The Ex Im Bank: Caught In The Swirl Of Donorgate
Across Lafayette Park from the White House sits the Export-Import Bank, an obscure agency with only 440 employees and a budget of just $726 million. That's small beer as federal agencies go, but Ex-Im's involvement with President Bill Clinton's network of Arkansas friends and financiers is making it a target for Justice Dept. prosecutors and congressional investigators probing the nexus of money, influence, and favors in the White House. And if the President nominates Wall Street veteran and Democratic donor James A. Harmon to run the agency, as expected, Ex-Im's troubles could multiply.
FIRE FIGHTING. Even before the Donorgate scandal broke, Ex-Im officials had their hands full putting out fires. The agency's five-year authorization expires in September. It's now defending itself against Capitol Hill budget-cutters, who view Ex-Im as a prime example of corporate welfare, since the bulk of its below-market loans and guarantees are subsidized by taxpayers and go to multinational corporations. It also didn't help that Ex-Im's current chairman, Martin A. Kamarck, authorized bonuses averaging $5,000 to almost half the bank's employees. Government personnel authorities now say the move was illegal. Kamarck says he was trying to reward Ex-Im's top performers, but erred in tapping a government fund designed to keep highly skilled people who might resign. Kamarck, whose wife, Elaine, is chief of staff to Vice-President Al Gore, is expected to quit once the Senate confirms a replacement.
Ex-Im is also drawing fire for expanding the range of projects it backs. Its cheap loans to state-controlled Russian natural-resource enterprises have raised questions of whether Ex-Im's money is at cross-purposes with Administration policies supporting privatizations and financing by capital markets. "Ex-Im is in serious trouble," warns Edward Rice, director of the Coalition for Employment through Exports, a business-backed Ex-Im advocacy group.
Harmon's anticipated appointment could complicate Ex-Im's predicament. As senior chairman of Schroder Wertheim & Co., Harmon, 61, now holds a nonexecutive position with the investment bank. A corporate-finance expert, he capped a 22-year career there by engineering the buyout of his own institution by deep-pocketed British merchant bank Schroders PLC in 1994.
These days, Harmon is known more for political finance. He helped former New York City Mayor David N. Dinkins raise some $2.5 million in 1993 and became one of Clinton's and the Democratic National Committee's biggest donors in 1996. He and his wife have given $204,000 since 1992 to Clinton and other Democratic candidates, but the bulk of that came in three chunks last year, in the form of soft money to the DNC. Soft money is an unregulated donation to a political party. Harmon's major donations all came six weeks before or after he attended White House coffees.
Harmon also hired Tony Coelhlo, the former California Congressman whose fundraising among savings-and-loan officials on behalf of Capitol Hill Democrats raised hackles in the late 1980s. And Harmon has become a prodigious fund-raiser on Wall Street, helping to amass some $2 million for the DNC at a June, 1996, event at the Waldorf-Astoria hotel. Harmon says he'd be "honored to be named" to a government office, and declined further comment. But Steven Kotler, Schroder Wertheim CEO, says Harmon "will be offered a position based on his credentials as a Wall Street executive and not because he gave money."
Other Ex-Im chairmen have also been party financiers. But at this sensitive time, say agency supporters and detractors alike, Ex-Im needs a leader whose pocketbook isn't the main attraction. "Ex-Im's survival depends on the credibility of its new chairman," says a top GOP Senate aide. "Bringing in a political person who muddies the waters isn't doing the agency any good."
Ex-Im may be unknown to the average American, but General Electric, Boeing, and Motorola know it well. They have benefited from Ex-Im loans, guarantees, and export credit insurance. Last year, Ex-Im made $11.5 billion in financing available to exporters, supporting the sale of American-made printing presses to Brazil, aircraft to China, and tractors to Kazakhstan. The bank was subsidized to the tune of $894 million in 1996. It claims that some $14 billion worth of exports and 300,000 American jobs depended on its financing last year. But congressional and Justice Dept. investigators aren't focusing on such success stories. Instead, they're looking into Ex-Im's relationship to Democratic donors, especially the role of Maria L. Haley, one of five Ex-Im directors and a longtime "Friend of Bill" from Arkansas who ran then-Governor Clinton's program to attract foreign investment to the state.
Haley, a native Filipino, met on several occasions with, and received numerous phone calls from, Clinton's Arkansas golfing buddies and political supporters. In the summer of 1996, Haley pushed for approval of $6.5 million in loan guarantees for the Sun Tech Group Co., controlled by a wealthy Thai businessman, Sawadi Horrungruang, and represented in Washington by Pauline Kanchanalak, a native of Thailand living in Virginia. The request, which is still pending, would enable Sun Tech to open 100 Blockbuster video stores in Bangkok. The Thai application caused an internal debate over its propriety. Ex-Im has never approved financing for franchise rights, as retail stores outside the U.S. don't directly create American jobs.
Ex-Im documents indicate that Haley began advocating approval around the time Kanchanalak made large donations to the DNC. One $85,000 contribution came on June 18, 1996, the day DNC fund-raiser John Huang arranged for Kanchanalak to be invited to a White House coffee. Huang called Haley the same day as well, and twice more in August. Kanchanalak also had unusual access at Ex-Im, meeting with or phoning Haley three times after the donation.
The DNC has returned $250,000 of Kanchanalak's donations because of questions about their foreign origin. Through an Ex-Im spokesman, Haley says she had no knowledge of the donations when she agreed to meet with Kanchanalak. But Congressional sources say a Justice Dept. task force on Feb. 24 subpoenaed records from Kanchanalak's U.S.-Thai Business Council, along with Ex-Im documents. House and Senate panels have done the same. The Thai council could not be reached for comment. Kanchanalak declined comment.
RED FLAG? Suspicions of White House meddling were raised last fall when the Administration appointed Gloria Cabe, a former aide to Clinton when he was Arkansas Governor, as a special assistant to Kamarck. Concerns over Haley and Harmon were heightened on Feb. 25 with the release of documents showing Clinton's hands-on role in raising campaign funds by authorizing the use of the White House for overnight stays in the Lincoln bedroom and kaffeeklatsches with the President.
Ex-Im officials hope to resist their critics by noting that the bank showed a $1.2 billion profit last year, its first since the early 1980s. But congressional and Administration budget experts say the profit figure is based on a reduction, from $5.7 billion to $2.4 billion, in reserves to cover future losses. Trouble is, Ex-Im's portfolio is becoming riskier because of lending in Russia and other emerging markets. Such accounting gimmicks are making the agency, already under duress, more vulnerable to GOP partisans.