A Jackson County judge Friday denied a request from Bank of America that a receiver be appointed to take control of a Grandview car wash owned by U.S. Rep. Emanuel Cleaver’s company.
In a one-page order, Judge Charles McKenzie denied the bank’s request to immediately take control of the car wash, which it considers collateral for a $1.3 million loan to Cleaver Co. LLC made in 2002.
In late March, Bank of America sued Cleaver, his wife Dianne, and the Cleaver Co. to recover more than $1.5 million it contends is now owed on the loan. In its lawsuit, the bank said payments have not been made and that a receiver is necessary to protect the car wash.
A lawyer for the bank declined comment on the judge’s decision, and a bank spokeswoman had no comment. A spokesperson for Cleaver, a Democrat and former mayor of Kansas City, also declined comment.
It was not immediately clear when the court might hear the bank’s full lawsuit.
Court records show that part of the $1.5 million car wash debt is guaranteed by the Small Business Administration, a federal agency charged with helping small employers. Last week, the agency said its guarantee was for roughly 75 percent of the obligation, which means taxpayers could eventually be on the hook for more than $1 million.
That amount could be reduced if the Cleavers make payments on the loan, the car wash is sold or if Bank of America reduces its demand for repayment, either through a court decision or on its own.
Both Cleavers personally guaranteed the loan, as the SBA requires. The court may eventually decide how much money, if any, the couple will have to pay on that guarantee.
In his latest financial disclosure to Congress, Cleaver claimed annual income from the Methodist Church and a city pension of roughly $30,000, in addition to his congressional salary of $174,000.
However, Cleaver’s financial disclosures — required of all members of Congress — have never listed the car wash loan. On the House Ethics Committee website, members are advised that their yearly statements of income, assets and debt do not have to include “contingent liabilities, such as that of a guarantor.”
But another part of the rules notes that members are required to report business debts for which they are “personally liable.” A House Ethics Committee staff member would not comment on which category the Cleaver obligation involves and whether it was required to be reported. A staff member for the Office of Congressional Ethics also declined comment.
Cleaver has reported the car wash as an asset. In his last report, he valued it at between $100,001 and $250,000.
In an emailed statement regarding his disclosure, Cleaver said: “I have fully complied with all disclosure ethics rules and regulations as a member of the House of Representatives. I have done this both to the letter and in the spirit of those rules and regulations. Furthermore, I have long been an advocate and supporter of more transparency in government and even stricter regulations for members of Congress.”
Members of Congress and some government employees have filed financial disclosures since 1978. Generally, they require members to disclose earned and unearned income, assets, debts, travel payments, outside positions held and agreements with outside entities about past or future employment.
They’re filed so that voters and taxpayers can detect potential conflicts of interest.
Cleaver is a member of the House Financial Services Committee, which “has jurisdiction over all issues pertaining to the economy, the banking system, housing, insurance, and securities and exchanges,” according to the committee’s website.
Cleaver has cast votes on issues related to Bank of America. He voted for the 2008 bill that provided loans to various banks in financial trouble. Bank of America eventually received $45 billion from the law, popularly known as TARP, money it has since repaid.
But Cleaver also voted for the Dodd-Frank financial overhaul bill, which Bank of America and other large financial institutions bitterly opposed.
A spokeswoman for Common Cause, a governmental ethics watchdog group, said if omitting the car wash loan is acceptable under ethics rules, it could undermine the value of such disclosures as a means for citizens to detect potential conflicts of interest.
“If you can have that big of a loan…(and) the disclosure form doesn’t get to that, what else doesn’t it get to?” asked Sarah Dufendach of Common Cause. “It goes against the spirit of the rules.”
House rules and federal law include penalties for anyone who knowingly files an inaccurate financial disclosure.
As a practical matter, however, members of Congress are almost never punished for an incomplete or inaccurate financial filing. By some estimates, 25 percent of disclosures are deficient each year, leading to dozens of amended filings.
Cleaver has filed five disclosure amendments since 2004, according to the website operated by the Center for Responsive Politics.