OCC Chief Attended Fundraisers When Lobbying For Freddie
(Dugan - comptroller of the currency - how can a fox watch the henhouse? :) This is no different than the 80's scandals eh? Don't forget the keating 5)
By Damian Paletta
OF DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Following negative publicity in 2003, Freddie Mac (FRE) asked the law firm Covington & Burling to investigate more than 75 controversial political fundraisers thrown by the mortgage giant's top lobbyist, R. Mitchell Delk.
At the time, Covington officials privately notified Freddie Mac that one of their top partners, John C. Dugan, attended at least eight of the fundraisers. Within days of those dinners, Dugan donated a total of $3,250 to the Republican candidates Delk had honored.
"You get hundreds of these solicitations when you are in the private sector," Dugan said in an interview Monday defending his attendance. "You go to some of them if they are someone you want to give money to."
Last Tuesday, the Federal Election Commission alleged the fundraisers broke campaign finance laws and reached a record $3.8 million settlement with Freddie Mac. None of the attendees were sanctioned, but Delk and several others were given letters of admonishment for how the fundraisers were organized.
Dugan, now the Comptroller of the Currency, had been one of Freddie Mac's lead outside lobbyists when he attended the fundraisers between 2001 and 2003. He helped bring in $880,000 from Freddie Mac to the law firm from 1998 to 2004, according to the Center for Public Integrity, which monitors lobbying disclosures.
Dugan said he was not attending the dinners as a representative of Freddie Mac or Covington but as a "private citizen."
"I did, at the time, represent Freddie Mac on a number of issues, but my attendence" was as a private citizen, he said.
Dugan left the firm last August to oversee the federal agency that has jurisdiction over all the country's national banks.
His presence sheds new light on the fundraisers, which both led to Delk's resignation and more problems for the government-sponsored enterprise as it tried to emerge from a $5 billion accounting scandal in 2003.
The FEC records linking Dugan to the dinners present him as one of the few people with connections to Freddie Mac who participated in the fundraisers. But he said there were others.
"There were many, many such people," he said, though he said he could not recall who.
Dugan said he and Delk have been friends for years, having served together on the Senate Banking Committee in the late 1980s.
Delk's attorney, Kenneth Gross, has said that the fundraisers, which raised $1.7 million for the candidates, were private and were not meant to represent Freddie in any way.
"It is a common practice for the government relations people to hold fundraisers in their personal capacity," Dugan said.
The FEC said that Delk and others had referred to the fundraisers as "Political Risk Management."
In 2002, Delk told then-Freddie chief executive Leland Brendsel that "we proposed to Chairman Oxley a political model that was bold and unprecedented," according to the FEC. "We offered to use our fundraising model to marry his interests as Chairman with our interest in assisting committee members supportive of the continued strength of America's housing finance system..."
Delk also referred to the dinners as highlights of the government relations practice at Freddie Mac.
Dugan said he did not know how Delk had communicated with the board about these dinners and could not speculate if that would have led him to not attend the dinners.
"That's kind of a hypothetical," he said.
Despite Dugan's attendance at the fundraisers, Covington still conducted the internal probe and represented Freddie Mac when it reached the record $3.8 million settlement with the FEC.
"Yes, Freddie Mac was fully informed that a Covington partner had attended some of these fundraisers, as had obviously many other individuals around town," said Robert K. Kelner, a partner at Covington who represented Freddie in its FEC settlement.
Covington has not publicly released its internal review of the fundraisers, but Kelner said the firm was not asked to vet the dinners before questions arose in 2003.
"Our firm, including John Dugan while he was here, was not counsel to Freddie Mac in regard to the events hosted by Mr. Delk at the Galileo restaurant or in regard to any of Mr. Delk's fundraising activities," Kelner said.
Dugan was not involved in Covington's investigation, but he was involved in assessing the political and legislative risks these dinners might have on the GSE.
"It was very carefully considered about whether it raised any ethical or conflict issues," Dugan said. "It was decided that it had not."
Craig Holman, the campaign finance lobbyist at Public Citizen who filed the original complaint against Freddie to the FEC, disagreed.
"It clearly shows a conflict of interest," regarding Covington's role in the case, he said. "Any time at which you have an entity which is investigating where their own business practices are at stake, it is a very questionable study immediately," he said.
Federally chartered corporations such as Freddie Mac are prohibited from making contributions in connection with federal elections, and the FEC alleged that these fundraisers violated that law. Freddie did not admit wrongdoing in the case.
Fundraisers Were Held When GSE Legislation Was Pending
The main benefactor of the fundraisers was House Financial Services Committee Chairman Michael Oxley, R-Ohio. Fundraisers were also held for other members of the House committee.
One of the most high-profile legislative battles over the last five years for the financial services industry has been the push to create a new regulator for Fannie Mae (FNM) and Freddie Mac. Several bills have failed, as House and Senate lawmakers could not agree on what limits should be placed on both government-sponsored enterprises.
Oxley's committee has jurisdiction over the bills in the House.
Fannie and Freddie have each struggled to rebound from major accounting scandals in the last three years. Both GSEs have replaced their chief executive officers and other top brass.
Dugan's Eight Donations
Three of Dugan's donations were made to Oxley's political action commmittees. Delk held a fundraiser for Oxley's PAC on Jan. 17, 2003, and Dugan donated $1,000 to the campaign the next day, according to FEC records.
Another fundraiser was held for the PAC on Jan. 16, 2002. Dugan donated $250 six days later. A third fundraiser was held for the PAC on Jan. 21, 2003, and Dugan donated $500 on Jan. 23.
Other donations that coincided with Delk's fundraisers were $250 donated seven days after a dinner held for Rep. Mike Castle, R-Del., $250 donated 18 days after a dinner held for Rep. Tom Davis, R-Va., $250 donated 10 days after a dinner for Rep. Deborah Pryce's, R-Ohio, PAC, $250 donated 16 days after a fundraiser for Rep. Roy Blunt's, R-Mo., PAC, and $500 donated nine days after a dinner held for Sen. Bill Frist's, R-Tenn., PAC.
Dugan's term at the OCC expires in 2010. His agency does not have oversight over Fannie and Freddie, but it does regulate banks that compete with both GSEs on the secondary-mortgage market.
-By Damian Paletta, Dow Jones Newswires; 202-862-9241; Damian.Paletta@dowjones.com
(END) Dow Jones Newswires
April 24, 2006 12:57 ET (16:57 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.- - 12 57 PM EDT 04-24-06 |
