Northern Trust Can't Be Trusted

By Mike Schuster Feb 25, 2009 1:15 pm

Struggling bank living large on taxpayers' tab.

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For those who haven't had their daily dose of outrage, yet another bailout recipient is treating federal money -- or the "leftover funds" because of it -- as lavish client incentives. Northern Trust (NTRS) and its members were captured last week by telephoto-wranglers TMZ (TWX) gallivanting to and from luxury hotels, a PGA event and live concerts - all on the company's dime.

Or was it the taxpayers' dime?

A little background on Northern Trust is necessary to truly appreciate its executives' gall.

The Chicago-based custody bank received $1.6 billion from the US government's stimulus package - an amount they didn't request but gratefully accepted. This would lead the casual observer to assume the company was financially sound. Not so - Northern Trust laid off 450 employees -- roughly 4% of its staff -- this past December.

So what does a presumably struggling financial institution do in a time of dire economic need? If you've been paying attention to the news over the last few months, you already know the answer: It parties like there's no tomorrow (which, of course, may be true).

The company sponsored a PGA tour event -- called the Northern Trust Open -- at Los Angeles' lush Riviera Country Club. TMZ reports the cost of fronting the cost ran into the "millions" - and Northern Trust also covered part of the $6.3 million purse.

Of course, a PGA tour isn't exciting without a crowd, which the bank was happy to provide: Hundreds of clients and employees were flown in -- though it isn't clear in which flight class -- and booked into classy hotels like the Beverly Wilshire, the Ritz Carlton and the Casa Del Mar.

And it gets worse.

Fancy dinners were thrown at the Ritz, the Loews Hotel and a private hangar at the Santa Monica Airport; concert performances -- on 3 separate nights, mind you -- by Chicago, Sheryl Crow and Earth, Wind & Fire entertained the guests. The House of Blues was entirely shut down for a private Northern Trust party. And yes - personal gifts for the ladies from Tiffany and Co. (TIF) were also provided.

As for the total cost, CEO Frederick Waddell isn't talking. However, TMZ reports that the bills just for Chicago and the House of Blues were $100,000 and $50,000, respectively. (Would you trust a financial advisor who thought Chicago was worth 100 grand?)

Waddell claims the parties and gifts were necessary to ensure strong client relationships, and assures us that no part of the TARP handout was used.

In response, Representative Barney Frank co-signed a letter demanding the bank pay the Treasury back for the expense. Whether a stern warning alone will be effective is not yet known.

Aw, hell - of course it won't.Twitter: @mcs212