Northern Trust under fire for lavish parties

February 24, 2009 8:31:06 PM PST
The Northern Trust Bank is being criticized for spending money on lavish parties at a PGA golf tournament it sponsored in California.Northern Trust did get more than a billion dollars from the federal government's bailout program. But Northern Trust says this time, the criticism is unfair.

Many members of Congress are outraged.

Massachusetts Senator John Kerry called the incident "another idiotic abuse of taxpayer money, while our country is on the brink."

Kerry plans to introduce a bill this week to end what he calls extravagant spending practices of banks that receive taxpayer bailouts.

But Northern Trust is defending itself, saying it didn't use any bailout money for the parties.

Northern Trust Bank, headquartered on Chicago's famed LaSalle Street, has been an icon of power and financial strength for more than a century.

But on Tuesday night, Northern Trust is coming under fire for lavish spending on concerts and cocktail parties, much of it caught on tape by celebrity news Web site

The bank, which received $1.6 billion dollars in federal bailout funds, sponsored the Northern Trust Open, a PGA golf tournament held this past weekend near L.A.

Northern Trust wined and dined hundreds of clients, flying them to L.A. for a first-class dinner at the Ritz on Wednesday, including a performance by the group Chicago. On Saturday, the bank paid to shut down the House of Blues for a private performance from Cheryl Crow. There were gift bags from Tiffany's, and much, much more alleged excessive spending.

"Obviously, it's wrong, people are losing their homes, they shouldn't be supporting golf tournaments for crying out loud," said Deena Wrongkiewicz.

Now members of Congress are asking for their money back, saying the bank should "immediately return to the federal government the equivalent of what Northern Trust frittered away on these lavish events" in a letter sent by Representative Barney Frank on Tuesday, chairman of the House Financial Services Committee.

Northern Trust says this was the second year of a five-year contract to sponsor the tournament. "We paid for these events ourselves. They were paid for as part of a business decision regarding an annual event to show appreciation for our clients. Northern Trust is not a bank that was or is losing money and therefore had to go to the government for assistance," said senior vice president Douglas Holt on Tuesday night.

But Illinois' top money man, Treasuer Alexi Giannoulias, says even though Northern Trust may not have asked for the bailout funds, this was excessive.

"The perception alone that they're throwing lavish parties doesn't help anybody's situation especially when they're laying off workers," said Giannoulias.

In fact, in December Northern Trust announced it would eliminate 450 jobs. And it took a much different tone, the bank's CEO calling the economy "extraordinarily difficult" when those layoffs were announced.

But on Tuesday night there was no indication that Northern Trust plans to return any of the money to the government.

Critics say whether Northern Trust wanted the bailout money or not, it comes with certain responsibilities.