By Susan Crabtree - 08/07/09 01:32 PM EDT
The Senate Ethics Committee on Friday dismissed complaints against Democratic Sens. Chris Dodd (Conn.) and Kent Conrad (N.D.) over their participation in Countrywide Financial Corp.'s VIP lending program.
But the panel cautioned the senators that they should have "exercised more vigilance" in their dealings with the mortgage giant to avoid an appearance of preferential treatment.
The Senate Ethics Committee has spent a year investigating loans Countrywide made to Dodd and Conrad through the VIP program — operated under former Chief Executive Angelo Mozilo and known within the company as “Friends of Angelo."
Both senators had denied wrongdoing and said they never asked for favorable loan terms from Countrywide.
Dodd, who is facing a tough reelection fight, breathed a sigh of relief Friday after learning about the ethics committee dismissing the complaint.
“I’m pleased and gratified that the Democrats and Republicans on the Ethics Committee have dismissed this complaint and found that the underlying accusations simply were not credible,” Dodd said in a statement. “I’ve said all along that I welcomed a close examination of my mortgages, and I’ve also said all along that Jackie and I received the same mortgages that anyone else could have received.”
Dodd was holding a news conference in Connecticut on Friday to discuss the dismissal of the complaint against him.
A spokesman for the National Republican Senatorial Committee said Dodd still has a lot of work to do in restoring trust with Connecticut voters.
“Whether it’s his role in approving bonuses for AIG executives, his questionable real estate deal in Ireland or his decision to move to Iowa and run for President while the housing market was collapsing, it’s hard to see this as anything other than one issue down, but many more still unanswered,” said NRSC spokesman Brian Walsh.
Conrad also expressed relief that he was cleared of any wrongdoing, but acknowledged that he should have been more vigilant in avoiding an appearance of impropriety when securing the loans.
“This is most welcome news,” he said in a statement. “The Ethics Committee’s exhaustive inquiry confirms what I have said all along: I did not ask for or receive any preferential pricing on my loans.”
“While I should have shown more vigilance in the appearance of these transactions, the committee has concluded I did nothing unethical, and that is the truth,” he added. “I am deeply grateful to the people of [North Dakota] for standing by me through this difficult period.”
The action dismisses a complaint filed June 13, 2008, by Citizens for Responsibility and Ethics in Washington (CREW), which asked the panel to investigate whether mortgages Dodd and Conrad obtained through Countrywide violated the Senate gifts rules. Dodd’s and Conrad’s participation in the program was first raised in a June article in Portfolio.com that implicated several government officials on both sides of the aisle as benefiting from sweetheart lending deals through the VIP program.
Senate rules bar lawmakers from “knowingly” accepting a loan from a bank or other financial institution on terms that are not “generally available” to the public. A more general rule prohibits senators from using their official position for personal gain.
Reacting to the dismissal, CREW executive director Melanie Sloan blasted the ethics committee for failing to hold the senators accountable for participating in a program they knew was intended for VIPs.
“As is its practice, the Senate Ethics Committee has cleared the senators of any wrongdoing despite the fact that the senators participated in a program the committee found ‘offered quicker, more efficient loan processing and some discounts,’” she said.
Rep. Darrell Issa (Calif.), the top Republican on the House Oversight and Government Reform Committee, said the dismissals clear the way for his committee to issue subpoenas of critical Countrywide VIP documents. Rep. Edolphus Towns (D-N.Y.), who chairs the Oversight panel, has cited the Senate ethics committee investigation as one reason he did not want to move forward with a full committee probe.
Earlier this week, Issa traded barbs with Conrad over House Republicans’ report on his participation in the program.
“The limited scope of the Senate Ethics Committee investigation has not addressed Countrywide’s intentions in extending the benefits of its VIP program to high-ranking government officials,” Issa said in a statement. “Evidence shows that Countrywide employees intended to use preferential treatment to curry favor with government officials. This was clearly wrong and needs to be fully investigated.”
Earlier Friday, Towns categorically denied benefiting from the Countrywide VIP program in the face of a Wall Street Journal report that his loans with the mortgage giant contained information indicating that they were handled by the VIP unit.
In its dismissal letter, the ethics committee said it pored over 18,000 pages of documents from Countrywide and its former employees, which included information about its VIP loan program and the details of the senators’ mortgages and their dealings with the company from 2002 to 2008.
The panel also conducted lengthy depositions with numerous Countrywide employees, including account executives who originated the mortgages and the underwriter who reviewed their loan files.
“The Committee treated this matter very seriously and took every possible step during the course of its year-long inquiry to obtain certain information from multiple sources, including issuing subpoenas for detailed contemporaneous documents and testimony, while needing to be attentive to the concerns raised by the parallel investigations,” the Committee wrote.
The Committee also concluded that VIPs were offered “quicker, more efficient” loan processing and some discounts but noted that “there is evidence on the record” that the discounts weren’t the best deals available at Countrywide or in “the marketplace at large.”
The panel said there was no credible evidence that Conrad or Dodd received interest rates below prevailing market rates even though they were handled by Countrywide’s VIP unit and designated as FOA loans. In addition, the service the senators received was “available to thousands of other non-Senate customers” at Countrywide and the terms of the loans were available “industry-wide to borrowers with comparable loan profiles,” the committee found.
Still, the committee cautioned that senators’ awareness that they had been placed in a VIP program “should have raised red flags.”
“In order to avoid the appearance of impropriety, you should have inquired very specifically about how you became a member of the VIP unit, whether you may have been offered treatment based on your official position, and if you were receiving preferential treatment not available to other borrowers with similar profiles,” the committee wrote.
The committee ended the letter by acknowledging that it has not offered specific guidance to senators about what they should consider when negotiating mortgages and other financial transactions. In the future, it indicated that it would be more proactive in providing guidance and encouraged senators and staffers to consult the committee before participating in any similar financial program.
This is not the first time that recent ethics allegations have been raised about lawmakers benefiting from improper loans.
The issue of favored treatment in mortgage lending was raised in the campaign between former Sen. Rick Santorum (R-Pa.) and now-Sen. Bob Casey Jr. (D-Pa.) in 2006.
At the time, Santorum’s campaign manager accused Casey of hypocrisy in questioning the circumstances of a Santorum home loan because Casey had secured a mortgage from an institution whose officers were campaign contributors. Media reports had raised questions about Santorum’s mortgage on his Virginia home because it came from a Philadelphia financial institution that normally provides mortgages only to affluent customers of its investment services.
The same year, The Hill reported on $7.5 million in promissory notes Rep. Gary Miller (R-Calif.) received from a campaign contributor and business partner. He used the promissory notes to purchase real estate from the company.
This story was updated at 3:25 p.m.