Republican opponents of the Export-Import Bank on Tuesday tried to spotlight corruption allegations at the agency as lawmakers battle over its future before a looming reauthorization deadline.
A House Oversight subcommittee subpoenaed a fired bank employee who is among four under investigation in three separate incidents that allegedly included the payment of kickbacks by companies seeking government export assistance and the improper awarding of contracts to help run the agency.
The employee, Johnny Gutierrez. who worked in the bank’s short-term trade finance division, invoked his Fifth Amendment right against self-incrimination in refusing to answer any questions at the hearing.
The subcommittee’s chairman, Jim Jordan (R-Ohio), said the allegations raised major concerns about how the bank polices itself.
Republican lawmakers sharply questioned Fred Hochberg, the bank’s president, about what Jordan called “allegations of serious and widespread corruption” at an agency that provides billions of dollars a year in loan guarantees and other export assistance.
“Given such massive government largesse, the bank is a natural target for fraud, and its employees are natural targets for bribery and corruption,” Jordan said. “What is shocking is how the bank has managed that risk.”
Hochberg defended the bank, saying other employees helped alert management to the incidents.
“I would obviously prefer to have no fraud,” Hochberg said. “But if it comes up, the fact that our employees are alert to it and want to root that out is something I admire in our employees."
Democrats joined Hochberg in defending the bank, which provides loan guarantees to foreign buyers of American products as well as other assistance to U.S. exporters.
President Obama, along with most Democrats and some Republicans, said the bank is vital to U.S. competitiveness because many other nations, including China, Brazil and Japan, provide even greater assistance to their exporters.
The bank gets no taxpayer funding. It pays for its operations through interest and fees for its assistance and last year sent a record $1.1 billion in profit to the Treasury.
Conservative lawmakers, calling the aid “corporate welfare” that mostly benefits large corporations such as Boeing Co., oppose reauthorizing the bank’s charter, which expires Sept. 30.
Although the bank has received no congressional funding in recent years, its opponents noted that taxpayers are on the hook for any future losses on the $140 billion in outstanding loans and other assistance the bank has extended over the years.
Republicans are divided on the issue, leaving the bank’s fate up in the air.
Incoming House Majority Leader Kevin McCarthy (R-Bakersfield) said he favors letting the bank’s charter expire.
But other Republicans support the bank, which is strongly backed by the U.S. Chamber of Commerce and leading business groups.
The National Assn. of Manufacturers released a report Tuesday warning that U.S. companies “stand to lose tens of billions of dollars in business” if the bank shuts down.
Also Tuesday, William E. Brock III, who served as Labor secretary under President Reagan, wrote an opinion column in the New York Times saying the bank should be reformed but not abolished.
At the hearing, Rep. Matt Cartwright (D-Pa.) accused Republicans of using the corruption allegations, which are still under investigation, to help torpedo the bank’s reauthorization.
Without it, the bank would be unable to make new loans or provide other assistance to exporters.
“I am concerned that this hearing today has been called in a rush to judgment intended to tarnish the reputation of the bank and its employees in an attempt to unduly influence a vote on the bank’s reauthorization,” Cartwright said.
But Jordan said corruption at the bank appeared to be more widespread than the three cases.
“What better time to discuss real concern at the Export-Import Bank than when we’re looking at reauthorization,” he said.
Rep. Mick Mulvaney (R-S.C.) cited a 2013 federal survey of bank staff members that found that only 42% agreed that the “organization’s leaders maintain high standards of honesty and integrity.”
Mulvaney said there was “an unhealthy culture” at the bank.
Hochberg said that he has increased ethics training and that most corruption cases involved outside firms trying to receive inappropriate assistance, not wrongdoing by employees.
“Those are four isolated cases,” he said of the employees under investigation.
In addition to Gutierrez, two other employees have been fired, Hochberg said. The fourth is on administrative leave.
The allegations are being investigated by the bank’s inspector general as well as the Justice Department, Hochberg said.
Jordan pressed him numerous times to provide more information about the cases. But Hochberg said he was advised by the inspector general and the bank’s counsel not to discuss details because doing so could jeopardize the investigation.
Cartwright submitted a letter from the bank’s acting inspector general, Michael T. McCarthy, that said no bank employees were involved in 71 cases since 2009 involving indictments or criminal charges against people for attempting to defraud the agency.
“At this time, we have not developed evidence of widespread employee misconduct or systemic employee involvement in fraud schemes at the bank,” McCarthy said.
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