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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