Rep. Maxine Waters cites similar ethics claims against a peer, who was cleared

By Paul Kane
Washington Post Staff Writer
Tuesday, August 10, 2010; A03

In defending herself against congressional ethics charges, Rep. Maxine Waters plans to put a surprising witness on the stand: The House Ethics Committee.

The committee unveiled a three-count charge against the California Democrat on Monday, alleging she broke conflict-of-interest rules by helping arrange a cash infusion of more than $12 million in federal bailout funds for a troubled bank in which her husband was a large shareholder.

Waters has countered that her initial assistance was intended to benefit a broad category of minority-owned banks, not just her husband's bank, and that follow-up help to the bank was minimal and handled by staff.

The congresswoman has expressed no intention of settling the case. She is expected instead to defend herself in an ethics trial, which would probably begin in September.

In her defense, Waters and her attorneys intend to present the case of another member of Congress who recently faced similar charges before the ethics committee and was exonerated.

Rep. Sam Graves, a four-term Missouri Republican who sat on the Small Business Committee, was accused of helping his wife's investment partner by inviting him to testify before the committee. Graves said that his wife's partner was acting on behalf of a larger trade association and that his staff had selected him to testify.

The ethics committee cleared him of the charges.

"This committee has adopted an approach that is sharply divergent and significantly harsher than the decision rendered in Graves and other relevant precedent," Waters's attorneys, Stanley Brand and Andrew Herman, wrote the Ethics Committee last month. "In light of the disparate treatment of Representative Waters the allegations cannot be reconciled with this committee's precedent."

The Brand-Herman memo was released Monday as part of the Ethics Committee's "statement of alleged violation," which outlined the conclusions of an investigative subcommittee that had been examining Waters for almost a year. It found that Waters "improperly exerted" her influence by helping Boston-based OneUnited Bank in securing funds from the federal Troubled Assets Relief Program.

The Waters case, which will be heard by an eight-lawmaker panel, will probably hinge on whether it can be proven that her office's actions led to OneUnited's TARP aid.

In September 2008, Waters arranged a meeting between the bank's officers and Treasury officials. At the meeting, the bank's officers requested $50 million in federal money. In exchange, the bank said it would turn over the value of its holdings in Fannie Mae and Freddie Mac, the mortgage giants that had just been placed in conservatorship by Treasury and the Federal Reserve.

Treasury balked at the request, saying the law did not allow such an exchange.

At the time, OneUnited was in poor financial shape. According to the committee's charging documents, Waters's husband, Sidney Williams, held $350,000 in OneUnited stock as of June 30, 2008; two months later, its worth had dropped to $175,000.

In interviews with ethics investigators, Waters said that she arranged the meeting as part of an effort to help minority-owned banks in general, and not OneUnited specifically, and said her husband's investment in the bank did not motivate her actions. She told the ethics investigators that, after the meeting, she removed herself from the effort to help the bank, citing the conflict.

But the four-member investigative subcommittee found that the lawmaker's chief of staff, Mikael Moore, remained "actively involved in assisting OneUnited representatives with their request for capital from Treasury."

The report said that Waters did not instruct Moore, who is also her grandson, to "refrain from assisting OneUnited" and that the eventual $12.1 million infusion of TARP funds prevented her husband's bank shares from becoming "worthless."

Brand and Herman, however, argued that Moore's assistance to OneUnited was done "without [Waters's] direction or knowledge." They wrote that the help her office gave consisted of three e-mails to the staff of Rep. Barney Frank (D-Mass.), the chairman of the Financial Services Committee, along with the receipt of several other e-mails from OneUnited officials asking for updates.

Waters's attorneys devoted most of their 16-page defense to the Graves case. Graves, the ranking member of the Small Business Committee, invited Brooks Hurst to testify at a hearing related to the renewable fuels industry. At the time, Hurst and Graves's wife were co-investors in a pair of renewable fuel cooperatives.

Graves's wife held less than 0.2 percent interest in the two companies -- slightly more than Sidney Williams's 0.1 percent stake in OneUnited.

In dismissing the case, the Ethics Committee wrote last year that Hurst had appeared before Congress not in his private business role but as a representative of the Missouri Soybean Association and that Graves's aides had played the key role in selecting him to appear.

For Ethics Committee members, the difference between the two cases may come down to a question of results: In Graves's case, his wife's business partner did not see any direct benefit from the invitation to testify. But, the committee alleges that OneUnited ultimately received direct federal help because of Waters's intervention on its behalf.

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