Rep. Tony Coelho, the third-ranking member of the House Democratic leadership, is resigning from Congress, sources said Friday night.
The stunning decision by the 46-year-old Californian follows mounting reports of ethical problems that threatened to block his advancement up the leadership ladder.
Coelho's announcement was made in the form of an interview with the New York Times. In it, Coelho (D-Merced) said that he did not want to put his party and his colleagues through a protracted investigation of his personal finances.
'A Chance to Move On'
"I want to give my party a chance to move on," he said. "I don't intend to put my party through more turmoil. I don't intend to put this institution through more turmoil. And more importantly, I don't intend to put my family through more turmoil."
Coelho had been expected to face investigations by the House and the Justice Department for a 1986 investment involving the purchase of $100,000 in junk bonds underwritten by the investment firm of Drexel Burnham Lambert. He has acknowledged failing to report on his financial disclosure form the help that he received from a Columbia Savings & Loan executive in buying the bonds.
The resignation announcement came only hours after Coelho's press spokesman had informed reporters that his boss was planning to jump into the expected race for House majority leader "with both feet."
Officials in Washington were thunderstruck by the news, which came near the end of a tumultuous week that saw House Speaker Jim Wright move toward an expected resignation this week.
"Oh, my God," said George Kundanis, a top aide to House Majority Leader Thomas J. Foley (D-Wash.) when he learned from a reporter of Coelho's decision.
Foley is expected to become the new Speaker if Wright's resignation takes place. That would open up his job as Democratic leader, the No. 2 position in the House. Coelho had been regarded as the front-runner for that post.
'A New Challenge'
"If I can't be leader and if I can't be whip," Coelho told the New York Times, "it's time to try a new and different challenge. Therefore, June 15, which is my 47th birthday, will be my last day in the Congress."
Coelho's unexpected move clears the way for Rep. Richard A. Gephardt of Missouri to enter the race for majority leader. Gephardt and Coelho met Friday in the latter's Capitol office.
Other candidates in the race are expected to include Rep. Ed Jenkins of Georgia.
There will also be a spirited fight for the post of majority whip, which Coelho is vacating. The likely candidates include Reps. William H. Gray III of Pennsylvania, David E. Bonior of Michigan and Beryl Anthony Jr. of Arkansas.
Earlier, Common Cause, the liberal lobby group, called for a House ethics investigation of Coelho.
In a letter to House Ethics Committee Chairman Julian C. Dixon (D-Los Angeles), Common Cause President Fred Wertheimer said that a formal House inquiry is needed to determine whether Coelho violated rules prohibiting members from accepting "favors or benefits" under questionable circumstances.
Coelho has admitted that he did not report details of a 1986 junk bond transaction that netted him $6,882 in six months--a deal in which he put up none of his own money.
Coelho also admitted underpaying his tax on the bond transaction by more than $2,000. He blamed his accountant for the error.