Hedge fund manager Marc Mezvinsky had friends in high places when he
bet big on a Greek economic recovery, but even the keen interest of his
mother-in-law, then-Secretary of State Hillary Clinton, wasn't enough to
spare him and his investors from financial tragedy.
In 2012, Mezvinski, the husband of Chelsea Clinton,
created a $325 million basket of offshore funds under the Eaglevale
Partners banner through a special arrangement with investment bank
Goldman Sachs. The funds have lost tens of millions of dollars
predicting that bailouts of the Greek banking system would pump up the
value of the country’s distressed bonds. One fund, exclusively dedicated
to Greek debt, suffered near-total losses.
Clinton stepped down as secretary of state in 2013 to
run for president. But newly released emails from 2012 show that she
and Clinton Foundation consultant, Sidney Blumenthal, shared classified
information about how German leadership viewed the prospects for a Greek
bailout. Clinton also shared “protected” State Department information
about Greek bonds with her husband at the same time that her son-in-law
aimed his hedge fund at Greece.
That America’s top diplomat kept a sharp eye on
intelligence assessing the chances of a bailout of the Greek central
bank is not a problem. However, sharing such sensitive information with
friends and family would have been highly improper. Federal regulations
prohibit the use of nonpublic information to further private interests
or the interests of others.
The mere perception of a conflict of interest is unacceptable.
Through its press representative, Eaglevale declined
to comment for this story. Clinton’s campaign press office did not
respond to a request for comment.
A former Goldman Sachs broker himself, Mezvinsky
formed Eaglevale Management with two ex-Goldman Sachs partners in
October 2011. As a “global macro” firm, Eaglevale’s strategy is to seek
profit opportunities in politically volatile situations. Mezvinsky set
up several funds in the Cayman Islands, a secretive tax haven, with
Goldman Sachs serving as Eaglevale’s prime broker and banker. The giant
brokerage firm has a
checkered history of manipulating the value of Greek debt to the detriment of Greece.
The same month that Eaglevale incorporated its offshore arm, Gary Gensler, the head of the
United States Commodity Futures Trading Commission, which polices hedge funds,
emailed Clinton that a bailout by the European Central Bank could “turn market sentiment” in favor of Greek bonds.
Gensler had previously worked as co-head of finance
at Goldman Sachs; he is now the financial director of Clinton’s election
campaign. Goldman Sachs has donated up to $5 million to the Clinton
Foundation and $860,000 to Hillary Clinton’s political campaigns.
Shortly after Clinton resigned, Goldman Sachs paid her $675,000 in
speaking fees.
Clinton’s deputy in charge of economic policy was
Robert Hormats, a former vice chairman of Goldman Sachs. Hormats and
Clinton shared an extensive email trail about the possibility of bailing
out Greece, including classified materials, and internal state
department memos about the debt from the U.S. ambassador to Greece.
Again, monitoring Greece was part of Clinton’s job
description, but, ethically, that does not mean that a family member
should make bets that depend upon the actions of another family
member—leaving aside the question of whether “insider” information was
divulged to Mezvinsky by Blumenthal or his parents-in-law.
During 2011, Secretary of State Clinton
lobbied the leaders of European governments
to bail out the Greek financial system. She advocated imposing
austerity measures on Greece—raising taxes, cutting public employee
salaries and eliminating social welfare programs—to make the investors
holding the debt happy.
Driven by investor’s belief that Greece would be bailed out, the speculative value of its debt
climbed into the stratosphere in late 2011 and early 2012.
The bonds gradually sank to 2008 levels by the end of the year, with
temporary spikes, as investors alternately gained and loss confidence in
the prospect of a bailout. In other words, there were multiple
opportunities for Greek-bond hedge funds to buy cheap and sell dear.
At a February 2012 summit meeting about the Eurozone debt crisis in Munich,
Clinton urged leaders of the European Union to commit to a Greek bailout.
In April, Eaglevale booked $19 million from a dozen
investors. California’s public employee pension fund, CalPERS,
reportedly invested $13 million. Goldman Sach’s CEO, Lloyd Blankfein,
jumped in with his own money, as did Chelsea Clinton’s former boss,
Marc Lasry, who specializes in buying distressed debt.
In May, Blumenthal,
emailed two “confidential” memos about the Greek debt situation to Clinton. Hormats was included in the email loop.
The first memo, Blumenthal told Clinton, is “based on
conversations with German Finance Minister Wolfgang Schauble and those
close to him … the information comes from an extremely sensitive source
and should be handled with care. This information must not be shared
with anyone associated with the German government.”
The unnamed spy reported that in secret meetings with
German Chancellor Angela Merkel, Schauble had searched for a
politically acceptable way to bail out the Greek debt in order to avoid
collapsing the economies of Greece, Italy, Spain and Ireland.
The second memo was classified and blacked out by
State Department censors when Clinton’s emails were released. No doubt,
it was informative.
In June, Clinton’s deputy, Jake Sullivan emailed her
“a depressing snapshot” of reports that Greek banks were failing and
that Merkel was against a Greek bailout. The next day, he reported “
re: Greece”
that Ambassador Dan Smith “just spoke to the Central Bank Governor and
assessed that the economic situation was “ok for now” provided that
“small depositors put money back into the banks.”
A few days later, Clinton asked Sullivan for a
confidential state department report, “Solidarity Bonds Greece Revised.”
He sent it to her adding, “If you like, send it on [to] WJC,"
presumably a reference to William Jefferson Clinton.
Clinton ordered an aide, “Pls print two copies” of
the Greek bond report. The report was blacked out as a “protected”
document when the emails were made public.
Did Mezvinsky benefit from his family connection?
The emails show that Clinton did at least one
official favor for her son-in-law. In August 2012, she forwarded Deputy
Secretary Thomas Nides
an email from Mezvinsky lobbying on behalf of his former Goldman Sachs colleague, Harry Siklas.
Siklas and Goldman Sachs were invested in a deep sea
mining venture called Neptune Minerals. Siklas asked Mezvinsky to broker
a talk with Clinton about “current legal issues and regulations” on
deep sea mining. Clinton ordered Nides to “follow up on this request.”
Nides replied, “I’ll get on it.”
