Mile 11: Anatomy of a Scandal/Disgrace

Ask any Marine Private to state the 14 leadership traits taught in boot camp and he or she will rattle off: Bearing, Courage, Decisiveness, Dependability, Endurance, Enthusiasm, Initiative, Integrity, Judgment, Justice, Knowledge, Loyalty, Tact, and Unselfishness. If you asked any Private to prioritize those traits by importance, I bet “integrity” would be in the top three. I would round it out with “judgment” and “justice”. The average corruption scandal/disgrace in Washington typically involves the lack of at least one of these traits. Yet rather than being held accountable, the players will inevitably lie (integrity), blame someone else (justice), or plead ignorance (judgment). If there is an investigation, it will typically drag on long enough for those involved to make it through the next election cycle at which point most people will have either forgotten, accepted the official version of events, or because corruption scandals/disgraces are so complicated and can’t be summed up in a sound bite, the public won’t understand it or take the time to learn the truth. Investigations will too often whitewash the whole affair or be quashed if the outcome could be too damaging. The pattern has become all too clear.

The corrupt politicians in federal government all got their start somewhere, most at the state and local government level. I believe that if enough people simply demanded accountability and exposed local corruption and incompetence early on, we could dry up this supply of integrity challenged or incompetent people before they get the chance to make it to Washington. Have you ever heard about the Financial Resources Mortgage (FRM) scandal in New Hampshire? Below is an attempt to sum up just a few of the main elements and alert the public on a sudden vote scheduled for Tuesday August 5, 2014 to re-appoint one of the key players. FRM was the biggest financial fraud case and subsequent government cover-up in New Hampshire history, and a classic example of how most government scandals play out. The cover-up of the scandal caused far more financial damage to the victims than the two criminals who are in prison.

When U.S. Senator Jeanne Shaheen was the Governor of New Hampshire, she appointed Peter Hildreth as the Banking Commissioner out of all the other qualified people in the state who could have done that job. Why? We now know that Hildreth had ties to Scott Farah, President of the mortgage brokerage firm FRM, which his agency regulated. FRM simply matched up borrowers and private lenders. Despite being found insolvent, dozens of registered complaints, over 70 violations of state and federal laws, and efforts from Banking Department employees to shut it down, FRM was allowed to stay in business for years. Why? Nonetheless, FRM maintained an A+ rating from the Better Business Bureau because the Banking Department betrayed the public trust by lying to those who asked about the true financial status of FRM. Why?

In the fall of 2009, FRM voluntarily shut its doors after stealing millions of dollars from hundreds of lenders from around the country. The losses were devastating and led to numerous personal bankruptcies, divorces and even two suicides. Former Commissioner Hildreth would later claim that he had “verbally recused” himself from any FRM issues after being told that his brothers were investors in FRM, yet he injected himself on FRM matters more than once, to include showing up at FRM’s offices and removing computers immediately after the collapse. Why? His brothers and others got their money back years earlier, due to money that was stolen from a sister company, CL&M, led by Don Dodge via an illegal twenty million dollar line of credit from Dodge to Farah. CL&M serviced many of the construction loans brokered through FRM. The money was stolen from an escrow account that held those loan funds that hadn’t been dispersed to borrowers yet. CL&M was operating openly across the hall from FRM without a license or bond insurance as required by law. Why? The bond insurance alone would have compensated the victims.

After the collapse, Hildreth claimed that the private loans were now somehow securities or stock in FRM and blamed any lack of government oversight on Mark Connolly, the Director of the NH Bureau of Securities. Why? Richard Head, Director of Consumer Protection at the NH Attorney General’s office, who we now know ignored several criminal complaints about FRM, was tasked to conduct the official investigation. Why? Regarding FRM, the Attorney General’s Office stated publicly that the state, “has not identified anything that would suggest liability, but we are always mindful of that, since one of our responsibilities is to defend the state against such suits.” Therein lies the problem in a nutshell. Can we trust government agencies and bureaucrats to investigate themselves when there is such a blatant conflict of interest? Trust in government is at an all-time low and it’s because the Richard Heads of the world are allowed to investigate themselves or their co-workers with little to no oversight or consequence.

Richard Head whitewashed any of his own shortcomings and doubled down on Hildreth’s claim that legitimate loans were now somehow securities. Why? Connolly would have nothing to do with the “cover up” and later wrote a book by that name, which does an excellent job of illustrating the lengths that government employees went to in order to cover up their betrayal of the public trust. None of us are perfect, but the people that we allow to make, break, and selectively enforce the laws need to be held accountable at every level if we are to instill trust in our government. Hildreth was allowed to retire with full benefits, despite pending charges of negligence and malfeasance, after publicly claiming he had damaging information about Governor John Lynch. Why?

Later, Governor Lynch tried to promote Richard Head by nominating him to be the Deputy Attorney General out of all the other qualified people in the state who could have done that job. Why? The first time, he withdrew the nomination due to a telephone campaign to the Executive Council by some of the FRM victims and concerned citizens. Later, he nominated him again with short notice, but when the victims caught wind of it and mobilized, the nomination was shot down on a close vote. A few years ago, Richard Head, helped U.S. Attorney Eric Holder, investigate Project Veritas which simply exposed how easy it was for dead people to vote in the New Hampshire primaries. Why? You can read about that in James O’keefe’s book “Breakthrough” in the chapter titled, The Rise of Richard Head.

The decision in 2009 by the Attorney General’s office to quickly force FRM into Chapter 7 bankruptcy rather than state receivership where it belonged caused far more financial damage to the victims than what was stolen by Farah and Dodge. Richard Head called that an, “unintended consequence.” This blog is perhaps another one.

Steve Nottinger (New Hampshire 2013 Attorney of the Year. Why?) was appointed as the trustee by a federal bankruptcy court to liquidate the estates of FRM and CL&M both of which had little to no assets at that time. He hired his own small law firm, which included his wife Debbie and partner Jim Donchess, former Mayor of Nashua. Why? Within two weeks of the collapse, in a private meeting with the AG’s office and the Banking Department, the trustee was also quick to jump on the notion that legitimate loans were now somehow securities or stock in FRM. Why? No one from the Securities Bureau was even invited to the meeting. Why?

The trustee immediately seized all of the loans and properties ever brokered through FRM, claiming they were securities and now part of the estate, an estate that he gets 3% of. He also is paid over $300 /hr from the estate to liquidate it. His firm has been paid over two and a half million dollars so far. His “securities” claim was later rejected by the federal bankruptcy court, but by tying victims up in court for years, he received millions in settlement agreements which were arguably made under duress. Why?

To add insult (and theft) to injury, the state filed a claim against the estate for over two hundred thousand dollars (money to come directly from the victims) for a Banking Department audit conducted after the collapse as well as penalties (for the first time) and back taxes. Why? The trustee and judge approved the claim. Why?

The FRM story is just a microcosm of the bigger macrocosm that is our federal government. If people want change in government, then the only hope is to start in our backyards and clean our own houses first. It’s been said that no single raindrop thinks it’s responsible for the flood. The Attorney General during most of this time frame was Kelley Ayotte who managed to get herself elected as New Hampshire’s other Senator before the majority of this information came out. She testified, “I’m a firm believer that the buck stops at my desk. But the buck never made it to my desk.” Why? It always manages to make it into someone’s pocket though.

It has been learned that a vote on Head’s reappointment is scheduled for this Tuesday August 5, 2014. Please contact Governor Maggie Hassan at (603)271-2121 and the Executive Counselors listed below and request that a public hearing be conducted to discuss the above issues in more detail before such an important vote is cast..

The Honorable Joseph Kenney (603) 271-3632 Joseph.Kenney@nh.gov
The Honorable Colin Van Ostern (603) 271-3632 cvanostern@nh.gov
The Honorable Christopher Sununu (603) 658-1187 csununu@nh.gov
The Honorable Christopher Pappas (603) 2713632 cpappas@nh.gov
The Honorable Debora Pignatelli (603) 271-3632 dpignatelli@nh.gov
For more information:

http://sos.nh.gov/nhsos_content.aspx?id=47412&terms=frm

Update:
The vote by the Executive Council on the reappointment of Richard Head was taken off of the agenda by the Governor immediately prior to the meeting. Thank you to all who called or sent emails. I sent the following email to each of the Executive Council members after the meeting:

“…I was at the meeting in the morning and spoke with the Governor. I asked her if it was 1) being postponed in order to have a public hearing first, 2) withdrawn permanently or 3) if it would resurface again. She told me that the AG’s office withdrew it and that it could very well come up again. I asked her that if that were the case, would there be a public hearing before the vote. She said that she didn’t believe that there was a mechanism or need for having a public hearing on a routine re-appointment of a government employee, and went on to tell me that she thought Richard Head was a very good one. That concerns me.

When Governor Lynch nominated him to be the Deputy AG, they scheduled the vote immediately before the Chandler report was to be released, which they knew would be damning. Many of us contacted the Executive Council and asked that they at least wait for the Chandler report. The Governor withdrew the nomination. Weeks later, a rumor went out that it was resubmitted and that there would be a vote the upcoming Wednesday. I talked with a council member the Monday before and was told that it wasn’t even on the agenda. Somehow it ended up on the agenda at the last minute, but he was shot down 3 to 2.
I fear that the same tactic may be used again. I invited Governor Hassan to check out a website that I put up over the weekend and welcomed her input as to why she thinks he is such a very good government employee. I would like to put out the same invitation to all of the Executive Council members. I will gladly post anything that any of you would like to say (completely unedited), either for or against the re-appointment of Mr. Head. Also, I would ask that if his name is resubmitted, that someone could drop me a quick email so that I could attend the meeting. Thank you.
Best Regards,
Pete Martino”

 

 

 

 

 

No single raindrop thinks it’s responsible for the flood.

 

 

Be careful when you blindly follow the masses. Sometimes the “m” is silent.

 

 

 

 

 

 

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