Docket No. 481

In the Matter of Charles W. Mann

March 1, 1994

Disposition Agreement




This Disposition Agreement ("Agreement") is entered into
between the State Ethics Commission ("Commission") and Charles W.
Mann ("Rep. Mann"), pursuant to s.5 of the Commission's Enforcement
Procedures. This Agreement constitutes a consented to final order
enforceable in the Superior Court, pursuant to G.L. c. 268B,
s.4(j).

On April 27, 1993, the Commission initiated, pursuant to G.L.
c. 268B, s.4(a), a preliminary inquiry into possible violations of
conflict of interest law, G.L. c. 268A, by Rep. Mann. The
Commission has concluded its inquiry and, on August 9, 1993, found
reasonable cause to believe that Rep. Mann violated G.L. c. 268A.

The Commission and Rep. Mann now agree to the following
findings of fact and conclusions of law:

1. Rep. Mann has served in the House of Representatives from
1966-1970, and from 1980 to the present. Rep. Mann also served as
the Assistant Legislative Secretary to Governor Sargent from 1970-
1974. Beginning in 1991, he has sat on the Joint Committee on
Banks and Banking. As a legislator, Rep. Mann is a state employee
as that term is defined in G.L. c. 268A, s.1(q).

2. Rep. Mann owned a lakefront cottage in Pembroke. On July
19, 1989, he refinanced a $105,000 mortgage on the cottage with the
Bridgewater Credit Union ("BCU"). In June 1990, Rep. Mann's
mortgage became delinquent with an unpaid principal balance of
$104,362.48. Following an unsuccessful workout period, BCU
purchased the property for $96,500. The credit union then sued
Rep. Mann on July 19, 1991 for an alleged deficiency. Rep. Mann
brought a counter claim against BCU asserting that the Credit Union
failed to use due diligence in giving notice of its foreclosure
sale. On December 21, 1992, BCU and Rep. Mann settled the suit for
$10,000.

3. Rep. Mann and former BCU Director John Peck have been
partners in real estate ventures since the early 1980s. In
connection with one of their development projects, Rep. Mann and
Peck borrowed $120,000 from BCU on September 25, 1986, to purchase
two lots of land on Elm Street in Hanson. Beginning in spring
1990, the partners routinely fell behind in their payments, and
stopped making payments altogether in March 1991 leaving an unpaid
principal balance of $115,178.74. On November 21, 1991, BCU
notified Peck and Rep. Mann that it would foreclose on the Elm
Street properties on December 9, 1991. Ultimately, BCU conducted
a foreclosure sale on August 12, 1992 at which it sold the lots for
$78,000. The credit union later brought suit against the partners
for an alleged deficiency.[1]

4. BCU is a corporation organized under G.L. c. 171 for the
purpose of accumulating and investing the savings of its members
and making loans to them. Each credit union must have a board of
directors to provide the general direction for its affairs. The
credit union's membership elects the board of directors. As part
of their duties, BCU directors determine whether and when to
foreclose on delinquent loans, whether to write off mortgage
deficiencies as losses or to pursue them with collection actions,
whether to settle collection actions for less than the full
deficiency, and whether to enter into other loan workout
agreements.

5. Under G.L. c. 167, s.22, the state Commissioner of Banks
may take possession of a banking institution if he certifies that
it is in an unsound and unsafe condition to transact the business
for which it was organized. Acting under this authority, Banking
Commissioner Michael Hanson certified BCU on October 18, 1991, and
placed it under the control of the Massachusetts Credit Union Share
Insurance Corporation. The Commissioner based his certification
decision on the findings of successive annual bank examination
reports dated February 28, 1990, and February 1, 1991. The
certification effectively removed the sitting eleven member board
of directors.[2]

6. The ousted directors disputed the certification. They
met on a number of occasions at the Halifax Country Club to devise
a strategy to secure their reinstatement. Rep. Mann and Rep.
Jacqueline Lewis were invited to and attended one of these meetings
in November 1991. They agreed to meet with Banking Commissioner
Hanson to determine why he took the certification action.

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7. On November 29, 1991, Rep. Mann and Rep. Lewis met with
First Deputy Banking Commissioner Thomas Curry and Chief Examiner
of Credit Union Examinations John McWhirter. (Hanson did not
attend the meeting.) During the meeting, Rep. Mann questioned the
Commissioner's aides as to the basis of the certification decision.
Upon being informed of some of the banking violations[3] underlying
the certification, Rep. Mann characterized them as minor, stating
that "there are violations, and then there are violations."
Although Rep. Mann did not request that the Commissioner change his
certification decision, he expressed his strong disagreement with
the Commissioner's decision.

8. Following the November 29, 1991 meeting, the ousted
directors desired a hearing or appeal before the Governor and asked
Rep. Mann to set up a meeting. Rep. Mann declined, but agreed to
arrange a meeting with then Special Assistant to the Governor
Stephen Tocco. Rep. Mann briefed Tocco on the increasingly public
dispute[4] and requested that he "hear the directors' side of the
story." Tocco met with three of the ousted directors, but took no
action on their concerns.

9. The ousted directors also collected the signatures of 385
BCU shareholders in connection with a petition that made 16 demands
on the Banking Commissioner. The petition demanded the
Commissioner fully disclose the details of the administration of
BCU since its certification. The directors addressed the petition
to Rep. Mann and Rep. Lewis, with the request that they present it
to the Commissioner. Rep. Lewis delivered the petition and
signatures to the Commissioner.

10. The Commission discovered no evidence that in return for
the legislative efforts, the ousted directors promised favorable
loan treatment to Rep. Mann, or his partner Peck. Nor did the
Commission unearth any evidence that Rep. Mann threatened the
Banking Commissioner with adverse political consequences if he
did not change the certification decision.[5]

11. General laws c. 268A, s.6 prohibits a state employee from
participating as such in any particular matter in which, to his
knowledge, he or his partner has a financial interest.

12. The controversy as to Commissioner Hanson's certification
of BCU was a particular matter.[6] In addition, Rep. Mann's asking
the Governor's Special Assistant to hear the former directors'
grievances was tantamount to a request for a determination whether
the certification decision was proper. That request was also a
particular matter.

13. Rep. Mann and his partner Peck had a reasonably
foreseeable financial interest in these particular matters because
the ousted directors, if reinstated through a reversal of the
certification, would have been in the position to make litigation
and loan workout decisions affecting Rep. Mann's and Peck's
financial interests in the delinquent and foreclosed upon loans.[7]

14. By meeting with the Commissioner's staff and arranging
the Tocco meeting, Rep. Mann participated in the controversy
surrounding the public dispute between the Banking Commissioner and
the former BCU directors. Moreover, by arranging the meeting with
the Governor's Special Assistant, Rep. Mann participated in what
was effectively a request for a determination.

15. By involving himself in the BCU certification
controversy, as described above, Rep. Mann officially participated
in particular matters in which to his knowledge he and his partner
possessed a financial interest. By doing so, Rep. Mann violated
G.L. c. 268A, s.6.

16. The Commission is unaware of any evidence to indicate
Rep. Mann knew he was participating in "particular matters" and
therefore violating s.6 when he acted as described above.[8]

In view of the foregoing violation of G.L. c. 268A by Rep.
Mann, the Commission has determined that the public interest would
be served by the disposition of this matter without further
Enforcement proceedings, on the basis of the following terms and
conditions agreed to by Rep. Mann:

(1) that Rep. Mann pay to the Commission the sum of five
hundred dollars ($500.00) as a civil penalty for
violating G.L. c. 268A, s.6;

(2) that Rep. Mann waive all rights to contest the
findings of fact, conclusions of law and terms and
conditions contained in this agreement and in any other
related administrative or judicial proceeding to which
the Commission is or may be a party.

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[1] The terms of the mortgage note provided for joint and several
liability. Therefore, Rep. Mann was potentially liable for the
entire deficiency.

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[2] Since December 1992, the credit union has been released from
the control of the Massachusetts Credit Union Share Insurance
Corporation and is now operating on its own.

[3] Citing confidentiality concerns, the staffers refused to
disclose all of the banking violations uncovered in the 1990 and
1991 examination reports.

[4] The local print media and cable television station provided
considerable news coverage of the directors' removal.

[5] The Commission based its decision to impose a modest sanction
in this case on its finding that Rep. Mann did not attempt to place
undue pressure on Administration officials to act in a manner that
would benefit himself or his partner Peck. Compare In re Craven,
1980 s.17 (maximum fine allowed by law imposed on legislator
serving on House Ways and Means Committee who pressured Department
of Community Affairs to fund the Jamaica Plain Community
Development Foundation [which had entered into a lease agreement
with the legislator's family real estate trust] or risk adverse
budget action).

[6] General laws c. 268A, s.1(k) defines "particular matter" in
part as "any judicial or other proceeding, application, submission,
request for a ruling or other determination, contract, claim,
controversy, charge, accusation, arrest, decision, determination
[or] finding..." (emphasis added).

[7] Under s.6, a government official may not participate in matters
that determine the personnel who will make decisions regarding that
official's financial interests. See EC-COI-93-17 (selectman, who
was employed as local teacher, could not participate in
reappointment of Town Manager, an appointee who would be a voting
member of the school department's collective bargaining team); EC-
COI-86-25 (city councillor, who was employed as local teacher,
would not participate in selection of new school committee member,
an appointee who could negotiate teacher's collective bargaining
agreement).

[8] Ignorance of the law is no defense to a violation of G.L. c.
268A. In re Doyle, 1980 SEC 11, 13. See also, Scola v. Scola, 318
Mass. 1, 17 (1945).


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