Senate ethics records

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The Honorable Kent Conrad
l nitcd Stales Senate
Washington. D.C. 20510
Dear Senator Conrad:
~niteb ~tates ~enate
SELECT COM MITTEE ON ETHICS
HART SENATE OFFICE BUILDING. ROOM 220
SECOND AND CONST'TUTlON AVENUE. NE
WASHINGTON DC 2051o-&!25
August 7. 2009
rhe Select Committee on I:thics informs ~ou that after an extcnsi,e. ~car-long
TE~E"'"'C'·E 202 '21.!-2931
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~:; m 228-3752
u1' cstigation it is dismissing a June 13. 2008 complaint from CitiLens for Responsibilit) and
Ethics in Washington ("CRE\\.'"). which requested that the Committee in,estigate whether
mortgages you obtained from Countrywide Financial ("Countrywide'') violated the Senate Gifts
Rule. In its complaint. CREW cited a June 12. 2008 artic le published in Porifolio.com.
\\'hile the Committee finds no substantial credible e,·idcnce as required b~ Committee
ruk~ that; our Countr) \\ide mortgages' iolatcd Senate ethics rules.lhe Commiuce does belie\'e
that you should ha\e e-.:ercised more vigilance in your dealings with Countryv.-ide in order to
a\ oid the appearancl! that yo u were receiving preferenti al treatment based on your Status as a
SenatOr.
fo reach Lhe conclusion that you did nOt "iolate ethics rules. Lhe Committee careful!~
examined v.·hcther ~our conduct ,·iolatcd the · enate Gifts Rule. which states: ·-~o Member.
otTtcer. or employee of the Senate shall kno'' ingl~ accept a gift except as provided in the rule ...
The rule provides an exception for opportunities and benefits " in the fom1 of loans from banks
and other £lnancial institutions on terms generall) aYailable to the public ... thercb) allo,., ing
Senators to accept opportunities ofTered onl) 10 a group 1hat is not defined on the basis of one· s
statu~ as a enate employee. rhc Committee also considered whether your conduct \iolated
Senate Rule 37. "'hich prohibits Senators from using their oi1icial posiuon fur personal gain
Scope of Committee Inquiry - 18,000 Pa ges of Documents
The Committee treated this matter \'er~ serious!~ and tool e\e~ possible step during the
course of its year-long inqui~ to obtain information from multiple sources. including issuing
subpoenas for detailed contemporaneous documents and testimon~. wh1le needing to be auentiYe
to the concerns raised b) parallel investigations.
To that end, the Committee carefully revic,,ed more than 18.000 pages of documents
from Countr)\\ide and its former emplo~ees. \\htch included information about its VJ.P. loan
uni1. the "Friends of. \ngelo" program. and the details of~ our mongagcs and dealings with the company from 2002 to the time of the complaint. The Committee also conducted lengthy
depositions with numerous former Country'v'ide employees. including both account executives
who originated your mongages that are the subject of CREw· s complaint and the undenHiter
who rc,·ie,,ed your loan tiles. hnall). the Comminee sought. rccci,ed. and examined loan files
and detailed explanations from ) ou about your dealings w·ith Countrywide.
Countrywide's V.l.P. L oan Unit and the Friends of Angelo Program
\\11ile it ''as not the primary focus of the Committee·s in,·estigation to detemline the
breadth and scope of Countryv. ide· s V J .P. program. the Comminee nevenheless carefull)
undenook to ascertain hmY the V.T.P. program \\Orked in order to determine \\hether ~our
conduct violated Senate rules. Through its inqui0. the Comminee learned about the purpose and
policies of the V.l.P. and "Friends of Angelo·· programs. It appears the V.I.P. loan unit was
initially established for the purposes of originating. processing, and funding home loans as a
courtesy to scnior-le,·el employees and \".J.P. customers. but it increasingly gre\\ in scope and
size. A large subset of\ .. l.P. loans referred b~ Angelo ~1ozilo . former Coun~\\ide C.E.O ..
were kno,\n as the ··Friends of Angelo .. or F.O.A During the mortgage boom that occurred
from late 2002 through 100-L the V.LP. loan unit handled thousands of loans worth billions of
dollars for a very broad spectrum of individuals. large numbers of whom had never met, let alone
befriended, Mr. Mozilo.
OveralL it appears that \'.I.P.s were often offered quicker. more enicient loan processing
and some discoums. Ho"e,·er. it also appears that all \".l.P. loans, including F.O.A. loans. \\ere
required to meet the same undenvriting standards and conditions for resale on the secondary
market as non-V.J.P. loans. Furthermore. there is evidence on the record that the discoun ts
offered to V.I.P.s and F.O.A.s were not the best deals that were a\ailable at Countryvvide or in
the marketplace at large In sum. participation in the \'.I P. or F.O A. programs did not
necessarily mean that borro\\ers rccei' ed the best tlnancial deal a\ ailable either from
Count0wide or other lenders.
Senator Conrad 's Response to the Committee
The Com mince asked~ ou for spccitlc. detailed. and thorough responses." ith
documentary suppon where a' ailable. to numerous questions regarding ~our mortgages and
participation in a \'.LP. program. You informed the Committee that )OU briefly spoke with
former Country·wide C.E.O. Angelo Mozilo about obtaining a mongage for~ our beach property
in 2002 duri ng a phone conversation you were having with your long-time, mutual frjend. James
.\.··Jim·· Johnson. the fom1er C.E.O. of Fannie ~lae. You also informed the Committee that vou
became aware sometime in ~00-+ that )OU bad been placed in a \'.l.P. program. You told the
Committee that you did not recall ever being informed about what the program \\as. and you
assumed it was mere!~ an employee and customer relations effort. Further. you told the
Committee that you remained a Countrywide customer because ofthe company·s
professionalism, their service and competitive rates. and the convenience of refinancing with
,·our current lender. You also said that vou did not become aware oflhe ··Friends of Aneelo'· . . ....
program unti I J w1e 2008. As a part of~ our response. you prm ided the C omminec \\ ilh a copy
of an estimate from a competing lender m connection\\ ith the 2002 purchase.
2 No Credible EYideoce of an Ethics Rule Violation
After examining the cxtensi\e record before it. the Comminee found no credible
e\·idence that )OU knowing]) accepted a gift. including a loan not a\·ailable ro the public.
First. your mortgages were made in a commercially-reasonable manner based on tcm1s
and conditions a\'ailable to borrowers"' ith similar loan profiles. While your Countr~"'' dc loans
were handled through the \'.T.P. loan unit and dc~ignated as F.O.,\. loans. the sef\ ice )OU
recei,·ed was a,·ailable to Lhousands of other non-Senate customers at CountrY'' ide and the loans
you received appear to haYe been available indu~t~ _,,ide to borrowers '' ith comparable loan
profiles. There is no C\'idence that the interest rates for any of your Countrywide mortgages
were below prevailing market rates.
It appears your loans met all applicable underwriting standards and that you and your
'' ife were excellent loan candidates and establi~hed C oumryv.ide customers in good standing.
You sought a competing mongage offer from anmher lender on the ~002 purchase that otlcred
tem1s substantially similar to the ones Count:r: ''ide pro,·ided. '\\'ith regard to the rciinancing of
your e ight-unit apartment building. the substantial credible evidence is that it would not be
unprecedented for Countrywide to approve mortgages on multi-unit properties if the loan could
be resold on the second~· market. You \\ere ad' ised that our loan met that standard before
you rccei\'ed the mortgage.
Second, there is no credible e' idence that you sought or knowing!) recei' ed any financial
benefits not available to other bonowers with similar loan profiles. The Committee has found no
e\ idence that ) ou e\ er asked for special treatment or that anyone e\ er communicated to ) ou. or
anyone acting on your behalf. that you were receiving specific discounts or other special
treatment not a\'ailable to other borro" crs because of' our status as a Senator.
Third. there is no credible evidence that you used your oflicial position for personal gain.
The Committee found no evidence that you fu ll) understood the scope of the Y.l.P. program.
knew that you were in the -- Friends of Angelo" program. or att~:mpted to use your status as a
Senator to receiYe loan terms not aYailable to the public.
Guidance for You and the cnate Commuoit\ At Large
Although the Commit1ce dismisses this matter after finding no ,·iolations or Senate rules.
it belie\'CS this case offers important guidance for) ou. the Senate community. and the
Committee in order to avoid the appearance of preferential treatment in the future.
The C ornmittee has found no e\ idence that you sought entrance into the \' .I.P. loan unit.
but believes you should ha"e exercised greater care in your dealings with Countrywide. Your
direct conversation" ith Countrywide C.E.O. Angelo Mozilo. a subsequent reported comment to
a loan employee that you were going to tell i\1r. \tlozilo what great sen·icc Countr) ""ide
pro' idecl and your e' entual a\\areness that your loans were in fact being handled through a
program \\ith the name --YJ P.:· should ha\·e all raised red flags for you. ln order to a\oid
3 the appearance Of impropriet). }OU should have inquired \·er) SpeciilcaiJ) abOUt how you
became a member ofthe V.J.P. unit, whether you may have been offered treatment based on your
official position, and if you were receiving preferential treatment not aYailable to other borrowers
with similar loan profiles.
The Committee also recognizes that it has nor pre\ iousl~ offered specific guidance to
enators. officers. and employees on the matters the) should consider ''hen negotiating
mortgages and other tinancial transactions. The Committee should proacti\el;. provide more
guidance to the Senate community about issues surrounding mortgage negotiations and
encourages Senators. officers. and employees to seck prior guidance concerning participation in
any programs like the one addressed here.
~1-~~ Barbara Boxer
Chairman
Mark Pryor. Member
Sherrod Brown. ~lembcr
Sincere tv.

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