AP: McCrory Failed to Report Six-Figure Payout from Controversial Mortgage Broker
Report raises questions on conflicts of interest in governor’s appointment of banking director and eight members of Banking Commission, which regulates mortgage industry.
RALEIGH -- Gov. Pat McCrory accepted a $185,000 payment from a controversial mortgage broker shortly after taking office, the Associated Press reported Tuesday. Just 18 days later, McCrory appointed the director of the State Banking Commission as well as eight Banking Commissioners -- which raises red flags about why the payment was not mentioned on the governor’s ethics disclosure.
Within weeks of McCrory taking office in January 2013, the board of Charlotte-based Tree.com, the parent company of online mortgage broker LendingTree, took special action to provide McCrory an early stock payout for his service on the Tree.com board of directors before he resigned. McCrory resigned from the Tree.com board on Jan. 4, 2013, one day before he was inaugurated as Governor. But the resignation did not take effect until Jan. 31st, and the Tree.com board awarded McCrory a huge stock windfall on Jan. 30th.
In 2012, LendingTree has paid $3M in penalties to the State of South Carolina for failing to disclose relevant information to mortgage customers.
“Gov. McCrory’s refusal to disclose this huge payday after he was sworn in as Governor is a red flag warning of conflicts of interest,” said Gerrick Brenner, Executive Director of Progress North Carolina Action. “McCrory received a huge payday from a company regulated by the Banking Commission, then weeks later he appoints a slew regulators to the Banking Commission. The obvious question is, ‘Who is this Governor really working for?’”
This isn’t the first time the governor has misled the public about his financial dealings while in office. Earlier this year, McCrory failed to report his ownership of Duke Energy stock amid the controversy over Duke’s coal ash spill and the McCrory Administration’s collusion with the company. In both cases, Gov. McCrory has failed to report financial dealings which raise questions about the influence these companies have on his actions as governor.
“North Carolina deserve a governor who does not hide huge stock payouts and clear conflicts of interest,” added Brenner. “The State Ethics Commission should immediately investigate the governor’s pattern of misleading ethics disclosures and the payouts that he has tried to keep secret.”
CHARLOTTE, N.C. (AP) -- Soon after taking office, North Carolina Gov. Pat McCrory and U.S. Rep. Mark Sanford of South Carolina accepted six-figure stock payouts from an online mortgage broker accused by regulators of deceiving its customers.
The two Republicans served as directors at Tree.com, the Charlotte-based corporate parent of the website LendingTree. As board members, they were entitled to large chunks of restricted company stock if they held their positions long enough. Both resigned after their election victories, which would have rendered their unvested stock worthless had the board not taken special action to provide them early payouts.
McCrory and Sanford deny they did anything improper by accepting the stock payouts, which were not fully described in their ethics statements. Their timing and total value are only being revealed now, as the result of an Associated Press investigation into the company's financial records and interviews with Tree.com officials.
Early vesting of restricted shares for departing directors is not unheard of in the corporate world.
However, more than a dozen securities lawyers and ethics experts told the AP that such stock payouts are uncommon for elected officials, and raise significant concerns. These experts gave differing opinions about whether laws were broken.
But "there is no question (this) raises a host of red flags for prosecutors and regulators," said Jacob Frenkel, who handled corruption cases as a federal prosecutor and served as senior counsel in the Securities and Exchange Commission's Division of Enforcement.
In the months after receiving his $171,071 payout of stock from Tree.com, McCrory appointed the state's banking director and a majority of the banking commissioners who regulate mortgage brokers.
Some of Tree.com's payments to McCrory and Sanford weren't publicly disclosed until May 2014, when the company filed its 2013 year-end proxy statement with the U.S. Securities and Exchange Commission. Other details - such as the fact that Sanford received his $108,539 in Tree.com stock after taking office in Congress - have never been made public until now.
McCrory declined requests for an interview. In a written statement, McCrory spokesman Josh Ellis said the governor fully complied with state law and "continues to uphold high ethical standards."
Sanford also declined to answer any specific questions about the Tree.com stock. He wrote in an email to the AP that the company went `'the extra mile in their adherence to top-notch business practices, ethics and documentation."
But the retroactive vesting of Sanford's stock could violate a prohibition on members of Congress accepting gifts exceeding $350 from non-family members, said Washington University Law School professor Kathleen Clark, an expert on Congressional ethics rules.
McCrory joined the Tree.com board in January 2009, a year before ending his last term as Charlotte's mayor. Like all board directors, he was awarded restricted company stock as a performance and retention bonus, which vested in annual installments - as long as he stayed on the board.
While no North Carolina law bars elected officials from serving on corporate boards while in office, they are prohibited from taking official actions that might benefit their personal holdings.
McCrory won election as governor in November 2012. Company records show that he filed his resignation as director the day before his Jan. 5 inauguration, but made it effective Jan. 31, 2013 - the day after the next board meeting, and 26 days after his swearing-in.
That Jan. 30, the board voted to accelerate the vesting of McCrory's 10,063 restricted stock, valued on that date at $171,071, even though thousands of the shares were not due to vest for another 16 months.
McCrory also was paid $4,375 in directors' fees for his board service in January 2013, the records show, although Ellis said the governor did not participate in the January board meeting.
And even after McCrory's departure, Tree.com paid its directors a special $1 per share cash dividend on any unvested stock they held at the end of the prior year, giving the governor another $10,063 on April 12, 2013, according to the SEC records.
McCrory's total take of $185,509 from Tree.com in 2013 far exceeded the $139,590 salary he earned as governor that year.