Corporate Cop Sued; Stock Fraud Alleged
Deputy Atty. Gen. Larry D. Thompson, head of a Bush administration task force on corporate crime, was accused in a lawsuit filed Wednesday of taking part in an alleged securities fraud while a director at Providian Financial Corp.
Providian delayed disclosing losses in the second quarter of 2001, “artificially enhancing and inflating Providian’s stock prices,” said a statement announcing the suit by Judicial Watch, a self-styled public interest group which has sued the Clinton and Bush administrations before. Investors relied “on a rosy picture of the company that did not exist,” Judicial Watch Chairman Larry Klayman said at a press conference in Dallas.
The suit, filed in federal court in San Francisco, names Thompson, Providian and other officers of the seventh largest U.S. issuer of Visa and MasterCard credit cards. It was filed on behalf of a Dallas-area investor, Robert Lake, who is seeking $75,000 in damages. Judicial Watch, which sued the Clinton administration 80 times, said the Thompson case is its second against the Bush administration.
The allegations in the lawsuit are frivolous, Justice Department spokeswoman Barbara Comstock said in a statement. Thompson’s “actions have been entirely professional and proper at all times.”
“The plaintiffs appear to be using Providian to make a political point,” company spokeswoman Laurel Munson said. She refused to comment on specific allegations.
As a member of Providian’s audit and compliance committee, Thompson and others knew bankruptcies, credit losses and delinquencies were rising among Providian’s customer base and knew the company wouldn’t meet its financial projections in the first quarter of 2001, the lawsuit said.
Thompson sold about $2.5 million of Providian stock three days before the company’s shares tumbled in July 2001, according to a financial disclosure statement the Justice Department released last month. Thompson, the department’s No. 2 ranking official, resigned from the Providian board on May 9, 2001, the day before he was confirmed by the Senate as deputy attorney general.
That was the same day Providian held its annual meeting and made alleged misrepresentations about the financial performance of the company, the Judicial Watch lawsuit said.
President Bush appointed Thompson, a former partner at the Atlanta law firm of King & Spalding, to head a task force aimed at assuring the American public the government is getting tough on corporate fraud.
