The nation's top bank regulator asked examiners to avoid going to work for banks they supervise for at least a year after leaving the government, but he acknowledged he lacks the authority to make such a restriction mandatory.
Comptroller of the Currency John D. Hawke Jr., in a message sent yesterday to all 2,900 employees of the agency, said the issue of post-employment work by bank examiners needs to be addressed by new legislation. He cited the controversy over Riggs Bank, which hired its chief examiner in 2002, a move that has drawn intense criticism from members of Congress and raised questions about the objectivity of the examination process.
Riggs was fined $25 million by the Office of the Comptroller of the Currency (OCC) in May for failing to abide by laws designed to prevent money laundering. In hearings on Capitol Hill in June, Hawke acknowledged a "failure to supervise" Riggs strongly enough. The bank had substantive weaknesses in its anti-money-laundering program for at least seven years that were never corrected.
One of the issues that arose in the hearings was Riggs's employment of R. Ashley Lee, the examiner-in-charge at Riggs for four years before retiring and being hired as a vice president of Riggs. Lee was put on leave by Riggs earlier this month until criminal investigations into his conduct as an examiner and as a Riggs executive are complete.
In an interview, Hawke said he first tried to address post-employment restrictions on examiners-in-charge four years ago. He "put the matter on the back burner" after learning of legal obstacles to the OCC issuing its own rules. Such matters are the purview of the Office of Government Ethics, which has no restriction on where government employees may work after they leave. Former government employees are in some cases barred for a period of time from representing companies they used to regulate in dealings with their former agencies.
"Riggs brought home the kind of damage that can be done when a situation like that occurs," Hawke said. "It underscores the importance of focusing on the undesirability of our [examiners-in-charge] changing sides of the table without taking some break."
Hawke said that he has "a completely open mind" as to whether Lee did anything wrong in his dealings with Riggs and that he has no problem with former examiners going to work in the banking industry. He said he is more concerned about avoiding the appearance of conflict when examiners-in-charge go to work for banks they oversaw. Lee wasn't alone. Hawke said such situations arise once or twice a year.
Hawke said his letter was not a statement of OCC policy but of his personal opinion. Several members of Congress have proposed legislation on the matter.