U.S. Rep. Richardson’s Dance with Default

Posted On: Sunday, August 16, 2009

The adage that “it isn’t what happens to you that counts but how you handle it” has a new face in U.S. Rep. Laura Richardson (D-CA). It is a cautionary tale, applicable to leaders in any industry as well as public officials. When one’s reputation is under attack explaining what happened, clarifying misperceptions, admitting errors – if any were made – create credibility. Not doing so harms reputation.

Rep. Richardson’s particular story centers on a house in Sacramento she bought when she was a California Assemblywoman and then abandoned when she went to Congress in 2007. How her mortgage was handled has spurred a complaint to the House Committee on Standards of Official Conduct by Citizens for Responsibility and Ethics (CREW) in Washington.

The Los Angeles Times (LAT) reported that her home went into default early in 2008. Former neighbors’ say their contacts with her Washington office about the house being rundown, overgrown with weeds, and congregating rats went unanswered; the City of Sacramento at one point declared the property a public nuisance. Washington Mutual held the mortgage and the LAT reported the property went into foreclosure, was bought at auction by a man who had began remodeling it and then learned that the bank decided to give the house back to Rep. Richardson. CREW last month asked for an investigation on whether preferential treatment was extended to the congresswoman not given other citizens in the same boat.

Rep. Richardson hasn’t had much to say about this, which is a key reason the story stays alive in the court of public opinion and her reputation is clouded.

Her statement in May 2008 denied that the house had been in foreclosure and wasn’t seized by the bank; she said she’d renegotiated her loan without special provisions. And yet, apparently there is a man who bought her house and had a deed, according to news reports. So, whatever the complications, not addressing seeming contradictions head on leaves open to question her credibility, and thus her reputation.
This isn’t her only mortgage problem according to the LAT, which says she’s also been in default at various times on two other properties she owns.

Following Rep. Richardson’s mortgage crisis for well over a year, the newspaper reported July 30, 2009 that neighbors and the man who purchased her house had been interviewed by the Office of Congressional Ethics (OCE). If its findings warrant, the OCE can turn the matter over to the House Committee on Standards of Official Conduct, commonly called the Ethics Committee.

Rep. Richardson won by a landslide two years ago in a special election to fill a Congressional seat in Long Beach, CA – a few hundred miles from that house in Sacramento. Her media site conveys all the work she is doing on behalf of her district, which is appropriate. But demonstrating business as usual may be a PR strategy, but it doesn’t build trust when questions about her handling of personal finances go unexplained in other forums.

A loan default may or may not be avoidable based on one’s circumstances. Rep. Richardson path out of foreclosure has either fairly or unfairly put her under fire. One can recover from a loan default. It is a much harder and longer road back from reputation default.

Gael O’Brien is a catalyst for leaders leading with purpose and impact. She is an executive coach with a corporate and public affairs background. Gael is President of Strategic Opportunities Group.

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