The most powerful man in the Navy authorized an aircraft carrier cruise for a classmate from the U.S. Naval Academy, Thomas Brasco, a wealthy executive at Goldman Sachs. High rolling colleagues at the Wall Street bank also came along for the ride.
Admiral Jonathan W. Greenert, the incoming Chief of Naval Operations, was Commander of U.S. Fleet Forces (head of the Atlantic Fleet) in 2008. He confirmed through a spokesman that he approved the trip and that he knew Brasco from the academy, but both Greenert and Brasco declined to say whether they are friends.
Brasco is now Chief Operating Officer of Goldman Sach’s U.S. Private Wealth Management division, which offers its investment and trading expertise to some of the wealthiest Americans, clients with at least $12 million in assets to invest.
But on March 3, 2008, Brasco was a managing director at Goldman when he and his associates were wined and dined at taxpayers’ expense.
It was an unseasonably warm and sunny 72 degrees in Norfolk, Va., as the seven wealthy Goldman Sachs executives, a spouse and four friends arrived at the airport, leaving behind the brewing storm back on the Street. They looked forward to a dramatic overnight on a nuclear-powered Navy aircraft carrier, an exclusive trip.
Back on the Street, insider talk had just begun to circulate that Bear Stearns, the fifth largest U.S. investment bank, was close to collapse. The nation’s crumbling housing market and subprime mortgage crisis had come to call on Wall Street.
But the focus was on fun that day as Goldman executives arrived at Norfolk’s Waterside Marriott, greeted by Navy public affairs officials. After check-in, Navy vans took the group of 12 to the historic Missouri House, a stately Georgian mansion on the waterfront, then home to Admiral Greenert.
The group had dinner with Greenert and his wife, and they visited in the Greenert’s home for two hours. It was a rare privilege, available to few even in the military.
Greenert and Brasco graduated from the Naval Academy together in 1975, and despite his civilian standing, Brasco has cultivated his connections in the Navy. A former submarine officer, Brasco is a member of the board of the U.S. Naval Academy Alumni Association and Foundation. Last year it oversaw $12 million in contributions. Brasco advises the Foundation on investments.
The morning after dinner with the Greenerts, Navy public affairs officers met the Goldman executives at their hotel and took them to the naval base where they were flown out to the U.S.S. George Washington. The ship’s commanding officer, Capt. David C. Dyhkoff, greeted them.
The group spent the night and had breakfast and lunch on the aircraft carrier before being flown back to the base and taken to the airport.
Details of this trip were obtained from documents released by the Navy under the Freedom of Information Act. The trip is one of several investigated by the National Security News Service.
Navy spokesmen say special connections do not determine who the Navy picks as “distinguished visitors” for the aircraft carriers. The Navy chooses community and business leaders, journalists, celebrities and members of Congress and their staff who can influence the general public, spokesmen say. Officials say the Navy hopes that the breathtaking aircraft landings on the carrier deck will impress these leaders so that they will go back and talk or write about the Navy’s capabilities.
The Navy says the Greyhound only takes visitors to the aircraft carriers when it is already scheduled to bring supplies or personnel to the ship. The Navy averages about 1900 of the distinguished visitor tours a year.
Lawrence J. Korb, Senior Fellow at the Center for American Progress and former assistant secretary of the Navy under President Reagan, says taking Wall Street bankers on a visit to an aircraft carrier just as the market was beginning to topple does not make sense. Goldman Sachs was unlikely to influence opinion favorably for anyone given the anger the American people were about to fire at the Street.
“This raises questions about the timing and the appropriateness of this trip,” Korb says. “This was a time when the market was collapsing and, remember, Goldman was a big player in that collapse.”
Stephen Cohen, a spokesman for Goldman Sachs, says that the Street’s financial troubles would not have affected Brasco’s ability to shed a positive image on the Navy. “He brought some colleagues and some friends,” he says. “Tom didn’t go as a representative of any particular Wall Street institution or Wall Street. He went as a private individual.”
Cohen, speaking for Brasco, declined to say what Brasco’s relationship was with Greenert or how the idea for the trip came up. “I don’t think we’re going to be terribly helpful in how it came about,” Cohen says.
Greenert says through a spokesman that he approved Brasco’s trip and that he knew him from the Naval Academy, but Greenert also declined to say whether they are friends.
“They were classmates. [Greenert] knew him,” Commander Danny Hernandez, a Navy spokesman says. “Mr. Brasco and other members of the embark were active and influential in business and community and they were ideal candidates for the distinguished visitors embark program.
“It’s not uncommon for someone who has the connections to open this up to others who would be ideal candidates for this program. Networking is a big part of trying to get people out there.”
In Jan. 2004 a top Navy command issued eight pages of detailed instructions on how visits for “distinguished visitors” should be carried out. “DVs are people who are active and influential in their community, business or government…who have not had previous exposure to the naval aviation, aircraft carrier operations or the military.”
“The intent is to avoid the appearance of a good old boy network. We’re trying to reach out to folks who haven’t experienced the Navy,” Steve Fiebing, a deputy public affairs officer for the Naval Air Forces Command in the Pacific, says of the Navy’s instruction not to bring out former members of the military.
Two former Marines also came on the trip. Peter Grieve, also a Naval Academy graduate and on the investment committee of the U.S. Naval Academy Foundation, was then a managing director at Goldman and is now Chairman of the Board at Cordia Bancorp. Robert Howe is chairman of the Board of ADS Financial Solutions, which sells software to financial institutions, and a member of the board of Cognizant Technology Solutions, an off-shore information technology firm with over $2 billion in revenue. Neither man could be reached for comment.
When asked about the Navy’s assertion that the trips are intended to impress influential leaders unfamiliar with the military and the instruction that the trips are not intended for former military, Fiebing says the instruction was just a general guideline.
“Just because (someone) had previous military experience, unless it’s very recent, we wouldn’t exclude that person,” Fiebing says.
When Greenert was asked about the instructions referring to former members of the military, Navy public affairs produced another set of instructions.
“While retired military and traditional vocal supporters are not excluded, the Navy reaps greatest benefit by providing these scarce opportunities to those who have not seen their Navy in action,” the undated instructions read. “Nominees with moderate knowledge of issues and little first-hand experience of the Navy are preferred.”
Former Navy Capt. Conrad Chun handled the arrangements for the trip for Goldman executive Brasco. He says he does not remember the particular visit but that the visit for the wealthy Wall Street bankers fits the pattern of others he arranged.
“We provide a lot of business leaders with these trips because they’re influential people,” Chun says. “They talk to people. They tell people how important the Navy is. It’s America’s Navy. They have a right to see it.”
The Navy limits the general public to in-port tours of ships and reserves its at-sea excursions to distinguished visitors with influence. None of the Navy public affairs officials interviewed could say how the Goldman group, heading back to a Wall Street meltdown, might help the Navy’s image.
Among the heavy hitters on the trip was Bruce Heyman, a Goldman managing director in Chicago. Heyman is active in Chicago politics and bundled $50,000 in contributions for Barack Obama in his election for president. Heyman attended a White House state dinner for German Chancellor Angela Merkel in June, along with singer James Taylor.
Another prominent couple was Linda Daines, then a managing director at Goldman, and her husband, the late Dr. Richard F. Daines, then the New York state health commissioner. Both Goldman Sachs and Dr. Daines would be caught up in the swine flu scare a year later – Dr. Daines for ordering healthcare workers to get flu vaccinations and Goldman Sachs for getting the H1N1 vaccine ahead of pregnant women and children during the shortage.
By the time of the cruise, Goldman, one of the nation’s most successful investment banks, had already begun protecting itself by betting against the housing market in 2006 through different mortgage securities. It sold what it dubbed “Abacus,” complex financial instruments that let Goldman insiders bet they would fail. When they did, Goldman insiders reaped huge profits but the firm’s clients, who bought the securities thinking they were sound investments, lost $1 billion dollars. The Securities and Exchange Commission would charge Goldman with securities fraud and it would pay a $550 million penalty, the largest ever levied by the S.E.C.
In six months, the firm’s largest trading partner and insurer of its securities, insurance giant American International Group, would face collapse and receive what grew to a $180 billion bailout. Panic spread and stocks tumbled on Wall Street. Goldman agreed to stricter regulation and more scrutiny in exchange for a $10 billion bailout.
At Congressional hearings, AIG executives would testify that Goldman had exaggerated its risks and that its demands that the insurance company post billions in collateral for Goldman’s potential losses helped push AIG to the edge.
In July, after a lengthy legal battle, Bloomberg News reported that Goldman Sachs was one of the biggest beneficiaries of very short-term Federal Reserve loans. At the height of the financial crisis, Goldman took $15 billion in exchange for securities ranging from Treasuries to mortgage bonds.
According to Reuters, the Fed lengthened the window for overnight loans to as many as 28 days for large primary dealer banks.
The facility was launched in March 2008, just as Bear Stearns was about to become the first major investment bank to require a rescue in what turned into the worst financial meltdown in modern history.
The same month, Goldman Sachs took their Navy cruise.
Former Navy Secretary John Dalton and Goldman Sachs executives were not the only ones entertaining on America’s most expensive ships. William L. Ball, a former Navy Secretary turned lobbyist, booked a cruise with a very impressive guest list of billionaire and multimillionaire associates.