2 Treasury Officials Resign for Memos Justifying Bank Grants

Two Treasury Department officials who hastily composed memos justifying $11 million in grants to banks owned by friends of the Clintons resigned Wednesday, Treasury Secretary Robert E. Rubin told a congressional committee investigating the matter.

Kirsten Moy, director of a program that awards grants to banks in poor communities, ordered deputy Steve Rohde to draw up the memos just hours before congressional investigators showed up to review the grant files, a Treasury inspector general’s report showed. The grants were awarded a year ago.

“This action was a serious error of judgment,” Rubin said in a letter Wednesday to Rep. Spencer Bachus (R-Ala.), chairman of a House investigative committee that asked to see the files.

Moy will leave in October and Rohde will leave Aug. 30.

Rubin said all grants were awarded based on merit. But his department has taken steps to tighten controls and ensure proper documentation of grant decisions, he said in the letter.

Undersecretary John D. Hawke said the program will adopt a conflict-of-interest policy for grant reviewers and strengthen internal procedures.

Bachus and other Republicans investigating the grants said the undated memos were inserted into the files to make it look like they had been written when the grants were made instead of after the fact.

Moy and Rohde could not be reached for comment.

Rohde told Treasury investigators that the memos were not misleading because they reflected the actual evaluation process and were based on notes he made when the grants were awarded.

The program, known as the Community Development Financial Institutions fund, channeled nearly one-third of its first $37 million in grants to four banks with ties to the Clintons.

The money went to community development lenders associated with South Shore Bank, also known as Shorebank, a Chicago-based institution.

A former college roommate of Hillary Rodham Clinton’s, Jan Piercy, was a senior vice president of Shorebank and was later appointed by the president to serve as U.S. executive director of the World Bank.

House investigators found that Shorebank controls two other banks that received grants.

A grant also went to Southern Development Bancorp., an Arkansas institution that once had Mrs. Clinton on its board of directors.