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Mark Patterson’s Executive Decision

It’s worth taking a closer look at the “issue areas” that Mark Patterson, the former Goldman Sachs lobbyist now serving as the chief of staff to Treasury Secretary Geithner, is restricted from participating in, and asking how these prohibitions might be interpreted and enforced. Today let’s look at the issue of executive compensation.

Under the terms of Treasury’s February 4, 2009 recusal memorandum, Patterson is prohibited from involvement in “shareholder votes on executive compensation.” This prohibition evidently stems from Patterson’s 2007 lobbying against H.R. 1257, a bill supported by then-Senator Obama, which would have authorized shareholders to vote on executive compensation packages. As this article notes, Goldman Sachs CEO Lloyd Blankfein, who received compensation of about $70 million in 2007 (though a mere $9 million for 2009), was not a fan of this proposal, and Patterson was one of the lobbyists who (successfully) tried to kill it. Thus, “a Washington influence-peddler who worked against Obama’s effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general.”

The authors were told by Treasury that Patterson “recused himself from discussions on this and all other issues he worked on during his time in the private sector.” They then ask “Does this mean that Geithner’s chief of staff cannot be involved in conversations and decisions regarding corporate compensation issues, including the AIG bonuses? If so, wouldn’t that place Geithner at a disadvantage as he tries to handle such matters?”

But Patterson’s recusal memorandum doesn’t prohibit him from involvement in all corporate compensation issues, only “shareholder votes on corporate compensation.” Does Treasury interpret this to allow Patterson to be involved in all executive compensation issues so long as shareholder voting isn’t involved? And if shareholder voting is involved, is Patterson excluded from the entire issue, or can he simply decline to “participate” (leave the meeting, cover his ears?) when shareholder voting comes up?

Judging by Treasury’s response to my FOIA request, there is no documentation as to how the recusal memorandum has been implemented, nor any documentation of Patterson actually being recused from any particular meeting, appointment or matter. It would appear, therefore, that the Treasury General Counsel is not making case-by-case rulings on the memorandum, or at least not issuing formal instructions to Treasury officials with respect to its requirements. Instead, it would seem that it is up to Patterson, consulting the GC’s office as he deems fit, to interpret and apply the memorandum’s prohibitions.

It is hard to say for sure how Patterson has handled the executive compensation issue. His calendars, however, suggest that he has participated in matters relating to executive compensation. For example, Patterson was intimately involved in preparing Treasury Secretary Geithner for meetings, testimony, speeches and press interviews in March 2009, when the issue of AIG bonus payments was the hot topic of every event. It seems virtually certain that Patterson participated in the AIG bonus issue, and indeed a March 28, 2009 calendar entry shows he participated in a conference call “follow up on AIG discussion.”

Did the recusal memorandum have any practical effect on Patterson’s ability to participate in executive compensation issues or to influence executive compensation decisions in a manner that might benefit Goldman Sachs? Did the interpretation and application of this memorandum fall entirely on Patterson, operating on the honor system? These might be interesting questions for some congressional investigation.

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