By John Morgan and Virginia Canter
May 2, 2018

Earlier this week, CREW sent a letter to members of the Senate Budget Committee and the inspector general of the Federal Reserve System asking for an investigation of Office of Management and Budget (OMB) Director and Consumer Financial Protection Bureau (CFPB) acting Director Mick Mulvaney to determine if he has fulfilled his ethical obligation to pay his debts after having taken complex, unusual, and potentially dishonest steps to avoid paying debts his company owed. Two companies partially owned by the director are parties to a multi-million dollar foreclosure suit involving a parcel of land in South Carolina. The land deal has created a number of financial and legal problems for Director Mulvaney, and could pose a conflict for his role as a financial regulator at the CFPB. CREW is also asking authorities to investigate if Director Mulvaney misled Congress about a loan that is now at the center of an ongoing lawsuit.

In 2007 and 2008, when Director Mulvaney was a South Carolina state representative, Lancaster-Collins Road LLC, a company in which he has a financial interest, borrowed more than $4 million dollars from Paragon Bank and a local firm, Fonville & Co., to develop a plot of land in upstate Lancaster County. However, the project got underway right as the financial crisis hit the U.S. housing market, and it quickly became a financial and legal mess. The deal was soon underwater. In September 2016, as the loan from Paragon was nearing default, a company called “Indian Land Ventures LLC,” in which Mulvaney also has an ownership stake, borrowed money from Southern First Bank to purchase the loan from Paragon. As a result, the remaining balance of the Paragon loan was paid off. Indian Land Ventures then filed a foreclosure action against Lancaster-Collins Road, claiming that it assumed Paragon’s role as first lien holder, with a lien superior to that of Fonville, the second lien holder. If that action is successful, Indian Land Ventures will gain title to the property, free and clear of the Fonville lien, and Fonville will likely not be paid back for its loan. Fonville filed claims in a lawsuit against Indian Land Ventures and Lancaster-Collins Road for contract violations and other claims stemming from events that allegedly occurred in the lead-up to the foreclosure.

This lawsuit raises several questions about whether Director Mulvaney truthfully answered the Senate’s questions during the confirmation process for his appointment to OMB. First, then Rep. Mulvaney told Senators that the foreclosure was “uncontested.” Yet, when Fonville filed its claims in the foreclosure action just three days before he was confirmed, Mulvaney took no action to correct the record. Second, Mulvaney also told lawmakers that the Fonville loan was “unsecured,” but public records show that Fonville recorded a lien on the property, which confirms that it was a secured loan.

The remaining loan from Southern First Bank could also create potential conflicts of interest for Mulvaney in his role as acting director of CFPB. According to the Form 278 disclosure he filed with the Office of Government Ethics prior to taking office as director of OMB, Mulvaney personally guaranteed the new loan from Southern First Bank, which means that he will be responsible for paying the remaining balance of the loan when it comes due. This loan became due in April 2018. According to Southern First’s Securities and Exchange Commission (SEC) filings, the bank is primarily regulated by the Federal Reserve and the Federal Deposit Insurance Corporation, but it is also subject to some CFPB regulations. It would violate ethics rules if the bank offered Mulvaney’s company, Indian Land Ventures, favorable treatment with respect to their outstanding loan because Mulvaney, the loan guarantor, is the acting head of a government agency that regulates it.

Troublingly, these potential conflicts were never fully vetted as part of his confirmation by the U.S. Senate. While Mulvaney serves simultaneously as the director of both the CFPB and OMB, he was only confirmed by the Senate to serve as budget director. He took over as acting CFPB director in a controversial series of maneuvers when former head Richard Cordray stepped down from the position in November 2017.

This also is not the first controversial land deal involving Mick Mulvaney. Early in the 2000s, Mulvaney was a central figure in a property scandal that cost local residents and businesses millions of dollars. In September 2002, Mulvaney, then a local businessman, made a sales pitch to Lancaster County officials to transform a plot of land near the North Carolina border known as “Edenmoor.” He pushed the county to issue $30 million in bonds to pay for the project, and in exchange he promised to build homes, apartments, and a hotel. Not long after the bonds were approved in 2004, he turned around and sold the property for a reported $7 million profit. Edenmoor then fell into disrepair and the project went nowhere. The land eventually created tax problems for the county. The cost of Mulvaney’s failed project was ultimately born by bondholders and paid for with special fees assessed on area businesses and homeowners.

Given his questionable track record as a land developer, it seems reasonable to ask whether Director Mulvaney is telling the truth about the litigation surrounding his latest land deal gone bad. Not only is it troubling that the head of both the OMB and CFPB mislead the Senate about whether a foreclosure he was involved with was contested, but he could also be vulnerable to conflicts of interest. The Senate needs to make sure that he is being honest with the American people he serves.