Ethics probe of Rep. Waters derailed by infighting, sources say

By R. Jeffrey Smith and Carol D. Leonnig
Washington Post Staff Writers
Thursday, December 16, 2010; 11:01 PM

A lengthy House investigationof Rep. Maxine Waters (D-Calif.) has been derailed by infighting within the politically charged ethics committee over errors in building a case against her, according to congressional sources with direct knowledge of the probe.

The probe, opened in 2009, dissolved this fall and most likely will fall to a newly composed committee and possibly a new investigative staff, the sources said.

The case - one of the most prominent ethics investigations undertaken by the committee - came apart as committee and staff members argued over whether documents should be subpoenaed and when the trial should be scheduled and for how long. They all expected Waters to agree to a negotiated settlement, which she ultimately declined.

At one point, the committee's ranking Republican, Rep. Jo Bonner (Ala.), accused the chairman, Rep. Zoe Lofgren (D-Calif.), of violating House rules. Other complaints and counter-complaints have been flung for months between Lofgren and the professional staff leading the investigation.

On Thursday, the committee's staff director and chief counsel, R. Blake Chisam, notified the House that he is resigning. Because of his closeness to Lofgren, his departure is seen as an indicator that Lofgren might not return as the committee's top Democrat after Republicans take control of the House next year.

At least one committee member, Rep. G.K. Butterfield (D-N.C.), has urged that the entire panel be replaced in the next Congress and that a new investigative team take a fresh look at the allegations.

The breakdown of the Waters inquiry highlights the difficulties that the ethics committee faces in policing House colleagues. The panel sought to restore public confidence in its work during the current Congress, scrutinizing nearly two dozen members for possible transgressions and preparing for several trials. But its staff of 14 was quickly overwhelmed.

The Waters probe focused on whether the California Democrat, who chairs a House banking subcommittee, had improperly arranged federal help for OneUnited, a minority-owned bank in which her husband had a significant investment. But the investigation followed a twisting path, according to congressional sources, and sometimes missed what many agree in hindsight were important steps.

Last month, Lofgren tried to fire two investigators, and she told others that they had misled her about the probe. But the firings were blocked by Bonner, and the employees remain on paid leave.

The events at issue involved players at the Treasury Department, the Federal Deposit Insurance Corp. and the House Financial Services Committee. The committee is headed by Rep. Barney Frank (D-Mass.), who has acknowledged helping to write legislation that enabled OneUnited to qualify for a $12 million federal bailout.

Lofgren had been pushing for the Waters trial to start in mid-September but staff investigators said that was "impossible," internale-mails show. Then, in September, after asking the staff for an update on its preparations, Lofgren became concerned that it was not ready and urged putting off the trial. Lofgren and Chisam learned that investigators were missing important e-mails from Waters's chief of staff and hoped to request or subpoena them.

At a Sept. 16 meeting, however, investigators told her that they were fully prepared to "begin a hearing immediately," according to sources and a staff e-mail. Staff members complained that Lofgren and Chisam had obstructed their probe.

In conversations with others, Lofgren and Chisam have, in turn, accused the staff of failing to collect needed documents before an investigative subcommittee formally accused Waters of violations in June. They also say that the staff did not disclose in a timely way some of the evidence gaps.

For their part, some staff members said Lofgren repeatedly refused to approve a request to subpoena Waters in late 2009 and a request early this year to subpoena Frank and his staff. Instead, they said, she repeatedly sought voluntary compliance with evidence requests. Lofgren generally has sought records voluntarily and subpoenaed them only when members did not comply.

As tensions escalated, staff members had begun to distribute updates and recommendations about the probe to all committee members, rather than first clearing them with Chisam and Lofgren.

In an e-mail to Lofgren and other committee members Oct. 13, for example, staff prosecutor Sheria Clarke called Lofgren's efforts to shorten the trial "troubling" and said her decision could compromise the staff's efforts to present a "fair, thorough, and effective" case. The staff wanted 30 hours to present its case, but Lofgren ordered that the charges be presented in six hours, according to congressional and legal sources.

Perhaps the only issue on which all of those involved in the probe agree is that they had expected Waters to concede that she had made mistakes and to accept an admonishment. Her refusal to do so caught everyone by surprise and caused the staff to renew the search for evidence.

Waters's attorneys have said the renewed search was illegal. They have told Waters's grandson and chief of staff, Mikael Moore, who was at the center of her office's interactions with OneUnited, that he need not turn over e-mails subpoenaed in September from a private account. No action has been taken by the committee to enforce the subpoena.

Richard Sauber, an attorney for the suspended staff investigators, Stacey Sovereign and Morgan Kim, said criticisms of his clients' handling of the case are "egregious."

"The Chair of the House Ethics Committee . . . placed my clients on administrative leave without explanation," he said in an e-mailed statement. "Now my clients are subjected to a series of cowardly, anonymous leaks - all in violation of Committee rules - from certain elements of the Committee purporting to blame my clients for a host of transgressions."

Waters attorney R. Stanley Brand said the committee and its staff ignored committee rules and tried to force Waters into a quick settlement. When she refused, they spent months "trying to manufacture a case," he said.

"No amount of backtracking, adjusting of theories or concealment could overcome the truth," Brand said. "There were no violations," and "inevitably the case unraveled."

Staff writers Kimberly Kindy and Paul Kane and research editor Alice Crites contributed to this report.

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