A Banker’s Last Day at the Office, in a Bank He Built Aggressively

MOORESTOWN, N.J., July 24 — There are no grand sendoffs planned. No speeches, either. In fact, Vernon W. Hill II, who founded Commerce Bank 34 years ago, is not even planning to go to the office on Tuesday.

Faced with a federal threat of not being allowed to open any more bank branches unless he stepped aside, the board members of Commerce Bancorp, which Mr. Hill hand-picked, voted last month to remove him as chairman and chief executive effective July 31.

How Mr. Hill rose to become so influential a figure in New Jersey business and politics is the story of an ambitious real estate developer who cultivated powerful friends as he built a network of Burger Kings and then banks across the state. It is also a story of pride and excess.

“It’s a Greek tragedy,” said Allen Starkie, an executive recruiter at Knightsbridge Advisers, who lured several senior managers to Commerce. “Vernon was an incredibly gifted protagonist who challenged the fates and won, but he developed such extreme hubris that in the end, it undermined his success.”

Mr. Hill’s career has been defined more than anything else by a willingness to defy the establishment. He founded Commerce with a plan to make retail banking more like retail shopping, opening spacious branches when the rest of the industry was scaling back. And in the highly regulated world of public corporations, he openly awarded tens of millions of dollars of contracts to friends and relatives, including about $50 million for his wife, who decorated and designed many of the nearly 450 branches.

In Moorestown, the well-heeled South Jersey town he calls home, he built a 46,000-square-foot Tuscan-style mansion where a farmhouse once stood. Construction of the home, complete with a 4,000-square-foot gym and fountains inside and out, so alienated his neighbors that Moorestown established a historic preservation commission.

But last month the establishment pushed back.

Under the terms of a cease-and-desist order with federal bank regulators, Commerce agreed to stop signing contracts that entangled the bank with businesses run by its board members, officers and members of their families.

But his troubles have not ended there. The federal Office of the Comptroller of the Currency, the bank’s primary regulator, says it is continuing to look into possible insider dealing at Commerce, and two people close to the investigation say the 61-year-old Mr. Hill is at the center of the examination.

Mr. Hill’s lawyer, Robert S. Bennett, said in a telephone interview that his client did not believe he had done anything improper. “I can’t believe that he would ever put his interests above those of the bank,” Mr. Bennett said, noting that the business deals in question were all publicly disclosed. “These things were done in the sunshine.”

Mr. Hill declined to be interviewed for this article.

This was not Commerce Bank’s first brush with the law. In 2004, a federal grand jury indicted two Commerce executives, Glenn K. Holck and Stephen M. Umbrell, on charges of giving loans to the Philadelphia city treasurer in exchange for the city’s financial business. In 2005, the two executives were convicted of conspiracy and the treasurer was found guilty of fraud and conspiracy. Although investigators disclosed that they had taped Mr. Hill talking about business with the treasurer, Mr. Hill was never charged.

The son of a prosperous Virginia real estate developer, Mr. Hill ran the bank as if it were his own personal patronage system. He hired numerous people with deep connections to New Jersey municipal and state governments, and then he hired their relatives. He befriended George E. Norcross III, one of New Jersey’s most influential Democratic politicians, and appointed him chief executive of Commerce Bank’s insurance business. The bank has done business for more than 30 years with the law firm in which Mr. Norcross’s brother is a managing partner, and last year it paid the firm $1.4 million for legal services, a move the bank said in a regulatory filing was not approved by the board.

Ever since he opened the first Commerce branch in Marlton, N.J., in 1973 at the age of 27, Mr. Hill was a self-styled maverick with little patience for tradition. Owner of more than 40 Burger Kings, he brought a retail mindset to the banking industry, which never operated that way.

When rivals were closing their branches, Commerce aggressively opened new “stores,” as Mr. Hill called them, and kept them open long past the closing times of other banks. Today it is New Jersey’s largest bank and has reached into New York City, Washington and Palm Beach, Fla. In light of its recent legal troubles, Commerce has scaled back plans to open new branches this year from 65 to about 50.

As its presence in the state grew, so did its political influence. Today the Commerce board includes not only Mr. Norcross, but also a former Senate president and acting governor,Donald T. DiFrancesco, who came on in 2002, and a former chairman of the Ocean County Republican Party, Joseph Buckelew. On the same day in 1996, Mr. Hill purchased the insurance businesses of both Mr. Norcross and Mr. Buckelew and folded them into Commerce.

As much as Mr. Hill’s departure from Commerce raises questions about how the bank, based in Cherry Hill, N.J., will fare without its founder — analysts have already speculated that it will soon be sold — it also raises questions about the possible collateral damage to Mr. Norcross.

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“The power in South Jersey has been George Norcross,” said Senator Raymond J. Lesniak, a Democratic senator from Union County and former chairman of the Budget and Appropriations Committee. “Vernon was just part of the political empire built by George Norcross.”

As Alene Ammond, a former Democratic senator in New Jersey who has clashed publicly with Mr. Norcross, put it: “They formed a cartel. It was a very happy marriage. With George Norcross’s clout as a political boss, he then paved the way throughout the state for them to establish themselves with bonds, insurance — town by town, county by county.”

In the late 1990s and early 2000s, Commerce Bank was the largest underwriter of municipal bonds in New Jersey. Indeed, by 2002 it was underwriting more than half of them.

Even as its bond business grew, Commerce was making contributions to Democratic and Republican politicians alike through its political action committees. It stopped making the political donations in 2003, as Wall Street analysts and others questioned whether they created conflicts of interest.

As far back as 1993 a state grand jury was investigating whether the design company operated by Mr. Hill’s wife, Shirley, was awarded business from Camden County, where Mr. Norcross was then the Democratic Party chairman. When the grand jury subpoenaed phone records, the county said they were inadvertently destroyed. Neither Mrs. Hill nor any county official was ever charged.

The business arrangement at Commerce that has attracted the most scrutiny is its relationship with InterArch, the architectural and design company owned by Mrs. Hill. Over the past decade, the bank has paid the company about $50 million to design and furnish bank branches. Last year alone, it paid Mrs. Hill $9.2 million for her services.

In addition to her role as the bank’s chief interior designer, Mrs. Hill became the bank’s de facto protocol officer, making surprise inspections — sometimes with her Yorkie, Sir Duffield, in tow — to ensure that employees were complying with company standards.

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Mrs. Hill and her husband shared a flare for the flamboyant.

At Christmas, he has held lavish parties at their home, Villa Collina, with a different theme, and food, in each room after being greeted by trumpeters and served canapés while Broadway entertainers performed.

The bank held annual “Wow Awards” to honor its best employees, renting out Radio City Music Hall for a night of festivities for hundreds of workers, with Mr. Hill escorted to the stage arm-in-arm with two sequined Rockettes.

Mr. Hill’s neighbors are familiar with his grand scale. When the couple was building their mansion on a wooded 44 acres here, they complained of a parade of construction vehicles: earth movers, dump trucks, water tankers to fill the artificial ponds on the property. Then there were the helicopters overhead at all hours. One neighbor said she asked why the helicopters were necessary, and was told by a construction worker it was so Mrs. Hill could give orders to construction crews through a megaphone.

“I work at home, and when I say there was one dump truck a minute going in and out, I’m not kidding,” said Jeannie Roulet, a quilt maker who lives on the street the Hills use to get to their service entrance. “I have the cracks in our plaster to prove it.”

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