ProPublica: Business & Money

Biden’s Cozy Relations With Bank Industry

2008-08-25T11:36:00-05:00

by Eric Umansky

With Sen. Joe Biden joining the Democratic ticket, there's renewed scrutiny of Biden's connections to the credit card industry. Biden has been particularly cozy with MBNA, a financial services company from Delaware, and now a subsidiary of Bank of America.

Over the past 20 years, MBNA has been Biden's single largest contributor. And as the New York Times and Wall Street Journal note, Biden's son Hunter was hired out of law school by MBNA and later worked as a lobbyist for the company.

The Times also details just how helpful Biden has been to MBNA and the credit card industry. The senator was a key supporter of an industry-favorite bill -- the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" -- that actually made it harder for consumers to get protection under bankruptcy.

As the Times notes, Biden was one of the first Democratic supporters of the bill and voted for it four times until it finally passed in March 2005. A spokesman for Sen. Obama told the Times, "Senator Biden took on entrenched interests and succeeded in improving the bill for low-income workers, women and children."

Yet the Times actually looked at the legislative record and paints a different picture:

[Biden] was one of five Democrats in March 2005 who voted against a proposal to require credit card companies to provide more effective warnings to consumers about the consequences of paying only the minimum amount due each month. Mr. Obama voted for it.

Mr. Biden also went against Mr. Obama to help defeat amendments aimed at strengthening protections for people forced into bankruptcy who have large medical debts or are in the military; Mr. Biden argued that the amendments were unnecessary because the legislation already carved out exemptions for those debtors. And he was one of four Democrats who sided with Republicans to defeat an effort, supported by Mr. Obama, to shift responsibility in certain cases from debtors to the predatory lenders who helped push them into bankruptcy.

The Washington Post's David Broder detailed other industry-friendly aspects of the bill back in 2005. One proposed amendment to the bill would have stopped corporations from "judge-shopping" and going to the most-friendly venues for their bankruptcy cases. The amendment was introduced by Republican Sen. John Cornyn of Texas and appeared to have wide bipartisan support. But it never passed. Broder writes that Biden helped kill it.

How Taxpayer Money Is Wrapped Up in Georgian War

2008-08-12T10:40:00-05:00

by Sharona Coutts

Russia's announcement this morning that it will cease its offensive in Georgia has created a potential lull in what was a rapidly escalating military and diplomatic crisis.

Whether the fighting really ends, one result of the conflict is clear: it has thrown a bright light on that region's importance to global oil supplies. A pipeline that runs through Georgia is the second largest in the world.

But a little-reported fact is that American tax dollars were used to help fund big oil projects in the region.

Georgia sits between the rich oil deposits of the Caspian Sea in the East, and the friendly shores of the Mediterranean in the West. Since 2006, a 1,100 mile pipeline has pumped that crude from Baku, in Azerbaijan, westwards across the conflict-torn continent to tanker ships waiting at the Turkish city of Ceyhan. The multi-billion-dollar Baku-Tbilisi-Ceyhan pipeline is run by an international consortium, including American oil-giants Chevron and Conoco-Phillips.

The Daily Mail in the U.K. has reported that Russian planes have targeted the pipeline, and Georgia's president, Mikheil Saakashvili, told reporters at a conference call that the war is a Russian oil-grab to "control energy routes."

So, how is U.S. taxpayer money bound up in all of this?

It has to do with the role of the two government agencies, the Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC), that lend money to private companies doing business overseas.

These agencies exist to promote U.S. business abroad, which they do by giving loans and guarantees for projects that are too big or, in many cases, too risky for the tastes of private banks and financiers.

"We exist to take risks that the commercial markets either cannot or are not willing to make," said Phil Cogan, spokesman at the Ex-Im Bank. "That's the reason for export credit agencies for the most part. It's to support the exporters of the United States because those exporters wouldn't be able to make the sale unless there was a guarantee or direct lending."

In the case of this pipeline, the Ex-Im Bank gave a $160 million guarantee to a group of banks that wanted to lend money to the companies involved in the project. If the project fails or goes up in flames (which it could do, literally) Ex-Im will bail out the private banks, and taxpayers will be left holding the bag.

Same deal for OPIC, which gave the project $100 million in "political risk insurance." In other words, the companies apparently weighed the risk of just the sort of conflict the region is now facing, and then went to a government agency for insurance.

Critics see these guarantees as a form of corporate welfare.

"If we're talking about the oil and gas industry, there's absolutely no need for the federal government to be investing in any new projects," said Keith Ashdown from Taxpayers for Common Sense, a non-profit that works to reduce wasteful government spending. "These guys are making money hand over fist, and they can be investing in their own new capital projects."

In the case of the BTC pipeline, activists and academics have been warning about the project's dangers for years, and arguing that taxpayers shouldn't incur the risk.

Ex-Im spokesman Cogan stresses that the government-funded bank usually brings in a net profit from the fees it charges for insuring risky projects. He also said that this loan is far from the biggest that Ex-Im has made.

Nor is the U.S the only country whose taxpayers helped make the deal happen. The biggest player in the project is British Petroleum, which owns just over 30 percent of the pipeline. The U.K.'s export credit agency, as well as the European development bank, also put money into the deal.

BP spokesman Robert Wine said despite the reports that the pipeline has been targeted by Russian planes, the "pipeline hasn't been affected by the conflict." He said that BP "continues to monitor the situation."

"The pipeline is a channel that runs through Georgia," he said. "We don't have business interests of any great note in Georgia, and clearly this is a matter for the governments of Georgia and Russia."

Companies Tap Pension Plans to Pay Exec Benefits

2008-08-04T11:45:00-05:00

by Paul Kiel

Company pensions are no longer a trapping of the American life. A report by the Government Accountability Office issued last month found that about half of employers with defined-benefit pension plans have frozen one or more of those plans. But just as American is the execs' golden parachute, often at the expense of the little guy.

Wall Street Journal as loading their executives' benefits onto their pension plan. (Credit: Justin Sullivan/Getty Images)" /> So this is an American story. The Wall Street Journal reports today on how some companies have very quietly loaded executives' benefits onto their pension plans. The advantages for the companies are manifold: They get to reap tax breaks intended for regular pensions and their execs get the security of having their retirement benefits backed by the funds. The catch: The move could put the pension payments for company employees -- who often have no clue about the arrangement -- in jeopardy.

The IRS says that for a company to get tax breaks for its pension fund, the fund cannot disproportionately benefit its highest paid workers. Because of that rule, companies had previously set aside "supplemental" executive pensions, which don't get tax breaks.

But some companies have figured out a way to load those executive benefits onto rank-and-file plans. The trick is just to make sure that the ratio between low- and high-paid workers still fits. The Journal writes that methods range from a kind of gerrymandering ("carefully moving employees about, in various theoretical groupings, to achieve a desired outcome") to counting Social Security as part of the pension. ("This effectively raises low-paid employees' overall retirement benefits by a greater percentage than it raises those of the highly paid.")

There's no easy way to identify how many companies have chosen this arrangement, but the Journal manages to find a few: Intel and Oneida among them. Intel, in fact, is spotlighted for being particular shrewd. They moved $200 million in exec benefit obligations into the fund, while investing $187 million in cash. The move won the company $65 million in tax breaks this year and enabled it to "book as much as an extra $136 million of profit" over 10 years.

Intel told the Journal the arrangement doesn't hurt lower-paid employees because most don't profit from the company's plan. Instead, they get their benefits from a profit-sharing plan, with the pension serving as backup.

The story offers a number of examples of companies where the added obligations contributed to pension funds' failure, Oneida among them. (Oneida is now under new management.) In some of those cases, lower level employees had their pensions cut sharply as a result.

But it's not easy even for employees to know whether their company has decided to follow this strategy. That's because consultants know it wouldn't prove popular:

Generally, only the executives are aware this is being done. Benefits consultants have advised companies to keep quiet to avoid an employee backlash. In material prepared for employers, Robert Schmidt, a consulting actuary with Milliman Inc., said that to "minimize this problem" of employee relations, companies should draw up a memo describing the transfer of supplemental executive benefits to the pension plan and give it "only to employees who are eligible."

Waxman’s Strategy for Undoing Blackwater

2008-07-30T16:22:00-05:00

by Matthew Schwarzfeld

Blackwater Worldwide may have misrepresented its size to obtain small business contracts, the House oversight committee announced on Monday. The finding is the result of an investigation by the Small Business Administration (SBA), and it's just the first of three reviews of the controversial security contractor requested by Chairman Henry Waxman (D-CA).

Unlike a number of investigations by the FBI and the committee itself that have focused on the conduct of Blackwater's guards in Iraq and Afghanistan -- for instance, the allegedly unprovoked shooting of Iraqi civilians -- Waxman appears to be taking a new tack: scrutinizing the contractor's employment practices to make it ineligible for future federal contracts.

In March, Rep. Waxman contacted the SBA, Internal Revenue Service (IRS) and Department of Labor (DOL) to ask each agency to conduct a review of Blackwater's compliance with federal employment laws. The first to report its findings (PDF), the SBA inspector general, determined that Blackwater and its affiliates may have obtained more than $100 million in contracts set aside for small businesses, in spite of receiving more than a billion dollars in federal contracts since 2002.

As Waxman explained in a memo (PDF) accompanying the launch of the three investigations, they each hinge on Blackwater's self-classification of its workers as contractors rather than employees. Waxman argues that classifying security personnel as contractors has allowed Blackwater to apply for small business contracts for which it wasn't eligible, underpay income taxes and workers benefits, and avoid complying with DOL anti-discrimination requirements for federal contractors.

Blackwater has argued that it recruits and trains workers but relinquishes management and oversight to its clients. "After being deployed, Blackwater has little if any knowledge regarding the location or activities of these independent contractors. Blackwater's only real involvement is to pay the independent contractors," Blackwater President Gary Jackson said in an October 2006 affidavit for the small business application.

Waxman has countered Blackwater's claims by pointing to statements by Erik Prince -- including in televised interviews (5:02-5:21) and congressional testimony (PDF) -- in which Blackwater's CEO says that his company maintains tight control over its personnel. Waxman also referred to the company's legal defense in a civil suit brought against it by the estates of four Blackwater guards killed in Fallujah. The company argued that because the four dead guards were employees, rather than contractors, the company's liabilities were limited to the provisions in the Defense Base Act.

"When the issue is whether Blackwater can be held liable for the wrongful death of Blackwater guards, Blackwater argues that the guards are 'employees,'" Waxman wrote (PDF) in the March memo. "But when the issue is whether Blackwater must pay or withhold...taxes for the guards [or if it's] eligible for small business preferences in contracting...Blackwater calls these same guards 'independent contractors.'"

In response to Waxman's memo, Blackwater called the charges baseless.

"Chairman Waxman's allegations regarding Blackwater's employment practices are completely without merit. Blackwater's classification of its personnel is accurate, and Blackwater has always been forthcoming about this aspect of its business with its customer, the U.S. government," the company said in a statement.

So far, Waxman's strategy seems to be working.

The SBA IG report states that the security contractor's small business applications "could have involved potential misrepresentations by Blackwater" -- a charge which, if true, could result in a fine, prison time and suspension from receiving federal contracts. The SBA IG referred the case against Blackwater to the Department of Defense and Veterans Affairs for further investigation, including a determination of possible penalties.

Though the IRS and DOL haven't issued their reports, an earlier IRS ruling unrelated to Waxman's investigation questioned Blackwater's employment classification.

After the SBA report, Blackwater officials reiterated their belief in the accuracy of their worker classifications and pointed to the complexity of these rules. In a statement, the company said, "If after fair and complete examination of the facts, the appropriate authorities have alternate recommendations about our worker classification, we are open to considering other options so long as we can continue to serve our government clients in the best way possible."

In Florida, Agency Gave Mortgage Licenses to Thousands of Ex-Cons

2008-07-29T11:08:00-05:00

by Paul Kiel

As we detailed yesterday, the Justice Department is pursuing a wide array of prosecutions and investigations in response to the subprime mortgage meltdown. There are the high-profile, complex Wall Street cases. On the other end of the scale are hundreds of mortgage fraud prosecutions, where small-time operators, drawn to the best game in town, allegedly scammed lenders or buyers.

In an ongoing series, the Miami Herald has been demonstrating how it is that Florida came to be the nation's leader in mortgage fraud. Part of the reason, of course, is that Florida was one of the hot spots for the housing boom and, later, bust. But as the Herald found, a lot had to do with the fact that the state allowed thousands of ex-cons to work in the mortgage profession.

Yesterday, in response to the paper's series, the state's attorney general called for an investigation of the Office of Financial Regulation, the office that polices the mortgage industry.

The stories are full of jaw-dropping numbers and anecdotes.

The paper found that from 2000 to 2007, "regulators allowed at least 10,529 people with criminal records to work in the mortgage profession. Of those, 4,065 cleared background checks after committing crimes that state law specifically requires regulators to screen out, including fraud, bank robbery, racketeering and extortion." The Herald found that those criminals "went on to commit nearly $85 million in mortgage fraud."

Only 29 applicants were rejected based on their criminal record. And the kicker: "Regulators allowed at least 20 brokers to keep their licenses even after committing the one crime that seemed sure to get them banned from the industry: mortgage fraud."

As for the anecdotes, it’s hard to know which to choose. There's the mortgage broker who won his license despite convictions for car theft and passing bad checks and who "didn't even make it through the 24-hour mortgage-broker training class without breaking the law... He persuaded a classmate who worked for Sprint PCS to sell him cellphone customers' Social Security numbers." The broker went on to use buyers' credit histories to steal more than $200,000.

But the most egregious has to be Scott Almeida, who got his license as a mortgage broker despite a conviction for cocaine trafficking. All Almeida had to do to get the license was offer a written explanation for his crime and rehabilitation. As he told the Herald, "I had to write a letter. It took three seconds. It wasn't a battle."

Almeida also had to sign a probation agreement, which entailed a promise not to own a brokerage or break any mortgage-industry laws for five years. He got to choose his own probation supervisor. He chose Frank Giffone, whom he'd met in federal prison. And, well, Giffone didn't prove to be much of a mentor:

Shortly after going into business together, the pair sent salesmen to search out elderly, often disabled people living in ramshackle houses in poor neighborhoods of Hillsborough, Polk and Lee counties.

They promised home-equity loans for badly needed renovations.

State regulators received two written warnings in 2004 that Almeida was lying on the loan applications and stealing money. One was from the daughter of a 76-year-old victim, the other from investigators at the Hillsborough County Consumer Protection Agency.

But despite the fact that Almeida was on probation, and had promised not to break the law, regulators took no action against his license.

Almeida later pleaded guilty to stealing from both borrowers. Giffone pleaded guilty to racketeering.

There’s more on the Herald’s site, including a video report on the findings.

Justice Dept. Spreads Wide Net With Mortgage-Related Prosecutions

2008-07-28T13:20:00-05:00

by Paul Kiel

Nearly everyone agrees that something went very wrong with the mortgage industry. Mortgage lenders made extremely risky loans. Wall Street banks hyped securities that were backed by such loans. In the continuing wake of the crisis, the Justice Department has launched a range of investigations and prosecutions of behavior that might have gone beyond risky or irresponsible to criminal. Here’s a rundown of exactly what skullduggery the feds are looking for.

The investigations reflect the complex, interwoven nature of the meltdown itself. They range from mortgage fraud by small-time operators all the way to corporate fraud by companies that were once among the biggest mortgage lenders in the U.S. and securities fraud at major Wall Street banks.

The FBI has said that it currently is investigating 21 corporations involved in the subprime mortgage industry, companies that FBI Director Robert Mueller characterized as "generally relatively large." The investigations run the gamut, he's said, focusing on investment banks, hedge funds, brokerage houses, credit rating agencies and due diligence firms.

The FBI hasn't named the corporations, but reports have fingered a few. Last week, the Los Angeles Times reported that a federal grand jury had issued subpoenas to Countrywide, New Century and IndyMac, three of the country's largest subprime mortgage lenders.

The scope of that investigation is itself varied, according to the Times. Aspects reportedly include the V.I.P. loans that Countrywide CEO Angelo Mozilo provided to influential public officials, such as members of Congress, congressional staffers and a federal judge. Also of interest to investigators, reported the Times, is "whether securities investors were defrauded about the value of subprime mortgages they purchased, as well as other possible crimes such as insider trading by corporate officials." Representatives for Countrywide and IndyMac declined to comment on the subpoenas. A spokesman for New Century did not reply for a request for comment.

The Justice Department filed its first major indictment last month, accusing two Bear Stearns hedge fund managers of securities fraud for misleading investors. The funds, which invested heavily in mortgage-backed securities, collapsed last summer, resulting in approximately $1.4 billion in losses to investors. One manager was also indicted for unloading $2 million of his own shares in the fund while hiding his concerns from investors. Both managers have pleaded not guilty, and their lawyers argue the two are being made scapegoats for the market crisis.

Alongside such high-profile prosecutions, the Justice Department has also charged more than 400 defendants with mortgage fraud in the last several months as part of "Operation Malicious Mortgage." A recent guilty plea in New York is a typical example: Dominick Devito admitted to buying up millions in real estate with phony mortgage loan applications. The FBI says it has more than 1,400 open mortgage fraud cases.

What’s a Raise If Your Boss Doesn’t Pay You?

2008-07-23T09:44:01-05:00

by Robert Lewis

The Department of Labor hasn't been adequately protecting workers whose employers skimp on paychecks, don't pay overtime or don't pay a livable wage, according to a two-part Government Accountability Office report released last week.

This has many experts worried, especially now that the federal minimum wage is set to rise 70 cents to $6.55 an hour starting Thursday.

The Wage and Hour Division of the Labor Department, which is supposed to protect workers from substandard pay and working conditions, pursued about 30,000 enforcement actions in 2000, one-third fewer actions than the 47,000 the division followed in 1997, according to one GAO report. The report also found that the number of investigators in the office dropped by 20 percent over the same period. And the office, the GAO noted, is responding to more complaints over the phone as opposed to going out into the field.

The department "may not be addressing the needs of workers most vulnerable to [Fair Labor Standards Act] violations," the report concluded.

"If there's no enforcement of that minimum wage floor, [the increase] doesn't mean anything," said Cathy Ruckelshaus, litigation director for the National Employment Law Project, a national nonprofit that advocates for low-wage workers.

The lack of enforcement also hurts law-abiding employers who must then compete against companies that keep costs down by underpaying workers, she added.

The House Education and Labor Committee held a hearing last week to probe the lack of enforcement. Gregory Kutz, the GAO's managing director of forensic audits and special investigations, testified at the hearing and highlighted several specific cases, including garment workers whose employer refused to pay legal wages because they weren't U.S. citizens.

With the federal minimum wage increasing, advocates are concerned about the potential for an increase in wage violations.

"Every time there's an increase in the minimum wage, there are employers who aren't in compliance," said Kim Bobo, executive director of Interfaith Worker Justice, who also testified at the house hearing. "So it increases the workload for the wage and hour division. It puts them in an even greater crisis."

Analysts estimate that nearly six million workers will eventually get a mandated raise thanks to the revised minimum wage. That is, assuming employers actually pay it.

"Given its record, there is some concern that WHD will be lackluster in enforcing the upcoming minimum wage increase," Congressman Phil Hare (D-IL), who is also on the committee, told us via a statement. "Congress will be keeping a close eye on this and stepping up pressure on the Department of Labor to hold employers accountable."

The Department of Labor hasn't yet responded to our requests for comment. If and when they respond, we'll post an update.

SEC: Bomb Detector—Bought by Military—Was Front for Scam

2008-07-17T11:14:00-05:00

by Michael Grabell

Last year, while working at The Dallas Morning News, a colleague and I wrote a story about a purported explosives detection device called Sniffex. According to the company, Sniffex could detect explosives up to a football field away by reading the "interference between the magnetic field of the earth, the explosive, the device itself and the human body."

Critics called it a sham. Yet one unit in the U.S. military bought the device -- eight for about $6,000 each -- even though the military’s own tests (PDF) said the Sniffex performed no better than random chance. (The testers concluded that the Sniffex operates according to the same principles as a Ouija board.)

Now, the Securities and Exchange Commission has accused Sniffex of being little more than the front for a $32 million stock fraud scheme that enriched insiders at the expense of unsuspecting investors.

According to the SEC complaint (PDF) filed Tuesday, Sniffex -- which later became Homeland Safety International -- installed a figurehead CEO, named Paul B. Johnson, to hide the involvement of two Bulgarian residents who actually controlled the company.

The company then issued a series of what the SEC alleges were false press releases, including one that touted “impressive” results from tests conducted by the New Mexico Institute of Mining and Technology. In reality, the tests were conducted by Johnson himself and the results were inconclusive, the SEC says.

The SEC’s complaint also alleges that in 2005 one of the Bulgarians coordinated a spam campaign to hype the stock, taking advantage of the London subway bombings to make his pitch.

The stock rocketed from 80 cents a share to $6 a share in less than three months. While the stock price increased, the insiders sold. The stock plummeted and now trades at one tenth of a penny.

The story on Sniffex was part of a series (see sidebar) The Dallas Morning News did on penny stocks and a group of lawyers, stock brokers and financiers whom the SEC suspects were sending out junk faxes and spam to manipulate the prices of several stocks. The SEC dubbed them the "shell creation group."

In a second complaint (PDF) filed earlier this week, the SEC alleges that the "shell creation group" made about $20 million by sending out junk faxes and spam on several penny stocks, including one e-mail (PDF) after Hurricane Katrina that read "Get Filthy Rich as the Recovery Begins."

Mark Lindberg, a businessman named in both the Sniffex and shell creation group complaints, was charged (PDF) Monday by federal prosecutors with conspiracy to commit securities fraud. (Neither Lindberg nor his lawyer returned calls for comment.)

We tried to reach the Bulgarian businessmen through their Web site, but the listed phone number was disconnected. No one we talked to had contact information for them or their lawyers. The attorney for Sniffex CEO Paul Johnson said his client didn’t make money from the stock sales and hasn’t done anything wrong. "From what we understand he was really a pawn in how this happened," said Kip Mendrygal, Johnson's attorney.

Ethics Committee Examining Countrywide Loans to Senators

2008-06-17T17:12:00-05:00

by Paul Kiel

There are a couple of noteworthy updates to our post yesterday on the Countrywide V.I.P. or "Friends of Angelo" mortgage loans to Sens. Chris Dodd (D-CT) and Kent Conrad (D-ND).

First, Conrad says that he's begun "talking to the Ethics Committee" after a D.C. watchdog filed a complaint Friday. The panel does not comment on investigations, but it's a sign that at least a preliminary inquiry is under way.

Second, Dodd spoke to reporters for the first time since the story broke last Friday. Up until today, he'd only responded with a brief statement. Dodd again denied that he'd sought or knew he was receiving any special treatment. At the same time, he said today ($) that he'd been told in 2003 he'd been designated a V.I.P. account. He never asked what that meant, he said, but assumed it was a normal status bestowed on Countrywide customers who had an additional mortgage with the company.

Conrad has said that he'd personally called Countrywide CEO Angelo Mozilo to inquire about obtaining a mortgage, but did not expect or notice any special treatment.

Watchdog Files Ethics Complaint over Senators’ V.I.P. Mortgage Loans

2008-06-16T12:53:00-05:00

by Paul Kiel

Two senior Democratic senators got special "V.I.P." loans from the mortgage lender Countrywide Financial. Both say they had no idea they'd received rate and fee reductions. But a D.C. watchdog has filed an ethics complaint asking whether the senators should have noticed their V.I.P. treatment. Citizens for Ethics and Responsibility in Washington also asks that the Senate ethics committee establish a vetting process for lawmaker loans.

Senate rules prohibit gifts of more than $100 over the course of a year from a private entity, but Jan Baran, a Republican ethics attorney, said it was important lawmakers not be penalized "when they have unwittingly accepted something. Not knowing that something is a gift is relevant." Baran also said that the exclusivity of the loan terms was also relevant. Even if such terms were not available to the general public, he said, they might not be considered gifts if provided to "many other people" -- he drew an analogy to lawmakers receiving invitations to the Oscars, which is attended by thousands of other people. "We need more information about these types of loans."

Sens. Kent Conrad (D-ND) and Chris Dodd (D-CT) both received discounts through the "Friends of Angelo" program, Portfolio magazine reported last week, Angelo being Countrywide CEO Angelo Mozilo.

Conrad has said that former Fannie Mae CEO Jim Johnson gave him Mozilo's number in 2004 when he was seeking a lender for a $1.07 million mortgage on his Delaware vacaction home. He spoke with Mozilo, he said, but never asked for or expected a discount. Internal Countrywide emails obtained by Portfolio show that Mozilo instructed his subordinate to lop off $10,700 in fees. Conrad announced over the weekend that he is donating $10,500 to Habitat for Humanity.

That same year, Conrad also got special treatment when he sought a mortgage to buy an eight-unit apartment building. Countrywide had a policy against providing loans for buildings with more than four units, but Mozilo made an exception, according to another internal email, "due to the fact that the borrower is a senator." Conrad says he was told the company "frequently made exceptions, especially for good customers." He now says he'll renogiate the loan because of the apparent special treatment.

It is less clear how Sen. Dodd became a Friend of Angelo. A spokesman told the Washington Post that neither Dodd nor his wife spoke to Mozilo about their loans. But Portfolio reported that Dodd received rate reductions on two different properties cumulatively amounting to savings of more than $70,000 over the life of the loans. In a short statement on Friday, Dodd said he and his wife "did not seek or expect favorable treatment" and that they'd "shopped around and received competitive rates."

CREW's letter to the ethics committee asks that the panel not only probe the loans to Conrad and Dodd, but also find out whether other lawmakers received similar deals. "The public needs to have confidence that members of Congress are not taking advantage of their elected positions to get better deals on their mortgages," said CREW's executive director Melanie Sloan. The group also called for a "vetting process" for loans.