A Top Bank Regulator Is in His Job Illegally, Watchdog Argues

Keith Noreika was made a "special government employee" so he could get around ethics rules. Now his time is up. But he's not going anywhere.

Keith Noreika, acting Comptroller of the Currency, speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, June 22, 2017. Top U.S. banking regulators are sprinting to ease the Volcker Rule, stress tests and other constraints on Wall Street after the Trump administration issued a long list of proposals last week for rolling back post-crisis financial rules. Photographer: Andrew Harrer/Bloomberg via Getty Images
Keith Noreika speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on June 22, 2017. Photo: Andrew Harrer/Bloomberg News/Getty Images

Most people remember the last day of a temp job. Maybe colleagues take you out to lunch; maybe you send that goodbye email promising to keep in touch. But for Keith Noreika, the temporary head of the Office of the Comptroller of the Currency, his final temp day is just like any other Tuesday. Because he doesn’t plan on leaving.

Noreika’s unusual stint running the OCC, a top bank regulatory agency, as a “special government employee” enabled him to sidestep congressional vetting and ethics rules for members of the executive branch. But a watchdog group believes that unique status runs out today, and they want Noreika investigated for illegally overstaying his welcome.

“The more the Trump administration gets away with breaking the rules on ethics, the more they create precedents,” said Jeff Hauser, executive director of the Revolving Door Project at the Center for Economic and Policy Research, who filed the complaint against Noreika with the Treasury Department’s inspector general. “We’re only seeing the tip of the corrupt iceberg.”

Noreika was a corporate lawyer defending Wells Fargo, JPMorgan Chase, and others, until being selected to head the second most important bank regulator in the federal government. Instead of taking Noreika through the Senate confirmation process, the Trump administration named him “first deputy comptroller,” a non-confirmable position. When Comptroller Thomas Curry stepped down on May 5, Noreika slid into the top slot.

The position was considered temporary until Trump got a permanent replacement for Curry confirmed. This enabled Noreika to spend time at the OCC, learn key details of the bank examination process from the inside, and use that knowledge to assist corporate clients when he spun back out to Big Law. The temp gig would be a huge resume-builder, as Noreika could command mind-boggling legal fees with an OCC directorship under his belt.

But there was a catch: Federal ethics laws would create conflict of interest burdens in office, and the Trump ethics pledge would prohibit Noreika from communicating with OCC colleagues for a year after exiting, or from lobbying the agency for five years.

So administration officials found a loophole. If Noreika was made a “special government employee,” a status typically reserved for part-time members of advisory committees — or for Huma Abedin — he would be exempt from ethics statutes or the Trump pledge, enabling him to flow smoothly between the OCC and a law firm partnership without restrictions. The only condition? Special government employees can only work “one hundred and thirty days during any period of three hundred and sixty-five consecutive days,” per law.

The end of that 130-day cycle is September 12. This means that, according to critics, either today is Noreika’s last day, or he must transition to being a permanent federal employee, thereby subject to all applicable ethics laws both in office and after he leaves.

The nominee to take over the OCC, former OneWest Bank CEO Joseph Otting, just advanced through the Senate Banking Committee last week; he has yet to receive a vote on the Senate floor. Noreika has said he would remain acting comptroller until Otting was confirmed.

Hauser believes that’s not good enough. In his complaint to the inspector general, he contends that Noreika “is continuing to serve as a special government employee longer than legally permissible.”

OCC spokesperson Bryan Hubbard argued in comments to The Intercept that “the 130 days are business days not calendar days, which translates to sometime in November.” But the phrase “business days” appears nowhere in the statute. Hauser added that the reference to a “period of 365 consecutive days” clearly refers to a year, meaning that “the word ‘days’ is being used in a dictionary sense, rather than as shorthand for business days.”

When pressed on this, Hubbard claimed that the Office of Government Ethics has long interpreted the language in the U.S. Code to refer only to working days on which services were performed. He referred to this 2007 guidance from the OGE on how to count special government employee days.

The OGE does say there that the 130-day test reflects a “good-faith estimate” of days of service that can be exceeded to an unspecified degree. It adds that days when the employee only performed “de minimis” operations for an agency — like a one-minute telephone call — wouldn’t count toward the total. (A Kennedy-era presidential memorandum, by contrast, states that “a part of a day should be counted as a full day… and a Saturday, Sunday or holiday on which duty is to be performed should be counted equally with a regular work day.”)

A separate 2007 Office of Legal Counsel memo, denying a request to tally up hours worked in calculating days of service, states “The term ‘days’ of service … is better read to mean calendar days on which the SGE performed work for the agency.” It further says that “context also supports the conclusion that the term refers to calendar days.”

These guidances appear to mainly refer to part-time advisers, not full-time heads of federal agencies. Noreika has been acting comptroller every day since May 5, weekdays and weekends. If any decision needed to be made on any day, Noreika would have that responsibility. He doesn’t turn in his badge and duties over to a deputy every Friday night, only to regain them Monday morning. The OGE’s guidance states specifically, “Any day on which an SGE performs any work for which he or she is compensated by the Government should be counted as a day, regardless of the amount of time worked that day or the nature of the services.” Unless the OCC shuts down on weekends or unless Noreika is working for free, he has been compensated every day since May 5.

The OGE or OLC guidances may not be the final arbiter of statutory interpretation in an agency-specific matter, Hauser contends. That’s why he asked the Treasury inspector general, whose jurisdiction includes the OCC, to investigate. At press time, a spokesperson for the inspector general was checking on whether the office would launch an inquiry.

It’s unclear at this point how many days Noreika might go over the 130-day limit while still serving. Otting is not currently on the Senate calendar for confirmation, and the chamber’s schedule is packed for the foreseeable future.

This can certainly look like a semantic debate. But the entire special government employee maneuver represented an end-run around customary processes for federal agency heads. Trump installed his own henchman at a top bank regulator without the consent of Congress, in order to fulfill a deregulatory agenda. Indeed, at the OCC, Noreika has sought to water down Dodd-Frank provisions, such as the Volcker Rule, and attacked the Consumer Financial Protection Bureau’s ban on class-action lawsuit restrictions, after representing clients fighting class-action suits.

So Noreika’s tenure at the OCC was already unusual for evading rules set up to prevent corruption. It set a precedent for ideologues to infiltrate government without even the fig leaf of congressional sanction, as well as for revolving-door types to spin short-term service into big money as insider informants for corporate America. Extending this cravenness beyond even the loophole’s time limit would show disregard for the law.

However, it does give an idea to temps everywhere: Just don’t leave.

Top photo: Keith Noreika speaks during a Senate Banking Committee hearing in Washington, on June 22, 2017.

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