Because of an error in the report by the special counsel investigating House Speaker Jim Wright (D-Tex.), Thomas M. Gaubert was identified incorrectly in an article April 22. Gaubert was national finance cochairman of the Democratic Congressional Campaign Committee in 1986. (Published 4/26/89)

When Speaker of the House Jim Wright called to say "my friend, Tom Gaubert" was being mistreated by federal savings and loan regulators and wanted to "come talk to you," Ed Gray, chairman of the Federal Home Loan Bank Board, said he knew what Wright really wanted. "I have been in government long enough to know that you don't have to ask the question explicitly to know what the message is, and I knew what the message was," Gray told congressional ethics investigators. "My impressions," said Gray, "were that he was interfering with the regulatory process on behalf of friends, and I thought this was a violation of his job as one of the highest ranking members in the United States government." Special counsel Richard Phelan reached much the same conclusion, telling the House Ethics Committee that Wright's efforts on behalf of Gaubert "exceeded the bounds of proper representation" and violated House rules. "Wright's intervention on behalf of Gaubert demonstrated a continuing attempt to influence the bank board to change its legitimate administrative responses," Phelan said. But the ethics committee rejected Phelan's recommendation to cite Wright for violating House rules in the Gaubert case, voting 8 to 4 against bringing charges. Phelan recommended action against Wright over three other S&L incidents and in those cases as well, the members of the committee decided there had been no violation of House rules. The ethics committee's decisions to reject its special counsel's recommendations on charges involving the speaker and savings and loan regulators illuminates the debate in Washington over the proper role of elected officials in the day-to-day work of the federal government. The four cases draw a fine line between right and wrong. In two of them, the special counsel said Wright tried to have top regulators fired, but the ethics committee accepted Wright's denial. In two others, the counsel and committee disagreed over whether Wright improperly interfered in regulatory matters. Craig Hall Dallas real estate man Craig Hall was in serious financial trouble by the fall of 1986. Raising money through 325 tax-shelter partnerships, Hall had built an empire the size of a small city: 65,000 apartments, 4 million square feet of offices, mostly in the Southwest. Then the price of oil plummeted, the regional economy started to slide and Hall began having trouble making payments on more than $1 billion in mortgages to some 20 S&Ls. Hall's loans were so big that if he couldn't pay, the loss would wipe out most of the S&Ls, several of which were already being supervised by the Federal Savings and Loan Insurance Corp. (FSLIC). For months, Hall tried to refinance the loans, telling regulators it would be cheaper to give him new loans than to let him go under and take the S&Ls with him. Finally, Hall took his case to Wright. Hall was not the only one short of money at that time -- FSLIC itself was going broke. The savings and loan crisis was just beginning and FSLIC was asking Congress for permission to sell $15 billion in bonds to recapitalize the insurance fund. The "FSLIC recap bill" had sailed through a subcommittee on a voice vote and was headed for a vote. In late September, Wright called Bank Board Chairman Gray. He "asked me if there wasn't anything I could do" about Hall's plea for new loans. Wright did not ask for anything specific, Gray told ethics committee investigators, but "anybody who has worked in government for very long knows that when the soon-to-be speaker of the House of Representatives is asking you to look into it, its not just anybody." On Sept. 26, emerging from a meeting with Hall, a report reached the bank board that Wright had put a hold on the bill to recapitalize the FSLIC. As Hall himself put it, "Congressman Wright has in some manner held up the bill and ... it appeared it somehow related to us." According to Phelan's report, bank board chief of staff Shannon Fairbanks decided that allowing Hall to restructure his debt would "please Wright and get Gray what he wanted, a recapitalization bill." But neither she nor Gray was comfortable with the decision. "We felt terrible about the choices posed for us," she said. "We crossed a line between what we felt was permissible or not. ... I made a judgment that I did not like doing this, but I was committed to get the bill and willing to violate what I felt was ... right in order to get the bill." After investigating the connection between Hall and the FSLIC recapitalization, Phelan concluded that Wright had violated House rules: "Wright's blocking of the recapitalization bill after his call regarding Hall constituted a prohibited suggestion of reprisal in advance of action taken by the agency," he said. Wright's response was that he had never held up the FSLIC bill. "That's ridiculous. Of course I didn't," he testified. The ethics committee, voting 9 to 3, dismissed Phelan's allegation as "unfounded." The committee report said, "The speaker did not block or 'hold hostage' any legislation... . There is no evidence that the speaker put a hold on the recap legislation specifically in order to affect a particular case." Tom Gaubert Ed Gray and Shannon Fairbanks also accused Wright of pressuring the bank board on behalf of Tom Gaubert, a prominent Texas S&L owner and treasurer of the Democratic Congressional Campaign Committee. A real estate developer, Gaubert acquired Independent American S&L in 1984, and served as its president until January 1986, when FSLIC forced him to resign because of heavy losses at Independent American and his involvement with a $65 million bad loan that caused a small Iowa S&L to fail. Gaubert was later indicted on fraud charges in the Iowa case, tried and found not guilty. At the time he was forced out of Independent American, Gaubert signed two agreements prohibiting him from running any FSLIC-insured association. Later, Gaubert decided he wanted back in and complained to Wright, who suggested Gaubert talk to Gray. Wright called Gray and urged him to meet privately with Gaubert. But Gray and Fairbanks told Wright it would violated bank board rules for someone being disciplined by the enforcement division to go over the heads of the staff and take their case directly to the chairman. Special counsel Phelan concluded that on its face, Wright's request for a meeting was clearly within House rules that allow members to arrange meetings with regulatory agencies. The real issues, Phelan said, were whether Wright went too far in pressing for the meeting after Gray said it would violate agency procedures, and whether Wright "actually intended to influence a change in bank board position and not merely to arrange a meeting." On both issues, the special counsel said Wright broke the rules. The committee disagreed, accepting Wright's testimony that he simply told Gray, "Would you hear him {Gaubert}? Would you let him come and talk to you?" Wright's calls on behalf of Gaubert "fell squarely within" the proper role of a member of Congress, the committee said. "Speaker Wright was simply carrying out his official duties on behalf of concerned Texas citizens who needed his assistance... . Joe Selby Selby spent 32 years on the staff of the Comptroller of the Currency, until he was hired as executive vice president and director of regulatory affairs of the Federal Home Loan Bank of Dallas to clean up the S&L mess. A few weeks after his calls to Ed Gray about Gaubert and Hall, Wright phoned Gray about Selby. According to Gray, Wright, "said that he understood Selby was a homosexual. And he understood from people that he believed and trusted that Selby had established a ring of homosexual lawyers in Texas at various law firms and that in order for people to deal with the Federal Home Loan Bank supervisory people, they would have to deal with this ring of homosexual lawyers." "He said to me, 'Isn't there anything you can do to get rid of Selby?' " Gray testified. Congressional staff investigators said they believed Gray, and said the call was a direct violation of House rules. But Wright says, "there never was any demand that anyone be fired and there was never any threat to expose anyone's alleged sexual preferences." His denial was accepted by his ethics committee colleagues. Bill Black As deputy director of FSLIC, Bill Black was involved in all the disputes between Gray and Wright and was involved in at least two confrontations with Wright. After M. Danny Wall took over for Gray, he said he paid a visit to Wright and was asked about Black. Wall said Black was no longer with the bank board, but had taken a position as vice president with the independent Federal Home Loan Bank of San Francisco. According to Wall, he was barely back at his office before Wright aide Phil Duncan was on the phone to the bank board's congressional relations chief, calling Black's hiring by the San Francisco bank "unsatisfactory." Wall said of Duncan: "He wanted Black fired." Special counsel Phelan said there was no direct evidence Wright -- as distinct from Duncan -- asked that Black be fired. But Phelan said he found it "highly unlikely that Phil Duncan would have made a call to the bank board of his own volition." Citing other evidence of Wright's animosity toward Black, Phelan said the effort to get him fired violated House rules against using "undue influence." The ethics committee noted that Phelan never questioned Duncan about the incident, saying that "there is no evidence in the record that the speaker was aware of Mr. Duncan's conversations."