Corruption meets corporate welfare

U.S. Export-Import Bank President Fred Hochberg hits Capitol  Hill this week to beg Congress to reauthorize the bank’s charter before it expires on June 30. The Senate Banking Committee will hold hearings on Tuesday and Thursday, with the House Financial Services Committee doing the same on Wednesday. 

Here’s what lawmakers should ask Hochberg during his testimony: Why should we reauthorize a federal agency that epitomizes Washington’s culture of corruption? 

{mosads}That’s no exaggeration. A relic of FDR’s New Deal, the Export-Import Bank (Ex-Im) uses taxpayer dollars to subsidize U.S. exports to some of the world’s largest foreign corporations. It is the very definition of corporate welfare: It uses taxpayer funds to finance private profit, and right now its portfolio of taxpayer-backed loans and guarantees stands at a staggering $134 billion. 

This places Ex-Im officials in an extraordinary position. They are all that stands between big businesses and billions of dollars in taxpayer money. This also makes them prime targets for attempted bribes, kickbacks, and other illegal schemes—a temptation that apparently is too much for many Ex-Im officials to turn down. 

A review of the bank’s legal issues in recent years—involving both Ex-Im’s own employees and those of its corporate beneficiaries—is more reminiscent of the Gambino crime family than of a federal agency. Between October 2007 and March 2014, there were 792 reported claims of fraud involving the Export-Import Bank and 124 investigations initiated by the bank’s Office of Inspector General. 

These and other investigations resulted in 85 indictments for fraud, bribery, or other wrongdoing, with 48 criminal judgments issued since 2009. From 2010 to September of last year, 66 years of prison sentences were handed down to employees of Ex-Im and its beneficiaries who were found to have defrauded the bank.

An illustration of this corruption came recently with the case of Johnny Gutierrez, a former Ex-Im loan officer who pleaded guilty to federal bribery charges in April of this year. The U.S. Department of Justice charged Gutierrez with accepting over $78,000 in bribes in return for helping unqualified loan applicants obtain financing from Ex-Im. With an additional 31 fraud investigations currently ongoing, it’s likely Gutierrez isn’t a single, isolated incident of official misconduct at the Export-Import Bank. 

The problems with Ex-Im don’t just stop at cases of outright corruption. They also extend to the cozy relationships it maintains with corporate America. In this way, Ex-Im epitomizes Washington’s revolving door that treats federal agencies like a training ground for lucrative private sector careers. 

Consider the case of Kevin Varney, who until 2013 was the presidentially appointed chief of staff at Ex-Im. After a brief stint with a consulting firm that is chock full of former Obama administration officials, Varney joined Ex-Im’s largest beneficiary as a director. 

His job responsibilities? Overseeing the unit of business that receives tens of billions of taxpayer dollars courtesy of Ex-Im.                       

These insider connections also give some recipients a distinct advantage over other businesses that don’t have the same government access. The Wall Street Journal reported earlier this year, for instance, that the bank’s largest beneficiary worked behind the scenes to draft its own loan rules with Ex-Im officials. 

This type of business-government collusion is inevitable when a federal agency dispenses billions of dollars in taxpayer-backed subsidies to mega-corporations. It creates a fertile environment for fraud, corruption, and graft—and taxpayers get stuck with the tab. And even when illegal conduct doesn’t enter the picture, Ex-Im is still a blatant example of the corporate welfare that hard-working Americans see and despise in Washington. 

Hochberg will have a hard time defending this abysmal record when he’s on Capitol Hill this week. Lawmakers should remember that a vote to reauthorize Ex-Im is a vote to reauthorize Washington’s culture of corruption and corporate welfare. This is exactly what they claim to oppose on the campaign trail—and now they can put their words into action by allowing the Export-Import Bank to expire.

Hanson is the federal affairs manager for Americans for Prosperity.


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