WASHINGTON, D.C. — Dennis M. Kelleher, Co-founder, President, and CEO of Better Markets issued the following statement regarding an initial review of the 234-page report of the Special Committee of the Federal Deposit Insurance Corporation (FDIC) that was supposed to fully investigate all the issues related to the allegations of workplace misconduct:
“There is no question that there has been very serious workplace misconduct at the FDIC for a long time and an inexplicable and inexcusable failure of leadership to stop it. Those failures have spanned Republican and Democratic leadership at the FDIC, but the reporting and investigation have been materially incomplete and misleading. In particular, the FDIC Special Committee’s report (SC Report) focused primarily on the current Democratic Chair and failed to also fully review the conduct of former Republican Chair McWilliams or her senior leadership team, including current Vice Chair Travis Hill and former Chief of Staff Brandon Milhorn regarding the FDIC Inspector General’s (IG) 2 year investigation into sexual harassment and the IG’s extensive report entitled ‘Preventing and Addressing Sexual Harassment,’ which was issued on July 10, 2020 (Report). This is a continuation of similar inexplicable material omissions in the media reports, which precipitated this investigation and the SC Report. Tellingly, the SC Report expressly states that it focused on Chair Gruenberg due in significant part to that incomplete reporting (pp.5-6). If you only read the media reports and the SC Report you might not know that former Republican McWilliams was the FDIC Chair from June 5, 2018, until February 4, 2022 (for 3 years and 8 months) or that the extensive IG’s Report on sexual harassment was delivered to her for her leadership team to act on.
“If the investigation and SC Report had fully and properly examined the role of former Republican Chair McWilliams and her senior leadership team, it may well have determined that former Republican Chair McWilliams and her senior leadership team should have and could have ended the workplace misconduct beginning in May 2020 when they received the draft IG Report, and certainly no later than July of 2020 when the IG’s Report was final. However, that did not happen, and the misconduct and mismanagement continued. One would think that any legitimate, independent, unbiased investigation or report of misconduct at the FDIC would have thoroughly examined the role and conduct of the leadership of the FDIC in connection with this critically important IG Report. However, while the SC Report discusses the IG Report extensively (calling it the ‘OIG 2020 Sexual Harassment Report’ and mentioning it more than 35 times, on pp. 80-86 in detail), it limits its discussion to the Report itself and the FDIC or ‘the FDIC’s management’s response,’ but doesn’t mention that the ‘management’ was former Republican Chair McWilliams or her senior leadership team. In fact, the SC Report only mentions former Republican Chair McWilliams 14 times in immaterial ways, Travis Hill (McWilliams’ Deputy for Policy from 2018-2022 and before that her Senior Advisor) only once, and Brandon Milhorn (McWilliams’ Chief of Staff, Deputy and COO and then Vice Chair Hill’s Chief of Staff until recently) not even once, in 234 pages. In stark contrast, Chair Gruenberg is mentioned 108 times.
“This appears consistent with the prior and ongoing political attacks on Chair Gruenberg that have similarly omitted mention of former Republican Chair McWilliams and her senior leadership team or the IG Report. The objective of those political attacks appear to be an attempt to force Chair Gruenberg to resign, which would automatically result in Republican Chair Travis Hill becoming Acting Chair. This would put Republicans in control of the FDIC; deadlock the FDIC Board with 2 Republicans and 2 Democrats; and effectively end the FDIC’s and interagency rulemaking because the Republicans have opposed Democratic proposals. This is all fueled by multiple, but almost entirely unreported personal, political, and policy conflicts of interests, including those of current FDIC Vice Chair Travis Hill.
“In addition to seeing the reports of misconduct as an opportunity to take control of the FDIC and kill financial rules, especially the pending Basel III capital rule, some also see this as an opportunity for payback for what was claimed to be the unfair ousting of former Republican Chair McWilliams by FDIC Democrats including now-Chair Gruenberg. Additionally, the conclusion seems inescapable that the law firm picked to do the investigation has deep and pervasive conflicts that should have disqualified it from any role investigating the FDIC. These concerns are supported by the SC Report, which fails to adequately address these critical questions:
(1) it was known at the FDIC that the IG was investigating reports of sexual misconduct and harassment at the FDIC starting in July 2018 – what did former Republican Chair McWilliams and her senior leadership team know, when did they know it, and what did they do during that time?
(2) as noted by the SC Report, Republican Chair McWilliams and her leadership staff only ‘concurred with 12 of the 15 recommendations’ of the IG, providing ‘alternative actions to address the remaining 3 recommendations,’ but was that an adequate and appropriate response by former Republican Chair McWilliams and her senior leadership team given that the harassment and misconduct continued?
(3) although a draft of the IG Report dated May 22, 2020 was provided to former Republican Chair McWilliams and her senior leadership team and they responded to it via a letter dated June 16, 2020, as of the date the IG Report was issued on July 10, 2020, every one of the 15 recommendations were still “open” and uncompleted – was that appropriate and proper conduct by the former Republican Chair McWilliams and her senior leadership team to such serious misconduct?
(4) while the SC Report noted (p. 86) that the FDIC ‘implemented a plan to take corrective actions … as well as a timeframe by which to complete them’ and ‘periodically reported’ on the status, and that the IG ‘confirmed each of the 15 recommended actions was closed out ‘as of September 2021,’ should it have taken former Republican Chair McWilliams and her senior leadership team more than a year to address the IG’s recommendations? What does taking 14 months to ‘close out’ 15 recommendations regarding such misconduct say about former Republican Chair McWilliams and her senior leadership team’s attitude toward this very serious IG Report and the issues of sexual harassment detailed in it?
(5) what does taking 14 months to address the IG’s 15 recommendation say about the adequacy of the IG investigation and Report as well as former Republican Chair McWilliams and her senior leadership team’s response given the misconduct continued if not got worse?
(6) what does it say regarding the sufficiency of the actions taken by former Republican Chair McWilliams and her senior leadership team given the subsequent reporting of workplace misconduct and culture of the FDIC? What was inadequate about what former Republican Chair McWilliams and her senior leadership team did or did not do given that the SC Report noted multiple times confirmation that many of the IG Report’s deficiencies continued to present? For example, the SC Report ‘confirmed’ the IG findings that ‘fear of retaliation at the FDIC remains real and widespread.’ Didn’t former Republican Chair McWilliams and her senior leadership team have a responsibility to end that, and numerous other deficiencies found by the SC Report? If so, why didn’t they?
(7) apart from the IG investigation and Report, what did Republican Chair McWilliams and her leadership team, including Travis Hill, do or not do (a) during their years in control of the FDIC regarding workplace conduct and sexual harassment, and (b) during the 21 months after they received the IG’s draft report on sexual harassment; and
(8) whatever Republican Chair McWilliams and her leadership team did or did not do, don’t the subsequent reports of sexual harassment and misconduct in the media and the SC Report show that they failed entirely in their response to the IG Report and in the management and conduct of the FDIC while they were in charge of the FDIC, including for almost two years after receiving the IG’s draft report?
“Additionally, the FDIC Special Committee selected a law firm to conduct the investigation that has at least the appearance of egregious conflicts of interest if not actual conflicts of interest. Rather than pick a law firm that specializes in workplace misconduct or sexual harassment, the Special Committee picked a law firm that has – and advertises – an extensive ‘Banking and Financial Institutions’ practice. That firm represents numerous major financial institutions and a number of their trade groups. To the extent it can be determined from the public record, almost all of those clients – if not all of them – appear to oppose financial rules unless they were deregulatory actions undertaken by Republican appointees to the agencies. Indeed, as even a cursory review of the public record reveals, that law firm has often appeared before the FDIC and other banking agencies representing those clients in opposing what the FDIC and other agencies have proposed to do.
“On November 16, 2023, we said that there must be a full, thorough investigation of all the reports of misconduct and harassment, and anyone engaged in such conduct should face the severest penalties as fast as possible. We pointed out then that the Republican members of the FDIC Board had direct conflicts of interest because Vice Chair Hill was a senior member of former Republican Chair McWilliams’ leadership team and would become Chair if Chair Gruenberg was unable to serve. Moreover, those FDIC members also have a conflict of interest due to disagreements over highly consequential pending policy actions. For example, one way to kill the capital rule is to take out the Democratic FDIC Chair who supports the capital rule and replace him with Republican Vice Chair Travis Hill who is already on record as opposing even proposing the capital rule. This would result in the FDIC Board being deadlocked at two-two and shutting down the FDIC and interagency rulemaking.
“None of this is to excuse or absolve Chair Gruenberg of responsibility for his management, conduct or misconduct. There were clearly very significant failures at the FDIC, including during his leadership, but any fair review of those failures would not just focus on one person, ignore almost 4 years of leadership by former Republican Chair McWilliams and her senior leadership team, and fail to thoroughly review what was done and not done by whom in connection with the IG’s investigation and Report.
“As we have repeatedly said, the allegations are very serious and the victims deserve a full, fair, unbiased, unconflicted, untainted, and credible investigation of all the issues and every leader’s conduct, regardless of party or partisanship. In light of the omissions referenced above, that is not what has happened. We will continue to review the 234-page SC Report in the coming days and weeks and may offer additional comment.”
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