House Democrats are strongly considering filing an ethics complaint against Financial Services Chairman Mike Oxley, alleging that the Ohio Republican and his top aides improperly tried to force a mutual fund industry group to oust its top lobbyist, a Democrat, and hire a Republican instead.

Democratic leaders will meet this week to decide whether to seek a formal inquiry by the ethics committee into Oxley’s actions, as well as to determine which Members would take the lead in any such effort, said several Democratic sources. Rep. John Dingell

(D-Mich.), who is personally close to the Democratic lobbyist, Julie Domenick of the Investment Company Institute, is also expected to attend the meeting.

An ethics filing against Oxley would end an unofficial, six-year cease-fire between the two parties on such charges, and could lead to a flurry of new complaints being lodged against Democratic lawmakers, including Minority Leader Nancy Pelosi (D-Calif.), by Republicans seeking to retaliate for what they see as an overtly partisan attack, senior GOP aides warned.

But Democrats are furious over allegations that the course of an investigation into the mutual fund industry by Oxley and the Financial Services Committee was linked to the employment status of Domenick, ICI’s executive vice president. ICI is the main trade group for mutual fund companies.

Democrats also see the incident as just the latest example of powerful GOP lawmakers like House Majority Leader Tom DeLay (Texas) and Senate Republican Conference Chairman Rick Santorum (Pa.) forcing K Street firms and Corporate America to hire, and make campaign contributions to, Republicans.

“We are going to make an issue of this. People are very concerned,” said a top Democratic leadership aide of the ICI allegations, although this source cautioned that no final decision has been made on whether to proceed with an ethics complaint.

This source said that when it comes to legitimate ethics concerns, the undeclared truce doesn’t apply. The cease-fire, the aide insisted, is for harassing complaints based on politics, not substance.

“This could be a criminal case,” the aide added. “This is serious.”

According to The Washington Post, ICI officials were told by two Oxley aides, Robert Foster and Sam Geduldig, that the Financial Services Committee would hold off on an investigation of mutual fund companies and their business practices if Domenick was either replaced with a GOP lobbyist, or if ICI instead hired a well-known Republican to work with her.

Oxley and Rep. Richard Baker (R-La.), who chairs the subcommittee on capital markets, insurance and government-sponsored enterprises on Financial Services, held a recent private meeting with Domenick and other ICI officials. But the issue of her work for the trade group reportedly did not come up.

Through his spokeswoman, Peggy Peterson, Oxley denied that he linked any committee action with who represents ICI.

“The rumors of some quid pro quo are exactly that — rumors,” said Peterson. “Chairman Oxley and the Financial Services Committee will continue to pursue numerous policy concerns we have with [the] mutual fund industry.”

Peterson said Geduldig, who was singled out by The Post for allegedly making threats about Domenick during a Dec. 10 Christmas party, “is a young staffer who was not included in the meetings that led to the decision to review the mutual fund industry. He was not in a position to know.”

Geduldig, who was coalitions director for Financial Services, has since left Oxley’s staff to work for House Majority Whip Roy Blunt (R-Mo.). Foster is the new majority staff director for the panel.

Financial Services Committee ranking member Barney Frank (D-Mass.) said that while he talked to several Democrats during last week’s recess, he’s not aware of anyone pursuing a formal ethics investigation yet. “But we haven’t been around much,” he noted.

[IMGCAP(1)]

As for filing an ethics complaint himself, Frank said: “I don’t know anything that would be the basis for that.” He added that without explicit knowledge of a Member or staffer delivering a threat, filing a complaint right now would be groundless.

However, Frank said, it is clear the mutual fund industry got the message that it has been put on notice that Domenick is not welcome on Capitol Hill.

“But I don’t know who sent them that message, and therefore I don’t know what the basis [for a complaint] is,” Frank said.

Oxley is known for taking a tough partisan line with the companies his panel oversees, especially in terms of fundraising.

Before the last election, Oxley and some of his aides leaned repeatedly on lobbyists in the financial services industry to attend fundraisers for GOP lawmakers, including then-Rep. Connie Morella (Md.) and other vulnerable Republicans, according to industry sources. “There wasn’t any explicit threat made, but it would be, ‘The chairman really wants you to do this,’” said a top financial services industry lobbyist.

Oxley also attracted attention last cycle by holding 17 joint fundraisers with a lobbyist for mortgage market giant Freddie Mac, Mitchell Delk. According to the Wall Street Journal, many of the events were staged on behalf of Financial Services Committee members. While legal, some Congressional watchdog groups questioned the propriety of having a committee chairman so closely identified with a company his panel holds sway over.

GOP leadership sources vehemently denied that Oxley had done anything wrong with regards to ICI, and caution that Speaker Dennis Hastert (R-Ill.) will not let an ethics charge against Oxley go unchallenged.

“It would be a stupid, stupid thing to do,” said a high-ranking Republican staffer. “You can assume that there will be a response, and that could include a complaint against Pelosi.”

Other Democrats likely to be targeted in a GOP ethics counteroffensive are Reps. Paul Kanjorski (Pa.) and Jim Moran (Va.), with Kanjorski being the most likely of the three to see a complaint, according to Republican sources.

At one point in the last cycle, Pelosi had two leadership PACs operating simultaneously, a potential violation of federal election law. Amid questions about the relationship between the PACs, she closed one of them. The Federal Election Commission has opened an investigation of the matter.

Pelosi’s spokesman called such concerns “hypothetical” and said the California Democrat has denied any wrongdoing. But according to the San Francisco Chronicle, Pelosi placed a $1 million earmark in the recent omnibus bill for a think tank founded by her longtime political adviser and campaign treasurer, former California Lt. Gov. Leo McCarthy. McCarthy ran both of her leadership PACs.

Kanjorski has faced complaints that he helped steer millions of dollars in federal contracts to companies owned or controlled by his daughter and four nephews. Kanjorski has repeatedly denied violating any ethics rules.

The unofficial ethics cease-fire nearly broke down last year over Kanjorski, only to be rescued at the last moment by Hastert.

Republicans were on the verge of filing a complaint against Kanjorski in late July, but after a top aide to then-Minority Leader Richard Gephardt (D-Mo.) warned that Democrats would respond by filing a complaint against DeLay, thus reigniting the Congressional ethics wars of the late 1980s and early1990s. In the end, Hastert rejected the idea and nothing was filed.

Moran, for his part, borrowed more than $500,000 from companies and lobbyists with business before Congress, including getting $447,500 from credit card giant MBNA Corp. back in 1998. The loan came at just about the same time that Moran increased his support for legislation to rewrite the nation’s bankruptcy laws, a proposal that had strong backing from MBNA.

Moran released a statement earlier this month stating that the ethics committee had informed him that it would not begin a formal investigation into the loan.

Ethan Wallison contributed to this report.