But just as Bush is tarnished by his record at Harken Energy and Vice President Dick Cheney is under investigation for shady practices at Halliburton, Thompson’s public persona as anti-corruption cop is undermined by his past association with the credit card company Providian Financial Corp. While Thompson served on the Providian board of directors and audit committee, the firm was cited for consumer, shareholder and accounting fraud, as well as insider trading.
In addition to consumer fraud, Providian was charged with accounting irregularities while Thompson was head of the audit committee. Starting in the second quarter of 2001, the company began writing off loan defaults on a monthly basis, rather than immediately. The change in accounting practice had the effect of delaying a sharp drop in earnings, shifting $30 million in loan losses to the third quarter report of 2001, rather than the second quarter report.
While eventually all the expenses were accounted for, the accounting gimmick allowed top executives to cash in on stock options before the value of the shares fell. Outstanding shareholder and employee lawsuits have alleged insider trading.
During this period, CEO Shailesh Mehta sold 75,000 shares worth $3.7 million. David Alvarez, a former president of the company’s integrated circuit unit, sold off $12.2 million worth of options. Several other directors and executives followed suit.
It was also around this time—in May of 2001—that Thompson sold some $4.7 million worth of Providian stock upon being confirmed by the Senate to his government post. The sale was nominally carried out to comply with ethics regulations. It was nevertheless a lucky coincidence. Providian stock began to fall two months later from a high of nearly $60. The company only revealed its accounting change in August of that year, under pressure from investors. By November, the stock was trading at a low of $2.