Congress: Life Among the Ruins
In the wake of the House Bank scandal, the bad news got worse-and real work came to a halt
It was as if the House, never much in order, had finally imploded. Just days after truant check writers started jetting home to apologize, the House postmaster resigned amid a new money scandal. Republicans called the Democratic majority corrupt; Democrats accused their leaders of abandonment. One nervous member joked about outfitting Congress in "No Excuses" jeans. But there was no laughter when Illinois primary voters ousted Democrat Charles Hayes, one of the House's top check kiters.
The bad news just got worse. Attorney General William Barr took the bank matter out of congressional hands late last week, naming a retired federal judge to look into the mess--a possible first step to the appointment of a special prosecutor. A few contrite rubber barons admitted to floating checks unwittingly to their re-election campaigns. Then there was the House post office, where three staffers already have admitted to embezzlement. Last week, a federal grand jury--as well as an internal House investigation--began to examine whether the post office offered members some potentially illegal privileges: convenient, interest-free floats that allowed members to cash checks and wait several months before covering the sums; free cash withdrawals using vouchers ostensibly written to pay for stamps for "official" mailings. Sources also told U.S. News that more than 20 members with campaign post-office boxes off Capitol Hill may have used House postal employees to retrieve mailed contributions, a possible violation of federal law.
No more perks. As the charges and rumors exploded, the real business of government came to a halt. Democrats needed a strategy to put their issues--like middle-class tax cuts--back on the front page. Yet Topic A for the anxious and embattled House Speaker Tom Foley late last week was a package of internal reforms--including raising the $100 annual fee for the House gym and ending no-cost prescription drugs and free parking. "Why didn't we do this two years ago?" sniffed one member. At least Democrats could hope that the mea culpas of former GOP colleagues like Defense Secretary Dick Cheney and his fellow cabinet members Lynn Martin and Edward Madigan would defuse Democrats' culpability. But they fretted that party discipline would fall apart. "You can't count on votes when survival is the issue," says House Budget Committee Chairman Leon Panetta.
House Republicans had problems of their own. GOP Whip Newt Gingrich of Georgia, who considers the scandal his party's best chance to root out Democratic incumbents, was furious at Bush's tepid early response. But the president lashed out at the end of the week, calling the Democrat-dominated Congress a bastion of "PACS, perks, privilege and paralysis." Lawmakers "cannot manage a tiny bank or a tiny post office," Bush said. Others predicted that troubled Republicans would be more likely than Democrats to lose seats over the bank scandal, since they represent the more unforgiving surburban and rural districts. The polls, meantime, show that half the nation's voters now disapprove of their own members. And the newest anger focused on an easy-money culture--run in a way that courted abuse, even fraud. It is, explains Texas Democrat Charles Wilson, who bounced 81 checks valued at $143,857, "an invitation to carelessness."
Paper trail. At the House post office, the easy-money mentality may have invited even more. Members and staff can buy stamps at five branches in Capitol office buildings, but the operation--under contract from the U.S. Postal Service--also cashes checks of all kinds. A confidential postal inspector's audit shows systemic disregard for record keeping, substantial cash shortages and loose management that allowed check cashing to become a main business at some branches. Of 169 checks inspectors found in post-office tills last summer, 161 "bore no indication of the accepting employee," 126 did not "indicate the date of acceptance" and nine were insufficiently endorsed. More than half were personal checks. Such lapses erased any paper trail, enabling clerks to hold checks, effectively giving the check writers floats.
Now, investigators are probing another possible scam, this time involving the vouchers congressional offices use to purchase stamps for "official" purposes. It centers on these possible abuses: whether members or staffers received cash instead of stamps for the vouchers and whether members bought stamps with campaign funds and later cashed in the stamps for their personal use. So far, authorities have discovered that postal clerks often destroyed vouchers, making it impossible to tell how many cash exchanges occurred--and with whom. Several knowledgeable sources told U.S. News that post-office employees routinely shifted money in and out of tills to cover telltale losses during audits, which were always announced ahead of time. Possible criminal violations include misappropriation of funds, embezzlement and obstruction of justice.
Turf battle? On another front, the federal grand jury investigating the post office is now examining a claim of possible coverup. Frank A. Kerrigan, former chief of the Capitol Police, says that on behalf of House Democratic leaders, staffers--including House counsel Steve Ross and Heather Foley, an unpaid administrative assistant and wife of the speaker--tried to quash an early post-office investigation. Both firmly deny the charges. Kerrigan has given the grand jury a tape he secretly recorded of a meeting with Ross in which there was disagreement over who should conduct the probe. The grand jury may find that this was a turf battle between the speaker's office and former Sergeant-at-Arms Jack Russ--who ran the bank and the Capitol Police. Their relationship was frequently strained, and Russ resigned two weeks ago. So, last week, did Postmaster Robert ("Can't-Say-No") Rota. "He always bent over backwards to be helpful to members," says House Administration Committee Chairman Charlie Rose. "This time he fell over."
Critics say the six-member House task force now investigating the post office is itself open to conflicts of interest. Democrat Mary Rose Oakar, for instance, is on the task force even though she heads a subcommittee responsible for the entire postal operation. Democrat Rose, another task-force member, has also helped place at least a dozen workers on the postal payroll, according to sources. "It's like asking the rabbits to guard the lettuce," complains one Democrat. The task force is to report by May 30.
Answers may be just as hard to come by at the now-defunct bank. One line of inquiry centers on whether rubber checks helped some members pay last-minute election expenses. Republican ethics-committee member Fred Grandy says panel members worried about several cases of unusually heavy activity in members' accounts around election time. Wilson of Texas, for example, admits to writing a $10,000 check to his campaign on Dec. 21, 1990, that became an overdraft when the bank held a deposit check for the same amount for 40 days.
What the bank scandal vividly shows is that many members live perilously close to the financial brink, despite their $129,500 salaries. Wilson admits to a lifestyle "marginally" beyond his means--and sparse savings. Many of his colleagues, he confides, are in the same boat. Not surprisingly, a U.S. News study of the 24 worst check abusers reveals an overextended group who, in addition to holding home mortgages, have borrowed thousands of dollars from banks, friends and the House credit union.
New York's Robert Mrazek, the second-worst House-bank offender with 972 bad checks, is a case in point--and his Senate bid was in jeopardy last week. Mrazek has mortgage and personal loans of $530,000 to $1.2 million and properties that include a Maine retreat, a 134-acre Virginia farm and a share of a Bahamian island--all on an average annual income since 1988 of between $140,000 and $185,000. A Florida real-estate agent says he is about to foreclose on the island partnership, which he says hasn't made a payment since March 1991. A spokesman says Mrazek sold his share and that he "is not in arrears" on any mortgage.
Voter rage--and fear of political mortality--have left members scurrying. Speaker Foley's assurances that reform is at hand hardly mollify Democrats afraid even of talking anymore about perks. And Republicans are just as uncertain about how to proceed. Appointment of Justice's special counsel is bound to help Gingrich's slash-and-burn politics by dragging the crisis on for months. It might also produce late revelations that would be a most unwelcome October Surprise for incumbents.
The Hill's easy-money culture
The array of perks for House members makes life very convenient, allowing many to live better than their salaries would otherwise permit. Some, however, use the perks to live close to the financial edge.
Floating checks. The House bank and perhaps the House post office cashed checks and then held them--allowing members to give themselves free loans.
Quick credit. Members and staffers make frequent use of the House's federal credit union, which offers loans of up to $15,000 with only a signature required as "collateral."
Juggling funds. Investigators are looking into allegations that some members floated personal checks from the House bank to cover emergency campaign expenses.
Postage fakery. Investigators are checking to see whether members and postal workers cashed "official mail" postage vouchers instead of using them to buy stamps.
Coverup. A grand jury is listening to taped conversations to see whether Democratic leaders recently thwarted a budding investigation by Capitol Police into the post-office scams.
This story appears in the March 30, 1992 print edition of U.S. News & World Report.