Near End for FRM Investigations?

The saga of banking commissioner Peter Hildreth ended last Thursday when he abruptly resigned rather than face the likelihood of being removed by the Executive Council regarding his oversight (or lack thereof) of the Financial Resources Mortgage affair that saw hundreds of investors lose tens of millions of dollars.

Banking Commissioner Peter Hildreth has resigned before likely being fired from his job. (photo courtesy N.H. Banking Commission)

At times, you need a score card to keep of the various legislative and regulatory investigations into the state’s greatest Ponzi scheme. But we might be nearing the end of the trail. As far as we know, the Secretary of State’s office is last state agency conducting its own investigation. Hildreth’s resignation (effective Jan. 1) ended four days of Executive Council hearings. And those hearings coincided with the release of the report by a joint House and Senate legislative study committee looking into the FRM affair that found plenty of fault to go around—to the banking department, securities department and attorney general’s office. To paraphrase the line in the classic movie “Cool Hand Luke,” what the state had was a clear failure to communicate on a number of levels.

As we noted last week, the legislative report includes recommendations to change the state’s consumer protection laws, clarify jurisdiction for the state’s banking and securities regulators, and improve inter-agency communication to protect investors, lenders and consumers. It also recommends that private citizens be provided with more options to resolve complaints when they believe that regulators have failed to act promptly or appropriately. What is less clear is what the new legislature is going to do about all of this.

Gov. John Lynch, who had called for Hildreth’s resignation in June (when the state Attorney General’s FRM report was released), was equally insistent last week that Hildreth’s exit off the public stage wasn’t part of a settlement—even though, according to the Associated Press, he won’t need to go into work for the rest of the month. Hildreth, who was appointed in 2001 and reappointed by Lynch to serve until 2013, can begin planning on collecting state retirement benefits (including health care) next year when he turns 60. For his part, Lynch can now move to fill the post of commissioner, which has been vacant since Hildreth was put on a paid leave months ago.

One of the investors who lost money was less than impressed with the result. Al McIlvene of Kittery Point, Maine, who with his wife lost about $800,000 through FRM, believes Hidlreth should have been fired. McIlvene told the Associated Press he was rankled when Hildreth testified that it was a “sad thing” that the scheme’s victims were “expecting a certain lifestyle” that they lost in the scandal.

“The human tragedy that has gone on here is more than just an impact to a lifestyle,” McIlvene said. “We’re talking about people who are losing their homes, declaring bankruptcy, getting divorced, we’ve had two suicides. This has had dramatic impact on hundreds of people and for him to say it’s a lifestyle change is clearly understating the problem.”

We’ll leave the final word for today with an editorial in the Keene Sentinel. In a sobering and sometimes scathing take about the FRM investigations and its aftermath, the Sentinel editorial observed, “Given the inconclusive but sweeping nature of the FRM regulatory failure, it’s unlikely a more fitting solution could have been found.”

This Daily Dispatch was written by Michael McCord.

Posted by Hilary Niles on Dec 7 2010. Filed under agencies & departments, banking & lending, Commerce, Government, Justice, Money, securities & investments, Weekly Briefing, white collar crime. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry