January 22, 1999

Hyde's Actions In Failed S&L Case Cast Shadow On Impeachment Hearings

EDITOR'S NOTE: At the Senate impeachement hearings Judiciary Committee chairman Henry Hyde has remarked on the importance of enforcing the law regardless of privilege. Hyde was widely quoted in the prosecution's closing statement "We must never tolerate one law for the ruler and another for the ruled." However Hyde's own actions in response to the failure of a savings and loan in Illinois indicate that indeed there is one law for the rulers and another for the ruled. This story was originally written in November 1998, during the Congressional impeachement process.

By Dennis Bernstein

"Does the law apply to some people with force and ferocity while the powerful are immune?"

Rep. Henry Hyde, who asked that question in his remarks opening hearings on the impeachment of President Clinton, ducked legal responsibility for a failed savings and loan, according to investigators and others familiar with his actions.

"His attitude was basically, `I am a U.S. congressman. I've done nothing wrong. End of discussion'," says Fred Cedarholm, an experienced bank investigator. "Now to have him at Judiciary pontificating is just amazing."

Hyde was one of 12 directors of the Clyde Federal Savings and Loan of North Riverside Illinois, which failed to the tune of $68 million in 1990. All directors except Hyde contributed to an $850,000 settlement of the case in 1997.

Cedarholm, interviewed by telephone from his Illinois home, worked with the Resolution Trust Corporation (RTC), set up by Congress in 1989 to handle the extraordinary number of savings and loans institutions which failed during the 1980s. His work included auditing hundreds of millions of dollars in bank loans, with a special focus on evaluating directors' liabilities.

Although Illinois was the center of a great deal of savings and loan activity, the RTC office in Chicago was shut down in 1992. Many key investigations were moved to Kansas City just as they were moving toward court action, according to Cedarholm, who claims that the move reflected political string-pulling.

The savings and loan industry ran into trouble in the early 1980s. S&Ls were stuck with fixed rate mortgages that did not pay enough to keep up with accelerating inflation, and were restricted by law from putting money into higher-yielding — and more risky — investments.

Hyde, a former member of the House Banking Committee, was considered one of the industry's most influential allies. But he went beyond giving speeches — he reported receiving over $100,000 in fees for lectures advocating deregulation of the industry. He took the unusual step of joining an S&L's board of directors while still serving in Congress.

Hyde joined Clyde's board of directors in 1981, at the request of Clyde chairman, Sylvia Miedema, a contributor to Hyde's political campaigns. In May 1982, federal regulators warned that Clyde faced difficulties, with insolvency possible in 13 to 14 months.

Back in Washington, Congress was reacting to these problems by giving thrifts greater leeway to make loans. Hyde himself abstained from these votes because of the obvious conflict of interest, but Clyde moved away from the traditional S&L model of local mortgages and small business loans, and opted for risky out-of-state investments. Minutes from board meetings in 1982 and 1983 show Hyde often encouraged these investments. Hyde also supported special breaks, including low-rate loans, for bank insiders and transferring $287,625 into an employees profit-sharing plan when the bank was losing money.

Hyde resigned from Clyde's board in 1984.

Clyde survived until 1990. In 1993, the RTC filed a $17 million suit against the firm's directors, including Hyde, citing a long list of questionable banking practices, and complaining of mismanagement, gross negligence, breach of fiduciary duties and breach of contract.

Hyde denied responsibility, saying he had relied on the judgment of "professionals." He insisted the thrift was healthy when he departed and termed the RTC's actions "an abuse of government power."

Hyde's view is challenged by Timothy J. Anderson, an independent banking consultant in the Chicago area. According to Anderson. "All board members looked to Hyde for leadership. ... It was Hyde who got them to invest millions of dollars in a Dallas office project that could not go forward. ... He was the board member who was controlling management." Subpoenaed to testify before the National Commission on Financial Institution Reform, Recovery and Enforcement, Anderson — a former Marine, and Republican precinct captain — criticized the government for not pursuing the Clyde case.

For his part, Hyde mounted a spirited defense against the RTC accusations — including an undercover investigation designed to discredit Anderson.

In an interview, Chicago-based private eye Ernie Rizzo acknowledged that he was hired to do "a total and complete investigation" of Anderson. During the two-month investigation, Rizzo interviewed "quite a few" of Anderson's associates, including "working people, neighbors, business associates, things like that."

Posing as an independent television producer working on a documentary about the Clyde case, Rizzo convinced Anderson to turn over nearly 400 pages of documentary evidence. Rizzo said he found Anderson knowledgeable about the facts of the Clyde case and apparently motivated simply by outrage over the cost to taxpayers.

When the Chicago Tribune asked Hyde about Rizzo, he insisted that a "friend" had paid for and directed the investigation. The Congressional Accountability Project quickly demanded an investigation to determine if Rizzo's fee — estimated at $10,000 — amounted to an unreported gift. Hyde altered his explanation and announced that his lawyer had hired Rizzo and that he, Hyde, had reimbursed the lawyer.

By 1996, the former directors of Clyde were seeking to settle with the RTC, — except for Hyde who said, "I have not agreed to nor will I agree to make any payment in settlement of this case."

When the other directors agreed to pay $850,000 in 1997, they in effect picked up Hyde's share. Some Hyde allies have cited that as a sign of Hyde's innocence, but one former Clyde board member, Nicholas Lash, disagrees.

Lash, a professor of finance at Loyola University in Chicago, who does not "believe anybody should have paid anything," insists he has no personal animosity toward Hyde, but thinks the Congressman used his position to avoid paying his share. "I think we should have all paid and I don't know how he got away with it."

Bernstein is a producer for Pacifica Radio and an award winning investigative reporter.

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