CAMPAI FOR

ACCOUNTGANBILITY

December 15, 2015

Raymond Hulser

Chief, Public Integrity Section

U.S. Department of Justice

10th Street and Constitution Ave., NW
Washington, DC 20530

VIA EMAIL
Re: Investigation of David H. Stevens, Michael D. Berman and Jim Parrott
Dear Mr. Hulser:

Campaign for Accountability respectfully requests that the Public Integrity Section
investigate whether David H. Stevens, Michael D. Berman, and Jim Parrott, all former Obama
administration of?cials, violated 18 U.S.C. 207 by engaging in restricted activities following
their departure from the federal government.

Background

On December 7, 2015, The New York Times published an article describing the role of
three former administration of?cials, Messrs. Stevens, Berman and Parrott, in assisting the
nation?s largest banks in their effort ?to unseat Fannie Mae and Freddie Mac . . . and capture
their share of the pro?ts in the country?s $5.7 trillion home loan market.? 

Mr. Stevens, who once worked at Freddie Mac and Wells Fargo Mortgage served as the
president of Long Foster, the nation?s largest privately held real estate company before
becoming the Assistant Secretary of Housing and Federal Housing Commissioner at the
Department of Housing and Urban Development in mid-2009. Mr. Berman was the
founder and chief executive of CWCapital, a leading commercial real estate lender, became vice
chairman of the Mortgage Bankers Association in 2009, was promoted to chairman in
2010, and then became an adviser to HUD Secretary Shaun Donovan in 2012, focused on the
future of Fannie and Freddie. Jim Parrott was a lawyer in private practice before becoming
counsel to Secretary Donovan, where he advised on housing ?nance.2

After Fannie and Freddie were put into conservatorship under the Federal Housing
Finance Agency Mr. Berman was asked by the MBA to start a campaign to privatize

 

Gretchen Morgenson, Insiders Aid Big Banks in Effort to Displace Fannie and Freddie, The New York Times.
December 7, 2015 (attached).
3 Id.

1201 Connecticut Avenue, N.W. 0 Suite 300 0 Washington, D.C. 20036 0 (202) 780-5750



the home mortgage system; his priority ?was to ?lead the battle to restructure? Fannie and
Freddie.?3 Mr. Berman oversaw the Council on Ensuring Mortgage Liquidity, consisting mostly
of large banks and mortgage insurers, which published a report in late summer 2009
recommending Fannie and Freddie be replaced by new mortgage guarantors backed by private
capital, which would issue mortgage securities with government guarantees. The assets of
Fannie and Freddie would provide a foundation for the new system.4

Mr. Stevens joined HUD in mid- 2009, where he focused on the future of Fannie and
Freddie, attending numerous meetings with government sponsored enterprise 
principals, as well as with top mortgage industry of?cials.5 As counsel to HUD Secretary
Donovan from July 2009- December 2010, Mr. Parrott worked with Mr. Stevens. He then moved
to the National Economic Council at the White House, where he focused on housing ?nance
policy until departing in January 2013, after which he opened Falling Creek Advisors, where he

?advise[s] ?ve or six companies .in different parts of the housing ?nance ecosystem. ?6

In February 2011, the Treasury Department and HUD jointly issued a report to Congress,
which proposed reducing the role of Fannie and Freddie and, eventually, winding them down. 7
While inside Treasury, it was recognized that the plan would be ?bank- centric? and ?bene?t[ed]
larger institutions,? this information was not included 1n the report.8

About a month later, Mr. Berman, now the chairman, recruited Mr. Stevens to
join the group as its chief executive.9 Once there, Mr. Stevens continued arguing to reduce the
role of Fannie and Freddie and for a greater role for the big banks.0

In November 2012, Mr. Berman left private industry to join HUD as a senior adviser.
Mr Berman told The New York Times that HUD Secretary Donovan told him his major focus
was to be S. E. reform, to work with him and be his liaison to the White House and Treasury
and the National Economic Council as well as Congress on that issue. Mr. Berman returned
to the private sector in 2014, starting his own ?rm advising real estate lenders and informally
consulting for the FHFA.12

Thus, Messrs. Stevens, Berman and Parrott all worked on restructuring Fannie and
Freddie in their governmental capacities and, after leaving the Obama administration?Reforming America?s Housing Finance Market, A Report to Congress,? available at

(hereinafter ?Joint Report?).

8 Morgenson, NY Times, Dec. 7, 2015.

Id.

101d

ll Id

'3 Id.

is}

continued working on housing ?nance policy and met with government of?cials responsible for
matters involving Fannie and Freddie. Mr. Stevens met or spoke with housing policy of?cials 19
times between February 2012 and April 2015, meeting with White House of?cials 13 times, with
Edward J. DeMarco, the acting director of the FHFA - the conservator of Fannie and Freddie 
?ve times and Speaking with him by phone once; Mr. Parrott met with White House housing
of?cials six times after leaving government; and Mr. Berman had two such meetings following
his departure.'3

Legal Violations
Post-Employment Restrictions

As you know, 18 U.S.C. 207 restricts the activities of former government of?cials.
Following government service, it is a criminal violation for a former of?cer or employee to ever
knowingly make on anyone else?s behalf ?with the intent to in?uence, any communication to or
appearance before? any of?cer or employee of any department or agency in connection with a
particular matter in which the United States has an interest, in which the former employee
participated ?personally and substantially? while employed by the government, and which
involved a speci?c party at the time of the employee?s participation. 18 U.S.C. 207(a)(1).
Former senior employees also are restricted from attempting to in?uence of?cials in their former
agency on any matter for a period of one year. 18 U.S.C. 207(c).

If The New York Times report is accurate, Messrs. Stevens, Berman, and Parrott all
appear to have violated 18 U.S.C. 207(a)(1) and Mr. Stevens also may have violated 18 U.S.C.
207(c).

First, the conservatorship of Fannie and Freddie quali?es as a particular party matter.
Although Fannie and Freddie were placed into conservatorship in September 2008, under the
Bush administration, it was the job of the Obama administration to ensure Fannie and Freddie
were placed in ?sound and solvent condition? and to take action to ?preserve and conserve [their]
assets and The Obama administration ultimately authored a report recommending
that Fannie and Freddie be wound down.'5

The Times reported that Messrs. Stevens, Berman and Parrott spent considerable time
focusing on Fannie and Freddie while employed by the goverrunent. As Assistant Secretary of
Housing and Commissioner of the Federal Housing Administration, Mr. Stevens was ?a rimary
participant? in discussions at Treasury and HUD about the future of Fannie and Freddie. 6 While
working on the issue, his calendars show he attended meetings with GSE principals and with
high-level mortgage industry executives.[7 Even after he had agreed to join the MBA in March
2011, he met with Mr. DeMarco, who as head of FHFA, oversaw the conservatorship of Fannie

 

13
Id.
'4 See 
?5 Joint Report at 2.
'6 Morgenson, NY Times, Dec. 7, 2015.
I7
Id.

and Freddie. It is unclear whether Mr. Stevens played a role in drafting the Treasury/HUD report
that called for Fannie and Freddie to be wound down and for the private sector to play a greater
role.

Mr. Berman told the Times that the ?major focus? of his position as senior adviser to
Secretary Donovan was reform?, and his job was to serve as the secretary?s liaison to the
White House, Treasury and the National Economic Council on that issue.

Mr. Parrott?s role is less clear, but he worked on housing ?nance policy with Mr. Stevens
at HUD before joining the National Economic Council to lead housing ?nance policy.

Therefore, while working for the government, it appears Mr. Stevens, Mr. Berman, and
Mr. Parrott worked on a speci?c party matter restructuring of Fannie and Freddie that
restricted their post-govemment activities with regard to that matter.

If their work regarding Fannie and Freddie did, indeed, constitute a speci?c party matter,
the question is whether, after departing the administration and joining the private sector, they
attempted to in?uence any of?cer or employee of any department or agency in regards to any
actions pertaining to Fannie or Freddie on anyone?s behalf. Absent inquiring of the government
of?cials who attended these meetings what was said, it is impossible to know for sure, but the
circumstantial evidence is suf?cient to require further investigation.

Since departing the government in March 2011, Mr. Stevens has been employed by the
MBA, which long has lobbied to privatize the home mortgage system. Under Mr. Berman?s
leadership, in 2009, the Council on Ensuring Mortgage Liquidity recommended that Fannie and
Freddie be replaced by mortgage guarantors backed by private capital, and that some of Fannie
and Freddie?s assets namely the mortgage underwriting systems they?d built to bundle loans
into salable securities be turned over to them. Mr. Berman and the MBA pressed their case
with government of?cials extensively throughout 2009 and 2010.[8

In his position at the MBA, Mr. Stevens has continued pushing to decrease the role of
Fannie and Freddie and increase the role for private capital and, according to records uncovered
by The New York Times, has had numerous lobbying contacts with government of?cials
responsible for Fannie and Freddie.'9

Rejecting the assertion that he may have violated post-government employment
restrictions, Mr. Stevens claims he does not advocate on behalf of individuals or companies, but
rather for an industry and that he does so ?on a broad set of policy issues.?20 If, however, as an
advocate for the MBA, Mr. Stevens met and spoke with government of?cials and argued for a
reduced role for Fannie and Freddie and a greater role for private companies, a Speci?c party

 

I8 Id.
'9 Id.
201d.

matter on which it appears he spent considerable time during his government tenure, Mr. Stevens
likely violated the restrictions of 18 U.S.C. 207.

Further, Mr. Stevens terminated his government employment on March 31, 2011.
According to The New York Times, Mr. Stevens began meeting with government of?cials in
February 2012, less than one year after his government employment ended. If any HUD of?cials
were present or participated in any meeting with Mr. Stevens prior to March 31, 2012, as a
former senior employee as de?ned under 18 U.S.C. Mr. Stevens also may have
violated the one-year restriction on seeking of?cial action from his former agency on any matter.
18 U.S.C. 207(c)(1).

The New York Times also found Mr. Berman and Mr. Parrott each met with White House
of?cials responsible for housing issues: Mr. Berman on two occasions and Mr. Parrott on six. In
an interview with the Times, while denying any attempt to in?uence anyone in the government
on housing ?nance reform, Mr. Berman said ?he kept working on the project with administration
of?cials not as an advocate but because of his ?contacts and granular knowledge of what was
going This indicates Mr. Berman met with administration of?cials speci?cally to discuss
Fannie and Freddie, while a paid consultant to real estate lenders. It strains credulity to believe
that during these meetings, he had no intent to in?uence government of?cials.

Mr. Parrott?s explanation is similarly unsatisfying. While representing ?nancial
institutions, including Bank of America and a mortgage insurer, he met with White House
of?cials not as an advocate, he says, but to ?give them a sense of how people are thinking and
how things are likely going to develop in their world.?22

In summary, Messrs. Stevens, Berman and Parrott all bore signi?cant responsibility for
handling issues related to the conservatorship of Fannie and Freddie while employed by the
government. Following their government service, all three men went on to private sector
positions representing businesses with a signi?cant ?nancial interest in whether the government
winds down Fannie and Freddie and provides for an increased role for the private sector. While
paid by those businesses, each man met with government of?cials working on issues pertaining
to Fannie and Freddie, and each appears to have admitted to having discussed housing ?nance
reform. Exactly what was said the crux of any potential violation at these meetings is
unknown, but under the circumstances, an investigation is clearly warranted.

Lobbying Disclosure Act

 

Finally, Mr. Stevens has stated that he advocates on behalf of the MBA and The New
York Times discovered that he has met with government of?cials at least 19 times. Pursuant to
the Lobbying Disclosure Act, lobbyists must register with the Secretary of the Senate and the
Clerk of the House of Representatives. 2 U.S.C. 1603 Failure to register is punishable by

 

3? Id.
32 Id.

civil ?nes and knowing and willful failure to register can result in criminal prosecution. 2 U.S.C.
1606. A review of the lobbying disclosure forms filed by the MBA from 2012 through 2015
reveals that Mr. Stevens has not registered to lobby.23 While the details of Mr. Stevens?
employment and activities as the president and chief executive of the MBA are unknown, in light
of the apparent lobbying activities uncovered by The New York Times, the question of whether
Mr. Stevens improperly failed to register in violation of the Lobbying Disclosure Act merits

inquiry.
Conclusion

With the country?s $5.7 trillion home mortgage market at stake, the debate over the future
of Fannie Mae and Freddie Mac has been highly controversial and has involved a large number
of players spending untold sums to in?uence the outcome. When it appears that those involved
in in?uencing the outcome of important policy decisions may have crossed ethical lines and
violated con?ict of interest laws, Americans? con?dence in these decisions is undermined. As a
result, it is imperative that the Department of Justice investigate this matter to ascertain whether
Messrs. Stevens, Berman and Parrott violated the restrictions on their post-government
employment activities and whether Mr. Stevens improperly failed to register as a lobbyist.

Thank you for your attention to this matter.
Sincerely,

Anne L. Weismann
Executive Director
Encl.
cc: David A. Montoya

Inspector General
US. Department of Housing and Urban Development

 

23 Mortgage Bankers Association, 201 1-2015 Lobbying Disclosure Reports, Secretary of the Senate, Of?ce of
Public Records.

          

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