Freddy St Germain's Long Ride
Loughran, Joe
Joe Loughran FREDDY ST GERMAIN'S LONG RIDE Congress and the S&L scandals have a long history, going back at least to the reign of former Democratic Rep. Fernand St Germain, who, while overseeing...
...Disclosure...
...But buried among supplemental documents, a "clean" opinion by accounting firm Arthur Andersen revealed "partners' capital" of $1.1 million and 1984 income of $158,000...
...Mr...
...The delay guaranteed St Germain's re-election and his chairmanships...
...That honor arguably belongs to a 1987 House inquiry into the conduct of for'See Martin Mayer, The Greatest-Ever Bank Robbery...
...The committee ignored Four Seasons' implicit valuation of $1.4 million in December 1980 and St Germain's sale of the remaining 2 percent for only $2,400 in February 1985...
...There was a catch...
...Though copies of investment checks occasionally surfaced elsewhere, none supported these partnerships or loans, despite subpoenas calling for "all checkbooks and passbooks maintained, cancelled checks, and bank savings and loan, and brokerage account statements, received by Rep...
...St Germain's lightly contested 1984 reelection campaign, helping to swell his current campaign war chest to $602,650, one of the biggest of any House member...
...On February 5, 1986, the House ethics committee voted to investigate...
...Washington, D.C...
...The PAC donated to Rep...
...The Congressional Ethics Bailout Voting 12-0, the committee shrugged it all off: "Certain allegations were not sustained by clear and convincing evidence...
...Ferland . . . is a founder and behind-thescenes power of the . . . National Association of Home Builders...
...5) ignoring business relationships between "long-standing friends" and the federal government...
...The S&L crisis—which Martin Mayer called "the worst public scandal in American history"!---affords sufficient blame for all: the Reagan and Bush administrations, Congress, industry executives and developers, investment banks, law and accounting firms, PACs, regulators...
...The committee ignored $120,000 invested in tax shelters, generating more than $400,000 in write-offs and found "abusive" by the IRS...
...Yet the committee twice "admonish[ed] all members to avoid . . : even an inference . . . suggesting improper action...
...A GIT money market account generated $5,001 to $15;000 in interest but was worth only $5,001 to $15,000 at year-end...
...No formal application was required...
...THE AMERICAN SPECTATOR JUNE 1991 19 sistance in return for an IMF bill...
...In January 1971, general partner Ferland founded Four Seasons with five family members and St Germain as limited partners...
...He returned to Washington in 1989 to establish St Germain, Rodio & Ursillo, Ltd...
...But he was quite a host in his own right, inviting an S&L lobbyist along on the 1980 congressional allnighter which boosted deposit insurance and rocked the S&Ls...
...In May 1983, St Germain again agreed to purchase a condo at Lettelleir's suggestion...
...St Germain personally requested the Richardson, Bronx, and Wheaton loan recasts, explaining in the last case that lower payments would allow him to pay his taxes...
...Lettelleir's approval and control," included a price of $106,000, a $10,600 deposit, and an $84,800, 29-year Florida Federal mortgage at 9.25 percent...
...Garn-St Germain all but freed S&Ls THE AMERICAN SPECTATOR JUNE 1991 17 to lend money to or "invest" in any venture with a taxpayer-backed guarantee...
...No paperwork was required...
...St Germain left office worth $2 million (ninth highest among congressional retirees) and with a $57,000 congressional pension, complete with cost-of-living adjustments...
...To defer taxes on a capital gain triple his 1980 salary, St Germain accepted $1,850 cash and notes payable in 1981...
...Jerry Fisher, a law school classmate and "personal friend" of St Germain, was in charge of the III sales...
...St Germain reportedly acquired 20 percent for $2,000, implying a $10,000 partnership valuation...
...Upon settlement, a $17,000 "purchase rebate" materialized, though St Germain had contracted at $190,000...
...The $46,399 purchase price listed in disclosure documents indicated additional investments (or further errors...
...The committee acknowledged that the Providence and Cranston purchase agreements gave lenders "misimpression(s)" of a 4-percent equity investment...
...It did not account for a missing $10,600, 10 percent of the purchase price...
...Common Cause immediately called for an investigation...
...The erstwhile neophyte again had demonstrated a penchant for applying contradictory interpretations of the rules to serve his purpose: obtaining mortgage approval on one hand, avoiding full disclosure on the other...
...ick a number, any number, but make it big—between a hopelessly optimistic $200 billion and a horrific $1.4 trillion...
...In 1971, [Fisher] was phoning everyone he could think of," even St Germain, despite his ignorance of whether the congressman could afford to buy a restaurant, or five...
...Eleven months later, "certain properties" were sold for $1.3 million...
...It ignored his lavish entertainment by S&L lobbyists and other special interests, in flagrant violation of congressional gift rules and federal law...
...He met Marquette Credit Union president Charles Leveille to request a 100-percent loan for the Wheaton IHOP...
...A Commerce Savings CD worth between $50,001 and $100,000 generated only $1,001 to $2,501 in interest...
...This comparison was not made, probably because St Germain's loan-toprice ratio was 100.5 percent...
...The committee noted, "The congressman, to date, has received $21,200 as a partnership distribution of the proceeds from the sale to Famco as well as $16,000 in repayment of his 1980 and 1983 loans...
...And what did lenders expect in return for generous and flexible terms on $1.3 million...
...For this, at least, we will always be indebted to the Keating Five...
...Reagan blinked, and St Germain won...
...the late Michael A. Abatuno, his attorney, was the first of four trustees...
...The report is an unquestioning account of a lucrative web of "long-standing friendships" spun by St Germain among S&L executives, developers, and others...
...Was Four Seasons ever an investment, or was it something else...
...to lobby Congress for a client list that included at least one S&L...
...the loan was approved...
...He denied under oath any knowledge of $27,300 in forgiven commissions involving the Bronx and Wheaton IHOPS...
...Its final report noted without irony that the delay provided "insufficient time . . . to receive and analyze the subpoenaed materials...
...The report asserted a commitment to make the case "a matter of utmost priority" in the 100th Congress...
...The loan-tovalue ratio was now 99 percent, but Florida Federal did not adjust the mortgage...
...St Germain deftly, and falsely, attributed "the Rube Goldberg approach" to Abatuno, "a general practitioner and not a real estate specialist...
...Nor was III's agreement to reduce St Germain's price by 5 percent "in consideration" for his assumption of brokerage fees, because no such consideration existed...
...It issued the required subpoenas on August 28, a year after allegations surfaced...
...St Germain to other Florida investments render the investments improper...
...Bronx, New York...
...An affinity for short-term stock trading also went unremarked...
...Neither was pursued...
...As Davis explained, "Paying 12 and 13 percent for their deposits while receiving a pittance in income from their mortgage portfolios, the thrifts had managed to virtually wipe themselves out...
...In hindsight, the first question must be answered affirmatively but the second raised issues involving: (1) relationships between III and St Germain...
...Surely, House subcommittee chairmen can influence institutions across federal, state, and local lines...
...given a new mortgage payment of $1,825, St Germain apparently cleared $675 a month...
...Fiscal containment, on the other hand, has never concerned it: taxpayers will receive, and future generations pay, the bill...
...GarnSt Germain allowed S&Ls to invest 40 percent of assets in non-residential real estate and 30 percent in consumer loans...
...In March 1979, Joseph T. Lettelleir, president of Florida First Service Corporation, a wholly owned Florida Federal subsidiary, suggested St Germain purchase a unit in St...
...The 100th Congress (1987) stated: After working on the measure for more than a year, St Germain tacked most of his 260-page bill onto a minor piece of Senate-passed legislation and got it through the House at 2:30 a.m...
...Among "the usual suspects," however, only Congress enjoys oversight immunity...
...Fisher did not explain his inability to sell thirty-eight properties at "net book value" to uncounted contacts from the SBA, law school, and IHOP franchisees...
...Ferland founded Parkview in June 1976 with eight Ferlands, St Germain, and James A. O'Leary (the School Street filings' notary) as limited partners...
...Ferland's unsubsidized . . . developments...
...No documents authenticated an investment implying a $20,000 partnership valuation...
...To suggest the 1970s and 1980s were a period of transition in the financial industry would be rather like contending that today's S&Ls are suffering from liquidity problems...
...He was twice referred to on loan applications as Crepe's president, most likely to take advantage of his position...
...The Crepe Trust Crepe was established in February 1972 with $29,000 "seed money" borrowed from Fleet National Bank...
...He pocketed $250,000 in campaign contributions largely provided by the financial-industry interests he had served so well...
...In November, St Germain admitted failing to disclose seven flights on an S&L corporate jet that violated congressional gift rules, and possibly federal law...
...Free of the independent prosecutors it routinely seeks for real and imagined executive-branch abuses, Congress insists that its ethics committees suffice when allegations of misconduct arise...
...Each cost $99 or less, but St Germain violated House rules in 1980 by accepting two flights worth $198...
...His relationship with Fisher made the purchases possible and four were underway before Crepe was established...
...By April 20, 1972, the broker offered to purchase nine New York pancake houses...
...But the Keating Five case was neither the first nor the worst coverup of congressional involvement in the crisis...
...The stockholding surfaced a year after the first merger attempt and five months after the second...
...Fernand J. St Germain, a principal architect of S&L deregulation, who became a multimillionaire by investing with "long-standing friends" whose activities he regulated...
...Florida Federal withdrew once more...
...A September 11, 1985, article by Brooks Jackson of the Wall Street Journal paraphrased a St Germain remark that "you never get rich in office" before chronicling several investments by which he had done just that...
...Regulations that limited brokered deposits—which electronically chase the highest interest rates around the country—to 5 percent of total were dropped...
...St Germain considered himself a "real estate neophyte" but neglected to explain why a neophyte would purchase five restaurants without obtaining legal advice from a specialist...
...After that, he raced across the Capitol to the Senate . . . [which] passed the bank legislation shortly before sunrise, and Congress went home...
...It seemed unlikely that three late-winter flights between Washington, D.C., and Florida would cost only $99...
...Of his 1980 Depository Institutions Deregulation and Monetary Control Act (DIDMCA), Politics in America...
...As the story broke, St Germain was blocking an $8.5 billion Federal Savings and Loan Insurance Corporation cash infusion with which Federal Home Loan Bank Board chairman Edwin Gray proposed to expedite an S&L cleanup expected to cost a "mere" $50 billion...
...Dixon's wife Betty bought 3 percent of the concession (annual sales $120 million) for less than $15,000 in July 1986, and received more than $150,000 in dividends, plus unspecified director's fees, in less than three years...
...submitted the report to then-Speaker Jim Wright (a future soi-disant "victim of ethics cannibals") on April 9, 1987, while five senators were meeting elsewhere on Capitol Hill on behalf of Charles H. Keating, Jr...
...The HUD budget grew from $12.7 to $18.9 billion during St Germain's tenure as bank committee chairman...
...A call to the Official Airline Guide contradicted the committee's summary...
...Islet worth...
...A return to Congress for further relief yielded the Garn-St Germain Depository Institutions Act of 1982...
...The Senate Ethics Committee's Keating Five candy court did little to assuage the public with its expedient sacrifice of lame (read: sitting) duck Alan Cranston or by toothless findings of four senators' "poor judgement and insensitivity," given special counsel Robert Bennett's extraordinarily detailed presentation of the evidence...
...Minor quibble and major point: Given a chronic failure to catch mathematical or clerical errors, can committee judgments on broader issues be held any less suspect...
...The committee listed seven gift flights received from Florida Federal Savings and Loan between March 1979 and February 1985...
...The states' response, according to Davis, was instantaneous: On the last night of California's 1982 legislative session, [the Nolan Bill] passed in 20 seconds with not a hint of debate...
...The committee was unconcerned that the new chairman of the Bank Supervision and Insurance subcommittee had incurred $1.3 million in debt to finance five IHOPS on a $42,500 salary...
...20 THE AMERICAN SPECTATOR JUNE 1991 House banking subcommittee chairman for "100 percent financing" or a loan recast...
...The committee also wrote, "In January 1972 III was negotiating with a national real estate broker to purchase $21 million worth of III property...
...Chairman Julian C. Dixon (D-Cal...
...The committee found that "St Germain consistently understated—by more than a million dollars," the restaurants' market value...
...International House of Pancakes...
...In April 1984, it announced a second agreement...
...The committee wrote, "This violation was de minimis in amount and a singular occurrence not part of an overall pattern of improper acceptance...
...Ferland became one of the state's biggest developers and operators of those projects...
...Why didn't the committee notice, or care...
...In the early 1970s, Mr...
...on the last night of the session...
...Section 1014...
...Tampa Legal Properties...
...The $4,810.55 paid into escrow covered the deposit and closing costs...
...Federal law requires disclosure of gifts totalling $250 or more...
...7) containing the inquiry within the bounds of press allegations...
...In September 1983, four months after St Germain's stock purchase, Florida Federal announced a merger with First Mutual Savings of Pensacola, which the FHLBB halted...
...Comparisons...
...What did St Germain know...
...Perhaps fearing that the pension, PAC pot, and portfolio would prove insufficient to his needs, St Germain spent no time moping in defeat...
...The committee concluded St Germain's contribution "reflect[ed] his share in the holdings," although no summary of purchases, sales, and residual valuations was provided...
...He played no role in the transactions and did not explain the "consideration," though he would serve as Crepe trustee from December 1973 to April 1976...
...2) restrictions on "outside counsel...
...The committee found no irregularities, even though the money invested by and shares of the sixteen investors listed in its report did not add up to the stated 50 percent, or $335,000...
...The Keating Five case was neither the first nor the worst coverup of congressional involvement in the S&L crisis...
...St Germain incorrectly listed the purchase price as $17,900 in documents signed and dated May 15, 1986...
...Florida Federal Savings and Loan As Florida Federal successfully sought to convert to a stock company, St Germain aide Paul Nelson called the Federal Home Loan Bank Board (FHLBB) several times to "inquire into the status...
...A key DIDMCA provision raised deposit insurance from $40,000 to $100,000 per account, setting the stage for disaster literally overnight...
...Three, including Greene, sold St Germain a combined 5 percent share in June 1982 for $39,000, suggesting a total valuation of some $780,000...
...III) to sell thirty-eight restaurants worth $10 million...
...The trust included five properties and five original partners...
...The ethics committee did not stir...
...A friend since 1972, the year after St Germain became a banking subcommittee chairman, Lettelleir "knew of the congressman's interest in purchasing Florida property...
...Its 1987 edition noted "a talent at legislative hostage-taking" in a year-long battle with the Reagan Administration for housing asThe House ethics committee was "not persuaded that the facts that officials of Florida Federal were co-investors . . . or introduced Rep...
...It had not yet begun to manifest its determined resistance to all persuasion...
...Only fifteen months elapsed from staff intervention with the FHLBB to conversion to St Germain's investment to Florida Federal's second failed merger attempt...
...the first distribution for 1985" for $11,250 in March and a $120,000 check that September, "reflecting . . . proceeds of the new financing...
...The committee concluded: "This undervaluation violated House Rule XLIV and the Ethics in Government Act of 1978...
...Had requests "to be considered" launched and sustained "long-standing friendships" with Ferland, the Florida Federal officials, and any number of others...
...Did Ferland and Koffler pay $185,000 for stock worth $15,600 in 1985...
...Ethics math again came a cropper with an October 1983 agreement to purchase a $47,500 condominium with a $1;000 deposit...
...One gift flight and assorted reporting deficiencies "do not rise to such level warranting further action...
...III padded the "net book value" of each of St Germain's IHOP purchase agreements by 5 percent to accommodate alleged brokerage commissions...
...Between March 1972 and March 1973, Crepe purchased five IHOPS for $1.3 million with two loans from Fleet National Bank, and one each from Old Stone Bank, Rhode Island Hospital Trust National Bank, and Marquette Credit Union...
...E Porter 7htst...
...Were transactions properly disclosed...
...The committee was unmoved...
...The seller agreed to lease the unit for $2,500 monthly...
...While its archives reflected date-of-flight purchases for the month in question, advance purchase discounts would defeat the implication that the flights arose spontaneously...
...It noted that Fleet National Bank and Rhode Island Hospital Trust National Bank were federally chartered and FDIC-backed and that Old Stone Bank was FDIC-insured...
...and—most importantly—(8) failing independently to recognize and address a single allegation, despite thirteen years of questionable conduct by St Germain...
...City Savings, Mercury Savings, Rhode Island Hospital Trust, and Wright Patman Congressional Federal Credit Union ac-counts earned $3,501 to $9,500 but were not listed as holdings...
...Concerned that Florida Federal would force First Mutual to pay "unreasonable" post-merger dividends, the Bank Board's conditional approval precluded the eventuality...
...Petersburg's Bayfront Tower in a "distress sale...
...In 1975 (the committee received or provided no specifics), Ferland founded School Street with five Ferlands and St Germain as limited partners...
...Parkview Associates...
...Rhode Island Real Estate The Rhode Island opportunities offered by St Germain's first congressional campaign manager, prominent developer Roland 0. Ferland, offer further proof of the value of "long-standing friendship...
...Note: the committee's tiresome repetition of "long-standing friend(ship)" reflected the absence from the congressional lexicon, until after its report was released, of the more inventive "constituent service" to explain very close, mutually rewarding relationships with powerful special interests, regardless of domicile...
...Four Seasons East Group...
...St Germain . . . from January 1, 1971 to date...
...Scribner's, $24.95...
...And by the end of Freddy's ride, Rhode Island, forty-third most populous of the states, with less than a million people, ranked third among the fifty states and Washington, D.C., in 1988 HUD per capita spending...
...The committee avoided naming the generous seller, but page 524 identified real estate giant Arvida Corporation...
...Under the Nolan Bill, a California-chartered thrift could invest 100 percent of its deposits in any venture it chose . . . The Nolan Bill was quickly copied in Texas and Florida state charters...
...One man's prescience is another's insider trading: the SEC and federal prosecutors eventually focused on Storer warrant transactions (among others) in investigations of convict Mike Milken and bankrupt corporate felon Drexel Burnham Lambert...
...3) favorable bank loan adjustments and/or recasts...
...Fernand St Germain, who, while overseeing the deregulation of the nation's S&Ls, became a multimillionaire—and a House ethics committee inquiry liked what it saw...
...18 THE AMERICAN SPECTATOR JUNE 1991 •SandpiPer Key Condominium...
...All told, $176,250...
...That it sought to whitewash Senate complicity in the Lincoln Savings and Loan's $2-billion failure was quite unremarkable...
...A Washington Post lawsuit made public the grand jury's findings of "substantial evidence of serious and sustained misconduct...
...I said, 'If something comes along, I hope you'll consider me,' " the congressman recalls...
...The committee's outside counsel, the law firm of Johnnie L. Cochran, Jr., provided another twist...
...His encounters with lenders again raised an unanswered specter of "influence...
...A curious "compromise (a proposed increase to $50,000 had met stiff opposition), it was never intended to protect individual savers, whose accounts then averaged $6,000...
...An otherwise undocumented $19,000 down payment was "transferred from" the two small units...
...The committee ignored a particularly troubling characterization of the Ferland-St Germain relationship in the September 11, 1985, Wall Street Journal, which could not have escaped its attention: While the congressman used his growing political leverage . . . to help obtain federally subsidized housing for Rhode Island, Mr...
...He approached Rhode Island Hospital Trust for a loan on the Bronx property which Old Stone had rejected...
...In fifteen years, St Germain received $390,000 from the Ferland partnerships, a 31-fold return on unproven investments—excluding the alleged School Street loans...
...one owned 50 percent...
...His purchase of Storer Communications warrants on April 24, 1985, was most noteworthy...
...OAG archives indicated at least three violations at coach rates, no substitute for a "Hawker Siddeley twin-engine jet . . . [with] luxury seating for seven...
...Florida Real Estate The committee next reviewed St Germain's Florida real estate investments, including: •Bayfront Tower Condominium...
...In November 1985, School Street sold its real estate...
...a"partnership distribution" of $24,000 in September 1983...
...He blamed a House staffer who advised that if "a filer cannot reasonably ascertain the fair market category of value," book value would suffice...
...It appeared so...
...Non-disclosure of the 1980 flights, at $265 each, violated federal law...
...and Wheaton, Maryland...
...The committee nevertheless concluded they were "not the product of [his] desire to avoid public awareness of his stock ownership," even as its Florida Federal narrative raised serious doubts...
...Had Four Seasons' value plunged 92 percent...
...Both matters were blamed on "misapplication of advice...
...In 1971, excessive debt forced International Industries, Inc...
...Securities trading...
...The 1982 edition of Politics in America stated: "St Germain . . . used his senior position on the Banking Committee's Housing Subcommittee to blanket his district with housing projects for the elderly...
...All but Pashayan remain in Congress—Craig as senator from Idaho...
...The trust still owned five parcels in 1985...
...6) disregarding real estate purchase agreements intended to deceive lenders...
...4) avoidance of material issues, including abusive tax shelters and entertainment by lobbyists...
...In a 1990 Harper's article, L. J. Davis wrote that in the two years following DIDMCA's enactment, the thrift industry's net worth plunged from $32.2 billion to $3.7 billion...
...In noncommittal phrasing, the committee wrote, "The congressman was tohave contributed $3,000 for his 15 percent share...
...St Germain clearly rewarded his friends...
...The $131,250 in 1985 distributions contradicted his disclosure of only $15,001 to $50,000 in limited partnership income...
...In "a special Saturday session" at Marquette, a loan $900 larger than that requested was approved...
...Twenty-eight years after he was first elected to Congress, St Germain lost his bid for a fifteenth term, as Republican Ronald K. Machtley took 56 percent of the vote in a solidly Democratic district...
...The change increased taxpayer liability exponentially, as deposits flooded back to S&Ls from monstrously successful (but uninsured) money market funds (MMFs...
...In a "legal analysis" of the commissions, it wrote, "the statement con-tamed in each purchase agreement [recognizing Halliwell as the broker] was not correct...
...St Germain's 1985 disclosure further muddied the waters, indicating Four Seasons limited partnership income of $5,001 to $15,000, not a $2,000 capital gain on the sold position...
...2) purchase agreements falsely inflating selling prices through phantom brokerage fees...
...Its 1985 rental income was between $15,001 and $50,000...
...Fisher's testimony notwithstanding, investors apparently competed for blocks of III properties...
...Joe Loughran is a writer living in New Hampshire...
...Were the $3,390 included (and there was no such indication), closing costs could not have exceeded an unlikely $421...
...Congress has focused on political containment of the looming S&L disaster for half a decade...
...Tice enough, given size, term, and rate, but not as a ratio of loan amount to "total economic value" (including land, improvements, and capitalized net income) where the nine examples ranged from 50 to 80 percent...
...The congressman claims to have contributed $7,500 to obtain a 15-percent interest...
...The committee asked no questions, and, while noting a "long-standing friendship," concluded that no further action was warranted...
...Common Cause renewed its call for an investigation in mid-December...
...Some accounts were partially invested and/or subject to rollovers...
...In thepurchase of two IHOP restaurants in Providence and Cranston, Rhode Island, a 4-percent down payment/"owner equity" reflected unpaid commissions...
...In February 1982, Greene "assigned 20 percent of his interest in the Tampa Legal Properties partnership" to St Germain because "his friend was interested in Florida investments...
...More liberal than historically lax state charters, it undercut what Davis said was the state charters' raison d'etre: "In return for the more liberal provisions of state law, the state-chartered banks and thrifts were expected to make handsome campaign contributions to the men and women who have made liberal provisions possible...
...In suggesting his was an arm's-length relationship with Crepe, he clearly prevaricated...
...3) an inept, or nonexistent, review of documents...
...But with everyone's prints on the body in the most expensive whodunit in history, accountability will prove problematic...
...His 1985 disclosure incorrectly listed the purchase price as $90,000, but anything is possible...
...Given his sixteen years as a lawyer and his eleven as a congressman, it is inconceivable that St Germain had been manipulated by a conveniently deceased attorney...
...He ordered two small units, but "the developer" convinced him to buy a large townhouse instead for $190,000...
...Nelson] did not specifically recall whether he made these calls at the behest of Rep...
...This is another in a series of TAS articles on the Great American Congress in Crisis mer Democratic Rep...
...Democrats Dixon, Vic Fazio, Bernard Dwyer, Alan Mollohan, Joseph Gaydos, and Chester Atkins were joined by Republicans Floyd Spence, John Myers, James Hansen, Charles Pashayan, Thomas Petri, and Larry Craig in the whitewash...
...He retained 2 percent of Four Seasons, 15 percent of Parkview, and an indeterminate share of School Street...
...On several occasions, he initiated transactions before Crepe became involved...
...The original partnership had seventeen investors...
...In turn, the purchase agreements were presented to banks to obtain loans...
...On one occasion, St Germain treated several guests to a dinner he openly charged to an absent lobbyist's credit card...
...How did he know it...
...The committee stated: "The condition that Florida Federal found most undesirable was that imposing limitations on the payment of dividends...
...The sales agreement, "subject solely to Mr...
...Although aforementioned "misimpression" clearly influenced the banks, the committee found the evidence inconclusive...
...The committee also "considered whether the congressman knowingly made false statements . . . influencing .. . federally insured banks," in violation of U.S.C...
...The Committee focused on whether the congressman improperly used the influence of his office to secure . . . financing...
...Fisher and St Germain had renewed their friendship while Fisher was working with the Small Business Administration (SBA) in Washington...
...Old Stone Bank rejected one loan but approved another...
...And there was, of course, the multi-million-dollar nest-egg hatched with the help of "long-standing friends...
...Petersburg, Florida...
...It added that he failed to recognize a $270,000 note dated December 31, 1984, and payable January 2, 1985, as income or a holding in 1984...
...Leaving "influence" aside, the committee posed two other questions: Were the loans sound...
...Though the amounts were not trivial, the question was not raised...
...The committee missed this vast discrepancy and found no evidence suggesting that the investment "had any basis other than his friendship with Roland Ferland...
...Village Square of Titusville...
...and (4) disclosure lapses...
...In March and April 1972 "for valuable consideration," William Halliwell released Crepe from $41,500 in commissions due him according to the Providence, Cranston, and Richardson purchase agreements...
...In December 1980, St Germain sold thirteen-fifteenths of his 15-percent share to Ferland Corporation and Koffler Corporation for $185,000, for a blistering compound annual return of 53 percent...
...St Germain's own disclosures contradicted it: 1985 School Street limited partnership income was $50,001 to $100,000...
...Rhode Island Federal S&L originated a $43,110 mortgage, leaving an unaccounted-for gap of $3,390...
...Regarding St Germain's purchase of five International House of Pancakes (IHOP) restaurants in 1972 and 1973, the committee raised serious questions before finding the evidence "inconclusive...
...In 1971, he began an 18-year chairmanship of its Bank Supervision and Insurance subcommittee...
...All five IHOP loans had been extended two to six years by 1977...
...He wrote Old Stone president Robert Stevens requesting "100 percent financing" for the Bronx and Richardson IHOPS...
...State-chartered, state-insured, and state-regulated, Marquette Credit Union was never subject to federal regulation or, by extension, improper influence...
...Could conversations with such Florida Federal officers as founder Greene on five pre-conversion, pre-merger gift flights have included the S&L's future prospects...
...12.gift flights, his relationship with Florida Federal Savings and Loan, his real estate investments in Florida and Rhode Island, and his purchase of five International House of Pancakes restaurants...
...The loans were secured by assignment to the lenders of rents from III, which leased back all five restaurants...
...St Germain was president and sole beneficiary...
...A June 1989 Wall Street Journal article described Cochran as "a long-time friend of Rep...
...Dixon [who] at the time headed the [Los Angeles International] Airport commission," which gave the concession for twenty-one duty-free, news, and gift shops in April 1986...
...St Germain asked . . . to invest in some of Mr...
...Arvida apparently did not adjust its $2,500 monthly lease either...
...It did nothing...
...If St Germain made a down payment, its return or application against the mortgage went unacknowledged by the committee...
...At the chairman's request, Florida Federal provided a 90-percent loan-to-value mortgage of $171,000 for thirty years at 12.5 percent (though he "requested" 12.25 percent) with $23,958 to complete escrow...
...Adjusted for $68,500 in phantom commissions, the five IHOPs cost $1.3 million, $7,100 less than loans provided, before $7,700 in adjustments paid Crepe on transfer of the Providence and Cranston properties...
...In January 1973, Fleet National Bank "unilaterally reduced the interest rate [on the Providence and Cranston loans] to 7.5 percent . . . with the mortgage payment to remain the same," reducing annual interest expense by some $27,000...
...Could developers dependent on federal housing projects or S&L executives subject to federal regulation afford to ignore such requests...
...The committee stated, "Florida Federal was not connected with this property acquisition" [emphasis added], but did not comment on the odd similarity between lessee First Service Properties and Lettelleir's Florida First Service Corporation...
...As he signed these documents—knowing he was the subject of an inquiry—he presumably made every effort to minimize errors...
...The committee reviewed St Germain's 2Report 100-46, House Calendar No...
...Arguing that "it would be inappropriate to attribute improper action . . . based solely on inference," the committee evinced an unmistakable pattern of its own, thoroughly discrediting itself by: (1) delays serving St Germain at the expense of the nation...
...THE AMERICAN SPECTATOR JUNE 1991 21...
...Results of a grand jury investigation into his entertainment by special interests were referred to the committee in 1988...
...While reviewing an Old Stone loan, the committee "analyzed" nine allegedly comparable loans and concluded St Germain's Texas loan (and, by implication, all five) "did not represent an aberration...
...He reportedly loaned the partnership $16,000...
...In this light, St Germain's misleading disclosures hardly appear inadvertent...
...In 1981 he became chairman of the whole committee, now called Banking, Finance and Urban Affairs...
...School Street Associates...
...Purrhase Agreements and IHOP Pricing...
...The committee was "not persuaded that the facts that officials of Florida Federal were co-investors . . . or introduced Rep...
...Even in Mar-quette's case, however, questions of "influence" could not have been so simple...
...A 2-percent commission (much more in the case of sick S&Ls) bought S&Ls the chance to grow beyond their means and management, while generating hundreds of millions of dollars for Wall Street firms, financial intermediaries, and boiler rooms...
...But wait: the 2 percent was still listed as a holding...
...St Germain sold some or all warrants on April 26, gaining 10 percent in forty-eight hours...
...The committee found St Germain's failure to "specifically report" his May 1983 purchase of $30,000 in Florida Federal stock a "deficiency...
...The committee found nothing irregular in a clearly dubious progression involving "long-standing friendships" between the chairman of the Financial Institutions Supervision, Regulation, and Insurance subcommittee and the S&L executives...
...A September 1984 amendment to his disclosure documents clarified the stockholding but again failed to report the transaction date...
...No adjustments were detailed for the other three properties...
...His explanation that the investment was "intended to be temporary" would support a contention that he originally sought short-term gains which might have accrued had the merger proceeded unconditionally...
...three payments totalling $19,500 in 1984...
...Here is what it found: Free Flights House rules bar acceptance of gifts worth $100 or more from anyone with an interest in legislation...
...The committee was not curious as to how a colleague whose congressional salary averaged $45,000 from 1961 to 1985 amassed a portfolio yielding $450,000 to $800,000 in 1985 unearned income...
...And, finally, St Germain and his wife personally guaranteed notes on all but Old Stone's Richardson loan, where no guarantee was required...
...Counsel for the congressman did not offer any plausible explanation for the non-reporting...
...St Germain leased the condo to First Service Properties for $46 more than his monthly payments...
...Did Arvida or Florida Federal offer similar opportunities to private citizens "interested in Florida real estate...
...St Germain's disclosed securities, real estate, and other holdings, less underlying debt, were worth $1.7 to $2.2 million in 1985, excluding homes in Woonsocket and Newport, Rhode Island...
...The committee concluded that "the allegation of improper activity was not confirmed...
...A bank representative testified that "falling interest rates" precipitated the reduction, but the committee quoted Federal Reserve sources indicating rates were rising, then dropped the subject...
...Ten securities bought and sold during 1985 were held an average of ninety-three days...
...An undated letter to "Fred" concerning two properties concluded: "Either way—time is of the essence," suggesting strong third-party interest...
...What the Ethics Committee Missed The committee missed dozens of disclosure inconsistencies, including: •Interest income...
...It did not wonder whether IHOP debt or managerial distractions had compromised St Germain's ability to fulfill his increased responsibilities...
...If unprompted, his solicitude toward St Germain's "good friend," founder and president Raleigh W. Greene, Jr., was an unprecedented turn for a non-constituent...
...A freshman assignment to the Banking and Currency Committee would see him through his career...
...What, then, accounts for them and the committee's inability tospot them...
...Curiously, the ethics committee chairman failed to disclose the investment before the story broke...
...We have every reason to suspect that the ethics committee's conclusions on the case of St Germain were written before its inquiry began...
...St Germain to other Florida investments render the investments improper...
...A Shearson money market account with $100,001 to $250,000 produced only $2,501 to $5,000...
...Several were legislation-sensitive...
...Freddy St Germain Fernand Joseph St Germain (no period after the t) was elected to Congress from Rhode Island's 1st District in 1960...
...How does one deny a request by a By the end of Freddy's ride, Rhode Island, forty-third most populous of the states, with less than a million people, ranked third among the fifty states and Washington, D.C., in 1988 HUD per capita spending...
...The committee acknowledged, "St Germain has never disclosed the purchase transaction by stating the date orcategory of value...
...Nice try, but the committee noted he was fully aware of market value, having stated it as $1.8 million on a January 1983 mortgage application and having sold the Providence unit for $470,000 in December 1984...
...In February 1986, a year after the alleged final sale, St Germain received a $4,526 Four Seasons "nonpreferred distribution...
...If not, the rebate conveniently reduced out-of-pocket costs to $7,000...
...Was St Germain snookered...
...In 1975, Fleet "recast" both loans, extending them five years at 8 percent and reducing St Germain's monthly payments by $1,020...
...St Germain received a "tax-free" distribution of $1,500 in December 1982...
...And few congressmen wielded more power over the industry than In legislative and investment matters, St Germain worked fast, late, and often under cover of darkness...
...On April 25, Storer accepted a $1.6 billion leveraged buyout offer...
...The committee found no market "variance" and concluded, "no further action is warranted...
...Ferland undoubtedly understood that federal spending on housing grew from $144 million to $11.1 billion between 1960 and 1987...
...St Germain sought 100-percent financing for units in Richardson, Texas...
Vol. 24 • June 1991 • No. 6
