By Paul Kane and Ben Pershing
Washington Post Staff Writers
Tuesday, August 3, 2010; A01
An ethics report released Monday found that Rep. Maxine Waters probably broke conflict-of-interest rules in urging federal aid for a bank where her husband had served on the board and owned hundreds of thousands of dollars in stock.
The California Democrat, a member of the Financial Services Committee, denied any wrongdoing and said she will not settle with the House ethics committee, most likely meaning a second public trial of a leading Democrat this fall. Rep. Charles B. Rangel (N.Y.) is set to stand trial on allegations that he broke congressional rules with his personal finances and with his fundraising efforts for a New York college.
The twin scandals and expected trials further complicate what was already expected to be a difficult midterm election year for Democrats. Although Waters and Rangel represent solidly Democratic districts, Republicans are holding them forth as examples of House Speaker Nancy Pelosi's inability to live up to her pledge to run the "most ethical Congress in history." The GOP has made ethics reform and legislative transparency part of its pitch to try to reclaim the majority in November.
Pelosi (D-Calif.) echoed her stance on the Rangel matter, offering a muted response that suggested the Waters case showed that the ethics panel is doing its job of policing the House.
"As we have said in the past about the process, ethics proceedings are a result of a bipartisan, confidential and independent process in the House," Nadeam Elshami, Pelosi's spokesman, said in a statement.
Although Rangel's legal team continues to hope that it can reach a settlement and avoid a trial on 13 counts of violating House rules by acknowledging some wrongdoing, Waters signaled that she thinks a public airing would be the only chance to clear her name.
"I have not violated any House rules," she said in a statement. "Therefore, I simply will not be forced to admit to something I did not do. . . . The record will clearly show that in advocating on behalf of minority banks, neither my office nor I benefited in any way, engaged in improper action or influenced anyone."
The ethics committee took two key steps Monday. It announced that the subcommittee that had been investigating Waters concluded it had a reason to believe she violated the chamber's conflict-of-interest rules, and it established a new eight-member subcommittee to hold a trial.
The committee also released an 80-page report that was prepared last August by the quasi-independent Office of Congressional Ethics, which serves as a preliminary investigator and recommends to the full House ethics committee whether it should pursue matters.
The case revolves around Waters's role in arranging meetings between Treasury Department officials and executives of minority-owned OneUnited Bank and whether her intent was to broadly benefit minority-owned financial firms represented by the National Bankers Association (NBA) or simply to aid Boston-based OneUnited.
OneUnited suffered during the collapse of the mortgage industry because it had invested heavily in shares of federal mortgage giants Fannie Mae and Freddie Mac, and at one point in the fall of 2008 it was seeking close to $100 million from Treasury for those shares.
Waters's husband, Sidney Williams, had served on the board of directors of OneUnited and owned $350,000 to $750,000 in the bank's stock at the end of 2008. Disclosure forms for 2009 show similar holdings.
Twice in September 2008, Waters approached Financial Services Chairman Barney Frank (D-Mass.) to discuss OneUnited's pursuit of federal assistance. According to Frank's testimony, she acknowledged a potential conflict: "Sidney's been on the board."
Frank told the investigators that he did not want Waters involved in the OneUnited issue. "Stay out of it," he said he told her.
"Representative Waters told [Frank] that she was in a predicament because her husband had been involved in the bank, but 'OneUnited people' were coming to her for help," the report states.
In an interview Monday, Frank emphasized that his motivation for warning Waters away from the issue was because he was already aware of the financial problems of the bank in his home town. "It was something I was working on independent of her," he said.
In December 2008, after correspondence between bank officials and Waters's staff, OneUnited received $12.1 million from the Troubled Assets Relief Program.
The preliminary investigation by the ethics office included interviews with former Treasury secretary Henry M. Paulson Jr., who told investigators that he agreed to have his senior aides meet with OneUnited's executives after receiving a call from Waters, believing it would be a meeting involving many minority bankers. Paulson told investigators he called Waters after the meeting to ask why only OneUnited officials were present.
Based on interviews with Paulson, Waters, her staff and others, the preliminary report said "the discussion at the meeting centered on a single bank -- OneUnited."
Waters said Monday that the meeting was requested "on behalf of the NBA, not on behalf of OneUnited Bank."
According to the report, three bank executives attended the meeting: one from the NBA and two from OneUnited, one of whom had just been selected chairman of the NBA. He was there to advocate on behalf of the association's members as well as OneUnited, he is quoted as saying in the report.
Waters, a 20-year House member from South Central Los Angeles, also maintained that her actions did not directly result in OneUnited or anyone else receiving federal money and that she received no personal benefit.
Because the House adjourned Friday for a nearly seven-week break, no public action is expected in the Rangel or Waters cases until Congress returns.