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Miers provided misleading information to Judiciary Committee

Ron Brynaert

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Harriet MiersMiers gives wrong dates in questionnaire; Firm was sued during period omitted

President Bush's nominee to the Supreme Court, Harriet Miers, provided erroneous and incomplete information to the Senate Judiciary Committee about her membership on a Board of Directors for a real estate investment company, RAW STORY has learned.

Miers also neglected to mention a class action lawsuit that accused the firm, Capstead Mortgage, of violating federal securities laws. The suit, which was later dismissed, came during the period Miers failed to include in her responses to the Senate questionnaire.

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According to Capstead�s 1999 annual report (pdf file) filed with the U.S. Securities and Exchange Commission, Miers remained on the board as late as March 9, 2000. Miers opted not to stand for re-election, and in April of 2000, the former senior managing director at Bear, Stearns & Co., Inc., Howard Rubin was voted on to the board and replaced her as chair of the Audit Committee.

But Miers 57-page questionnaire returned to the Senate on Tuesday claimed that her tenure at Capstead lasted only from January 1993 to 1997 (link).

The embattled nominee is already under fire from members of her own party. Senators from both parties have questioned other answers she gave on her application, saying that her responses were "insufficient." One Democrat went so far as to say her answers "range from incomplete to insulting."

Beyond the Capstead's SEC filing, Miers is listed as chair of the Audit Committee on the firm�s corporate website and a member of the Nominating Committee in the 1999 annual report. Miers also chaired the Audit Committee in 1998, according to the firm's report.

Miers neglected to mention a class action lawsuit for violation of the Securities Exchange Act that was filed against the corporation in July 1998 and consolidated with 23 similar suits in 1999.

Stockholders "complain[ed] of a scheme by Capstead and its top insiders to cause Capstead's stock to trade at artificially inflated levels by misrepresenting Capstead's financial results, its business, and the success of its investment strategy." Miers was not named as a defendant in the case.

A July 1998 press release (link) asserted that the company's leaders were "falsely representing to the market that the Company had positioned itself to generate strong earnings in virtually any interest rate environment," and "issued false financial statements that overstated Capstead's earnings and assets by failing to take necessary write downs to the portfolio."

In June, 1998, Capstead wrote down the value of its mortgage servicing assets and sold its interest-only securities, resulting in losses of about $255 million. The losses were greater than all income the company had accrued during the previous year.

The President's nominee was also managing partner of a Texas lawfirm during a period when it shelled out $22 million to settle a suit which alleged "it aided a client in defrauding investors."

Miers wasn't specifically named in any of the suits, but as the chair of the Audit Committee she had oversight over many of the financial aspects of the company. A call placed to the firm that absorbed the lead attorneys in the suit was not returned.

Capstead's guidelines for the Board of Directors (link) state that the Audit Committee's duties include "the integrity of the Company's financial statements; (ii) the performance of the Company's internal audit function and independent auditors; (iii) the independent auditor's qualifications and independence; and (iv) the Company's compliance with legal and regulatory requirements. The committee shall be directly responsible for the appointment, compensation, retention and oversight of the Company's independent auditors."

The Senate questionnaire asked Miers whether or not she was party to civil legal or administrative proceedings. She responded that she didn't "recall being a party to any civil, legal, or administrative proceedings" and that her "firm was a party to a number of law suits" but that she was never the "subject of complaint."

As late as January 31, 2000 Miers owned 43,822 Capstead common shares (pdf link), including options to purchase 32,892 Common shares and 1,125 held by her mother. RAW STORY was unable to determine if or when Miers cashed in her holdings.

In late 2003, Capstead�s lawfirm, Haynes Boone, prevailed in federal court. The court held that the "plaintiffs had failed to allege misrepresentations or omissions with the particularity required by federal law."

Michael Boone, one of the law firm's co-founders, was included in an October 5th press release issued by Progress for America, a conservative advocacy group backing Miers that named friends and supporters available for media interviews on the Supreme Court nominee's background.

Miers' Senate Judiciary hearings are scheduled to begin Nov. 7.

Originally published on Thursday October 20, 2005.

 


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