Lobby's Co-CEO Quit After Probe
Green Issued Loans Without Authorization

By Jeffrey H. Birnbaum
Washington Post Staff Writer
Thursday, May 17, 2007

Wall Street's largest and most important trade association yesterday acknowledged for the first time that one of its co-chief executives resigned abruptly earlier this year after an internal investigation uncovered loose financial management by him.

Micah S. Green, 49, resigned from the Securities Industry and Financial Markets Association (SIFMA) after the group's board learned about loans to employees that he had approved without sufficient authorization while he headed one of the two groups that merged to form SIFMA, industry executives familiar with the investigation said.

Green received at least one of those loans himself, which he paid back in full.

Green's sudden departure from SIFMA surprised both K Street and Wall Street. He was widely believed to be on track to become the sole chief executive of the association when Marc E. Lackritz, 60, relinquished his co-leadership role in a few years.

Instead, the organization issued a brief statement March 29 asserting that a single chief executive would be more efficient and that Green would "refocus his professional activities in the Washington, D.C. area." No mention was made of an investigation into the finances of the predecessor group, the Bond Market Association (BMA).

Yesterday, SIFMA altered its position to include inadequate procedures at the BMA as a reason for Green's departure.

"The SIFMA Board reviewed anonymous allegations regarding past practices at the BMA, one of SIFMA's predecessor organizations," SIFMA said in a written statement. "These allegations proved largely unfounded, but it was determined that certain internal controls and procedures at the BMA could have been improved. These procedural deficiencies were among the factors considered when SIFMA moved to a single CEO structure."

The SIFMA investigation found that over the past decade or so, the BMA gave about a dozen loans to employees that totaled nearly $1 million, industry executives said. Some were approved by the board, but many were not and should have been.

The largest of the loans was for nearly $200,000 and was interest-bearing. Some of the loans were interest-free. The executives familiar with the situation said all the loans had been repaid.

The investigation was prompted by an anonymous letter to the board last year that alleged free-spending practices at the BMA.

In an interview yesterday, Green expressed regret that he had not been more vigilant about his association's finances. "We were following procedures that were in place at the association," he said. "But those procedures should have been reviewed and changed, and they were not. If I could turn back the hands of time, I certainly would have changed them to require explicit board approval of loans."

"I thought it was my job to make sure that our practices fit within existing policies," he added. "But now, looking at it in a different light, I wish I had been more proactive in reevaluating the appropriateness of those existing policies and procedures."

SIFMA was formed in November through the combination of the Securities Industry Association, the trade group for stock sellers, and the BMA, the group for bond sellers, to create a more forceful, cost-effective voice for the financial-services industry. Lackritz had been president of the securities group, and Green had been president of the bond association.

The combined group is Wall Street's main mouthpiece as well as its heftiest political benefactor. When added together, SIFMA's political action committees gave more than $1 million during the 2006 election season, putting the organization in the top 25 of all PACs. Its combined $8.5 million in spending on federal lobbying last year placed it in the top 30.

The financial-services industry is the biggest corporate player in national politics. Only organized labor donates more money to candidates for federal offices.

Lackritz has been a friend, colleague and mentor of Green's for two decades. Lackritz hired Green as a lobbyist in 1987 when Lackritz headed the Washington office of the Public Securities Association, a predecessor of the BMA. When Lackritz took over the Washington office of the Securities Industry Association in 1990, Green took his job at the Public Securities Association.

Lackritz went on to become chief executive of the Securities Industry Association in 1992, and Green became chief executive of the BMA in 2001.

"We finish each other's sentences," Lackritz once said of Green.

Recently SIFMA got a new chief financial officer. It had originally chosen the BMA's finance chief, Hugh Moore. But in early April, Moore announced his retirement and SIFMA said the executive vice president of the former Securities Industry Association, Donald D. Kittell, would stay on as the combined group's top finance officer. "Hugh Moore took an early retirement for personal reasons," SIFMA spokeswoman Christina Martin said.

Martin said that the primary reason for the board's decision to have only one leader was its belief that a single chief executive was needed to streamline the organization quickly. "In the spring, concern was mounting over the lack of progress on the merger integration," she said. "It was becoming clear that a single CEO was necessary to increase the speed of decision-making and establish a clear chain of command. Accelerating the integration process was a key factor in the CEO decision; the additional facts were also taken into consideration."

Green also acknowledged that the board was eager to move more rapidly to combine the two groups. "Integrating the two organizations was taking longer than anyone had originally hoped," he said. "Going to a single CEO was needed to facilitate the integration process."

He added that he, the association and its leader, Lackritz, remain close. "Marc and I are dear friends and continue to be," he said. "Now there's one leader, and there had to be."