Bank at center of Rep. Waters inquiry has checkered past
OneUnited Bank, the financial institution at the center of a congressional ethics investigation involving Rep. Maxine Waters, paid for a luxurious lifestyle for its chairman, including a Porsche and a house on Pacific Coast Highway in Santa Monica despite his having a record that includes arrests and allegations of drug use.
The bank has been criticized by regulators in Florida for having an unusually poor record of lending to people in low-income neighborhoods. It also has failed to pay back $12 million in federal bailout funds.
The bank chairman, Kevin L. Cohee, assembled one of the country’s largest African American-owned banks, with more than half a billion dollars in assets, in a coast-to-coast acquisition spree unusual for a bank focused on lower-income customers.
Yet although the bank touts itself as an institution for the underserved, its directors approved paying a reported $26,500 monthly lease for Cohee’s beach house in Santa Monica and providing him the all-expenses-paid luxury sports car — until regulators ordered a halt to such corporate largesse. Waters’ husband, Sidney Williams, served on the board of the bank from January 2004 through April 2008 and owns 3,500 shares of the bank’s stock, according to the House Ethics Committee’s report of alleged violations.
Cohee’s high-flying perks came despite his having been charged in 2007 with felonies after his arrest by the Santa Monica Police Department on suspicion of possessing cocaine, crack cocaine and concentrated cannabis, according to the Los Angeles County district attorney’s office. The case was dismissed the next year after Cohee completed a drug diversion program.
He was also arrested in 2007 after a woman filed a complaint alleging that Cohee had forcibly sodomized her, according to public records. Prosecutors did not pursue the assault charge. The Boston Herald quoted Cohee as saying that the arrest was “utter and complete nonsense that went nowhere.”
Cohee could not be reached Wednesday for comment on the arrests.
Accusations that Waters, who represents a heavily minority district in South L.A., dispensed special favors to OneUnited Bank are just the latest controversy for the closely held Boston bank that has faltered in recent years. The bank has lost more than $30 million since 2008, and has seen deposits plummet.
Five of OneUnited’s 10 branches are in the Los Angeles area, all in neighborhoods with large African American populations.
Unlike its peers that have typically expanded in their local markets, OneUnited set its sights across the country. It grew by acquiring two of L.A.'s black-owned financial institutions, Founders National Bank and Family Savings Bank, and a troubled Miami bank.
In the Florida market, OneUnited’s last two reviews by the Federal Deposit Insurance Corp. produced ratings of “substantial non-compliance” with federal laws that require financial institutions to lend to local communities — the lowest rating possible.
OneUnited has made just three home loans over the last 31 months in economically hard-hit Miami-Dade and Broward counties, said Kenneth H. Thomas, an independent banking consultant.
He said that of the deposits raised at OneUnited’s two Florida branches, less than 10% has been loaned back to the community. Typically, 50% is needed to meet the federal requirements.
OneUnited has argued that it is only being cautious in one of the most overinflated real estate markets in the country. But Thomas accused the bank of using its Florida branches as a “deposit outpost” while concentrating on lending in other markets under the direction “of heavy-hitters from Boston, L.A. and D.C.”
“They’re red-lining our communities here in Florida,” Thomas said.
The connection between Waters and Cohee dates back to at least 2002, when the congresswoman lobbied heavily for Family Savings to remain black-owned when it put itself up for sale.
Family Savings ultimately backed out of a deal with a white-owned banking firm from Illinois and accepted a slightly better offer of about $12 million from Cohee’s bank.
In creating one of the nation’s largest African American banks, Cohee assembled a powerful board that includes a number of wealthy Bostonians and Washington lobbyist Leander J. Foley, a White House advisor during the Carter administration.
Cohee added glamour to power when he acquired Founders, which was owned in part by former Lakers great Earvin “Magic” Johnson. A spokesperson for Johnson said he retains an investment interest in the bank but is not involved in day-to-day operations.
In 2008, regulators concluded that OneUnited had “engaged in unsafe or unsound banking practices and violations of law.”
Industry tracker MinorityBank.com calls OneUnited the worst-performing minority financial institution in the country.
When the economy melted down in 2008 and the government took over mortgage finance giants Fannie Mae and Freddie Mac, OneUnited was hard hit. It lost more than $50 million in investments in Fannie and Freddie securities.
Waters arranged an emergency meeting in September 2008 with Treasury Department officials to discuss funding through the Troubled Asset Relief Program, known as TARP.
In response to regulatory orders, OneUnited raised $17 million in private capital from Boston’s State Street Bank, strengthening its finances. It later obtained $12 million in bank bailout funds from the U.S. Treasury — money it has not yet repaid.
Indeed, OneUnited is among just eight banks nationwide that have missed five consecutive quarterly TARP dividend payments, according to Neil M. Barofsky, special inspector general for the TARP program. More than 700 banks received TARP money.
The House Ethics Committee has accused Waters of violating three House rules in seeking aid for the bank, given her husband’s financial interest. She has denied wrongdoing, saying she didn’t benefit financially and was acting on behalf of minority banks in general, not just OneUnited.
Cohee and a bank lawyer, Robert Cooper, declined to be interviewed by The Times. They issued a statement saying OneUnited “cannot comment on matters related to allegations facing Rep. Waters … due to the ongoing nature of the proceedings.”
“The bank continues to focus on providing critical financial products and services in a responsible manner to underserved urban communities of Boston, Miami and Los Angeles that have been devastated during the current economic downturn,” the statement said.
In 2008, when OneUnited posted huge losses, the Massachusetts Division of Banks and the FDIC launched a regulatory review.
The regulators imposed heavy sanctions on OneUnited, requiring it to raise capital, tighten its lending policies, avoid over-concentrating its investments and rein in executive compensation, including halting payment on the Cohee beach house and selling the Porsche it had supplied him.
Times staff writer Andrew Blankstein contributed to this report.