[House Report 112-690]
[From the U.S. Government Publishing Office]


                                                House Calendar No. 163

112th Congress                                              Report

2d Session             HOUSE OF REPRESENTATIVES            112-690
_______________________________________________________________________



                            IN THE MATTER OF
                      REPRESENTATIVE MAXINE WATERS

                               ----------                              

                              R E P O R T

                                 of the

                          COMMITTEE ON ETHICS




 September 25, 2012.--Referred to the House Calendar and ordered to be 
                                printed



112th Congress 
 2d Session             HOUSE OF REPRESENTATIVES                 Report
                                                                112-690
_______________________________________________________________________













                                                House Calendar No. 163

112th Congress                                              Report

2d Session             HOUSE OF REPRESENTATIVES            112-690
______________________________________________________________________


                          IN THE MATTER OF 
                      REPRESENTATIVE MAXINE WATERS

                               __________

                              R E P O R T

                                 of the

                          COMMITTEE ON ETHICS




 September 25, 2012.--Referred to the House Calendar and ordered to be 
                                printed


                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

76-082                    WASHINGTON : 2012








                          COMMITTEE ON ETHICS

Bob Goodlatte, Virginia              John A. Yarmuth, Kentucky
Acting Chairman                      Acting Ranking Member
Mike Simpson, Idaho                  Donna F. Edwards, Maryland
Steve LaTourette, Ohio               Pedro R. Pierluisi, Puerto Rico
Shelley Moore Capito, West Virginia  Joe Courtney, Connecticut
Tim Griffin, Arkansas                John Sarbanes, Maryland

                              REPORT STAFF

               Dan Schwager, Chief Counsel/Staff Director
             Deborah Sue Mayer, Director of Investigations

                       Patrick McMullen, Counsel
                      Christopher R. Tate, Counsel
                Brittany M. Bohren, Investigative Clerk












                          LETTER OF SUBMITTAL

                              ----------                              

                          House of Representatives,
                                       Committee on Ethics,
                                Washington, DC, September 25, 2012.
Hon. Karen L. Haas,
Clerk, House of Representatives,
Washington, DC.
    Dear Ms. Haas: Pursuant to clauses 3(a)(2) and 3(b) of rule 
XI of the Rules of the House of Representatives, we herewith 
transmit the attached Report, ``In the Matter of Representative 
Maxine Waters.''
            Sincerely,
                                   Jo Bonner,
                                           Chairman.
                                   Linda T. Sanchez,
                                           Ranking Member.














                            C O N T E N T S

                              ----------                              
                                                                   Page
 I. INTRODUCTION......................................................1
II. PROCEDURAL HISTORY................................................2
III.ANALYSIS..........................................................6

IV. CONCLUSION.......................................................18
 V. STATEMENT UNDER RULE 13, CLAUSE 3(c) OF THE RULES OF THE HOUSE OF 
    REPRESENTATIVES..................................................18
APPENDIX A: Office of Congressional Ethics, Report and Findings, 
  Review 09-2121, Aug. 6, 2009...................................    19
APPENDIX B: Report of the Outside Counsel to the Committee on 
  Ethics in the Matter of Representative Maxine Waters...........    99
APPENDIX C: Letter of Reproval to Mikael Moore...................   498














                                                 House Calendar No. 163
112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-690

======================================================================



 
             IN THE MATTER OF REPRESENTATIVE MAXINE WATERS

                                _______
                                

 September 25, 2012.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

             Mr. Goodlatte, from the Committee on Ethics, 
                        submitted the following

                              R E P O R T

                            I. INTRODUCTION

    In July 2009, the Office of Congressional Ethics (OCE) 
forwarded to the Committee on Ethics (Committee) a Report and 
Findings, concluding that Representative Waters may have 
violated House conflict-of-interest rules when she called the 
then-Secretary of the Treasury to set-up a meeting between the 
Secretary\1\ and representatives of the National Bankers 
Association (NBA).\2\ As it turned out, all of the NBA 
representatives who attended the meeting were also associated 
with OneUnited Bank (OneUnited), and OneUnited was the only 
minority bank represented at the meeting. In light of the fact 
that OneUnited requested $50 million in financial assistance 
from the Treasury Department at the meeting, and that 
Representative Waters' husband was a former member of the Board 
of Directors of OneUnited and a then-stockholder in the bank, 
OCE recommended that the Committee further investigate the 
allegations.
---------------------------------------------------------------------------
    \1\The Secretary agreed to the meeting but ultimately did not 
attend. Other Treasury officials attended the meeting in his place.
    \2\Office of Congressional Ethics, Report and Findings, Review 09-
2121, Aug. 6, 2009.
---------------------------------------------------------------------------
    As discussed in greater detail in Section II, the Committee 
has conducted an extended, and at times contentious, 
investigation of the allegations OCE referred to it. That 
investigation spurred allegations that the Committee and its 
staff had violated Representative Waters' due process rights, 
which ultimately led to the Committee's decision to hire 
Outside Counsel William R. ``Billy'' Martin, the voluntary 
recusal of six Members of the Committee, and the appointment of 
six new Members to establish a Committee of Members who had no 
role in reviewing Representative Waters' matter in the 111th 
Congress and were given the sole task of resolving this matter 
(the Waters Committee). Further, all current Committee staff 
who were involved in Representative Waters' matter in the 111th 
Congress were recused from the matter in the 112th Congress.
    Outside Counsel has made recommendations based on a ``clear 
and convincing'' standard of proof. This is the standard 
required by Committee Rule 23(c) to determine if allegations in 
a Statement of Alleged Violation (SAV) have been proven, and is 
the appropriate standard applied to Outside Counsel's de novo 
review of the allegations. Thus, if Outside Counsel does not 
believe that such a standard would be met, then his de novo 
review would appropriately recommend that no Investigative 
Subcommittee would be warranted, and the matter should be 
resolved. That standard, however, only applies to proving the 
allegations in an SAV in a formal adjudicatory proceeding which 
is necessary only before recommending a sanction to the House 
of Representatives. To be clear, such a burden of proof does 
not apply to the level of evidence necessary for the Committee 
to express its concerns in a letter of reproval.
    In addition, Outside Counsel has recommended that there is 
evidence supporting certain conclusions (particularly regarding 
the timing and nature of Representative Waters' Chief of 
Staff's (COS) knowledge of her conflict), and that the Members 
have the responsibility to make credibility determinations 
about that evidence, but that prior to the Members' credibility 
determinations, the evidence that does exist does not meet the 
clear and convincing standard. The Members have now made those 
credibility determinations, and applied their judgment and 
experience to the factual findings and analysis of the Outside 
Counsel.
    The Waters Committee has thoroughly reviewed Outside 
Counsel's final report in this matter. Additionally, the 
Committee provided Representative Waters and her COS the 
opportunity to appear before the Committee. Representative 
Waters' COS took that opportunity. The Committee heard his 
testimony on September 21, 2012, had a full discussion with 
him, and considered his testimony carefully before reaching the 
Committee's conclusion. The Committee agrees with Outside 
Counsel's conclusions and recommendations. Accordingly, the 
Waters Committee has unanimously determined that there is not 
clear and convincing evidence that Representative Waters 
violated any House rule, law, regulation, or other applicable 
standard of conduct by her efforts to assist the NBA and other 
minority and community banks in the 2008 timeframe. However, 
after making its credibility determinations, the Waters 
Committee has concluded that sufficient evidence suggests that 
contrary to Representative Waters' instructions and without her 
knowledge, Representative Waters' COS acted to assist OneUnited 
on two occasions after the COS knew or should have known that 
Representative Waters had a conflict of interest regarding 
OneUnited. Accordingly, the Waters Committee has issued a 
letter of reproval to Representative Waters' COS.

                         II. PROCEDURAL HISTORY

    On April 2, 2009, the OCE began a review of allegations 
that Representative Waters may have violated House Rule XXIII, 
clause 3 and House precedent regarding conflict of interest 
when she called the then-Treasury Secretary and requested that 
Treasury Department officials meet with representatives from 
the NBA. OCE's review centered on this meeting, which OCE 
alleged to have focused on a single bank--OneUnited--in which 
Representative Waters' husband held stock and for which he had 
previously served on the Board of Directors.
    On July 24, 2009, OCE voted to refer the matter to the 
Committee for further investigation and transmitted its Report 
and Findings on this matter to the Committee later that month. 
Following an investigation by Committee staff pursuant to 
authority granted by Committee Rule 18(a), the Committee 
established an Investigative Subcommittee (ISC or Waters ISC) 
on October 29, 2009. The staff assigned to the ISC were the 
former Director of Investigations and two staff attorneys. That 
team was supervised by the former Chief Counsel and Staff 
Director. During the course of the investigation, the ISC 
issued 11 subpoenas, interviewed 13 witnesses and reviewed over 
1,300 pages of documents.
    In the Spring of 2010, the ISC came to an agreement to 
release a report critical of some conduct in the matter, but 
recommending no further action or sanction. However, the former 
Chief Counsel and Staff Director advised the Committee that the 
rules did not permit an ISC to issue a report that was critical 
of a Member without adopting a Statement of Alleged Violation 
(SAV) and providing the Respondent with the opportunity for an 
adjudicatory hearing under the rules for an adjudicatory 
subcommittee.\3\ The former Chief Counsel, however, also 
assured the ISC that Representative Waters would accept an SAV 
and waive her right to a hearing.\4\
---------------------------------------------------------------------------
    \3\As discussed below, the Waters Committee disagrees with this 
interpretation.
    \4\The former Chief Counsel's assurances proved to be incorrect.
---------------------------------------------------------------------------
    Ultimately, on June 15, 2010, the ISC adopted an SAV 
alleging three counts of misconduct: violations of clauses 1 
and 3 of House Rule XXIII, the House Code of Official Conduct, 
and paragraph 5 of the Code of Ethics for Government Service. 
On June 30, 2010, Representative Waters filed a Motion for Bill 
of Particulars. The following day, on July 1, 2010, the ISC 
issued an Order denying the Motion for Bill of Particulars. On 
July 12, 2010, Representative Waters filed a Motion to Dismiss 
the SAV. The ISC denied this motion on July 15, 2010.
    On July 28, 2010, the ISC transmitted the SAV to the full 
Committee. Shortly thereafter, the Committee established an 
Adjudicatory Subcommittee (ASC or Waters ASC) to conduct a 
hearing on the SAV. The same staff members who had been 
assigned to and worked on the Waters ISC continued to work on 
the Waters ASC, with the addition of another staff attorney. 
Throughout August 2010, the staff interviewed numerous 
witnesses, and sought the voluntary production of documents 
from various sources. During this time period, staff also 
attempted to schedule a settlement conference with 
Representative Waters.
    On August 25, 2010, counsel for Representative Waters 
submitted a letter objecting to the ongoing investigation by 
the ASC. Specifically, counsel stated that ``[s]uch inquiry 
violates both this Committee's rules and comparable federal 
criminal procedures and raises significant questions about the 
sufficiency of the evidence that the Investigative Subcommittee 
relied upon when it issued the charges contained in its SAV.'' 
The then-Chair and the then-Ranking Member jointly responded to 
this letter on August 31, 2010, highlighting the fact that 
Committee Rule 23 contemplates that both the Committee counsel 
and the Respondent will prepare their case for a hearing, and 
also reminding counsel that criminal law precedent is not 
binding on the Committee, as the disciplinary proceedings in 
the House are not a criminal trial.
    After a series of disagreements between the Committee 
Members and staff regarding scheduling, on October 7, 2010, the 
ASC scheduled a hearing in Representative Waters' matter for 
November 21, 2010. On or about October 12, 2010, the Committee 
postponed the date of the hearing by one week, until November 
29, 2010.
    On November 15, 2010, staff submitted a formal motion to 
the ASC to recommit the matter to the ISC, on the grounds that 
it had obtained new evidence. The following day, Representative 
Waters filed a response to the Motion to Recommit. On November 
18, 2010, the ASC voted to recommit the matter to the ISC.
    As explained more fully in the Report of Outside Counsel, 
the decision to recommit the matter preceded a significant 
upheaval in the makeup of Committee staff and the conduct of 
Committee business for the duration of the 111th Congress. The 
personnel issues that began in November 2010 were ongoing at 
the beginning of the 112th Congress, and only began to be 
resolved once the Committee hired a new Staff Director and 
Chief Counsel on May 2, 2011. The Committee was without a full 
complement of staff until July, 2011. By the end of the 111th 
Congress, the Committee recognized the need to hire Outside 
Counsel to complete this matter. However, the Committee had to 
first reconstitute its full time staff, which postponed the 
process for selecting and formalizing a relationship with 
Outside Counsel until the hiring of Mr. Martin on July 20, 
2011.
    The Committee's first charge to Outside Counsel was a 
thorough review of the serious allegations regarding the 
Committee's own conduct in this matter. Mr. Martin thus 
conducted an extensive review of due process allegations raised 
by both Representative Waters and the Committee itself, which 
included a document review comprising over 100,000 pages, 
interviews of 26 witnesses, including all Members of the 
Committee from the 111th Congress as well as all current and 
former staff who may have had knowledge of the relevant issues, 
and a significant and thorough analysis of the legal issues as 
embodied in Part II of Outside Counsel's Report. The vast 
majority of this review took place between July, 2011 and the 
end of 2011. However, one witness refused to testify without 
the issuance of a subpoena. This same witness indicated an 
intention to refuse to answer questions upon the issuance of a 
subpoena on the basis of the witness' Fifth Amendment 
privilege. The witness did ultimately testify before the Waters 
Committee, but the witness's recalcitrance delayed the 
completion of the first phase of Outside Counsel's review by at 
least four months.
    On February 17, 2012, based on the advice received from 
Outside Counsel, six Members of the Committee for the 112th 
Congress--the Chairman, the Ranking Member, and all current 
Committee Members who also served on the Committee during the 
111th Congress--voluntarily requested recusal from this matter. 
Outside Counsel did not find any evidence of wrongdoing by any 
Member of the Committee, and no Member requested recusal 
because of any such wrongdoing. Instead, the Members requested 
recusal because:
          (1) They believed that, out of an abundance of 
        caution and to avoid even an appearance of unfairness, 
        their voluntary recusal would eliminate the possibility 
        of questions being raised as to the partiality or bias 
        of Committee Members considering this matter;
          (2) They wanted to assure the public, the House, and 
        Representative Waters that this investigation was 
        continuing in a fair and unbiased manner; and
          (3) They wanted to move this matter forward in a 
        manner that supports the greatest public confidence in 
        the ultimate conclusions of this Committee.\5\
---------------------------------------------------------------------------
    \5\See Letter from the Chairman, Committee on Ethics to the Speaker 
of the House of Representatives at 2 (February 17, 2012), available at 
http://ethics.house.gov/sites/ethics.house.gov/files/
Letter%20to%20the%20Speaker.pdf.
---------------------------------------------------------------------------
    The recusals necessitated bringing six new, substitute 
Members of the Committee, who were appointed on February 17, 
2012 as well, up to speed on the work of Outside Counsel. Upon 
completion of this process and Outside Counsel's due process 
review, Outside Counsel submitted his conclusions from that 
phase of the review to the newly constituted Waters Committee 
in May, 2012. On June 6, 2012, the Acting Chairman and Acting 
Ranking Member of the Waters Committee wrote to Representative 
Waters, notifying her that upon the advice of Outside Counsel, 
the Waters Committee had unanimously found that none of the 
individual allegations raised regarding the conduct of 
Committee Members or staff, nor the totality of the 
circumstances of those claims, amounted to a deprivation of her 
due process rights.
    Only upon conclusion of the first phase of the review was 
Outside Counsel authorized to conduct a de novo review of the 
actual substance of the allegations against Representative 
Waters. This review was similarly thorough; Outside Counsel 
reviewed all prior ISC and staff interview transcripts and all 
documents produced to the Committee, and also re-interviewed 
several key witnesses. Members of the Waters Committee also 
reviewed many of these ISC and staff interview transcripts and 
key documents. Finally, after providing Representative Waters 
and her COS the opportunity to appear before the Committee, the 
Waters Committee held a public hearing on September 21, 2012. 
The Committee heard Representative Waters' COS' testimony and 
fully considered it. The Outside Counsel's findings and 
conclusions for both phases of its work are set forth in the 
attached Outside Counsel's Report.
    The Waters Committee, which has been involved in this 
matter for less time than any other participant, notes that 
many factors contributed to the length of this matter, which, 
given all those factors, while unfortunate, was not, in fact, 
unreasonable. Such factors include: (1) the significant number 
of motions and complaints raised by Representative Waters and 
the unprecedented level of consideration given to those 
concerns, even though all were eventually dismissed; (2) the 
very complicated task of tracking legislative actions by 
various staff, offices, lobbyists and departments at the center 
of the financial crisis in September and October of 2008; (3) 
the breakdown of communications in the last Congress, discussed 
more fully below; and (4) the normal demands of conducting 
thorough and responsible investigations. The time Outside 
Counsel spent on this matter is entirely appropriate. In total, 
Outside Counsel reviewed over 150,000 pages of documents, in 
addition to conducting numerous interviews. In fact, of the 
numerous occasions in which the Committee has engaged an 
outside counsel for such matters, 14 months is an average 
length of engagement.

                             III. ANALYSIS

    As Section II details, Outside Counsel's work proceeded in 
two phases. First, Outside Counsel reviewed allegations raised 
by both Representative Waters and the Committee that the 
Committee and its staff had violated Representative Waters' due 
process rights. After an extensive investigation, Outside 
Counsel concluded, and recommended that the Waters Committee 
find, that none of the conduct alleged, either considered 
separately or in its totality, amounted to a violation of 
Representative Waters' due process rights. In reaching this 
conclusion, Outside Counsel assumed, for purposes of its due 
process analysis only, that certain conduct actually occurred 
as alleged. Thus, Outside Counsel assumed that a member of 
Committee staff disclosed confidential Committee information, 
in violation of the Committee's confidentiality rules. Outside 
Counsel found that Representative Waters also violated the 
Committee's rules by disclosing confidential Committee 
information during a televised press conference and on her 
House Web site. Outside Counsel also found that certain 
Committee staff communicated with Committee Members from one 
party regarding active matters, including Representative 
Waters' matter, without copying the Committee as a whole. 
Finally, Outside Counsel assumed that a former member of the 
Committee staff made comments that were racially insensitive 
and completely inappropriate.
    Outside Counsel took these allegations extremely seriously, 
as did the Waters Committee. Outside Counsel concluded, for the 
reasons detailed in his thorough legal and factual analysis, 
that none of the alleged conduct rose to the level of a 
violation of Representative Waters' constitutional rights. The 
Waters Committee, whose Members had no role with respect to the 
investigation of Representative Waters' matter during the 111th 
Congress, unanimously agreed with this conclusion and 
independently made the same determination.\6\
---------------------------------------------------------------------------
    \6\The Waters Committee's conclusions with respect to the due 
process review were previously detailed in two public statements, dated 
June 6, 2012 and June 8, 2012.
---------------------------------------------------------------------------
    Having completed the due process review, Outside Counsel 
commenced the second phase of his work, reviewing the 
substantive allegations raised by the OCE Report and Findings. 
After reviewing the entire evidentiary record, including 
information from OCE and all of the information gathered during 
the Committee's prior investigation, and conducting additional 
interviews, Outside Counsel concluded and recommended that the 
Committee find that Representative Waters did not violate any 
House rule, law, regulation, or other applicable standard of 
conduct. The Waters Committee unanimously concurred with this 
recommendation.
    With respect to Representative Waters' actions to set up a 
meeting between the then-Treasury Secretary and representatives 
from the NBA--who were also associated with OneUnited--Outside 
Counsel concluded that Representative Waters reasonably 
believed, at the time she requested the meeting, that the 
attendees would be speaking on behalf of minority banks 
generally. While it appears that all of the minority bankers 
who attended the meeting were associated with OneUnited, and 
that OneUnited was alone in requesting substantial financial 
assistance from the Treasury Department at the meeting, the 
record indicates that Representative Waters did not have reason 
to know of either of these facts when she arranged the meeting. 
Accordingly, Outside Counsel recommended that the Waters 
Committee find that Representative Waters reasonably believed 
she was arranging the Treasury meeting on behalf of a broad 
class of minority banks, and that in doing so she did not 
violate any House rule, law, regulation, or other applicable 
standard of conduct. The Waters Committee agreed with Outside 
Counsel's recommendation.
    Outside Counsel also reviewed allegations that 
Representative Waters' COS took steps to assist OneUnited after 
Representative Waters realized that the bank made a request for 
federal financial assistance from the Treasury Department and 
that she had a conflict of interest regarding the bank's 
request--and any other efforts to provide specific financial 
assistance to OneUnited--due to her significant financial 
interest in the bank. Outside Counsel concurred in 
Representative Waters' determination that she had a conflict of 
interest with respect to OneUnited's request for specific 
financial assistance. Outside Counsel also recognized that the 
House Rules prohibit Members from doing anything through staff 
that the Rules prohibit them from doing directly.\7\ Further, 
longstanding Committee precedent holds Members responsible for 
the actions of their staff, when those actions are within the 
scope of the staff's official duties.\8\ Thus, Outside Counsel 
believed that if Representative Waters' COS knowingly ignored 
Representative Waters' conflict of interest--after the conflict 
became clear--and facilitated OneUnited's request for federal 
financial assistance, Representative Waters could be 
responsible for violating House rules.
---------------------------------------------------------------------------
    \7\See, e.g., Comm. on Ethics, In the Matter of Allegations 
Relating to Representative Laura Richardson, H. Rep. 112-642, 112th 
Cong. 2d Sess. Appendix B at 58 (2012) (``Members are responsible for 
violations that occur in their office, and cannot shield themselves 
from liability by using staff as a proxy for wrongdoing''); House Comm. 
on Standards of Official Conduct, In the Matter of the Investigation 
into Officially Connected Travel of House Members to Attend the Carib 
News Foundation Multinational Business Conferences in 2007 and 2008 
(hereinafter Carib News), H. Rep. 111-422, 111th Cong., 2d Sess. 126 
(2010) (``it would not well serve the House as an institution to allow 
its Members to escape responsibility by delegating authority to their 
staff to take actions and hide behind their lack of knowledge of the 
facts surrounding these actions.'')
    \8\See, e.g., Carib News at 122 (``Many times Members act through 
the actions of their staff and, therefore, should be held liable for 
those actions in certain circumstances''); Comm. On Standards of 
Official Conduct, In the Matter of Representative E.G. ``Bud'' Shuster, 
H. Rep. 106-979, 106th Cong. 2d Sess. 31 (2000) (Member held liable for 
violations of prohibition on campaign work by official staff arising 
from lack of uniform leave policy, despite finding of no evidence that 
the Member was aware that staff were performing campaign-related work 
in the congressional office); Statement Regarding Complaints Against 
Representative Newt Gingrich, 101st Cong. 2d Sess. 60, 165-66 (1990) 
(Member held responsible for violations arising out of presence of 
political consultant in his office); In the Matter of Representative 
Austin J. Murphy, H. Rep. 100-485, 100th Cong. 1st Sess. 4 (1987) (``a 
Member must be held responsible to the House for assuring that 
resources provided in support of his official duties are applied to the 
proper purposes'')
---------------------------------------------------------------------------
    However, Outside Counsel recommended that the Committee 
find that the evidence here does not establish that 
Representative Waters violated House rules. As Outside 
Counsel's Report details, it appears that Representative Waters 
recognized and made efforts to avoid a conflict of interest 
with respect to OneUnited. She informed the then-Chairman of 
the House Financial Services Committee that she was ``not going 
to be involved in'' OneUnited's request for assistance from the 
Treasury Department, and then relayed this decision to her COS. 
Accordingly, Outside Counsel concluded and recommended that the 
Waters Committee find that Representative Waters did not 
violate House rules by failing to exercise adequate oversight 
of her COS with respect to his work on behalf of OneUnited.
    The significant difference between the Waters Committee's 
conclusions in this matter and the report that the ISC in the 
111th Congress was prepared to adopt is that the ISC was 
prepared to find that Representative Waters failed to 
adequately supervise her COS and thus allowed him to take 
actions to assist OneUnited that Representative Waters herself 
could not have taken. As previously noted, the Committee has 
previously held Members responsible for the actions of their 
staff in some circumstances, where the staff act within the 
scope of their official responsibilities.\9\ However, the 
Waters Committee finds that Representative Waters took at least 
three steps to inform her COS of her conflict of interest with 
respect to OneUnited and to prevent the COS from acting on that 
conflict: (1) she publicly disclosed her financial interest in 
OneUnited at a Financial Services subcommittee hearing and on 
her annual Financial Disclosure Statements; (2) she informed 
the Chairman of the Financial Services Committee of the 
conflict and indicated that she would not be involved with 
OneUnited's request for financial assistance; and (3) she 
informed her COS of her conversation with the Chairman and 
directed her COS not to involve himself with OneUnited's 
request. These actions distinguish Representative Waters' 
conduct from other matters in which the Committee has found a 
Member to have violated House rules by failing to supervise 
their staff.
---------------------------------------------------------------------------
    \9\See n.8 supra.
---------------------------------------------------------------------------
    Outside Counsel also analyzed the conduct of Representative 
Waters' COS, who is also her grandson. Outside Counsel 
considered evidence that Representative Waters told her COS of 
her conflict of interest with respect to OneUnited prior to 
September 19, 2008, which is the first date on which the COS 
sent an email that was unambiguously intended to assist 
OneUnited specifically. Outside Counsel determined that the 
record clearly established that Representative Waters and the 
former Chairman of the Financial Services Committee both 
recalled a conversation in which Representative Waters 
recognized that she had a conflict of interest with respect to 
any specific request for financial assistance by OneUnited, and 
agreed not to be involved with such requests. Indeed, the 
Chairman of the Financial Services Committee testified that he 
told Representative Waters, ``I recommend that you stay out of 
it.'' However, Outside Counsel recommended that the record did 
not establish, to a clear and convincing standard, that 
Representative Waters had this conversation with the Chairman 
of the Financial Services Committee, or relayed it to her COS, 
by September 19, 2008. The weight of the evidence suggests that 
Representative Waters' conversation with the Chairman of the 
Financial Services Committee occurred no later than September 
20, 2008, and that Representative Waters likely directed her 
COS not to work on OneUnited matters soon after that 
conversation. For this and other reasons, the Waters Committee 
thus concluded that the COS knew or should have known he was 
not to work on OneUnited matters before he emailed information 
regarding OneUnited's holdings of Fannie Mae and Freddie Mac 
stock to a Financial Services Committee staffer on September 
23, 2008.
    The Waters Committee notes that Outside Counsel did not 
conclude that the conversations between Representative Waters 
and the Chairman of the Financial Services Committee, or 
between her and her COS, definitely occurred on or before 
September 19, 2008. Rather, Outside Counsel recommended that 
the evidence could not establish, to a clear and convincing 
standard, that those conversations occurred before that date.
    The Waters Committee, in weighing the credibility of the 
witnesses and relative strength of the evidence in the record, 
concluded that Representative Waters likely instructed her COS 
not to work on OneUnited matters before September 19, 2008. The 
Waters Committee credited the testimony of the former Chairman 
of the Financial Services Committee in late 2009 that his 
conversation with Representative Waters about OneUnited 
probably occurred around the time of the NBA's meeting with the 
Treasury Department, which was held on September 9, 2008. In 
fact, the closest reading of the then-Chairman's testimony 
provides an indication that his conversation with 
Representative Waters occurred early in the week of September 
8, 2008, because that was the first time in which both parties 
were together in Washington, DC after the Chairman received a 
call from a Massachusetts State Senator alerting him to 
OneUnited's problems. The Waters Committee acknowledges that 
when Outside Counsel interviewed the former Chairman nearly two 
years later, his recollection of the date of the conversation 
was less firm. In that interview, the Chairman indicated that 
he believed the conversation occurred ``[b]efore September 19 
or 20,'' but was only certain that it occurred by September 
20th. In light of the passage of time between these interviews, 
the Waters Committee gave greater weight to the Chairman's 
initial recollection, which, in any event, was not inconsistent 
with his more recent testimony.\10\ Accordingly, the Waters 
Committee did not credit the COS's testimony that 
Representative Waters conveyed that conversation to him, and 
her direction with respect to refraining from work on OneUnited 
matters, in late September or early October 2008.
---------------------------------------------------------------------------
    \10\In the former Chairman of the Financial Services Committee's 
recent interview, he agreed that his conversation with Representative 
Waters concerning OneUnited was within the ten day period following the 
Treasury Department meeting. This recollection is obviously not 
inconsistent with his statement in the same interview that the 
conversation was before September 19, 2008.
---------------------------------------------------------------------------
    The Waters Committee also concluded that it strained 
credibility to assert, as the COS did, that when Representative 
Waters informed the COS of her conversation with the Chairman 
of the Financial Services Committee, she directed him only 
``not to, quote/unquote, work on issues that day.'' (Emphasis 
added.) The Waters Committee questioned why, if Representative 
Waters felt that she had a conflict of interest with respect to 
OneUnited matters, she would instruct her COS to refrain from 
working on such matters for only one day. The Waters 
Committee's conclusion was bolstered by Representative Waters' 
own description of her direction to her COS during an August 
2010 press conference:

          There has also been a question about whether or not I 
        instructed my staff not to get involved with OneUnited 
        Bank, and their interest in assessing (sic) TARP 
        funds . . .
          I told my chief of staff that I had informed Chairman 
        Frank about OneUnited Bank's interest, that we were 
        only concerned about small and minority banks broadly, 
        that Chairman Frank would evaluate OneUnited's issue 
        and make a decision about how to proceed.
          And given the e-mails that the committee has offered 
        as their evidence, we communicated with each other 
        clearly.

    Representative Waters did not state that she qualified or 
limited her direction to her COS in any way, and she stated 
that she ``clearly'' communicated that direction to her COS. 
This conclusion is further bolstered by the testimony of the 
Chief Counsel for the Financial Services Committee, who stated 
that ``[the COS] and I had a conversation. I don't remember if 
I--I don't remember how we came to have it, whether I called 
him in or he stopped by. But we had a very brief conversation 
in which he mentioned the concern about a conflict and 
indicated that [Representative] Waters therefore would not be 
playing an active role in regard to [OneUnited] because of the 
concern about the conflict.'' This testimony confirms that the 
COS understood the import of the instruction from 
Representative Waters and chose to act in contravention of that 
instruction.
    Outside Counsel also considered evidence suggesting that 
Representative Waters' COS knew or should have known--
regardless of how and when Representative Waters conveyed her 
conflict of interest to him--that Representative Waters had a 
significant financial interest in, and thus a potential 
conflict of interest with respect to, OneUnited. That evidence 
included Representative Waters' disclosure of the stock 
ownership during a public meeting of a Financial Services 
subcommittee in October 2007. The COS testified that he was 
aware of the hearing before it occurred, and discussed 
Representative Waters' testimony regarding OneUnited with her 
beforehand. The COS further testified that he sometimes 
attended hearings with Representative Waters, but he could not 
recall whether he attended the October 2007 hearing or heard 
Representative Waters disclose her husband's ownership of 
OneUnited stock.\11\ The Waters Committee's conclusion that the 
COS knew or should have known of his employing Member's 
financial interest in OneUnited is further supported by 
Representative Waters' own testimony to the Committee that her 
COS ``would have known that my husband was invested in 
OneUnited.''\12\ Further, Representative Waters disclosed her 
financial interest on her Financial Disclosure Statements. 
Finally, the COS suggested to the ISC that he understood at the 
time that the conversation between Representative Waters and 
the former Chairman of the Financial Services Committee 
centered on Representative Waters' conflict of interest. 
Despite the evidence to the contrary, including Representative 
Waters' own statement, the COS denied any knowledge of 
Representative Waters' financial interest in OneUnited to 
Outside Counsel.
---------------------------------------------------------------------------
    \11\Representative Waters' COS represented to the Committee ``that 
the disclosure that [Representative Waters] made publicly [at the 
October 2007 hearing] referenced only her husband's director position, 
not a financial interest.'' He also indicated that a video recording of 
the hearing showed that he was not present when Representative Waters 
made the disclosure he referenced. The COS is incorrect on both counts. 
Representative Waters made two disclosures, at different times in the 
hearing. Her first statement on the topic disclosed only that her 
husband ``is a director of a minority bank.'' However, later in the 
hearing, Representative Waters added that her husband ``is also a 
shareholder in OneUnited Bank.'' See Hearing Before the Subcommittee on 
Oversight and Investigations of the Committee on Financial Services, 
U.S. House of Representatives, 110th Cong., 1st Sess., October 30, 
2007, at 6, 21-22. Further, the video recording of the hearing only 
shows half of the audience in the hearing room and limited views of 
certain seats behind the Members, and thus does not establish whether 
the COS was in the hearing room when Representative Waters disclosed 
her husband's financial interest in OneUnited.
    \12\Representative Waters testified as follows:
    The Witness. I remember when we had a FIRREA hearing and I said my 
husband was invested.
    ISC Chairwoman. Because there was a witness from OneUnited at the 
hearing?
    The Witness. Yeah. They had people there from NBA and some other 
places, and FDIC was there, everybody was there, and I disclosed 
publicly. I disclosed in all my required disclosure. I mean, I've never 
tried to hide anything.
    ISC Chairwoman. So [the COS] understood there was a financial 
interest there because of the public disclosures, because of your 
disclosure----
    The Witness. He would have known that my husband was invested in 
OneUnited. The public knows, everybody knows. The newspapers knew. My 
financial disclosure papers were available to everybody.
---------------------------------------------------------------------------
    Outside Counsel recognized the evidence suggesting that the 
COS knew or should have known of Representative Waters' 
financial interest in OneUnited, but recommended that the 
record, standing alone, did not establish that conclusion to a 
clear and convincing standard. Outside Counsel thus deferred to 
the Waters Committee to weigh the credibility of the COS's 
claimed ignorance of Representative Waters' financial interest 
in OneUnited, in light of the evidence to the contrary. The 
Waters Committee credits Representative Waters' own statement 
regarding her COS's knowledge and the totality of the evidence 
in concluding that the COS knew or should have known of 
Representative Waters' financial interest in OneUnited. Thus, 
the COS knew or should have known that Representative Waters 
had a conflict of interest with respect to specific actions to 
assist OneUnited, regardless of how and when Representative 
Waters informed him that she believed such a conflict existed.
    The Waters Committee agrees with Representative Waters' 
determination that she could not take specific actions to 
assist OneUnited due to her significant financial interest in 
the bank. First, it is clear to the Waters Committee, as it was 
to Representative Waters, that Representative Waters did have a 
conflict which prevented her from taking particular action to 
uniquely assist OneUnited. The Waters Committee notes that 
Representative Waters had an investment in OneUnited which, at 
that time, was worth approximately $350,000. Furthermore, the 
assistance OneUnited was seeking was nothing less than avoiding 
the failure of the bank itself. Such failure could have cost 
Representative Waters her entire investment.
    It is the Waters Committee's belief, and hope, that most 
Members understand that they cannot take official actions that 
would assist a single entity in which the Member has a 
significant interest, particularly when that interest would 
clearly be affected by the assistance sought. Certainly 
Representative Waters seemed to understand that principle.
    In assessing the credibility of Representative Waters' COS' 
statements on this point, the Waters Committee considered other 
statements by the COS that the Waters Committee found 
inconsistent with the record. For example, when the COS was 
asked whether a person who communicated with the COS about the 
impact of the conservatorship was associated with OneUnited, 
the COS answered ``I'm not sure.'' But the COS received an 
email from that person on July 16, 2008, in which the sender 
referenced ``OneUnited Bank . . . on whose board I serve.'' The 
sender stated that he made this statement for ``[f]ull 
disclosure,'' but that he believed the COS already knew at the 
time that he was on the Board of Directors of OneUnited. After 
being confronted with these inconsistencies at the hearing on 
September 21, 2012, the COS changed his testimony yet again. At 
the public hearing, the COS told the Committee that he did not 
deny knowing that the individual was on the OneUnited Board, 
but explained that in matters on Capitol Hill, individuals 
often ``wear many hats.'' While he is correct to assert that, 
in life, people may serve in more than one role, the COS' 
September 21, 2012, testimony regarding his knowledge of the 
individual's position with OneUnited directly contradicts his 
testimony before the Outside Counsel just two months earlier on 
July 5, 2012.\13\ Outside Counsel expressed the same concerns 
about the COS' credibility at the September 21, 2012 hearing 
when he stated,
---------------------------------------------------------------------------
    \13\This is only one example of the serious concerns the Waters 
Committee had about the COS' testimony. As Outside Counsel noted in 
their Report and at the September 21, 2012 hearing, there were other 
examples where the COS' testimony changed after being confronted with 
contradictory evidence.

          Indeed, the Committee could reasonably find that [the 
        COS'] credibility is even less now than before this 
        hearing started. On two key points, [the COS] appears 
        to have changed his testimony today when confronted 
        with evidence and arguments that contradict his earlier 
        statements. Those points include [the COS'] knowledge 
        of whether [the individual] was a OneUnited Board 
        member--which [the COS] previously denied knowing but 
        is now admitting--and his admission that Representative 
        Waters told him to stop working on OneUnited matters 
        and did not limit that instruction to just one day. 
---------------------------------------------------------------------------
        That is a difference in his testimony.

    Representative Waters' COS has suggested that the Committee 
has, in its Report in In the Matter of Representative Graves, 
previously excused certain actions in matters where there may 
be a conflict of interest.\14\ The COS' reliance on Graves is 
misplaced for two reasons.\15\
---------------------------------------------------------------------------
    \14\Representative Waters' COS submitted his views of the 
Committee's precedents in an interview with Outside Counsel.
    \15\The Waters Committee notes that the Committee's decision in 
Graves postdated the facts of this case, and so the COS could not have 
relied on it at the time. See Committee on Standards of Official 
Conduct, In the Matter of Representative Sam Graves, H. Rept. 111-320, 
111th Cong. 1st Sess. (2009) (Graves). In fact, the Committee's 
position at the time of the events of this case can be found in the 
House Ethics Manual, released in Spring 2008. See House Ethics Manual 
(Ethics Manual) at 237 (2008).
---------------------------------------------------------------------------
    First, Graves is factually distinct from this case in 
almost every relevant respect. Representative Graves invited a 
friend to testify before the Committee on Small Business, on 
behalf of the Missouri Soybean Association. Representative 
Graves' friend had an investment in two renewable fuel 
cooperatives in which Representative Graves' wife had also 
invested. But Representative Graves' friend did not appear on 
behalf of either of those cooperatives, and the Small Business 
Committee did not intend to take any action to benefit those 
cooperatives; in fact, the hearing in question did not involve 
any legislation that would ultimately come to the House 
floor.\16\ By contrast, the financial connection between 
Representative Waters and OneUnited was more direct (given that 
she actually owned stock in the entity in question) and the 
actions contemplated (attempts to prevent significant financial 
losses to OneUnited, either legislatively or through 
collaboration with the Treasury Department) more impactful than 
those in Graves.
---------------------------------------------------------------------------
    \16\See Graves at 1-3.
---------------------------------------------------------------------------
    Second, while Representative Waters' COS appears to rely on 
a single sentence in Graves that might be construed to support 
the proposition that a Member may advocate on behalf of 
singular entities in which the Member has a financial interest, 
so long as that interest is a small enough fraction of the 
entity's ownership that the Member might be situated as a 
member of a ``class'' of investors in that entity, the 
Committee's actual statement is considerably more limited than 
the COS suggests. In Graves, the Committee stated that 
Representative Graves' wife held a ``minimal'' interest in two 
biofuels companies and thus, ``even if Mr. Hurst's testimony 
benefited only the two companies in which Mrs. Graves was 
invested, Representative Graves' or Mrs. Graves' personal 
financial interest in either investment would have been 
affected as members of a class of investors and not as 
individuals.''\17\ This single sentence of dicta the COS cites 
was entirely unnecessary to the Committee's decision in 
Graves,\18\ which rested instead on the facts that: (1) the 
witness was testifying about matters of interest to an entire 
association of similar entities; (2) the witness did not make 
any specific requests on behalf of any one entity; (3) neither 
Representative Graves nor Mrs. Graves could derive a financial 
benefit from the friend's testimony; (4) Representative Graves 
did not, in fact, derive a financial benefit from the 
testimony; and (5) in any event, the witness met all reasonable 
and objective requirements established for a witness before the 
Small Business Committee. But even if it were not dicta, the 
COS' interpretation of Graves cannot be correct.
---------------------------------------------------------------------------
    \17\See id. at 18.
    \18\See id. at 17 (``assuming arguendo that Representative Graves 
or his wife benefited financially from [the] testimony''); id. at 18 
(``even if Representative Graves or his wife had derived a financial 
benefit from [the] testimony, such benefit would only have been as a 
member of a class of investors in renewable fuel companies.'').
---------------------------------------------------------------------------
    Certainly, the language in the Report concerning 
Representative Graves should not suggest that all actions on 
behalf of a single entity are permissible as long as there are 
numerous shareholders, and the interest itself is disclosed. 
For instance, a Member could hold two million dollars worth of 
stock in a major public corporation, and still hold a fraction 
of a percent of the overall stock. But to suggest that that 
Member, or their office, should be able to take official action 
that would uniquely affect that corporation, and directly 
impact the Member's two million dollar investment would be 
shocking to the public and to the principles and guidance that 
have long been a part of the standards of conduct in the House 
of Representatives.
    It is also often said that the preferred method of 
addressing conflicts is full and complete disclosure of the 
facts that pose a conflict. That is largely true because 
Members are expected to be integral parts of their districts, 
and will not always be able to distinguish their interests from 
those of broader groups of their constituents. However, it has 
never been suggested that disclosure is the only method for 
addressing conflicts, and that the House has no rules 
prohibiting acting in conflict. One problem with assuming that 
disclosure of interests cures all conflicts is that the actions 
taken with regard to those conflicts are not always disclosed. 
For instance, in this case, while Representative Waters' 
interest in OneUnited was disclosed, Representative Waters' 
COS's actions to obtain direct assistance for OneUnited from 
other offices in the House would not have been publicly 
disclosed but for an investigation into allegations of 
impermissible conflicts by the Office of Congressional Ethics 
or this Committee.
    Instead, Committee precedent and guidance is clear, as 
presented by the Outside Counsel and reiterated here by the 
Waters Committee, that such directed actions are impermissible. 
For instance, the Ethics Manual makes clear that legislative or 
official action--other than voting--on behalf of an entity in 
which a Member has an interest requires added circumspection 
and may implicate the rules and standards that prohibit the use 
of one's official position for personal gain.\19\ More 
directly, when the House began to require that Members certify 
their lack of financial interest in certain official actions, 
the Committee provided clear guidance as to what such 
impermissible financial interests would include. That guidance 
states that ``a Member's direct ownership of stock, even a 
small number of shares in a widely held company, likely would 
constitute a financial interest under Rule 23.''\20\ Therefore, 
any suggestion that there is no indication in the precedent or 
guidance of the Committee giving notice to Members and their 
staff to avoid providing official assistance to entities in 
which the Member has a significant financial interest, is 
simply incorrect. In addition, to the extent it contradicts 
this clear guidance, Graves should not be read to permit 
Members free rein to act on behalf of a single entity in which 
they have a publicly disclosed financial interest, merely 
because there are numerous shareholders.
---------------------------------------------------------------------------
    \19\See Ethics Manual at 237.
    \20\Id. at 239.
---------------------------------------------------------------------------
    Accordingly, the Waters Committee finds that the COS could 
not, consistent with House rules, take actions specifically 
directed at assisting OneUnited. However, as Outside Counsel's 
Report establishes, Representative Waters' COS did take such 
actions on at least two occasions. While Outside Counsel did 
not determine that the COS's efforts ultimately benefitted 
OneUnited, the House rules do not permit a Member or their 
staff to take specific actions that would, if effective, accrue 
to the financial benefit of the Member. The Waters Committee 
finds that Representative Waters' COS violated House rules by 
acting to specifically benefit OneUnited after he knew or 
should have known that Representative Waters had a significant 
financial interest in OneUnited--which interest would have been 
dramatically affected if OneUnited did not receive the 
assistance--and most likely after he had been instructed not to 
take such actions.
    In deciding to resolve this matter at this stage, the 
Waters Committee has not followed the course taken by the 
Committee in the 111th Congress, which impaneled an ISC, 
adopted an SAV, and impaneled an ASC before recommitting the 
matter to the ISC. It is important to note that the ISC in the 
111th Congress had agreed to issue a report, much like Outside 
Counsel's Report here, which expressed concerns regarding the 
actions of Representative Waters' COS and the liability that 
Representative Waters had for those actions. However, the 
former Staff Director and Chief Counsel advised the ISC that it 
could not issue such a report without first adopting an SAV. 
The former Staff Director and Chief Counsel viewed the SAV/ASC 
process as the sole mechanism for the Committee to adopt a 
report criticizing a Member's conduct, in part based on the 
concern that issuing such a report, without adopting an SAV and 
conducting an ASC hearing, would deprive the Member of 
procedural rights that flow from those steps, including the 
right to review the SAV and the supporting evidence. The Waters 
Committee disagrees with that interpretation.
    Instead, the Waters Committee's decision to resolve this 
matter without impaneling an ISC or adopting an SAV is based on 
two considerations. First, this Committee believes that, 
contrary to the advice of the former Chief Counsel, it is 
inappropriate to adopt an SAV where the Committee concludes 
that disciplinary findings and sanctions are not warranted. 
Second, the Waters Committee believes that, while the Rules may 
require some form of notice and hearing prior to the 
publication of a report critical of the conduct of a Member or 
staff, that notice and hearing is not limited to the SAV/ASC 
procedure. Rather, this Committee believes that notice and 
hearing, when there is no finding that discipline is warranted 
and no recommendation for a sanction by the House, requires 
only advance opportunity to review the report and to address 
the Committee in a Committee hearing. Such a hearing may be 
conducted as any other congressional hearing; the rules 
governing the adoption of an SAV or conduct of an ASC hearing 
would not apply.\21\ The Waters Committee notes that, as with 
claims of a prohibition on ex parte communications between 
Committee Members and staff--which does not exist--the 
requirement for formal notice and hearing prior to the 
publication of some Committee reports, regardless of whether 
disciplinary findings or sanctions are recommended, is overly 
burdensome and may lead to greater backlogs and delays, and 
fewer public reports of Committee activity, particularly when 
the Committee does not believe disciplinary action is required.
---------------------------------------------------------------------------
    \21\Committee staff has consulted with the Parliamentarian, who 
agrees with this interpretation.
---------------------------------------------------------------------------
    Although it does not believe that disciplinary action or 
sanctions are warranted by the allegations against 
Representative Waters, the Waters Committee takes this 
opportunity to again caution all Members that they may be held 
responsible for the actions of their staff, and to emphasize 
each Member's obligation to properly supervise all staff. The 
Waters Committee believes that these rules and standards of 
conduct are unambiguous and clearly established. It is equally 
clear that a Member or their staff may not take actions which 
are intended to assist a specific entity in which the Member 
has a financial interest, and in a manner that could affect 
that interest. Thus, a Member is responsible for ensuring that 
her or his staff does not take actions that the Member could 
not take due to the Member's own financial interests. Generally 
speaking, Members are expected to be aware of actions that 
staff take on the Member's behalf. However, where a Member has 
financial interests that could be affected by such actions by 
staff, the Member's responsibility for oversight of their staff 
may require additional measures by the Member.
    Specifically, where a Member is aware that they may have a 
conflict of interest with respect to advocacy on behalf of 
certain persons, entities, or issues, the Member should inform 
all members of their staff of the potential conflict. A best 
practice to avoid mistakes, misunderstandings, and matters such 
as this, may be to notify all staff of each of the particular 
entities in which the Member has a financial interest, and 
document that notification. Staff should also be instructed to 
inform any entities in which the Member has a financial 
interest, to direct their specific requests for assistance to 
another Member or committee.
    The Waters Committee recognizes that Representative Waters 
has long had an important role with respect to protecting 
minority and community banks, and that, as a senior Member of 
the Financial Services Committee, she can serve as a key 
advocate for those entities. However, the need to inform staff 
of potential conflicts of interest is most acute when a Member 
is intimately involved in representing a particular industry, 
policy interest, or other defined constituency and the Member 
has an interest in one particular entity in that constituency. 
Put another way, the more likely it is that an entity in which 
a Member holds a financial stake will come to that Member's 
office for assistance, perhaps because of their leadership 
positions and relative influence, the more that Member must 
make sure to prevent such conflicts.
    One of the issues that complicated the resolution of this 
matter was the nature of the relationship between 
Representative Waters and her COS, who is also her grandson. 
Federal law prohibits a Member from employing the Member's 
``relative,'' as defined by 5 U.S.C. Sec. 3110. While the 
statutory definition does not include a grandchild, the Waters 
Committee recommends that the House consider amending relevant 
statutes or House Rules to recognize that employer/employee 
relationships with grandchildren can be just as fraught with 
risk as other familial relationships. It is clear to the Waters 
Committee that the appearance issues that those situations 
raise can be just as troubling as those with children.
    The Waters Committee also notes another issue that arose in 
the consideration of this matter during the 111th Congress, 
namely the breakdown in communications within the Committee and 
the perception that Committee Members and staff were acting on 
a partisan basis. The Committee works best when, and demands 
that, Members exercise their own independent and non-partisan 
judgment when considering matters before the Committee. 
Therefore, the Committee must operate on the principles of 
open, frank, and non-partisan communications. If concerns about 
partisan conduct among Committee Members or staff arise, the 
Committee must return to these basic principles. During the 
Committee's investigation of this matter in the 111th Congress, 
suspicions arose between all Members on one side of the 
Committee and the Committee leader from the other side, along 
with both partisan designees and certain nonpartisan staff who 
became seen as aligned with one party or the other. The mutual 
suspicions were the same: that Members and staff were acting in 
partisan political ways. Some of those suspicions were based on 
the belief that, for partisan reasons, certain staff were 
communicating with Members of only one party. There were also 
suspicions that Committee members, while caucusing with members 
of their own party, were making decisions regarding the matter 
along party lines. Finally, there was a belief that the 
designees of the Chair and Ranking Member were themselves 
acting in improper partisan ways and coordinating with party 
leadership.
    As Outside Counsel concluded, and the Waters Committee 
found, much of this suspicion was unfounded or overblown. 
However, the Waters Committee believes that if such suspicions 
infect the Committee's work again, Committee Members must take 
their concerns to the full Committee so they do not fester and 
multiply. The Waters Committee also recommends that the 
Standing Committee on Ethics consider adopting additional 
policies with respect to caucusing by Members, staff 
communications with Members of a single party, and the roles of 
the designees to the Chairman and Ranking Member. These 
policies should further the basic principles of open and frank 
communication and encourage Members and staff to act on a bi-
partisan and non-partisan basis.
    With respect to the designees, the Waters Committee notes 
the recommendation of an ISC in a prior matter: ``[T]he 
Investigative Subcommittee recommends that the Standards 
Committee establish written policies and procedures as to the 
duties and responsibilities of the designated counsels to the 
Chair and Ranking Member to ensure that such counsels are 
performing their duties to the Committee consistent with the 
provisions of Committee Rule 6.''\22\ This recommendation was 
adopted by the full Committee, but has not yet been 
implemented.
---------------------------------------------------------------------------
    \22\Carib News at 137.
---------------------------------------------------------------------------
    The Waters Committee also believes that the principle of 
open, frank communication should apply to allegations of 
inappropriate remarks by Committee staff, whether the remarks 
are racially insensitive or otherwise improper. A former 
Committee staff member made comments that were racially 
insensitive and completely inappropriate during the 111th 
Congress.\23\ It appears that the Committee Chair at the time 
and its former Staff Director and Chief Counsel waited to take 
action with respect to these allegations until well after they 
learned of them. Further, when they did take action, they 
terminated the employees without discussing the allegations 
with either the then-Ranking Member of the Committee or the 
employees themselves. This unilateral action appears to have 
been a result of the mutual partisan suspicion and breakdown of 
communication discussed above. The Waters Committee believes, 
and recommends that the Standing Committee consider reiterating 
that, at the point the Committee's leadership or staff become 
aware of insensitive or inappropriate comments related to bias, 
it is incumbent on them to deal with such allegations in an 
open, frank, and bi-partisan or non-partisan manner.
---------------------------------------------------------------------------
    \23\As the Outside Counsel concluded, those comments were unrelated 
to this matter. See Outside Counsel's Report at 65.
---------------------------------------------------------------------------

                             IV. CONCLUSION

    The allegations against Representative Waters and her COS 
were serious, and they required a thorough investigation. The 
Waters Committee is confident that, with the assistance of 
Outside Counsel, its investigation of these allegations has 
been thorough and fair. In fact, the Committee, both before and 
after the appointment of the Waters Committee, has taken 
unprecedented steps towards fairness, including voluntary 
recusals of a majority of the Committee, a thorough 
consideration of the demands of constitutional due process, and 
providing notice and the opportunity for a hearing on a report 
that does not recommend any findings of misconduct or sanctions 
for the Member.
    Ultimately, for the foregoing reasons, Outside Counsel 
recommended and the Waters Committee concluded that 
Representative Waters did not violate any House Rule, law, 
regulation, or other applicable standard of conduct. However, 
the Waters Committee finds that Representative Waters' COS 
violated House rules by taking specific actions that would 
accrue to the benefit of OneUnited, a bank Representative 
Waters had a significant financial interest in and which 
interest could have been significantly impacted by the actions. 
Specifically, the Waters Committee finds that Representative 
Waters' COS knew or should have known of Representative Waters' 
financial interest in OneUnited and her conflict of interest in 
taking official action on their behalf alone. Based on its 
findings, the Waters Committee issues the attached Letter of 
Reproval to Representative Waters' COS for his misconduct in 
this matter.

 V. STATEMENT UNDER RULE 13, CLAUSE 3(c) OF THE RULES OF THE HOUSE OF 
                            REPRESENTATIVES

    The Committee made no special oversight findings in this 
Report. No budget statement is submitted. No funding is 
authorized by any measure in this Report.



