puts", far
outnumbering "call" options, those betting the stock would rise.

say they have never seen that kind of imbalance before, reports CBS
News Correspondent Sharyl Attkisson. Normally the numbers are fairly

After the terrorist attacks, American Airline stock price
did fall obviously by 39 percent, and according to sources, that
translated into well over $5 million total profit for the person or
persons who bet the stock would fall.


At least one
Wall Street firm reported their suspicions about this activity to the
SEC shortly after the attack.

The same thing happened with
United Airlines on the Chicago Board Options Exchange four days before
the attack. An extremely unbalanced number of trades betting United's
stock price would fall — also transformed into huge profits when it did
after the hijackings.

"We can directly work backwards from a
trade on the floor of the Chicago Board Options Exchange. The trader is
linked to a brokerage firm. The brokerage firm received the order to
buy that 'put' option from either someone within a brokerage firm
speculating, or from one of the customers," said Randall Dodd of the
Economic Strategy Institute.

U.S. investigators want to know
whether Osama bin Laden was the ultimate "inside trader" — profiting
from a tragedy he's suspected of masterminding to finance his
operation. Authorities are also investigating possibly suspicious
trading in Germany, Switzerland, Italy and Japan.

September 29, 2001, the San Francisco Chronicle pointed

"Usually, if someone has a
windfall like that, you take the money and run," said the source, who
spoke on condition of anonymity. "Whoever did this thought the exchange
would not be closed for four days.


"This smells real bad."




was an unusually large jump in purchases of put options on the stocks
of UAL Corp. and AMR Corp. in the three business days before the attack
on major options exchanges in the United States. On one day, UAL put
option purchases were 25 times greater than the year-to-date average.
In the month before the attacks, short sales jumped by 40 percent for
UAL and 20 percent for American.


for British securities regulators and the AXA Group also confirmed
yesterday that investigations are continuing.

The source familiar
with the United trades identified Deutsche Banc Alex. Brown, the
American investment banking arm of German giant Deutsche Bank, as the
investment bank used to purchase at least some of the options.


weekend, German central bank president Ernst Welteke said a study
pointed to "terrorism insider trading" in those stocks.

Chronicle illustrated the story with the following chart:

On October 19, 2001, the Chronicle wrote:

Oct. 2, Canadian securities officials confirmed that the SEC privately
had asked North American investment firms to review their records for
evidence of trading activity in the shares of 38 companies, suggesting
that some buyers and sellers might have had advance knowledge of the



FMR Corp.
spokeswoman Anne Crowley, said her firm -- which owns the giant
Fidelity family of mutual funds in Boston -- has already provided
"account and transaction" information to investigators, and had no
objection to the new procedures announced yesterday. Crowley declined
to describe the nature of the information previously shared with the

So the effort to track down the source
of the puts was certainly quite substantial.

What were the
results and details of the investigation?

Apparently, we'll never

David Callahan - executive editor of SmartCEO - submitted a Freedom of
Information Act request to the SEC regarding the pre-9/11 put options.

SEC responded:

letter is in response to your request seeking access to and copies of
the documentary evidence referred to in footnote 130 of Chapter 5 of the
September 11 (9/11) Commission Report.


We have been
advised that the potentially responsive records have been destroyed.

the SEC had responded by producing documents showing that the pre-9/11
put options had an innocent explanation (such as a hedge made by a
smaller airline), that would be understandable.

If the SEC had
responded by saying that the documents were classified as somehow
protecting proprietary financial information, I wouldn't like it, but I
would at least understand the argument.

But destroyed? Why? (See Afterword for
additional details.)

Not the First Time

This is not
the first destruction of documentary evidence related to 9/11.

in March:

As I
pointed out in 2007:

The 9/11 Commission Report was largely
based on a third-hand account
of what tortured detainees said, with two
of the three
parties in the communication being government

The official 9/11 Commission Report states:

5 and 7 rely heavily on information obtained from captured al Qaeda
members. A number of these "detainees" have firsthand knowledge of the
9/11 plot. Assessing the truth of statements by these witnesses-sworn
enemies of the United States-is challenging. Our access to them has been
limited to the review of intelligence reports based on communications
received from the locations where the actual interrogations take place.
We submitted questions for use in the interrogations, but had no
control over whether, when, or how questions of particular interest
would be asked. Nor were we allowed to talk to the interrogators so
that we could better judge the credibility of the detainees and clarify
ambiguities in the reporting.

In other words, the 9/11
Commissioners were not allowed to speak with the detainees, or even
their interrogators. Instead, they got their information third-hand.


Commission didn't really trust the interrogation testimony. For
example, one of the primary architects of the 9/11 Commission Report,
Ernest May, said in May

We never had full confidence in the interrogation
reports as historical sources.

As I noted
last May:

Newsweek is running an essay by [New York Times
investigative reporter] Philip Shenon saying [that the 9/11 Commission
Report was unreliable because most of the information was based on the
statements of tortured detainees]:

The commission
appears to have ignored obvious clues throughout 2003 and 2004 that its
account of the 9/11 plot and Al Qaeda's history relied heavily on
information obtained from detainees who had been subjected to torture,
or something not far from it.


The panel raised no
public protest over the CIA's interrogation methods, even though news
reports at the time suggested how brutal those methods were. In fact,
the commission demanded that the CIA carry out new rounds of
interrogations in 2004 to get answers to its questions.


That has troubling implications for the
credibility of the commission's final report. In intelligence circles, testimony obtained through torture is
typically discredited;
research shows that people will say
anything under threat of intense physical pain


yet it is a distinct possibility that Al Qaeda suspects who were the
exclusive source of information for long passages of the commission's
report may have been subjected to "enhanced" interrogation techniques,
or at least threatened with them, because of the 9/11


Information from CIA interrogations of two
of the three—KSM and Abu Zubaydah—is cited throughout two key chapters
of the panel's report focusing on the planning and execution of the
attacks and on the history of Al Qaeda


in the panel's report indicate when information was obtained from
detainees interrogated by the CIA. An analysis by NBC News found that
more than a quarter of the report's footnotes—441 of some
1,700—referred to detainees who were subjected to the CIA's "enhanced"
interrogation program, including the trio who were waterboarded.


Commission members note that they repeatedly pressed the
Bush White House and CIA for direct access to the detainees, but the
administration refused. So the commission forwarded questions to the
CIA, whose interrogators posed them on the panel's behalf.


The commission's report gave no hint that harsh interrogation
methods were used in gathering information, stating that the panel had
"no control" over how the CIA did its job; the authors also said they
had attempted to corroborate the information "with documents and
statements of others."


But how could the commission
corroborate information known only to a handful of people in a shadowy
terrorist network, most of whom were either dead or still at large?


Former senator Bob Kerrey of Nebraska, a Democrat
on the commission, told me last year he had long feared that the
investigation depended too heavily on the accounts of Al Qaeda
detainees who were physically coerced into talking


Kerrey said it might take "a permanent 9/11 commission" to end
the remaining mysteries of September 11.

Zubaida was well-known to the FBI as being literally crazy. The Washington
quotes "FBI officials, including agents who questioned
[alleged Al-Qaeda member Abu Zubaida] after his capture or reviewed
documents seized from his home" as concluding that he was:

a loudmouthed and mentally troubled hotelier whose credibility dropped
as the CIA subjected him to a simulated drowning technique known as
waterboarding and to other "enhanced interrogation" measures.


Retired FBI agent Daniel Coleman, who led
an examination of documents after Abu Zubaida's capture in early 2002
and worked on the case, said the CIA's harsh tactics cast doubt on the
credibility of Abu Zubaida's information.


"I don't have
confidence in anything he says, because once you go down that road,
everything you say is tainted," Coleman said, referring to the harsh
measures. "He was talking before they did that to him, but they didn't
believe him. The problem is they didn't realize he didn't know all that much."




said, 'You've got to be kidding me,' " said Coleman, recalling accounts
from FBI employees who were there. " 'This guy's a Muslim. That's not
going to win his confidence. Are
you trying to get information out of him or just belittle him
Coleman helped lead the bureau's efforts against Osama bin Laden for a
decade, ending in 2004.


Coleman goes on to

Abu Zubaida ... was a "safehouse keeper" with
mental problems who claimed to know more about al-Qaeda and its inner
workings than he really did.


Looking at other
evidence, including a serious head injury that Abu Zubaida had suffered
years earlier, Coleman and others at the FBI believed that he had severe mental problems that called
his credibility into question. "They
all knew he was crazy
, and they knew he was always on the damn
phone," Coleman said, referring to al-Qaeda operatives. "You think
they're going to tell him anything?"

ACLU, FireDogLake's
Marcy Wheeler
and RawStory
broke the story yesterday that (quoting RawStory):


Senior Bush administration officials
sternly cautioned the 9/11 Commission against probing too deeply into
the terrorist attacks of September 11, 2001
, according to a
document recently obtained by the ACLU.


The notification came in a letter dated January
6, 2004
, addressed by Attorney General John Ashcroft, Defense
Secretary Donald H. Rumsfeld and CIA Director George J. Tenet. The ACLU
described it as a fax sent by David Addington, then-counsel to former
vice president Dick Cheney.


In the message, the officials denied
the bipartisan commission's request to question terrorist detainees,
informing its two senior-most members that doing so would "cross" a
"line" and obstruct the administration's ability to protect the nation.


response to the Commission's expansive requests for access to secrets,
the executive branch has provided such access in full cooperation,"
the letter read. "There is, however, a line that the Commission should
not cross -- the line separating the Commission's proper inquiry into
the September 11, 2001 attacks from interference with the Government's
ability to safeguard the national security, including protection of
Americans from future terrorist attacks."




Commission staff's proposed participation in questioning of detainees
would cross that line," the letter continued. "As the officers of the
United States responsible for the law enforcement, defense and
intelligence functions of the Government, we urge your Commission not
to further pursue the proposed request to participate in the
questioning of detainees."

Destruction of


The interrogators made videotapes of the
interrogations. The 9/11 Commission asked for all tapes, but the CIA
lied and said there weren't any.


The CIA then destroyed the


Specifically, the New
York Times
confirms that the government swore that it had turned over all of
the relevant material regarding the statements of the people being

“The commission did formally request
material of this kind from all relevant agencies, and the commission
was assured that we had received all the material responsive to our
request,” said Philip D. Zelikow, who served as executive director of
the Sept. 11 commission ....


“No tapes were acknowledged or
turned over, nor was the commission provided with any transcript
prepared from recordings,” he said.

But is the
destruction of the tapes -- and hiding from the 9/11 Commission the fact
that the tapes existed -- a big deal? Yes, actually. As the Times
goes on to state:

Daniel Marcus, a law professor at
American University who served as general
counsel for the Sept. 11 commission
and was involved in the
discussions about interviews with Al Qaeda leaders, said he had heard
nothing about any tapes being destroyed.


If tapes were destroyed, he said, “it’s a big deal, it’s a very
big deal,” because it could amount to obstruction of justice to
withhold evidence being sought in criminal or fact-finding

Indeed, 9/11 Commission
co-chairs Thomas Keane and Lee Hamilton wrote:

who knew about those videotapes — and did not tell us about them —
obstructed our investigation.

The CIA also is refusing to
release any transcripts from the interrogation sessions. As I wrote
a year ago:

What does the fact that the CIA
destroyed numerous videotapes of Guantanamo interrogations, but has 3,000
pages of transcripts
from those tapes really mean?


it means that CIA's claim that it destroyed the video tapes to protect
the interrogators' identity is false. Why? Well, the transcripts
contain the identity of the interrogator. And the CIA is refusing to
produce the transcripts.


Obviously, the CIA could have "blurred"
the face of the interrogator and shifted his voice (like you've seen on
investigative tv shows like 60 Minutes) to protect the interrogator's
identity. And since the CIA is not releasing the transcripts, it
similarly could have refused to release the videos.


The fact that
the CIA instead destroyed the
videos shows that it has something to hide.

to Create a False Linkage?

I have repeatedly pointed out that
the top interrogation experts say that torture
doesn't work

As I wrote
last May:


The fact that people were
tortured in order to justify the Iraq war by making a false linkage
between Iraq and 9/11
is gaining attention.


Many people are
starting to understand that top Bush administration officials not only
knowingly lied about a non-existent connection between Al Qaida and
Iraq, but they pushed and insisted that interrogators use special torture methods aimed at
extracting false confessions to attempt to create such a false linkage.


the Senate Armed Services Committee found that the
U.S. used torture techniques specifically aimed at extracting false confessions

(and see this).


as Paul Krugman wrote
in the New York Times:

Let’s say this slowly: the
Bush administration wanted to use 9/11 as a pretext to invade Iraq,
even though Iraq had nothing to do with 9/11. So it tortured people to
make them confess to the nonexistent link.

to NBC

  • Much of the 9/11 Commission Report was based upon the
    testimony of people who were tortured
  • At least four of
    the people whose interrogation figured in the 9/11 Commission Report
    have claimed that they told interrogators information as a way to stop
    being "tortured."
  • One of the Commission's main
    sources of information was tortured until he agreed to sign a
    confession that he was NOT EVEN ALLOWED TO READ
  • The
    9/11 Commission itself doubted
    the accuracy of the torture confessions, and yet kept their doubts to

In fact, the self-confessed "mastermind" of 9/11
also confessed to crimes which he
could not have committed
. He later said that he gave the
interrogators a lot of false
information - telling them what he thought they wanted to hear - in an
attempt to stop the torture
. We also know that he was heavily
tortured specifically
for the purpose of trying to obtain false information about 9/11
specifically, that Iraq had something to do with it.



Remember, as discussed above, the torture
techniques used by the Bush administration to try to link Iraq and 9/11
were specifically geared
towards creating false confessions
(they were techniques created by the communists to be used in show




above-linked NBC news report quotes a couple of legal experts to this

Michael Ratner, president of the Center for
Constitutional Rights, says he is "shocked" that the Commission never
asked about extreme interrogation measures.

"If you’re sitting at
the 9/11 Commission, with all the high-powered lawyers on the
Commission and on the staff, first you ask what happened rather than
guess," said Ratner, whose center represents detainees at Guantanamo.
"Most people look at the 9/11 Commission Report as a trusted historical
document. If their
conclusions were supported by information gained from torture, therefore
their conclusions are suspect.

Greenberg, director of the Center for Law and Security at New York
University’s School of Law, put it this way: "[I]t should have relied on
sources not tainted. It calls into question how we were willing to use
these interrogations to construct the narrative."

interrogations were "used" to "construct the narrative" which the 9/11
Commission decided to use.

Remember (as explored in the book The
by respected journalist Philip Shenon), that the
Executive Director of the 9/11 Commission was an
administration insider whose area of expertise is the creation and
maintenance of "public myths" thought to be true, even if not actually
. He wrote
an outline of what he wanted the report to say very early in the
, controlled what the Commission did and did not analyze,
then limited the scope of the Commission's inquiry so that the
overwhelming majority of questions about 9/11 remained unasked (see this article and this article).



constitutional law expert Jonathan Turley stated:

9/11 Commission] was a commission that was really made for Washington -
a commission composed of political appointees of both parties that ran
interference for those parties - a commission that insisted at the
beginning it would not impose blame on individuals.

Obstructions of Justice

[Other examples of obstructions of
justice include the following:]

  • The chairs of both the 9/11
    Commission and the Joint Inquiry of the House and Senate Intelligence
    Committees into 9/11 said
    that government "minders" obstructed the investigation into 9/11 by
    intimidating witnesses
  • The 9/11 Commissioners concluded that officials from the Pentagon lied to
    the Commission, and considered recommending criminal charges for such
    false statements
  • Investigators for the Congressional Joint
    Inquiry discovered that an FBI informant had hosted and even
    rented a room to two hijackers in 2000 and that, when the Inquiry
    sought to interview the informant, the FBI refused outright, and then
    hid him in an unknown location, and that a high-level FBI official
    stated these blocking maneuvers were undertaken under orders from the
    White House. As the New York Times notes:

    Bob Graham, the Florida Democrat who is a former chairman of the
    Senate Intelligence Committee, accused the White House on Tuesday of
    covering up evidence . . .

    * * *

    The accusation stems from
    the Federal Bureau of Investigation's refusal to allow investigators
    for a Congressional inquiry and the independent Sept. 11 commission to
    interview an informant, Abdussattar Shaikh, who had been the
    in San Diego of two Sept. 11 hijackers.

    In his
    book "Intelligence Matters," Mr. Graham, the co-chairman of the
    Congressional inquiry with Representative Porter J. Goss, Republican of
    Florida, said an F.B.I. official wrote
    them in November 2002 and said "the administration would not sanction a
    staff interview with the source.''
    On Tuesday, Mr. Graham
    called the letter "a smoking gun" and said, "The reason for this
    cover-up goes right to the White House."

don't need to even discuss conspiracy theories about what happened on
9/11 to be incredibly disturbed about what happened after: the government's obstructions
of justice.

Indeed, the 9/11 Commissioners themselves are disturbed:

  • The
    Commission's co-chairs said
    that the CIA (and likely the White House) "obstructed our


  • The
    Senior Counsel to the 9/11 Commission (John Farmer) - who led
    the 9/11 staff's inquiry - said
    "At some level of the government, at
    some point in time...there was an agreement not to tell the truth about
    what happened
    ". He also said "I was shocked at how different the truth was
    from the way it was described .... The tapes told a radically different
    story from what had been told to us and the public for two years....
    This is not spin. This is not true."

Afterword: Footnote 130 to chapter 5 of the
official 9/11 Commission Report states:

Highly publicized allegations of insider trading in
advance of 9/11 generally rest on reports of unusual pre-9/11 trading
activity in companies whose stock plummeted after the attacks. Some
unusual trading did in fact occur, but each such trade proved to have an
innocuous explanation. For example, the volume of put options-
investments that pay off only when a stock drops in price-surged in the
parent companies of United Airlines on September 6 and American Airlines
on September 10-highly suspicious trading on its face. Yet, further
investigation has revealed that the trading had no connection with 9/11.
A single U.S.-based institutional investor with no conceivable ties to
al Qaeda purchased 95 percent of the UAL puts on September 6 as part of a
trading strategy that also included buying 115,000 shares of American
on September 10. Similarly, much of the seemingly suspicious trading in
American on September 10 was traced to a specific U.S.-based options
trading newsletter, faxed to its subscribers on Sunday, September 9,
which recommended these trades. These examples typify the evidence
examined by the investigation. The SEC and the FBI, aided by other
agencies and the securities industry, devoted enormous resources to
investigating this issue, including securing the cooperation of many
foreign governments. These investigators have found that the apparently
suspicious consistently proved innocuous. Joseph Cella interview (Sept.
16, 2003; May 7, 2004; May 10-11, 2004); FBI briefing (Aug. 15, 2003);
SEC memo, Division of Enforcement to SEC Chair and Commissioners,
"Pre-September 11, 2001 Trading Review," May 15, 2002; Ken Breen
interview (Apr. 23, 2004); Ed G. interview (Feb. 3, 2004).

Did the Commission have full access to information regarding put
options? Was the Commission misled, as it was on other issues? Was
evidence destroyed or fabricated? We will never know, as the underlying
documents have - according to the SEC - been destroyed.