Today, the Federal Trade Commission announced that Richard Fairbank, CEO of Capital One Financial Corp., will pay a $637,950 civil penalty to settle charges that his acquisition of Capital One Financial stock violated the Hart-Scott-Rodino (HSR) Act. Fairbank’s recent multi-million dollar compensation package included over 100,000 Capital One Financial shares in 2018, which increased his holdings to $168 million. The complaint alleges that Fairbank failed to report his sizable stock windfall to federal antitrust authorities and illegally finalized the acquisition before the agencies could investigate. While Fairbank is a repeat filing offender with wrongdoing spanning two decades, today’s FTC order is the first time he has been penalized.
“As the CEO of one of America’s largest banks, Richard Fairbank repeatedly broke the law,” said Holly Vedova, Acting Director of the Bureau of Competition. “There is no exemption for Wall Street bankers and powerful CEOs when it comes to complying with our country’s antitrust laws.”
The HSR Act requires companies and individuals to report large transactions over a certain threshold to the FTC and DOJ so that the federal agencies can investigate the deals before they close. The agencies have 30 days after a transaction has been reported to conduct an initial investigation and file a “second request” demand for additional information. It is generally illegal to finalize an acquisition during this investigatory period. The maximum civil penalty for an HSR violation is currently $43,792 per day.
According to the complaint, Fairbank twice failed to comply with the HSR Act in making filings relating to his multi-million dollar compensation package. In 1999 and 2004, Fairbank failed to file under the HSR Act prior to acquiring Capital One Financial voting securities. In making a corrective filing in 2008, Fairbank alleged that his filing failure was inadvertent, and he pledged to implement a system to ensure that, going forward, the required HSR notifications would be filed. The FTC gave Fairbank a free pass for the 1999 and 2004 acquisitions. Fairbank did not pay a penny in penalties for his wrongdoing.
Despite these warnings for his failures to comply, as the complaint alleges, in 2018 Fairbank again violated the notice and waiting period requirements of the HSR Act because he did not file before acquiring additional Capital One Financial voting securities in excess of the HSR filing threshold, as adjusted. Specifically, Fairbank was in violation of the HSR Act from March 8, 2018 until he made a corrective filing and observed the 30-day waiting period, which ended on Jan. 17, 2020.