Ex-Im Bank Watchdog Pursuing 40 Fraud Cases: Lawmaker

Photographer: Andrew Harrer/Bloomberg

Representative Jim Jordan, an Ohio Republican, said the U.S. Export-Import Bank benefited from 22 deals involving the Ex-Im Bank from 2002 to 2011, and was the subject of a 2006 federal lawsuit alleging it engaged in a scheme to defraud the bank. Close

Representative Jim Jordan, an Ohio Republican, said the U.S. Export-Import Bank... Read More

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Photographer: Andrew Harrer/Bloomberg

Representative Jim Jordan, an Ohio Republican, said the U.S. Export-Import Bank benefited from 22 deals involving the Ex-Im Bank from 2002 to 2011, and was the subject of a 2006 federal lawsuit alleging it engaged in a scheme to defraud the bank.

The U.S. Export-Import Bank’s internal watchdog has at least 40 active investigations into allegations of fraud by employees or agency beneficiaries, the chairman of a House investigating panel said.

“Apparently, the bank employees need regular reminders that it is wrong to accept bribes,” Representative Jim Jordan, an Ohio Republican who heads a House Oversight and Government Reform subcommittee, said today at a hearing. Jordan cited a briefing provided to the panel by the acting inspector general.

U.S. House Republicans are stepping up pressure on the agency, focusing on alleged wrongdoing as the bank seeks renewal before its charter expires Sept. 30. The committee is targeting four cases involving employees, including three former workers and an employee on leave.

Fred Hochberg, the bank’s president, today defended its role in helping overseas companies buy U.S. goods, without using tax dollars. Hochberg declined to discuss the ongoing probes, and said the bank has stringent ethics practices.

“A culture of ethics starts at the top,” Hochberg said. “I, personally, and the management team at the bank are fully committed to running an ethical agency and operating at the highest ethical standards in the government. Anything less is unacceptable.”

Fraud Probes

Hochberg said the vast majority of fraud cases investigated by the inspector general in recent years have involved outsiders trying to cheat government, not employees of the bank.

Some Republican lawmakers and Tea Party-affiliated groups say the 80-year-old bank is a form of corporate welfare that primarily benefits companies including Boeing, General Electric Co. (GE) and Caterpillar Inc. (CAT) and should lose its financing powers when they expire.

The bank’s foes include House Majority Leader-elect Kevin McCarthy, a California Republican, and Tea Party-aligned groups including the Club for Growth and Heritage Action.

Representative Darrell Issa, a California Republican who leads the Oversight and Government Reform Committee, says he favors renewing the charter after making changes that include tougher ethics rules and more investigative power for the agency’s inspector general. The Office of Inspector General is an independent office within the agency that investigates complaints of fraud or violations of law.

‘Highest Standards’

“This is a long-standing program that has merit but that in fact we have an obligation to make sure lives up to the highest standards,” Issa said today at the hearing.

The investigation into misconduct allegations at the bank complicates the debate over reauthorization, potentially fueling more Republican opposition.

The top Democrat on the panel’s economic growth subcommittee said Republicans are in a “rush to judgment intended to tarnish” the bank and its employees in the final days of the reauthorization debate.

“The Tea Party faction of the Republican party is holding this reauthorization hostage,” said Representative Matt Cartwright, a Pennsylvania Democrat.

Shortly after the panel convened, a witness subpoenaed by the committee, former Ex-Im short-term trade division employee Johnny Gutierrez, declined to testify by invoking his Fifth Amendment right against self incrimination.

Florida Company

Jordan said Gutierrez is alleged to have taken bribes from Impex Associates, a Coral Gables, Florida, exporter of construction and hotel supplies. Jordan said Impex benefited from 22 deals involving the Ex-Im Bank from 2002 to 2011, and was the subject of a 2006 federal lawsuit alleging it engaged in a scheme to defraud the bank. The inspector general took up the fraud case three years later, the lawmaker said.

A phone call to a telephone number listed for Impex in directory assistance wasn’t working today. Gutierrez’s lawyer, Douglas McNabb, didn’t respond to e-mail and phone calls seeking comment today.

Other top Republican lawmakers oppose renewing the bank’s charter. House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican and top advocate for shuttering the bank, yesterday sent a letter to Hochberg inquiring about any transactions with Russia and foreign entities sanctioned by the U.S. President Barack Obama has escalated economic sanctions on Russia after its incursion into Ukraine and annexation of the Crimea.

Conservative Base

In the Senate, a group of Democrats led by Maria Cantwell of Washington sought to lay down some markers today, calling for a multiyear reauthorization for the bank. Cantwell said Hensarling is appealing to his party’s conservative base and ignoring the needs of business.

“I think we’ve got to be more concerned about not just the Club for Growth’s growing numbers of members in the United States House and Senate but growing the U.S. economy,” she said.

Business groups also are pushing back, releasing a study today that showed other nations’ support for their exporters exceed the Ex-Im’s support. In the study, the National Association of Manufacturers said nine of the top U.S. trading partners -- including China, France, Japan, South Korea and Brazil -- provided almost half a trillion dollars in credit aid last year, or about 18 times the $27 billion Ex-Im provided for U.S. exports in 2013.

China’s Ex-Im Bank authorized the most at more than $153 billion in 2013, the report said.

Manufacturers Group

“The size and scope of the Ex-Im Bank pales in comparison to the official export credit agencies of our top competitors,” Jay Timmons, the NAM president, said in a statement. “If Congress eliminates the Ex-Im Bank, these other nations will jump in and fill the void, and manufacturers in the United States stand to lose tens of billions of dollars in business.”

The drive to shut the bank gained momentum when McCarthy, elected as No. 2 House Republican, said he was joining other foes of the lender, including Hensarling and House Budget Committee Chairman Paul Ryan of Wisconsin.

Lawmakers leave Washington for a five-week recess starting Aug. 1, which means the debate may be waged through September. The Obama administration is seeking a five-year reauthorization and a gradual increase in the bank’s lending cap, to $160 billion from $140 billion.

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Steve Geimann

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