The Center for Public Integrity isn't always my cup of tea, but its article out today on GE's subprime lending activities is worth a look. The Center's Michael Hudson has interviews with eight former staffers of WMC Mortgage Corp., which was acquired by GE in 2004. After the acquisition:
GE asked Amy Brandt to stay on. She added CEO to her title. Internal documents obtained by iWatch News indicate GE promised the 31-year-old executive as much as $20 million in compensation over three years — including a $10 million upfront bonus at the closing of the deal.
General Electric declined to answer questions from iWatch News about the acquisition. It won't say how much scrutiny it gave the lender before it closed the deal, or whether it was aware of WMC's earlier fraud problems.
GE officials made it clear at the time that their regard for Brandt played a role in the company's decision to buy WMC. "A big part of us doing the acquisition was Amy, no question about it," a top GE executive told American Banker.
Immelt and other GE honchos thought so much of what Brandt had done with WMC, Businessweek later noted, they invited her to talk before the parent company's top 600 executives at its annual leadership summit in Boca Raton, Fla.
As she left the stage, Immelt gave her a high five.
The article reports that an internal quality control team "found many examples of fraud committed by in-house staffers or the independent mortgage brokers who helped bring in customers to the lender. ... Some employees also fabricated borrowers' incomes by creating bogus W-2 tax forms, he says. Some, he says, did it old-school, cutting and pasting numbers from one photocopy to another. Others, he says, had software on their computers that allowed them to create W-2s from scratch." Also, "salespeople who were putting down fake jobs on borrowers' loan applications — even listing their own cell phone numbers so they could pose as the borrowers' supervisors and 'confirm' that the borrowers were working at the made-up employers."
The Center for Public Integrity article is illustrated with a large photo of GE CEO Jeffrey Immelt, but it doesn't mention that Mr. Immelt is chairman of President Obama's Council on Jobs and Competitiveness. GE is such a huge company that it may be unreasonable or unfair to expect the CEO to know or even really be responsible for everything that goes on there. But that's probably not the argument that Mr. Immelt's executive compensation lawyer makes when he defends the well more than $90 million Mr. Immelt has been compensated over a period in which GE gave an undistinguished performance for its shareholders.