Bankruptcy Bill Opponents Criticize Loan (Louis Freeh's employer, MNBA)

ASHINGTON, Aug. 8 — In an effort to block a bill sought by credit card companies to overhaul the nation's bankruptcy laws, opponents are pressing for an investigation into the relationship between a major credit card issuer and an important House sponsor who received a $447,500 loan from the company on what appeared to be highly favorable terms.

The recent disclosure of the 1998 loan to Representative James P. Moran, a six-term Democrat who represents the northern Virginia suburbs of Washington and who has had personal financial problems, is threatening to complicate the lobbying campaign on behalf of the bill, its supporters acknowledge. The disclosure has also complicated Mr. Moran's re-election campaign this November.

The loan was made by the MBNA Corporation of Delaware, which describes itself as the world's largest independent credit card company and which has lobbied aggressively for the bankruptcy bill. The loan was made in January 1998, a month before Mr. Moran signed on as the lead Democratic sponsor of an earlier version of the bill.

Mr. Moran and MBNA have denied that there was anything unusual about the loan, which consolidated Mr. Moran's other debts when he owed tens of thousands of dollars in credit card bills and faced the prospect of bankruptcy.

"The timing of my loan was wholly coincidental with the co-sponsorship of bankruptcy reform," Mr. Moran said.

The bankruptcy bill, which MBNA and the nation's credit card industry and banks have pursued for years, has never been so close to passage. The bill, which would make it harder for people to erase their debts in bankruptcy, was approved by a House-Senate conference committee last month. The bill's supporters say it would end abuses by high-income borrowers who file for bankruptcy to escape debts they are able to pay.

But the bill's opponents, including major consumer groups, say that in their campaign to block the bill, they intend to invoke Mr. Moran's name in questioning the motivation of the bill's sponsors, and to urge further investigation of the loan by the House ethics committee, the election commission and other federal agencies.

They say that while it might be impossible to stop the bill, its passage will come at a serious public-relations cost to Mr. Moran and MBNA.

"Absolutely, we intend to raise this," said Frank Torres, legislative counsel for Consumers Union, the national consumer rights group. "We've got a questionable loan being made to Congressman Moran at the same time he is agreeing to support this industry-sponsored bill. He was an early Democratic supporter, which gave it an air of bipartisanship."

Travis B. Plunkett, legislative director of the Consumer Federation of America, said: "We've got a well-timed loan to a key politician on a high- profile issue that he played a major role in. If that doesn't warrant an ethics investigation, what does?"

Mr. Moran's loan from MBNA, which was a first and second mortgage on his home, consolidated other debts, some from cancer treatments for his daughter, some from losses in the stock market.

Credit analysts who have reviewed the circumstances of Mr. Moran's loan said that the interest rate, 10.5 percent a year, and the loan's size were generous to the lawmaker, given his debt load at the time. He was allowed to borrow more than 97 percent of the value of his home, a larger percentage than would have been permitted by other lenders. Federal records show it was the largest mortgage package given by MBNA to any single debtor that year.

Mr. Moran declined to be interviewed for this article. In a statement, he said there was no connection between the loan and his sponsorship of the bankruptcy bill, and the terms of the loan were not generous.

"I sponsor or co-sponsor dozens, if not hundreds of pieces of legislation every year," Mr. Moran said. "I supported bankruptcy reform legislation because of its merits."

Some community leaders and news organizations have discounted Mr. Moran's explanations. The Washington Post, which serves as a hometown newspaper for many of Mr. Moran's constituents and which first reported the loan last month, said in an editorial that it could see "no favorable interpretation of Mr. Moran's behavior" and that his acceptance of the loan "suggests impropriety."

Last month, a fellow Virginia Democrat, Lieutenant Governor Kaine, said that Mr. Moran had committed "an error in judgment" by accepting the loan, and that the issue should be investigated by the House ethics committee, known formally as the Committee on Standards of Official Conduct.

A spokesman for the committee, which has tended to pursue cases in recent years only when they were forwarded by prosecutors or were the result of a criminal conviction, would not comment when asked if the panel had opened an inquiry.

Mr. Moran has been criticized before over his personal finances. In 1999, he took a $25,000 loan from a pharmaceutical company lobbyist shortly before he signed on as a sponsor of a bill to help the company maintain its patent on an allergy drug. In June, he reported that he had accepted a $50,000 loan from the chairman emeritus of America Online, a major employer in northern Virginia.

The National Legal and Policy Center of Falls Church, Va., a conservative legal group, filed its complaint last month with the Federal Election Commission, charging that the MBNA loan amounted to an illegal campaign gift and needed to be investigated. The election commission has said in a letter to the group that the complaint is under review.

A spokesman for MBNA, Brian Dalphon, said the company's loan officers had apparently offered the mortgage package to Mr. Moran without realizing that he was a member of Congress and might be involved in the bankruptcy bill.

The loan, Mr. Dalphon said, "made good business sense" because with a mortgage loan, "we improved our position by getting security for an unsecured loan.

"He had credit cards with us, he was having financial difficulties," Mr. Dalphon said. "This put him in a better position to be able to pay us back from a cash- flow standpoint."

In urging colleagues to support the bill, Mr. Moran said in Congressional testimony in March 1998 that "the current bankruptcy system is broken" and that "the time-honored principle of moral responsibility and personal obligation to pay one's debts has been eroded by the convenience and ease with which one can discharge his or her obligations."

I didn't know if it was ok to post entire New York Times article so that's why original is snipped.

Nothing to see here,as Director of the FBI, Louis Freeh has already investigated this matter and found no criminal wrong doing in exchange for a lucrative job over at MNBA.

"He was allowed to borrow more than 97 percent of the value of his home..."

It's a 'Rat, nothing to see here, move along. ;^)

Translation of the new Bankruptcy bill:

IF you are a small company or individual screwed by a big company going bankrupt, too bad.

IF you are an individual or small company that goes bankrupt, you are in debtor's prison for life to your creditors.

Oh, and if you try to default on your payment's to your creditors you are held in contempt of the bankruptcy court and will actually get to go to jail.

Welcome to Amerika.

Refer to #3. I talked to my attorney who represents my small company (less than 10 employees). He said if a major company who I sell to goes bankrupt, I might collect 5-10% of the debt owed because we are small fry. If I were to do the same to my creditors (as an individual), I lose my house and up to 30-40% of my future income above and beyond taxes (!!!) for a period of time to be determined by a judge!

This is really unbelievable. They either have very ignorant people working in their loan department or this spokesman is so arrogant that he thinks anything he says will be accepted as the absolute truth. And it probably will be by a lot of people. This should be investigated even more vigorously that Traficant was but I'm not holding my breath. After all, Moran has always been in lock step with the party elite.

MBNA probably hired Louis Freeh not realizing that he was the former Director of the FBI and he had the power to quash any FBI investigation into this matter, LOL !!!!!!!

A spokesman for MBNA, Brian Dalphon, said the company's loan officers had apparently offered the mortgage package to Mr. Moran without realizing that he was a member of Congress and might be involved in the bankruptcy bill.

Probably. Nothing would surprise me with this crowd. I'm glad I canceled all my MNBA cards a couple of years ago. I think it was when James Kallstrom became a big wheel in their organization. I figured if he worked at MNBA like he conducted the investigation of TWA 800, then I didn't want any involvement with that company in any way.

I believe this bill crosses if not get right to the boarder of indentured servitude. The debtor becomes indentured to the creditor based on a meanse test.

The old bankruptcy act, followed by the bankruptcy code(s) were born out of the historic elimination of debtor's prisons.

I see this as MBNA desperatly trying to cover their own enron type of implosion based on their own creative accounting practices and write offs.

"you are held in contempt of the bankruptcy court and will actually get to go to jail."

And without a jury trial. You don't get a jury trial for "trivial" sentences, which is six months or less. "Trivial."

Yeah right. This is a bribe, pure and simple.

direct criminal contempt or indirect criminal contempt?

Bankruptcy judges are not Article 3 judges as listed in the constitution. They do not have a lifetime appointment (at least on paper).

Contempt is to protect the integrity of the court and the standards are fairly clear. (ie you must be warned first)

In a previous version it said you must have the residence for two years before it can be protected under a homestead exclusion.

This is silly because there is a four year statute of fraud provision in the bankruptcy code right now. You never could just pack up and buy the proverbial sold gold house in texas or florida in order to "hide" your assets.

Does anyone know if they are still alowing the state to select the state's vs the federal personal exemptions?

"Contempt is to protect the integrity of the court and the standards are fairly clear. (ie you must be warned first)."

Warned? Warned about what? That you must pay money which you don't have? What good is that type of "warning?" I disagree that the standards are clear. It is basically whatever a judge wants to say it is and you can rot in jail until a higher court grants you habeus corpus relief.

I believe (and hope) that you are incorrect. Kay Bailey Hutchison and Phil Gramm said that that would happen over their dead bodies.

Can someone post the current version of the bill, especially the part about exemptions for homes?

Simple generic example: Judge issues a written order and the person does not comply with the written order.

In order for the court to have a finding of contempt, the judge must have a hearing in which the person is permitted to present evidence why they should not be held in contempt. (i complied as best i could, noncompliance was involuntary, etc.) Contempt must be willful, voluntary and contumacious. In other words the judge must show you intentionally did not comply and you knew it.

If you do not have the money after the fact you don't have the money.

This is a bad bill and will be a bad law. This is especially true with all the lay offs.

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