William K. Black

Bill Black is an Associate Professor of Economics and Law at the University of Missouri – Kansas City (UMKC) and the Distinguished Scholar in Residence for Financial Regulation at the University of Minnesota Law School. He is a white-collar criminologist. He was, after a national search, recruited by the Association of Certified Fraud Examiners and the American Institute of Certified Public Accountants to serve as the Executive Director of the Institute for Fraud Prevention from 2005-2007. He taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

He was recruited to become litigation director of the Federal Home Loan Bank Board, recruited to be the deputy director of the FSLIC, SVP and General Counsel of the Federal Home Loan Bank of San Francisco, and recruited to serve as the Senior Deputy Chief Counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

At the staff level, he led the reregulation and resupervison of the S&L industry and was instrumental in creating and training agency, FBI agents, and AUSAs on sophisticated financial fraud techniques, particularly “accounting control fraud.” Black developed the concept of “control fraud” – frauds in which the leader uses the entity as a “weapon.” Control frauds cause greater financial losses than all other forms of property crime combined and kill and maim thousands. In finance, accounting is the “weapon of choice.” Black developed the concept by serving like the chief coroner of the agency. He and his staff “autopsied” every failures and looked for patterns to understand the rapidly evolving nature of the debacle. The patterns they discovered allowed them to confirm that the crisis had become an epidemic of control fraud. The patterns also allowed the regulators to target for closure the worst frauds while they still reporting record (albeit fictional) profits. The autopsies also revealed the frauds’ Achilles’ “heel” – the need to grow extremely rapidly. The agency adopted rules restricting growth to target that “heel” of the frauds.

The academic public administration literature uses Black’s work as a regulator as the exemplar of effectiveness and integrity. Black’s regulatory career is profiled in Chapter 2 of Professor Riccucci’s book Unsung Heroes (Georgetown U. Press: 1995), Chapter 4 (“The Consummate Professional: Creating Leadership”) of Professor Bowman, et al’s book The Professional Edge (M.E. Sharpe 2004), and Joseph M. Tonon’s article: “The Costs of Speaking Truth to Power: How Professionalism Facilitates Credible Communication” Journal of Public Administration Research and Theory 2008 18(2):275-295.

George Akerlof called Black’s book, The Best Way to Rob a Bank is to Own One (University of Texas Press 2005), “a classic.” Paul Volcker praised its analysis of the critical role of Bank Board Chairman Gray’s leadership in reregulating and resupervising the industry:

Bill Black has detailed an alarming story about financial – and political – corruption.  The … lessons are as fresh as the morning newspaper.  One of those lessons really sticks out: one brave man with a conscience could stand up for us all.

Robert Kuttner, in his Business Week column, proclaimed:

Black’s book is partly the definitive history of the savings-and-loan industry scandals of the early 1980s. More important, it is a general theory of how dishonest CEOs, crony directors, and corrupt middlemen can systematically defeat market discipline and conceal deliberate fraud for a long time — enough to create massive damage.

The book was translated into French with an updated chapter on the global crisis and then published in an even more updated version in English. The following unsolicited comment may be the most candid. Dr. Kaminski, the brilliant and honest, but failed, former top risk officer at Enron wrote:

There is one particular book I wish I had read in the early days of my business career, which would have saved me and the firms I worked for a lot of money.

Many companies that have eventually gone bankrupt have been very successful at projecting the image of unstoppable success for a long time.

The book, entitled The best way to rob a bank is to own one: how corporate executives and politicians looted the S&L industry, was written by William Black, associate professor of economics and law at the University of Missouri-Kansas City. It is based on his experience as a regulator of savings and loans (S&L) institutions during the S&L crisis of the 1980s and early 1990s.

Within its pages, Black introduces the concept of ‘control fraud’ – effectively, a very simple recipe for great riches and limited civil and criminal liability.

Black is a serial whistleblower. He blew the whistle on a presidential appointee, Federal Home Loan Bank Board Member Lee Henkel who served as Charles Keating’s “mole” at the agency. Henkel resigned in disgrace. Black took the detailed notes of the “Keating Five” meeting with Senators Cranston, DeConcini, Glenn, McCain, and Riegle at which the Senators unsuccessfully sought to intimidate the regulators into withdrawing their recommendation that Keating’s Lincoln Savings be taken over and Keating removed. Black’s notes, virtually a transcript, led to the Senate ethics investigation of the “Keating Five.” Black blew the whistle on Speaker of the House “Jim” Wright’s similar efforts to intimidate the agency not to act against several Texas CEOs leading control frauds. This led to a House ethics investigation. The independent counsel leading that investigation formally recommended that the House ethics committee charge Wright with an ethics violation for repeatedly attempting to get Black fired (the Committee declined). Black’s blowing of the whistle and his testimony, however, is credited by even the author most hostile to Black with playing a material role in Speaker Wright’s decision to resign in disgrace.

After Keating’s efforts to intimidate the four regional regulators (which included Black) failed, he used Senator Glenn to arrange a luncheon meeting with Glenn, Keating and Speaker Wright and used Senator Cranston to arrange an afternoon meeting the same day with the head of the regulatory agency, “Danny” Wall. At the luncheon meeting, Speaker Wright fulminated against Black and Gray (Wall’s predecessor who took on the S&L fraudsters). At the Speaker’s invitation, Keating and his team then met immediately after the lunch with Wright’s top aides to develop a strategy to get Black fired and to bankrupt Gray and Black through civil suits. Keating twice hired private detectives to investigate Black. He sued Black and Gray for $400 million in their individual capacities.

Shortly after the Speaker’s aides and Keating and his team had this conference aimed at removing and crushing Black, Keating met with Black’s ultimate boss, Danny Wall. Keating began the meeting by emphasizing that he had just met with the Speaker and that the Speaker would be far more favorably disposed toward Wall if he were to get rid of the “red-bearded lawyer in San Francisco” (Black). At the end of that meeting with Keating, the cowed Wall ordered Mr. Dochow, the national head of supervision at the agency, to reach “an amicable resolution with Keating.” That, of course, was only possible if the agency surrendered. At Dochow’s formal recommendation, pursuant to Wall’s order, the regulatory agency took the unprecedented action of removing its regional regulator’s jurisdiction (Black and his colleagues) over Lincoln Savings and entered an agreement that was, effectively, a cease and desist order against the agency. This surrender allowed Keating to stay in control of Lincoln Savings and greatly increase its losses to $3.4 billion – the most expensive bank failure in U.S. history until the current crisis. Black and his colleagues’ testimony before Henry B. Gonzalez, the new, reformist chair of the House Financial Services Committee was instrumental in Wall’s decision to resign in disgrace and Dochow’s decision to resign his senior position.

Keating’s infamous order, in writing, to his chief political hit man was that his “HIGHEST PRIORITY” was to “GET BLACK … KILL HIM DEAD.” (The original is in all caps.)

Black has helped the World Bank develop anti-corruption initiatives (and implement them in India), served as an expert for OFHEO (now FHFA) in its enforcement action against Fannie Mae’s CEO, assisted Icelandic and French leaders responding to their financial crises, and addressed members of the UN General Assembly on policies needed to reduce the risk of future financial crises. Black has testified to Congress five times about the most recent financial crisis – on the subjects of financial derivatives, executive and professional compensation, Lehman’s failure and related regulatory failures, and the role of control fraud in the bubble and crisis. He testified before the Financial Crisis Inquiry Commission about the epidemics of accounting control fraud that drove the crisis.

In 2015, he testified before the Irish parliamentary inquiry commission investigating the cause of Ireland’s banking crisis and assisted Ecuador in efforts against procurement fraud, money laundering and sanction violations, and cartels and other forms of anti-trust enforcement.

Black’s pro bono efforts to get the Department of Justice to prosecute the elite bank frauds that led the three great epidemics of “accounting control fraud” that drove the most recent financial crisis have been profiled in many publications. The most recent is the February 2016 edition of the American Bar Association Journal. His Ted Talk on the fraud epidemics that drove the crisis has over 1.3 million views.

Black appears regularly in “Bill Black’s Finance and Fraud Report” on the Real News Network. His blogs can be found primarily on New Economic Perspectives (the blog of the UMKC economics department) where he is the editor-in-chief.

He is a regular at Kilkenomics – the annual festival of economics and comedy in Kilkenny, Ireland because he says that the Irish have decided that it (slightly) less painful to laugh than to cry.

His spouse of 36 years is June Carbone, the inaugural holder of the Robina Chair in Law, Science and Technology at the University of Minnesota’s law school. This is why Black lives in Kansas City in the Fall semesters where he teaches at UMKC and then gets to spend winters in balmy Minnesota. Yes, brilliant planning, and yes, June is the smart one. They have three children.

Black is a founding member of the newly formed Bank Whistleblowers United that proposes practical steps to restore accountability to Wall Street elites and restore effective financial regulation.

Black continues to simulate being a soccer player.

He can be contacted at blackw@umkc.edu

650.743-8835 and @WilliamKBlack