Florida's fraud watchdog muzzled

Published July 27, 2012

Even as Florida was leading the nation in mortgage fraud, Tom Grady thought it wise to close half the state's regional offices charged with investigating the mortgage business. As head of the Office of Financial Regulation, Grady, a millionaire securities lawyer, took a bulldozer to the place, slashing office resources and personnel, including fraud investigators, and ousting a veteran administrator to put a crony of the governor's in his place. He also spent lavishly on his own travel. Though he's out of office now, Grady's poor management affected the state's ability to police wrongdoing in the financial sector, which may have been the point all along.

Grady was handpicked by Gov. Rick Scott, a neighbor in Naples, to take over as commissioner of OFR, the state agency that oversees and investigates mortgage brokers, banks and securities firms. He shares Scott's government-cutting, antiregulation ethos, and during his short tenure moved aggressively to pare back the office's physical presence throughout the state. Florida is known as a hotbed of mortgage and financial fraud. Fort Lauderdale is home to so many scammers it's known as "Fraud Lauderdale." But Grady, a former conservative Republican legislator, led the effort to chop more $3.5 million from the agency by eliminating 81 positions including investigators and closing regional offices in Fort Myers, Jacksonville, Pensacola and Fort Lauderdale.

Grady, who is back in private practice, insists that the lost resources won't affect financial investigations. That would be more believable if during the six months Grady ran OFR he'd been more professional and less political. But Grady's actions suggest he saw his job as advancing Scott's plan to shrink government's size and influence and put friends in high places. For instance, Grady replaced a veteran division director with Greg Hila, an unqualified chiropractor-turned-real estate agent who played golf with Scott. And Grady's grand idea for boosting investigations into securities fraud was to establish an "all-volunteer" advisory council of securities lawyers to hunt and report on the wrongdoing they see. Never mind that lawyers who represent clients often have professional obligations to keep quiet.

Yet for all of Grady's zeal for cost-cutting, it didn't extend to his own expenses. There Grady didn't skimp, staying at a Ritz-Carlton at $296 per night in Sarasota, spending more than $6,000 for in-state travel, taking a car service instead of taxis and seeking reimbursement for more than $10,000 in office furniture. When Grady left OFR to become interim president of Citizens Property Insurance, he kept up the pattern, spending more than $10,000 on travel in just two months.

Grady saved the state a few million dollars at OFR, but he may have cost Florida's victims of financial fraud even more. By closing so many regional offices, Grady made it harder for the agency to effect a statewide presence and provide victims with locally delivered relief. Yes, it's smaller government — but it's also government doing less to protect financial consumers and investors.