It was the banks' fault. So says former Enron Corp. chairman Kenneth Lay, who says Bank of America, Compass Bancshares and JPMorgan Chase should have notified him that when he signed their loan documents, he was violating loan provisions that restricted personal stock purchases. Judge Sim Lake of Houston didn't agree, finding Lay guilty on May 25 of fraud and misrepresentation for using personal loans from the three banks to buy Enron stock. Judge Lake in Houston also presided over the conspiracy and fraud case against Lay and former Enron president Jeffrey Skilling, who were both convicted on May 25 of fraud. Defense attorneys for Lay claim he wasn't aware of the loan restrictions and may not even have seen or signed the loan forms. Moreover, they say, even if he is guilty, the transgressions are a civil, not criminal matter. The agreements with the three banks, for a line of credit valued at about $75 million, allowed him to borrow as much as 70 percent of the value of nonstock assets and 50 percent of the value of any stock purchases. The loans were all repaid. Indeed, Lay also intimated that had not an official from NationsBank, which was later acquired by BofA, targeted him in the 1990s about the deal, he would have not be in this position. Yeah, and the bank official forced him to bilk all those Enron employees out of their pensions, too. Sentencing for both verdicts is set for September 11.
Calling trade associations the "Swiss bank accounts of American politics" for hiding and spending corporate political funds and heightening risks for shareholders, the Center for Political Accountability accused them of helping companies conceal and spend more than $100 million in corporate funds. This spending, the report notes, poses serious risks to company economic interests and reputations and to shareholder value. The CPA is leading a nationwide shareholder initiative to bring transparency and accountability to corporate political spending. "In 2004, more than $100 million was spent by just six trade associations on political and lobbying activities, including contributions to political committees and candidates. None of this spending is required to be disclosed by contributing corporations," the CPA noted it its report. "The use of trade associations as conduits for political spending allows companies to give political money and then claim they didn't know it ended up supporting organizations and candidates with which they may not want to be publicly associated. Singled out were the U.S. Chamber of Commerce and the American Insurance Association.
Comptroller of the Currency John C. Dugan warns that the bank supervisory process must support a competitive banking industry that innovates and ensures a safe and sound system that avoids excessive risks. During a recent speech to the Conference on Bank Structure and Competition, sponsored by the Federal Reserve Bank of Chicago, he proposed regulatory guidance on nontraditional mortgage products that "is not intended to ban innovative mortgage products." The Fed and the Office of the Comptroller of the Currency have taken a great deal of heat recently for suggesting some institutions had overextended themselves in commercial real-estate lending, particularly mid-sized and community banks-and should raise their capital requirements. "What our proposed guidance seeks to do instead is to ensure that all nontraditional mortgage products are properly underwritten and disclosed," he said. Regulation works best when it helps banks identify emerging and growing risks, which encourages banks to develop advanced tools and techniques to manage those risks, for their own account and for their customers, he noted.
