[Congressional Record Volume 140, Number 127 (Tuesday, September 13, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 13, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                    ETHICS POLICY AT THE WHITE HOUSE

  (Mr. WOLF asked and was given permission to address the House for 1 
minute and to revise and extend his remarks and include extraneous 
material.)
  Mr. WOLF. Mr. Speaker, given that President Bill Clinton committed to 
running the most ethical administration ever, I am continually 
surprised at the lack of attention to potential ethical problems 
presented by those with regular White House access with no 
accountability.
  We now have reports coming from the Brazilian press that James 
Carville is down in Brazil working on the presidential election, a 
client that he did not disclose on his financial disclosure form filed 
in July. Is Mr. Carville going to be asked to account for this 
situation?
  The lack of financial disclosure by Tony Coelho is another situation 
where the White House is apparently allowing broad influence and policy 
involvement by an individual who retains extensive, lucrative outside 
business. Mr. Coelho's financial, legal, and business ties to unions, 
corporations, and pension funds with billions of dollars at stake, make 
his access to the White House and involvement in personnel and policy 
matters an area ripe with potential conflicts.
  Last month, the New York Times reported on Mr. Coelho's involvement 
with personnel and policy at the Agriculture Department. As Fred 
Wertheimer of Common Cause has pointed out, Mr. Coelho is in a ``quasi-
public, quasi-private'' position that could allow his banking company 
to take advantage of inside information about Government policy.
  Is the White House that is now talking about morality and values 
going to run a values-free ethics policy at the White House?
  The American people deserve a full accounting of the interests 
represented by those who profess to represent the ``public interest.''


                                     House of Representatives,

                                Washington, DC, September 8, 1994.
     Hon. Leon E. Panetta,
     Chief of Staff,
     The White House,
     Washington, DC.
       Dear Mr. Panetta: Given that as a candidate Bill Clinton 
     committed to running ``the most ethical Administration 
     ever,'' I am again concerned about the stunning lack of 
     attention to potential ethical problems presented by those 
     with regular White House access and no accountability.
       The lack of financial disclosure by Tony Coelho is the 
     latest situation where the White House is apparently allowing 
     broad influence and policy involvement by an individual who 
     retains extensive, lucrative outside business. Mr. Coelho's 
     financial, legal and business ties to unions, corporations, 
     pension funds and the like, make his access to the White 
     House and involvement in personnel and policy matters such as 
     are detained in The New York Times (attached) an area ripe 
     with potential conflicts. As The New York Times described, 
     Tony Coelho is ``everybody's Mr. Inside.'' Given this status 
     and his current role as the lead Democrat spokesman isn't it 
     appropriate that the American people know what outside 
     interests he represents?
       While Mr. Coelho says he does not lobby (rather he 
     ``consults'' or ``advises''), his actions in contacting the 
     Agriculture Department last year certainly raise the 
     appearance that he is using his contacts to maximum benefit. 
     As Fred Wertheimer of Common Cause has pointed out Mr. Coelho 
     is in a ``quasi-public, quasi-private'' position that could 
     allow his banking company to take advantage of inside 
     information about government policy.
       I understand from the White House Counsel's office that 
     this matter is under review. I would hope that in an effort 
     to avoid the appearance of conflicts that the new apparent 
     spokesman for the Democrat Party would be open with the 
     public regarding the multitude of business and financial 
     interests that he promotes and represents.
       I look forward to hearing from you on this matter.
           Sincerely,
                                                    Frank R. Wolf,
                                               Member of Congress.
                                  ____


                [From the New York Times, Aug. 19, 1994]

           Democrats' New Overseer Is Everybody's Mr. Inside

                         (By Stephen Engelberg)

       Washington.--When Congress last year was blocking final 
     Government approval of a genetically engineered hormone that 
     had cost hundreds of millions of dollars to develop, the 
     drug's maker, the giant chemical concern Monsanto, turned for 
     advice to a man renowned for his skills as a legislative 
     strategist.
       When Sun Diamond Growers, the California agribusiness, 
     organized a dinner earlier this year to retire the 
     Congressional campaign debt of Henry Espy, brother of 
     Agriculture Secretary Mike Espy, it called on one of the most 
     prolific fund-raisers in the history of the Democratic Party.
       And last week, when President Clinton was looking for a 
     gifted political pro who could rebuild the President's 
     popularity and rescue sagging Democratic prospects for the 
     November elections, he chose a man with an encyclopedic 
     knowledge of the nation's Congressional districts.
       The man whose expertise is so prized by so many disparate 
     groups? Tony L. Coelho, who left Congress as House majority 
     whip in 1989 for a lucrative career as a New York investment 
     banker amid accusations that he had improperly used his 
     political contacts to arrange and finance a $100,000 junk-
     bond investment for himself.
       Since leaving the House, Mr. Coelho has commuted to New 
     York, where he has learned the intricacies of money 
     management. At the same time, he has kept his hand very much 
     in the Washington game, and the announcement last week that 
     he was accepting a three-month unpaid stint as chief 
     strategist and spokesman at the Democratic National Committee 
     brought mixed responses.
       While the coterie of Democratic campaign consultants and 
     career politicians embraced it as a savvy move by a miscue-
     prone White House, others worried that Mr. Coelho was once 
     again blurring the lines among business, politics and 
     personal interest.
       ``I'm never happy unless I have several balls in the air,'' 
     Mr. Coelho said in a recent interview. And that he has.
       Since Mr. Clinton's election almost two years ago, Mr. 
     Coelho has served as an informal adviser to the White House, 
     attending several high-level strategy meetings a month. He is 
     raising money for the legal defense fund that will help the 
     President fight whitewater accusations and a former Arkansas 
     employee's sex harassment charges. And his former aides hold 
     important posts in the Clinton Administration.
       What Mr. Coelho calls his ``extended family'' includes 
     Thomas R. Nides, chief of staff to Mickey Kantor, the United 
     States Trade Representative; Marcia L. Hale head of the White 
     House office that deals with governors and state legislators, 
     and Kim Schnoor, senior aide to Agriculture Secretary Espy. 
     Leon E. Panetta, his former colleague in the California 
     Congressional delegation, is now the White House chief of 
     staff and was instrumental in the selection of Mr. Coelho as 
     the new party overseer.
       At the same time, Mr. Coelho earns more than $1 million a 
     year as president of a subsidiary of Wertheim Schroder & 
     Company, a New York investment bank that manages nearly $4 
     billion for pension funds, corporations and well-heeled 
     individuals. Mr. Coelho's contacts, and the investment bank's 
     impressive track record, have made it one of the fastest-
     growing such companies on Wall Street.
       Fred Wertheimer, president of the public-interest lobbying 
     group Common Cause, says Mr. Coelho's roles at the White 
     House and in the Democratic Party put him in a ``quasi-
     public, quasi-private'' position that could allow his banking 
     company to take advantage of inside information about 
     government policy. ``That's not an argument that he's going 
     to do it,'' Mr. Wertheimer said. ``But it's a dangerous 
     situation.''
       Mr. Coelho says he gains no business advantages from his 
     ties to the Clinton Administration and never lobbies for 
     companies or friends who need help from the Government, 
     although he acknowledges that clients frequently seek his 
     counsel on the ways of Washington.
       ``It happens all the time,'' Mr. Coelho said. ``I will give 
     people advice. People will say to me, `Tony, I'm having this 
     problem with Joe Schmo or X bill or agency.' I will give them 
     my best advice, based on 25 years in government. But if they 
     want something done, I say, `Go see this law firm or that 
     lobbyist.'''
       Mr. Coelho said he saw no reason to disclose a list of his 
     clients, as Mr. Wertheimer of Common Cause has suggested. He 
     agreed that it would be improper for him to remain on Wall 
     Street if he held a paid position in the Democratic Party, 
     saying, ``I would have to make a complete break.''
       Lloyd N. Cutler, who accepted a temporary stint as White 
     House counsel, took a leave of absence from his law firm to 
     do so. And several of the political consultants who advise 
     Mr. Clinton, including James Carville and Paul Begala, have 
     publicly disclosed their client lists.


                Help for Monsanto: ``I Love Networking''

       But both Mr. Carville and Mr. Begala are paid for their 
     work, under contract with the Democratic National Committee. 
     In contrast, Mr. Coelho said, ``I don't get a cent.''
       ``I'm an adviser,'' said Mr. Coelho, who, unlike some of 
     Mr. Clinton's other informal advisers, has never held the 
     permanent pass that grants unfettered access to the White 
     House. ``I don't have an office, I don't have hours. I'm a 
     citizen of this country who is advising the people who run my 
     party.''
       Few citizens, however, have his connections or cachet.
       Consider how Mr. Coelho advised Monsanto on its struggle to 
     win approval for the genetically engineered hormone, bovine 
     somatotropin, which enhances the milk production of cows. It 
     is a case study of the interlocking relationships that Mr. 
     Coelho can call on. As he put it, ``I've lived in this town 
     for 30 years, and I love networking.''
       At a House hearing in June 1986, Mr. Coelho, then a 
     subcommittee chairman, seemed opposed to the hormone, 
     repeatedly asking why the Agriculture Department had helped 
     develop it when the American dairy industry faced a milk 
     glut. (Mr. Coelho says now that he did not really oppose the 
     hormone and that he held the hearing only to placate a 
     Wisconsin Republican whose vote he needed on his own dairy 
     bill.)
       Seven years later, Monsanto's president, Robert B. Shapiro, 
     called Mr. Coelho at the suggestion of a friend. Congress, 
     which Mr. Coelho had long since left, had just imposed a 90-
     day moratorium on the sale of the hormone and was demanding 
     further study of its economic impact on small dairy farmers. 
     When he called Mr. Coelho, Mr. Shapiro said in an interview, 
     the company was ``eager to find people who could give us 
     advice and perhaps be helpful.''
       Mr. Coelho, who has epilepsy, says he saw the drug as the 
     vanguard of a biotechnology revolution that could bring cures 
     for many diseases. ``We need to have breakthroughs,'' he 
     said, ``and, well, here was the first breakthrough, and these 
     people were trying to stop it.'' Mr. Coelho says he never had 
     business dealings with Monsanto or Mr. Shapiro. His 
     investment bank, a spokesman said, holds stock in neither 
     Monsanto nor any biotechnology company.
       After receiving that call from Mr. Shapiro, Mr. Coelho 
     called the Agriculture Department to find out where things 
     stood. Mr. Coelho has some of his strongest ties at 
     Agriculture. Secretary Espy won his first race for Congress, 
     in 1986, with substantial financial help from the Democratic 
     Congressional Campaign Committee, which was then headed by 
     Mr. Coelho. Further, Mr. Espy's selection by Mr. Clinton as 
     Agriculture Secretary came on Mr. Coelho's recommendation. 
     And before the new Secretary picked his staff, Mr Coelho 
     proposed several choices to him; one, Kim Schnoor, a former 
     Congressional aide of Mr. Coelho, became Mr. Espy's domestic 
     counselor.
       It was Ms. Schnoor who received the call that Mr. Coelho 
     made to the Agriculture Department to see whether anyone 
     there was blocking approval of the hormone. According to an 
     internal Monsanto memo, Mr. Coelho stood ready to hammer home 
     the company's concerns at a dinner he was planning with Mr. 
     Espy.
       The Monsanto memo, dated Sept. 21, 1993, expressed hope 
     that Mr. Coelho would enlist Mr. Espy to persuade Mr. 
     Panetta, then the head of the White House Office of 
     Management and Budget, to ``duck'' a request from Congress 
     for a study of the hormone's economic effects.
       Within a few days, a copy of the internal Monsanto memo was 
     obtained and made public by the Washington-based Foundation 
     on Economic Trends, a group that questions the hormone's 
     safety. The dinner meeting between Mr. Espy and Mr. Coelho 
     never took place.
       Nonetheless the hormone received final approval from 
     Congress a few months after the Office of Management and 
     Budget, in completing its study, had concluded that the 
     economic effects of the hormone would be minimal.
       Jeremy Rifkin, president of the Foundation on Economic 
     Trends, says the conversation between Ms. Schnoor and Mr. 
     Coelho was inappropriate. The Monsanto memo, he says, is 
     proof that Ms. Schnoor provided ``sensitive information to 
     give Coelho ammunition to make Monsanto's case with the 
     Secretary.''
       Tom Amontree, deputy press secretary at the Agriculture 
     Department, disagrees. He says Ms. Schnoor engaged in a brief 
     conversation with Mr. Coelho in which she explained only that 
     the Office of Management and Budget was handling the study.
       In a letter hand-delivered to the Agriculture Department, 
     Mr. Rifkin demanded at the time that the department 
     investigate the incident. But no inquiry was ever undertaken, 
     and Mr. Amontree says the letter from Mr. Rifkin was lost. 
     Mr. Rifkin says he plans to renew his protest this week, this 
     time to Attorney General Janet Reno.


                aid for the brother of an old colleague

       Six months after the tussle over Monsanto, Mr. Coelho lent 
     a helping hand to a politician in need. This time the 
     beneficiary was Mr. Espy's brother Henry, who had 
     unsuccessfully run for the Secretary's old Congressional seat 
     in Mississippi.
       The campaign had left Henry Espy saddled with a $75,000 
     debt, and his campaign treasurer wrote to Federal election 
     officials that ``an enormous amount of individual pledges, 
     against which checks were issued, were not honored subsequent 
     to Mr. Henry Espy's defeat.''
       Into the breach stepped Mr. Coelho and Richard Douglas, 
     senior vice president of Sun Diamond Growers. Mr. Coelho had 
     many contacts with the company in his years representing a 
     California agricultural district in Congress, and his 
     investment bank now manages about $12 million of Sun 
     Diamond's pension money.
       Mr. Douglas, a lifelong friend of Secretary Espy, sent 
     letters on Sun Diamond's stationery inviting prospective 
     contributors to a dinner last March 31. At the dinner, Mr. 
     Coelho says, he gave a 20-minute presentation that reminded 
     the audience that Henry Espy was a ``good investment'' who 
     would be heard from again in politics. Secretary Espy, Mr. 
     Coelho says, did not attend.
       After the dinner, Mr. Douglas wrote to those who had 
     attended. He thanked them for their help with ``a most 
     difficult task'' and noted that Mr. Coelho stood ready to 
     call other prospective contributors. Mr. Coelho says no one 
     ever asked him to make any such calls, however.


                     everybody wants to know a star

       Mr. Coelho's own return to prominence was not a sure thing 
     in 1989, when he resigned from the House over his purchase of 
     $100,000 in junk bonds from Drexel Burnham Lambert, financed 
     in part with a loan from a troubled California savings and 
     loan association.
       After two years of investigation, Mr. Coelho says, he 
     received a letter from the Justice Department informing him 
     that the case had been closed. The Justice Department 
     confirms that it declined prosecution in the matter.
       After leaving Congress, Mr. Coelho ruled out the choice of 
     many other former lawmakers: Washington lobbying. Instead, he 
     joined a Wertheim Schroder subsidiary, Wertheim Schroder 
     Investment Services, which had fallen on hard times.
       Wertheim Schroder Investment Services manages money for 
     large investors, union-management pension funds, corporations 
     and individuals. Its investment performance has dramatically 
     improved since 1989, and Mr. Coelho's contacts and 
     persuasiveness have helped increase the amount of money it 
     manages to nearly $4 billion, from $700 million.
       Steve Kotler, president of Wertheim Schroder & Company, 
     says an investment banking company that performed similarly 
     but without Mr. Coelho's contacts or skills as a manager 
     would need 10 years to achieve that much growth.
       Jack Marco, president of a Chicago-based company that is a 
     consultant to 118 union-management pension plans, notes that 
     many firms boast flashy performance numbers. But it is 
     personality, he says, that opens doors.
       ``Certainly people love to be around a star,'' Mr. Marco 
     said. ``Our clients say it: `That's somebody that's in the 
     press. I know him. He comes to our meetings. I could call him 
     up today.'''
       Mr. Coelho, Mr. Marco said, can get his company's name on a 
     pension fund's short list more easily than many. ``But if he 
     didn't have the numbers,'' Mr. Marco said, ``he wouldn't get 
     the money.''
                                  ____



                                     House of Representatives,

                                Washington, DC, September 8, 1994.
     Hon. Leon E. Panetta,
     Chief of Staff,
     The White House,
     Washington, DC.
       Dear Mr. Panetta: I am writing regarding the recent news 
     stories regarding the involvement of White House political 
     consultants James Carville and Mandy Grunwald in the ongoing 
     Brazilian presidential election.
       From the White House Counsel's office I understand that Mr. 
     Carville has declined to comment on whether or not he is 
     involved in the Brazilian election, but only says that his 
     financial disclosure filing in July was accurate ``at that 
     time.'' In addition, I understand that Mandy Grunwald says 
     she is not involved in the Brazilian election but says others 
     in her firm may be involved. I hope you will look further 
     into this matter. I understand it is of great interest and 
     speculation in the Brazilian press (copy of an article from 
     the Brazilian press is attached) which reports Mr. Carville 
     negotiated this contract in April.
       If these individuals or their firms are involved in this 
     election, what kind of payment are they receiving for their 
     services and by what means are they receiving it? If, as 
     reported, a third party is paying them and how has this 
     arrangement been conducted? When were the arrangements made? 
     If others in their firms are receiving any financial 
     compensation in connection with this account, do any of the 
     proceeds go into partnership income? When were negotiations 
     or contracts regarding this matter conducted?
       As you know, the White House ``Directive'' issued by Mack 
     McLarty requiring these political consultants to file 
     financial disclosure has no legal consequence anyway 
     according to the White House Counsel's office. In addition, 
     the crafting of the ``Directive'' only required that the 
     consultants disclose clients they work ``directly'' for 
     rather than clients that might produce partnership income 
     from which they draw their income. Thus, as I pointed out in 
     my earlier letter to you on this matter (July 27, 1994 
     attached) the consultants have not been required to follow 
     the same rules as apply to everyone else required to file 
     financial disclosure forms. Why does the White House continue 
     to play fast and loose with these ethical issues?
       Again, I would hope that you would reconsider the wisdom of 
     giving these consultants special treatment and apply the same 
     rules to them as apply to you and all other White House pass 
     holders.
       I hope you will also require further clarification on the 
     matter of the involvement of these consultants in the 
     Brazilian election. Having White House inner circle advisers 
     intimately involved in foreign elections seems to be a 
     situation ripe for political problems and conflicts. The 
     American people at least have a right to know about these 
     matters in an upfront and honest manner. Requiring the 
     consultants to file the same forms as you and all other White 
     House pass holders filed and assuring their accuracy would be 
     a start.
       I look forward to hearing from you on these matters.
           Sincerely,
                                                    Frank R. Wolf,
                                               Member of Congress.
                                  ____

       Washington.--The PSDB [Brazilian Socialist Party] 
     presidential candidate, Fernando Henrique Cardoso, followed 
     closely the selection of the James Carville firm--Carville is 
     an advisor to President Bill Clinton--as campaign advisors. 
     Sergio Motta and Sergio Machado, members of Fernando 
     Henrique's team, Eduardo Jorge Caldas, his ex-cabinet chief, 
     and ex-governor Tasso Jereissati took the bidding in the 
     United States and swore participating foreign companies to 
     absolute secrecy. The [following] information was given to 
     the Jornal do Brasil by a public relations source on 
     condition that we preserve his anonymity.
       Carville, introduced to Cardoso by a mutual friend, also a 
     Clinton advisor, won the competition and has already been to 
     Brazil at least three times. Clinton's favorite consultant 
     has two assistants in Brasilia, but another analyst flies to 
     Brazil every other week. Carville's advice could cost a 
     million U.S. dollars.
       In July, Carville sent the American Congress a list of his 
     clients, both domestic and foreign, but he did not mention 
     the PSDB. This omission could cause some complications with 
     the Congress. Following is the exchange we had with the 
     public relations person.
       ``How many companies participated?''
       ``At least ten were invited to bid. But eight would be a 
     better number. The bulk of the contracts went to Brazilian 
     public relations firms
       ``Did Brazilian and foreign companies take part in the same 
     bidding?''
       ``There was no separate bidding for international 
     consultancies.''
       ``When did this take place?''
       ``In April.''
       ``How long did it take to get an answer?''
       ``It was decided quickly. Within two weeks.''
       ``Who took care of the bidding for the PSDB?''
       ``Several people. Sergio Motta, from Sao Paulo, and Sergio 
     Machado, from Ceare.
       Also Eduardo Jorge, Fernando Henrique's cabinet chief. 
     Tasso Jereissati and Fernando Henrique were directly involved 
     in the process and followed the whole bidding.''
       ``Did you request secrecy?''
       ``And how!'' The PSDB asked the bidders to maintain 
     absolute discretion.''
       ``Why did they call on outside companies?''
       ``The technology developed abroad is more advanced. It 
     revolves more around fine-tuned messages to the voter and is 
     based much more on the results of polls. They do not yet have 
     this analytic capability in Brazil. It is one thing to take 
     polls and enter the date; it is quite another to develop 
     strategies based on these data.
       ``How many American companies were involved?''
       ``As far as I know, two. James Carville's company won.''
       ``Is Carville working now?
       ``Yes.''
       ``How big is his staff in Brazil?''
       ``From what they tell me, Carville has two assistants in 
     Brasilia. He has been to Brazil three times and should be on 
     his fourth trip right now, as the elections are a month away. 
     If he isn't in Brazil right now, he will be in the coming 
     week.''
       ``How much do consultants get paid?''
       ``That's hard to say, it depends on the degree of follow-up 
     they do, but for this kind of consulting for five or six 
     months. I would say that the minimum would be $150,000 and 
     the maximum one million dollars, U.S. That amount would be 
     for the whole job.''
                                  ____



                                     House of Representatives,

                                    Washington, DC, July 27, 1994.
     Hon. Leon E. Panetta,
     Chief of Staff,
     The White House,
     Washington, DC.
       Dear Mr. Panetta: I am writing regarding the recent 
     financial disclosure papers filed by political consultants 
     pursuant to the ``Directive'' issued by the former Chief of 
     Staff Mack McLarty.
       Because of the clever crafting of the ``Directive'' the 
     papers filed by the political consultants are not even close 
     to those you yourself and other White House staffers filed as 
     an employee of the White House and holder of a 24-hour-a-day 
     access pass. My office has been informed by the White House 
     Counsel's office that these papers don't even have any legal 
     consequence as do those filed by all other staff. 
     Furthermore, the consultants were not required to file any 
     dollar ranges of their assets, list gifts and travel 
     accommodations, or identify accounts on which they work 
     indirectly as well as directly. Once again, the White House 
     has made up unique rules for these consultants.
       What is wrong with applying the same rules to the political 
     consultants with White House access passes as apply to all 
     other pass holders? Why do they continue to get special 
     treatment?
       The credibility of the White House is at an all-time low. 
     The filings submitted in response to the ``Directive'' only 
     add to the cynicism and distrust of the White House. I would 
     hope you would fix this situation or stop the charade of 
     ``openness.''
           Sincerely,
                                                    Frank R. Wolf,
     Member of Congress.

                          ____________________