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Now that Well Fargo’s CEO John Stumpf has, by accident, set a precedent of having a top executive at a financial services firm respond to a chorus of calls for him to suffer for overseeing an organization that stole from customers, why aren’t there more calls for the Stumpf Standard to apply elsewhere?

Here are the markers Elizabeth Warren set down in her Senate grilling, recapped on Twitter:

A bank teller would face criminal charges & a prison sentence for stealing a handful of 20s from the cash drawer. — Elizabeth Warren (@SenWarren) October 12, 2016

As I said: @WellsFargo CEO Stumpf should resign, return every nickel he made during the scam, & face DOJ/SEC investigation. He’s 1 for 3. — Elizabeth Warren (@SenWarren) October 12, 2016

Despite Warren being absolutely correct on the gaping disparity between the treatment of small fry and the elites, Corporate America is chock full of devices to protect supposed leaders from suffering any real consequences of profiting from chicanery, such as reporting chains that allow them to throw subordinates under the bus and the extensive use of outside experts as liability shields (“our lawyers said it was OK”).

So while the public should keep up the pressure for a criminal investigation of Stumpf and the executive that ran the business that created all the bogus accounts, Carrie Tolstedt, what about also demanding more accountability the regulators that impose fines and similarly situated executives elsewhere? Admittedly, the OCC is making a gesture in that direction by making a “horizontal review” to see whether other banks engaged in Wells-style hyper aggressive sales and fake account generation.

That’s a start, but misses a more basic point: there are financial services industry chiefs who had to know stealing that was taking place on their watch, yet have been given a free pass. Look no further than private equity.

Recall that the New York Times’ Gretchen Morgenson pointed out earlier this month that state and city treasurers who were public pension fund trustees were eager to get their names in headlines by withdrawing their business from Wells Fargo. Bear in mind the actual amount of money that Wells appears to have purloined from customers was $2.4 million (although they were clearly harmed in other ways less easily measured, most importantly credit score damage).

Yet the amount of pilferage by Apollo, the focus of Morgenson’s article, was $40.3 million per a recent SEC settlement.1 Were these trustees, who have a much higher standard of care in that role than as treasurers, going to put Apollo in a penalty box as they did Wells FArgo? The answer was either silence, or worse, defenses of investing in private equity.

This sort of complacency is sadly typical of badly captured investors, as we’ve documented over the past three years. But in light of the Stumpf Standard, there’s no justification for the SEC failing to fine the executives of private equity firms.

To make it easy, we’ll look at two firms that were fined by the SEC, Apollo and KKR, which are also the purest private equity plays among the private equity firms that have gone public.

The bottom line: The “I’m the CEO and I know nothing” excuse doesn’t wash at private equity firms.

Private equity contracts not only specify who “key men” are, but these terms are also among the few that limited partners negotiate heavily. The key men are considered to be so integral to the operations of the fund that if they stop working on its business to the degree specified, the fund is required to curb many of its operations until suitable replacements are installed. Here is the definition of “Key Man Clause” from the Institutional Limited Partners Association’s glossary: If a specified number of key named executives cease to devote a specified amount of time to the Partnership, which may include time spent on other funds managed by the manager, during the commitment period, the “key man” clause provides that the manager of the fund is prohibited from making any further new investments (either automatically or if so determined by investors) until such a time that new replacement key executives are appointed. The manager will, however, usually be permitted to make any investments that had already been agreed to be made prior to such date. It’s crystal clear where the buck stops in private equity. The SEC can’t credibly take the position that these individuals didn’t know what was happening in their funds. And the SEC similarly can’t pretend that it’s hard to figure out who was responsible. Let’s look at the “key man,” or in its new politically correct version, “key person,” language from Apollo VIII, a limited partnership agreement in our Document Trove. Not surprisingly, it’s not all in one tidy place, but these sections give you the drift of the gist: Key Person Event: At any time a majority of the Senior Principal Partners or a majority of the Additional Principal Partners cease to devote the relevant Required Time Commitment (including as a result of prolonged inattention, prolonged absence for any reason, termination of employment, death, disability, or removal). Senior Principal Partners: Leon Black, Joshua Harris and Marc Rowan; provided that, other than for purposes of determining whether a Key Person Event has occurred, such individual has not ceased to be engaged in the management of the Partnership, the General Partner or the Management Company pursuant to Section 6.14 or otherwise remains actively affiliated with the General Partner or the Management Company. Additional Principal Partners: Those individuals listed on Schedule IV hereto and any successors to or substitutes for or additions to any of the foregoing individuals approved by the Advisory Board; provided that (a) other than for purposes of determining whether a Key Person Event has occurred, such individual has not ceased to be engaged in the management of the Partnership, the General Partner or the Management Company pursuant to Section 6.14 or otherwise remains actively affiliated with the General Partner or the Management Company, and (b) the aggregate number of any successors to, substitutes for or additions to the individuals listed on Schedule IV hereto may not exceed four. So if it wasn’t obvious, there’s a short list of people who can be held responsible for bad conduct in that fund. Unlike big bank execs, who sit in an adminisphere well removed from daily operations, the heads of the firms are deeply expert in the business and actively involved. Stumpf was unable to answer most of the nitty-gritty questions of about how the retail business worked in the Congressional hearings. Based on having some very large bank clients back in the stone ages when the megabanks were a fraction of the size they are now, that was unlikely to be a convenient memory lapse. Someone at his level gets at most very forgettable PowerPoint overviews of processes and procedures. In traditional commercial banking, executives oversee large numbers of people through many layers of hierarchy. Stumpf described branch managers, managers of managers, and yet another layer of manager…and that still seemed to be below area presidents. Tolstedt, the head of the community banking, was higher up the food chain than that. So you have five layers of manager sitting over branch staff through and including Tolstedt. And despite her lofty pay and meeting with Stumpf once a week, the organization chart suggests she reported to the chief operating officer, and not to Stumpf directly ( note this organization chart isn’t conclusive regarding her reporting line, but she is on the same level as a lot of other profit centre managers, and it’s conventional for them to report into C level execs). By contrast, private equity firms as entire entities are vastly smaller than banks and have much flatter organizations. Wells Fargo, per Stumpf’s Congressional testimony, has 268,000 employees. Even large private equity firms are a full two orders of magnitude smaller. KKR has roughly 1200 employees and Apollo, 960. And even though both are relatively pure private equity firms (compared to the more diversified alternative investment mangers Blackstone and Carlyle), both Apollo and KKR have other types of funds, like credit and real estate vehicles. And the individual funds are profit centers within the businesses that have their own teams and draw on firm general resources, so the decision chains on a fund level are even more compact. And remember, that the SEC has sought restitution and fines in private equity based on misconduct in specific funds. Moreover, unlike managers in banks, who get the top by virtue of being (perceived to be) good managers as opposed to having expertise, private equity big dogs grew up in and built their firms. The business of their business is knowing how to structure and price deals, negotiate, and cultivate and manage relationships with their investors. They are the antithesis of the sort of administrators at a remove that you see in big banks or Corporate America generally. The heads of private equity firms can routinely afford to pay the entire fines and restitution that the SEC has imposed so far all by themselves without breaking a sweat. Remember how indignant the public was that even the $41 million clawback that Stumpf paid was only a small percentage of the estimated at $240 million he’d then accumulated over his career at Wells and its predecessors? Leon Black made more tha double that in 2014 alone, a cool $564 million. KKR’s annual shows Henry Kravis and George Roberts to be not as well paid, with Kravis reported as taking home $52.3 million in 2015 and $62.2 million in 2014, and Roberts pulling down $52 million in 2015 and $64 million in 2014. But KKR also has undergone a restructuring, so there may be more here than meets the eye. Nevertheless, even this less egregious pay level, particularly given how fabulously wealth both men are, is more than enough for them to have been able to easily cough up the KKR restitution and fines just between the two of them. These pay packages contrast with the total fines and restitution paid by Apollo of $52.7 million and for KKR, $28.7 million in recent SEC settlements. Similarly, I’ve gotten informed guesstimates of the income of specific founders of private equity firms that grew to the mid-sized level that are only middle-of-the-packinsh performers. When one individual succeeds in retaining most of the firm’s profits for himself (a more common state of affairs than you’d think; the leavings are still attractive enough to retain senior people for at least a while), he’s often pulling down $100 million a year for himself.

So why had the SEC apparently not even considered making these private equity barons at public companies bear at least some of the cost of misconduct that they can’t credibly claim they missed? In fact, their brethren in the firms that are still private, which represents the bulk of the industry, have a legitimate beef against the SEC: when they pay fines and give money back, it does come out of an entity owned by firm members, and thus hits their bottom lines. Yet the very biggest players in the industry, with some of the highest earning general partners, get to dump the cost on public shareholders.

The obvious reason is bad incentives at the SEC. To them, what matters is the number of headlines they get, not the quality or impact of what they do. And law firms who want to falsely depict the SEC as fierce. That makes their job of defending clients against the CES’s wet noodle lashings seem seem more difficult than it is. So they dutifully propagate the agency’s propaganda that the raw number of enforcement actions is a proxy for effectiveness. See this breathless Morrison & Foerster missive to clients as an example. As a private equity insider commented via e-mail:

Morrison & Foerster complains that the SEC took a YUGE number of enforcement actions in the just-ended federal fiscal year, but that people like Elizabeth Warren are unreasonable and implacable in viewing the agency as toothless: Of course, the agency is all about quantity, not quality for exactly this reason–so that it and its allies can present the SEC as tough, even though the reality is otherwise.

Even though experts, the press, and the general public increasingly demand that individuals be held accountable, figuring out who was culpable and determining a basis for assigning fines is more work. And that’s before you get to the fact that the officers of public companies are much more willing to write checks than individuals. So the SEC, as it does in so many other ways, follows the course of least resistance by letting miscreants off easy.

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1 If you’ve been following the sordid tale of private equity abuses at Naked Capitalism, you’ll know that it’s very likely that Apollo and the other big firms who’ve settled could and should have been fined on other grounds as well. The SEC has adopted a posture of selective enforcement, of hitting one firm with one set of abuses to show the SEC takes a dim view of that, and then using another to illustrate other practices it does not like. But that means a lot of conduct is still going unpunished. For instance, as we’ve written repeatedly, the overwhelming majority of private equity firms have been charging transaction fees while not providing them through a registered broker-dealer. That’s a black letter law violation subject to dollar-for-dollar fines for the fees charged, a harsh sanction designed to show serious this misconduct is. Yet so far the SEC has dinged only an itty bitty firm for this abuse.