By Pam Martens: April 2, 2013
In addition to collecting her $250,000 for sitting on the Board of General Electric, former SEC Chair Mary Schapiro, who left the SEC post in December, will be hanging her shingle at Promontory Financial Group LLC as a managing director. The firm has not disclosed the amount of her compensation.
Promontory’s founder, Eugene Ludwig, was formerly the head of the Office of the Comptroller of the Currency (OCC) from 1993 to 1998. The OCC is the primary regulator of national banks. Before becoming head of the OCC, Ludwig was a partner at the corporate law firm, Covington & Burling, the firm where former head of the criminal division of the Justice Department, Lanny Breuer, returned earlier this year. The Justice Department has been heavily criticized for failing to prosecute Wall Street banks or their top executives.
The U.S. Attorney General, Eric Holder, also hails from Covington & Burling. Former OCC chief, John Dugan, who served at the OCC from 2005 to 2010, also came from and returned to Covington & Burling. Prior to joining the OCC as its head, Dugan was a registered bank lobbyist.
Ludwig founded Promontory in 2001. In 2006, Ludwig was listed on a Federal lobbying disclosure form as a lobbyist for General Motors on an issue before the Federal Deposit Insurance Corporation (FDIC) as part of his work for Promontory. The company was paid $3.4 million by General Motors for the 2006 lobbying engagement. It earned additional sums from GM in subsequent years. Another Promontory lobbyist, Colleen Brennan, lobbied the SEC in 2006 on behalf of TD Ameritrade, a securities firm.
In more recent years, Promontory’s business model has evolved from lobbyist to self-styled privatized regulator-for-hire. One of its engagements was selection as one of the firms hired by the OCC and Federal Reserve to review foreclosure files by banks found to have engaged in abusive foreclosure practices. As we previously reported, that process has a strong stench. Below is an excerpt of our earlier report:
The speciousness of the original OCC plan has been challenged by the General Accountability Office, ProPublica, and a host of consumer advocates. The GAO found that the letters sent to borrowers who may have been wronged in the foreclosure process were written over their heads and failed to mention any specific dollar amounts they might be entitled to – thus removing the incentive to wade through the legalese. ProPublica found that in at least one case, that of Bank of America, “supposedly independent, third-party reviewers would sit at a computer, analyzing each homeowner’s case by going through hundreds of questions, such as whether the bank had properly reviewed a homeowner for a modification or had charged bogus fees. But the reviewers weren’t starting from a blank slate. Bank of America employees had already supplied the answers, which the reviewers would have to override if they did not agree.”
On March 25 of this year, Senator Elizabeth Warren and U.S. Representative Elijah Cummings wrote to the OCC and the Federal Reserve to demand that they provide the full set of documents related to the Independent Foreclosure Reviews as the pair had requested in January. The letter revealed that $2 billion had been paid to Promontory (and 7 other accounting and consulting firms) for conducting the Independent Foreclosure Reviews. No breakdown had been provided as to how much each firm received. Promontory performed the reviews for Wells Fargo, Bank of America and PNC.
Warren and Cummings said in the letter: “Criminal activity should not be shielded by regulators as if it constitutes proprietary information or trade secrets.”
The Independent Foreclosure Review process ended on January 7 of this year with the announcement that the reviews were being halted and 10 of the banks involved, including four of the largest — JPMorgan Chase, Citigroup, Bank of America and Wells Fargo – were settling with regulators for $8.5 billion. At the time, the OCC said in a statement that the $8.5 billion “includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments.”
On the exact date of the announcement of that settlement, January 7, Julie Williams, Chief Counsel of the OCC, joined Promontory as a Managing Director.