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To serve as Florida financial regulation chief, attorney had to give up suit

Tom Grady, left, greets Gov. Rick Scott on Aug. 2, the day he was appointed commissioner of the Office of Financial Regulation.

Photo courtesy of Bill Cotterell, Tallahassee Democrat

Tom Grady, left, greets Gov. Rick Scott on Aug. 2, the day he was appointed commissioner of the Office of Financial Regulation.

TALLAHASSEE — Tom Grady is a successful securities attorney, prominent Republican money-raiser and former state representative from Naples.

Gov. Rick Scott said Grady's financial and legislative fluency made him the clear pick to lead Florida's Office of Financial Regulation.

"I have high expectations for him," said Scott, whose beachfront estate is a half-mile from Grady's $4 million home.

But there was one awkward and expensive situation that Grady had to clear up before accepting his dream job.

He needed to extricate himself from a lawsuit he pursued against the State Board of Administration, which manages Florida's $118.9 billion (as of Thursday) pension fund.

Scott, Attorney General Pam Bondi and Chief Financial Officer Jeff Atwater are board trustees.

"He couldn't be suing the state and take this job," Scott said. "I didn't want that to happen."

The Office of Financial Regulation oversees financial services such as state-chartered banks, brokerage firms, payday lenders, loan providers and credit unions. The agency has about 450 employees, including investigators and examiners throughout its nine statewide offices.

Grady, 53, starts Aug. 29 and replaces Orlando lawyer Tom Cardwell, who resigned after two years. At an annual salary of about $133,000, Grady will stay on the job until he leaves or Cabinet members vote him out.

• • •

Why sue the state?

Grady and Tampa lawyer Guy Burns claimed the board of administration owed them more than $1 million after they represented it in a 2005 lawsuit against Alliance Capital Management, a New York money-managing firm.

Alliance had directed state pension money into Enron securities as the energy company began to fail, resulting in a $300 million hit to the pension fund.

A jury ruled in Alliance's favor. Even worse, Grady said, board of administration managers signed an agreement before the jury verdict that said neither Alliance nor the board would appeal the jury's decision.

With no chance of a courtroom victory, Grady and Burns billed the board $1.4 million for fees such as travel and hotels, computer research, investigation and expert witnesses, and copier services, according to court documents.

The board rejected their invoice, citing a contingency-fee provision in the legal contract that required a "favorable" verdict for payment of legal services.

In March 2010, as the statute of limitations neared expiration, the lawyers filed suit to compel mandatory binding arbitration and recover fees. Their client, they said, had hindered their ability to get a favorable verdict.

"I thought at some point the SBA would probably say, 'You know, you're right,' " Grady said in an interview. "We thought the attitude might change."

A Leon County circuit judge, siding with Grady and Burns, issued an order compelling arbitration in November. The Attorney General's Office appealed.

Oral arguments were Aug. 2, the day Scott and the three-member Cabinet enthusiastically approved Grady as the new Office of Financial Regulation commissioner. They made no mention of the legal fight playing out across town.

The arguments proceeded without Grady's stake in the case. He assigned his rights and interests to Burns, according to a May 16 agreement he sent to the Governor's Office. He said he was not paid for reassigning his interests.

What else happened May 16? Cardwell sent Scott and Cabinet members a letter reminding them to appoint a successor.

Scott said he did not know all of the details of the lawsuit, but enough to know Grady could not be in that position as a state leader. Grady agreed, saying in a phone interview that he was "a little uncertain as to whether to file in the first place."

• • •

Originally a supporter of Scott gubernatorial rival Bill McCollum, Grady came to Scott's side after he won the primary, contributing $500 to his Naples neighbor and friend.

"After the governor was elected, after I saw where all of the chips fell, I decided there would likely be some opportunity for me in public service," he said. "I would not want to be involved in any kind of dispute with the state at the same time I would like to be pursuing my public service, so I got out of it."

Grady's new job is not without peril. Don Saxon was forced out of the job in 2008 by then-Chief Financial Officer Alex Sink and Gov. Charlie Crist following a Miami Herald expose that revealed the department's ineffective oversight of the mortgage broker industry.

Grady said he's prepared after nearly three decades of fighting financial fraud as a securities lawyer in Naples. He said he spent time in a training program offered by the agency's securities division a few years ago.

"I've always felt that the state's securities regulators were more important from a consumer standpoint than the federal regulators," Grady said.

As a House member elected in 2008, Grady backed changes to Florida law that aimed to help investigators pursue securities crimes and "the Bernie Madoff kind of guy." The changes also gave the Office of Financial Regulation power to suspend dealers or businesses that fail to give requested records to the agency.

He drew ire from some for proposals, including a banks-supported measure that would have sped up the foreclosure process by allowing lenders to bypass courts and another requiring state employees to contribute a portion of their salaries to the pension fund.

Neither passed, though Scott signed a similar pension measure into law this summer.

• • •

Three months after filing the State Board of Administration lawsuit, Grady turned his attention to another person he believed owed him money: Crist. Grady sued Crist for refunds on behalf of contributors to his U.S. Senate campaign after Crist switched his party affiliation from Republican to independent. A Collier County judge ruled Crist could keep the money.

Grady's wife of 26 years, Ann, made Naples headlines last year when she qualified to run for his House seat. She was concerned Republican candidate Kathleen Passidomo was not conservative enough to represent District 76. Mrs. Grady, a personal trainer, dropped out before the primary.

Like the governor, Tom Grady is a lifelong conservative — editor of Florida State University's Republican newsletter — and part of the wealthy elite. His net worth in 2010 was $8.1 million.

They think alike on "most, maybe all important issues," Grady said.

Democratic Rep. Evan Jenne of Dania Beach, who served with Grady on the House Insurance and Banking Subcommittee, said he respects Grady for his sharp legal mind but is wary of the world view he shares with Scott.

The governor's perspective, he said, tends to favor businesses over consumers. Still, Grady showed streaks of a proconsumer philosophy, especially with HB 483, the bill he sponsored to strengthen investor protections.

"That leads me to believe he's going down the path of helping folks," Jenne said. "He could be an incredible advocate if he handles this correctly."

Times staff writers Steve Bousquet and Kris Hundley contributed to this report. Reach Katie Sanders at (850) 224-7263 or

To serve as Florida financial regulation chief, attorney had to give up suit 08/20/11 [Last modified: Monday, August 22, 2011 12:59pm]
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