It was one of the most shocking bribery cases in United States history. Louisiana Democratic Congressman William Jefferson’s house was raided in 2005, revealing over $90,000 in cold hard cash stashed in the now-disgraced lawmaker’s freezer. Days before, Jefferson had been videotaped by federal agents receiving $100,000 at the Ritz-Carlton in Arlington, Virginia. He ultimately received 13 years in prison for his indiscretions, the longest sentence ever handed down to a Congressman for bribery. What is often lost in this story, however, is what Jefferson was “selling” in return for these generous bribes: access to the Export-Import Bank of the United States.
The Export-Import Bank (known colloquially as “Ex-Im”) is an 80-year-old, government-backed financial institution. A relic of FDR’s New Deal that for decades has provided generous taxpayer backed loans and loan guarantees to foreign companies – ostensibly to finance the purchase of American exports. But with the bank’s charter set to expire in June, Ex-Im has come under increased scrutiny thanks to its long history of questionable deals and even more questionable conduct.
Just last week, Florida-based Lender Hencorp Becstone Capital LC agreed to pay a whopping $3.8 million to settle a lawsuit with the Department of Justice, which alleged that Hencorp made false statements to obtain Ex-Im funding. The DOJ probe found that a Hencorp employee created documents for a fake export transaction for the purpose of then distributing funds to friends and associates.
As recently as 2008, Hencorp was ironically named Ex-Im’s “Small Business Regional Lender of the Year”, with the bank’s then-President going so far as to laud Hencorp for “careful underwriting and due diligence practices.” Go figure.
Questionable practices aren’t just limited to Ex-Im recipients. Several senior-level Ex-Im employees were removed from their posts less than a year ago amid allegations that they received cash payments and kickbacks in return for improperly steering awards to favored companies. These outright cases of bribery and deception among the bank’s political backers, patrons and even staff underline the fundamental problems with this institution.
The cozy relationship the Export-Import Bank has with many of its beneficiaries is equally troubling. Boeing, for example (the biggest single recipient of Ex-Im funding over the last decade) has long been entwined with the bank – but recent revelations expose just how close that relationship is.
Delta Airlines has argued that many of their routes have been undercut by foreign airlines thanks in part to the lucrative, taxpayer-backed Ex-Im assistance to their foreign competitors, who are able to charge passengers less. Delta filed suit to require the bank to perform economic impact reviews on large deals, and the bank was ultimately required by Congress to formulate rules for those reviews. But who did Ex-Im turn to for help crafting them? None other than Boeing.
While the head lobbyist of Boeing said this is an example of how government should work, the vast majority of businesses aren’t so fortunate as to be able to write their own regulations. But given that Ex-Im exists for the sole purpose of picking winners and losers in the marketplace, is it any surprise that the bank might be susceptible to the age-old Washington practice of influence peddling?
It’s a concept that isn’t lost on the many companies vying for Ex-Im’s largesse.
In 2010, Exxon spent $97,367 on travel expenses for four Ex-Im employees in connection with a deal in Papua New Guinea. The tab included business class flights around the globe, a show performed by locals and chartered airfare around the island. Less than 11 months later, the $3 billion proposal was approved. To be sure, it is difficult to show an explicit link between the lavish travel gifts provided to Ex-Im staffers and the Papua New Guinea award. Nevertheless, it is precisely this kind of arrangement that understandably raises the collective eyebrows of American taxpayers.
The good news, however, is that the party may soon be coming to an end at Ex-Im: the bank’s legal authorization is set to expire in June. That means Congress has a rare opportunity to accomplish something by doing nothing this summer. By running out the clock on the beleaguered bank, Congress can strike a blow against the kind of crony capitalism that Ex-Im has come to embody, a much-needed victory for taxpayers.
Eighty years of picking winners and losers, controversy, lax oversight, and scandal are enough. It’s time to break the bank.
Brent Gardner is Vice President of Government Affairs at Americans for Prosperity.