Updated March. 25, 2013 23:37
A civic group established by consumer advocate Ralph Nader will file a lawsuit aimed at eradicating the practice of giving the "revolving door" bonus, which is suspected as the U.S. governments secret connection with Wall Street. The bonus refers to the practice of a large financial institution paying a huge sum in the form of severance pay when its executive assumes a top government post.
How the legal dispute will unfold is attracting speculation because the U.S. practice is similar to Korea`s privilege given to those who retire as top government officials, which aroused controversy in the course of forming the new administration in Seoul.
According to the news site Huffington Post on Sunday, Public Citizen, a 42-year-old leading civic group founded by Nader, announced its plan to file the suit. If a company is paying you a multimillion-dollar bonus for your government service, theyre going to expect something in return. Theres no way around that. This is literally a corporation buying the allegiance of a public official, said Craig Holman, a lobbyist for Public Citizen.
The looming dispute was sparked by a report issued by the nonpartisan watchdog POGO, the Project on Government, Friday. Jacob Lew, who was sworn in as Treasury secretary for the Obama administrations second term last month, was found to have received 1.6 million U.S. dollars in cash and 500,000 dollars in stock in January 2009, when he resigned as a Citigroup executive to become deputy secretary of state. POGO investigated similar cases by inspecting audit reports submitted to the U.S. Securities and Exchange Commission. In its Friday edition, The New York Times called the contents of the report shocking.
Such a hefty severance pay is called a revolving door bonus because it leaves the possibility that he or she could return at any time after serving a government post. Thomas Nides, a former Morgan Stanley executive who became deputy secretary of state in January 2011, rejoined the company last month after serving two years in the administration. When he resigned from Morgan Stanley, he received 5 million dollars in severance pay.
The Blackstone Group, one of the worlds largest asset management firms, is known to have in its clause that an officer who leaves our firm to accept specified types of positions in government service will continue to vest in units as if he had not left our firm during the period of government service.
Michael Smallberg of POGO, who authored the report, told the Huffington Post, This is a practice that should never be accepted in reality, and (if Public Citizens files suit) it will have to hold both the payer and payee accountable.