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BREAKING NEWS: Senate Proposes Incentive Ban for Bailed Out Banks
February 25, 2009
Sen. Kerry proposes banning TARP recipients from hosting or sponsoring incentives and other events
By Leo Jakobson
A leading U.S. senator today proposed legislation that would prevent any company that has accepted federal bailout funds from holding any conference or event without first receiving a waiver from the Secretary of the Treasury.
Sen. John Kerry (D-Mass.) announced yesterday that his bill would require the CEO of any company breaking these regulations to reimburse the treasury the cost of that event, plus a fine of at least $100,000.
The legislation came on the heels of congressional outrage over incentive programs run by Northern Trust Corporation for employees and clients in conjunction with its sponsorship of the PGA’s Northern Trust Open, held Feb 16-22 at the Riviera Country Club in Pacific Palisades, Calif. Northern Trust has taken $1.5 billion from the federal Troubled Assets Relief Program (TARP).
Kerry's legislation is the latest hurdle faced by the incentive and meetings industry, which has responded by proposing a set of best practices guidelines. The U.S. Travel Association (USTA) has joined with eight other business travel groups, including Site (formerly the Society of Incentive and Travel Executives) to issue a model corporate policy for any TARP recipient. And a grassroots group has established Keep America Meeting, which is collecting signatures on a petition to draw attention to the important role meetings, events and incentive programs play in building successful businesses, as well as pointing out the industry’s huge impact on the U.S. economy—$40 billion in taxes and more than one million jobs.
Kerry's legislation, the TARP Taxpayer Protection and Corporate Responsibility Act, has three main components, according to a releaseissued by his office:
• Any recipient of TARP funds shall not be allowed to host, sponsor, pay for conferences and events and pay for holiday or entertainment events for the year in which they receive TARP funds.
• A recipient may seek a waiver from the Secretary of Treasury for any event which the recipient believes is directly related to the operation of the business. The Secretary has thirty days to respond to a waiver request.
• Any violation will require the federal government to be reimbursed by the company's CEO for the cost of the event and there will a fine of $100,000 per violation. A recipient will have 30 days to reimburse the government and pay the fine. The fine increases $10,000 a day for each day after 30 days.
"I'm sick and tired of picking up the newspaper and reading about another idiotic abuse of taxpayer money while our country is on the brink," Kerry said in his release. "Americans who play by the rules are losing their jobs and struggling to pay their mortgages. The companies that came to Congress in desperate need of help to stay afloat become their own worst enemies when they pull stunts like this. It's an embarrassment that this legislation is necessary, but some companies clearly need a reality check to get their priorities straight so taxpayer money is used to get their house in order and not to pay for lavish parties. Congress has zero tolerance for this kind of excess."
Roger Dow, president and CEO of the USTA, responded to the Northern Rock outcry with the following comments: "We agree that companies receiving federal assistance must be accountable to taxpayers for responsibly using public funds. But, we are perilously close to falling into a witch-hunt mentality in which working Americans are unfairly punished. For every case of wasteful spending, we are seeing scores of instances in which the game of ‘gotcha’ has forced businesses to cancel legitimate activities that would have grown their bottom lines and generated jobs and economic growth for local communities."
A spokesperson for Northern Rock reportedly told the Chicago Tribune that the company has a five-year sponsorship contract with the PGA for the Northern Trust Open, signed in 2007, that the client events were part of the bank's marketing budget, and were paid for out of the bank’s $641 million net operating income for 2008.
The CEO of Northern Trust also received a letter from the House Financial Services Committee chairman, Rep. Barney Frank (D-Mass.) and 17 Democratic members of the committee demanding the bank reimburse the treasury the full amount its spent sponsoring the tournament and related events.
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