N.H. banking commissioner faces removal hearing

By Norma Love
Associated Press / October 12, 2010

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CONCORD, N.H. — New Hampshire’s Executive Council decided yesterday to move ahead with proceedings to remove the state banking commissioner for not doing more to stop a now-defunct mortgage firm from running a Ponzi scheme.

The council voted unanimously to begin hearings Nov. 29 on a petition calling for Peter Hildreth’s removal.

Governor John Lynch said he concurred with the council. After the vote, he asked councilors not to make public comments about the issue until after the hearing.

In New Hampshire, the governor doesn’t have the power to fire commissioners unilaterally. The five-member council will hold its hearing and decide afterward whether to fire, reinstate, or reprimand Hildreth, who is on paid leave after refusing Lynch’s request to resign.

Hildreth said he recused himself from handling anything about Financial Resources Mortgage because his brother was an investor, but he never put that in writing. But the petition said Hildreth was involved in discussions about the firm and failed to establish a clear line of command on handling complaints and audits indicating problems. Audits as early as 2001 showed problems at the firm, which submitted false information, the petition said.

“Despite its discovery and acknowledgment of these deficiencies and others, and despite the Bank Commissioner’s power to take further investigative and regulatory steps to safeguard the public, the Bank Department failed to take adequate measures to ensure that FRM conducted its business in a manner compliant with the public interest and with state and federal laws and regulations,’’ the petition said.

The mortgage firm’s head and an assistant have pleaded guilty to defrauding investors, but the state continues to investigate what happened to try to ensure such schemes don’t evade scrutiny. A joint legislative committee held hearings, and the state attorney general’s office issued a report spreading blame among the Banking Department, attorney general’s office, and Bureau of Securities Regulation.

Last week, the secretary of state ordered an investigative hearing to discuss new details, including the existence of offices the firm set up in more than a dozen states.

US Representative Paul Hodes, a Democrat, has made the state’s lapse an issue in the US Senate campaign. He has repeatedly criticized rival Kelly Ayotte, a Republican, over the issue. Ayotte was attorney general when complaints surfaced about the firm involved, but the complaints were sent to the Banking Department, which has jurisdiction over such matters.

A draft report prepared by the legislative committee recommends changing state laws to clear up ambiguity about who is in charge of addressing consumer complaints. The draft report found the Banking Department was ineffective. The report said it failed to recognize the significance of multiple consumer complaints, to follow through on enforcement, and to share records with securities regulators.

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