Imagination At Work


The Wall Street Journal.

March 16, 2013


Imagination at Work

By Al Lewis

Mary Schapiro did not bring good things to life as head of the Securities and Exchange Commission. Now she's off to General Electric .

Last week, GE said it nominated the career regulator to its board of directors. At the SEC, Ms. Schapiro made $165,000 a year for ceaseless work. At GE, she'll make $250,000 for part-time work.

"Her understanding of corporate governance and financial regulation will be of great benefit to GE," CEO Jeffrey Immelt said.

If the SEC were an airline, GE would be one of its frequent fliers. In 2009, GE paid $50 million to settle accounting-fraud charges. "GE bent the accounting rules beyond the breaking point," said Ms. Schapiro's then- director of enforcement, Robert Khuzami, in an official news release. Typical of SEC settlements, GE neither admitted nor denied guilt.

In 2010, GE paid $23.4 million to settle charges stemming from a kickback scheme with Iraqi government agencies. "Offshore does not mean off- limits," Mr. Khuzami said. "Bribes and kickbacks are bad business, period."

In 2011, GE Funding Capital Market Services paid $25 million to settle securities-fraud charges from an alleged municipal-bond scheme. "Our in- depth investigations have uncovered pervasive corrupt practices in the municipal-securities reinvestment market, and we are requiring financial firms one by one to step up and pay the price for their misconduct," Mr. Khuzami said.

Too bad the chief of the FBI can't join a group he previously alleged was involved in "pervasive corrupt practices."

President Obama appointed Ms. Schapiro after the SEC missed most of the frauds leading up to the 2008 financial crisis. At the SEC, Ms. Schapiro shook down some big companies for some big settlements—including Goldman Sachs and Bank of America—but rarely was an individual perpetrator held responsible.

By one count, Ms. Schapiro did no more than her predecessors, who weren't dealing with a collapse of trust in the financial markets. The SEC averaged 680 settlements a year under Ms. Schapiro, versus an average 682 a year in the three years before her tenure, according to NERA Consulting, a global advisory firm.

"Mary Schapiro will join a long list of SEC commissioners who have been forgotten with the passage of time," is how former SEC chief accountant Lynn Turner put it in an email exchange with me last week.

GE shares traded above $35 before the financial crisis, fell below $7 after the crisis, and have since recovered to about $23.50. For this performance, Mr. Immelt's total annual compensation soared 19% last year to $25.8 million.

As a finance conglomerate with tentacles in everything, GE lobbied for the bailout of the entire financial system in 2008. GE also received tens of billions in federal loan guarantees through its finance subsidiary, GE Capital.

Hands out for bailouts, GE has always been a stalwart opponent of regulation—even sending lobbyists to Washington to attack the SEC's postcrisis whistleblower rules that protect corporate employees who bring matters to the attention of regulators.

It has also been slashing jobs, even after President Obama appointed Mr. Immelt to head his Council on Jobs and Competitiveness. The council is quietly going away after two years of accomplishing nothing, while GE remains in a job-hacking, $2 billion cost restructuring.

GE recently dumped its 25-year slogan, "We bring good things to life." It now has a new one: "Imagination at work." Ms. Schapiro will fit right in.

—Al Lewisis a columnist for Dow Jones Newswires in Denver. He blogs at; his email address is