Tony West emerges as US’s key weapon against banks

West’s approach brings in record mortgage fines for DoJ

He is the US government’s $36bn man.

Tony West, an avid runner and one-time fundraiser for Barack Obama, has emerged as the Department of Justice’s main weapon in holding banks accountable for the financial crisis.

In early June, lawyers for Citigroup called Mr West, the number three official at the DoJ, seeking an extension from that month’s Friday the 13th deadline for settling an investigation into mis-selling of mortgage-backed securities. When they reached him in Alaska where he was on business, Mr West held firm, insisting the DoJ was preparing to sue the bank the following week.

Four hours before the midnight deadline on June 13, the bank’s lawyers reached Mr West again during dinner, a person familiar with the matter said. Their pledge to recommend the bank pay a penalty of $3bn to $4bn reignited negotiations and avoided a lawsuit. Citigroup ultimately paid $7bn in fines and consumer relief.

This week, Mr West’s work was in the spotlight again when the DoJ inked a record $16.65bn settlement with Bank of America. After weeks of stop and start talks, the bank came close to DoJ’s initial request of $20bn, a figure that had seemed unfathomable weeks earlier.

Those two settlements plus JPMorgan Chase’s $13bn deal bring the DoJ’s haul in the mortgage settlements to $36.6bn in fines and relief to homeowners in the form of mortgage modifications and financing to build affordable housing rental units.

“By the time I am sitting across the table from a financial institution to discuss whether we will settle or sue, there aren’t generally many facts that remain in dispute,” Mr West said in a recent speech. “The main question on the table is whether we will be able to satisfy three general principles that guide us in all of these cases: accountability, transparency and redress.”

Mr West’s masterful move, one person directly involved in negotiations said, is serving as the hub negotiating on the one hand with the bank and the other with regulators and states, keeping both sides in the dark and using that opacity to smooth out a deal.

Starting with the JPMorgan deal, Mr West asked all of the parties – other regulators, several state attorneys-general – to tell him what their case was worth. Once a deal was finally hammered out often through calls on secured lines, each party would be given papers to sign noting the amount they would receive. The payments to the others were redacted.

The idea was to “reduce the sandbox fights”, this person said. It also built trust among the competing authorities. It did not hurt that he gave them each more than they initially sought.

Mr West has ruffled the feathers of some bankers by insisting on admissions of wrongdoing and big fines they say are never explained in logic, but others praise his approach to settlement talks.

“He doesn’t start stomping and screaming. He will tell you where he stands,” said one person who has been directly involved in one of the bank’s negotiations. “He has been willing to meet people if not half way maybe two-thirds of the way,” this person added.

Mr West often uses vivid language to highlight alleged abuses in complex financial deals. He compared BofA with a grocer peddling sour milk and used a butcher analogy to explain the DoJ’s case against Standard & Poor’s, the credit rating agency.

“It’s sort of like buying sausage from your favourite butcher, and he assures you the sausage was made fresh that morning and is safe. What he doesn’t tell you is that it was made with meat he knows is rotten and plans to throw out later that night,” Mr West said of S&P.

S&P is fighting the lawsuit.

A California native, Mr West did his first stint at the DoJ after graduating from Stanford law school, where he met his wife Maya Harris, and became president of the school’s prestigious law review. His sister-in-law, Kamala Harris, is the California attorney-general and a forceful partner in several of the bank settlements.

He will tell you where he stands. He has been willing to meet people if not half way maybe two-thirds of the way

a person involved in one of the bank’s negotiations

During his eight years as a federal and state prosecutor, Mr West ran twice for political office and lost. He then left government for a private law firm.

But Mr West’s hunger for public service was reignited after listening to the speech by Mr Obama, then a senator, during the 2004 Democratic National Convention, he told the Stanford Lawyer magazine. Mr West later teamed up with a law school classmate to head fundraising in California for Mr Obama’s 2008 presidential campaign.

In 2009, Mr West was appointed to head the DoJ’s civil division, where he co-ordinated legal actions against BP for the Deepwater Horizon oil spill in the Gulf of Mexico. He was confirmed by the Senate to the number three slot in early 2013.

Despite the record settlement amounts, Mr West has shown no signs of resting.

“We’re not letting up and we’re not going away and … we’ll continue to pursue these cases either to litigation in the courts or to a significant resolution – whichever is in the best interests of the American people,” he said when announcing the BofA settlement.

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