WASHINGTON --- Despite their denials, influential Democratic Sens. Kent Conrad and Chris Dodd were told from the start they were getting VIP mortgage discounts from one of the nation's largest lenders, the official who handled their loans has told Congress in secret testimony.
Both senators have said that at the time the mortgages were being written they didn't know they were getting unique deals from Countrywide Financial Corp., the company that went on to lose billions of dollars on home loans to credit-strapped borrowers. Mr. Dodd still maintains he got no preferential treatment.
Mr. Dodd got two Countrywide mortgages in 2003, refinancing his home in Connecticut and another residence in Washington. Mr. Conrad's two Countrywide mortgages in 2004 were for a beach house in Delaware and an eight-unit apartment building in Bismarck in his home state of North Dakota.
Robert Feinberg, who worked in Countrywide's VIP section, told congressional investigators last month that the two senators were made aware that "who you know is basically how you're coming in here."
"You don't say 'no' to the VIP," Mr. Feinberg told Republican investigators for the House Oversight and Government Reform Committee, according to a transcript obtained by The Associated Press.
The next day, Mr. Feinberg testified before the Senate Ethics Committee, an indication the panel is actively investigating two of the chamber's more powerful members:
- Mr. Dodd heads the Banking Committee and is a major player in two big areas: solving the housing foreclosure and financial crises and putting together an overhaul of the U.S. health care system. A five-term senator, he is in a tough fight for re-election in 2010, partly because of the controversy over his mortgages.
- Mr. Conrad is chairman of the Budget Committee. He, too, has an important role in the health care debate, and on legislation to curb global warming.
Both senators were VIP borrowers in the program known as "friends of Angelo." Angelo Mozilo was chief executive of Countrywide, which played a big part in the foreclosure crisis triggered by defaults on subprime loans. The Calabasas, Calif.-based company was bought last July by Bank of America Corp. for about $2.5 billion.
Mr. Mozilo has been charged with civil fraud and illegal insider trading by the Securities and Exchange Commission. He denies any wrongdoing.
Asked by a House Oversight investigator if Mr. Conrad, the North Dakota senator, "was aware that he was getting preferential treatment?" Mr. Feinberg answered: "Yes, he was aware."
Referring to Mr. Dodd, the investigator asked:
"And do you know if during the course of your communications" with the senator or his wife "that you ever had an opportunity to share with them if they were getting special VIP treatment?"
"Yes, yes," Mr. Feinberg replied.
Bryan DeAngelis, Mr. Dodd's spokesman, said Mr. Feinberg has repeatedly made allegations of special treatment that were not true.
Mr. Conrad's spokesman, Chris Gaddie, said Monday that the senator "never asked for, expected or was aware of loans on any preferential terms" and has "worked overtime to set the record straight."
The ethics committee determines whether senators violated standards of conduct. The outcome of the investigation could hinge on whether the mortgage violated strict limits on gifts to lawmakers or ran afoul of other Senate rules. The committee typically just issues a report. It could recommend a censure vote by the Senate, but that is rare.