Senate ethics records

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3->A!J,>"-A BOXEll, C.AI IFORNIA, CH.AIRMA..,
IOh,NY ISA'<SO'I. GEORGIA V•CE CHAIRMAN
MAA~ L I'RVOI!, AAi<A"'SAS
SrlERROD l!'lO'N" OHIO
PAT ROOERTS. ><A'SAS
.i~MES E. RISCh IOA><C
.•Oil'< C SASSAMA'I Ct;IEF COUNSEL ANO STAFf 0 RECTOR
A'-"<fTTE GI~LIS DEPUTY STAFf DIRECTOII
The Honorable Christopher J. Dodd
United States Senate
Washington. D.C. 20510
Dear Senator Dodd:
mntteb ~tatts ~enate
SELECT COMMITTEE ON ETHICS
HART SENATE OFFICE BUILDING, ROOM 220
SECOND AND CONSTITUTION AVENUE, NE
WASHINGTON, DC 20510-6425
August 7. 2009
TELEPH<l"E: {2021 424-2981
FACSIMU.E: (202) 22'-7•16
TOO. (2021 22s-J7S2
The Select Committee on Ethics infonns you that after an extensive. year-long
investigation it is dismissing a June 13. 2008 complaint from Citizens for Responsibility and
Ethics in Washington c ·CR.EW"), which requested that the Committee investigate whether
mortgages you obtained from Countrywide Financial ("Countrywide .. ) violated the Senate Gifts
Rule. ln its complaint, CREW cited a June 12, 2008 article published in Por((olio.com.
Wl1ile the Committee finds no SLtbstantial credible evidence as required by Committee
rules that your Cow1trywide mortgages violated Senate ethics rules, the Committee does believe
that you should have exercised more vigilance in your dealings with Coumryv.ide in order to
avoid the appearance that you were receiving preferential treatment based on your status as a
Senator.
To reach the conclusion that yo u did nm violale ethics rules. the Committee carefully
examined whether your conduct violated the Senate Gifts Rule, which states: ·'No Member.
officer. or employee of the Senate shall knowingly accept a gift except as provided in the rule.''
The rule provides an exception for opportunities and benefits " in the form of loans hom banks
and other financ ial institutions on tenns generally available to the public:· thereby allowing
Senators to accept oppmiuni6es offered only to a group that is not defined on the basis of one ·s
status as a Senate employee. The Committee also considered whether your conduct violated
Senate Rule 37, which prohibits Senators from using their offici al position for personal gain.
Scope of Committee Inguin' - 18,000 Pages of Documents
The Committee treated this matter very seriously and took every possible step during the
course of its year-long inquiry to obtain information from multiple sources. including issuing
subpoenas for detajled comemporaneous documents and testimony. while needing to be attentive
to the concerns raised by parallel investigations.
To that end. the Committee caJefully reviewed more than 18.000 pages of documents
from Countrywide and its former employees, which included information about its Y.l.P. loan
unit. the "F1iends of Angelo .. program. and the details of your mortgages and dealings with the
company from 1999 to the time of the complaint. The Committee also conducted length y depositions \\ith numerous former Count f)"\\ ide! emplo) ees. including the account executi' e "ho
originated your 2003 mortgages that are the subJect of CRE\V' s complaint and the undcrwri tcr
"ho re,ie\Yed vour loan tiles. Finallv. the Comminee sought. recei' ed. and examined loan tilec; . . ~
and detailed C:\planations from ~ou about) our dealings wilh Countr) ''ide.
Countrywide's V.J.P. Loan Cnit and the Friend of Angelo Program
While it \\as not the primar) focus ofthe Committee's imestigation to determine the
breadth and scope ofCountrywide·s V.l.P. program. the Committee newrtheless carefull~
undertook to ascertain ho" the V.I.P. program \\Orked in order to determine ''hether your
conduct violated 'enate rules. Through its inquiry. the Committee learned about the purpose and
policies of the V.l.P. and .. Friends of Angelo·· programs. It appears the \'.I.P. loan unit was
initiall y established for the purposes of ori ginating. processing, and funding home loans as a
courtesy to senior-level employees and V.I.P. customers. but it increasingly grew in scope and
size. A large subset of V. f.P. loans referred by Angdo Mozilo. former Countrywide C.E.O ..
''ere known as the ·"friends of Angelo" or F.O.A. During the mortgage boom that occurred
from late 2002 through ~004. the V .I.P. loan unit handled thousands ofloan~ worth billions of
dollars for a 'er) broad spectrum of indi' iduals. large numbers of'' hom hnd newr mel. Let alon~
befriended. :Mr. ~ lo:tilo
0\ erall, it appears that Y.l.P.s were often offered qu1cker. more efticaemloan processing
and some discounts. llo\\·e, er. it also appears that all \'J.P. loans. including F.O.A loans. \\ere
required to meet the same underwriting standards and conditions for re. ale on the secondarJ
mark.et as non-\' .l.P. loans. Furthermore. there ts C\ idence on the record that the discounts
offered to\' .J .P .s and 1- .O.A.s were not the best deals that were a' ai !able at Countr)'v>·idc or m
the marketplace at large. In sum, participation in the \'.l.P. or F.O .. \ . programs did not
necessarily mean that borrowers received the best 1inancial deal available either from
Countrywide or other lenders.
Senator Dodd's Response to the Committee
The Committee asked yo u for specific. detailed. and thorough responses. with
documentary suppon \\here available. to numerous questions regarding your mortgages anti
participation inn \'.J.P. program. You informed the Committee that you c\entually became
a" are that you had been placed in a V.I.P. program. You told the Comminee that you inquired
'' ith Countrywide as to ''hat the V .l.P program was and were told that it offered heightened
attention to sen ice qualit}. You also said that )OU did not become a\,are of the "Friends of
·\ngelo·· program until June 2008, have ne\ er met \ngelo Ylozilo. and ne'er communicated \\ ith
him abom an) of) our loans.
You pro' ided the Committee '"ith the loan tiles for lbe mortgage and a report. dated
Jul) 22. 2008. prepared b~ CrossCheck Compliance LLC. entitled .. Re\ tC\\ of the Terms and
Conditions of Certain Res1dential Mortgage Loans." The report conclude ~ that. .. based on the
market data we anal~ Led. \\C lind that the terms and conditions that the lDoddsj received for the
two loans were consistem with those that an~ borro\\cr. who possessed similar credit. income.
asset. and equity positions. would have recei,ed during the highly acti\ c relinance market that
2 existed during the first halfof2003." You told the Committee that you sought three competing
offers for your 2003 refinances and received simi Jar rates to the ones offered by Country'v'.'ide.
Fu1ihermore, you stated 1hat it was your practice to seek competing otTers for all the loans you
sought.
No Ct·ediblc Evidence of an Ethics Rul e Violation
After examining the extensive record before it, the Committee found no credible
evidence that you kno\vingly accepted a gift. including a loan not available to the public.
First, your mortgages were made in a commercially-reasonable manner based on terms
and conditions available to borrowers with similar loan profi les. While your Countrywide loans
were handled through the V.I.P. loan unit and designated as F.O.A. loans, the service you
received was available to thousands of other non-Senate customers at Countryvvide and the loans
you received appear to have been available industry-wide to bonowers v,·ith comparable Joan
profiles. It appears your loans met all applicable undervvriting standards and that you and your
wife were excellent loan candidates and established Countrywide customers in good standing.
You sought competing mortgage offers from other lenders that oiiered tenns substantially
similar to the ones Countrywide provided. There is no evidence that the interest rates for your
Countrywide mortgages were below prevailing market rates.
Second. there is no credible evidence that you sought or knowing!) received any financial
benefits not available to other borrowers with similar loan profiles. The Committee has found no
evidence that you or your wife ever asked for special treatment or that anyone ever
communicated to you or your family that you were receiving specific discounts or other special
treatment not available to other borrowers because of your status as a Senator.
Third, there is no credjble evidence that you used your official position for personal gain.
The Committee found no evidence that you fully understood the scope of the V .I.P. program.
knew that you were in the ·'Friends of Angelo·· program, or attempted to use your status as a
Senator to receive loan terms not available to the public.
Guidance for You and the Senate Community at Large
Although the Committee dismisses this maner after tinding no Yiolations of Senate rules.
it believes this case otTers important guidance for you. the Senate community, and the
Committee in order to avoid the appearance of preferential treatment in the future.
The Committee has found no evidence that you sought entrance into the V.I.P. loan unit.
However, once you became aware that your loans were in fact being handled through a program
with the name "V.I.P .... that should have raised red tlags for you and compelled you to find out
exactly how you became a member of the V .l.P. unit. whether you may ha\'e been offered
treatment based on your official position, and very specificall y if you v-.-ere receiving preferential
treatment not available to other bon·owers with similar loan profiles .
..,
.) The Comminee also recognizes thal it has nm preYiousl~ offered specitic guidance to
Senators, ofticers. and cmplo:ees on the matters [hey should consider \\hen negotiating
mortgages and other financial transactions. The Comminee should proacm·ely pro\ ide more
guidance to the Senate community about issues surrmmding mortgage negotiations and
encourages Senators. officers. and employees to seek prior guidance concerning participation in
any programs like the one addressed here.
r
~a-)~ Barbara Boxer
Chairman
Mark Pryor. Member
Sherrod Brov.,. \I ember
incercl~.

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