NH banking chief faces removal hearing

CONCORD, N.H. — Removal proceedings begin Monday against New Hampshire Banking Commissioner Peter Hildreth, who is accused of not doing enough to stop a now defunct mortgage firm from running a Ponzi scheme.

Gov. John Lynch said the Executive Council, which will decide Hildreth's fate, wants to allow one week for the hearing with deliberations on Dec. 6. That would mean the current council, which voted unanimously to hold the removal hearing, would act as Hildreth's judge and not the councilors elected Nov. 2.

Lynch said he believes the council has the authority to set the schedule despite efforts by Hildreth's lawyer to postpone the start and length of the hearing.

Hildreth's lawyer, David Nixon, had asked a Superior Court judge to postpone the start of the proceedings and to block Lynch from presiding over the hearing, saying Lynch has prejudged Hildreth. Judge Larry Smukler denied his requests.

"I'm very discouraged and disappointed," Nixon said last week.

Nixon may call more than 100 people to testify on Hildreth's behalf. Possible witnesses include former Govs. Craig Benson, Steve Merrill and Walter Peterson, former Executive Councilor Dudley Dudley, former Senate President Ed Dupont, former Safety Commissioner Dick Flynn, unsuccessful U.S. Senate candidate Ovide Lamontagne, Attorney General Michael Delaney and Deputy Attorney General Orville "Bud" Fitch.

In New Hampshire, the governor doesn't have the power to unilaterally fire commissioners. The five-member council will hold its hearing and decide afterward whether to fire, reinstate or reprimand Hildreth, who is on paid leave after refusing Lynch's request to resign.

The case against Hildreth centers around the state's failure to identify and halt a multimillion dollar Ponzi scheme by the principals of Financial Resources Mortgage.

Hildreth said he had recused himself from handling anything about Financial Resources Mortgage because his brother was an investor, but he never put that in writing. But the removal petition against Hildreth said he was involved in discussions about the firm and failed to establish a clear line of command on handling complaints and audits indicating problems. Audits as early as 2001 showed problems at the firm, which submitted false information, the petition said.

"Despite its discovery and acknowledgment of these deficiencies and others, and despite the Bank Commissioner's power to take further investigative and regulatory steps to safeguard the public, the Bank Department failed to take adequate measures to ensure that FRM conducted its business in a manner compliant with the public interest and with state and federal laws and regulations," the petition states.

The mortgage firm's head and an assistant have pleaded guilty to defrauding investors, but the state continues to probe what happened to try to ensure such schemes don't evade scrutiny in the future.

A joint legislative committee held hearings, and the state attorney general's office issued a report spreading blame among the Banking Department, Attorney General's Office and Bureau of Securities Regulation.

A report prepared by the committee recommends changing state laws to clear up ambiguity about who is in charge of addressing consumer complaints.

The report found the Banking Department was ineffective, saying it failed to recognize the significance of multiple consumer complaints, to follow through on enforcement and to share records with securities regulators.

The Secretary of State also ordered an investigative hearing to discuss new details, including the existence of offices the firm set up in more than a dozen states.