On Saturday, William Osborn was elected the next chairman of Northwestern’s Board of Trustees. On Tuesday, the Northern Trust Corporation, a Chicago bank at which he holds the same title, came under fire from the House Financial Services Committee for allegedly spending lavishly after receiving federal bailout funds.
Once the chief executive officer, Osborn currently serves as chairman and director of Northern Trust Corporation and its principal subsidiary, The Northern Trust Company. He declined to comment about his personal involvement in the incident.
Last week, the bank flew hundreds of its employees and clients to Los Angeles for a golf tournament, according to a widely syndicated report from TMZ.com, an entertainment Web site. The Northern Trust Open allegedly featured “lavish parties and concerts” with Sheryl Crow, Chicago and Earth, Wind & Fire and supplied its female guests with gifts from Tiffany & Co.
In a statement posted on the company’s Web site, Northern Trust CEO Frederick Waddell said the company paid for the event using funds it had raised last year and that “no Capital Purchase Program funds were allocated for operating expenses, including marketing, advertising, corporate sponsorship or charitable activities.”
University officials said Osborn’s involvement with the bank is irrelevant to NU.
“The university has nothing to do with that,” said Al Cubbage, vice president for university relations.
Northern Trust spent millions of dollars for its sponsorship and related spending, according to a letter sent Tuesday to Waddell from the House Financial Services Committee. In November, Northern Trust received $1.5 billion in government funds under the Troubled Asset Relief Program. The company laid off 450 workers a month later.
“At a time when millions of homeowners are facing foreclosure, businesses and consumers are in dire need of credit, and the government is trying to keep financial institutions – including yours – alive with billions in taxpayer funds, this behavior demonstrates extraordinary levels of irresponsibility and arrogance,” the letter said. “Federal taxpayers should not and will not stand for such abuses, and we will insist that any future Treasury support for Northern Trust be conditioned on a thorough reform of your company’s policies and practices.”
The House Financial Services Committee first heard about the situation from TMZ, said Steven Adamske, spokesman for financial services committee chairman Barney Frank, D-Mass.
“We’re asking Northern Trust to repay part of their TARP funds for the extraneous expenditures,” Adamske said. “We inquired into what those expenditures were.”
In his speech to Congress Tuesday night, President Barack Obama addressed concerns taxpayers have expressed about similar situations with banks that received bailout funds.
“I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer,” Obama said. “This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.”
Although representatives of Northern Trust did not return phone calls Wednesday, Waddell’s statement on the Web site addressed shareholders’ concerns.
“We understand this is a time of great anxiety and financial distress, and the question of supporting an event such as the Northern Trust Open is legitimate,” Waddell said in the statement. “We came to the conclusion that no public purpose would be served by canceling the Northern Trust Open and related events.”
Sean Collins Walsh contributed reporting.
