Northern Trust faces scrutiny for event spending
NEW YORK -- Northern Trust Corp., a bank that received $1.6 billion in government funds, is facing scrutiny for hosting parties and other events connected to its sponsorship of a professional golf tournament.
Reports of the parties brought a swift protest from Washington, with Democratic lawmakers pressing the bank to return the money spent on the events, and Sen. John Kerry proposing legislation restricting banks that received government funds from hosting, sponsoring or paying for conferences or entertainment events.
In Washington, Democratic lawmakers on the House Financial Services Committee pressed Northern Trust President and CEO Frederick Waddell to immediately return the money spent on the outing to the government.
Eighteen Democrats on the financial services panel, led by Chairman Barney Frank, said in a letter to Waddell, "We insist that you immediately return to the federal government the equivalent of what Northern Trust frittered away on these lavish events."
"At a time when millions of homeowners are facing foreclosure, businesses and consumers are in dire need of credit, and the government is trying to keep financial institutions -- including yours -- alive with billions in taxpayer funds, this behavior demonstrates extraordinary levels of irresponsibility and arrogance," they wrote.
Many banks that received money as part of the government's $700 billion government package passed last fall have come under heavy criticism from politicians in Washington in recent weeks about their spending habits -- from hosting conferences to buying corporate jets -- after obtaining the funds.
The Chicago-based custody bank was the title sponsor of the PGA Tour's Northern Trust Open that was played last week at Riviera Country Club in suburban Los Angeles.
The bank also hosted dinners and concerts for clients and employees who attended the weeklong event. A report by entertainment Web site TMZ said Northern Trust flew in hundreds of employees and clients for the event, putting them up at fancy hotels throughout the area and hosting dinners and concerts throughout the week of the tournament.
The events are part of the bank's global marketing activities and are focused on showing appreciation for clients and attracting new business, said Douglas Holt, a spokesman for Northern Trust.
Other banks have faced heavy scrutiny before events even took place in recent weeks, forcing their postponement or cancellation. Political outcry led to Goldman Sachs Group Inc. and Wells Fargo & Co. altering conferences, while Citigroup Inc. canceled a contract to take delivery of a corporate jet. All three of those banks also received federal bailout funds, but at much larger amounts than Northern Trust.
Northern Trust's Holt noted that no government funds are allocated to operating expenses, including marketing, advertising, corporate sponsorships or charitable activities. He said those costs come from cash flow from the bank's operations.
PGA Tour Commissioner Tim Finchem noted that Northern Trust is in the wealth management business, and that entertainment vehicles help their business. "I think it's unfair to them," he said. _____
Associated Press Writer Solvej Schou in Los Angeles and AP Business Writer Marcy Gordon in Washington contributed to this report