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New Orleans, La. -
A loophole in the law allows the president of a local public board to put tens of thousands of dollars into his pocket every year.
Last month, New Orleans-based First NBC Bank rang the opening bell on Wall Street, celebrating the bank's initial public offering.
But going public also allowed us to take a peek into the bank's financial records -- more specifically, the compensation of board members.
One of the bank's board members, Bud Carrouche, dodged our questions related to his role with another board, a public board: the New Orleans Fire Fighter's Pension and Relief Fund. He's the president. But the ties between the bank's board and the Fire Fighter's Pension Board has us asking questions.
Loyola CPA Patrick Lynch says First NBC records show that last year, Carrouche received $52,000 in compensation from the bank board.
When we asked Lynch whether this was a common financial arrangement for someone who's on a bank board, he told us, "Oh yeah, definitely."
Carrouche received almost $39,000 in cash; the rest came in the form of vested stock options in the bank.
Remember that loophole we mentioned? Here's where it comes into play.
New Orleans CityBusiness editor Greg LaRose says Carrouche has a seat on the bank board because of his role as president of the Fire Fighter's Pension Board. The firefighters invest money with First NBC -- they're one of the bank's largest investors -- so, LaRose says, the bank offered Carrouche a spot on the board.
Because of Carrouche's role volunteering on the Fire Fighter's Pension Board, he was lined up for thousands of dollars of compensation from the bank board. He's essentially profiting from his volunteer public position indirectly.
LaRose says, "And that's, I think, the key. He's a volunteer in representing public employees and he benefits from taking part in a private business."
Let's put his bank compensation package in perspective. The city says New Orleans firefighters make a base salary between $28,000 and $48,000 a year. That means Carrouche made more in compensation from First NBC Bank than a typical firefighter makes in base pay.
And next year, Carrouche could make even more.
CPA Lynch has seen these bank boards and how they're operating, and he says Carrouche may get close to this compensation and close to the same amount of stock options every year.
Lynch says, "Theoretically, if they maintain the same policy they're saying they're giving each director of the holding company 12,000 options a year. So as time goes out, you will be getting 12,000 new options every year."
Carrouche's total compensation could go up about $13,000 a year.
LaRose says, "I don't know of any other instances where you've had the director of a pension fund for public employees in that position. So that is where I think it raises the ethical concerns."
We looked over state disclosure records for members of every other state retirement board, and couldn't find one other retirement board member who also receives compensation from a private bank board.
In fact, Kathy Bourque with the Louisiana State Police Retirement System wrote to us, "That in our opinion would be a conflict of interest and would not be authorized by the board."
But according to the State Ethics Board, as long as Carrouche recuses himself from any First NBC votes when he serves on the Fire Fighter's Pension Board, the arrangement is not against the law.
We didn't have compensation details until now, but we did first mention Carrouche's bank board role on November 14 of last year. Two days after that story aired, Carrouche filed an amendment to his state financial disclosure filing, disclosing his paid seat on the board.
For three years, Carrouche misfiled his disclosure statement to the ethics board.
Carrouche also should have reported to the ethics board about each time he recused himself from a Fire Fighter's Pension Board vote involving First NBC. He didn't start doing that until we aired our November story.
It leads us to ask whether Carrouche was trying to hide his bank board appointment. If not, why did he amend his filings two days after our story aired and made it public?
We won't get an answer to that on camera, because Carrouche's not talking to us.
A source close to First NBC says Carrouche has also been silent in bank board meetings that our source attended. He never said a word. But hundreds of thousands of dollars the firefighters have invested with FNBC will indirectly help earn the president of the Fire Fighter's Pension Board -- tens of thousands of dollars every year.
Lynch says, "Look at what that pension plan is invested into the holding company, round it off 5 percent of its shares. That gives the bank capital to operate with… So they're going to stroke him to keep that there."
Carrouche told us by email that since 2006, all money from First NBC has been direct-deposited into an escrow account called Firemans Public Relations. State records show that's a limited liability company Carrouche started in 2010.
Also Carrouche told us he has refused to take any stock options and has none, although the bank's SEC filings show he has in fact received stock options.
It's not uncommon for large investors to have someone on the board; it even could be beneficial. Firefighters have a large amount of money with the fund, so it could help them to have someone on the bank board looking over their money.
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