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Odd Subpoena Imperils Inquiry

An unusual arrangement concocted last week by the House Oversight and Government Reform Committee to share subpoenaed documents with the House ethics panel could create enforcement hurdles in its search for mortgage documents.

In a subpoena the Oversight Committee released late Friday night, the panel demanded Bank of America turn over loan information related to Countrywide Financial’s VIP loan program, specifically mortgages issued to current and former House lawmakers, as well as House aides and officers, and a broad swath of other federal employees.

But in a novel directive, the subpoena instructs Bank of America to split the distribution of those documents concerning current House lawmakers and their spouses, sending full documents to the House ethics committee but redacted versions — eliminating names, addresses and other identifiers — to the Oversight panel.

According to former House ethics aides and other individuals knowledgeable with the Committee on Standards of Official Conduct, the Oversight Committee’s decision to divide its prospective document haul in such a way — essentially subpoenaing documents on behalf of another committee — is an exceptional occurrence, one that could raise legal questions including challenges to the subpoena.

“They have jurisdiction to find facts and determine what might be done in connection with the mortgage banking industry, and they obviously don’t have jurisdiction over obligations of Members of Congress,— Rob Walker, an attorney with Wiley Rein who was previously a top aide to the Senate and the House ethics committees, said of the Oversight panel.

“In terms of enforcing the subpoena and complying with the subpoena, it could raise some very significant enforcement issues,— Walker added. “Subpoena enforcement requires acting on specifics and so, if it does become an issue, there may have to be some further compromise in terms of what information the ethics committee is able to share to accomplish enforcement of the subpoena.—

But attorney Stan Brand, a former House counsel, offered a starker view of the Oversight panel’s unique subpoena.

“In a word, they’re poaching on the ethics committee’s jurisdiction,— Brand said. “And it’s not just a legal issue. It’s a sensitive internal one because it’s the ethics committee that’s designed to look into the conduct of Members, so if every committee started doing this they could obliterate the jurisdiction of the ethics committee.—

Brand noted that the Oversight Committee’s decision to issue a subpoena including another panel’s jurisdiction could create an opening for Bank of America to object to turning over the documents.

“Bank of America has the same rights any other witnesses has,— Brand said. “They can object and say it’s not within the jurisdiction of the committee.—

The subpoena issued to Bank of America is included in a broader investigation of mortgage lenders announced by the Oversight Committee last week amid rising tensions between the panel’s Democratic and Republican lawmakers over whether to investigate the program.

Ranking member Darrell Issa (R-Calif.) had pursued a Countrywide investigation for months without the panel’s formal blessing, as Chairman Edolphus Towns (D-N.Y.) had resisted an inquiry, arguing that the dragnet could expose sensitive personal information of innocent people and deferring to the Justice Department as best-equipped to review the program.

Democratic committee spokeswoman Jenny Rosenberg did not return calls Monday for comment, but Republican committee spokesman Kurt Bardella said the decision to distribute mortgage documents to the ethics panel resulted from negotiations between the panel’s leadership that did not directly include the House ethics committee.

“From our vantage point, we were trying to get as much information as we possibly could. The only caveat the majority laid out was making sure Members of Congress went to ethics, and the subpoena not go to Senators,— Bardella said.

But Bardella emphasized that “who got what— is not the focus of the investigation, but rather it is the recent economic crisis tied to subprime loans and other mortgage products.

He declined to say whether the Oversight panel would seek an ethics investigation based on redacted documentation.

“We’re going to see what we have before we make any judgments or any calls,— Bardella said. “I suspect if there is wrongdoing, the pressure from the American people will be pretty significant. There will be a requirement for action just based on that.—

But the Oversight panel’s decision to ship information to the ethics panel — loan documents that could number into the thousands of pages — won’t necessarily trigger an investigation, according to former House ethics aides.

“If ethics received information from the other committee’s subpoenas, they would have to assess the information provided and decide where this fits in their overall investigative priorities,— said Ted Van Der Meid, a former top House ethics aide now at McKenna, Long & Aldridge.

Walker said he expects the committee would examine any documents obtained from the subpoena to be examined under internal rules that allow the panel to consider information from any source in determining whether to begin an investigation, not just from a formal complaint.

“As a practical matter, if the subpoena results in information coming to the committee that indicates there might have been a violation or violations … it would force the committee to act,— Walker said.

Among the panel’s options, in addition to an investigation, however, could be a referral to the Justice Department.

The House ethics committee does not comment on investigations. It is not known whether the ethics panel has examined Member mortgages since the Countrywide VIP loan program was disclosed in 2008 or whether it plans to do so in the future.

The Senate Ethics Committee spent more than a year reviewing whether Sen. Chris Dodd (D-Conn.) or Sen. Kent Conrad (D-N.D.) violated the chamber’s rules for loans each received through the Countrywide VIP program.

The Senate panel ultimately cleared both lawmakers but chastised the pair for not being more vigilant about shielding themselves from the appearance of special treatment.

Both Senators had denied wrongdoing and said they never asked for favorable terms on their loans.

Brett Kappel, an ethics lawyer at Arent Fox, said he anticipates that if the ethics panel reviews the mortgage documents, it will mimic the Senate investigation, focusing on fair market values, whether other borrowers of similar economic means received similar interest rates and whether the loans violated gift rules.

“One thing that will augur in the Members’ favor is if these same sort of Friends of Angelo discounts were given to non-Members, celebrities, athletes,— Kappel said, referring to the loan designation designed by Countrywide CEO Angelo Mozilo to curry favor with specific customers. “It’s not so much an attempt to buy influence as it is a marketing device.—

Van Der Meid echoed that anticipation: “You only really can look at something like that in the overall context of whether a Member was getting something that he or she knew was a special gift.—

But he noted that any investigation initiated by the ethics panel could extend to a Member’s annual financial disclosures, as well as whether a Member who received a VIP loan took actions favorable to Countrywide.

It is not known how many House lawmakers may have received mortgages via Countrywide’s special division. According to personal financial disclosure forms filed by House lawmakers in mid-2008, the last such reports filed before Congressional involvement in the VIP loan program was first reported by, at least a dozen Members held Countrywide-issued mortgages.

Financial disclosure forms filed by House lawmakers do not reveal every mortgage, however, because Members are not required to list property that does not generate rental or other income.

But among those lawmakers whose mortgages could come under review is Towns himself.

The Wall Street Journal reported earlier this year that Towns may have received loans via that Countrywide program, citing mortgage documents that showed an address and branch number corresponding to the VIP program.

At that time, a Towns aide said Towns was not aware of whether his loans, including a mortgage of a Lutz, Fla., home, were processed through the VIP program and said he received no special treatment.

The subpoena requires Bank of America to submit all documents by Nov. 6.

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