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August 3, 1994 - Part 5
(16:19:35) Hearings host NINA TOTENBERG segues back to House Banking Committee Hearings - testimony of JEAN HANSON, JOSHUA STEINER, DENNIS FOREMAN, and JACK DEVORE
August 3, 1994 - Part 5
(16:38:00) Hearings host DON BODE voice over segue back to Senate Banking Committee Hearings: The CHAIRMAN. Let's go ahead and restore Senator DAmato's time and then at the end of the statement, if the Members want to have a comment to make, we'll Mr. EGGLESTON. Mr. Chairman, I most definitely do have a comment to make at the conclusion of Mr. D'Amato's statement. Senator D'AMATO. Mr. Klein, in your deposition, you stated that you had discussions with Bernard Nussbaum, then-White House Counsel, concerning the possible recusal of Roger Altman from all RTC decisions involving the Madison case; is that correct? Mr. KLEIN. That is correct, sir, Senator DAMATO. In one of those discussions with Mr. Nussbaum, did you come to learn that Mr. Altman had had a meeting at the White House with several White House officials at which Mr. Altman 's recusal had been discussed? Mr. KLEIN. Yes, I did, sir. As I said in my opening testimony, approximately a week after the February 2nd meeting I learned of that fact, Senator DAMATO. Do you know whether White House officials advised Mr. Altman with respect to his decision to recuse himself in all RTC dealings in connection with Madison? Mr. KLEIN. I did not know, sir, no. Senator D'AmATo. You have a view about whether it was improper for the White House staff to advise Mr. Altman with respect to his decision to recuse on a matter that would affect Madison or Whitewater, Mr. KLEIN. In my opinion, the White House staff shouldn't advise Mr. Altman on that matter, sir. Senator DAMATO. Would it be imprudent? Mr. KLEIN. I think it would be imprudent. Senator DAMATO. You have a view whether it would be proper for White House staff to put pressure on a Government offical not ,to recuse himself? Mr. KLEIN. In a matter relating to the White House like this, I do have a view on that, sir. I think it would be improper to put Senator DAMATO. Did Mr. Nussbaum ever express a preference concerning whether Mr. Altman should recuse himself from RTC decisions involving Whitewater? Mr. KLEIN. He did discuss a preference with me, sir, yes. Senator D'AMATO. And what was that? Pressure on an official. Mr. KLEIN. He preferred that Mr. Altman not recuse himself. Senator DAMATO. And did he tell you why? Mr. KLEIN. He said that he preferred that because he thought that the politics were such. in other words, there were political con 102 siderations at this time, Ms. Rickie Tigert was before a Committee this was in early February, before a Committee and that Commit- tee or several Members of the Minority were trying to extract a blanket recusal.
August 3, 1994 - Part 5
(16:40:48) There were also press calls and-in that regard, and people call, ing for, as well, Mr. Altman's recusal. Mr. Nussbaum said he thought, as a matter of principle, that people shouldn't recuse unless they were required to. He also said, in particular, he said that he was concerned about Ms, Kulka. Senator DAMATO, What did he say about his concern as it related to Ms. Kulka? Mr. KLEIN. He said that Ms. Kulka was someone he had known from a case he had done, the Kaye, Scholer case in private practice, and he said in words to this effect, I don't believe I can quote it, but that she was a difficult person to deal with, she was unreasonable, she could be unfair. Senator D'AMATO. Is it clear to you, based on your conversations with Mr. Nussbaum, that he preferred to have Roger Altman as the decisionmaker? Mr. KLEIN. Yes, sir. Senator D'AMATO. Do you know why Mr. Nussbaum-well, you said that and I see our time is running out. Let me ask you this. Did he indicate anything about dealing with Ms. Kulka, that you recall? Mr. KLEIN. I believe he said he had had an experience with her in the Kaye, Scholer case, when he was in private practice. Senator D'AMATO. And what was that experience? Mr. KLEIN. He was a lawyer, as I understand, he was representing Kaye, Scholer when Ms. Kulka was involved, she represented the OTS in a proceeding against Kaye, Scholer. That was my understanding. Senator D'AMATO. Did he say something like she was tough? Mr. KLEIN. The words that come to my mind are "difficult" or "unreasonable," sir. Senator D'AMATO. What about "aggressive"? Mr. KLEIN. That is consistent with what he said, yes. Senator D'AMATO, I want to thank you for your very candid testimony, Mr. Klein. The CHAIRMAN. Let me also say before yielding to Senator Sasser that we've heard a lot of witnesses and I'm refreshed by the fact that the answers we've gotten so far are more straightforward and , I think, direct than some of the others we've gotten, and that I rind that a refreshing tone and I appreciate that, and I just want to say that now to the witnesses that are here. Mr. Eggleston, you'd asked to make a comment and I said we'd permit that. Mr. EGGLESTON. Thank you, Mr. Chairman. In light of the comments that Senator D'Amato made, I have been counting up the number of individuals and entities that have reached the conclusion that Mr. Altman did not have a legal obligation, ethical obligation to recuse himself. I think the suggestion that Mr. D'Amato made was that I needed to go back, I think I and all of us needed to go back to Ethics 101 if we couldn't see that he absolutely had an obligation to do so. 103 My understanding, as I sit here today, is that prior-that Mr. Altman had discussed this with a variety of people at the Treasury Department prior to the time that he had the February 2nd meeting and that the advice he got was either that he did not have a legal obligation to recuse himself or that people gave him political advice. Senator Bentsen said it's up to you. I think Ms. Kulka, to the extent I remember, did not tell him that he had a legal or ethical obligation to do so. My recollection is that there had been some discussion with Mr. Foreman, the Treasury Department Ethics Officer, beforehand on the legal or ethical obligation. He was told he did not have such. He was told-Mr. Altman was told at the February 2nd meeting that if he had a legal or ethical obligation to recuse himself, he should do so. At the end of that meeting, it is my recollection that he was going to seek legal ethics opinions from the Ethics Officer at the RTC and from the Treasury Department. Based on the testimony I've heard here today, he did so and those two officials determined that he did not have a legal or ethical obligation to recuse himself. This matter has also been reviewed by Mr. Cutler who came in, was brought in in order to review this. Mr. Cutler determined that he, Mr. Altman, did not have a legal or ethical obligation to recuse himself. This matter was also reviewed by the Office of Government Ethics, an independent agency under the supervision of Mr. Potts. Mr. Potts, as we have heard, was appointed during the Bush Administration, he is at least a Republican appointee, if not a Republican. Mr. Potts, at the conclusion of extensive factual investigation by the Treasury Department, I think, concluded two things: That Mr. Altman did not have a legal or ethical obligation to recuse himself. Mr. Potts, in addition, concluded that it was perfectly appropriate-that it was not legally or ethically inappropriate-for Mr. Altman to discuss his recusal issue with anyone he wanted.
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August 3, 1994 - Part 5
(16:45:21) I don't have enough fingers to have quite counted up the number of entities, apart from myself, who are legal and ethics experts who .have come to the conclusion that Mr. Altman did not have a legal or ethical obligation to recuse himself. The discussion and the issues that were under discussion at the time, February 2, were not legal/ethical discussions, If he had a legal or ethical obligation to recuse himself, he would do so. It was political, It was how was it going to look. It was where was he going to take more heat. Was he going to take more heat if he stayed there or was the Administration going to take more heat through the sort of impact of domino effect after Rickie Tigert. Was Jamie Gorelick going to be asked to recuse herself. Mr. Ludwig, on the 25th, even though there is no matter in front of him, decides to recuse himself. Is some midlevel person at the EPA going to be asked to recuse herself, even though there is nothing remotely in front of her. The issue was political and press and congressional; it was not legal/ethical, and I think the fact that every entity that has looked at it came to that same conclusion is worth an enormous amount to me, sir. The CHAIRMAN. I think it was important that you have a chance to put your statement on the record. You've done that. 104 Senator DAmato has asked for 30 seconds to respond. I think in light of the time that was taken to do that, that it's not ail unreasonable request, so Senator D'AMATO. Mr. Chairman, I'm just trying to make the point that we've invented a Senator KERRY. It's not an unreasonable request, Mr. Chairman but oil the other hand, it absolutely breaks up the process here and totally sets a different standard for how we're proceeding. I'm just saying to my friend that, you know, we're going to get into that same old problem at the end of the line here. Senator D'AMATO. I just wanted to make an observation, if I might. The CHAIRMAN. I think when-I'm told by the clerk over here that when the objection was raised by Senator Boxer that it had the effect of taking 40 seconds off his time so let's restore that and Senator KERRY. He already did restore the time. The CHAIRMAN. Well, I'm told we did not-well, now I'm told that we did. So I'm getting conflicting messages myself. I recognize Senator D'Amato for 30 seconds. Senator D'AMATO. Mr. Chairman, I just wanted to make the point that we've heard a lot about this new definition, and I'd like to know what is the legal definition of "de facto recusal"? What does it mean? That's my point and that's what I raised because I kept hearing it over and over, and I thank my colleagues. The CHAIRMAN. We'll get into that. Senator Sasser. Senator SASSER. well, thank you, Mr. Chairman. Mr. Eggleston, you learn in law school one thing is elementary as in is there a de facto position and a de jure position, and would you explain for the Committee the difference between the two or perhaps I ought to do it. De facto is when something is actually the fact of the matter and de jure is something which might appear to be legal or perhaps you'd have a better definition, but let's hear the definition of that. Mr. EGGLESTON, I can tell you the way I'm using the two words and I don't-I assume they're consistent with the way others are. There were two things he could have done. He could have publicly announced that he was taking himself off the case or he could have done what he did, which is just announce to his staff and to the White House-he did to both, Ms. Kulka testified before you that he told her the same thing-he could announce that he was not going to be a decisionmaker on this matter. I've called that de facto. Senator Sasser, if you have a better word for that, I don't -- I didn't mean to coin a phrase by using that expression, but what I meant was he was not going to participate in the decision. That's something he told us and that's now something I understood that he told his own staff, his own RTC staff. Senator SASSER. So he was essentially out of the decisionmaking line on the question of whether or not to proceed with the civil actions against Madison Guaranty S&L. Mr. EGGLESTON. That was my understanding as of the February 2nd meeting. 105 Senator SASSER. Of course, that all became irrelevant on down the line because the statute of limitations was extended and it made no difference whether or not he chose to proceed with the action against Madison or not. Mr. EGGLESTON. That's correct, both Houses of Congress passed the extension. I think the President signed it on February 12th extending the statute through December 31, 1995. Senator SASSER. Now, Mr. Eggleston, let me ask you this: Did you attend the October 14, 1993 meeting that was attended by Ms. Hanson, the General Counsel of the Treasury Department, and Mr. Steiner and Mr. DeVore? Mr. EGGLESTON. I did, sir. senator SASSER. Did you also attend the meeting on February 2, 1994 with Mr. Altman and Ms. Hanson?
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August 3, 1994 - Part 5
(16:50:32) Senator SASSER. Did you also attend the February 24 hearing before this Committee here? Mr. EGGLESTON. I did. Senator SASSER. Now, Mr. Altman was asked a series of questions at that hearing and that's become a great bone of contention here. Did there come a time in that hearing when you were surprised by Mr. Altman's testimony and felt that he could have answered more forthrightly? Mr, EGGLESTON. During the immediately during the questioning of Senator Gramm, he--I think Mr. Altman testified about the one substantive contact that he had had. He described it as procedural relating to the statute of limitations issue. I was surprised that he had not mentioned the fact that the second subject had been recusal. I had, as I think the Committee heard from Ms. Hanson, I'd actually called Ms. Hanson the day before or within a couple of days before. She testified, it was the day before, to make sure that Mr. Altman was prepared to answer a question about the February 2nd meeting. In light of that, I was surprised that he had not testified about the recusal aspect. Senator SASSER. Well, did you speak to any of the Treasury staff about Mr. Altman's testimony while you were at the hearing, Ms. Hanson or others? Mr. EGGLESTON, I did not. Immediately after the testimony before Mr. Gramm, I went out in the hallway. I had a cellular phone and I called back to the White House to say that I was concerned. I did not speak to any members of the Treasury staff. Senator SASSER, So you were concerned about Mr. Altman's response to the question? Mr. EGGLESTON. I was, and I called back to the White House, Senator SASSER. In fact, who did you call, Mr. Eggleston? Mr. EGGLESTON. I called someone in Mr. Podesta's office. I don't-as I sit here today, remember whether I'd-I called to speak to Mr. Podesta. I may have gotten Mr. Podesta, I may have gotten his deputy. Senator SASSER. As a matter of fact, you were so concerned that You called the White House Counsel, Mr. Bernie Nussbaum, who's on vacation in Mexico; is that correct? Mr. EGGLESTON. I did, Mr. Nussbaum had left Thursday morning, the morning of the hearing, for-it was actually a Federal Bar 106 Council event. He had been the president the year before and I called him, I think on more than one occasion on that weekend to tell him that I was concerned about the testimony. Senator SASSER, Do you have any explanation as to why Mr. Altman did not refer to the recusal here before the Committee, the subject of the recusal? Mr. EGGLESTON. Sir, I do not. When I called Ms. Hanson the day before, she told me the three subjects that lie was going to testify to, or two or three subjects that he was going to testify to about regarding the February 2nd meeting. I specifically asked whether he was prepared to answer questions about that meeting, and she said that he would testify that related to procedures-I said 3 and now I can only remember 2-but about procedures relating to the statute of limitations, and I recall that she specifically mentioned the recusal issue, that he would testify [about that]. Senator SASSER. Did you ever have any conversation with Ms. Hanson thereafter about Mr. Altman's testimony and why he did not address the issue of recusal when he was before the Committee on February the 24th. Mr. EGGLESTON. I did not. By that time, I'd raised it within the White House. There is substantial, I think there's been testimony about it, there were substantial conversations in the White House about this issue, and the White House was deciding sort of what to do and how to respond. I did talk to Ms. Hanson again. I did not talk to her about Mr. Altman's testimony, I want to make sure I'm clear on that. Senator SASSER. You subsequently had conversations with Ms. Hanson, but not about the subject of Mr. Altman's testimony Mr. EGGLESTON. Correct. Senator SASSER [continuing]. Before the Senate Banking Committee? Mr. EGGLESTON. Not about that particular issue. I called her to ask her whether it was true that Jay Stephens had been hired to pursue the civil matter. I called the next day. During the hearing Mr. Altman had testified that Pillsbury, Madison & Sutro was the law firm [that had been hired]. I heard during the course of the day on Thursd ay that Jay Stephens had been hired. I called her the next morning or that day to say I've heard this. I assume since the law firm is public information, the name of the lawyer is public information, is it Jay Stephens? She told me either she didn't know or she didn't know who Jay Stephens was and that was the end of that conversation. Senator SASSER. She did not know who Jay Stephens was? or that Mr. EGGLESTON. She told me either that she didn't know she didn't know who Jay Stephens was. I actually think she told me she didn't know who Jay Stephens was, but I can't-it could have been the former. Senator SASSER. The fact that Jay Stephens was hired was a matter of some chagrin to some members of the White House, was it not? Mr. EGGLESTON. I had spoken about it with some people. Senator SASSER. I'm not unsympathetic with their concern about him being hired myself. 107 Mr. Klein, one quick question, you are turning to Mr. Altman's testimony before the Committee on February 24th, were you surprised by his testimony?
August 3, 1994 - Part 5
(16:55:45) Mr. KLEIN. I was concerned in two respects, Senator, One, as I said, I had heard that the issue of recusal had been raised, That's all I heard was that he had brought it up and there was nothing in the newspaper accounts referring to recusal in the lengthy descriptions of his testimony. Senator SASSER. Well, my time has expired, but you heard it had not been brought up by, not by Mr. Altman at the Committee Mr. KLEIN. No, I heard it had been brought up at the meeting, but not discussed at the hearing by Mr, Altman, and so I was concerned about the omission, essentially the same point that Mr. Eggleston just made. Senator SASSER. Thank you very much. The CHAIRMAN. Thank you, Senator Sasser. Senator Gramm. Senator BRYAN. Excuse me, Mr. Chairman. Earlier the point I think he had indicated that he had concerns about two points and I don't think that he fully responded to the question. The CHAIRMAN. He should respond. Mr. KLEIN. The second point I had, later in the day there were press accounts on Friday the 25th about the hearing. Late in the day about 4:00, Cliff Sloan, Associate Counsel, came to my office and asked me if he could talk to me and he said, look, I've read in the paper that Mr. Altman only testified that there was one meeting. He said I was involved in and know about some meetings in late September, early October. Sloan said, I don't know what Mr. Altman's knowledge was. 1 didn't deal with Mr. Altman, but I know about these meetings and I think it's important that the White House make sure it responds accurately to any questions and not say that there was only one meeting or anything like that. So I had a concern about additional meetings and I had a concern about the fact that as far as I could tell, recusal had not been mentioned, even though I had learned that recusal had in fact been discussed at the February 2nd meeting, The CHAIRMAN. Thank you. Thank you, Senator Bryan. Senator Gramm. Senator GRAMM. Mr. Mein, your basic involvement here is that you're the one who was asked to look at the Altman testimony to try to decide what he had said that might not have comported with the facts.
August 3, 1994 - Part 5
(16:57:52) Hearings coverage hosts NINA TOTENBERG voices over segue back to House Banking Committee Hearings at which JEAN HANSON, JOSHUA STEINER, DENNIS FOREMAN, and JACK DEVORE testify - this House hearing footage runs to the end of the tape
August 3, 1994 - Part 3
(12:42:05) In voice over, hearings host NINA TOTENBERG segues to Senate Banking Committee Hearings: coming up with some procedures and changes in the law, perhaps, if necessary, to go through and discuss this issue regarding, again, the interface between these agencies so that we don't run into these problems down the road. Secretary BENTSEN. Senator, thank you, and I understand the confusions of titles. I was getting out of an elevator the other day in Washington, a young man took a look at me and stopped the elevator door and held me and he said, I know you. He said wait a minute, let me think. He said, yes, I know, you are Senator Bentsen. He said, I went to a political rally of yours in Texas. He said, whatever happened to you? Senator MOSELEY-BRAUN. Thank you very much, Mr. Secretary. The CHAIRMAN. We won't ask you right now to give the answer to that question, but I'd like to hear that later. Senator Hatch. 52 OPENING COMMENTS OF SENATOR HATCH Senator HATCH. Thank you, Chairman. And welcome, Lloyd, we're happy to have you here. I just want to say for the record, in my 18 years here, you've always been a great person of candor and integrity and wisdom and honesty. And, frankly, your word has always been your bond, so that's important, And I think all of us feel that way. Secretary BENTSEN. Thank you very much. Senator HATCH. Let me just try to clarify or clear up a few discrepancies that bother me, Do you recall the first conversation you had with Mr. Altman on the subject of his recusal from Madison Guaranty, and if so, could you summarize that conversation for us? Secretary BENTSEN. I could be corrected on trying to remember a date, but I would-I think that was on February the 1st. And he told me he was trying to make up his mind on recusal and that he'd been challenged in that regard and challenged by Members of the Congress as to a possible conflict of interest, and he was asking for my advice. I told him that that had to be his decision, that he knew the facts in that case, I did not. And I must say, I sympathized with him very much about the tough spot he'd been put in. I understand he thinks that I counseled him to recuse himself. He may have come to that interpretation because I was sure sympathizing, but I don't recall so telling him. Senator HATCH. OK. Let me ask a few questions about reports, including Ms. Hanson's testimony that prior to the February 2nd meeting at the White House, Mr. Altman informed you that he had decided to recuse himself from the RTC civil investigation in the Madison Guaranty case. Do you recall Mr. Altman telling you at that time that he had decided to recuse himself?
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August 3, 1994 - Part 3
(12:45:17) Secretary BENTSEN. I recall he told me that but not at that time. I don't remember the date, and I know I was relieved when he told me. And, as I have found out additional facts subsequent to that, if I'd have been him-if I would have been in his position, I sure would have recused myself. Senator HATCH. He stated that the first time he decided to recuse himself was February 25th. Would that be consistent with your recollection? Secretary BENTSEN. Well, at that time, yes. If that wasn't the date, it's close to it. Senator HATCH. Were you aware that Treasury General Counsel had recommended to Mr Altman that he recuse himself from Madison matters before that? Secretary BENTSEN. I don't remember being told that. Senator HATCH. OK. Did you at the time have an opinion on whether Mr. Altman should recuse himself-well, you've expressed that. Secretary BENTSEN. Yes. Senator HATCH. You said that if it had been your choice, you would have done it? Secretary BENTSEN. Yes. Senator HATCH. Can you tell us why you, if it had been your choice, you would have done it under those circumstances? Secretary BENTSEN. Well, I think he was put in a position where he was considered a friend of the President and he was being chal- 53 lenged that that friendship would influence his judgment and I think he was right to just get rid of that argument. Senator HATCH. OK. Yesterday, Mr. Altman said something to the effect that you expressed your own surprise or puzzlement to him that he did not recuse himself, that it was in his own self-interest to recuse. Did you offer Mr. Altman any advice on recusal from Madison matters and, if so, what was that advice? Did you, for example, tell Mr. Altman that recusing himself or making a decision to recuse was something he had to do? Secretary BENTSEN. I told him he had to make that decision that was his, his alone-that he had the facts, that I did not. Senator HATCH. Did anyone from the White House ever discuss the matter of Mr. Altman's recusal with you? Secretary BENTSEN. I don't remember anyone in the White House discussing it with me. Senator HATCH. Thank you. That's all I have. The CHAIRMAN. Thank you. Senator Murray. OPENING COMMENTS OF SENATOR MURRAY Senator MURRAY. Thank you, Mr. Chairman, and welcome Mr. Secretary. Again, I have the privilege of going last and listening to all of the comments before me. We've been here for 31/2 hours and I have to ask you the question I've been asking myself for the last several hours. Why are you here? Secretary BENTSEN. Oh, it is not for me to say. Senator MURRAY. Well, as long as you are here, I really have to ask you a question. You knew Jack Kennedy, you knew Sam Ervin, you knew Howard Baker. You've been here a long time. I'm new to this. If you were sitting on this side of the table listening to all this testimony and hearing everything, what conclusions would you come to? Secretary BENTSEN. Boy, I don't want to tell this Committee what to do, but, Senator, there has been-you've had three investigations and they've been independent investigations. They say no criminal act was committed, no violation of ethical standards, but some troubling things. And 1, as Secretary of the Treasury, assume the responsibility for what happens in Treasury, and I have also told you we're going to try to correct some of those concerns, and we'll be pleased to have the recommendation of this Committee, which has been deeply involved in this issue, and in turn that of the Justice Department and the IG and I sure want to get the Office of Government Ethics involved in it. And we're going to move and try to see that we don't have this kind of problem develop in the future and then I'd arrive at a judgment, but that's yours. Senator MURRAY. Do you think anybody should be removed from their job? Secretary BENTSEN. I think that whatever happened here was not with the intent to harm. I think there were some errors in judgment, but I haven't found anybody that calls them right all the time,
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