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Treasury officials in charge of grant program resign amid memo flap

August 7, 1997

WASHINGTON (AP) _ Two Treasury Department officials in charge of a program that awarded $11 million in grants to banks with ties to President Clinton and his wife have resigned in the wake of a report showing they composed memos justifying the grants a year after awarding the money.

Kirsten Moy, director of the Community Development Financial Institutions Fund, ordered deputy Steve Rohde to draw up the memos just hours before congressional investigators showed up in April to review the grant files, a Treasury inspector general’s report showed. The grants were awarded in July 1996.

``This action was a serious error of judgment,″ said Treasury Secretary Robert Rubin in a letter sent Wednesday to Rep. Spencer Bachus, R-Ala. Bachus is chairman of a House investigative committee that asked to see the files.

``The Department will make it clear that such actions will not be tolerated,″ Rubin said.

Rubin said all grants were awarded based on merit. But the program will institute a conflict of interest policy for grant reviewers and take other steps to strengthen internal procedures, Treasury officials said.

Bachus and other Republicans investigating the grants said the memos, which were undated, were inserted into the files to make it look like they had been written when the grants were made instead of after the fact.

``The Treasury Department needed to take strong action and this was a necessary step,″ Bachus said on Wednesday. ``Kirsten Moy and Steve Rohde wrote spurious documents in a blatant, calculated attempt to mislead Congress and obstruct the subcommittee’s investigation.″

Moy, who will leave in October, was not immediately available for comment.

Rohde said he had decided to leave Treasury months ago, despite attempts by department officials to change his mind. ``Any suggestion that I was asked to resign by the Treasury Department is completely untrue,″ he added. Rohde submitted his letter of resignation June 4, and agreed to stay on until Aug. 30, he said.

A report showed that Moy, after learning that Bachus’ aides were planning to visit, ordered Rohde to compose the memos. Against the advice of a department lawyer, Moy and Rohde inserted the documents into the files without dating them, the committee said.

Rohde told the Treasury investigators that the memos were not misleading because they reflected the actual evaluation process and were based on notes he made when the grants were awarded to the banks.

The program channeled nearly one-third of its first $37 million in grants to four related banks with ties to the Clintons.

The money went to community development lenders associated with South Shore Bank, also known as Shorebank, a Chicago-based institution.

A former college roommate of Mrs. Clinton’s, Jan Piercy, was a senior vice president of Shorebank and was later appointed by the president to serve as U.S. executive director of the World Bank.

House investigators found that Shorebank controls two other banks that received grants.

A grant also went to Southern Development Bancorp., an Arkansas institution that once had Mrs. Clinton on its board of directors. Another grant went to Enterprise Corp. Mrs. Clinton was on the board of the bank’s Arkansas-based parent corporation.

The Treasury inspector general’s report found that of the 32 entities awarded money from the community development fund in July 1996, the four with connections to the Clintons did not have evaluation memos, a routine part of the application process.

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