July 11, 2002
For the second time in less than a year, questions are being raised about a possible connection between U.S. Rep. James P. Moran Jr.'s (D-8th) personal financial dealings and legislation pending before Congress.
The most recent allegations were made in articles in the July 7 and July 8 Washington Post. Moran negotiated a debt consolidation loan with MBNA, using his Alexandria home as collateral. At the time, he was a co-sponsor of bankruptcy legislation that was supported by MBNA and others in the banking industry.
"We had two credit cards with MBNA that were maxed out, and they offered us the loan as a way to collect that debt," Moran said. "We negotiated a rate of 10.5 percent at a time when the going mortgage rate was about 7 percent. I certainly didn't see that as a low-interest rate and didn't feel that I owed MBNA anything except repayment of the loan."
Moran obtained the MBNA loan after a cold call from the company. His wife conducted the initial discussions with the company. "They offered us 12.5 percent. I told them that was too high. I suggested 9.5 percent, and we finally agreed on 10.5 percent," Moran said.
"I had 15 credit cards that were all maxed out and owed over $700,000. In the past three years, I have sold both of my houses and have paid off all of the debt. Of 535 members of Congress, I am the poorest. I have nothing except my reputation for hard work and public service. Aside from my relationship with my children, that's the most important thing to me."
MORAN'S FINANCIAL troubles were the result of the costs of caring for a critically ill child. "We thought we were going to lose Dorothy, and so we tried to give her everything we could," he said. "Our insurance paid for about 80 percent of her medical bills, but that still left a lot more to cover."
The loan was based on what has been called a "generous" appraisal of Moran's Alexandria home. MBNA appraised the property at $451,000. First Federal Mortgage of Bethesda, which had appraised the property the year before the MBNA appraisal, had appraised it at $491,000. While the tax assessments over the past five years have been consistently lower than both amounts by about $100,000, the property sold for $465,000 in March 2001.
"I dealt only with loan officers at MBNA," Moran said. "I never spoke with anyone at the company about the bankruptcy legislation, and I don't believe that any of the executives at MBNA were aware that I had even obtained a loan from the company."
Documents show that Moran did not meet with anyone from MBNA about the bankruptcy legislation. He did meet with representatives of First Virginia Bank at their headquarters in Falls Church, along with fellow Virginia congressmen Tom Davis and Frank Wolfe. "We have this meeting once a year, and they did tell us that the bankruptcy legislation was one of their highest priorities," Moran said.
MORAN CO-SPONSORED the legislation along with four of the five Democrats from Virginia. "I was chairman of the New Democrat Coalition, and the Virginia delegation was also supportive of the legislation," Moran said. "I did not control the timing of when the legislation was introduced, however. I wasn't even a member of that committee."
Moran repaid the MBNA loan by having $4,500 deducted from his paycheck each month, leaving him just $2,000. The loan was paid off with the proceeds from the sale of his house last year.
Two other personal loans to Moran have raised questions in the recent past.
Moran accepted a $25,000 loan from longtime friend Terry Lierman in 1999 at the same time Congress was considering legislation, which extended Lierman's company’s (Schering-Plough Corp.) patent on Claritin. Moran also accepted a $50,000 loan from James B. Kimsey, chairman emeritus of AOL.
"Both of these individuals were friends of mine before I was elected to Congress," Moran said. "Jim Kimsey wanted to give me the money as a gift, but I wouldn't accept it. I paid it back over the period of a few months at 15-percent interest. I paid Terry Lierman back at 12.5-percent interest rate."
"I have done nothing illegal or unethical," Moran said. "The insinuations in the press have been unfair, and the conclusions inaccurate."
Alan Mitchell works for a local banking institution. "While I would not like to comment about any specific loan given to any individual about which I do not have direct knowledge, I can tell you that, based on more than 20 years of experience in the banking industry, loan officers, or at a minimum, their supervisors, have a great deal of discretion about who they approve for loans," Mitchell said. "Each institution has its own mechanism for assessing risk and making credit determinations. It is my understanding that this loan was secured with a piece of property. Also, a 10 1/2-percent mortgage, in 1998, was not that unusual, even a bit high. Every day, people with credit histories that cause them to be a high risk walk into financial institutions and are approved for loans. It would be absolutely impossible for me to form an opinion about whether there was anything else going on with this particular loan."
Laura Neil, who lives in Alexandria, had this reaction.
"I would like to know more about whether the people at MBNA who were lobbying on behalf of this bankruptcy legislation even knew about the loan," she said. "It is my experience that people in different departments in large corporations frequently don't talk to each other and have no idea what each other is doing. I'd like to know whether this is the case here."