Fox & Friends advanced disputed allegation against Obama "auto czar"

››› ››› JEREMY HOLDEN

Fox & Friends hosts repeatedly touted the allegation that Steven Rattner "threatened to ruin" Perella Weinberg's reputation, as Dave Briggs put it, if it continued to oppose the Obama administration's Chrysler bankruptcy plan. Only hours later did anyone on the program mention that the administration and the investment firm have both denied the allegation.

During the May 4 edition of Fox News' Fox & Friends, guest co-host Dave Briggs and co-hosts Gretchen Carlson and Steve Doocy repeatedly touted, in Briggs' words, "an accusation by a lawyer, who represents ... one of those [hedge fund] lenders who says that" Steven Rattner, the Obama administration's choice to lead its Auto Task Force, "threatened to ruin their reputation, and by using the White House press corps." It was not until a subsequent discussion, approximately two hours later, that anyone on Fox & Friends mentioned that the Obama administration and the investment firm that allegedly came under pressure -- Perella Weinberg Partners -- have denied the allegation, made by lawyer Thomas E. Lauria, a partner at the White & Case law firm.

Indeed, even when Doocy stated during the initial discussion that Perella Weinberg "apparently, according to ABC News, was singled out by Rattner," he did not mention that ABC News senior White House correspondent Jake Tapper, who was reportedly the first national figure to report Lauria's allegation, also reported on May 2 that "[t]he White House and a spokesperson for the investment bank in question challenged the accuracy of the story."

During the initial Fox & Friends discussion, Briggs, Carlson, and Doocy had the following exchange:

BRIGGS: [T]here's an accusation by a lawyer, who represents one of those creditors who you're talking about, one of those lenders who says that the administration -- the auto czar, if you will -- threatened to ruin their reputation, and by using --

DOOCY: Yeah.

BRIGGS: -- the White House press corps even. And this becomes an issue because there is basically a handful of lenders that held out for a better deal in bankruptcy.

DOOCY: Yeah.

BRIGGS: But with GM, which could go bankrupt in the future, they have tens of thousands of lenders, not a dozen or so.

DOOCY: Yeah.

BRIGGS: And there are people all over this country, pensioners, not just hedge funds, that could hold out for a better deal in bankruptcy, as well. So this could have a lot more to come.

CARLSON: I don't think the story is going away, though, about this alleged threat with regard to Rattner, who, of course, is the guy who's been heading up the whole task force for the Obama administration with the auto industry. Remember, he's also potentially in trouble for his own dealings with his own investment firm -- an investigation underway there.

Now, allegations that he did strong-arm some of these hedge funds saying, "Look, you know, we're going to come after you if you don't take this deal." That's illegal. You can't do that. I got a little chuckle out of the fact that he was going to send the White House press corps after them.

BRIGGS: Right.

DOOCY: Yeah. Well --

CARLSON: The last time I checked, they were pretty much in the camp for Barack Obama.

DOOCY: Sure.

CARLSON: Maybe they would turn on hedge funds instead. I'm not sure.

Moments later, Doocy said: "I think -- look, if somebody is standing in the way of a publicly traded company from a government bailout, why not go ahead and say, 'OK, this is who is holding out.' For them to say -- but for this Steven Rattner guy to use these behind-the-scenes strong-arm tactics, is that so bad to say, 'Well, that company is holding out.' " Doocy later added, "It was this particular [hedge fund], though, that apparently, according to ABC News, was singled out by Rattner, and said, 'OK, I'm going to get -- come after you.' "

It was only during the subsequent Fox & Friends discussion, approximately two hours later, that Doocy noted, "The White House says that didn't happen. This hedge fund says it didn't happen."

Tapper reported on May 2 -- two days before Fox & Friends discussed the allegation -- that the administration and a spokesman for Perella Weinberg denied Lauria's account. From Tapper's May 2 entry on his Political Punch blog:

A leading bankruptcy attorney representing hedge funds and money managers told ABC News Saturday that Steve Rattner, the leader of the Obama administration's Auto Industry Task Force, threatened one of the firms, an investment bank, that if it continued to oppose the administration's Chrysler bankruptcy plan, the White House would use the White House press corps to destroy its reputation.

The White House and a spokesperson for the investment bank in question challenged the accuracy of the story.

"The charge is completely untrue," said White House deputy press secretary Bill Burton, "and there's obviously no evidence to suggest that this happened in any way."

A May 3 post on The New York Times DealBook blog reported that Lauria first made the charges in a Detroit radio interview, then did a follow-up interview with Tapper, during which he "identified Mr. Rattner":

In an interview with a Detroit radio host, Frank Beckmann, Mr. Lauria said that Perella Weinberg "was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight."

In a follow-up interview with ABC News's Jake Tapper, he identified Mr. Rattner, the head of the auto task force, as having told a Perella Weinberg official that the White House "would embarrass the firm."

Blogs like Clusterstock, Zero Hedge and Finem Respice have picked up on the reports, raising questions about whether the Obama administration acted improperly in negotiating with the debtholders.

But people briefed on the matter told DealBook that Mr. Rattner has never spoken to Mr. Lauria, and that participants on the conference call Mr. Lauria describes have denied his account.

The DealBook post further reported that "Perella Weinberg said in a statement that the firm decided to back the government-proposed settlement Thursday afternoon, after Mr. Obama criticized the lenders in harsh terms," and included the following "full statement by Perella Weinberg":

Suggestions have been made that the Perella Weinberg Partners Xerion Fund changed its stance on the Chrysler restructuring due to pressure from White House officials. This is incorrect. The decision to accept and support the proposed deal was made by the Xerion Fund after reflecting carefully on the statement of the President when announcing Chrysler's bankruptcy filing. In considering the President's words and exercising our best investment judgment, we concluded that the risks of potentially severe capital loss that could arise from fighting this in bankruptcy court far outweighed any realistic potential upside.

We have a very specific mandate from our investors, and that is to carefully weigh investment risks and rewards. It is not our investment mandate to pursue political or risky legal campaigns with our investors' money. This was our assessment of investment risk and reward, nothing else.

While we did and still do believe that the lenders would be justified in pressing their objections under conventional bankruptcy law principles, we believe a settlement would now be in the best interests of all parties in the context of avoiding a drawn out contested bankruptcy litigation proceeding, and we encourage our colleagues in the loan syndicate to pursue this immediately.

From the May 4 edition of Fox News' Fox & Friends:

DOOCY: Four minutes after the top of the hour. If you are a Chrysler employee, you probably have today off. That's because, of course, they have -- ever since they declared bankruptcy last week, they are shuttering all of the factories. And here's what is happening now behind the scenes.

By -- it sounds like May 22nd -- they are going to have an auction of all the assets. And those stakeholders who drove it right up to the brink, it sounds like they're going to have to settle for between 9 cents on the dollar and 38 cents. So when you look at the fact that the government was saying, maybe you should take this 33 cents on the dollar thing, that could have been the best deal they were going to get.

DAVE BRIGGS (guest co-host): Could be. And that's at the center of this right now, because there's an accusation by a lawyer, who represents one of those creditors who you're talking about, one of those lenders who says that the administration -- the auto czar, if you will -- threatened to ruin their reputation, and by using --

DOOCY: Yeah.

BRIGGS: -- the White House press corps even. And this becomes an issue because there is basically a handful of lenders that held out for a better deal in bankruptcy.

DOOCY: Yeah.

BRIGGS: But with GM, which could go bankrupt in the future, they have tens of thousands of lenders, not a dozen or so.

DOOCY: Yeah.

BRIGGS: And there are people all over this country, pensioners, not just hedge funds, that could hold out for a better deal in bankruptcy, as well. So this could have a lot more to come.

CARLSON: I don't think the story is going away, though, about this alleged threat with regard to Rattner, who, of course, is the guy who's been heading up the whole task force for the Obama administration with the auto industry. Remember, he's also potentially in trouble for his own dealings with his own investment firm -- an investigation underway there.

Now, allegations that he did strong-arm some of these hedge funds saying, "Look, you know, we're going to come after you if you don't take this deal." That's illegal. You can't do that. I got a little chuckle out of the fact that he was going to send the White House press corps after them.

BRIGGS: Right.

DOOCY: Yeah. Well --

CARLSON: The last time I checked, they were pretty much in the camp for Barack Obama.

DOOCY: Sure.

CARLSON: Maybe they would turn on hedge funds instead. I'm not sure.

DOOCY: I know, and see, keep in mind the big banks said, OK, we'll take the deal. But it was those hedge funds, and in fact on -- I think it was Thursday -- Thursday, we gave the name of the three -- the names of the three hedge funds that were holding out, and this was one of them. The outfit was --

CARLSON: Perella Weinberg Partners.

BRIGGS: Perella Weinberg Partners.

DOOCY: That's it exactly. I had to look --

CARLSON: I'm not so sure that they shouldn't hold out. I mean --

DOOCY: I think -- look, if somebody is standing in the way of a publicly traded company from a government bailout, why not go ahead and say, "OK, this is who is holding out." For them to say -- but for this Steven Rattner guy --

BRIGGS: OK.

DOOCY: -- to use these behind-the-scenes strong-arm tactics, is that so bad to say --

CARLSON: But why shouldn't they hold out?

DOOCY: -- "Well, that company is holding out."

CARLSON: 'Cause the union --

BRIGGS: See, I agree with you.

CARLSON: You know, the union, pretty much, I'm not sure --

BRIGGS: Well, they can -- no, they can --

CARLSON: -- that they had to take 50 cents on the dollar.

BRIGGS: You get pulled out -- if you're getting a better deal --

DOOCY: Oh, go ahead and hold out.

BRIGGS: The government --

DOOCY: Go ahead and hold out. Sure.

BRIGGS: -- was getting a much better deal --

DOOCY: Yeah.

BRIGGS: -- than these lenders were offered. The UAW is getting far better deal than these lenders were offered.

DOOCY: Right.

BRIGGS: Why not hold out? It's their own self-interest.

DOOCY: They can hold out, but --

BRIGGS: That's what capitalism is all about.

DOOCY: -- but why not go ahead and say, look, we had a deal except for this one company. This great, big hedge fund said they weren't going to take the money.

CARLSON: I don't think it was just one though.

BRIGGS: It wasn't just them.

CARLSON: There was 20 hedge funds.

BRIGGS: It was Oppenheimer --

CARLSON: The four largest creditors: J.P. Morgan Chase, Citigroup, Morgan Stanley, and Goldman Sachs. But then there's up to 20 hedge funds who made up the rest of the difference.

DOOCY: Right. It was this particular one, though, that apparently, according to ABC News, was singled out by Rattner, and said, "OK, I'm going to get -- come after you."

BRIGGS: Well, Oppenheimer was also a holdout. Stairway Capital Management was also a holdout, among --

DOOCY: There were four.

BRIGGS: -- among the few.

DOOCY: Four big ones.

[...]

BRIGGS: Let's talk the latest about the big three. Plants for Chrysler begin shutting down today for the next 30 to 60 days. All but four, at this point, will reopen. Four of those expected to shut down by September in Ohio, Wisconsin, Missouri, and Michigan.

Also some controversy, guys, as you know, about some of the lenders that may have been strong-armed before Chrysler went into bankruptcy.

DOOCY: That's right. This story came from ABC News that suggested that the car czar, Steven Rattner, apparently had threatened one particular hedge fund. And remember, hedge funds were the stakeholders. Hedge funds and big banks owed a lot of money by Chrysler.

Anyway, this one, Perella Weinberg Partners, apparently and reportedly the White House, in the form of Rattner said, unless you take this deal where we're offering 33 cents on the dollar, we're going to embarrass you. We're going to just drag you through the mud and make you look bad with the press corps and stuff like that.

The White House says that didn't happen. This hedge fund says it didn't happen. But, nonetheless, it is interesting to think that, that story was circulating, that they felt that they were being pressured by the White House to take the deal.

CARLSON: I believe it was an attorney for this particular hedge fund that went on the record saying that this, in fact, did happen. If this happened, folks, this is huge news. This is huge news, because a lot of people already concerned about government involvement in general in the car companies, in the banks, in other businesses.

And now, if there are strong-arm tactics being used -- I got a chuckle at least out of the fact that they were going to sic the White House press corps --

BRIGGS: Who is clearly in the tank.

CARLSON: -- on this hedge fund, who's -- yeah, who hasn't necessarily been siced on the Obama administration --

BRIGGS: Yeah.

CARLSON: -- that wholeheartedly, but it will be interesting to see what they could do to a hedge fund.

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FOX & Friends
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