Warren Worked on Bank Suit While Head of TARP Panel

Elizabeth Warren, named by President Barack Obama to set up the new consumer finance agency, was paid $90,000 this year to be an expert witness in a class-action lawsuit against some of the biggest U.S. banks.

Warren, who at the time she did the work was head of the Congressional Oversight Panel monitoring the $700 billion bank bailout, was retained by a law firm that represents retailers suing credit-card networks Visa Inc. and MasterCard Inc., and banks including Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. for alleged antitrust violations in setting card processing rates, her financial disclosure forms show.

In an interview, Warren said that she first discussed being an expert witness before joining the oversight panel in November 2008. She said she cleared the outside work with the panel’s ethics counsel. The two reports she wrote, which she said she can’t discuss because they are filed under seal in a New York federal court, contain “nothing that I haven’t said in print, on TV and in published academic articles.”

As an appointee to a part-time government post, Warren was permitted to continue doing outside work under the rules governing such positions. Some ethics attorneys said her work created at least the appearance of a conflict of interest given her leverage over banks as head of the watchdog group.

Photographer: Melissa Golden/Bloomberg

Elizabeth Warren pictured here during a Congressional Oversight Panel hearing. Close

Elizabeth Warren pictured here during a Congressional Oversight Panel hearing.

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Photographer: Melissa Golden/Bloomberg

Elizabeth Warren pictured here during a Congressional Oversight Panel hearing.

“She should have had the judgment to say no,” said Richard Painter, a University of Minnesota law professor who was chief ethics lawyer in the White House counsel’s office under President George W. Bush and last year published a scholarly work on government ethics. “It’s highly inappropriate in a position that has this much power.”

Resigned from Panel

Warren’s new position makes her a full-time political appointee of the Obama administration and she is now covered by more restrictive ethics rules. Since her Sept. 17 appointment, Warren has resigned from the oversight panel and taken a leave from Harvard Law School, where she is a professor. She also has stopped her consulting work.

Geoffrey Hazard, a professor at the University of California Hastings College of the Law, said he doesn’t believe Warren’s consulting work raises major ethical issues. “If you think about all the different connections among various people at the national level in Washington and New York, this is pretty pale,” said Hazard.

Obama named Warren, 61, as assistant to the president and special adviser to Treasury Secretary Timothy F. Geithner. The appointment allowed the administration to avoid a potentially tough confirmation battle while allowing Warren to immediately begin influencing the creation of the Consumer Financial Protection Bureau, part of the Dodd-Frank regulatory law.

Consumer Issues

The regulator is likely to have sway over issues dealing with consumer loans, including credit cards.

Warren has risen to prominence in Washington with critiques of the government’s handling of the financial rescue and what her supporters say is her plain-spoken support for the economic plight of Main Street. Introducing Warren at the White House, Obama said she is “a janitor’s daughter who has become one of the country’s fiercest advocates for the middle class.”

Her most recent financial disclosure form, filed with the Senate in June, shows that she earned $534,125 in 2009. That includes $349,375 from Harvard; $67,728 in publishing royalties, $94,772 from insurer Travelers Cos. for legal work on a Supreme Court case; $2,250 from University of Iowa for research expenses and $20,000 from the law firm Wilmer Cutler Pickering Hale and Dorr for “occasional” lunch meetings with its attorneys.

Informal Meetings

Wilmer Cutler does legal work for most of the biggest banks, including Bank of America and Citigroup, and also has represented Angelo Mozilo, the former chief executive officer of mortgage lender Countrywide Financial Corp.

Warren said that her meetings at the firm were informal and occurred roughly three or four times a year. Wilmer also paid her $10,000 in 2008 for an “educational program,” her disclosure for that year shows. The discussions held in the firm’s Boston office, she added, centered on bankruptcy law, her legal specialty.

“I was very careful,” Warren said. “I never talked about TARP or the work of the Congressional Oversight Panel.”

Overall, Warren said that she strove to go above and beyond the panel’s ethics rules. “I added bells and whistles to what was needed,” she said.

Painter, the University of Minnesota professor, said Congress made a mistake in setting up the oversight panel as a part-time job where members are allowed to do outside work.

‘Unusual Arrangement’

Republican Representatives Darrell Issa of California and Spencer Bachus of Alabama have questioned Warren’s current role reporting both to Geithner and Obama, calling it in a letter to the White House counsel earlier this month “an unusual arrangement” that could impede congressional oversight of the consumer bureau.

In the antitrust case, Warren said she first discussed working as an expert witness in March 2008 with an attorney from a Miami law firm, Kenny Nachwalter PA, and filed a report with the court in July 2009. She said she was paid $50,000 for one report and $40,000 for a second one, receiving the money in 2010. Warren said that the reports won’t become part of the court record in the case because she hasn’t been deposed by the other side.

The lawsuit is “a very big issue for the credit card networks and issuers and there is a lot of money at stake,” said Todd Zywicki, a professor at George Mason University School of Law who specializes in consumer credit issues and has followed the case. “Considering the way she used her chairmanship to browbeat the financial services industry in a very high-profile manner, the appearance here seems especially troubling.”

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To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

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