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90–965 PDF 2014

EXAMINING ALLEGATIONS OF CORRUPTION AT 

THE EXPORT–IMPORT BANK 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, 

JOB CREATION AND REGULATORY AFFAIRS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 29, 2014 

Serial No. 113–144 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION AND REGULATORY AFFAIRS

JIM JORDAN, Ohio, Chairman 

JOHN J. DUNCAN Jr., Tennessee 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

DOC HASTINGS, Washington 

CYNTHIA LUMMIS, Wyoming 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY BENTIVOLIO, Michigan 

RON DESANTIS Florida 

MATTHEW A. CARTWRIGHT, Pennsylvania, 

Ranking Minority Member 

TAMMY DUCKWORTH, Illinois 

GERALD E. CONNOLLY, Virginia 

MARK POCAN, Wisconsin 

DANNY K. DAVIS, Illinois 

STEVEN A. HORSFORD, Nevada 

(III) 

C O N T E N T S 

Page 

Hearing held on July 29, 2014 ............................................................................... 1 

WITNESSES 

Mr. Johnny Gutierrez, Former Employee, Short Term Trade Finance Division, 

Export-Import Bank 

Oral Statement ................................................................................................. 6 

The Hon. Fred P. Hochberg, Chairman and President, Export-Import Bank 

of the United States 

Oral Statement ................................................................................................. 7 

Written Statement ............................................................................................ 9 

Ms. Diane Katz, Research Fellow in Regulatory Policy, The Heritage Foundation 

Oral Statement ................................................................................................. 14 

Written Statement ............................................................................................ 16 

APPENDIX 

July 28, 2014, letter to Rep. Cartwright from the Export-Import Bank, Submitted by Rep. Cartwright .................................................................................. 66 

July 28, Op-Ed by William Broch, submitted by Rep. Cartwright ...................... 68 

May 2014 CBO study, submitted by Rep. Jordan ................................................. 72 

July 25, 2014, Bloomberg article, submitted by Rep. Cummings ........................ 82 

Opening Statement from the Rep. Matt Cartwright ............................................ 85 

Federal employee viewpoint survey results ........................................................... 87 

(1) 

EXAMINING ALLEGATIONS OF CORRUPTION 

AT THE EXPORT–IMPORT BANK 

Tuesday, July 29, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION, AND REGULATORY AFFAIRS, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2154, Rayburn House Office Building, Hon. Jim Jordan [chairman 

of the subcommittee] presiding. 

Present: Representatives Jordan, DeSantis, Duncan, Meehan, 

Lummis, Collins, Meadows, Bentivolio, Cartwright, Duckworth, 

and Connolly. 

Also Present: Representatives Issa, Woodall, and Mulvaney. 

Staff Present: Molly Boyl, Deputy General Counsel and Parliamentarian; David Brewer, Senior Counsel; Sharon Casey, Senior 

Assistant Clerk; Steve Castor, General Counsel; Brian Daner, 

Counsel; Adam P. Fromm, Director of Member Services and Committee Operations; Linda Good, Chief Clerk; Michael R. Kiko, Legislative Assistant; Mark D. Marin, Deputy Staff Director of Oversight; Ashok M. Pinto, Chief Counsel, Investigations; Jessica Seale, 

Digital Director; Andrew Shult, Deputy Digital Director; Jonathan 

J. Skladany, Deputy General Counsel; Rebecca Watkins, Communications Director; Jaron Bourke, Minority Director of Administration; Courtney Cochran, Minority Press Secretary; Jennifer Hoffman, Minority Communications Director; Tim Lynch, Minority 

Counsel; Brian Quinn, Minority Counsel; and Katy Teleky, Minority Staff Assistant. 

Mr. JORDAN. The committee will come to order. I want to thank 

our witnesses for being here. We’ll get to you in just a minute. 

We’re going to start with opening statements, and begin by recognizing the chairman of the full committee, the gentleman from 

California, Mr. Issa. 

Mr. ISSA. Thank you, Mr. Chairman. Thank you for holding this 

very important hearing today. Our witnesses are here because it’s 

important the American people understand that with a pattern and 

a history of, and I use the word ‘‘corruption’’ in parentheses, but 

inappropriate behavior, questionable loans, a number of scandals 

that have made the American people question whether or not the 

term ‘‘bank’’ is appropriate for the Export-Import Bank. 

Ex-Im Bank is not just a government program or subsidy. It is, 

in fact, a longstanding entity that is intended to help us compete 

in our exports around the world, it’s intended to make American 

2 

products that would not otherwise be produced and exported possible, but it is, in fact, a program that comes with a cost. Any time 

the American people have a question about whether or not the risk 

is worth the reward. Mr. Chairman, I’m one member who believes 

that the risk and reward should be positive. 

Americans compete around the world with countries who play by 

different rules. There are countries, like China, that will simply 

buy their way into a market. They will bribe individuals in government to gain rights and capabilities. Even countries as advanced 

as France are known to fail to meet the anti-corruption laws that 

America observes. So for that reason, it’s important when Airbus 

has an opportunity to sell to America, that Boeing have an opportunity to have an even playing field. No company should be forced 

to move out of the country in order to access plans and financing 

that would be available to them—would not be available to them 

if they were within this. 

Having said that, our jurisdiction is not on renewing the Ex-Im 

Bank; our jurisdiction clearly is on waste, fraud and abuse and the 

organization—or organizational strategies necessary for the American people to have a feeling of confidence in the Export-Import 

Bank. That does mean that we have to look at failures related to 

corruption and failures related to does this entity make loans possible where they otherwise wouldn’t be possible, or is it often used 

for very high numbers for entities that would, in fact, otherwise 

still have a sale. 

This committee only a few weeks ago looked at an embassy program that went awry in Papua New Guinea. We do not blame the 

Ex-Im Bank for the failure of that construction project, but a deciding factor in the mid-construction change was, in fact, an Ex-Im 

Bank-sponsored loan program that was going to cause natural gas 

to be liquefied in Papua New Guinea and then sent to China. 

I, for one member, have serious questions about whether or not 

a company that is American flagged, but ultimately global, can receive income from one country, sell it to another country, and then 

claim that the risk should be on the American taxpayers. 

So as we look at both the loan portfolio, the loan criteria, and the 

integrity of the organization, I hope we’ll do so with a positive attitude that this is a longstanding program that has merit, but that, 

in fact, we have an obligation to see lives up to the highest standards, not of a bank, not of a government entity, but of a program 

designed on behalf of the American people to promote positive job 

growth here in America through our products being competitive 

around the world. 

And for that reason, Mr. Chairman, you are showing great leadership here today in giving the Bank and others an opportunity to 

make their case for how they can do better on behalf of the American people, and I thank you for that, and yield back the balance 

of my time. 

Mr. JORDAN. I thank the chairman. 

I would now yield to the ranking member of the subcommittee, 

the gentleman from Pennsylvania, Mr. Cartwright. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. And I welcome our 

witnesses on today’s panel. Today’s hearing is intended to examine 

recent allegations of corruption at the Export-Import Bank, an 

3 

independent, self-sustaining agency with a history of supporting 

U.S. jobs by financing the export of American goods and services. 

I do look forward to today’s testimony on the bank’s anti-corruption 

and anti-fraud efforts, the bank’s process for responding to employee integrity issues, and how it does maintain high ethical 

standards that Congress and the American public expect from all 

government agencies. However, I am concerned that this hearing 

today has been called, in a rush to judgment, intended to tarnish 

the reputation of the Bank and its employees in an attempt unduly 

to influence a vote on the bank’s reauthorization. 

Four Ex-Im Bank employees are currently under investigation. 

Details of those investigations cannot and should not be discussed 

at this hearing, because congressional oversight is not supposed to 

jeopardize ongoing personnel actions or criminal investigations. I 

hope that the chairman will agree to instruct members not to jeopardize unintentionally the investigations by pressing for certain details of alleged misconduct. 

Nonetheless, both Chairman Jordan and Chairman Issa have 

stated that these incidents, which we have very limited detail 

about, suggest a broader culture of corruption at the Bank, but the 

facts do not support that conclusion. Each of these investigations 

followed a formal referral for investigation that originated in the 

Ex-Im Bank’s general counsel’s office, and to date, every case of alleged fraud that the IG has referred for prosecution concerns outside entities which were seeking to steal taxpayer funds, not bank 

employees. 

Now, the fact that outside parties attempted to defraud the Bank 

does not indicate that there is a culture of corruption inside the 

Bank. Calling the Bank corrupt for crimes committed against it is 

what we call blaming the victim. 

Now, let’s talk about what this hearing is really about, and that 

is the reauthorization of the Ex-Im Bank. This issue, for the first 

time in modern memory, has become controversial, not because of 

the issue before us today, but because the Tea Party faction of the 

Republican Party is holding this reauthorization hostage. This 

hearing seems to be designed to influence this important upcoming 

vote with propaganda and political theater. 

A large group of Democrats as well as sensible moderate Republicans, many of whom I am proud to call my friends, understand 

the contribution that the Export-Import Bank makes to our communities by providing support for jobs and investments in small 

businesses all across America. It helps our domestic manufacturers 

compete with companies that are getting help from their own country’s export banks overseas. We have to level the playing field for 

our companies, because other countries are putting their thumbs 

on the scale in favor of their own manufacturers. If we don’t level 

the playing field for our companies, our companies and our workers 

face unfair disadvantage. 

The Bank supports businesses in every state in the union. In my 

district alone, I’m very happy that the Bank supports 10 companies 

and 639 jobs. In fact, in Pennsylvania, the Bank supports $5.5 billion in exports. Nationwide, the Bank has supported 1.2 million 

American jobs, generated billions for the government, and costs the 

U.S. taxpayers nothing. In fact, we make money on the deals. On 

4 

average, 87 percent of bank transactions benefit small business exporters of U.S.-made goods and services. These are deals that could 

not and would not be done by the private sector alone, and are the 

perfect example of the kinds of public-private partnerships we need 

to get our economy going again, get our businesses thriving again 

and get our people back to work. 

And speaking of getting back to work, I would note that this is 

the first hearing on the Economic Growth, Job Creation and Regulatory Affairs Subcommittee that has even tangentially anything to 

do with job creation, and therefore, I appreciate—having—appreciate the chairman having this hearing at all. 

I do hope the chairman will join with me and other Republican 

and Democratic members who are calling for a reauthorization of 

a bank that supports U.S. jobs by financing the export of American 

goods and services. In fact, an op-ed by William E. Brock, labor secretary under President Ronald Reagan shows how far away from 

the tenets of President Reagan the modern Republican Party has 

drifted. He said, as a Republican, I would prefer that the private 

sector carry the entire load of supporting our international competitiveness, but the world market is not a level playing field, and the 

Bank is absolutely vital for companies involved in the global economy. Having worked closely with Mr. Reagan on trade issues, I am 

confident that he felt the same. 

And, Mr. Chairman, I ask unanimous consent to enter this oped by Former Secretary Brock into the record. 

Mr. JORDAN. Without objection. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman, and I yield back. 

Mr. JORDAN. I thank the gentleman for his statement. 

According to a recent report—well, let me do one other thing 

first. I ask unanimous consent that Mr. Mulvaney, the gentleman 

from South Carolina, be allowed to participate in today’s hearing. 

According to a recent report in The Wall Street Journal, at least 

four bank employees are under investigation for accepting bribes 

and steering Federal contracts to favored companies. In fact, fraud 

within and against the Bank may be far more widespread. The acting Inspector General of the Bank has informed the committee that 

there are at least 40, 40 active and ongoing investigations of fraud. 

And I would just as an aside highlight, after the ranking member’s 

opening statement, that what better time, what better time to discuss real concerns at the Export-Import Bank than when we’re 

looking at the issue of reauthorization. I think this would be the 

appropriate time to have this kind of hearing and look at these 

very issues. 

In a hearing last month before the Financial Services Committee, 

Mr. Hochberg testified, ‘‘The article that was in yesterday’s Wall 

Street Journal, in my opinion, is actually a good article, because it 

says to our staff and to the exporter, if you’re doing anything 

funny, any funny business, we are on to you.’’ But just a few years 

ago the Export-Import Bank was at the center of the most high 

profile corruption scandal, Abscam, when former congressman, William Jefferson, was caught with $90,000 in his freezer. As part of 

that investigation, an Ex-Im Bank employee admitted to taking a 

$100,000 bribe from a Nigerian businessman seeking financing 

5 

from the Bank. Apparently, the Bank’s employees need regular reminders that it’s wrong to accept bribes. 

The allegations are appalling, but they are hardly shocking. The 

sole purpose of the Ex-Im Bank is to hand out billions of dollars 

to private companies in the form of direct loans, loan guarantees 

and credit insurance. Given such massive government largesse, the 

Bank is a natural target for fraud and its employees are natural 

targets for bribery and corruption. What is shocking is how the 

Bank has managed that risk. 

One of the witnesses before the committee today is alleged to 

have accepted bribes from a south Florida exporter known as 

Impex Associates. Ex-Im Bank has a long history with Impex Associates, approving over 22 deals stretching from 2002 to 2011. In 

2006, a 70-page lawsuit filed in Federal court laid out in excruciating detail how Impex Associates was nothing more than a massive scheme to defraud the Bank. Even after the whole world knew 

that Impex Associates was bilking the American taxpayer, it took 

the bank’s management 3 years, 3 years to suspect there was anything wrong and refer the matter to the Inspector General. In fact, 

during those 3 years, the Bank approved five more deals with 

Impex, subjecting taxpayers to up to $40 million in liability. 

According to the 2013 Federal Employee Survey, the Bank’s staff 

have little faith in its leadership. When asked if, ‘‘my organization’s 

leaders maintain high standards of honesty and integrity,’’ only 42 

percent of the employees at the Bank said yes; when asked whether they could, ‘‘disclose a suspected violation of any law, rule or 

regulation without fear of reprisal,’’ only 50 percent of the Bank 

employees said yes. That’s the culture that exists at the Bank, 

that’s why it’s appropriate we have this hearing at a time when 

we’re looking at the issue of reauthorization. 

President Obama famously said that when the American people 

lose faith in the ethical standards of government employees, all is 

lost. 

In the private sector, if half of the employees of a company lost 

faith in their leadership, there would be big problems with that 

company. Unfortunately, that is what appears to be the case today 

with the Export-Import Bank. That’s why we’re having this hearing. 

And with that, I would yield back our time and recognize—is 

there anyone else on the Democrat side who—is Mr. Cummings? 

Anyone else wish to make an opening statement? Anyone else on 

the Republican side wish to make an opening statement? 

We will now go to our—members have 7 days to submit opening 

statements for the record. We’ll now go to our witnesses. We have 

first Mr. Johnny Gutierrez, who’s the former official in the shortterm trade and finance division—trade finance division, excuse me, 

of the Export-Import Bank; we have the Honorable Fred Hochberg, 

who’s chairman and president of the Export-Import Bank of the 

United States; and Ms. Diane Katz, who is a research fellow in the 

regulatory policy division at the Heritage Foundation. 

I want to thank you all for being here. We know it’s not always 

easy to do this, but we appreciate you being here with us. 

Pursuant to committee rules, all witnesses will be sworn in before they testify. If you’ll please stand and raise your right hand. 

6 

Do you solemnly swear or affirm that the testimony you are about 

to give will be the truth, the whole truth and nothing but the 

truth, so help you God? Let the record show that each witness answered in the affirmative. 

You guys know how this works. You’re given 5 minutes, more or 

less, right around the 5 minute mark, to make your opening statement. I know some of you submitted those already in written form. 

I’d like to thank you all for being here. And we will start first with 

Mr. Gutierrez. 

WITNESS STATEMENTS 

STATEMENT OF JOHNNY GUTIERREZ 

Mr. JORDAN. Mr. Gutierrez, you have not provided us with any 

written testimony before today’s hearing. Do you wish to make an 

opening statement? 

Mr. GUTIERREZ. Upon advice of counsel, I hereby invoke my 

privilege against self-incrimination under the Fifth Amendment to 

the United States Constitution, which protects the innocent as well 

as the guilty. 

Mr. JORDAN. We certainly respect that right you have, Mr. 

Gutierrez, under our wonderful Constitution. 

Mr. Gutierrez, as an official in the Export-Import Bank’s shortterm trade finance division, you are uniquely qualified to provide 

testimony that will help the committee better understand allegations of corruption and fraud at the Export-Import Bank. To that 

end, I must ask you to consider answering the questions, so if you’ll 

just bear with me. 

Mr. Gutierrez, while you were at the Export-Import Bank, did 

you accept any gifts or items of value from either Geraldo Diaz or 

Impex Associates? 

Mr. GUTIERREZ. Upon advice of counsel, I hereby invoke my Fifth 

Amendment privilege against self-incrimination. 

Mr. JORDAN. I just have a couple questions, Mr. Gutierrez, and 

then we’ll let you go here. 

Mr. Gutierrez, The Wall Street Journal reported that you and 

three other Export-Import Bank employees accepted gifts and kickbacks and improperly awarded contracts to favored companies. Are 

you aware of any other employees at the Export-Import Bank who 

accepted gifts or items of value from companies or individuals seeking export financing? 

Mr. GUTIERREZ. Upon advice of counsel, I hereby invoke my Fifth 

Amendment privilege against self-incrimination. 

Mr. JORDAN. Just one last question, Mr. Gutierrez. Are you prepared to answer any questions here today about anything you did 

while you were at the Export-Import Bank? 

Mr. GUTIERREZ. Upon advice of counsel, I hereby invoke my Fifth 

Amendment privilege against self-incrimination. 

Mr. JORDAN. Does the ranking member have questions for Mr. 

Gutierrez? 

Mr. CARTWRIGHT. Not at this time. 

Mr. JORDAN. Mr. Gutierrez—— 

Mr. ISSA. Mr. Chairman? I would ask before you dismiss the witness that—instruct counsel to meet with our counsel to see whethVerDate Aug 31 2005 11:07 Nov 05, 2014 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\90965.TXT APRIL
7 

er or not there is or could be a proffer prior to dismissal, since Mr. 

Gutierrez is here pursuant to a subpoena. I would rather do that 

than to try to make contact later. 

Mr. JORDAN. We’re going to excuse Mr. Gutierrez. If—Mr. Gutierrez, if there’s a chance you and your counsel could visit briefly with 

our counsel and—after you’re dismissed, we would appreciate that. 

So we’ll just take a short recess. Mr. Gutierrez, you’re dismissed. 

A couple, 2-minute break here, and we’ll maybe rearrange the 

table a little bit, and then we’ll be right back for our opening statements from Mr. Hochberg and Ms. Katz. 

Mr. Gutierrez, thank you for being here today. The witness is 

dismissed. 

[recess.] 

Mr. JORDAN. Mr. Hochberg, you are recognized for 5 minutes. 

STATEMENT OF HON. FRED P. HOCHBERG 

Mr. HOCHBERG. Thank you. Chairman Jordan, Ranking Member 

Cartwright and committee members, thank you for inviting me 

here to testify before you today. 

Ex-Im Bank is the official export credit agency of the United 

States. We operate exclusively in cases where the private sector is 

unwilling or unable to provide support, and to level the playing 

field against foreign competition. I am proud of our 400-plus employees, too, each and every day. Ex-Im Bank has supported 1.2 

million private sector jobs in the U.S.—U.S. jobs since 2009, including 205,000 in fiscal 2013 alone. The Bank operates at no cost to 

taxpayers, and in fiscal 2013, the Bank generated $1,057,000,000 

for U.S. taxpayers above and beyond the cost of all operations and 

loan loss reserves. The $1 billion goes towards deficit reduction. 

We report on default rate to Congress every 90 days. As of June 

30th, Ex-Im’s default rate was.194 percent, or in other words, less 

than one-fifth of a percent. The private sector average rate, as calculated by the Fed, is currently three to four times that amount. 

Today’s hearing concerns ethics and how the agency addresses 

this important area of public trust. The Bank is fully committed to 

transparency and expects the highest ethical standards from all 

employees, and I look at this in three distinct areas: One, a culture 

of ethics starts at the top. I personally and the management team 

at the Bank are fully committed to running an ethical agency and 

operating at the highest ethical standards in government. Anything 

less than this is unacceptable. 

Second, a committed culture of ethics must also have a strong 

ethical training and compliance program to ensure that all employees understand and internalize regulations and ethical expectations. 

And third, lastly, because we don’t live in a perfect world, an effective monitoring enforcement program must also exist. We work 

very closely with the Inspector General to monitor and enforce ethical concerns or breaches. One of my first orders of business when 

I joined Ex-Im was to establish a regular meeting with the Inspector General. I continue to meet with him privately each and every 

month. 

8 

Before joining Ex-Im, I ran a business, a small business, in fact, 

for 20 years and I know what it means to meet a weekly payroll. 

I also know that the only way for an organization to be successful 

is to operate at a high ethical level and have zero tolerance for 

fraud, waste or abuse. 

Additionally, let me add that the agency’s ethics program are 

fully compliant with all laws, regulations and policies that govern 

this aspect of our work. We are committed to comprehensive ethics 

training for all employees—in fact, we have a manual right here— 

and foster an environment where employees are encouraged to ask 

questions and report suspected unethical behavior. 

Here are just seven examples of what we’re doing: all new employees receive the manual ethics training upon arrival; they also 

receive mandatory annual ethics training thereafter; three, Ex-Im 

thoroughly reviews all financial disclosure reports, required to be 

filed by all employees on an annual basis; four, we conduct background checks on all of our employees and contractors that work 

at the Bank; five, we also periodically conduct background re-investigations on employees who have access to sensitive information 

and those who hold high level security clearances; six, we provide 

advice to employees to avoid any potential conflicts of interest; and 

lastly, we work closely with and refer matters, as appropriate, to 

the Inspector General. 

As I mentioned, I meet monthly with the Inspector General and 

we review the status of audits and other ongoing investigations and 

periodic reports to Congress. I am only informed of an investigation 

at the discretion of the Inspector General. 

Ex-Im Bank fully respects the authority of Congress to provide 

oversight of the Bank, and we strive to comply with all congressional requests to the fullest extent possible without compromising 

ongoing investigations. I know that every member of this panel 

shares my concern about not interfering with an ongoing criminal 

investigation. The last thing I want to do is interfere with the ability of law enforcement officials to fully and successfully prosecute 

wrongdoing. 

I know there is intense interest in the allegations mentioned in 

the recent newspaper article. So as not to compromise the ongoing 

criminal investigations, privacy interest and due process rights, I 

can only say the following: Three individuals are no longer employed by the Bank and a fourth has been placed on administrative 

leave. 

I want to reiterate, the Bank has zero tolerance for ethics violations. And I look forward to answering your questions. 

[Prepared statement of Mr. Hochberg follows:] 

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Mr. JORDAN. We now recognize Ms. Katz. 

STATEMENT OF DIANE KATZ 

Ms. KATZ. Chairman Jordan, Ranking Member Cartwright and 

members of the subcommittee, thank you for having me here today 

to testify. My name is Diane Katz and I am a research fellow in 

regulatory policy at The Heritage Foundation. The views expressed 

in this testimony are my own and should not be construed as official positions of The Heritage Foundation. 

As you are aware, the charter of the Export-Import Bank expires 

on September 30th. Proponents of reauthorization assert that the 

Bank sustains American jobs, fills gaps in export financing, and 

levels the playing field against subsidies provided by foreign governments; however, there is abundant evidence to the contrary and 

the academic literature is virtually unanimous in concluding that 

export subsidies are detrimental. 

The Office of Inspector General and the Government Accountability Office have repeatedly documented mismanagement and 

dysfunction within Ex-Im, including insufficient policies to prevent 

waste, fraud and abuse. This pattern of carelessness with taxpayer 

dollars is evident in the multitude of criminal cases involving the 

Bank. 

As the chairman noted, employees say that ethical conduct is not 

among Ex-Im’s strengths. In a 2013 government survey, only 42 

percent of bank employees agreed with the statement, my organization’s leaders maintain high standards of honesty and integrity. 

In a 2013 review of direct loans, the Office of Inspector General 

identified the Bank’s non-compliance with even the most basic Federal procedures, noting ‘‘Bank personnel failed to document applicants’ eligibility and application requirements and disregard mandatory checks on applicants’ character and financial integrity.’’ 

Operational deficiencies appear to have worsened as bank financing has surged. Ex-Im’s portfolio has increased by 94 percent since 

2008. As noted by the Inspector General, this rapid growth raises 

concerns as to Ex-Im’s inability to manage and monitor its portfolio. 

Failures in management and monitoring are evident in dozens of 

cases of fraud. Based on a review of government data, The Heritage 

Foundation documented 124 investigations initiated between October 2007 and March 2014, as well as 792 claims involving more 

than a half billion dollars. There also have been 74 administrative 

actions since April 2009 in which bank officials have been forced 

to halt transactions based upon investigative findings. 

A lack of due diligence was explicitly cited in the disappearance 

of $577 million related to the Bank’s financing of a massive natural 

gas project in Papua New Guinea. The Inspector General noted 

that Ex-Im did not fully vet the relevant persons and entities connected with the project. 

Similar lapses were cited in the Bank’s financing of the Bolero 

mine project in Mexico, which defaulted within months of receiving 

a $420 million loan. According to the Inspector General, project 

vulnerabilities ‘‘were not sufficiently addressed in Ex-Im Bank’s 

due diligence efforts.’’ 

15 

In other cases, the Bank has engaged in literally dozens of transactions with an individual or a company before discovering that 

taxpayers were being defrauded. For example, from 2008 through 

2010, Jose Quijano acted as an exporter in 96 fraudulent loan 

transactions insured by the Ex-Im Bank. Between 2004 and 2007, 

Ismael Garcia acted as the purported exporter in at least 31 fraudulent transactions involving $23 million in loans. From 2004 

through 2007, Jose Velasco and others submitted false documents 

for 13 Ex-Im loan guarantees. The Bank subsequently paid $18 

million in claims on the defaulted loans. Between 2004 and 2009, 

Luis Moy acted as the exporter in 11 fraudulent Ex-Im Bank insured or guarantied loans totally $11.2 million. 

Fraud and corruption are not the only risks to taxpayers related 

to Ex-Im. The Government Accountability Office reported that the 

Bank appears to be relying on inappropriate risk modeling that 

could produce inaccurate estimates of subsidy costs and losses. 

Ex-Im officials also are skirting requirements for determining the 

effect of export subsidies on domestic firms. Specifically, the Bank 

omitted relevant data and analysis beyond that considered necessary to support staff recommendations for financing. 

Despite promises to improve matters over the years, bank officials continue to neglect due diligence, misstate losses, and exaggerate benefits. These failures are important to acknowledge as you 

consider whether to reauthorize the Bank or allow its charter to expire. Thank you. 

Mr. JORDAN. Thank you, Ms. Katz. 

[Prepared statement of Ms. Katz follows:] 

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Mr. JORDAN. We’ll now go to questions. The gentleman from Florida, Mr. DeSantis, is recognized. 

Mr. DESANTIS. Good morning, Chairman Hochberg. When did 

you become aware of Mr. Gutierrez’s alleged corruption? 

Mr. HOCHBERG. There are four employees who are under investigation. And on advice of counsel and after talking to the Inspector 

General not to jeopardize their case, I’m really not able to talk 

about a criminal investigation while it’s going on. 

Mr. DESANTIS. So you can’t even say when you were apprised of 

it just in terms of how we evaluate your role in running the agency, not even getting into the criminal charges? 

Mr. HOCHBERG. My—the Inspector General’s already been concerned that too much information has leaked about this. He has— 

he wrote a letter to—— 

Mr. DESANTIS. Okay. Well, let me—I take your point. Was this 

the first time you’ve been made aware of possible corruption by the 

Export-Import Bank employees in your tenure? 

Mr. HOCHBERG. Yes. I’ve been at the Bank for 5 years. This was 

the first year. 

Mr. DESANTIS. So you were not aware of any other instances of 

employee corruption since you’ve been at the Bank? 

Mr. HOCHBERG. Well, there are four cases that have been raised 

in the newspaper. I’m familiar with those four. 

Mr. DESANTIS. Now, at the June 25th Financial Services hearing, 

Chairman Jordan referenced that you said that yesterday’s Wall 

Street Journal article, in my opinion, is actually a good article. 

Did the Export-Import Bank need a reminder by The Wall Street 

Journal that it’s explicitly illegal to accept bribes? 

Mr. HOCHBERG. No. 

Mr. DESANTIS. And I bring that up, because most American’s 

don’t know what the Export-Import Bank is, but a lot of Americans 

do remember, and this was—I guess, the misconduct would have 

been before you got there, but it came to a head in 2009. There was 

a Member of Congress that the FBI found thousands of dollars in 

his freezer, Congressman Jefferson. That was a very high profile 

scandal. 

And so I guess my question is, you know, why are we here again? 

It’s been just 5 years since the Export-Import Bank was at the center of one of the biggest corruption scandals in Congress certainly 

in decades, and yet it’s back on the front page of The Wall Street 

Journal. So how is that a good thing? 

Mr. HOCHBERG. What I tried to say, Congressman, is that we 

work closely with the Inspector General. We have set a high ethical 

standard at the Bank. We work closely with all employees to provide ethics training. We instituted a multi-day course this year 

that was oversubscribed. Over 50 people have taken it so far. We’re 

going to be extending that. We have a high ethical standard there. 

On the other hand, enforce—the reason we have to have enforcement is not everybody plays by the rules, not everybody follows the 

rules, and when that does happen—and in this case, in the cases 

we’re talking about, employees at the Bank referred each and every 

one of those to the general counsel and to the Inspector General—— 

26 

Mr. DESANTIS. So the source of those—the four instances that 

The Wall Street Journal referenced, the source of that were employees referring that, or did those start in the context of a fraud 

investigation? 

Mr. HOCHBERG. It started with employees saying that something 

doesn’t look right in this transaction on this area of the Bank. 

Mr. DESANTIS. Okay. Because according to your letter to the 

committee, the alleged wrongdoing by Mr. Gutierrez was discovered 

during a fraud investigation. I think that’s what you’re saying. 

There as a transaction, people say, hey, there may be something 

wrong. So basically the foreign company may be committing a 

fraud or the domestic company against the Ex-Im Bank. 

Now, as I understand it, there are at least 40 outstanding fraud 

investigations of bank transactions that are outstanding. Is that 

correct? 

Mr. HOCHBERG. I don’t know about the precise number. I can say 

this, Congressman: We—there only have been four employees. 

There will always be at a bank of our size a number of transactions 

that will be under suspicion or will be investigated. 

Mr. DESANTIS. No. I understand that. And I agree with that, but 

my point is simply that if we have 40 fraud investigations, it seems 

as if that is kind of the way in which some of the employee misconduct can be discovered, and so if there are substantial number 

of outstanding fraud investigations, it stands to reason that there 

very well may be more instances of employee misconduct. 

I’m going to ask you this: You noted in your testimony that the 

Ex-Im Bank serves to kind of level the playing field, you have all 

these foreign countries that engage in subsidies for their domestic 

industries. And I guess my question is for you is, why are we worried about foreign nations engaging in industrial policies? It just 

seems to me that, I understand why that would be politically attractive, but economically it seems like it would be counterproductive, because you basically have central planners who are allocating capital rather than allowing private individuals. And so if 

China wants to go down that road, China may not be experiencing 

the growth that they would have if they were leaving private capital to allocate itself based on the private ownership. So how would 

you respond to that? 

Mr. HOCHBERG. We live in a world right now—and we have to 

partly accept the world we live in. We live in a world where there 

is state-directed capitalism in many, many countries; China’s one, 

but it’s not the only one. 

We want to make sure that when American companies are competing—if they compete against another company, it’s one thing; if 

they compete against China, Inc., or Korea, Inc., or Russia, Inc., 

and so forth, sometimes those companies are backed by those governments, we want to make sure if, only if our financing is needed 

to level the playing field, that we step in. We only step in in those 

rare occasions where we’re needed to. 

Mr. DESANTIS. My time is expired. I yield back to the chairman. 

Mr. JORDAN. The gentleman from Pennsylvania, the ranking 

member, Mr. Cartwright, is recognized. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

27 

Mr. Hochberg, I thank you again for appearing here today, and 

I just want to run over a few important facts with you. First of all, 

am I correct that the Ex-Im Bank supports 1.2 million American 

exporting jobs? 

Mr. HOCHBERG. Yes, that’s correct. 

Mr. CARTWRIGHT. Okay. At no cost to the taxpayer? 

Mr. HOCHBERG. That’s correct, no cost to the taxpayer. 

Mr. CARTWRIGHT. And this is a function, to address my colleague, 

Mr. DeSantis’ concern: How many other countries—it’s something 

like 40 other countries in the developed world that have the equivalent of the American Ex-Im Bank. Isn’t that true? 

Mr. HOCHBERG. There are actually 59 other export credit agencies around the world. 

Mr. CARTWRIGHT. 59 others in the world. And if we didn’t have 

ours to help American companies compete, the playing field would 

be much less level than it is today. Am I correct in that? 

Mr. HOCHBERG. That is totally correct. 

Mr. CARTWRIGHT. All right. Well, nevertheless, we do have this 

Wall Street Journal article about four cases of potentially criminal 

misconduct, and I want to talk about that. With respect to those, 

I understand that on the advice of the Bank’s counsel, you’re not 

able to discuss the details of those cases. Am I correct in that? 

Mr. HOCHBERG. That is correct. 

Mr. CARTWRIGHT. Now, we asked the acting Inspector General 

whether he would be able to discuss the circumstances of those 

four individuals, and in a letter we received from him yesterday, 

he explained as follows: ‘‘Disclosure of such information could seriously prejudice law enforcement efforts by alerting potential defendants to which potential witnesses and sources of information 

the government has obtained.’’ 

To your understanding, Mr. Hochberg, is that the same reason 

why you were advised not to discuss the details of those cases? 

Mr. HOCHBERG. Precisely. 

Mr. CARTWRIGHT. All right. But, Mr. Hochberg, I’m guessing it 

is a matter of some frustration to you that you cannot share more 

information about the allegations of misconduct concerning these 

four individuals. Is that right? 

Mr. HOCHBERG. Yes. I mean, they’re under investigation. I don’t 

have all the facts, so I would only be making conjecture. 

Mr. CARTWRIGHT. And I share your frustration, Mr. Hochberg, 

but I understand why we can’t do that here. It would be a scandal 

if something this committee did allowed potential defendants to 

avoid prosecution. And while I understand you can’t share with us 

the details about those four individuals, the question is, what, if 

anything, can you tell us about any employment action the Bank 

has taken against these individuals to date? 

Mr. HOCHBERG. There are four employees who are subject to an 

investigation, three of which have been separated from the Bank, 

one is still on administrative leave, because it was only discovered 

in the last 6 or 8 weeks. Each one of those is subject to a potential 

criminal investigation and criminal charges. So we are working 

with the Inspector General, Department of Justice, that is doing a 

full investigation. 

28 

Mr. CARTWRIGHT. Now, in terms of timing, Mr. Hochberg, as I 

understand it, the Bank took employment action against these individuals before The Wall Street Journal article first appeared. Am 

I correct in that? 

Mr. HOCHBERG. Oh, yes, months before. 

Mr. CARTWRIGHT. So at the time The Wall Street Journal reported back in June of this year that the Bank has suspended or 

removed four individuals for misconduct, the Bank was not only 

aware of the allegations, but it had already taken action. Correct? 

Mr. HOCHBERG. That’s totally correct. 

Mr. CARTWRIGHT. In a letter we received from the Inspector General yesterday—and I do ask for unanimous consent to enter this 

letter into the record. 

Mr. JORDAN. Without objection. 

Mr. CARTWRIGHT. He explains that, to date, he has not found evidence of widespread employee misconduct or any systemic employee involvement in fraud schemes at the Bank. 

My question is, in those instances in which employee misconduct 

has been alleged to have occurred, where did the tips come from 

and who asked the IG to investigate? 

Mr. HOCHBERG. In each of those cases, they came from other employees, who either referred the matter initially to their supervisor 

or the general counsel, and then later they were on referred to the 

Inspector General. 

Mr. CARTWRIGHT. Would that be a healthy indicator that the ethical training that you’ve mentioned and reporting that the Ex-Im 

Bank has developed over the years has been working? 

Mr. HOCHBERG. Yes. I mean, I would obviously prefer to have no 

fraud at the Bank, but I—if we’re going to—if it comes up, the fact 

that our employees are alert to it and want to root that out is 

something I admire in our employees. 

Mr. CARTWRIGHT. And would you briefly explain why a commitment to ethics is important to you in the culture at the Ex-Im 

Bank. 

Mr. HOCHBERG. Very simply, I mean, we operate at the public 

trust, we’re here to level the playing field and to support jobs, and 

so it’s important that everybody at the Bank operate at the highest 

ethical standards. It starts with top management, it continues 

through the training we do and making sure we have a culture 

that when people see something that’s awry or suspicious, that 

they alert the proper authorities so they can take a look at it. 

Mr. CARTWRIGHT. Well, thank you, sir. And I’m going to yield 

back to the chairman. 

Mr. JORDAN. I thank the gentleman. We’ll—before recognizing 

the other gentleman from Pennsylvania, I would just ask unanimous consent to enter into the record the CBO study, Fair Value 

Accounting, which estimates that the Bank will cost taxpayers $2 

billion over the next few years. Without objection, that will be put 

into the record as well. 

Mr. JORDAN. We’ll now recognize the gentleman from Pennsylvania, Mr. Meehan. 

Mr. MEEHAN. I want to thank the chairman. I thank our witnesses today for their presence here in helping us to identify a litVerDate Aug 31 2005 11:07 Nov 05, 2014 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 C:\DOCS\90965.TXT APRIL
29 

tle more clarification of just one of the issues I know that’s being 

raised right now, but let me just do some background in general. Mr. Hochberg, the Export-Import Bank, it does, what, about $50 

billion a year now in loans? Is that accurate? 

Mr. HOCHBERG. That’s a little high. We’re—— 

Mr. MEEHAN. It’s a little high? 

Mr. HOCHBERG. Last year we did $27.4 billion. 

Mr. MEEHAN. Oh, is that right? Okay. I’m looking at a different 

statistic, but I see—— 

Mr. HOCHBERG. Well, export supported, so in other words—because we don’t do 100 percent of any loans—— 

Mr. MEEHAN. Right. 

Mr. HOCHBERG. —so export supported. Last year we did $27.4 supporting about $36 billion worth of exports. 

Mr. MEEHAN. And most of those were—we see frequently discussions about big companies that are reportedly part of this process, 

but am I accurate in saying that—Mr. Bentivolio and I are having 

a little trouble here getting eye contact with his—but am I accurate 

in my understanding that actually about 90 percent of those loans 

go to small businesses? 

Mr. HOCHBERG. Yes. That’s correct. 

Mr. MEEHAN. So those are job creators back in the communities, 

and people—you—at the outset of your testimony, you identified 

that the reason that you’re in this market is that they were not 

able to get financing at traditional bank markets. Do you have a 

second where you could explain that? 

Mr. HOCHBERG. Certainly. I mean, you know, one, I was a small 

business owner myself in a family business for 20 years, and I remember this personally and I see this when I meet with small 

business owners around the country: It is always more difficult for 

a small business owner to get financing, ever more so when they 

also have customers overseas and they’re exporting. It’s still more 

foreign. We’re becoming more of an export Nation, but generally 

speaking, it’s even more difficult when they’re exporting. 

Mr. MEEHAN. The—Ms. Katz, I know you raised some points 

about confidence within the institution. I’m not—I did have to 

laugh to myself. You were concerned because 42 percent of the employees within the institution seemed to have confidence in the 

standards of honesty, integrity. What do you think the percentage 

of American citizens would be if they asked about the sense of confidence of honesty and integrity of Members of Congress today. 

Ms. KATZ. I’m not sure that’s—that’s the right standard, Congressman, that I would use. 

Mr. MEEHAN. I just—the people are cynical about a lot of things 

you see these days, but I just sort of say that facetiously. But very 

seriously, I mean, I’m as concerned as anybody about the concept 

of fraud at an institution like this, but as a former Federal prosecutor, I have to say to you that the concept of fraud at any institution in which there’s transactions that take place is really not that 

foreign a concept; in fact, we deal with it on a regular basis. Unfortunately, it seems to be human nature. 

Would you explain to me why we can’t resolve these issues by effective investigations and prosecutions like we do in many parts of 

our society? 

30 

Ms. KATZ. We do resolve many of them, dozens of cases in the— 

with respect to the Bank; however, I think that we—— 

Mr. MEEHAN. Dozens? Sorry. Have there been dozens of prosecutions? 

Ms. KATZ. Certainly. 

Mr. MEEHAN. There have been dozens? Okay. 

Ms. KATZ. Oh, certainly, if not more than that. I think, you 

know, the—the issue is that there is a record of mismanagement 

within the Bank and a lack of standards within the Bank that create an environment that is particularly ripe for fraud and other 

wrongdoing, and that’s the concern. I don’t think that it’s good 

enough to say, well, there’s corruption everywhere or there’s fraud 

everywhere, and therefore we can expect it at the Bank. 

I think the expectation should be that our public institutions are 

doing everything in their power to minimize the amount of fraud 

and corruption that exists, and I don’t think that that’s necessarily 

the case here. 

Mr. MEEHAN. Ms. Katz, I—or Mr. Hochberg, I—— 

Mr. HOCHBERG. Well, let—— 

Mr. MEEHAN. Let me ask a question and then you can respond 

to it. I mean, I had a period where I actually had the responsibility 

to sit on the corporate fraud task force in my previous time as a 

U.S. Attorney, because we were seeing this kind of issue throughout corporate institutions all the way—one of the resolutions, of 

course, were—in addition to increased prosecutions were the beginning of better compliance, the beginning of better kinds of internal 

controls. 

Mr. Hochberg, now aware of some of the concerns, are you prepared and are there steps in place to begin to put the kind of compliance programs and internal controls that would give the taxpayers confidence that decisions that are being made are being 

made on the merits and not for any kind of nefarious purposes? 

Mr. HOCHBERG. We are continually—excuse me. We have an auditing firm, an outside auditor, Deloitte and Touche, we have an 

audit committee, we have the General Accountability Office, the Inspector General, all of which give us recommendations on how to 

make the Bank run better, how to run better, more efficiently with 

less incidents or less potential fraud, waste or abuse, and we have 

taken those recommendations and we’re continue working to improve that. 

I do want to make one comment. When Ms. Katz said there are 

dozens, there are only four employees. There may be companies we 

look at on the outside trying to defraud the Federal Government, 

but that’s separate from employees. So I think we just need to 

make sure those are really two separate issues. 

Mr. MEEHAN. Well, thank you for drawing that clarification. 

And, Mr. Chairman, my time is up. 

Mr. JORDAN. Thank the gentleman. 

The gentlelady from Illinois, the Honorable Ms. Duckworth is 

recognized. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. And I’d like to 

thank my colleague from Pennsylvania, Mr. Meehan, for mentioning the Ex-Im Bank’s support for small businesses. In fact, last 

summer, over 100 businesses attended a forum just in my one disVerDate Aug 31 2005 11:07 Nov 05, 2014 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 C:\DOCS\90965.TXT APRIL
31 

trict alone in Schaumburg, Illinois, to learn more about the benefits 

of Ex-Im Bank. Since then, the businesses in my district have told 

me time and again how the Bank’s services keep them competitive 

in the global marketplace. 

Ex-Im Bank is a job creator and it plays a critical role in the 

economy in my home State of Illinois, which is the fifth largest exporting state in our country. At no cost to the taxpayers, it supported 1,600 jobs in my district alone and more than 200,000 

across the country. And, in fact, 2 weeks ago, with grave concerns 

for the Ex-Im Bank, the National Association of Manufacturers 

local chapter in my district asked for a meeting with me, where 

they brought up the importance of renewing the Ex-Im Bank’s 

charter. And, in fact, attending that meeting, in addition to the 

vice-president of technology, factory automation at Bosch Rexroth 

Corporation, I also had the president of the National Marine Manufacturers Association, which is a collection of small businesses who 

build pleasure boats for the entire—around the Nation. 

And one particular business in my district, Quality Float Works, in Illinois, who just won a $3 million contract with the nation of 

Saudi Arabia to provide some services and yet they cannot get the 

loan guarantee that they need for the million dollars in supplies 

and equipment. They will lose this contract that they’ve been competing for for many, many years, and it equates to an entire shift 

that they would add to their factory, people that will be out of work 

in my district if they can’t get this loan guarantee from the Ex-Im 

Bank. 

In short, the Bank is critical to small businesses, manufacturers 

and job creators in my district and all over the United States. I 

agree that no organization is immune from having bad actors within its ranks at some point. The question is what processes does the 

organization have in place to ensure that bad actors are caught and 

held accountable. 

I wanted to clarify something that Ms. Katz said. She said that 

of the dozens and dozens of cases that have been—have been referred to prosecution, but in fact, the Office of the Inspector General has said that, and—has not found any evidence of systemic 

corruption among Ex-Im Bank employees. According to the OIG, 

bank employees have not been implicated in any of the 70 instances in which fraud was referred to prosecution. 

And my understanding, Mr. Hochberg, is that these four employees that are currently under investigation were actually discovered 

by the Bank itself. Is that not correct? 

Mr. HOCHBERG. That is correct. 

Ms. DUCKWORTH. Could you—could you talk a little bit about the 

Bank’s role in the global economy? What are our competitors 

doing? Would U.S. businesses fall behind without the Ex-Im Bank? 

Mr. HOCHBERG. Thank you, Congresswoman. And we actually do 

issue, and just recently issued to Congress the end of June an annual competitiveness report. This is a report that is mandated by 

Congress where we survey customers and exporters and other export credit agencies to see how competitive we are. As I mentioned 

to Congressman Cartwright, there are 59 other export credit agencies and government agencies supporting exports around the world. 

We are in a period of the most brutal competition for exports and, 

32 

hence, jobs. Country after country is trying to export their way out 

of their economic malaise, and so U.S. companies, and again, 90 

percent of the companies we work with are small businesses as defined by the SBA, have a very tough time getting both the financing and competing head to head. 

So we make sure if the private sector isn’t there and there is a 

reasonable assurance of repayment, that we can step in and make 

sure that sale happens and supports jobs in our country, not overseas. 

Ms. DUCKWORTH. One of the things, Mr. Hochberg, that Quality 

Float Works told me about their concern with Saudi Arabia and 

this one contract in particular that they’ve been fighting for 3 years 

to finally win is the slow pay aspect. Can you talk a little bit about 

what Ex-Im does in terms of helping small businesses be able to 

survive after they provide services for people that do pay but are 

slow? 

Mr. HOCHBERG. That is a particular problem. It’s a particular 

problem in a number of countries, the one you mentioned, and I’ve 

heard that frequently mentioned. 

What we do is we provide—we provide insurance. So a customer, 

a U.S. company, the way they buy theft insurance or fire insurance, we will sell them credit insurance so they can insure their 

receivables, so that they know they’re going to get paid, and they 

can also give dating. So if they provide, say, 60 or 90-day terms to 

their customer, once they have the receivable insured by the U.S. 

Government, they can go to their bank and borrow against it. It becomes a collateral, part of what they call their borrowing base, so 

then they can get the cash flow, and we could also assist in that. 

We provide a 90 percent guarantee, if needed by a local bank, to 

make the loan, to give them working capital so that they have the 

cash flow to fulfill the order. 

Ms. DUCKWORTH. Thank you. I’m out of time. I yield, back, Mr. 

Chairman. 

Mr. JORDAN. Thank the gentlelady. 

Mr. Hochberg, does Mr. Gutierrez still—is he still employed at 

the Ex-Im Bank? 

Mr. HOCHBERG. He is not an employee. 

Mr. JORDAN. What were the financial terms of Mr. Gutierrez’s 

dismissal from the Bank? 

Mr. HOCHBERG. He was dismissed from the Bank early—— 

Mr. JORDAN. Is he receiving any compensation now, any taxpayer 

compensation now, any compensation from the Bank? 

Mr. HOCHBERG. He is not. 

Mr. JORDAN. All right. Mr. Hochberg, there have been four people identified in the Wall Street Journal as being part of this— 

being under investigation, four employees. Are the other three 

also—have the other three also been dismissed from the Bank? 

Mr. HOCHBERG. Three, including Mr. Gutierrez, has been dismissed. One is on administrative leave pending investigation. 

Mr. JORDAN. And the one on administrative leave is still receiving compensation from the Bank? 

Mr. HOCHBERG. That is correct. 

Mr. JORDAN. All right. Can you tell me who the other three individuals are? Can you name those other three? 

33 

Mr. HOCHBERG. I cannot name them. I’ve been asked, since 

they’re under criminal investigation—Mr. Jordan, as you know, 

you’re an attorney, I don’t want to jeopardize that case so they cannot be prosecuted to the full extent of the law? 

Mr. JORDAN. Who has specifically told you that you can’t tell 

us—identify who those individuals are? 

Mr. HOCHBERG. Well, you—the letter from the Inspector General—— 

Mr. JORDAN. No, no. I’m asking you, did the Inspector General 

say to you, Mr. Hochberg, don’t tell Congress the names of the 

other three individuals under investigation? Did he explicitly tell 

you that, make that statement to you? 

Mr. HOCHBERG. I was told by our counsel—— 

Mr. JORDAN. I’m not asking about your counsel, I’m asking about 

the Inspector General. 

Mr. HOCHBERG. Not to discuss this. Yes, he said not to discuss 

this. 

Mr. JORDAN. He said not to disclose the names of the other three 

individuals under investigation, one on paid leave, still receiving 

compensation? He said don’t tell who—don’t tell the American people, don’t tell Congress who they are? 

Mr. Hochberg. They’re under investigation. And you know and I 

know I cannot discuss this. 

Mr. JORDAN. What statute says you can’t? 

Mr. HOCHBERG. I’m trying a make sure that—if they’ve done 

wrongdoing, I want them to be prosecuted and removed, and to the 

full extent of the law. 

Mr. JORDAN. Is there any law that says you can’t disclose to a 

congressional committee doing appropriate investigation about an 

agency where there is fraud, alleged fraud, alleged bribes taking 

place, and you can’t disclose those names? Can you name the statute? 

Mr. HOCHBERG. Mr. Chairman, I would certainly—— 

Mr. JORDAN. Because I can’t name one. 

Mr. HOCHBERG. I’m not an attorney, but I’m not going to—— 

Mr. JORDAN. I’m not either. 

Mr. HOCHBERG. —jeopardize the case. 

Mr. JORDAN. But I know there’s no statute. 

Mr. HOCHBERG. I am not going to jeopardize the case because I 

would like these employees, if they are guilty, to be found guilty 

and to be prosecuted to the full extent of the law. 

Mr. JORDAN. So do we, but we’d also like to know that information when we’re doing an investigation. 

We had this debate—just last week, Mr. Gowdy raised this same 

question. We always—oh, we can’t give you information, we can’t 

give you documents because there’s an ongoing investigation. 

Well, we’d like to know, when will you—when do you think you 

will be able to tell us who those other three are? 

Mr. HOCHBERG. Mr. Jordan, I will read you what the Inspector 

General said. ‘‘A longstanding policy and practice of Federal 

law’’—— 

Mr. JORDAN. I want to know what the Inspector General told 

you. I’m not asking the Inspector General, Mr. Hochberg; I’m asking you. 

34 

Did the Inspector General specifically tell you, don’t tell this committee who is under investigation? Did he say that to you? 

Mr. HOCHBERG. I am reading from this letter, and I am not disclosing that information—— 

Mr. JORDAN. I can read a letter. I’m asking you. You’re the witness today under oath. I’m asking you, why can’t you tell us who 

the four people are? We know one, and he just took the Fifth. We’d 

like to know the other three. 

Mr. HOCHBERG. I cannot disclose those names to the public. 

Mr. JORDAN. I mean, when do you think you will be able to? 

Sometime after September 30th? Not before September 30th? 

Mr. HOCHBERG. It depends if they’re indicted. If they’re indicted, 

it becomes a public—then it becomes public information. 

Mr. JORDAN. Let’s go to this. Let’s change gears. Did you give $10 million—did the Export-Import Bank give $10 million to 

Solyndra in 2011? 

Mr. HOCHBERG. No, we did not. 

Mr. JORDAN. Our understanding is $10 million in loan guarantees occurred. John Scott, former vice president of Solyndra, touted 

the expedited manner in which Ex-Im Bank granted Solyndra loan 

guarantees, stating it benefited from a ‘‘fast due-diligence process.’’ 

The Export-Import Bank did not help in any way financing 

Solyndra? 

Mr. HOCHBERG. Well, that wasn’t the original question. We financed a company in Belgium that purchased products from 

Solyndra. 

We generally do long-term financing of foreign buyers who are 

looking at U.S. goods versus Chinese goods versus foreign goods, 

and to—and if they require—— 

Mr. JORDAN. So you did help with Solyndra. 

Mr. HOCHBERG. No, we financed a Belgian company that—— 

Mr. JORDAN. No, I understand how it works. I understand how 

the Export-Import Bank works. But it was tied to Solyndra, correct? 

Mr. HOCHBERG. It was—they made a purchase from Solyndra, 

that’s correct. 

Mr. JORDAN. Well, yeah, that’s how the Bank works. So how about Abound Solar? Did you do a $9.2-million loan guarantee to Abound Solar? 

Mr. HOCHBERG. I’d have to look at what the—look, we make 

loans, Mr. Chairman, to the foreign buyers who’s buying from U.S. 

companies. 

Mr. JORDAN. Right. I understand. Both Abound Solar and 

Solyndra went bankrupt. We have had—this committee has done 

a lot of examination of the loan guarantee program. And we just— 

I just found it amazing that you were also tied in with the very 

companies in the loan guarantee program which lost taxpayer 

money to Solyndra, Abound Solar, Beacon Power, and others, that 

you’ve given money to the—to benefit those same companies. 

Let me go back to you, Ms. Katz, real quickly. You mentioned the 

number 74 in your testimony. Tell me about that again. 

Ms. KATZ. Those are administrative actions that were reported 

taken by the Inspector General following integrity investigations at 

the agency. 

35 

Mr. JORDAN. Closed investigations where they found—— 

Ms. KATZ. Well, what’s referred to—there’s not a lot of transparency, as you might imagine, with these things. But administrative actions are responses by the Ex-Im Bank to stop transactions, 

cancel policies, or protect funds at risk based upon investigative 

findings. 

Mr. JORDAN. All right. Thank you. 

Last thing before I run out of time here, Mr. Hochberg. Again, 

just for the record, no one—the Inspector General didn’t explicitly 

tell you not to share with Congress the identities of the other three 

individuals under investigation, yes or no? 

Mr. HOCHBERG. I have been advised not to disclose the names of 

the individuals who are under investigation, not—— 

Mr. JORDAN. Okay. 

Mr. HOCHBERG. —to jeopardize their case. 

Mr. JORDAN. And who was that? Who advised you not to? Your 

counsel? 

Mr. HOCHBERG. Our counsel. 

Mr. JORDAN. Ex-Im counsel? 

Mr. HOCHBERG. And working with the Inspector General. 

Mr. JORDAN. Who advised you, counsel or Inspector General? 

Mr. HOCHBERG. Mr. Jordan, both. I met with the—I meet with 

the Inspector General on a regular basis. I meet with him every 

month, as I mentioned to you. And when these have come up, he 

has said not to discuss them. 

Mr. JORDAN. All right. I thank the gentleman. 

I will yield now to Ms. Kelly. The gentlelady is recognized for 5 

minutes. 

Ms. KELLY. Thank you, Mr. Chair. 

I’m glad that this panel is here today because I know how critical 

Ex-Im is to my district. Three hundred and one companies and 

36,000 jobs in my State depend on Ex-Im reauthorization. 

So, Ms. Katz, I’d like to speak about your testimony. I’d like to 

know a little bit more about the research that went into your assertions, because you seem to rely on reports from the IG and GAO 

as the basis for your assertions. 

Did you personally conduct any type of investigations into allegations of fraud or corruption at Ex-Im Bank? 

Ms. KATZ. I reported on what the Inspector General has issued 

and his reports to Congress, as well as the Government Accountability Office. And I believe that both of those bodies are considered 

to be pretty reputable when it comes to their reports. 

Ms. KELLY. Did you interview whistleblowers with direct knowledge, for instance? 

Ms. KATZ. No, I did not. 

Ms. KELLY. Okay. So you personally didn’t do any investigation. 

Ms. KATZ. I just do data analysis. 

Ms. KELLY. Okay. 

Did you ever speak with the IG to understand their assessment 

as to whether the Bank, in fact, is rife with fraud or corruption? 

Ms. KATZ. I didn’t need to do that. Based on the numbers that 

the IG reported, it was pretty evident what the degree of fraud is, 

as they reported it. 

36 

Ms. KELLY. Okay. So let me get this straight. You have testified 

that there is a record of fraud and corruption at Ex-Im Bank, and 

you haven’t personally conducted any investigation into such allegations, nor have you ever spoken to the IG for their views on 

whether such a record exists. Is that right? 

Ms. KATZ. Well—— 

Ms. KELLY. Is that right? 

Ms. KATZ. —Representative, their views are pretty plain. And if 

you’d like to see the reports—— 

Ms. KELLY. I’m just asking you, is that right? 

Ms. KATZ. If you would like to see the reports in which they 

make those views plain, then I’d be happy to send those to you. 

Ms. KELLY. But is that right, what I’m asking you? 

Ms. KATZ. Are you asking me—— 

Ms. KELLY. I’m asking you—— 

Ms. KATZ. —am I a police detective? I’m not. 

Ms. KELLY. No, I didn’t ask you that. I just asked you have you 

personally conducted any investigations or if you’ve ever spoken to 

the IG. That’s all I’m asking. 

Ms. KATZ. I have not spoken to the IG. I’ve read his—the office 

and IG’s reports. And I don’t do criminal investigations, but I do 

do data analysis. 

Ms. KELLY. Okay. Thank you. 

Ms. KATZ. Uh-huh. 

Ms. KELLY. It would seem to me that, on this issue of whether 

the Ex-Im Bank is rife with employee fraud and corruption, this 

committee should be hearing from the folks who have firsthand 

knowledge about any such investigations, namely the IG. 

Fortunately for us, the IG sent a letter, which has been talked 

about. And when we take a look at the letter, the IG expressly 

states that, since 2009, in the 71 indictments his office has secured 

against individuals who attempted to defraud the Bank, none were 

against employees of Ex-Im Bank. 

Ms. Katz, do you agree that it’s important for the public to understand that none of the indictments the IG has secured have involved Ex-Im Bank employees? 

Ms. KATZ. Well, the public should have all information about the 

Bank. 

Ms. KELLY. But do you—I just need you to answer that question. 

Ms. KATZ. I think I am. The fact that there haven’t been indictments doesn’t necessarily mean that there hasn’t been corruption. 

Ms. KELLY. Right. But it doesn’t mean that there has, either. 

It seems, to me, pretty relevant that there are no criminal indictments or information for corruption at the Bank since 2009 and 

that all criminal prosecutions have been brought against companies 

and individuals outside the Bank who seek to steal taxpayers’ dollars. 

Ms. KATZ. My testimony dealt with fraud cases specifically. I 

don’t think that I made any allegations with reference to employee 

corruption. I was very careful about that. 

Ms. KELLY. Another thing the IG notes in his letter to the committee is that, to date, his office has not developed evidence of 

widespread employee misconduct or systematic employee involvement in fraud schemes at the Bank. 

37 

And just so we’re clear, up until today, were you aware that the 

IG’s Office found no evidence of any systemic employee involvement 

in any fraud scheme? Or are you just learning that today? 

Ms. KATZ. I’m aware of the fraud investigations that the IG has 

undertaken, and that’s where my focus has been. 

Ms. KELLY. Okay. Thank you. 

I yield back. 

Mr. JORDAN. Thank the gentlelady. 

The gentleman from Maryland, the ranking member of the committee, is recognized for 5 minutes. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. 

Mr. Hochberg, there is a Bloomberg article dated July 25th, 

2014, entitled ‘‘House to Subpoena Ex-Im Worker as Time Runs 

Out for the Bank.’’ 

I ask unanimous consent that it be admitted into the record. Mr. 

Chairman? 

Mr. JORDAN. Without objection. 

Mr. CUMMINGS. Thank you very much. 

Mr. JORDAN. And in that article, Chairman Issa says, ‘‘Many of 

us support the concept of making sure there’s an availability of 

funds to support competitiveness in exports, but we have to make 

sure that the American people believe it’s being spent fairly and 

honestly.’’ 

Republican Members are concerned about what they have called 

a culture of corruption at the Bank based on one Wall Street Journal article identifying four incidents of employee misconduct. However, we know that since 2009 the IG has secured 71 indictments 

or criminal charges against parties who have attempted to defraud 

the Bank, none of which were against employees of the Ex-Im 

Bank. 

That tells me a very simple fact: that they exist across the government—and we see this across government. There are individuals who create business entities whose sole intent is to defraud 

the government, and in this case defraud the Ex-Im Bank. There 

seems to be a legitimate oversight concern for the outside parties 

that are attempting to defraud the Bank, and that is very, very important. 

Mr. Hochberg, I would like to discuss some of the antifraud efforts at the Bank and the results of those efforts. And I want to 

go through these things because I think that we need to be clear 

on the record of what’s going on at the Bank and what’s not. Because there are people whose careers are—could be tainted based 

on inaccurate information. 

One indicator of fraud is the default rate. Is that correct? Is that 

one of the things that you all look at? 

Mr. HOCHBERG. Yes, sir. 

Mr. CUMMINGS. Currently, your default rate is approximately 0.2 

percent. Is that correct? 

Mr. HOCHBERG. Actually, yes, a drop less than that even. 

Mr. CUMMINGS. I’m sorry? 

Mr. HOCHBERG. Slightly less than that. 

Mr. CUMMINGS. What is it? 

Mr. HOCHBERG. It’s 0.194 percent, less than one-fifth of 1 percent. 

38 

Mr. CUMMINGS. Mr. Hochberg, in your testimony, you state that 

the Bank works with its IG to establish an effective monitoring and 

enforcement program for fraud and ethical misconduct. The IG has 

notified the committee that it works with the Bank employees to 

identify potential fraud schemes in the early stages. 

Do you agree that Bank employees play an important role in detecting fraud? 

Mr. HOCHBERG. Without question. 

Mr. CUMMINGS. And why do you say that? 

Mr. HOCHBERG. Well, because in these four cases with the other 

employees, it was detected by employees. And our employees go 

through a rigorous ethical training, as I mentioned, upon joining 

the Bank. We actually even have a handy guide they can keep at 

their desk. 

We have a seven-member staff that is the ethics department in 

the legal counsel’s office that fields questions: How do I deal with 

situations? Is this an ethical behavior? 

We also just began conducting this year training, how to detect 

fraud in outside agencies, outside contractors, outside entities. 

Mr. CUMMINGS. So this is a big—it sounds like this is a big deal 

for you all. 

Mr. HOCHBERG. It’s a very big deal. Listen, the public trust is essential for us doing a good job. And so we take that very seriously, 

I take that very seriously, and so does our ethics staff. 

Mr. CUMMINGS. Now, the IG also stated that the most common 

fraud schemes involve outside parties obtaining loans through false 

representations and submission of false documents. Is that correct, 

Mr. Hochberg? 

Mr. HOCHBERG. That is correct. 

Mr. CUMMINGS. However, Republicans ignore this fact and instead choose to examine allegations of corruption reported in the 

Wall Street Journal with no other information. 

I’m concerned with the evidence of outside parties attempting to 

defraud the Bank. These were incidents which were revealed following an IG investigation based on referrals by Bank employees. 

Mr. HOCHBERG. That’s correct. 

Mr. CUMMINGS. So it is concerning that my Republican colleagues almost ignore the evidence of misconduct by outsiders and 

the role of Bank employees in identifying potential fraud. Instead, 

the majority focuses on what appears to be a few isolated incidents. 

And don’t get me wrong. If somebody is doing something wrong, 

we ought to deal with that. But, again, I just wanted to make sure 

the record is clear. 

And just one other thing, Ms. Katz. In answering Ms. Kelly’s 

question, Congresswoman Kelly’s question, did I hear you say you 

made no allegations of employee corruption? Is that—I wrote it 

down. Is that what you said? 

Ms. KATZ. Yes, sir. 

Mr. CUMMINGS. Very well. 

Thank you very much, Mr. Chairman. 

Mr. JORDAN. I thank the gentleman. 

Isn’t it true, Ms. Katz, that when you do the outside fraud investigation, that’s when you find out that there may be some problems 

on the inside? Isn’t that how it normally works, Ms. Katz? 

39 

Ms. KATZ. Well, certainly if there is widespread fraud, it should 

raise questions or at least concerns that the internal—— 

Mr. JORDAN. But isn’t that how Mr. Jefferson was identified? 

Isn’t that how these four individuals who are now being talked 

about today were identified? There was an outside concern, and 

then that caused the focus on the inside, and you found employees 

who were doing some things wrong. 

Ms. KATZ. Yes. 

Mr. JORDAN. Okay. I mean, that’s why—I mean, it’s all important, but that’s what leads to potential wrongdoing on folks on the 

inside. 

Ms. KATZ. Exactly. 

Mr. JORDAN. The gentleman from South Carolina is recognized 

for 5 minutes. 

Mr. MULVANEY. Thank you, Mr. Chairman. I thank both you and 

the ranking member for allowing me the courtesy of being here 

today. 

This is not my first Export-Import Bank hearing. As you can 

probably imagine, we’ve had several over in House Financial Services. So it’s not the first time I’ve heard some of the numbers that 

we’ve discussed today, some of the testimony that we’ve discussed 

today. 

But I just want to encourage, you’re not hearing both sides of the 

story. We hear, for example, Mr. Cartwright correctly pointed out 

in his opening testimony that 87 percent of the transactions at the 

Export-Import Bank involve small business. There’s a flip side to 

that, which is that they’re supposed to have 20 percent, just 20 percent, of their volume go to small business. They’ve missed that target regularly. So while the transactions are high, the number of 

dollars that actually go to small business are very small, and 

smaller than they’re obligated to be by law. 

We heard Mr. Hochberg talk about how he’s only interested in 

leveling the playing field. Fair enough. Only one-third of the 

Bank—what the Bank does actually goes toward leveling the playing field. You could get rid of two-thirds of the Bank tomorrow and 

still have the one-third of the Bank that is actually used to level 

the playing field. 

Finally, Mr. Cartwright correctly mentioned out that oftentimes 

this has not been controversial. I don’t have to remind my Democrat friends, it was actually then-Senator Barack Obama in 2008 

who said that this was corporate welfare that needed to be cut 

back. So there are two sides to those stories. 

What I want to focus on most now today, though, is jobs, because 

we hear a lot of talk in here about jobs. And I think if we take a 

close look at how the Bank talks about jobs, we might get some insight into the—let’s call it the unhealthy culture at the Export-Import Bank, what Ms. Katz calls, I think correctly, this record of 

mismanagement. 

Let’s look at how they talk about jobs. The GAO in May of 2013 

was extraordinarily critical of how the Bank talked about jobs. 

They were concerned with how the Bank counted. For example, 

they don’t make distinctions between full-time and part-time work. 

They don’t make distinctions between domestic jobs and international jobs. They haven’t figured out a way yet to count the jobs 

40 

that, for example, are created by Boeing in Japan, and that goes 

into the number. 

They expressed concern, the GAO did, about the language that 

they use. They say ‘‘support’’ jobs. No one knows what that means. 

It’s not ‘‘create’’ jobs. And I don’t think anybody is taking the position, at least Mr. Hochberg is not, that he’s created 1.2 million jobs. 

We use this nebulous term called ‘‘support’’ that no one really 

knows what it means, and the GAO says that that’s troublesome. 

But it’s why they count the jobs that I want my colleagues to 

think about the most. The GAO report asked the Bank, why do you 

report this? Are you obligated by statute to tell Congress about the 

number of jobs that you support? And the GAO said, no, one of our 

board of trustees members asked us to start doing that a couple 

years ago so that we could make it clear to Congress the good that 

we do. 

I suggest to you that it’s possible that maybe they fudge the 

numbers a little bit and that it’s insight into what is going on at 

the Bank. And my contention is that what we see here is why— 

this is a bureaucracy, a bureaucracy that is not primarily interested in helping small business or creating or supporting jobs, but 

a bureaucracy that’s first and foremost interested in justifying its 

own existence and maintaining its own level of funding. 

Ms. Kelly asked a good question of Ms. Katz, if she talked to the 

IG, she talked to the GAO; she has not. I have. We had that opportunity in House Financial Services. The GAO and the IG over the 

last 4 years have identified 76 difficulties within the Bank, 76 

shortcomings, some of which may have led to some of the outside 

fraud that we talked about today. 

One of the things the Bank was not doing is actually making 

sure that the outside lenders were doing credit checks on people 

who were using the Bank facilities—same thing that Fannie Mae 

and Freddie Mac were not doing before the housing crisis. 

Seventy-six meaningful things that the IG and the GAO said 

were wrong at the Bank. Half of them have not been fixed in the 

last 4 years. Nine of them the Bank doesn’t even admit are a problem, and they’re refusing to try and fix them. 

So I think that, as we take a look over what the culture is at 

the Bank and how the Bank operates and why the Bank operates, 

leads to my question, which is this, Mr. Hochberg: the thing that 

we did not have at Financial Services, which is the results of the 

Federal Employee Viewpoint Survey results, which say that only 

42 percent of your employees have a—think that the organization’s 

leaders maintain high standards of honesty and integrity, and just 

about half feel like they can disclose suspected violations of law. 

You’ve been there 5 years. The Obama administration has been 

in charge for 5 years. Where does this come from, if not from the 

top? 

Mr. HOCHBERG. Congressman Mulvaney, I appreciate your coming here and providing these questions because you have here and 

at the Financial Services Committee. 

I take very seriously the Federal Employee Viewpoint Survey. 

We do it every year. We encourage our employees to fill it out. 

There are many areas the Bank excelled. There are a number of 

areas of dissatisfaction. We have a lot of dissatisfaction on workVerDate Aug 31 2005 11:07 Nov 05, 2014 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 C:\DOCS\90965.TXT APRIL
41 

load. The workload more than doubled in the last few years. People 

do not have the resources. Congress has added those resources. 

And when you look at the survey, when you look at both positive 

and neutral, if you put those two together, Ex-Im had about a 75- 

percent rating. Government-wide was 80 percent. We’re short—— 

Mr. MULVANEY. Where does the 42-percent—— 

Mr. HOCHBERG. We are definitely short—— 

Mr. MULVANEY. Where does the 42-percent approval rating, positive approval rating, on leaders’ high standards of honesty and integrity come from, if not from the top? 

Mr. HOCHBERG. This is an area we’re working on. This is not— 

it’s an area for improvement. There are areas in this survey we excelled and some areas that need improvement. 

Mr. MULVANEY. We could go further if you want to, and I could 

ask you about the approval rating on ‘‘I have a high level of respect 

for my organization’s senior leaders,’’ 38 percent. ‘‘How satisfied 

are you with the policies and practices of your senior leaders,’’ 24.8 

percent. 

It comes from the top, doesn’t it? You’ve had 5 years to work on 

those types of things, haven’t you? 

Mr. HOCHBERG. Congressman Mulvaney, we have a high ethical 

standard. We have seven people in our ethics department. I look 

at our default rates, I look at our performance to Congress, I look 

at our financial performance. We have 25 years of unqualified clean 

audits from outside, independent auditors, from 

PricewaterhouseCoopers for a number of years and Deloitte Touche. They would indicate if there was a problem at the Bank; they 

would show up in those numbers. 

Mr. MULVANEY. Thank you very much. I’ve already overstayed 

my time. 

Mr. Chairman, Mr. Ranking Member, I would encourage you if 

you decide to further pursue this to bring in the IG and bring in 

the GAO and ask them about what they think, if they think the 

Bank has lived up to their expectations in getting their house in 

order. 

And I appreciate the time and the effort—— 

Mr. CUMMINGS. Mr. Chairman? 

Mr. JORDAN. The gentleman from Maryland. 

Mr. CUMMINGS. I ask unanimous consent that he be allowed— 

Mr. Mulvaney is on—I’m not on Financial Services. But he has 

made a lot of allegations. And I just—I saw you scribbling stuff. I 

would just like to hear what his answer is. Because, I mean, we 

had wonderful testimony from Mr. Mulvaney. 

Mr. JORDAN. I—— 

Mr. CUMMINGS. I’d like to hear it from the witness. 

Mr. JORDAN. —agree. Mr. Hochberg can respond. 

Mr. HOCHBERG. Thank you. 

Well, there are a number of allegations. There’s a lot going on 

here. Let me try and respond to the few notes I took. 

One, this year, about 22, 23 percent of all dollars are going to 

small-business entities, so in excess of the 20 percent that is required by Congress, that is a ‘‘should reach’’ by Congress. We have 

put more efforts into reaching small businesses and do more with 

small businesses in terms of dollar volume than the Bank has ever 

42 

done. We have done more loans to small businesses in these 5 

years than in the previous 8 years combined. So I am—— 

Mr. JORDAN. Is that 22 percent a direct—defined as directly 

going to small business, or is that routed through larger corporations who then work with small businesses? 

Mr. HOCHBERG. No, that actually is direct. 

Mr. JORDAN. Okay. 

Mr. HOCHBERG. If you add—— 

Mr. JORDAN. I just want to be clear. 

Mr. HOCHBERG. If you add the indirect, which I believe actually 

should be part of it—it’s something we’ve asked Congress to allow 

because, frankly, large companies in district after district—Congresswoman Duckworth—— 

Mr. JORDAN. Are you saying the GAO is wrong? Mr. Mulvaney 

cited the GAO said that it wasn’t 20 percent. You’re saying they’re 

wrong? 

Mr. HOCHBERG. This year, this year, the year we’re in, we’re 9 

months into the year, we’re at 22, 23 percent. 

Mr. JORDAN. All right. 

Mr. HOCHBERG. That was one question. 

In terms of the jobs number, GAO actually did not—they validated our methodology. We used the Bureau of Labor Statistics. 

We don’t make up these numbers. We actually use hard data from 

the Bureau of Labor Statistics and apply it to the actual exports 

that we do. That’s where the number comes from. What GAO asked 

us to do was to provide greater transparency on the methodology, 

but they did not dispute the methodology. 

We have 78 recommendations from the Inspector General. We 

have closed 33 of those. We have sent another 20 that are being— 

in discussion with the Inspector General. We have 16 that are actually open that are in discussion, working with GAO—with the Inspector General, what are the recommendations, understanding 

how we could implement them, whether we need systems or people 

or change in methodology. And we have two that are, quote/unquote, ‘‘unresolved’’ that we’re actually having a debate with the 

Inspector General whether they’re warranted or not. 

So 2 out of 78 actually have any degree of contention whatsoever. 

We have accepted, otherwise, all the other recommendations of the 

Inspector General and have put them into place. 

Mr. JORDAN. But 38 have been implemented. Is that the number 

you gave, 38 out of 78? 

Mr. HOCHBERG. Thirty-three are actually closed. 

Mr. JORDAN. Okay. 

Mr. HOCHBERG. Which means totally closed. 

Mr. JORDAN. So they’re done. 

Mr. HOCHBERG. —in process of being implemented. And as I 

said, only two are being discussed. 

Mr. JORDAN. And when did you receive these recommendations? 

Mr. HOCHBERG. They come—they’ve been over the years. Some 

of them take—— 

Mr. JORDAN. Over several years? 

Mr. HOCHBERG. Some of them take technology, some of them 

take IT support to change, so—but we’ve been working diligently. 

I mean, the Inspector General has said that we have fulfilled their 

43 

requirements. And I have not had an objection from the IG saying 

that we have not been cooperative, haven’t worked with them, 

haven’t accepted their recommendations. 

Mr. JORDAN. Yeah, so you’ve done 33 of the 78. You’ve completed 

33 of the 78. You’ve received—— 

Mr. HOCHBERG. Thirty-three are closed. The rest we’re in the 

process of closing. 

Mr. JORDAN. But that’s what we look at. We look at getting to 

the finish line and actually getting the job done. Thirty-three of 78 

I think was Mr. Mulvaney’s point. That’s less than half. 

Mr. HOCHBERG. Less than half have been totally closed, and—— 

Mr. JORDAN. Right. 

Mr. HOCHBERG. —the others are in the process. 

Mr. JORDAN. I understand what you’re saying, but I’m just saying, to Mr. Mulvaney’s point—— 

Mr. HOCHBERG. Mr. Chairman, there will always be items in the 

works. We’ll never get to zero. 

Mr. JORDAN. I understand that. 

Mr. HOCHBERG. It is impossible to get to zero. 

Mr. JORDAN. I understand that. I understand that. But we want 

to be clear and define these things accurately. 

The gentlelady from—did the gentleman have another point to 

make? 

Mr. HOCHBERG. The only other point I would make, actually—— 

Mr. JORDAN. Because usually just the Members get to filibuster, 

not the witness, but I’m letting you go. 

Mr. HOCHBERG. You’re a very kind chairman, sir. 

Mr. JORDAN. All right. 

Mr. HOCHBERG. In the last decade, some of the items that Ms. 

Katz was referring to, we have processed over 33,220—— 

Mr. JORDAN. Let me ask you about this. Let me just do one 

thing, since we’ve got this extended dialogue with you and Mr. 

Mulvaney. And I’ll let Mick jump back in if he—Mr. Mulvaney 

jump back in if he’d like. 

But he raised the issue that half the employees who took the survey said they can’t trust their leadership. Now, you’ve got a page 

and a half about ethics and training and all this stuff in your written testimony. I read it last night. You make a big—you made a 

big deal of it when you made your opening statement. You made 

a big deal to a number of Members. 

So you can trumpet all that you want, but the fact remains half 

the people who work for you who took the survey said, I’m not really confident in sharing information about dishonesty and potential 

problems, I’m not comfortable sharing that. 

Mr. HOCHBERG. Mr. Chairman, half—half—if you add also those 

who are neutral, said they didn’t have a real opinion on it, it’s 75. 

Mr. JORDAN. Well maybe because they’re scared, too. 

Mr. HOCHBERG. No, but it’s 75 percent, and the Federal Government average is 80 percent. We’re below the average. I would like 

to get—— 

Mr. JORDAN. Well, if you add it that way, yeah, if you mix this 

and that and come up with everything else—— 

Mr. HOCHBERG. Well, no, but let’s look—listen, I’m looking at the 

facts—— 

44 

Mr. JORDAN. —apple pie and butterflies. 

Mr. HOCHBERG. —I’m looking at the facts, and I’m saying, yes, 

we’re below the Federal average. I’d like to get higher. But let’s put 

it in—— 

Mr. JORDAN. But the people who, the people who did the survey—— 

Mr. HOCHBERG. Let’s put it in context. Let’s put it in context. 

Mr. JORDAN. —a bunch of them said, I don’t want to answer. And 

50 of them—50 percent who did said, you know what, I don’t have 

much trust. That’s a problem. That is a real problem. 

So maybe this—maybe we wouldn’t have all this fraud, these investigations, if you could have people who were willing to come forward and feel confident that they could give that information to the 

folks that they work for. 

Mr. HOCHBERG. Well, I go back—— 

Mr. JORDAN. All I’m saying is that’s a concern. 

Mr. HOCHBERG. I go back to what the Inspector General said in 

his letter to the committee yesterday: There is no—not developed 

any evidence of widespread employee misconduct or systematic employee involvement—— 

Mr. JORDAN. Maybe those same people are afraid to talk to him. 

The gentlelady from Wyoming is recognized for—— 

Mrs. LUMMIS. Thank you. 

Mr. JORDAN. Excuse me 1 second. 

Does the gentleman from South Carolina have an additional—— 

Mr. MULVANEY. Just to follow up on Mr. Cummings’ inquiries. I 

appreciate the information, Mr. Hochberg, and I obviously appreciate the back-and-forth, something we don’t get to do on the other 

committee. 

I do want to read the executive summary of just one of the 

things, the GAO summary regarding the jobs. I’m going to read 

verbatim from the very closing of the summary. It’s one sentence. 

‘‘Because of a lack of reporting on the assumptions and limitations of its methodology and data, congressional and public stakeholders may not fully understand what the jobs number that ExIm reports represents and the extent to which Ex-Im’s financing 

may have affected U.S. employment.’’ 

And there’s a couple other things, but I won’t go line by line. 

I guess my point was very similar to what the chairman’s was. 

If you’ve got a circumstance where 40 percent of—only 40 percent 

of the people working at a place are comfortable in blowing the 

whistle and you’re relying on those people to bring waste, fraud, 

and abuse to your attention, then it’s likely that you’re missing at 

least half of the waste, fraud, and abuse. 

And that you’re right, you did rely on—I think you mentioned 

earlier you relied on people within your organization to bring the 

current four circumstances to your attention, which is great. But 

when you’ve got a culture where a majority of people are afraid to 

bring that to your attention, it makes me worry, as a Member of 

Congress who has some oversight over this particular institution, 

that you are not catching enough of it. 

Mr. HOCHBERG. Well, it is not a majority that said that. If you 

take those who said they have the confidence and those who are 

neutral, don’t either feel one way or another—— 

45 

Mr. MULVANEY. Mr. Hochberg, if I take the neutral people and 

put them on the other side, then there’s 60—then I get my 60 percent. I mean, the bottom line is only 42 percent of the people said 

they were comfortable doing that. You could take the people in the 

middle, you’re absolutely right, and move them either way. That’s 

why you don’t count them. 

Mr. JORDAN. Great point. 

The gentlelady from Wyoming is recognized for 5 minutes. 

Mrs. LUMMIS. Thanks, Mr. Chairman. 

And I’d like the staff to put up the Impex timeline, because I’m 

going to concentrate on the Impex issue, Mr. Hochberg. 

So let’s walk through the Bank’s relationship with Impex Associates. That’s the Florida exporter that is alleged to have bribed Mr. 

Gutierrez. 

Do you know when the Bank first approved a deal with Impex 

Associates? Looks to me like it was 2002. 

Mr. HOCHBERG. 2002. 

Mrs. LUMMIS. Okay. And when did the Bank’s Office of General 

Counsel refer Impex Associates to the Office of Inspector General 

for investigation of fraud? 

Mr. HOCHBERG. I—well, first, it was before my time. You know, 

I did not join the Bank until 2009. 

Mrs. LUMMIS. Okay. Well, it looks to me like it was December 

2009, from this chart. 

And the basis for the referral was that the alleged buyer never 

existed and that the transaction was suspected to be fraudulent, 

right? 

Mr. HOCHBERG. You’re more familiar with that—as I said, this 

was referred to the Inspector General in—and our general counsel 

in 2009. 

Mrs. LUMMIS. Okay. And, in fact, reading the details of this referral, it says, ‘‘Impex Associates has been the exporter on more 

than 10 Ex-Im Bank-financed insurance and guaranteed transactions, and at least 6 of these transactions have resulted in claims 

to date.’’ Now, I think that that’s up on the slide, as well. 

So the Bank was paying out taxpayer money on 60 percent of 

Impex deals, and it didn’t suspect anything? 

Mr. HOCHBERG. Congresswoman, first of all, Ex-Im Bank got an 

Inspector General in 2007. This came—this was referred to the Inspector General, that was when the office was established, in 2009. 

And under my tenure and once the Inspector General was there, 

that’s when this issue came to a head. 

Mrs. LUMMIS. Okay. So—— 

Mr. HOCHBERG. You have over 6, 7 years beforehand when it 

went undetected by staff, general counsel of the Bank, and so forth. 

Mrs. LUMMIS. That’s amazing, that it went undetected. In fact, 

it’s kind of stunning. Because Impex’s fraud was open and it was 

notorious. There was a lawsuit, 2006 Federal lawsuit, Vyasulu v. 

Diaz, and it had a 69-page complaint laying out in precise detail 

exactly how Impex Associates is a scheme to defraud the ExportImport Bank. 

This lawsuit was publicly filed in open court. How could it have 

been missed? 

46 

Mr. HOCHBERG. Congresswoman, it’s before my time at the Bank. 

I was not there until 2009. I can’t really opine on what happened 

in 2006, ’07, or ’08 before I arrived at the Bank. 

Mrs. LUMMIS. But that doesn’t make the sins of Ex-Im in not 

monitoring this stuff forgivable. It only makes you forgivable. 

How did the Bank go on to approve seven more transactions for 

loan guarantees and insurance? 

Mr. HOCHBERG. I was not at the Bank. I cannot answer that 

question. 

Mrs. LUMMIS. Now, what have you done, then, to make sure this 

never happens again? 

Mr. HOCHBERG. Well, I believe we have a—contrary to some 

members of this committee, we have a culture of ethics. We have 

actually ethics training. I’ve got seven people in our general counsel’s office and, plus, the general counsel, as well. 

As I mentioned, we have an ethics manual that every new employee does. We review that every year. We have offered courses— 

employees this year started; they were oversubscribed—where employees can actually help them detect fraud on behalf of outside entities so that companies like an Impex—that employees are more 

alert to what should they be looking for in those transactions. 

Those are the kinds of things we’ve put in place. 

Mrs. LUMMIS. Well, what they should be looking for, at least, at 

a minimum, is open court records that document precisely the 

fraud that was perpetrated on Ex-Im Bank. 

I have additional time I would like to yield to the chairman. 

Mr. JORDAN. I thank the gentlelady for yielding. 

Mr. Hochberg, did you, did the Bank itself investigate how Mr. 

Gutierrez’s name became public? 

Mr. HOCHBERG. The Inspector—— 

Mr. JORDAN. Well, let me ask it first this way. How did his name 

get public? 

Mr. HOCHBERG. I have no idea. 

Mr. JORDAN. And, now, did you investigate how it went public? 

In our earlier exchange, you told me that counsel told me I can’t 

talk about it, can’t disclose the names, OIG, the Inspector General 

said, you know—advised us not to do that, at least in a letter; he 

didn’t say it to you directly. So you made a big deal of this. 

If you care so much about that not becoming public, did you investigate how one name did get public? 

Mr. HOCHBERG. I had a discussion with the Inspector General, 

and they are looking into how this became public. 

Mr. JORDAN. No, did you, inside, internally, did—you made a big 

deal, these seven lawyers you’ve hired, this big pamphlet you’ve 

held up several—or booklet you’ve held up several times, two and 

a half pages of your testimony talking about ethics, even though 

half the people are nervous about the folks above them and feel 

like they can’t be honest. 

You made a big deal of this, and so it seems to me, if something 

went public that wasn’t supposed to go public, you’d be all over it, 

you’d investigate that. And you’re telling me you didn’t investigate 

it? 

Mr. HOCHBERG. No, I did—I said I spoke to the Inspector General about it and said, how are we getting to the bottom of this? 

47 

Mr. JORDAN. Did your lawyers, did these seven people in ethics, 

did all this—did they look into it? Not the Inspector General; did 

you guys look into it? It’s one thing to have the Office of the Inspector General look into it. It’s another thing if you guys internally 

look at it. Did you do that? 

Mr. HOCHBERG. We referred this to the Inspector General because it was a—— 

Mr. JORDAN. You didn’t do any of your own internal investigation? 

Mr. HOCHBERG. We referred it to the Inspector General. 

Mr. JORDAN. Do you know today, testifying before Congress, how 

Mr. Gutierrez’s name became public, how the Wall Street Journal 

got his name and said he’s under investigation for bribery and 

fraud? Do you know how that got public? 

Mr. HOCHBERG. I do not. 

Mr. JORDAN. No idea. 

Mr. HOCHBERG. I do not. 

Mr. JORDAN. And does anyone else outside the Inspector General’s Office, to your knowledge, at the Export-Import Bank know 

how his name became public? 

Mr. HOCHBERG. At the current time, no. 

Mr. JORDAN. All right. 

The gentleman from Georgia is recognized for 5 minutes. 

Mr. COLLINS. Thank you, Mr. Chairman. 

Mr. Hochberg, I just have, you know, some questions here. Let’s 

go over—I think there’s a lot of concern, as noted in this hearing, 

about the Bank and some of its dealings and some of the things 

we’re reading in the headlines. So let’s just start with a few things, 

and we can do that, okay? 

According to the CBO, over the next 10 years, Ex-Im’s six largest programs will generate $14 billion under the government standard 

accounting framework. However, when CBO applies the privatesector accounting framework, the fair value accounting method, 

CBO projects the Bank to lose $2 million. 

I want you to discuss that process. Because, from my perspective, 

this is what a lot of my constituents say, there’s government accounting, then there’s real accounting. And this is something that 

I would like an answer on. 

Mr. HOCHBERG. Well, thank you, Congressman. 

You know, the government accounting system that was put in 

the FCRA, the Federal Credit Reform Act, in 1990, went into effect 

in 1992, that’s the accounting system that the U.S. Government 

runs on. We can—you know, I ran a company for 20 years. You 

can’t pick and choose your accounting system. That’s the accounting system that the government uses. 

Fair value accounting is an alternate approach to accounting. It 

is not—it is not force of law, it’s not what Congress has passed. So 

we abide by the accounting system that’s in place. 

The swing you mentioned from if you change accounting systems 

assumes one other gross statement, and that is that nothing else 

changes. Well, things could change. We could change our fee structure, we could change the way we operate to make sure that we’re 

still self-sustaining. 

Mr. COLLINS. So—— 

48 

Mr. HOCHBERG. It assumes nothing changes. 

Mr. COLLINS. Okay. And I appreciate it, but I guess my question here is, okay, you go from $14 billion under—yes, we’re going to— 

but a $2-million loss. Which is real? 

Mr. HOCHBERG. Well, under the current—— 

Mr. COLLINS. Are you going—— 

Mr. HOCHBERG. Under our current accounting systems, $14 billion by GAO—by, yes, GAO is—CBO is the correct number. But the 

fact of the matter is, Congressman, in October of this year, unmistakably we sent to Treasury one billion, fifty-seven million dollars. 

Over the last 2 years, we have sent to Treasury cash of $2 billion. 

That’s unmistakable. Whether you change the accounting system 

or not, the cash is still there. 

Mr. COLLINS. Okay. 

Following up on some other issues, Mr. Hochberg, the Wall 

Street Journal article, 2010, ‘‘The Bank changed how it disclosed 

financing deals and no longer discloses all the small-business loans 

it originates.’’ 

This is something that seems to be a thread today on a lot of 

other issues, not just this hearing but others, that transparency 

and accountability are things that the people are clamoring for. We 

see this in scandals all over the place. 

My question is, what is your rationale for reducing transparency 

and disclosure in this area? 

Mr. HOCHBERG. Well, Congressman, I’ll also refer you to this 

competitiveness report that we issue. We are cited as being, by our 

competitors, being the most transparent export credit agency in the 

entire world. And, frankly, the biggest readers of this document 

each week, each year, is not just Members of Congress, it’s the 59 

other export credit agencies, because we have greater transparency 

on our loans through the Federal Register, our environmental 

record, and so forth. 

Mr. COLLINS. That’s wonderful. But then, if that be true, that’s 

great, it’s a nice little book, but why not disclose it all? Why did 

we change the method? Why do we not disclose them—disclose all 

the small-business loans it originates? 

Mr. HOCHBERG. I am unfamiliar with—— 

Mr. COLLINS. This is a 2010 Wall Street Journal article that discussed this. 

Mr. HOCHBERG. Well, I’d be happy to get back to you on that. I’m 

not familiar with this precise—— 

Mr. COLLINS. Okay. And if you would, then I’ll submit the questions into the record. I’d like a written response on it. 

Mr. HOCHBERG. I’d be happy to do that. 

Mr. COLLINS. Because, again, you can bring the committee—and 

I think this is the part we’re getting to, these questions that come 

up. And I would, like you, I would point to something that says 

we’re doing it fine, but the reality is there’s articles that say that 

we’re not doing it. So, as we look at it, you know, these are things 

that we need. 

Also July of 2010, the Bank’s board of directors issued a resolution on individual delegated authority authorizing certain individuals and Ex-Im Bank officers to approve loans, guarantees, and insurance up to $10 million. 

49 

What steps have you taken to address the Inspector General’s 

criticism that individual delegated authority allows for application 

of inconsistent criteria and may insufficiently mitigate the risk of 

default or fraud? 

Mr. HOCHBERG. In an effort to both streamline the Bank and also 

provide accountability, we have—senior officers can approve up to 

$10 million. We have an audit of that on a regular basis that we 

ensure that those who have individual delegated authority are complying with the full credit standards of the Bank. 

We have uniform credit standards across the Bank. We’re working to increase the harmonization between programs, but we actually have a harmonized credit standard at the Bank. We have a division of the Bank, a senior vice president, who looks truly at credit 

policy to make sure that we apply it uniformly across every area 

of the Bank. We apply the same credit standards for countries regardless of what area of the Bank it’s in. 

So I would say that that’s not correct. 

Mr. COLLINS. So you would disagree with the Inspector General? 

Mr. HOCHBERG. Today—— 

Mr. COLLINS. After inputting the steps that you just talked 

about. 

Mr. HOCHBERG. Yes. 

Mr. COLLINS. Okay. 

Mr. HOCHBERG. In other words, each time the Inspector General 

has made some suggestions, we have worked to either incorporate 

them already or are working to incorporate them. 

Mr. COLLINS. Real quickly, and I know, Chairman, my time, but 

just indulge us 1 second. 

Going back to this other question where you say you’ll get back 

to me on no longer disclosing, one of the things the Office of Inspector General said, there are 40 outstanding investigations involving 

fraud against the Bank. I just have a question, because we’re not 

disclosing small-business loans. Do most of these cases involve 

small-business loans? 

Mr. HOCHBERG. Generally speaking, yes. I can give you a better 

precise answer, but, generally speaking, yes. 

Mr. COLLINS. So the ones that we’re not disclosing are the ones 

that right now we’re investigating for fraud against the Bank, for 

the most part. 

Mr. HOCHBERG. No, I don’t think that’s the case, sir. I’m sorry, 

your question is, we disclosed—last year, I’ll give you an example, 

we did 3,413 small-business loans. 

Mr. COLLINS. Wait, wait, wait. 

Mr. HOCHBERG. Each one of them is—— 

Mr. COLLINS. Let’s go back. That’s not my question. You’re—— 

Mr. HOCHBERG. I’m not sure I understand your question. 

Mr. COLLINS. Well, then, let’s go back. According to the Office of 

Inspector General, there are 40 outstanding investigations involving fraud against the Bank. Okay? Now, will you agree with that 

statement or disagree with that statement? 

Mr. HOCHBERG. I accept what the Inspector General—— 

Mr. COLLINS. Okay. Do most of these cases involve small-business loans? This is not—I don’t want to know 3,000 of it—I want 

50 

to know about these 40, and do they involve mainly small-business 

loans? 

Mr. HOCHBERG. I don’t want to mislead you. Let me get you a 

precise answer after I get your question in writing, and I’ll look it 

up. 

Mr. COLLINS. Okay. So you don’t know. 

Mr. HOCHBERG. I do not know precisely. 

Mr. COLLINS. Okay. And these are outstanding investigations, 

and you don’t know? 

Mr. HOCHBERG. I don’t know the—— 

Mr. COLLINS. Okay. 

Mr. HOCHBERG. —nature of every single outstanding investigation. 

Mr. COLLINS. Okay. 

Again, I think there’s a lot of issues here, there’s a lot of concern 

on the Hill concerning these actions, the things that we see. Transparency is needed, transparency in these questions. 

And, again, I think, as we said before, looking at these ideas and 

having the transparency, no matter what others may say, it’s coming down and saying, okay, what is the truth and what we’re seeing between the truth and reality. These have got to be answered, 

and I know the people in my district want to know this. 

And this is important for this committee to continue to look at, 

because this affects a lot of businesses, it affects a lot of priorities 

in this country. And, frankly, it’s not something that the government needs to be dabbling in, especially if there’s other ways to do 

it. 

So, Mr. Chairman, I do yield back. 

Mr. JORDAN. I thank the gentleman. 

Mr. Hochberg, real quickly, before yielding to Mr.—or recognizing 

Mr. Connolly, do you know if the bribery allegations against Mr. 

Gutierrez and the three others have—has there been any referral 

to the FBI and the Justice Department, do you know? 

Mr. HOCHBERG. To my knowledge, the Inspector General is working with the Justice Department on these. 

Mr. JORDAN. So the Justice Department is involved today as— 

your understanding, the Justice Department is involved in this investigation. 

Mr. HOCHBERG. That’s correct. 

Mr. JORDAN. And including the FBI. 

Mr. HOCHBERG. I don’t know that. 

Mr. JORDAN. Have you had any—have you personally had any 

conversation with the Justice Department and the FBI regarding 

the investigation into the bribery allegations against Mr. Gutierrez 

and the three others? 

Mr. HOCHBERG. No, I do not. 

Mr. JORDAN. Okay. I thank the gentleman. 

The gentleman from Virginia is recognized. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Welcome, Mr. Hochberg, to our committee. I’m sure it’s a special 

moment for you. 

Mr. Hochberg, what did you do before you became the head of 

the Ex-Im Bank? 

51 

Mr. HOCHBERG. I spent 20 years in business, a family business, 

small business for 20 years. Then I actually also—after that, I 

served in the Clinton administration. And I was also a dean of a 

school of management and urban policy in New York. 

Mr. CONNOLLY. And with that private-sector background, what 

made you decide you wanted to head up the Ex-Im Bank in this 

administration? 

Mr. HOCHBERG. You know, my family—my mother actually came 

here from Germany and started a business, and I was—I grew up 

in that. I grew up at the kitchen table hearing about it. I enjoyed 

going in—going to work together. I got my master’s degree; I was 

the first college graduate to go work at the company. Worked for 

20 years building a business called Lillian Vernon, a catalog company that became a public company. I took it public and spent 20 

spectacular years there. 

And I like public service. I like public service. Perhaps that’s 

coming from immigrant parents, where you think about trying to 

make this country a better country. And so this was a way I could 

participate in that, both at the Small Business Administration, as 

a dean of a graduate school, and then here at the Export-Import 

Bank. 

Mr. CONNOLLY. Well, I hope you understand that there are a 

number of us who very much appreciate that and are pleased 

you’re where you are and that you’ve made that kind of decision 

about public service. Thank you for your service to your country. 

Your testimony explained that on the advice of general counsel 

and the Bank’s IG, who’s leading the ongoing investigations, you 

will not disclose the details or information about the individuals involved in the alleged incidents of fraud or corruption. Is that correct? 

Mr. HOCHBERG. That’s correct. 

Mr. CONNOLLY. Do you think it’s fair that because there are alleged incidents of such fraud or corruption that the entire work of 

the Ex-Im Bank should be discredited and, indeed, we should allow 

the expiration of the authorization of the Ex-Im Bank to exist at 

all? 

Mr. HOCHBERG. No. 

Mr. CONNOLLY. Why? 

Mr. HOCHBERG. We have four individuals who are—one—have 

had alleged wrongdoing. We don’t know that they’ve committed a 

wrongdoing. They have not been indicted. They have not gone to 

court. So I think that we—that is—you know, those are four isolated cases. We have not had any in—I have been at the Bank 

since 2009. It is the first time. Nothing in 2009, ’10, ’11, ’12, and 

just came in at the end of ’13, this year. So we’ve had a number 

of years that have been no allegations whatsoever and no indictments. 

Mr. CONNOLLY. Because I think some who are maybe committed 

to an ideological agenda to allowing the Ex-Im Bank to expire want 

the public to have an impression that somehow it’s rampant with 

corruption and fraud. These are isolated incidents. 

Were any of them referred by you or your management, actually, 

to the IG? 

Mr. HOCHBERG. They were referred to by other employees. 

52 

Mr. CONNOLLY. Okay. So the system worked. 

Mr. HOCHBERG. The system worked. People looked and said, 

there’s something wrong with this transaction or something doesn’t 

seem appropriate here, and they brought it to the attention of the 

ethics officer and/or the IG. 

Mr. CONNOLLY. And, certainly, if you look at it in a context of 

a 5- or 6-year period, obviously it does not characterize in any way 

the operations of the Ex-Im Bank. 

Mr. HOCHBERG. I would agree with that. 

Mr. CONNOLLY. Unfortunately, human nature being what it is, 

sooner or later there’s always a bad apple that can appear, and the 

question is, how do we deal with it? And how would you characterize the response of the agency when brought to your attention? 

Mr. HOCHBERG. I am proud of the agency and our ethics department, which acted immediately. The employees, as evidence came 

through, were either put on administrative leave, and then ultimately three of them, as I said, have been separated from the 

Bank. 

Mr. CONNOLLY. Why do you think—okay. Thank you. 

Why do you think we need an Ex-Im Bank? 

Mr. HOCHBERG. We need an Ex-Im Bank because—first of all, 

we’ve been around for 80 years. It’s the same reason we started 

with: We need to create more jobs in this country. This is about— 

and one of the sources of jobs is going to be exports. One of the impediments to exporting is both risk and perceived risk, as well as 

foreign competition. So we exist when the private sector can’t step 

up to fill in the gap. 

That’s one reason during the financial crisis we did almost between two and three times the volume of loans, because there was 

a great need. As banks have entered the market again, our volumes are once again trimming back because our need is not as 

great. But my counterpart in Britain says, just because you’ve not 

had a fire in 5 years does not mean you sell the firetruck. 

Mr. CONNOLLY. Focus just a little bit on the foreign competition. 

So do our foreign competitors have an analog to the Ex-Im Bank? 

Mr. HOCHBERG. There are at least 59 other export credit—— 

Mr. CONNOLLY. I’m sorry, how many? 

Mr. HOCHBERG. There are at least 59 other export credit agencies 

around the world whose purpose, frankly, is even more—much 

more aggressive than anything we have in the United States. 

Mr. CONNOLLY. Who, for example, sticks out in your mind in that 

category? 

Mr. HOCHBERG. China is the largest, without question. China is 

very large. Brazil has a very active program, frankly, but so does 

Japan, so does Korea, so does Germany. Those are some of our 

most formidable competitors. 

Mr. CONNOLLY. When we look at, for example, the airline industry or the aircraft industry, what’s Boeing, for example, up against? 

Mr. HOCHBERG. Boeing is up against Airbus, which is supported 

by the export credit agencies of Germany, Britain, and France. 

They have three export credit agencies that support the sale of Airbus planes. 

53 

I was just in China. China is building a large commercial aircraft 

to compete with both Boeing and Airbus. Russia has an aircraft 

that also competes. 

So the competitive intensity around aircraft, which is our largest—aerospace is our largest single export category—is intense and 

getting more intense. 

Mr. CONNOLLY. Would you say that even with the help of Ex-Im 

Bank it’s not a level playing field, in terms of what we’re up 

against with Airbus? 

Mr. HOCHBERG. Oh, it frequently is not a level playing field. 

Mr. CONNOLLY. Yeah. 

Mr. HOCHBERG. I mean—— 

Mr. CONNOLLY. I would just end by saying, you know, I understand, I guess, from a pure ideological point of view, those who 

argue, well, ceteris paribus, all other things being equal, we 

shouldn’t need this kind of instrument, the market should work. 

But your testimony about 59 export subsidies—or, entities that 

subsidize our foreign competition tells us we’re a long way away 

from a perfect world or a level playing field. And it would be naive 

and, indeed, self-destructive, it seems to me, for the United States 

not to reauthorize the Ex-Im Bank. 

Thank you, Mr. Chairman, for your indulgence. I appreciate it. 

Mr. JORDAN. I thank the gentleman. 

The gentleman from Florida is recognized. 

Mr. DESANTIS. Mr. Hochberg, you stressed your commitment to 

ethics, and I do think that that’s sincere on your part, and I appreciate that. 

Do you believe, just understanding human nature, that there is 

a greater risk of bribery and graft with Ex-Im just simply because 

there are lucrative deals at issue? 

Mr. HOCHBERG. Greater than what? 

Mr. DESANTIS. Greater than, say, the Department of Education. 

Mr. HOCHBERG. I’m not in a position to really evaluate degrees 

of enticement to take briberies from one agency to another. 

Mr. DESANTIS. Okay. Very well. 

In terms of the accounting, I know they are back and forth. The 

way that the Bank does the accounting, there’s a windfall for the 

taxpayer. The way the CBO did it under fair value, it was a loss 

of a couple billion over 10 years. 

My question is just simply, you were in the private sector. That’s 

pretty standard convention to use the fair value accounting. What 

is the reason that fair value accounting is not used at Ex-Im? 

Mr. HOCHBERG. The Federal Government, Congress has passed 

a law that we use FCRA, Federal Credit Reform Act, that guise, 

for government accounting. We don’t pick and choose our accounting system. You, as Members of Congress, vote to approve whatever the accounting system is, and we abide by that law. 

Mr. DESANTIS. So you’re not opposed to fair value if Congress 

wants to go that way? I was under the impression—— 

Mr. HOCHBERG. Well, I haven’t made an opinion of—— 

Mr. DESANTIS. Okay. 

Mr. HOCHBERG. I haven’t studied it to give you an opinion on 

that. I’m simply telling you I follow the law. 

Mr. DESANTIS. Okay. 

54 

Mr. HOCHBERG. The law says we follow—— 

Mr. DESANTIS. No, I understand that, but I thought you had expressed some resistance to it. So you will not endorse using fair 

value accounting with the Bank at this time? 

Mr. HOCHBERG. I will endorse whatever the law says I should do. 

Mr. DESANTIS. Do you believe that—because there is an issue 

about the Bank supporting jobs, using the term ‘‘support’’; there 

was back-and-forth. Do you believe that the Bank actually creates 

jobs net? In other words, if there wasn’t the Bank, we would have 

fewer jobs here in the U.S. economy? 

Mr. HOCHBERG. Without question. 

Let me just talk about supporting jobs for a minute. I was recently in Chicago, a company called Howe Corporation. It makes 

refrigeration units they use on fishing boats and so forth. Mary 

Howe, fourth generation, is now exporting up to 40 percent a year. 

She said to me, because of you—it’s in the Chicago Tribune—because of the Ex-Im Bank, I did not have to lay off a single person, 

I kept my 40 people working. 

So, in that case, we supported those jobs. We did not necessarily 

add jobs, but were we not there, Mary said very clearly, I would 

have had to lay people off; I did not want to lay people off, so you 

supported my being able to keep a full workforce. 

In other places, where, as Congresswoman Duckworth said, 

there’s a new sale—in Mary’s case, we replaced sales lost because 

of the financial crisis. Where there’s a new sale, it often means 

adding another shift and hiring employees. 

So it depends. We use the word ‘‘support’’ to be conservative as 

opposed to being—— 

Mr. DESANTIS. No, I understand that. And I think you can point 

to a transaction, and you may have there, where maybe those jobs 

would not have been there without a certain finance package. 

But as I read the reports, there are examples in which Ex-Im 

loans benefit foreign competitors of our domestic manufacturers. 

For example, there was an energy refinery in Turkey, and there 

was concern raised here domestically from Texas refinery manufacturers basically saying, look, you’re directing government power to 

do this deal, but then that has ended up disadvantaging us. 

And so, when you’re saying it creates more jobs, are you also accounting for maybe the back end of some of those transactions and 

how that could affect domestic competitors? 

Mr. HOCHBERG. Congress has put in our charter, and we follow 

it, and we updated those regulations, it’s referred to as ‘‘economic 

impact.’’ On every transaction, we review, does the economic benefit to the U.S. economy outweigh any potential harm? 

So, in the particular transaction you’re referring to, we looked at, 

what is the economic benefit to the U.S. economy by making these 

exports, what is the potential harm to the U.S. economy, to ensure 

that there’s a positive benefit to the U.S. economy. 

And then the independent board, which is made up—it’s a bipartisan board—still votes on that transaction. 

Mr. DESANTIS. There was back-and-forth about the number of 

dollars that go to small businesses. I think it was 19 percent last 

year, and I think you’ve said now it’s up to 22 percent—— 

Mr. HOCHBERG. We’re stronger right now. 

55 

Mr. DESANTIS. —so far this year. As I understand it, the definition of ‘‘small business,’’ that includes firms with employees up to, 

what, 1,500? 

Mr. HOCHBERG. Well, the SBA makes those determinations of 

what actually is a small business. It’s not our determination. 

We—— 

Mr. DESANTIS. But is that—no, I understand that. But is that— 

when this stuff is being put out, it would include the firms up to 

1,500? Is that the number that’s used? 

Mr. HOCHBERG. Generally, in manufacturing, the rough number 

is 500. But, again, the SBA, they determine—I was at the SBA. 

They look at every industry and say, but what’s small by that industry’s category? 

Mr. DESANTIS. So, no, I understand that, but I’m just trying to 

figure out, the upper level of what would be considered small would 

be 1,500, is that—I’ve just read reports. I’m just seeing if that’s the 

case. 

Mr. HOCHBERG. I haven’t seen a number that high. 

Mr. DESANTIS. Okay. Well, look, the 500, if we can get that used 

for Obamacare, the initial thing, that would give a lot of relief to 

a lot of small businesses in my district. So I’m not above counting 

that as 500. 

One final question. How does the Bank view its role in terms of 

the national security component that could affect economic transactions between certain States? And some of these deals are with 

essentially State-directed enterprises. 

It was reported today in an article by a columnist in The Washington Post that two of Hamas’s supporters are Qatar and Turkey. 

Last fiscal year, the Bank authorized $775 million to Qatar, $4.3 

billion for business in Turkey. Of course, Turkey’s Prime Minister 

has come out and said that Israel is worse than Hitler, and he has 

basically taken a very anti-Western, pro-Islamist stance. 

So how can we, just as people in Congress, when we’re looking 

and we have duties with national security, how can we be sure that 

the deals that are being done are also consistent with our national 

security goals and strategies? 

Mr. HOCHBERG. There’s something referred to as the National Advisory Committee, which reviews all transactions over $30 million that the board votes upon. So they are shared with the State 

Department, Treasury, Commerce, and other relevant agencies, 

who render an opinion whether there’s anything wrong with the 

entities that are part of the transaction. 

So, in your case with Qatar or Turkey, as an example, they were 

all green-lighted by the various agencies that are part of the National Advisory Council. 

Mr. DESANTIS. Well, no, and I appreciate that. And, in fact, I 

think looking at some of the conflicts we see, I think our administration has been erring by siding with Qatar and Turkey over some 

of the stronger allies that we have in the region. 

But I appreciate the testimony, and I yield back. 

Mr. JORDAN. The gentleman from Pennsylvania is recognized. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

And, Mr. Hochberg, I want to associate myself with the remarks 

of Mr. Connolly of Virginia. And I thank you not only for appearing 

56 

here today, but I recognize your extensive credentials in the business world, your capabilities. You have the ability to go out and 

make an exponential amount of money, more than what the Federal Government is paying you for your public service, and I thank 

you for that. 

I also want to note that you came to the Ex-Im Bank in 2009. 

2009 isn’t when the Ex-Im Bank started. It started in 1934 by Executive order of President Franklin Delano Roosevelt. 

And for everyone’s information, Congress did not sue President 

Roosevelt for that Executive order as going beyond the bounds of 

the Constitution. In fact, President Ronald Reagan supported expanding it, as was noted in the New York Times article, op-ed, published yesterday by former President Reagan’s Secretary of Labor, 

William Brock III, who was also a Republican Senator from Tennessee. His op-ed is called ‘‘Don’t Kill the Export-Import Bank.’’ 

And he makes the particular point that President Reagan saw the 

value in the Bank in assisting American businesses to compete 

abroad and supported expanding it. 

I also want to note that the Export-Import Bank, in your testimony, Mr. Hochberg, has a default rate of 0.194 percent, which is 

less than one-fifth of 1 percent. And I certainly invite Mr. 

Mulvaney, my colleague, to challenge that if he thinks that that is 

incorrect. But that’s a very small default rate, indeed. 

But I want to direct my—and we don’t mean to ignore you, Ms. 

Katz, but you’re here from The Heritage Foundation. Am I correct 

in that? 

Ms. KATZ. That’s correct. 

Mr. CARTWRIGHT. The opinions you express are not simply your 

own, they are also those of The Heritage Foundation, correct? 

Ms. KATZ. No, that’s not correct. They reflect my own. 

Mr. CARTWRIGHT. They’re your own opinions but not those of The 

Heritage Foundation? 

Ms. KATZ. Correct. 

Mr. CARTWRIGHT. Okay. Are you paid by The Heritage Foundation? 

Ms. KATZ. Yes. 

Mr. CARTWRIGHT. Do they know you’re here today instead of at 

work? 

Ms. KATZ. I consider this work. 

Mr. CARTWRIGHT. Okay. 

Mr. JORDAN. Dealing with us is—— 

Mr. CARTWRIGHT. Here’s a question: Is The Heritage Foundation 

in favor of abolishing the Export-Import Bank? 

Ms. KATZ. I’m in favor of abolishing the Export-Import Bank. 

Mr. CARTWRIGHT. Okay. So—well, so you don’t know if The Heritage Foundation—— 

Ms. KATZ. Well, I—— 

Mr. CARTWRIGHT. —shares that opinion? 

Ms. KATZ. Well, The Heritage Foundation is made up of, you 

know, some, I don’t know how many people, 2- to 300 people, and 

there’s a variety of opinion in Heritage about all sorts of things, 

but I’m here to discuss my research and my opinions, and not those 

of Heritage in general. 

57 

Mr. CARTWRIGHT. All right. Can you tell us what percentage of 

the supporters of The Heritage Foundation are exporting companies? 

Ms. KATZ. I have no idea. 

Mr. CARTWRIGHT. Can you tell us what percentage of the supporters of The Heritage Foundation are companies assisted by the 

Ex-Im Bank in exporting? 

Ms. KATZ. No, because I really don’t pay any attention to who— 

you know, who funds Heritage. I do know, though, that the largest 

proportion of funders are individuals. 

Mr. CARTWRIGHT. Can you tell us what percentage of Heritage 

Foundation supporters of big companies or people associated with 

big companies, that don’t like competition from small U.S. exporters, assisted by the Ex-Im Bank? 

Ms. KATZ. I have no idea, but I do know that 75 percent of the— 

the benefits of Ex-Im financing go to about ten very large corporations, and only about half of a percent of small businesses in the 

U.S. Receive assistance from Ex-Im. 

Mr. CARTWRIGHT. Do you—I want to jump to a point that my colleague from Pennsylvania, Mr. Meehan, was driving home, and he’s 

a former Federal prosecutor. Do you have any information that 

U.S. attorneys are not good at prosecuting cases of fraud when 

they’re perpetrated against the Ex-Im Bank? 

Ms. KATZ. I have no information about that. 

Mr. CARTWRIGHT. Are you saying that U.S. attorneys don’t have 

the full range of prosecutorial tools available to them when handling cases of fraud perpetrated on the Export-Import Bank? 

Ms. KATZ. Well, they certainly have had dozens of cases to prosecute, which they have. 

Mr. CARTWRIGHT. But you’re not saying they don’t have the full 

range of tools, are you? 

Ms. KATZ. I don’t know what their—their arsenal is, sir. 

Mr. CARTWRIGHT. Do you have any information that the FBI 

doesn’t have the full range of investigative tools when handling 

cases of fraud perpetrated on the Export-Import Bank? 

Ms. KATZ. I don’t know what the FBI’s resources are with respect 

to the Export-Import Bank, although I do know that, you know, 

there have been, you know, considerable number of cases of fraud 

at the bank. 

Mr. CARTWRIGHT. So every time there’s a case of fraud involving 

the Export-Import Bank, a case of fraud against—perpetrated 

against the Export-Import Bank, every time there’s such a case, 

the U.S. Government has at its disposal the full range of investigative and prosecutorial tools that it can bring to bear on any prosecution that brings in this Nation. Am I correct in that? 

Ms. KATZ. You’re—I assume you’re correct, but my preference 

from a policy standpoint would be to be able to prevent fraud cases 

rather than building up, you know, ever larger resources for prosecutors to—after the fact. And what we do know is that Ex-Im is 

not managed with the intent of maximizing protection against 

fraud. 

Mr. CARTWRIGHT. Well, I happen to agree with Mr. Meehan of 

Pennsylvania that to do away with fraud entirely, you have to 

change human nature, not abolish the Export-Import Bank. 

58 

And I yield back, Mr. Chairman. 

Mr. JORDAN. I thank the gentleman. 

No one’s alleging that the Department of Justice can’t do fraud 

investigation of the Export-Import Bank, although I have questioned the Department of Justice investigation into other issues 

that have been in front of this committee, and I think, you know, 

26 Democrats agreed with every single Republican, saying we needed a special prosecutor in that situation. So no one’s alleging that 

here. 

What we are saying is there’s nothing in the law that prevents 

Mr. Hochberg from telling us what he knows, and he won’t do that. 

He won’t tell us the three other individuals, he won’t tell us anything about how Mr. Gutierrez’ name became public, he even won’t 

tell us if he even did—if they’ve done an investigation, it sounds 

like they haven’t, as to how that—if it’s so important that we not 

jeopardize and disclose who these people are, you would have 

think—you would have thought that they would have done an internal investigation to figure out how Mr. Gutierrez’ name became 

public. 

So that’s all we’re saying, is why not—frankly, Mr. Hochberg, 

we’ve had this before. We’ve had witnesses sit here and tell us, we 

can’t give you information that you’re asking for, because there’s an 

ongoing investigation, and then we do subpoenas and we get the 

information. In fact, the Inspector General told us, we asked him 

for certain documents relative to today’s hearing, and he said, go 

ask Mr. Hochberg. Get them from him. So obviously by—when he 

tells us that, you could provide them, you just choose not to provide 

them. 

The gentleman from South Carolina is recognized for 5 minutes. 

Mr. MULVANEY. Thank you, Mr. Chairman. I’ve just got some 

bits and pieces to fill in. 

Jobs, Mr. Hochberg. Mr. DeSantis before he left asked you a 

question about whether or not you count potential job losses when 

you provide your information to Congress about how many jobs you 

support. You don’t—you don’t count that, do you? For example, 

Delta claims they lost 7,500 jobs via the sale of—Export-Import 

Bank support to a purchase of Boeing jets by Air India. You don’t 

count those losses when you report those jobs to Congress, do you? 

Mr. HOCHBERG. First of all, Delta’s never validated where they 

got those numbers from. I have no—— 

Mr. MULVANEY. But I think you testify—I’m not trying to bait 

you, but I think you testified in the previous hearing that I was 

in that you report a gross number. 

Mr. HOCHBERG. We report the gross numbers of jobs that are 

supported by Ex-Im financing, but in candor, Congressman 

Mulvaney, in my opinion, they actually understate the jobs, they 

do not overstate them. 

Mr. MULVANEY. Fair enough. Mr. Cartwright raised a good point 

about default rates, and I meant to talk about that before, the default rate of .0, I think—0.195 is your default rate. Now, back as 

recently as the late 1980s and early 1990s, the default rate was 40 

percent. You all changed the way you count defaults, didn’t you? 

Or Congress changed it for you? 

59 

Mr. HOCHBERG. We calculate our default rates according to the 

way Congress has asked us to do so. And I have the results in front 

of me for the last 6 years—— 

Mr. MULVANEY. Is it the same way that—— 

Mr. HOCHBERG. —and most financial—— 

Mr. MULVANEY. —private financial institutions report defaults? 

Mr. HOCHBERG. To my knowledge, it is the same, and in fact, I 

mentioned in my oral testimony that our default—the commercial 

bank and industrial bank default rates as calculated by the Fed, 

the average is 3 to 4 times higher than ours. 

Mr. MULVANEY. No. I understand that, but you don’t count defaults the same way as a commercial bank does. A default to them 

is not the same as a default to you. 

Mr. HOCHBERG. We count—— 

Mr. MULVANEY. It’s not apples to apples, to Mr. Cartwright’s 

point, though. 

Mr. HOCHBERG. No. We calculate defaults to the way the Congress has asked us to report the default rates to Congress. 

Mr. MULVANEY. And back in the 1980s and 1990s, when the definition was different, that was as high as 40 percent, you still 

have—— 

Mr. HOCHBERG. I don’t know whether it was the same methodology. 

Mr. MULVANEY. You still debt on your books at the Export-Import Bank from pre-Castro Cuba, don’t you? Do you think you’re 

going to collect that debt? 

Mr. HOCHBERG. We—I don’t—I can’t answer that question, because I don’t know the answer to it. 

Mr. MULVANEY. If it were on there, do you think that you would 

be able—— 

Mr. HOCHBERG. It’s—it’s a hypothetical question. 

Mr. MULVANEY. But if it is on there, then I get to ask the question next time, right, because it’s on there. You all have debt on 

the books from pre-Castro Cuba, you have debt on the books from, 

I think, 1970s China when Mao was there. But anyway, my point 

of this—to Mr. Cartwright is this, that do not take—I encourage 

my colleagues not to take it as an apples-to-apples comparison. The 

.195 percent is not the same, not calculated the same way as it is 

in, say, Bank of America or PNC or something like that. 

The IG had two things to say, and I’m just going to ask you if 

you agree or disagree with these statements. The IG gave testimony to the Financial Services about 4 or 5 weeks ago. And Mr. 

Gratacos said that the bank management’s consistently failed to establish internal controls over business operations, and noted that 

there were ‘‘clear guidance to staff, and establishing clear roles and 

authorities have not been prevalent at the Ex-Im Bank.’’ 

Do you agree or disagree with that statement? 

Mr. HOCHBERG. I disagree. 

Mr. MULVANEY. And then he went on to say that, and I’m reading now from Ms. Katz’s testimony until I get to the quotations 

that, such operational shortcomings worsening of the bank, et 

cetera, et cetera, and then as noted by the Inspector General, ‘‘this 

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60 

cerns as to Ex-Im’s ability to manage and monitor this significant 

portfolio growth.’’ 

Do agree or disagree with that? 

Mr. HOCHBERG. I disagree with that. 

Mr. MULVANEY. Fair enough. And then lastly, Mr. Cartwright, or 

I think it may have been Mr. Connolly mentioned Ronald Reagan. 

My experience in my brief period here is that I don’t use Ronald 

Reagan quotations, I sort of treat them like Bible quotations in 

that you can usually find something to take either side of a particular story, but in order to rehabilitate my favorite President during my lifetime, in 1981 he suggested the bank needed to be reduced by at least a third, and in 1985 he asked ‘‘Is it fair to ask 

taxpayers to help pay billions for export subsidies to a handful of 

America’s biggest corporations? We also save billions by eliminating taxpayer subsidies to some of America’s biggest corporations 

through Export-Import Bank loans.’’ 

So it seems to me that the debate has been going on for a long 

time. The issues are still there. I just was hoping that maybe this 

might be the year we could fix some of them. 

With that, I’ll yield back. Thank you, Mr. Chairman. 

Mr. JORDAN. I thank the gentleman for his participation today. 

Let me just go where Mr. Mulvaney was, Mr. Hochberg, and I 

don’t—I don’t know. I mean, you normally try to ask questions you 

know the answer to, but I don’t know this one. The—he was—Mr. 

Mulvaney was talking about the Delta and the gross number of 

jobs that you report. The example you gave with the lady in Chicago, I think is in the refrigeration business and she has 40 employees, is that—when you report to Congress jobs that Ex-Im 

Bank financing supports, would those 40 jobs be in that number? 

Mr. HOCHBERG. Only the jobs—only what would be allocated to 

the financings we’ve done. We don’t finance 100 percent of her 

business, so I would not count 40 jobs. 

Mr. JORDAN. But—so—but you would count some of them? 

Mr. HOCHBERG. We count those that are allocated to exporting. 

Mr. JORDAN. And how do you determine that? 

Mr. HOCHBERG. We use the Bureau of Labor statistics, we look 

at the dollar volume, they have tables we’re able to access that 

says looking at the full supply chain of different categories of industrial products, we were able to calculate how many jobs are created in the supply chain. 

Mr. JORDAN. In that example, do you know how many were the 

supported job that she talked about, how many were used in your 

calculation that you gave Congress? 

Mr. HOCHBERG. Well—— 

Mr. JORDAN. Was it three, was it seven, was it 39? 

Mr. HOCHBERG. Mary said to me she’s got about 40 employees, 

and depending on the year, 20 to 40 percent of her sales were exports. So it depends—— 

Mr. JORDAN. You took 30 percent of that number and gave 

us—— 

Mr. HOCHBERG. No. Each year we would report based on what 

actually we did. We don’t take averages. We say what did we actually do working—if we did zero that year, we’d count zero. 

61 

Mr. JORDAN. Okay. Okay. Just, I didn’t—I didn’t know how you 

do it. 

Ms. Katz, there’s—are you familiar with this—the loan, the 

ExxonMobil liquid natural gas—— 

Ms. KATZ. Yeah. The New Guinea, the Papua New Guinea? 

Mr. JORDAN. The Papua New Guinea, yes. 

Ms. KATZ. Yes. A bit. 

Mr. JORDAN. All right. And it’s been reported that the Inspector 

General released a report detailing comprehensive inspection of 

this transaction, and he specifically said the fault of the bank for 

taking insufficient steps to protect the bank from fraud, and we’ve 

talked about a lot today, and for, ‘‘being unable to properly account 

for $500 million in local costs.’’ Are you familiar with that? 

Ms. KATZ. Yes. 

Mr. JORDAN. And so is it accurate to say we don’t know what 

happened to $500 million? 

Ms. KATZ. Well, there were—they were claimed to be local expenses, but they don’t have—— 

Mr. JORDAN. Any receipts? Any details about those local expenses? So we have no idea. 

Ms. KATZ. They can’t verify, they can’t verify them. 

Mr. JORDAN. And, Mr. Hochberg, I assume that’s a concern to 

you and the folks at the bank? 

Mr. HOCHBERG. Well, I just disagree with the assertion. 

Mr. JORDAN. All right. 

Mr. HOCHBERG. So let me just—let’s discuss what this project is. 

If I can—can I take 1 minute to—Congressman Mulvaney, when 

we have a debt to Cuba, it is written to zero. We don’t throw it 

away, because we—we may write it down to—it has zero value on 

the books, it’s been totally written off; on the other hand, we don’t 

take debts like that and remove them from our books, because, as 

the case with Argentina, other countries, at some point we expect 

to be repaid, but in terms of the value, it’s zero. 

Mr. MULVANEY. Do you count it as a default? 

Mr. HOCHBERG. It’s already been written off. Yes, it’s then a default number. 

Mr. MULVANEY. It’s been counted as a default? 

Mr. HOCHBERG. Yes. Yes. It’s then a default number. 

Mr. MULVANEY. Thank you very much. 

Mr. HOCHBERG. Back to your question, Mr. Chairman. On the 

project of Papua New Guinea, this was a project, a large LNG 

project in Papua New Guinea. The U.S. Export-Import Bank provided $3 billion so that more jobs would be supported here in the 

United States. Part of our support, we do a project of that nature, 

as you can understand, some costs are incurred locally, they’re not 

all—so as—standard practice with the OECD, Organization of Economic Cooperation and Development, we can do up through 30 percent of local costs to make sure that that sale gets done. About 

$576 million was incurred in local costs. Exxon Mobil is the project 

sponsor. They have certified under criminal penalty that those 

costs were true and incurred and validated. And the Inspector General has said, quote-unquote, that that transaction was properly 

structured and documented and complied with all laws of Know 

62 

Your Customer, and they had no evidence whatsoever for improper 

local costs submitted. So that is—I would disagree with Ms. Katz. 

Mr. JORDAN. All right. On the—with the three other individuals 

identified in The Wall Street Journal article who—for alleged fraud 

and potential bribes, were their—are they being investigated in relation to the same matter that Mr. Gutierrez is being investigated 

for? Is it all related to Impex or are the other three on some different issue or transaction? 

Mr. HOCHBERG. There are four individuals and there are three 

separate cases. 

Mr. JORDAN. So—and you—I assume you’re going to—when I ask 

you what those other cases involving what companies, you’re going 

to say, I can’t tell you. 

Mr. HOCHBERG. The Inspector General is working through these 

cases. They’ve really—they would like the opportunity and not to 

have anything more compromised then they believe has already 

been compromised by the—— 

Mr. JORDAN. But I keep coming back to this, Mr. Hochberg. 

There is nothing in the law that prevents you from, under oath, in 

front of a congressional committee doing a legitimate congressional 

investigation at an appropriate time when we’re looking at the ExIm Bank reauthorization legislation, there is nothing in the law 

that prevents you from disclosing the information we ask about. 

Mr. HOCHBERG. These are alleged and they’re under criminal investigation. 

Mr. JORDAN. And we understand ‘‘alleged’’ means alleged, and 

you can—you can—that does—you’re innocent until proven guilty, 

in fact, you can invoke any privilege and right you have, like we 

just saw a few hours ago from Mr. Gutierrez where he invoked his 

Fifth Amendment privilege, we understand all that, but we’re asking you, the guy at the head of the Bank, who just told us that 

there are four individuals under investigation for alleged bribes 

and corruption on three different issues dealing with three different loans the bank has made to different companies, different organizations, and you’re only going to tell us when—we only know 

about Impex, we’re asking about the other two. Can you tell the 

companies involved in the other two? 

Mr. HOCHBERG. First of all, you’ve made a couple of assertions 

that they deal with loans and other individuals. All I can say is 

there are four individuals; three are no longer working at the 

Bank, one is on administrative leave, and the Inspector General 

and the Department of Justice is investigating this for a possible 

criminal case. 

Mr. JORDAN. And you said you had—you’ve had no interaction 

with the Department of Justice. So is it accurate to say the Department of Justice has not instructed you not to share information 

with Congress? 

Mr. HOCHBERG. This is—these are in the hands—— 

Mr. JORDAN. Yes or no? That’s a yes or no. Did the Department 

of Justice instruct you not to share information with Congress? 

Mr. HOCHBERG. I have not dealt with the Department of Justice. 

Mr. JORDAN. All right. And just again for the record, and I did 

this earlier, the Inspector General has not specifically told you, Mr. 

Hochberg, do not talk to—do not disclose the three other individVerDate Aug 31 2005 11:07 Nov 05, 2014 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\DOCS\90965.TXT APRIL
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uals, do not disclose the three other companies or whatever’s involved in these three situations? Did he specifically tell you not to 

disclose that to us? 

Mr. HOCHBERG. The—our general counsel made that recommendation on concurrence from the Inspector General. 

Mr. JORDAN. The inspector—that’s—I’m not asking you that. 

Mr. HOCHBERG. The—the—— 

Mr. JORDAN. I’m asking did the Inspector General specifically tell 

you—— 

Mr. HOCHBERG. I did not speak directly—— 

Mr. JORDAN. Because what we get from the Inspector General 

when we asked for certain documents, he said, go talk to Mr. 

Hochberg, see if you can get the documents from him. So that 

would imply that you can give them to us, which is what the law 

allows you to do if you so choose, but you are choosing not to answer our questions and give us that information. 

Mr. HOCHBERG. I am choosing not to interfere with a criminal investigation. 

Mr. JORDAN. Okay. Does the gentleman have additional questions? The gentleman from South Carolina? 

We want to thank you, Mr. Hochberg and Ms. Katz, for being 

here today for an important hearing. And the committee’s adjourned. 

[Whereupon, at 12:18 p.m., the committee was adjourned.] 

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