Coelho Arranged Meeting of Colleague, S&L; Lobbyist

Assistant House Majority Leader Tony Coelho (D-Merced), who earned a $6,882 profit in 1986 by purchasing a junk bond with the help of Columbia Savings & Loan Chairman Thomas Spiegel, later arranged a meeting for a Columbia lobbyist with a member of the House Banking Committee to discuss issues of interest to Spiegel.

Coelho arranged the meeting last March between Rep. Richard H. Lehman (D-Sanger) and Norman Brownstein, a Denver attorney and lobbyist who now represents several savings and loan institutions, including Columbia, which is heavily invested in junk bonds.

Robert Bauer, Coelho’s attorney, said setting up the Lehman-Brownstein meeting was the only act by Coelho in the wake of his junk bond purchase that could possibly be construed as a quid pro quo for Spiegel’s help in obtaining the $100,000 bond. But Bauer dismissed it as insignificant because Coelho routinely introduces people to his colleagues in Congress.

On Friday, Common Cause, the citizens lobby that helped precipitate the current ethics investigation of House Speaker Jim Wright (D-Tex.), called on the House Ethics Committee to investigate Coelho’s junk bond purchase.

The group asked the panel to look into whether the deal violated a House rule prohibiting each member from accepting “favors or benefits under circumstances which might be construed by reasonable persons as influencing the performance of his governmental duties.”

The junk bond deal also has become the subject of a preliminary Justice Department investigation into the financial dealings of Coelho and Los Angeles Mayor Tom Bradley with Spiegel and Drexel Burnham Lambert Inc.’s junk bond department. The bond bought by Coelho was issued through Drexel by BCI Holdings Corp., which used the revenue for a buyout of Beatrice Foods.

Coelho staunchly denies that his junk bond deal was improper but he has declined to comment either on the Common Cause request or on the meeting he arranged for Brownstein.

Brownstein, in a telephone interview, described Coelho as a friend whose help he sought when he set out to lobby Lehman on behalf of his clients. “I had a conversation with Tony . . . and asked him: ‘Would you mind introducing me to this congressman?’ ” he said.

Lehman, who had been host of a contentious meeting with Columbia executives a few months before Brownstein’s visit, said he would not have met with the Denver attorney if Coelho had not asked him. “When Tony asks me to meet with somebody, I meet with them,” said Lehman, whose district is next to Coelho’s.

Campaign Contributions

He said Brownstein was introduced by Coelho as “a close friend of Gary Hart.” Brownstein had contributed to Hart’s presidential campaigns as well as to Coelho’s House campaigns and to the Democratic Congressional Campaign Committee, which Coelho headed for several years.

Brownstein said he outlined for Lehman the views of Columbia and his other clients on legislation now being drafted by Congress to restructure the savings and loan industry. Columbia strongly opposes restrictions on investments by S&Ls; in junk bonds.

But the meeting did not go well for Brownstein, Lehman said. Not only is Lehman an advocate of restricting S&Ls;’ junk bond investments, but also the congressman was put off by Brownstein’s approach.

“He and I didn’t get very far,” Lehman recalled. “He asked me to open some doors to meet some other (Banking Committee) members. ‘Disagreeable’ would be too strong a word, but I kind of brushed him off . . . . My job is not to go make appointments for people, so we didn’t do it.”

Lehman was also annoyed that a California S&L; had sent a Denver lawyer instead of one of its own executives to talk to him. “I would gladly meet with any S&L; industry executive,” he said, “but when several of them get together and send me an attorney, I’m not interested.”

According to reports that all lobbyists must file with the House clerk, Columbia is one of a group of six savings and loans represented by Brownstein. The others are Far West Financial Corp. of Los Angeles; Crossland Savings of Brooklyn, N.Y.; San Diego’s Imperial Corp. of America; American West of Miami, and Pima Savings & Loan Assn. of Tucson. Before this year, Columbia was listed as Brownstein’s sole savings and loan client.

Like Columbia, Brownstein’s other S&L; clients are interested in discouraging Congress from imposing any restrictions on the diversity of investments that they make. Under current law, savings and loans are permitted to put up to 40% of their assets in investments unrelated to housing.

Federal law also permits savings and loans to invest up to 11% of their assets in high-yield bonds, but Columbia and other California thrifts are permitted to buy as much as 15% under state law.

Riskier Ventures an Issue

Some members of Congress involved in writing new legislation governing the savings and loan industry, including Lehman, have expressed the view that many thrifts got into financial trouble in recent years by straying from housing-related investments into riskier ventures such as junk bonds.

“The problem here is not really Columbia,” Lehman said. “They may do it well, but you have to write the bill for those who do it poorly.”

Coelho has acknowledged that he purchased his $100,000 junk bond with the help of Spiegel and Columbia. He sold the bond a few months later at a net profit of $6,882.

Not only did Columbia lend Coelho half the money to buy the bond, but also Spiegel himself purchased the bond on Coelho’s behalf when the congressman failed to come up with his money on time. Spiegel later sold the bond to Coelho for the initial price--about $3,000 less than the going price of the bond at the time Coelho took possession of it--plus interest.

Coelho has admitted that he failed to report the Columbia loan on his annual financial disclosure report as required by House rules.

But he has denied that he violated any other House rules. Specifically, he has rejected suggestions that he violated a rule prohibiting members from receiving gifts or favors valued in excess of $100 from anyone with direct interest in legislation, a category that appears to include Spiegel.

In a letter to the House Ethics Committee, Common Cause President Fred Wertheimer noted that, at the time Spiegel helped Coelho with the bond purchase, the Federal Home Loan Bank Board was challenging Spiegel’s $9-million-a-year compensation package from Columbia. Coelho has said that he knew that Spiegel was a highly successful businessman but knew nothing about his dispute with the bank board.