Congressional Accountability Project
1611 Connecticut Ave. NW Suite #3A
Washington, DC 20009
Phone (202) 296-2787 * Fax (202) 833-2406
cap@essential.org * www.essential.org/orgs/CAP/CAP.html


December 6, 2000

The Honorable Lamar Smith, Chairman
The Honorable Howard Berman, Ranking Member
House Committee on Standards of Official Conduct
U. S. House of Representatives
HT-2, The Capitol
Washington, DC 20515

RE: Request for Investigation of Rep. James Moran
Dear Chairman Smith and Ranking Member Berman:

This letter constitutes a formal request to the House Committee on Standards of Official Conduct ("Ethics Committee") to investigate whether Representative James P. Moran (D-VA) violated federal law or House Rules by accepting and/or soliciting a $25,000 unsecured loan, with generous terms, from a registered lobbyist, Terry Lierman.

We provide this information to prompt the Ethics Committee to appoint an investigative subcommittee and an outside counsel to probe this matter. Ethics Committee Rule 19(a) states that "the Committee may consider any information in its possession indicating that a Member...may have committed a violation of the Code of Official Conduct or any law, rule, regulation, or other standard of conduct applicable to the conduct of such Member...in the performance of his or her duties or the discharge of his or her responsibilities."
 

A: Moran Accepted a $25,000 Low-Cost, Unsecured Loan from a Registered Lobbyist Who Received Legislative Assistance From Moran
On October 31, 2000, The Washington Post reported that Rep. James Moran had received a $25,000 unsecured, low-cost, open-ended loan ("Lierman loan") from Terry Lierman, who, at that time was a registered lobbyist and President of Capitol Associates Inc., a lobbying firm.
The stakes were high. Schering-Plough Corp. had assembled a lobbying team to persuade Congress to help preserve its monopoly on the popular allergy drug Claritin. Furious watchdog groups argued that extending the pharmaceutical giant's patent would cost consumers billions of dollars by delaying access to cheaper generic drugs.
The drug company found an ally in Rep. James P. Moran Jr. (D-Va.).
On June 30, 1999, Moran signed up to co-sponsor a bill to help Schering-Plough. On July 23, 1999, Moran sent a letter to other New Democrats, seeking their support. About the same time that summer, Moran received some much-needed financial help: an unsecured $ 25,000 loan from Terry Lierman, a lobbyist for Schering-Plough.(1)


According to the Post, the terms of the Lierman loan were generous to Moran, apparently far better than what was available in the commercial loan market through an arm's length transaction.

Yesterday, Lierman faxed to The Washington Post a copy of a one-paragraph promissory note dated June 25, 1999, that said Moran borrowed $ 25,000, with the option to borrow more at the same 8 percent annual interest rate. The promissory note was never publicly recorded, Lierman said.
Bankers, speaking without knowledge of the people involved, described the loan as unusual because it lacks a maturity date and has no provision for repayment of the principal other than to say that Lierman may call in the loan at any time.
"It would be very unlikely that you get those terms at a bank," said Keith Leggett, a senior economist at the American Bankers Association.
It also might have been difficult for Moran to go to a bank, something he said he didn't even consider. The promissory note is dated five days before Moran signed on to the Claritin bill and one day after Moran's wife filed for divorce.
* * * * *
The terms outlined in the promissory note require that Moran pay 8 percent in interest annually. The payments must be made no less than semiannually.
In June 1999, when Lierman lent Moran the money, the minimum rate for an unsecured personal loan in the Washington area was 12.5 percent, according to Bank Rate Inc., a company that tracks rates.
"With an unsecured loan and no collateral, [banks] really are going to look at your credit rating" to set the rate, said the company's John Schaffer. One possible reason that Lierman might charge Moran a lower rate is that the loan may be called in at any time, said Leggett, the bankers association economist.(2)
B: Request for Investigation of Whether Moran Violated Federal Law Prohibiting the Solicitation or Receipt of Illegal Gratuities


The Washington Post reported that "The promissory note [for the Lierman loan] is dated five days before Moran signed on to the Claritin bill."(3) The closeness in time between the Lierman loan and Moran's official acts in support of Lierman's client Schering-Plough(4) raises questions about whether Moran may have violated criminal prohibitions against the solicitation or receipt of illegal gratuities. The Ethics Committee should determine whether Moran violated the illegal gratuities statute, which prohibits government employees from directly or indirectly seeking or receiving personally anything of value other than "as provided by law...for or because of any official act performed or to be performed."(5)

As a part of this investigation, the Ethics Committee should determine whether Moran performed legislative favors for any of Lierman's other clients near the time of the Lierman loan. The Washington Post reported extensively on Moran's legislative assistance to Lierman's lobbying client Schering-Plough. In addition, during 1999, many of Lierman's other lobbying clients had legislative business before the committees on which Moran sits. The Ethics Committee should investigate if, how, and when Moran aided Lierman's other lobbying clients too. In addition, the Ethics Committee should evaluate whether it is true, as Moran claims, that "Terry [Lierman] really never lobbied me on anything."(6) Such an investigation would help illuminate the context of the Lierman loan, and whether the Lierman loan was an illegal gratuity.

Lierman explained to the Post that "the essence of what we do" at his lobbying firm, is to "lobby to increase funding for various health-related programs."(7) Such lobbying overlaps well with Moran's committee assignments. When Moran received the Lierman loan, he was a Member of the House Committee on Appropriations and the Committee on the Budget. According to Lierman's lobbying reports, during 1999, Lierman lobbied on behalf of 31 clients with matters pending before those committees, including:

Academic Health Center Coalition
Albert Einstein Medical Center
American Association for Cancer Research
Bermuda Biological Station for Research
The Bushnell
Cell Therapeutics, Inc.
College on Problems of Drug Dependence, Inc.
Concert Productions Inc.
Cystic Fibrosis Foundation
FDA-NIH Council
Foundation for Fighting Blindness
Fred Hutchinson Cancer Research Center
Health Physics Society
Joint Council of Asthma, Allergy and Immunology
Kennedy Krieger Institute
Lustgarten Foundation for Pancreatic Cancer Research
Lymphoma Research Foundation of America, Inc.
NCCR
National Nutritional Foods Association
National Association of Community Health Centers
New York University Medical Center
Northwest Regional Education Laboratory
Northwestern Memorial Hospital
Parkinson's Action Network
Pennsylvania Convention Center Authority
Pennsylvania Higher Education Assistance Agency
Research Society on Alcoholism
The Rotary Foundation of Rotary International
Sea Solar Power, Inc.
Spina Bifida Association of America Foundation
Wake Forest University Baptist Medical Center(8)

Rep. Moran is Ranking Minority Member of the House Appropriations Committee's Subcommittee on the District of Columbia. In 1999, according to Lierman's lobbying reports, Lierman lobbied on behalf of 19 clients with issues related to or incorporated into legislation making appropriations for the District of Columbia, including:

Academic Health Center Coalition
Albert Einstein Medical Center
Cell Therapeutics, Inc.
College on Problems of Drug Dependence, Inc.
Concert Productions Inc.
Cystic Fibrosis Foundation
FDA-NIH Council
Foundation for Fighting Blindness
Fred Hutchinson Cancer Research Center
Joint Council of Asthma, Allergy and Immunology
Lustgarten Foundation for Pancreatic Cancer Research
National Association of Community Health Centers
Northwest Regional Educational Laboratory
National Nutritional Foods Association
Parkinson's Action Network
Pennsylvania Higher Education Assistance Agency
Research Society on Alcoholism
The Rotary Foundation of Rotary International
Spina Bifida Association of America Foundation

Lierman's lobbying firm, Capitol Associates Inc., boasts of its ability to influence the congressional appropriations and budget processes. In promotional materials, Capitol Associates says that it "gets results for our clients....Many of our clients have goals and objectives that involve securing federal funding for various projects and initiatives. We have a long record of success in this area..."(9) The Ethics Committee should determine to what extent Lierman's lobbying of Moran, in 1999, reflects or is responsible for this "long record of success."
 

C: Request for Investigation of Whether Moran Violated a Statutory Prohibition Against Soliciting Things of Value from Favor-Seekers


The Ethics Committee should determine whether Moran violated federal law prohibiting federal employees from soliciting anything of value from favor-seekers or those who might be significantly affected by the employee's official acts.
 

(a) Except as permitted by subsection (b), no Member of Congress or officer or employee of the executive, legislative, or judicial branch shall solicit or accept anything of value from a person-

(1) seeking official action from, doing business with, or (in the case of executive branch officers and employees) conducting activities regulated by, the individual's employing entity; or

(2) whose interests may be substantially affected by the performance or nonperformance of the individual's official duties.(10)


The Ethics Committee should probe who solicited the Lierman loan, as well as when, how, and in what context it was solicited. The Washington Post reported that Moran couldn't remember who solicited the Lierman loan.

Moran said he couldn't recall if he had "directly called Terry. It may have been through . . . my campaign manager."(11)


One day later, the Post reported that Moran's campaign chairman, Mame Reiley, claimed that she -- not Moran -- solicited the loan from Lierman.

Mame Reiley, Moran's former chief of staff and his current campaign chairman, said it was she, not Moran, who first approached Lierman for the loan after she became aware that Moran badly needed money to pay a lawyer to represent him in a contentious divorce.

"I did so on my own, without Jim requesting it, because I didn't want to put Terry in an uncomfortable position" if he could not lend his friend the money, Reiley said. She said she went to Lierman because he was Moran's "closest friend."(12)

Even if Reiley initially solicited the Lierman loan, Moran may still have violated the prohibition against solicitation, because eventually Moran did know of and was therefore complicit in the solicitation. Furthermore, an Ethics Committee memorandum states that Members likely cannot evade the prohibition against solicitation by having someone else do the soliciting:
The terms of the prohibition [against solicitation] are very broad. The provision applies to the solicitation of not only money, but "anything of value"....A solicitation made by another person in the name of a Member, officer or employee, and with the knowledge and acquiescence of that official, will likely be deemed a solicitation by that official.(13)
 
D: Ethics Committee Should Determine Whether Moran Violated the House Gift Rule


For the purposes of the House Gift Rule, loans are treated as gifts, and are subject to restrictions and conditions set forth by the Gift Rule and subsequent interpretation by the Ethics Committee.(14) Some loan terms are impermissibly generous; according to the Ethics Committee "depending on the terms, a transaction labeled as a loan may in fact constitute an impermissible gift."(15) Because the terms and conditions of the Lierman loan appear better than what was available in the commercial market at that time, the loan likely violates the Gift Rule. The Ethics Committee's Gifts and Travel Booklet states that the

Committee has determined that Members and staff may accept a loan from a person other than a financial institution, provided that the loan is on commercially reasonable terms, including requirements for repayment and a reasonable rate of interest. That determination was based on a separate provision of the gift rule, clause 5(a)(3)(A), which allows the acceptance of "[a]nything for which the Member . . . officer, or employee pays the market value."(16)
The Ethics Committee should determine whether Moran violated the Gift Rule by accepting the loan, with its generous terms, from Lierman.
 
E: Ethics Committee Should Consider That Moran Did Not Pre-Clear the Lierman Loan Nor Did He Report It On Time
Before Members accept a loan from anything other than a financial institution, the Ethics Committee asks them to pre-clear the terms of a loan.
Whether a loan from a person other than a financial institution is on terms that are "commercially reasonable," and hence acceptable under the Committee's determination, will depend on a number of facts and circumstances. Thus, before entering into a loan arrangement with a person other than a financial institution, Members and staff should contact the Committee for a review of the proposed terms, and a determination by the Committee on whether the loan is acceptable under the gift rule.(17)
But according to the Post, Moran did not pre-clear his loan with the Ethics Committee, nor, apparently, did he tell the Ethics Committee that the source of the loan was a registered lobbyist.
Moran did contact the ethics committee by letter--three days after he got the loan.

But he asked only whether he could accept a loan from an unnamed individual and "whether there is any limitation on the profession of the creditor." The letter did not disclose the loan's terms.(18)

Although Moran did finally disclose the loan in an undated amendment to his 1999 financial disclosure report, he did not disclose the loan on time, as required by the Ethics in Government Act. The Post reported that:
Moran did not disclose the loan on the annual financial disclosure report he filed May 15 this year. That, Moran first said yesterday, was an oversight.

But late yesterday, his chief of staff said Moran was mistaken. On May 15, 2000, the same day that Moran filed his financial disclosure report, he wrote to the House Committee on Standards of Official Conduct and asked for a ruling on whether he had to disclose the loan. Moran's divorce lawyer had advised him that he did not have to disclose the loan because the money was being used to pay Moran's legal fees.

The ethics committee disagreed. So Moran disclosed the loan in an unsigned, undated amended report received July 31 by the House Legislative Resource Center.(19)
 

F: Ethics Committee Should Decide Whether Moran Violated the House Code of Official Conduct


The Ethics Committee must decide whether Moran's receipt of Lierman's loan is a stain on the House and a violation of the House Code of Official Conduct, which states:

A Member, Delegate, Resident Commissioner, officer, or employee of the House shall conduct himself at all times in a manner that shall reflect creditably on the House.(20)
In addition, the Ethics Committee should determine whether Moran violated the House Code of Official Conduct prohibition against the receipt of improper compensation, which states:
A Member...shall receive no compensation, nor shall he permit to accrue to his beneficial interest, from any source, the receipt of which would occur by virtue of influence improperly exerted from his position in the Congress.(21)
 
G: Conclusion
The Ethics Committee should appoint an investigative subcommittee and outside counsel to closely examine the terms of the Lierman loan, the circumstances surrounding the solicitation of the loan, and any official acts that Moran may have taken to aid Lierman's lobbying clients, to determine whether Moran violated federal law or House Rules in accepting the Lierman loan. Moran's acts described above, if true, are a disgrace to the entire House of Representatives, meriting strong criticism and sure punishment.
 

Sincerely,
 

Gary Ruskin
Director


ENDNOTES

1. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000. Attachment #1 also includes Jo Becker, "Lierman Plays Down Lobbying; Morella Challenger's Activities Included Representing Drug Companies." The Washington Post, November 1, 2000. "Rep. Moran's Loan Deal." The Washington Post, November 1, 2000. Jo Becker, "Moran Says He'll Repay Lobbyist Immediately; Congressman to Return Drug Firm Donations." The Washington Post, November 2, 2000. "Probe Moran." Roll Call, November 6, 2000.

2. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

3. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

4. See Attachment #2.

5. 18 U.S.C. §201(c)(1)(B).

6. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

7. Jo Becker, "Lierman Plays Down Lobbying; Morella Challenger's Activities Included Representing Drug Companies." The Washington Post, November 1, 2000.

8. See Attachment #3.

9. Capitol Associates website <http://207.127.113.12/home.asp?Page=Accomplishments>. See Attachment #4.

10. 5 U.S.C. § 7353.

11. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

12. Jo Becker and William Branigin, "Complaint Filed Over Loan From Lobbyist; Moran Got Cash From Friend."The Washington Post, November 1, 2000. See Attachment #5.

13. House Committee on Standards of Official Conduct Memorandum on Rules Governing (1) Solicitation by Members, Officers and Employees in General, and (2) Political Fundraising,

Activity in House Offices, April 25, 1997. <http://www.house.gov/ethics/m_memo_42597.htm>.

14. "In this clause the term 'gift' means a gratuity, favor, discount, entertainment, hospitality, loan, forbearance, or other item having monetary value." House Rule 26 clause 5(a)(2)(A).

15. House Committee on Standards of Official Conduct, Gift Rule Provisions Applicable to Loans to Members, Officers and Employees, May 23, 1997. <http://www.house.gov/ethics/Appendices_Gifts_and_Travel.htm#_Toc476623639>.

16. House Committee on Standards of Official Conduct, Rules of the U.S House of Representatives on Gifts and Travel, 106th Congress, 2nd Session, April 2000, at 50-51. <http://www.house.gov/ethics/Gifts_and_Travel_Chapter.htm#_Toc476623591>.

17. House Committee on Standards of Official Conduct, Rules of the U.S. House of Representatives on Gifts and Travel, 106th Congress, 2nd Session, April 2000, at 51. <http://www.house.gov/ethics/Gifts_and_Travel_Chapter.htm#_Toc476623591>.

18. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

19. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

20. House Rule 24(1) <http://www.house.gov/rules/RXXIV.htm>.

21. House Rule 24(3) <http://www.house.gov/rules/RXXIV.htm>.