Fwank speaks out on Waters Ethics Case

Frank warned colleague not to aid troubled bank By Susan Milligan and Beth Healy, Globe Staff  |  August 3, 2010 WASHINGTON — US Representative Barney Frank of Massachusetts urged Representative Maxine Waters of California to avoid any dealings with Boston-based OneUnited Bank because her husband owned stock in it. But the Democratic congresswoman didn’t heed his warnings, according to a House ethics report released yesterday, and now faces a possible trial before her colleagues over a conflict of interest with the bank. The 79-page report by the Office of Congressional Ethics said Waters confided to Frank that bank officials came to her for help in 2008. But she felt conflicted because her husband, Sidney Williams, had served on the board of OneUnited from 2004-2008 and was a stockholder. It is against House rules to use one’s power as a member for personal financial gain. “She knew she should say no, but it bothered her,’’ the report said. Issuance of the document turns the matter over to the House Ethics Committee and sets the stage for a trial. The case renewed attention on OneUnited, the nation’s largest minority-owned bank, which has been dogged by financial and governance troubles since the financial crisis erupted in the fall of 2008. The bank lost $50 million on invest ments in Fannie Mae and Freddie Mac when the government took over the mortgage agencies that September and was sanctioned soon after by bank regulators, who charged that it had employed poor standards on loans and documentation. Regulators also chided the bank’s top executives for taking excessive pay and perks, including a $6.4 million beachfront mansion in Santa Monica the bank says it used to conduct business. The bank’s chairman and largest investor, Kevin Cohee, had boasted that OneUnited didn’t enter into the subprime lending frenzy that brought down the economy and saddled borrowers with home loans they couldn’t afford. In fact, the bank was making very few home loans in recent years, according to a Globe review. The handful of mortgages the bank did write were mainly to wealthy clients in tony locations, including the South End and Martha’s Vineyard, despite the bank’s stated mission to support Boston’s urban communities. Waters and Frank took steps to help the bank. Waters placed a call to then-Treasury Secretary Henry Paulson at the request of Cohee and OneUnited’s senior counsel, Robert Cooper. At the time, Cooper had identified himself as chairman-elect of the National Bankers Association and as a OneUnited executive. But at the meeting with Treasury officials, he and Cohee focused on funds for their own bank, not for the association, according to the report. Bank officials declined to address the allegations. “OneUnited Bank and its executives cannot comment on the allegations facing Representative Waters before the House Committee on Standards of Official Conduct due to the ongoing nature of the proceedings,’’ the bank said in a statement. “The Bank continues to focus on providing critical financial products and services in a responsible manner to the under-served urban communities of Boston, Miami, and Los Angeles that have been devastated during the current economic downturn.’’ The report says that Cohee and Cooper refused to cooperate with the ethics commission beyond a phone conversation on April 17, 2009. It includes a number of e-mails and other documents that detail the bank’s effort to obtain federal help. For example, a Sept. 19, 2008, e-mail from Cooper to a member of Waters’s staff suggests that her office was aware that Cooper and Cohee had sought the meeting to advocate for OneUnited, not for a broader group of banks. Cooper offered a “back-up strategy in case Treasury does not grant the specific relief we are requesting within the next couple of days.’’ Waters, 71, denies any wrongdoing, saying she was merely trying to help struggling minority-owned banks damaged by the financial crisis. “I simply will not be forced to admit to something I did not do, and instead have chosen to respond to charges made by the House Committee on Standards of Official Conduct in a public hearing,’’ Waters said in a statement, referring to the formal moniker for the ethics committee. The Associated Press reported that Waters is expected to be accused of violating a House rule against using improper influence for personal benefit and related charges. In the report — compiled by the House ethics committee a year ago and released yesterday in anticipation of a possible trial — the person who talked with Waters about whether she should help OneUnited is identified as “Representative A.’’ The appendix names Frank, a Newton Democrat who chairs the Financial Services Committee, as a lawmaker who talked to the panel. Frank confirmed to the Globe that he is “Representative A.’’ In an interview after the release of the report, Frank said he advised Waters to let his staff handle any efforts to make OneUnited eligible for assistance under the Troubled Assets Relief Program because the bank is in his district. “I said: ‘Look, it’s a Boston institution. You should stay out of it. It’s a legitimate constituency thing for me. You should stay away from this,’ ’’ Frank told the Globe, recounting his conversations with Waters, a 10-term congresswoman and colleague on Financial Services. Frank said he thought Waters would take his advice. But according to the ethics panel, she did not. Frank said he asked his staff to help make OneUnited eligible for TARP funds. Frank said his action was implicitly sanctioned by the ethics report. “I was never a subject of the investigation,’’ Frank said, adding that he turned over many documents and e-mails to assist the panel in its inquiry. “I never said, ‘Give them the money.’ I said, ‘Make them eligible for the money,’ ’’ he said. OneUnited has encountered financial problems even though it received government aid under the TARP program. It has failed to make five straight dividend payments on the government infusion after delivering the first installment of nearly $94,000 in February 2009. The bank has said that because it is still struggling financially, it has put those funds toward lending and other business. Skipping payments is permissible if an institution can’t afford to pay them. But the federal government has the right to name two of the bank’s nine directors if it misses a sixth payment. In a statement, the bank said: “OneUnited Bank has deferred the payment of dividends to all shareholders this quarter in order to marshal capital and support funding for its new lending programs. As a TARP recipient, the Bank fully recognizes the importance of using prudent business judgment designed to create a safe and sound financial institution capable of being a long-term source of capital for the communities it serves.’’ The bank declined to comment on whether it will try to make its next scheduled payment. An ethics trial could further damage the embattled majority Democrats, who expect to lose seats in the November mid-terms. The House is already gearing up for a likely fall trial of Representative Charles Rangel, a New York Democrat accused of using congressional stationery to solicit funds for an academic center bearing his name and for improperly using a rent-controlled New York property as a campaign office.

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