The stakes were high. Schering-Plough Corp. had assembled a lobbying team to persuade Congress to help preserve its monopoly on the popular allergy drug Claritin. Furious watchdog groups argued that extending the pharmaceutical giant's patent would cost consumers billions of dollars by delaying access to cheaper generic drugs.
The drug company found an ally in Rep. James P. Moran Jr. (D-Va.).
On June 30, 1999, Moran signed up to co-sponsor a bill to help Schering-Plough. On July 23, 1999, Moran sent a letter to other New Democrats, seeking their support.
About the same time that summer, Moran received some much-needed financial help: an unsecured $25,000 loan from Terry Lierman, a lobbyist for Schering-Plough. Moran was in the midst of a messy divorce and in financial straits.
Lierman, a Montgomery County Democrat now running against Rep. Constance A. Morella (R-Md.), said he lent Moran the money based solely on their long-standing friendship.
"Jim Moran has been my friend for 26 years," Lierman said. "To draw any other conclusion would be malicious in any context."
Moran said his support of Schering-Plough had nothing to do with the loan. He said he was convinced by the company's argument that it deserved a patent extension because the drug's entry into the market had been delayed.
"I can see why people might raise their eyebrows if that's all the information they had," said Moran, a five-term incumbent from Alexandria. "But I met with a number of Schering-Plough people. Terry may have been involved in setting that up, but Terry really never lobbied me on anything."
Lierman said Sunday night that he could not release the terms of the loan without talking to Moran first. Yesterday, Lierman faxed to The Washington Post a copy of a one-paragraph promissory note dated June 25, 1999, that said Moran borrowed $25,000, with the option to borrow more at the same 8 percent annual interest rate. The promissory note was never publicly recorded, Lierman said.
Bankers, speaking without knowledge of the people involved, described the loan as unusual because it lacks a maturity date and has no provision for repayment of the principal other than to say that Lierman may call in the loan at any time.
"It would be very unlikely that you get those terms at a bank," said Keith Leggett, a senior economist at the American Bankers Association.
It also might have been difficult for Moran to go to a bank, something he said he didn't even consider. The promissory note is dated five days before Moran signed on to the Claritin bill and one day after Moran's wife filed for divorce.
Divorce records showed that the couple's finances were in dismal shape, the result of heavy stock trading losses and personal debts incurred since their young daughter's 1994 battle with cancer.
Members of Congress are forbidden to accept gifts "in return for being influenced in the performance of an official act." Even without a quid pro quo, a loan to a House member can be considered an improper gift if it was not made on "commercially reasonable" terms.
Members of Congress may accept loans from a person other than a financial institution "provided that the loan is on commercially reasonable terms, including requirements for repayment and a reasonable rate of interest," House rules say.
The law also prohibits members from soliciting a gift "from any person who has interests before the House," a prohibition that applies not only to the solicitation of money, but "anything of value."
Lierman said Moran, a longtime friend, came to him for help. Lierman said that he "probably did lobby Jim" on the Claritin bill but that there was no connection to the loan.
"He has a divorce problem and he comes to a friend, and a friend does what any friend would do," Lierman said.
Moran said he couldn't recall if he had "directly called Terry. It may have been through . . . my campaign manager."
Moran did not disclose the loan on the annual financial disclosure report he filed May 15 this year. That, Moran first said yesterday, was an oversight.
But late yesterday, his chief of staff said Moran was mistaken. On May 15, 2000, the same day that Moran filed his financial disclosure report, he wrote to the House Committee on Standards of Official Conduct and asked for a ruling on whether he had to disclose the loan. Moran's divorce lawyer had advised him that he did not have to disclose the loan because the money was being used to pay Moran's legal fees.
The ethics committee disagreed. So Moran disclosed the loan in an unsigned, undated amended report received July 31 by the House Legislative Resource Center.
Lierman reported collecting an amount ranging from $201 to $1,000 in interest from "Sen. Jim Moran" in 1999 on his financial disclosure form. Such forms do not ask for a specific amount. Moran said he tries to pay between $500 and $1,000 a month. His office said it would try to locate canceled checks and release them today.
The terms outlined in the promissory note require that Moran pay 8 percent in interest annually. The payments must be made no less than semiannually.
In June 1999, when Lierman lent Moran the money, the minimum rate for an unsecured personal loan in the Washington area was 12.5 percent, according to Bank Rate Inc., a company that tracks rates.
"With an unsecured loan and no collateral, [banks] really are going to look at your credit rating" to set the rate, said the company's John Schaffer. One possible reason that Lierman might charge Moran a lower rate is that the loan may be called in at any time, said Leggett, the bankers association economist.
Moran said he did not think there was anything unusual about the loan. "I just didn't want him [Lierman] to lose money," he said. "If he put it into a savings account, he wouldn't have earned as much as 8 percent."
House members are told to contact the Committee on Standards of Official Conduct "before entering into a loan arrangement with a person other than a financial institution." House rules also state that gifts from friends valued at more than $250 "may not be accepted unless the Standards Committee issues a written determination."
Moran did contact the ethics committee by letter--three days after he got the loan.
But he asked only whether he could accept a loan from an unnamed individual and "whether there is any limitation on the profession of the creditor." The letter did not disclose the loan's terms.
Lierman said that he and Moran first met in 1976, when Lierman, then the staff director for a Senate Appropriations subcommittee, hired Moran for a staff job. They became close friends, and their families vacationed together, Lierman said.
But last year, Moran's family life was unraveling.
On June 23, 1999, Moran's wife, Mary M. Moran, placed an emergency call to police during a domestic argument at the couple's Alexandria home. No charges were filed.
The next day, she filed for divorce. According to public records and associates of Moran who were contacted at the time, Moran was earning $136,700 as a congressman. But after making roughly $7,000 in monthly housing and loan payments, the family was living on less than $2,000 a month.
The day after that, Lierman, then a registered lobbyist for Schering-Plough, lent Moran the money.
On June 30, 1999, Moran signed up to co-sponsor the eventually unsuccessful bill to help the drug company extend its exclusive Claritin patent--and keep generic drug manufacturers from encroaching on its business. For Schering-Plough, it was no small matter; the drug brought the company $2.3 billion in revenue last year. But extending the patent could cost consumers $7.3 billion over 10 years, a University of Minnesota study found.
On July 23, 1999, Moran and Rep. Ellen Tauscher (D-Calif.) sent a letter to fellow New Democrats, urging them to vote for the Claritin bill.
Moran said yesterday: "There were a whole bunch of people bringing that up at the time. . . . I don't know how much influence I had."
Twenty days after the letter went out, Schering-Plough's political action committee donated $2,000 to Moran's campaign, Federal Election Commission records show.