NO FRAUD, BUT HUGE PROFITS SEEN IN WORLD TRADE CENTER ATTACKS
by Joe Shea
American Reporter Correspondent
LOS ANGELES -- The Los Angeles-based company that purchased a 99-year le= ase on the World Trade Center just two months ago may have risked little of=
its own money and could collect at least 10 times as much -- some $3 billi= on in insurance proceeds -- on the property built and nominally owned by th= e Port Authority of New York and New Jersey, The American Reporter has lear= ned.
Meanwhile, European stock regulators are investigating forward sal= es of stock in three reinsurance companies to learn if speculators may have= had advance word and money from terror suspect Osama bin Laden about the a= ttacks on the World Trade Center. A probe of short trading in two of the fi= rms -- Swiss Re and AXA France -- whose stock fell 13 to 15 percent in the = four trading days before the attacks, has not yet concluded. So-called "sh= ort" sales occur when an investor buys shares of stock for future delivery = at a lower price than they are currently trading.
German regulators, who studied trading only for Sept. 11 in a third rein= surance firm, Munich Re, on the Frankfurt exchange (it was 3 p.m. Tuesday i= n Frankfurt when the attacks occurred), said they found no irregularities.
But European analysts publicly questioned the short sales even before t= he attacks because prospects for the firms were generally thought to be goo= d, and because the Financial Times had done a positive story about o= ne of the firms just before the short selling began, MSNBC reported.
Thes= e developments suggest that investigators may not have the whole story on l= ast Tuesday's disaster, which took more than 5,300 lives and is expected to= result in losses of more than $20 billion.
Two key words in a theory that financial motives may have been behind = the attack are "packaging" and "Anchor." Did masterminds of Tuesday's atta= ck "package" Middle Eastern terrorism in a way that was certain to point to= Osama bin Laden? And was the insolvency or loss of anchor tenants in seve= ral huge shopping centers owned by World Trade Center's new owners a motive= to commit insurance fraud?
It appears not. The fraud theory relies on several leaps of logic. F= irst, it has to be true as the Taliban claims that all means of communicati= on have been removed from Bin Laden so that he could not communicate with h= is international networks. Second, it would require that hijack leader Moh= ammad Atta or someone familiar with those networks be able to run them in h= is stead -- presumably for the benefit of a third party who would receive t= he insurance proceeds.
Finally, it would require that the operations leader, Atta or someone = else, be able to persuade the hijacking teams to surface and take action th= at would cost them their lives in the name of Bin Laden's anti-American jih= ad, but in reality to benefit speculators.
Could such a "package" of terrorists -- perhaps assembled by an internat= ional arms dealer or mercenary chief with close ties to the Middle East -- = fool the FBI and all the world's intelligence agencies into believing Osama= bin Laden was behind the attacks?
Possibly. That's because intelligenc= e agencies, at a distance and with great difficulty, follow the machination= s of Middle Eastern terrorists -- not international businessmen. U.S. offi= cials have not yet tied Bin Laden directly to the attacks, and already conc= ede they may have been carried out by one of his network of 20 or more terr= orist groups acting on their own; they also acknowledge that insurance and = credit card fraud have been part of the Bin Laden operation for years.
German authorities reportedly suspected that Bin Laden was behind the = sales of stock in a number of companies, called "reinsurance" firms because= for a fee they accept part of the potential loss liability of the promary = insurance underwriters who have covered a given property.
"NBC News reported Saturday that German officials had asked the FBI and = the U.S. Securities and Exchange Commission to look into whether bin Laden'= s associates may have 'sold short' stock in a Munich company that holds sec= ondary insurance on the World Trade Center," the financial news Web Site MS= NBC reported Sept. 17, saying the FBI was probing the allegation. "A report= in the New York Times indicated that investigators were also checki= ng whether airline stocks may have been sold short," MSNBC said.
But the most vulnerable part of of a stock/insurance scam theory is on t= he other side of the world, at the World Trade Center site in Manhattan. T= he towers were purchased just two months ago -- the "purchase" being a 99-y= ear lease -- by real estate partners that then took out a $3 billion insura= nce policy probably required by the lease.
According to the Financial Times, the lease has an all-importan= t escape clause: If the buildings are struck by "an act of terrorism," the = new owners' obligations under the lease are void. As a result, the new own= ers are not required to make any payments under their lease, but they will = to be able to collect on the loss of the buildings that collapsed or were o= therwise detroyed and damaged in the attacks.
Examined from this point of view, the word "Anchor" comes into play. Th= e U.S. economy is in or very nearly in a recession. Unemployment is rising= even as corporate profits fall. Hundreds of thousands of layoffs have bee= n announced, and more are likely to come.
For huge companies, the response to tough economic times is typically t= o downsize; for consumers, it means a reduction in spending for non-essenti= als. The new owners of the World Trade Center have been facing the loss of = "anchor" tenants at its other properties that could significantly undermine= their investment; they own several large malls where "anchor" tenants Mont= gomery Ward and JC Penney have closed their doors or moved.
Who were the = owners?
The World Trade Center was owned by New York-based Silverstein Properti= es and Australian-owned Westfield America, according to the authoritative, = London-based Financial Times and SEC documents filed by Westfield, a= shopping mall developer that owns several large malls in the Los Angeles a= rea and bought the World Trade Center buildings from the Port Authority of = New York and New Jersey for $3.2 billion, including a cash payment of $300 = million, in July; financing was completed just two weeks ago. They insured = the building for about $3 billion, news reports say. Now, the new owners s= ay the decision to rebuild is in the hands of the state and federal governm= ents.
"Ultimately, the decision will be made by politicians. It is a state an= d federal government decision about whether or not to rebuild on the site,"= an executive for the buyers told the Financial Times in a statement= published Sept. 14.
Larry Silverstein, a Manhattan real estate developer= and chairman of Silverstein Properties, says he hopes to rebuild. "It woul= d be the tragedy of tragedies not to rebuild on this part of New York," he = told the Wall Street Journal. "It would give the terrorists the victory th= ey seek."
A popular New Yorker and board member of the city's Museum of Jewish Her= itage who controls 10 million square feet of Manhattan office space -- much= of which was lost last Tuesday -- Silverstein would be the last person to = seek to destroy his own investment, for insurance or any other purpose. Bu= t he doesn't own or control any of his financial partners.
Westfield A= merica is 83 percent owned by the Lowy family of Australia and their closel= y-tied partner, P.M. Capital, Ltd., an Australian mutual fund. The mall bus= iness is headquartered 11601 Wilshire Blvd. in West Los Angeles, close to t= he Federal Building. The company owns 40 shopping malls in nine states wit= h the brand name "Shoppingtown." It had renamed the World Trade Center the = Westfield Shoppingtown World Trade Center, according to its most recent fil= ing with the Securities Exchange Commission.
The firm's other filings say it engages in some high-risk financial in= struments known as derivatives, and is very active in the foreign currency = market but not as speculators. It also trades in exotic financials such as= interest rate swap contracts.
But "Anchor" is capitalized in the company's annual 10-K report, as in= "the Anchor and other major tenants," apparently to distinguish the kind o= f leases those tenants get compared to smaller retailers, who must particip= ate in the upkeep of the mall and usually share a percentage of their recei= pts with Westfield.
The company acknowledges that the loss of Anchor or other major tenants= due to termination of their leases or insolvency could materially impact i= ts bottom line, and several have been lost in recent months. Meanwhile, as= of June 30, the company has more than $1.7 billion in debt payments due be= tween now and 2004, including two more payments of $100 million each to the= Lowy family for the $300 million loan that was used to fund the World Trad= e Center lease. The first payment was made on June 29, 2001.
Westfield was facing substantial challenges as the nation's economy slow= s and consumer enthusiasm is dampened. Also, one of its directors, Roy Fur= man, was chairman of Livent, Inc., the broadcast production firm whose seni= or management apparently defraused it of millions of dollars, according to = a 16-page indictment.
Furman was a victim in that fraud, and his company was sold to SFX Ent= ertainment for $79 million in cash and $33 million in deferred payments ear= lier this year. Westfield is also being sued by investors who charge that = the price paid them when the company was purchased by the Lowy's was far be= low its real value. Such suits are typical of mergers involving stock swap= s, however.
The Lowy family's patricarch, Frank Lowy, 70, has placed three of his so= ns on the Westfield board and controls its investment and spending decision= s via a Connecticut-based "advisory" firm his family controls. Lowy also o= wns Australia's Daily Mail and sits on that coountry's federal reser= ve board.
Frank Lowy's net worth was estimated by Forbes in 2001 at U.S.$2.2 billi= on, ranking him 209th among the wealthiest individuals in the world. He is= also Australia's most highly paid executive, with a salary of U.S.$7,680,000= in 1999.
Like Silverstein, Lowy is active in Jewish causes, and funded a school= named after his family for overseas students of Tel Aviv University in 199= 7.
Would people like Larry Silverstein and Frank Lowy engage in an insura= nce scam that took the lives of 5,000 innocent people? No. They may be am= ong the most predatory sharks in the roiled waters of Manhattan real estate= , but there is zero possibility that either group could also be mass murder= ers of the Osama bin Laden variety.
Nonetheless, both men have much to lose -- and perhaps much to gain -- i= n the destruction of the World Trade Center, even if they are not the kind = of international rogues like former Saudi arms dealer Adnan Khashoggi, who = might knowingly do business with terrorists.
Silverstein's office buildings in Lower Manhattan will probably getmor= e valuable now that 20 percent of all the office space in that area has bee= n destroyed or made unusable.
But some of his own properties other than the Twin Towers are undoubte= dly on the list of condemned buildings, and the malls controlled by Lowy ar= e likely to lose tens of millions as Americans rein in their spending and w= ait for the storms of war to pass.
That doesn't mean that terrorism and business can't go hand in hand, how= ever. The European securities regulators looking into the short sale of sto= ck in two reinsurance companies are still trying to determine if some finan= cial manager for Osama bin Laden -- whose late father was one of Saudi Arab= ia's richest men and a partner of the Saudi royal family in a huge construc= tion firm that built entire cities there -- shorted reinsurance stocks in a= nticipation of the attack.
While that investigation goes on, it will remain one of the great ironie= s of the World Trade Center attacks that the Jewish owners of the World Tra= de Center will get billions of dollars in insurance payments as a result of= an attack by their enemies in the Islamic world.