House ethics panel clears Rep. Laura Richardson of misconduct

The House Ethics Committee on Thursday cleared Rep. Laura Richardson (D- Long Beach) in her dealings with a bank that canceled the sale of a foreclosed home she owns in Sacramento.

The bipartisan panel unanimously found that Richardson “did not receive an improper gift or other benefit” when Washington Mutual placed a hold on the sale.

Richardson said in a statement that the committee report “confirms that I have at all times acted in accordance with my ethical duties as a member of Congress. I am thankful this is over and behind me and I can continue to do what I enjoy, which is serving the people of California’s 37th District.”

But the committee’s 87-page report brought new attention, in an election year, to the financial affairs of the congresswoman, who has a history of problems making her house payments — she has defaulted on three homes. The Sacramento house at one time was declared a public nuisance by the city because of its rundown condition.

The committee found that Richardson was “a victim of mortgage fraud.” Her mortgage application for the Sacramento home reported rental income from properties she owns in Long Beach and San Pedro, but she never received income from the properties.

Richardson’s mortgage broker, “without her knowledge, fraudulently submitted false rental income information,” the committee said. The committee referred the broker to the Justice Department.

The report noted that the congresswoman “admitted that she did not review the mortgage application as closely as she should have.” An independent mortgage consultant hired by the committee concluded that Richardson “likely would not have qualified” for the mortgage without the fraudulent rental income information.

The ethics panel, formally known as the Committee on Standards of Official Conduct, concluded that Washington Mutual treated Richardson the same as it would treat “any other similarly situated customer.”

The committee found that the bank had “mistakenly” allowed the foreclosure sale after informing Richardson that it had placed a 60-day hold on the foreclosure proceedings.

Richardson bought the Sacramento house for $535,000 in early 2007 after her election to the state Assembly. The house went into foreclosure in early 2008.

It was bought by a real estate investor for $388,000. But then Washington Mutual took back the house and returned it to Richardson. The bank settled a lawsuit filed by the buyer by refunding the foreclosure sale amount and paying the buyer an additional $100,000, the report says.

After Washington Mutual canceled the foreclosure sale, the bank and Richardson worked out a loan modification. The committee’s mortgage expert concluded that the modification was “commercially reasonable.”

Also on Thursday, the Office of Congressional Ethics, an independent body that investigated Richardson separately, noted in a report that a Sacramento neighbor, upset with the conditions of the congresswoman’s property, paid a gardener to tend to the lawn a number of times.

“Even if Rep. Richardson knowingly received these services, any violation of the gift rule would be de minimis,” the office concluded.

richard.simon@latimes.com