Virginia Rep. James P. Moran Jr. (D) borrowed $50,000 from America Online founder and former chief executive James V. Kimsey in January of last year as he struggled financially, using the money to trade in stocks before repaying it a few months later.
The six-term U.S. House member -- who represents Arlington County, Alexandria and parts of Fairfax County -- did well enough at first with his gamble to repay the loan, with interest at an annual rate of 15 percent, for a total of about $52,100. But Moran continued buying and selling stock options last year, in the end losing about $15,000, he said.
Moran disclosed the loan and his stock trading yesterday in financial statements required by members of Congress.
"There may be questions about my judgment in accepting this loan and what I did with the money," Moran said in a statement. "That is understandable and warranted, but there was no compromise of the public trust involved in this transaction nor in any prior loans that I have reported."
The Kimsey loan is not the first of its kind for Moran, who in 2000 acknowledged accepting a $25,000 loan the previous year from a lobbyist for a pharmaceutical company. Five days after that loan, Moran signed on to co-sponsor a bill that helped the company extend lucrative patents. He repaid the loan and has denied wrongdoing.
Nor is it his first brush with high-risk stock trading and losses. Moran, a former stockbroker who once managed Kimsey's portfolio, lost $120,000 of his own money on stock options and futures contracts in 1995 and 1996.
Moran said Kimsey, who retired from AOL in 1995 to become chairman emeritus, initially offered money to the congressman as a gift in January 2001. By that time, Moran was emerging from a contentious divorce and working to settle the couple's debts.
"He knew the financial situation I was in and wanted to help me out," Moran said of Kimsey in an interview. "I said, 'I can't accept anything from you, and I've got to deal with this myself.' "
Days later, Moran said, a check for $50,000 from Kimsey arrived. Moran said he "was going to return it" but decided to accept the money, telling Kimsey it had to be in the form of a loan at a higher-than-normal interest rate.
"We only would accept an interest rate that would be so high that it would be above reproach," said Leslie Kerman, Moran's lawyer. House ethics rules say a loan may be considered an improper gift if made on terms more favorable than an ordinary person could obtain.
Kimsey was on a yacht yesterday and not available for comment, his office said. His chief of staff, Peter Kirsch, confirmed Moran's description of the loan and said Kimsey expected nothing in return.
"This was a friend helping out a friend," Kirsch said. "Jim helps friends out all the time."
Moran repaid the loan in four installments between March 9, 2001, and May 17, 2001, with stock market winnings, Kerman said. He said Moran decided to repay the loan because "it was causing too much anxiety."
After Moran repaid the loan, his net stock market profits turned into losses. The losers included investments in which Moran essentially bet on the direction of the Nasdaq 100 index, a highly volatile group of technology stocks.
"I said, 'Look, this is just stupid,' " Moran said. "I realized at some point it's time to realize that I'm not as smart as I think I am."
Moran informed the House ethics committee about the Kimsey loan on May 27, 2001, Kerman said. Lawyers for the ethics committee told Moran on Wednesday that the case had been closed, Kerman said. Officials at the committee said they do not publicly comment in such matters.
Yesterday's disclosure again prompted waves of criticism from Moran's political opponents, who have tried unsuccessfully for years to use Moran's personal financial history as a wedge to unseat the popular incumbent.
"He didn't do it again?" said Republican Demaris Miller, who lost to Moran in 1998 and 2000. "His ethics are a mess. The poor man is a mess. The reason he was in financial trouble is because of all the gambling [in the market] he did in the first place. I thought he had learned his lesson. I guess not."
Joe Underwood, past chairman of the Fairfax County Republican Party, called on Moran to resign. "Mr. Moran just doesn't seem to be able to keep his fingers out of other people's pockets," Underwood said. "If Jim Moran had one shred of honor, he'd resign. But we know him a lot better than that."
Several lawyers who specialize in election and ethics law said that the loan appeared to be legal and to fall within House ethics rules. The guidelines recommend, but do not require, that members get clearance for a personal loan, which Moran did not do.
Jan Witold Baran, who represented former House speaker Newt Gingrich against charges of ethics violations, said the Kimsey-Moran loan seems to satisfy House rules.
"Taken on its face, he seems to have disclosed what had to be disclosed," Baran said. "You got a loan, he repaid it in a short time and paid a pretty steep interest rate."
But Baran, recalling the firestorm that accompanied allegations about Gingrich and a book advance, said politicians must be concerned about more than just meeting specific ethics standards.
"You are left with an appearance issue," he said. "The voters in his congressional district will judge him on that when it comes time to vote."
Celia Wexler, senior policy analyst of Common Cause, said the loan was a reminder that wealthy and influential people stand ready to bail out members of Congress.
"It still raises questions because you don't know if there is any agenda there, or if there will be in the future," Wexler said. "These kinds of financial arrangements are always troubling. But on the face of it, it doesn't seem as if it sets off larger alarm bells."
Moran has struggled for years with his personal finances. Losses from the stock trading in the mid-1990s created pressure that contributed to his divorce and helped push the congressman toward bankruptcy. His wife, Mary Moran, accused him in divorce papers of "wasting the family assets on his stock market gambling" on scores of trades over four years. The congressman said family finances were further mired by excessive credit card spending by Mary Moran.
In 1999, Moran accepted a $25,000 loan, at 8 percent interest, from Terry Lierman, a friend who was also a lobbyist for Schering-Plough Corp.
Moran repaid the loan at a market rate of 12.8 percent after it was made public. He said yesterday that a House ethics committee investigation into that loan had also been closed.
Kimsey, whose worth was estimated at more than $2 billion in 1999, is a fixture in Washington area politics. He has given more than $500,000 to the national political parties and federal candidates since 1997 and was an early supporter of Gov. Mark R. Warner (D), a fellow technology millionaire. Kimsey contributed the federal maximum to Moran's campaign in every election since 1994.
Since retiring in 1995, Kimsey has headed a private education and arts-oriented foundation in his name that reported $53 million in assets in 2000. He is the lead financial investor in a D.C. group seeking to bring a Major League Baseball team to Washington. |
