Concerning the revolving door of government regulators who, upon leaving office, take executive and high-ranking positions in the very industries they used to regulate, special outrage can rightfully be expressed regarding Mary Schapiro’s recent joining with Promontory Financial Group.
Promontory Financial Group is a global consulting firm that advises its clients on the paths to take when legality conflicts with profitability. Promontory has loaded its ranks with former government employees and financial regulators, building its profile as a “fixer” between banks and regulators. For example, the founder and CEO of Promontory, Eugene Ludwig, is the former head of the Office of Comptroller of Currency, one of the main watchdogs in the financial industry.
Mary Schapiro joins Promontory and was only a couple of months ago the chief of the Securities and Exchange Commission (SEC), the federal agency responsible for regulating and policing securities markets in the U.S.
Promontory has been embroiled in dealing with several scandals throughout the past and has a record of pursuing the interests of major corporations and big banks. In August, British bank Standard Chartered investigated by New York state banking regulators that it illegally laundered money for Iranian entities. Standard Chartered hired Promontory, who argued that only $14 million in money laundering transactions. In a settlement, Standard admitted that the illegal transactions totaled at least $250 billion and paid a $340 million fine. Prior to that, Promontory was paid about $1 billion to help three banks defend themselves in the robo-signing scandal.
“It certainly raises suspicions when these types of deals are made with former regulators, like Ms. Schapiro. Promontory wants the public to believe that former government regulators will not influence or impede the effectiveness of current government regulators. However, the motivation for hiring former financial industry watchdogs is to market those persons’ experience and influence to banks,” said Peter Mougey, a partner with the Levin, Papantonio law firm.
Aware of the suspicion regarding her new post, Schapiro told the Wall Street Journal last Tuesday that her new position should not raise concerns as she will not be lobbying, and that she does not intend to return to government work.
James L. Kauffman is an associate attorney with the Pensacola, Florida, law firm of Levin, Papantonio, Thomas, Mitchell, Rafferty, & Proctor. He is a member of the Business Torts Department and his practice focuses primarily upon representing individuals and entities seeking financial recovery for losses suffered from securities fraud.
