WASHINGTON – Federal investigators have concluded that Treasury Secretary John Snow did not violate conflict-of-interest rules in inadvertently investing in the bonds of two government-sponsored mortgage giants.
The conclusion was contained in a document from the Treasury Department's Office of Inspector General, released Friday to The Associated Press as a result of a Freedom of Information Act request.
"No evidence or information was developed during the course of the investigation which would suggest Secretary Snow knowingly held (government-sponsored enterprise) securities," according to the Treasury document.
Snow was a top executive at the railroad company CSX Corp. before he became Treasury secretary in February 2003.
As he prepared to move into the federal post, Snow has indicated he instructed his adviser to invest in Treasury bonds to avoid any conflict of interest. But his adviser in 2003 ended up buying $10.87 million in bonds held by government-sponsored enterprises of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
Fannie Mae and Freddie Mac are big players in the mortgage market, and Snow has pressed for tighter regulation of them.
Snow has indicated he was unaware of the purchase of the bonds. Once he became aware of the mistake, the bond holdings were sold in May 2004, at a loss of $478,000.
The results of the Treasury inspector general's investigation were "presented to the Public Integrity Section, Criminal Division, U.S. Department of Justice, which concluded that federal criminal prosecution was not warranted," the Treasury document said. "Similarly, the DOJ Civil Division also declined to seek civil remedies. In light of these decisions, we have closed our investigation."
Sen. Max Baucus of Montana, the highest-ranking Democrat on the Senate Finance Committee, responded: "I'm concerned by the conclusion that Secretary Snow had no knowledge about a $10 million personal stake in institutions he's sworn to oversee. The secretary of the treasury should know when his private investments intersect with his public responsibilities to the American people."
Brookly McLaughlin, a Treasury spokeswoman, said Snow is "committed to the highest ethical behavior and cooperated fully in this matter."