Tuesday, 28 September 2010

McCreevy wants to cash in on financial de-regulation – will the Commission stop him?

Last month former European Commissioner Charles McCreevy joined the board of NBNK Investments PLC, a new investment vehicle which according to media reports aims to “buy banking assets that are being sold off by banks for regulatory reasons”. McCreevy's salary will be between 61,000 and 122,000 euro per year depending on “NBNK achieving a major acquisition. McCreevy is also reported to hold 20,000 shares.”

It is unclear whether McCreevy has informed the Commission about this new job, but it seems obvious that it violates the Code of Conduct for Commissioners as it is clearly related to the content of McCreevy's portfolio as a Commissioner.

McCreevy was the EU’s Commissioner for Internal Market and Services from 2004 to February 2010. During his term a vast liberalisation of the financial sector took place in the EU. All the EU regulatory bodies reported to him, the supreme regulator of the EU financial markets. He was widely criticised as one of the main architects of a deregulated, unprotected financial system that inevitably led to the current crisis. After the crisis erupted, McCreevy admitted that the Commission had paid too much attention to the 'selling' side and ‘to those with the biggest lobby budgets’.

Was that a sincere recognition of an error? After quitting public service, McCreevy seems to be joining those very same powerful, wealthy lobbyists. His partner in the new banking company is Lord Levene, former chair and current employee of the insurance giant Lloyd’s and current chairman of the lobby group International Financial Services, London (IFSL). IFSL lobbied DG Internal Market under McCreevy (submitting consultation contributions for example).

As a commissioner, McCreevy was very receptive to Lloyd’s invitations. He also gave his consent on continued state subsidies to the company. Lloyd’s has also heavily lobbied McCreevy on the legislative dossiers around solvency rules. According to the company, Lloyd’s had ‘regular direct communication and dialogue’ with the unit on pensions and insurance of McCreevy’s DG Internal Market. Through its participation in expert groups, Lloyd’s says it had exerted substantial influence on policies. These facts make the question of when exactly McCreevy’s new job was arranged crucial.

Right now, NBNK clearly aims to profit from the continuing financial crisis: its main mission is to buy branches of insurance companies and banks that have to be sold to meet the EU conditions for government bailouts. McCreevy bears serious responsibility for the financial crisis as the chief EU regulator up to February. The Dutch daily De Volkskrant last week commented that “as a director of the investment firm NBNK from the City of London, McCreevy will now indirectly profit” from the new banking rules developed in response to the financial crisis.

In the context of last week’s media and citizens’ outcry over Commissioners going through the revolving door into industry lobby jobs while still receiving generous EU payments, the European Commission should draw a line. Ex-Commissioners McCreevy and Verheugen should be stopped before cashing in on the policies they promoted, the insider knowledge they gained and the contacts they developed while in public office.

In case the Commission has not yet assessed the potential conflicts of interest with McCreevy’s involvement in NBNK it should open an investigation now.

McCreevy is among the 17 former Commissioners receiving hefty ‘farewell bonuses’ from the Commission. Any such payments for McCreevy seem entirely inappropriate considering his involvement in NBNK. McCreevy hopes to receive €32,000 per year from Ryanair (not to mention stock options) and the €61,000-122,000 from NBNK. Adding taxpayers’ money to such earnings is a slap in the face of all those suffering from the impacts of the financial crisis.

Corporate Europe Observatory last week (on the basis of EU freedom of information law) asked the European Commission to see the documents related to a possible approval of McCreevy's new job as a banker.

More info on NBNK:

- Sharecast

- London Stock Exchange

- NBNK Investments plc

- FT Adviser


Friday, 24 September 2010

Commission under fire over revolving doors scandals and ‘farewell bonuses’ – will it block Verheugen?

After brewing for months, the controversy around the number of former Commissioners going through the revolving door into lobbying and lobby advisory jobs has finally boiled over. In the last few days, the six Commissioners that have moved into private sector jobs with potential conflicts of interest have been exposed in the press across Europe. This was sparked by the Financial Times Deutschland revealing that a number of former Commissioners were still receiving extremely generous EU payments years after leaving the Commission. Recipients of this farewell bonus of an average 100,000 euro per year for three years include ex-Commissioners who have taken lobby advisory jobs, such as Joe Borg and Charlie McCreevy.

During press conferences yesterday and today the Commission spokesperson faced a barrage of questions on this and on the revelations that the former Enterprise Commissioner Günter Verheugen has set up his own lobby consultancy firm, the European Experience Company. The Commission confirmed that the Ad-Hoc Ethical Committee is looking into the case and that a decision will be made “in the coming days or weeks”.

Meanwhile, Verheugen has reacted for the first time publicly to the criticism in an interview with Euractiv (in German). In the interview Verheugen denies there is any problem whatsoever. He also defends the Commission’s procedures and the Ethics Committee which has so far allowed former commissioners to do whatever they want. He told Euractiv: “Of course the committee has so far allowed everything and this does not surprise me, because every former Commissioner knows what he can and what he cannot do.” But Verheugen’s defence of his role in the European Experience Company shows that he himself has a highly questionable interpretation of the Code of Conduct for Commissioners.

Verheugen denies that he should have notified the Commission about the company earlier. “I have reported absolutely nothing, and I should not have and will not do so,” Verheugen told Euractiv. He argues that the Code of Conduct doesn’t apply because he is not receiving a salary. “I hold an equity interest in the company that I need not report to the Commission,” he said. “I’m not getting paid for being manager of the GmbH.The rules say nothing about setting up business or about investments, only about paid employment. A cleaner arrangement than this is impossible.”

Verheugen’s interpretation of the Code of Conduct is questionable. According to the Code unpaid jobs must also be cleared. As a Managing Director, Verheugen will be directly involved in the activities of the lobby consultancy and as a shareholder, he will financially benefit from the company’s activities. When the Commission asked Verheugen to inform them about his jobs in April, it clearly asked not only about paid jobs but about his ‘planned activities’. It is normal practice for ex-Commissioners to notify the Commission of all the functions they take up, including unpaid positions on foundation boards and so on. The Code of Conduct (Paragraph 1.1.1. on “Outside activities”) refers to the EU Treaty (Article 213(2)), which stresses the duty of ex-Commissioners “to behave with integrity and discretion as regards the acceptance, after they have ceased to hold office, of certain appointments or benefits”. Verheugen’s role as a managing director, investor and shareholder in the European Experience Company clearly falls under “appointments and benefits”.

Verheugen also claims that European Experience Company does not engage in lobbying and argues that “this is about pure consulting and training activities.” When the interviewer asked whether the company’s offer to develop “the right strategy to succeed in dealing with European institutions” could give the impression that the company engages in lobbying advice, Verheugen categorically denied this. “One must have a lot of bad intentions to interpret this wrongly,” he said. Insiders in Brussels lobbying also find this unconvincing. The Dutch daily newspaper de Volkskrant today quotes a Brussels-based lobbyist who argues that “Verheugen opens his address book for anyone who wants to pay for this. If he makes the phone call, you can meet a civil servant or others involved. On your own you won’t manage this so fast. It’s about exploiting a network”. de Volkskrant also points out that the European Experience Company’s website has been changed following the criticism.

The Commission’s decision is expected within weeks. Several thousand people have already joined the online petition launched by the ALTER-EU coalition earlier this week, calling upon the commission to “block Mr Verheugen’s involvement in the lobby firm European Experience Company.”


Thursday, 2 September 2010

Ex-Commissioner Verheugen in revolving door scandal

The German weekly WirtschaftsWoche earlier this week revealed that former Enterprise Commissioner Günter Verheugen has set up his own EU lobby consultancy firm, the European Experience Company. Verheugen started the new firm in April 2010, just two months after he ended his term as Commissioner, but did not inform the Commission about this. According to WirtschaftsWoche the Commission is now investigating whether Verheugen has violated the Code of Conduct for Commissioners.

WirtschaftsWoche quotes MEP Inge Gräßle who comments that this will mean that “now, anyone with money can buy access to the institutions through Verheugen”. “The Commission must start considering how it can protect itself against ex-Commissioners,” Gräßle told WirtschaftsWoche. The issue has led to significant controversy covered in the German and Austrian press. In the German daily Handelsblatt, the co-director of the European Experience Company Petra Erler (who is also Verheugen’s former head of Cabinet) made a clumsy and unconvincing attempt to counter the criticism.

In a letter to Commission President José Manuel Barroso earlier this week, Friends of the Earth Europe (FoEE) stressed that Verheugen’s failure to notify the Commission about his lobby consultancy company is “a clear breach of the rules”. Internal Commission documents released to FoEE under freedom of information rules show that the Commission in April explicitly asked Verheugen to inform them about “various activities that you may consider within the year”. Verheugen responded by sending information about four new positions he was taking up, but did not mention the European Experience Company. After a rather superficial assessment procedure, the Commission on July 7th informed Verheugen that it had approved his move to the four jobs which were with the Royal Bank of Scotland (senior adviser and vice chairman of Global Banking and Markets in Europe, Middle East and Africa), global lobby consultancy Fleishman-Hillard (member of international advisory board), the Turkish Union of Chambers and Commodity Exchanges (adviser) as well as a German banking lobby group (adviser). Ironically, Verheugen’s responses to the Commission were all sent from a fax machine with the sender message “EUROPEAN EXPERIENCE COMPANY”. But nowhere in the correspondence does he mention his involvement in this new company.

In the German daily Handelsblatt, Erler made an unconvincing attempt to counter the criticism, which she described as “insinuations” and “a fairytale”. She also disputed whether Verheugen should have notified the Commission about the company, arguing that she informed the Commission on August 30th. But this would mean she only notified the Commission after the critical article in WirtschaftsWoche had appeared. Erler tried to argue that Verheugen would not need authorisation anyway, as he is not employed by the company: “for Mr Verheugen this is just an investment. He is a shareholder”, Erler told Handelsblatt. This raises the question why the website of the European Experience Company presents Günter Verheugen as managing director?

Friends of the Earth Europe in their letter to Barroso also asked for clarification about Petra Erler. According the EU’s Staff Regulations, high-level officials like Erler need to get permission before going through the revolving door, although like for Commissioners there is no clear cooling-off period.

Friends of the Earth, as well as Corporate Europe Observatory, LobbyControl and other watchdog groups have called upon the Commission to intervene and block Verheugen’s involvement in the lobbying firm, but it remains to be seen whether the Commission will make any serious assessment of the very obvious potential conflicts of interest. The way in which Verheugen’s other four positions were given the green light does not bode well. When the Commission in April requested clarification from Verheugen about these four jobs, he replied with a brief letter stating that these jobs “will not include lobbying of any kind”. When the Commission asked him for additional information in early June, Verheugen sent back atwo-page response in which he claims that FleishmanHillard chose him for his “professional life-time experience” (as opposed to his 10 years as one of the most powerful European Commissioners?). He repeats that all the jobs “explicitly exclude any type of any lobby”. At the same time, however, many of the activities which Verheugen stated that he would be doing for his new employers sound very much like giving lobbying advice. The description also includes speech-making and other public outreach for his new employers. Amazingly, the Commission’s Ad-hoc Ethical Committee endorsed Verheugen’s explanations without further questions or comments and concluded categorically that the four jobs “do not entail any risk of conflict of interests”. The Commission accepted this and informed Verheugen that he had been given green light. The Commission’s Ad-hoc Ethical Committee, led by former Commission official Michel Petite who himself went through the revolving door in 2008, clearly has a far too lax attitude to conflicts of interest.

The website of the European Experience Company states that it “will not engage in any kind of lobbying activity”, but this is contradicted by the services offered elsewhere on the website. The company is actually entirely focused on assisting lobbying efforts to influence EU institutions, ranging from lobbying advice to more active engagement. It assists “top leaders of public and private institutions and enterprises” with EU lobbying efforts, for instance via “Intensive management seminars for institutions and enterprises in cooperation with experts from European institutions”. It also offers “strategy recommendations in the area of EU-policy and other political matters” and “support for your public relation endeavours in European affairs (speeches, media events, publications)”. The European Commission – in the context of its transparency register - defines lobbying as “actions initiated with the aim of influencing European policy formulation or decision-making processes ”.

Verheugen is one of six Commissioners from the previous Barroso Commissionthat have moved into private sector jobs which might entail conflicts of interest (out of the 13 Commissioners that left in February). In WirtschaftsWoche MEP Inge Gräßle calls upon the Commission to tighten its Code of Conduct and introduce a cooling-off period for job moves that involve conflicts of interest. Commission President Barroso last September promised such a review, but 12 months later there is still no sign of this. Also a review of the EU’s Staff Regulations is said to be underway, but so far the Commission has rejected any need for stricter rules to prevent conflicts of interest. A common-sense solution advocated by the ALTER-EU coalition would be to introduce a three-year cooling-off period for ex-Commissioners wanting to move into private sector jobs that involve lobbying or lobbying advice.


Financial lobbyists ‘educating’ MEPs?

Both the MEPs and banking lobbyists that participate in the European Parliamentary Financial Services Forum (EPFSF) claim that the EPFSF is not a lobby group but a “forum for discussion”.

Commenting on the recent call from more than 70 MEPs to counter the dominance of big banks and investment firms in the debates around financial reform in Europe, Catherine Denis, Director of EPFSF, told Public Affairs News that the objective of the EPFSF “is to organise debates where all participants can express their different points of view, including representatives of consumer groups”. This is also the impression given in the EPFSF’s Governance Principles.

On 2 September 2010, the EPFSF organised a seminar for MEP assistants to “educate” them on derivatives markets and the impacts of the proposals on the review of the Markets in Financial Instruments Directive (MiFID). Derivatives (described by critics as “weapons of financial mass destruction”) are very controversial due to their role in the financial meltdown, but the financial industry is fighting tooth and nail against stricter regulation of derivatives. The European Parliament will decide on these matters in the coming months and the EPFSF event looks very much like an effort to lobby MEPs (via their assistants) on how to regulate the derivatives markets.

Corporate Europe Observatory (CEO) asked Catherine Denis if we could attend the seminar, wanting to see for ourselves whether or not the EPFSF is acting as a lobbying vehicle for the financial industry. The response was that this was not possible because “only speakers and MEP assistants will attend”. However, Catherine Denis argued, “we have included speakers who are representatives from end-users”.

In the list of speakers, however, the only end-users of financial services we can see are Lufthansa and the European Association of Corporate Treasurers which are against strict regulation of derivatives. They will speak along with derivatives managers and brokers at least two of which are members of ISDA, the controversial lobby coalition of the derivatives industry. Not one single consumer organisation or other critical voice is involved.

Denis also informed us that in their “regular lunch and breakfast events”, the EPFSF now reserves four seats in the room (but none on the panel) for ‘consumer’ groups ranging from BEUC to EuroInvestors (which includes the union of European shareholders). “We might not be able to fill all the gaps regarding the diversity of sources of expertise, but we are doing our best to foster conditions enabling an open dialogue”, Denis stated in her response to CEO.

It is unclear how often genuine consumer groups like BEUC, or FIN-USE have been invited by EPFSF, but we can surely say the EPFSF has a strange perception of words like ‘diversity’ and ‘open dialogue’.

There are signs that MEPs are getting more critical of the EPFSF than was the case in the past. This is a healthy development. Surely the EPFSF should not be considered a neutral forum for discussion. Funded and controlled by banks and investment firms, the EPFSF plays a pivotal role as a lobbying vehicle for financial industry players aiming to influence MEPs.