Bloomberg News

House to Subpoena Ex-Im Worker as Time Runs Out for Bank

July 25, 2014

A U.S. House committee subpoenaed a former Export-Import Bank employee in a widening investigation that could complicate efforts to reauthorize the lender two months before its charter expires.

The worker is being ordered to testify July 29 to the House Oversight and Government Reform Committee, Chairman Darrell Issa said yesterday in an interview. The hearing, which will examine allegations of corruption at the bank, also will hear from President Fred Hochberg.

“The American people feel these programs are not well run,” said Issa, a California Republican. “There are examples of perhaps loans that were not necessary and the question of corruption. So if you want to keep a program alive, make it justify itself and be clean.”

U.S. Export-Import Bank: From Apple Pie to Endangered Species

Several House Republicans, including incoming Majority Leader Kevin McCarthy, oppose letting the bank continue after Sept. 30 when its charter expires, saying private lenders can do the job. The bank helps foreign customers buy U.S. goods.

Republican lawmakers and Tea Party-affiliated groups say the bank is a form of corporate welfare that primarily benefits companies including Boeing Co. (BA:US), General Electric Co. (GE:US) and Caterpillar Inc. (CAT:US) and should be shut when its charter expires. Issa said he favors continuing the bank, with some changes.

“Many of us support the concept of making sure there’s an availability of funds to support competitiveness in exports, but we have to make sure that the American people believe it’s being spent fairly and honestly,” Issa said.

‘Another Arrow’

Any investigation into the misconduct allegations may increase the chances that Congress will let the bank’s charter lapse, said John Pitney, a political science professor at Claremont McKenna College in Claremont, California.

Opponents “get another arrow in their very large quiver,” Pitney said. “It provides another way of justifying opposition to the general public.”

After the hearing was announced, a top advocate of shuttering the bank said the congressional investigation is clearly merited.

“The allegations of kickbacks and corruption at the Export-Import Bank are as disturbing as they are serious,” House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, said in a statement.

Worker Dismissed

Issa said he signed a subpoena yesterday to compel the appearance of an employee, Johnny Gutierrez. “He refused to come voluntarily,” Issa said.

Matt Bevens, a spokesman for the bank, today said Gutierrez has been dismissed. Gutierrez worked in the Ex-Im finance department.

Gutierrez’s lawyer, Douglas McNabb, said on June 24 that his client was under investigation and declined to provide additional details. McNabb didn’t respond to phone messages and e-mails yesterday seeking comment.

Becca Watkins, a committee spokeswoman, said Hochberg is among the witnesses. She didn’t identify others who will testify.

The bank’s inspector general is investigating alleged misconduct by four employees, and at least two of four people involved have left the bank, Hochberg said at a House hearing June 25. He didn’t name the employees.

Hochberg is defending the bank’s activities. In Boston yesterday, Hochberg took on detractors who say the bank lets the government pick winners and losers in the marketplace.

‘Crony Capitalism’

“If you listen to some people in Washington, you’ll hear the term ‘crony capitalism’ thrown around a lot,” Hochberg told the New England Council, an alliance that backs economic development.

“You want to know what real crony capitalism looks like? It looks like the government of China supporting state-owned enterprises with opaque subsidies and outrageous financing terms,” he said, according to prepared remarks. “It has nothing in common with what we do at Ex-Im.”

The bank’s support for U.S. exports have benefited businesses including aircraft giant Boeing of Chicago and Hartzell Propellers Inc. of Piqua, Ohio. The bank last year backed $37.4 billion in exports, and says it has returned more than $3.4 billion since 2005 to the U.S. Treasury.

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

After that, 41 House Republicans wrote to Speaker John Boehner and McCarthy urging them to move ahead with a long-term reauthorization to provide more certainty to exporters.

Congress is in session for 15 days before the charter expires due to a five-week recess starting Aug. 1. The Obama administration is seeking a five-year reauthorization and a gradual increase in the bank’s lending cap, to $160 billion from $140 billion.

When the bank was reauthorized for two years in 2012, it was after months of debate. President Barack Obama signed the measure a day before the bank’s charter was scheduled to lapse.

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

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


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