December 6, 2000

Lee J. Radek
Chief
Public Integrity Section
Criminal Division
U.S. Department of Justice
Tenth Street and Constitution Ave., NW
Washington, DC 50530

RE: Request for Investigation of Rep. James Moran and Terry Lierman

This letter constitutes a formal request to the Justice Department to investigate whether:

1. Representative James P. Moran (D-VA) violated federal statutes prohibiting the receipt of illegal gratuities, or solicitation of things of value from favor-seekers, by accepting and/or soliciting a $25,000 unsecured loan, with generous terms, from a registered lobbyist, Terry Lierman.

2. Terry Lierman violated the federal illegal gratuities statute by providing a $25,000 loan to Moran.

The stakes were high. Schering-Plough Corp. had assembled a lobbying team to persuade Congress to help preserve its monopoly on the popular allergy drug Claritin. Furious watchdog groups argued that extending the pharmaceutical giant's patent would cost consumers billions of dollars by delaying access to cheaper generic drugs.
The drug company found an ally in Rep. James P. Moran Jr. (D-Va.).
On June 30, 1999, Moran signed up to co-sponsor a bill to help Schering-Plough. On July 23, 1999, Moran sent a letter to other New Democrats, seeking their support. About the same time that summer, Moran received some much-needed financial help: an unsecured $ 25,000 loan from Terry Lierman, a lobbyist for Schering-Plough.⁽¹⁾

According to the Post, the terms of the Lierman loan were generous to Moran, apparently far better than what was available in the commercial loan market through an arm's length transaction.
 

Yesterday, Lierman faxed to The Washington Post a copy of a one-paragraph promissory note dated June 25, 1999, that said Moran borrowed $ 25,000, with the option to borrow more at the same 8 percent annual interest rate. The promissory note was never publicly recorded, Lierman said.

Bankers, speaking without knowledge of the people involved, described the loan as unusual because it lacks a maturity date and has no provision for repayment of the principal other than to say that Lierman may call in the loan at any time.
"It would be very unlikely that you get those terms at a bank," said Keith Leggett, a senior economist at the American Bankers Association.

 
It also might have been difficult for Moran to go to a bank, something he said he didn't even consider. The promissory note is dated five days before Moran signed on to the Claritin bill and one day after Moran's wife filed for divorce.

* * * * *
The terms outlined in the promissory note require that Moran pay 8 percent in interest annually. The payments must be made no less than semiannually.
In June 1999, when Lierman lent Moran the money, the minimum rate for an unsecured personal loan in the Washington area was 12.5 percent, according to Bank Rate Inc., a company that tracks rates.
"With an unsecured loan and no collateral, [banks] really are going to look at your credit rating" to set the rate, said the company's John Schaffer. One possible reason that Lierman might charge Moran a lower rate is that the loan may be called in at any time, said Leggett, the bankers association economist.⁽²⁾

 
A: Request for Investigation of Whether Moran and/or Lierman Violated Federal Law Prohibiting the Offering, Solicitation and Receipt of Illegal Gratuities

As a part of this investigation, the Justice Department should determine whether Moran performed legislative favors for any of Lierman's other clients near the time of the Lierman loan. The Washington Post reported extensively on Moran's legislative assistance to Lierman's lobbying client Schering-Plough. In addition, during 1999, many of Lierman's other lobbying clients had legislative business before the committees on which Moran sits. The Justice Department should investigate if, how, and when Moran aided Lierman's other lobbying clients too. In addition, the Justice Department should evaluate whether it is true, as Moran claims, that "Terry [Lierman] really never lobbied me on anything."⁽⁷⁾ Such an investigation would help illuminate the context of the Lierman loan, and whether the Lierman loan was an illegal gratuity.

Lierman explained to the Post that "the essence of what we do" at his lobbying firm, is to "lobby to increase funding for various health-related programs."⁽⁸⁾ Such lobbying overlaps well with Moran's committee assignments. When Moran received the Lierman loan, he was a Member of the House Committee on Appropriations and the Committee on the Budget. According to Lierman's lobbying reports, during 1999, Lierman lobbied on behalf of 31 clients with matters pending before those committees, including:

Academic Health Center Coalition
Albert Einstein Medical Center
American Association for Cancer Research
Bermuda Biological Station for Research
The Bushnell
Cell Therapeutics, Inc.
College on Problems of Drug Dependence, Inc.
Concert Productions Inc.
Cystic Fibrosis Foundation
FDA-NIH Council
Foundation for Fighting Blindness
Fred Hutchinson Cancer Research Center
Health Physics Society
Joint Council of Asthma, Allergy and Immunology
Kennedy Krieger Institute
Lustgarten Foundation for Pancreatic Cancer Research
Lymphoma Research Foundation of America, Inc.
NCCR
National Nutritional Foods Association
National Association of Community Health Centers
New York University Medical Center
Northwest Regional Education Laboratory
Northwestern Memorial Hospital
Parkinson's Action Network
Pennsylvania Convention Center Authority
Pennsylvania Higher Education Assistance Agency
Research Society on Alcoholism
The Rotary Foundation of Rotary International
Sea Solar Power, Inc.
Spina Bifida Association of America Foundation
Wake Forest University Baptist Medical Center⁽⁹⁾

Rep. Moran is Ranking Minority Member of the House Appropriations Committee's Subcommittee on the District of Columbia. In 1999, according to Lierman's lobbying reports, Lierman lobbied on behalf of 19 clients with issues related to or incorporated into legislation making appropriations for the District of Columbia, including:

Academic Health Center Coalition
Albert Einstein Medical Center
Cell Therapeutics, Inc.
College on Problems of Drug Dependence, Inc.
Concert Productions Inc.
Cystic Fibrosis Foundation
FDA-NIH Council
Foundation for Fighting Blindness
Fred Hutchinson Cancer Research Center
Joint Council of Asthma, Allergy and Immunology
Lustgarten Foundation for Pancreatic Cancer Research
National Association of Community Health Centers
Northwest Regional Educational Laboratory
National Nutritional Foods Association
Parkinson's Action Network
Pennsylvania Higher Education Assistance Agency
Research Society on Alcoholism
The Rotary Foundation of Rotary International
Spina Bifida Association of America Foundation

Lierman's lobbying firm, Capitol Associates Inc., boasts of its ability to influence the congressional appropriations and budget processes. In promotional materials, Capitol Associates says that it "gets results for our clients....Many of our clients have goals and objectives that involve securing federal funding for various projects and initiatives. We have a long record of success in this area..."⁽¹⁰⁾ The Justice Department should determine to what extent Lierman's lobbying of Moran, in 1999, reflects or is responsible for this "long record of success.
 

B: Request for Investigation of Whether Moran Violated a Statutory Prohibition Against Soliciting Things of Value from Favor-Seekers

(a) Except as permitted by subsection (b), no Member of Congress or officer or employee of the executive, legislative, or judicial branch shall solicit or accept anything of value from a person-
(1) seeking official action from, doing business with, or (in the case of executive branch officers and employees) conducting activities regulated by, the individual's employing entity; or
(2) whose interests may be substantially affected by the performance or nonperformance of the individual's official duties.⁽¹¹⁾

Moran said he couldn't recall if he had "directly called Terry. It may have been through . . . my campaign manager."⁽¹²⁾

Mame Reiley, Moran's former chief of staff and his current campaign chairman, said it was she, not Moran, who first approached Lierman for the loan after she became aware that Moran badly needed money to pay a lawyer to represent him in a contentious divorce.
"I did so on my own, without Jim requesting it, because I didn't want to put Terry in an uncomfortable position" if he could not lend his friend the money, Reiley said. She said she went to Lierman because he was Moran's "closest friend."⁽¹³⁾

C: Conclusion

Sincerely,

Gary Ruskin
Director
 

1. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000. Attachment #1 also includes Jo Becker, "Lierman Plays Down Lobbying; Morella Challenger's Activities Included Representing Drug Companies." The Washington Post, November 1, 2000. "Rep. Moran's Loan Deal." The Washington Post, November 1, 2000. Jo Becker, "Moran Says He'll Repay Lobbyist Immediately; Congressman to Return Drug Firm Donations." The Washington Post, November 2, 2000. "Probe Moran." Roll Call, November 6, 2000.

2. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

3. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

4. See Attachment #2.

5. 18 U.S.C. §201(c)(1)(B).

6. 18 U.S.C. §201(c)(1)(A).

7. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

8. Jo Becker, "Lierman Plays Down Lobbying; Morella Challenger's Activities Included Representing Drug Companies." The Washington Post, November 1, 2000.

9. See Attachment #3.

10. Capitol Associates website <http://207.127.113.12/home.asp?Page=Accomplishments>. See Attachment #4.

11. 5 U.S.C. § 7353.

12. Jo Becker, "Moran Got Loan From Drug Lobbyist; Va. Congressman Co-Sponsored Bill to Help Pharmaceutical Firm." The Washington Post, October 31, 2000.

13. Jo Becker and William Branigin, "Complaint Filed Over Loan From Lobbyist; Moran Got Cash From Friend."The Washington Post, November 1, 2000. See Attachment #5.