In these cynical times when working for the government is often caricatured as almost an act of moral turpitude, lifelong public servants seldom get the respect and admiration they deserve. The passing last weekend of George H. Painter, who served 35 years as an administrative law judge for the Commodity Futures Trading Commission and died Saturday in Los Angeles, gives us an opportunity to rectify the injustice.
I first encountered Judge Painter in the 1980s, when he lowered the boom on Monex International, a Newport Beach investment firm, and similar firms for selling what he considered illegal futures contracts to small investors. The so-called leverage industry, in which customers put a down payment on gold or silver purchases and borrowed the balance from the firms themselves, were then regarded by many CFTC officials as ripe for fraud -- one called it "the latest lie-by-day and fly-by-night scheme."
Painter was among them; he awarded reparations to some investors and declared the contacts illegal in 1983. For my stories from that era, see here, here and here. An update ran in 2010. Monex is still operating in Newport Beach.
Painter hit the headlines in a big way in 2010, when he announced his retirement from the CFTC with a broadside against a fellow judge, Bruce Levine, who had almost never issued a ruling favorable to an investor. "On Judge Levine's first week on the job, nearly twenty years ago," Painter wrote, "he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that [he] would never rule in a complainant's favor. A review of his rulings will confirm that he has fulfilled his vow." (See the linked article for a full discussion of the context of the dispute.)
Painter asked that the seven cases that would be left undecided upon his retirement be transferred not to Levine but to a judge from a different agency, such as the Securities and Exchange Commission. Most of the cases went to Levine anyway.
The George Painter who made that request seemed very much the same man who had viewed the leverage business with such clear eyesight three decades earlier. The standing of the individual investor at the CFTC, he told me, "has gone to hell. But it's always been that way, hasn't it? We're not prosecuting the bad guys."
Painter's son, Douglas, filled in some details of his remarkable life for me by email. George Painter was born Dec. 10, 1926, in Tulsa, one of 13 siblings. He "held strong convictions at an early age about the pernicious effects of racial discrimination, refusing to drink out of 'whites-only' water buckets on the farms at which he worked and protesting the unjust treatment of blacks," Douglas Painter wrote.
After stints in the merchant marine and the U.S. Army, George Painter obtained his degree from the University of Missouri in 1954. The next year he married his first wife, Armida, but "due to Missouri’s laws against miscegenation in effect at the time, the couple had to marry in the state of Kansas." (Armida was Chinese.) After obtaining his law degree, he served with the Veterans Administration and as a hearing examiner at what was then the Department of Health, Education and Welfare. He joined the CFTC in 1975.
Painter was not shy about identifying injustice. In a 1992 article in the Wall Street Journal, he criticized the CFTC for setting a high bar for customer recoveries: "[the] customer not only has to prove that brokers lied and cheated, you have to go in now and prove you’re stupid." Douglas Painter recalls that "when the commission reversed one of his cases in which over 95% of an elderly couple’s investment went to pay brokers’ commissions, he stated in a July 18, 1995, Washington Post article that the action was 'a green light to those in the industry with a proclivity for churning and otherwise taking advantage of the elderly and unsophisticated.'"
George Painter is survived by Douglas Painter, his siblings Iris, Charlotte, Jon, Joe and James, and numerous nieces and nephews. Government regulators who see their roles as standing up for the individual ripped off by the investment industry were rare during his life, and they'll be rarer now.