

  Bank 3/20*    <---+----- Original:   by Unnkown Author  ---*
                   *--- Reformatted:   by James P. Leonard ----> 7/10/92

  Representativess Knew of Overdrafts

  If the major media has been full of the developing  scandal of an
  imperial Congress abusing its own bank for  Members' private benefit,
  it has also been full of the  excuses these members have made to
  whitewash their  malfeasance.

  Prime among these are various versions of blaming the bank for bad
  record keeping and notification  procedures.

  However, according to the Report of the Committee on Standards of
  Official Conduct of the House of  Representatives, released March 10,
  (Report # 102-452),  every member who wrote a check which overdrew
  his account  by more than the amount of his next month's salary was
  notified of the fact by telephone and asked to cover the overdraft.

  So for most of the offenders, this excuse  simply will not wash.


  According to the report, "The daily accumulation of Member overdrafts
  was so routine that one Bank employee  spent much of her time tele-
  phoning Members..."

  Ms. Klemp, a Bank employee testifying before the Committee is quoted
  by the report as follows:

  Mr. McHugh (Chairman of the Committee):  "...did you tell them that
  they had to make their checks good but at  the very least they had to
  bring them below the next  month's salary?"

  Ms. Klemp:  "That is basically what I said_you have  x  number amount
  of overdrafts.   You  are  over  your next  month's  salary,  and  I
  would always give their salary  figure and ask them to please make a
  deposit.

  "I didn't always say make the exact deposit, but I said please, make
  a deposit.   In a lot of cases,  the Member  would  clear  up the whole
  amount.  In other cases, they  would just drop themselves back below
  the next month's  salary."



  Mr. McHugh:  "In terms of what you communicated to them...should they
  have known that their  overdrafts should  never  exceed  their  next
  month's salary?"

  Ms. Klemp:  "Yes, I did make that very clear.  In fact,  when I would
  call and again often talk to a staff person  I  would say at that time,
  if I started  to see a lot of  overdrafts coming in all of a sudden,
  sometimes a lot  came  in, sometimes it was a trickle all month, if a
  lot came in  and I could see there was going to be a problem, I would
  always say, you are not to exceed your next month's salary  or checks
  will start to be returned."

  But, according to the Report, they seldom, if ever were returned.

  So many Members were allowed to write checks  while vastly exceeding
  their monthly salaries.   In addition to the telephone calls  alerting
  members to  their overdrafts,  the  Report  quotes  a  1928  letter
  from the then Sergeant-at-Arms boasting,  that  the  House  Bank  was
  one of the first  in Washington  "to  install  up-to-date  methods of
  returning monthly statements to its depositors."



  While  the Report makes no mention of whether that practice still
  obtains, there is every reason to expect that it would,  and that
  Members would demand no less, although some of their statements
  raise the question of whether or not it  does.

  Furthermore,  the practice  of  allowing members  to write overdraft
  checks for the amount of their next month's  wages, was in itself,
  not  officially sanctioned,  other than, by custom.

  But the Report states that the General  Accounting Office, the
  investigative branch of Congress,  expressed misgivings about the
  overdrafts.  It  at  first,  beginning  in  the 1950s,  repeatedly
  requested the  Sergeant-at-Arms to rectify the situation and either
  not  allow overdrafts or to  establish  hard  and  fast  guidelines.

  The practice ultimately became sanctioned by custom, however, when
  the succeeding Sergeants-at-Arms defended  the practice as being an
  allowable  draft  against  the  next  month's salary, rather than as
  an overdraft.   Thus,  by  a  semantic game,  did  the Members  and
  their employee, the  Sergeants-at-Arms, extend their privilege.



  Criticism of the practice by the GAO, apparently ended in the 1970s,
  when the GAO audits were made public.   But it  did  make lists of
  suggested  regulations  which  were  never adopted, and it did note
  with horror that in a  ten year period  ending in 1968,  the number
  of  unpaid  checks  had tripled.

  It did not  mention  the  matter again  until the two reports that
  triggered the closure of the House Bank  and the disclosure of those
  who had abused their privileges, covering the two fiscal years from
  July 1,  1988  to  June 30, 1990.

  The Committee  had  some difficulty  in defining  what constituted
  "abuse of banking privileges."   Its assigned  task was to consider
  whether Members had "routinely and repeatedly" written overdraft
  checks  in  a  "significant" amount.

  It  decided  that any amount  up to one  month's advance  was not
  "significant," and  ultimately settled on  defining "significant"
  as being overdrawn in excess of one  month's salary.




  It acknowledged that anyone unfamiliar  with the House Bank  "will
  find this definition of 'significant amount' generous."  It then
  went on to say that "In common parlance, the  term 'repeated' means
  more than once, and 'routine' suggests a pattern of conduct."

  But the Committee decided  that "repeated" and "routine" meant that
  the  conduct  was  engaged  in  for more  than  20 percent  of the
  39 months under  review.  So the Committee of Members was still in
  fact  trying to protect its prerogatives.

  But the Minority Report, or  that of Republican members  of the
  Committee challenged this by stating, "we find it  impossible to
  defend a definition of 'abuse' that is so  narrow that it excludes
  an individual who wrote over 850  NSF checks totaling over $150,000
  with  seven separate  months  of negative  balance  exceeding next
  month's salary deposit."

  A late breaking report  in  The Washington Times, which has been the
  first to break and keep on the story, said  that finally the Justice
  Department is investigating the  scandal to determine whether Income
  Tax regulations and  campaign finance regulations had been violated
  with an eye  to criminal proceedings.  _ADR
