A powerful Northeast Pennsylvania lawmaker pulled strings for the state's largest bank in exchange for gifts, including New York Yankees and Rod Stewart tickets, according to a grand jury presentment released Wednesday.
Former Senate Democratic Leader Robert Mellow received the gifts from PNC Bank. Concealing them contributed to a "larger pattern of bid-rigging, improper influence, and commercial bribery" as he steered state Turnpike Commission bond work to PNC Capital Markets, the grand jury found.
PNC Bank has not been accused of illegal activity. The presentment describes how the Pittsburgh-based bank - the largest by market share in Northeast Pennsylvania - approached Mr. Mellow in 2005, specifically for turnpike bond work, a lucrative business. Mr. Mellow was described as having a close personal and business relationship with an unnamed PNC executive. Tony Lepore, Mr. Mellow's former chief of staff, testified that "Bob Mellow was exceptionally tight with one of the PNC regional presidents."
However, the rest of the presentment describes the PNC executive as a "regional vice president" without explanation of the apparent discrepancy.
Current president of PNC Bank Northeast Region Peter Danchak did not return calls for comment. Fred Solomon, spokesman for PNC Financial Services Group, declined to identify the PNC executive who testified before the grand jury or comment on the grand jury presentment.
Entertaining is common not only in banking, but in other industries based on relationships and sales, said Wilson Smith, a bank equities analyst with Philadelphia-based Patriot Capital Partners.
"This is about keeping business or getting more business. A baseball game, dinner, concert is not a huge expense, like flying someone to China or the Super Bowl," Mr. Smith said. "This is about sales, and sales people in any industry are always entertaining."
But anytime a state employee or elected official is on the receiving end of a company's hospitality, it requires a different level of scrutiny, Mr. Smith said.
At Mr. Mellow's guidance, the presentment describes how the bankers met with turnpike officials and key state senators that had influence over the commission. From April of 2006 through 2010, Mr. Mellow was treated to 10 New York Yankees games, a Rod Stewart concert and occasional dinners by the bank. Most of those trips ran between $250 and $450 per game including tickets, food and limousines. Combined, they totaled $3,490. A review of Mr. Mellow's financial disclosures through those years show one entry for PNC Bank, which was under the $250 individual threshold requiring disclosure, the unidentified PNC executive told the grand jury.
During the same time - June 2006 to November of 2012 -the bank handled 14 bond issues and collected $2.5 million of fees from the Turnpike Commission.
Mr. Mellow also received tickets to see "Dancing with the Stars" at the former Wachovia Arena and a concert by Canadian pop star Bryan Adams. One expense stood out: the PNC-paid-for reception and dinner at Sparks Steak House in New York City to help drum up support for Mr. Mellow as he mulled a run for governor. The event cost the bank $7,082. Mr. Mellow did not report it on his financial interest statement.
There's a psychology to "wining and dining," said Bruce Weinstein, Ph.D., author and business ethics expert. In cases like the one between PNC and Mr. Mellow, the relationship and fallout can get "troubling."
He used the scenario of giving an acquaintance a Starbucks gift card on his birthday, and the sense of obligation it creates on the part of the receiver to reciprocate. It's no different than a bank giving to a politician.
"No matter how much I may say, 'Forget about it,' 'it's fine,' and 'no strings attached,' I have created an obligation," he said.
There are two sides: The receiver does not need to accept the gift, even if it is allowed by law.
"We want our elected officials to make decisions in the best interest of the electorate, not based on their feelings of a particular contractor, feelings clouded by money," Dr. Weinstein said. "Otherwise, vendors could just staple a $20 bill to every application." Mr. Mellow is accused of failing to report the gifts, but even if he did disclose them, that would not make the act any more ethical, said Dr. Weinstein. Legality is a minimum standard of behavior. Ethical behavior is a higher standard.
PNC Bank, Dr. Weinstein noted, helped finance a speech he delivered earlier this month. "That may be influencing me right now, I don't know," he quipped.
PNC Bank has endeavored to position itself as a pioneer of ethical banking behavior as larger peers were slammed for creating systemic financial instability, giving rise to the housing bubble, and relying on government bailouts. The bank has an ethics hot line to answer questions or hear complaints from employees.
A copy of the PNC Business Conduct and Ethics Policy found on PNC's website has two pages dedicated to gifts and entertainment, saying costs must be of "reasonable and customary value." A section briefly mentions gifts and entertainment for government officials.
"Special care must be taken," it states, and directs employees to a private document on the matter in PNC's internal website for employees only.
Contact the writer: dfalchek@timesshamrock.com