INSIGHT INTO THE 9/11 DEBATE: “Economists Are Scared“

In an exclusive interview, United States economist Paul Zarembka talks about three solid scientific studies that suggest insider trading related to the terror attacks of September 11, 2001, and points a finger at others in his profession whom he says are running scared; the issue is too big for them to deal with.

By Lars Schall

Recently, I had published at Asia Times Online an exclusive investigation, Insider Trading 9/11 … The Facts Laid Bare (March 21, 2012). In this article I presented evidence of informed trading activities prior to the terror attacks of September 11, 2001 on areas of New York City and Washington that resulted in the death of 2,996 people, including the 19 hijackers of four commercial jets. (The four aircraft hijacked on September 11 were American Airlines Flight 11, American Airlines Flight 77 and UAL flights 175 and 93.)

On the same subject matter, Asia Times Online today presents an interview that I have conducted with United States economist Paul Zarembka:

Professor Zarembka is a professor of economics at the State University of New York (SUNY) at Buffalo. He has been the general editor for Research in Political Economy since 1977, and is the author of Toward a Theory of Economic Development, editor of Frontiers in Econometrics, and co-editor of Essays in Modern Capital Theory.

He is working on the concept and application of accumulation of capital. Furthermore, he is an expert on Marxist theory and economic development. In 2008, Zarembka edited the book The Hidden History of 9-11, a serious reference volume that examines 9/11 and its background, showing how much remains unknown and where further investigation and debate is needed. His own chapter in the book includes investigation of insider trading before 9/11 and was updated in 2011 [1].

Professor Zarembka, how did you as an economist became interested in the topic of insider trading activities prior to the terror attacks of 9/11?

Paul Zarembka: Well, I did not got directly interested in it, I got directly interested in 9/11 itself. That eventually led to insider trading, and since I specialized in econometrics it was the natural thing for me to jump unto and investigate for myself.

Right after the attacks, a fair amount of mainstream financial media articles surfaced, suggesting that there was informed trading going on related to 9/11. Why do you believe this reporting disappeared soon after and was never seen again?

Paul Zarembka: That’s a good question, and I’ll tell you what I think, but it’s kind of speculative, I can’t know for sure. What I think happened was that many people who were not involved in any way whatsoever with 9/11 noticed the extreme levels of put options in certain securities before 9/11. That is publicly available information, particularly if you have the services that provide that data to you. Some of these people noticed the extreme volumes and they thought, I believe, that it would lead to nailing Osama bin Laden as responsible for 9/11. So we’ve got a lot of news coverage for about a month or two after 9/11, and then suddenly it died. I think the reason why it died – and that’s speculation – is that somehow the word got out that it’s not going to lead to Osama bin Laden.

And so said the 9/11 Commission in its report.

Paul Zarembka: Right, but that was much later after it died, and I mean it really died very quickly. On the other hand, the fact that it got out there at all meant that the 9/11 Commission report had to say something about it. They said something very minimal, but they said something, and if hadn’t been for those news stories nothing would have probably got out about it.

What was the position of the 9/11 Commission relating to insider trading, and why do you think its conclusions are unconvincing?

Paul Zarembka: That’s a big question, perhaps bigger than you anticipated. Let me go back a little bit to the history of discussions about insider trading connected with 9/11. The first scientific paper that came out about it was from Professor Allen Poteshman who was at that time working at the University of Illinois at Urbana-Champaign. His article was published in the Journal of Business which nobody can criticize for its respectability and the integrity of its peer-review process, and yet he came to the conclusion that there was insider trading with high probability (nothing is ever certain in statistics) in American Airlines stock options and to a lesser extent in United Airlines (2). It was accepted for publication, I think, around 2004 well before the 9/11 Commission report came out, but they did not make any reference to it. I am not sure if they knew or didn’t know about it, but my guess would be that they would have been informed that that study had been done.

Now the 9/11 Commission made its reports and said that they did investigations throughout the financial world, I mean not just only in the United States but also abroad, and not just in put option trading but in other financial instruments, and they concluded that they could not find any evidence of irregular financial transactions. In its report only two cases are actually cited, the two cases that Poteshman had studied and written about, namely in American Airlines put option trading and United Airlines.  However, the Commission provided almost no direct evidence of what its finding was, but rather just made assertions. So what the 9/11 Commission said is basically worthless because they didn’t gave us any evidence for its statement.

The drama is magnified when two more studies were done which again confirmed that insider trading took place. Where it also gets dramatic is that in 2009 some parts of the investigation fed into the 9/11 Commission were released, and frankly I have to tell you that at least for American Airlines the report is convincing that there wasn’t insider trading in American Airlines. I say this not because it changes the final result very much, but I think it is a deep warning to everybody working on these kind of issues that these issues are complicated, and that in the final analysis the government has the data and has knowledge we don’t have — so some of what we are doing is based upon hard facts, but some of it speculates around things we don’t have the hard facts about.

And then the label “conspiracy theorist” raises its ugly head very fast when you do speculate.

Paul Zarembka: Yes, and that’s why I am not interested in speculating. I try to say truthfully whatever I discover. For example, Poteshman’s results were never a certainty, they were always stated as a high probability. But from an econometric point of view when you get results which have a probability of 99 percent you take them very seriously. And that leads us to something else. I have enough experience in econometric issues which were controversial to know that typically when you got controversial results that somebody else comes along with a series of objections to the methodology that you have used and you get a big controversy.

No one ever responded to Poteshman’s article from a critical perspective, and this is very curious. It’s a major piece of work, and he got the data actually from the Chicago Board Option Exchange in a way that the rest of us don’t have, he got confidential data for his work. I suspect that the CBOE wanted to find out if a methodology could be developed which would be useful for checking into insider trading in other incidents, not only in this one, and I think that’s why the CBOE gave him the data. Whatever the reason is, he had data the rest of us don’t have. So it really was something to investigate further, but his work was never challenged. And then we get two other papers which actually more than reinforced what Poteshman said.

One of those papers came from two professors and a graduate student at the University of Wisconsin-Madison, who studied abnormal trading in the S&P 500 index options prior to the 9/11 attacks. (3) Their study came to the conclusion that there was a high probability of insider trading in S&P 500 index options prior to September 11. What is very interesting about their results is that the underlying reports that were made available to the 9/11 Commission (which we didn’t see until later) say that they could not examine the S&P 500 index options because trading in it is too extensive. Now why that becomes interesting is because the 9/11 Commission report had said that they made a wide ranging study and they found no evidence of any sort of financial irregularities before 9/11, but also said the S&P 500 index options couldn’t even be investigated  – so the Commission is kind of contradicting itself. And more than that, when some did investigate the S&P 500 index options they find out that in fact it did have abnormal trading before 9/11, with high probability.

The other paper, the third one, is from Professor Marc Chesney and two of his colleagues at the University of Zurich in Switzerland. (4) They are engaged in a long-term project which has been ongoing now for about five years, continually improving their work and it’s getting larger and larger. They do is that they look at 14 corporations – five airlines, five banks and four other stocks. They also find that there was insider trading prior to 9/11 in a number of stocks, for example in Boeing and Merrill Lynch.

We can discuss this further, but the basic message now is that there are three studies showing high probability of insider trading prior to 9/11, while there are no reports out there which are showing the opposite. We only have the 9/11 Commission report saying something different.

Also interesting from Chesney’s work is this: Michael Ruppert made a lot of noise about the enormity of the profits that were made on put options before 9/11 and he also talks about options that were not exercised after 9/11, suggesting that some people were afraid of exercising their options. (5) But if you look carefully at Chesney’s paper, the detail in Chesney’s paper indicates that every single put option was exercised by the time of its expiration day. So there wasn’t anything left over. And in fact I have learned something along the way:  If a put option is in the money on the day of the expiration date it is automatically exercised. It isn’t allowed to just expire.

The other thing that came from Chesney that I wouldn’t know otherwise: he is calculating the actual gains from exercising the put options, and you can add up his numbers, and he comes up to about 15 million dollars just on the put options that he has looked at.  And if you double that in order to kind of add the other put options he didn’t examine, it would be 30 million dollars that could have been earned as a result of exercising the put option trades. The point I am making is that, for the put option trades, while important, we are not talking about billion of dollars here. There are other things that happened before and after 9/11 that were worth much more than 30 million dollars.

Am I right that the paper about the S&P 500 Index and the study by Professor Chesney are both not challenged either?

Paul Zarembka: That’s correct.

In light of these econometric findings, what do you think about the performance of the SEC and the FBI, since their investigations have been the basis for the conclusions of the 9/11 Commission?

Paul Zarembka: Well, let us go back to the implications for Poteshman because that indicates where the weaknesses of the conclusions of the 9/11 Commission are and what they might have gotten away with. First of all, the report that was released in 2009 cites a guy from the SEC by the name of Joe Cella, and that report basically gave the evidence of what the 9/11 Commission report asserted without stating how they came to that assertion. (6)

Cella said that they found a financial advisory service that send out on September 9, 2001 a fax to its subscribers that they should buy American Airlines put options at the current price. Cella reports that his investigators went out and got the list of the 2000 subscribers to this newsletter, Options Online. They found out that 55 of those subscribers had purchased put options on American Airlines. And they contacted about half of them and were told by them that they purchased the put options on September 10 because of the recommendation of the newsletter. So Cella was claiming that they nailed down 50 plus subscribers of that newsletter who bought put options on American Airlines. That number is not dramatic, representing about 2,5 percent  of the subscribers who received the recommendation. But it is a convincing report and would seem to account for a majority of the put option purchases on September 10.

There were also purchases of put options on American Airlines and other stocks the days before, so maybe Options Online was only reacting to those.

Paul Zarembka: That’s where it gets interesting. We don’t know exactly the motivations for the advice of Options Online. What you are mentioning means that we need to trace those other put options that Professor Chesney and his colleagues found, namely Boeing, Merrill Lynch, Morgan, Citigroup, and so forth. In other words, there could well have been a climate been created of buying put options before September 11 by people in the know, by people who had insider knowledge about what was going to happen, and that it spun off to some people who did not have that insider knowledge, for example maybe the editor of Options Online who made the recommendation of buying put options on American Airlines.

There’s another reason to think why this might makes sense. The article by Wong, Thompson and Teh notes that actually buying put options on American Airlines and United Airlines was kind of the most stupid thing to do if you knew what was coming down and you knew that airplanes of American Airlines and United Airlines would be involved on 9/11, because buying put options on exactly those airlines would have meant the risk of exposing yourself.

Also, I have to point out that I’m defending as an econometrician my profession in a certain way. I have looked very carefully at all these econometric works and I didn’t find a substantial weakness in them. They are not crazy pieces of research, but solid ones. And from their work we get also into internal contradictions of the Cella report when it is said that every avenue was investigated, but then said: Oh, by the way, we didn’t investigate the S&P 500 index options. When it was investigated by those people at the University of Wisconsin, Madison they find that there was in fact high evidence for insider trading in put options on the S&P 500 index.

Wong, Thompson and Teh also said that they would need better trading data to nail it really down.

Paul Zarembka: That’s actually a factor in all of the three studies.

I think another problem here with nailing down the evidence of 9/11 insider trading is that if the government had any interest in prosecuting this, they would offer protection to some people who know about the insider trading firsthand, correct?

Paul Zarembka: Yes, right. I mean, a very common method of criminal investigation is to offer protection to certain individuals to get to others.

You are calling for an international investigation. Why?

Paul Zarembka: Because I don’t feel at all satisfied with the study that was done by United States authorities. They don’t gave us the truth about what happened, for example, with Merrill Lynch insider trading before 9/11, or with Boeing. They had the opportunity and they don’t provide the information. They provided it only for American Airlines, that’s the only one that is convincing.

Isn’t it also an important reason due to fact that it is connected to mass murder, which isn’t time-barred, and thus it still needs to be prosecuted?

Paul Zarembka: Absolutely. It needs to be prosecuted.  We need to go back and find out about the put option trades Chesney talks about, to every single one of them – we need to go back to Boeing, Merrill Lynch, Morgan, Citigroup etc. You have to look at every single one of those and look at exactly at who did it, and don’t make a presumption that so- and- so is an American citizen and would never have done such a thing, etc. That’s not the way to go about anything in any serious piece of work. That needs to be done.

Why is it that those scientific papers we have talked about don’t get addressed from other economists?

Paul Zarembka: To be frank about my profession, the real reason is that they are scared. I know my profession. Ordinarily, when you have a topic which is as hot as this one, or maybe a topic not as quite so hot but has huge social implications, you want to research it, because you could make your career really moving forward, I’m just talking in normal academic terms. So you would think that there are other econometricians out there who would want to do their own study or criticize the other studies, but doing it in a very serious way, hoping that it will move their own professional career forward – and it’s not happening. And I think the reason is what I have said, they are afraid. This is too big for them to deal with. They are afraid that even getting into the topic gives it credence. Let me say it again: even getting into the topic legitimatizes the topic. That’s why Poteshman’s paper in the Journal of Business was so enormously important, because it legitimized the topic.

It seems as if there were more remaining questions about financial issues surrounding September 11th. For example, something that calls for attention is the staggering growth in

the amount of U.S. currency circulating outside banks … in July/August 2001.  The growth ran into the billions of dollars. … The currency component of the M1 monetary aggregate reported by the Fed rose by $13 billion (in the non-seasonally adjusted data), posting the highest such June-August growth rate in the 55 years since World War II.  Balance sheet data for the Reserve Banks show a similar decline in inventory holdings of currency in July/August 2001, while data from the U.S. Treasury Department suggest the growth in currency in circulation was concentrated in $100 bills.” (7)

Do you have an opinion on that?

Paul Zarembka: Bill Bergman, whom you quote here, basically says that there’s a field of research here that needs more explanation, and I understand what he is trying to ask us to look at and it is important. As you said, there was a huge increase in, particularly, the $100 bill currency supply in July/August of 2001, it was an enormous increase. That drives a question for explaining why it happened. And Bergman got apparently fired from his job for even asking the question, for even pointing out the problem. That’s my understanding. But having said that, I don’t have anything to offer to add to what he has done, except that I would note what he has done is important.

But there were other things happening on that day that were connected to financial issues. For example, I don’t know what to say about it, but the specific floors in which the World Trade Center towers were hit were particularly important financial floors. I am not talking about the whole buildings, I am talking about specific floors which were hit. Or the specific portion of the Pentagon which was hit was also extremely important for financial issues.

For the accounting.

Paul Zarembka: Yes, for the accounting, right. It is almost too much to believe that this is just a coincidence. Another thing, I have read reports that there were enormous gold stocks at the bottom of the World Trade Center, and trucks were coming in, carrying it out. Where did the gold go to? Did it happen, first of all, and if it did, where did it go to? And in Building 7, the third building that collapsed, you have SEC files that were destroyed. I know a person working in the Washington office of the SEC, who told me afterwards – they were dealing with all kinds of investigations that were being undertaken, and case after case after case was closed because they had no copies located elsewhere, the documents that they needed to prosecute these corporations.

What I’m saying is that the case of M1 money supply is just one of many cases. The significance of the put option issue is that the numbers are clear and what you ought to do as a prosecuting person is also clear: you go to the people, you go to the exact names, the exact people who did the trades, and you can get that, no question about that.

Through the brokers.

Paul Zarembka: Yes, who ought to know, right. But I’m just saying that insider trading is the cleanest example we have in financial irregularities, which is why it is attractive to investigate. There are other things out there. Insurance payoffs for the buildings that were destroyed, that’s another example, billions of dollars that we are talking about.

And we know that some re-insurance companies like Munich Re and Swiss Re were also targeted via put options.

Paul Zarembka: Yes, right.

You’re not only an expert on econometrics but also an expert on Marxist theory. Could you give us at the end of this interview an interpretation from a Marxist approach to the critical question “Cui Bono 9/11”?

Paul Zarembka: Well, first of all let me say, since I have done Marxist research and been the editor of a Marxist series for years – when 9/11 happened it took me a little while to decide that 9/11 is worth investigating in its own right. While it is a shocking human event, it is not a shocking theoretical event – I mean, it’s not shocking from a point of view of what I see as the Marxist understanding of what the state is capable of doing even to its own citizens. It is not shocking from that point of view.

But, anyway, you then go to the next question: Why would the U.S. state possibly do this at this time and for what purpose? Well, that can be a kind of a trap question, because no matter what I say somebody could come back and say: Well, they could have accomplished the same thing without 9/11. Nevertheless I still  going to say just a fact: the United States military-industrial complex has earned billions and billions of dollars as a result of 9/11. I think it would have been much more difficult to achieve those sums of money without 9/11. The U.S. military expenditures is already equal in size of all of the rest of the world combined. 9/11 surely helped that ideological support for such an incredibly large military.

Do you think from an economist point of view it has become reality what President Eisenhower warned about, that the military-industrial complex has become too large and too powerful, and is now calling the shots economically? (8)

Paul Zarembka: The short answer is yes, but the more complicated answer is that my understanding of Eisenhower’s statement is that it was long in preparation, it was kind of a year in the making. But, on the other hand, I mean, you can ask yourself the question: Well, why didn’t he do it two years earlier than that? It was kind of something he threw out at the last minute and didn’t have to take any responsibility for.

At the same time he was setting up the Bay of Pigs invasion that he foisted on Kennedy. So, yes, it’s a great thing to quote what Eisenhower said; I like it and it turns out to be correct, but I don’t fully understand his motivation when he waited to the last minute to say it and then afterwards couldn’t do anything about it, and what he did do as President was consistent with the rest of the U.S. foreign policy.

Well, his successor John F. Kennedy was dealing with the military-industrial complex a bit differently.

Paul Zarembka: Yes, he was the one who really challenged it. There is a wonderful book on this that should be read by anybody: JFK and the Unspeakable by Jim Douglas. (9)

Yes, it is just brilliant, I agree.

If people want to read something about JFK’s challenge of the military-industrial complex this is definitely the book to read, no doubt about it.

Thank you very much for taking your time, Prof. Zarembka!


(1) Paul Zarembka:, “Evidence of Insider Trading before September 11th Re-examined”, International Hearings on the Events of September 11, 2001, September 8-11, 2011, Ryerson University, Toronto, Canada, online at:, September 9, 2011.

(2) Allen M. Poteshman: “Unusual Option Market Activity and the Terrorist Attacks of September 11, 2001”, published in The Journal of Business, University of Chicago Press, 2006, Vol. 79, Edition 4, page 1703-1726.

(3) Wing-Keung Wong, Howard E. Thompson and Kweehong Teh: “Was there Abnormal Trading in the S&P 500 Index Options Prior to the September 11 Attacks”, Multinational Finance Journal, Vol. 15, no. 1/2, pp. 1–46 online at

(4) Marc Chesney, Remo Crameri and Loriano Mancini: “Detecting Informed Trading Activities in the Option Markets”, University of Zurich, April 2010, online at:

(5) See Michael C. Ruppert: “Crossing the Rubicon: The Decline of the American Empire at the End of the Age Of Oil“, New Society Publishers, 2004.

(6) See Commission Memorandum: “FBI Briefing on Trading“, dated August 18, 2003, online at:

(7) Bill Bergman: “A 9/11 Paper Trail: Benjamin Franklin, Rolling Over In His Grave”, published March 23, 2012 at:

(8) See Dwight D. Eisenhower: “Farewell Address”, delivered 17 January 1961, online at:

(9) James Douglass: “JFK and the Unspeakable: Why He Died and Why It Matters”, Orbis Books, 2008.

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