House Ethics Committee members said Friday at a hearing their investigation found no violation by Waters, a senior member of the House Financial Services Committee. She could become the panel's senior Democrat next year, or the chairwoman, if Democrats win control of the House.
However, the ethics panel said that Waters' chief of staff, Mikael Moore, did take actions in Congress in an attempt to help the bank and that he violated House standards of conduct. Moore, who is also Waters' grandson, likely will receive a letter admonishing him for his conduct but will not face more severe punishment, such as a reprimand, by the full House.
The next step is for the committee to vote to issue its final report and send Moore the letter.
The case has been beset by internal partisanship that led to all five committee Republicans and the top Democrat stepping aside in the case last February in favor of substitutes, to leave no questions about the committee's impartiality.
An outside counsel, Billy Martin, was hired to investigate the committee first and then to investigate the substance of the case. He found no wrongdoing by the committee, which had never hired an outside lawyer to investigate itself.
Virginia Republican Rep. Bob Goodlatte, acting chairman of the panel specifically for the Waters case, announced the tentative findings at the hearing but noted the committee had not issued its final report.
Goodlatte said the committee was convinced that when Waters asked for a meeting at the Treasury Department to discuss financial help for minority banks, she believed she did so on behalf of all minority banks -- not just OneUnited, where her husband owns stock. Goodlatte said the committee agreed with Waters' assertion.
The acting chairman said that when Waters realized OneUnited was in serious trouble, she told then-chairman of the House Financial Services Committee, Rep. Barney Frank, D-Mass., to handle any further matters in the case. Goodlatte said, however, that Moore continued efforts in Congress to get committee help for OneUnited, even sending the committee staff an email saying, "OneUnited is in trouble."
Waters did not testify at the hearing, but Moore defended himself, saying he violated no House rules. He insisted his actions were not aimed at helping OneUnited and said he received no financial gain.
Moore told the committee he was not aware that his grandfather, Sidney Williams, had a $350,000 stock investment in OneUnited in September 2008 when Rep. Waters tried to get the Treasury Department to help minority banks.
He argued the committee actions were based on what "the committee believes I should have known" and said this was "an impossible standard" to meet.
Waters routinely wins her Los Angeles district overwhelmingly. Now serving her 11th term, Waters won her last race with 79 percent of the vote.
Her position as top Democrat on the financial services panel next year also would be important to the Congressional Black Caucus because Waters is a senior member of the group. The caucus has been deeply concerned with how the mortgage foreclosure crisis affects minorities.
Goodlatte said at the hearing the committee agreed with Martin, the outside counsel, that Waters should not be charged "because there is not sufficient evidence in the record to prove violations by a clear and convincing standard, which is necessary before formal sanctions are recommended in the House of Representatives."
But when speaking of Moore, Goodlate said, "It is abundantly clear that Rep. Waters told Mr. Moore that he should not specifically assist OneUnited." Goodlatte said there were "substantial issues of credibility" involving Moore.
The key issue in the case was whether Waters requested the meeting at the Treasury Department to assist an association of troubled minority-owned banks -- as she contended -- or whether she was trying to get a bailout for OneUnited, the bank where her husband is an investor.
She contended she had nothing to do with the government's eventual decision to give OneUnited a $12 million bailout, and U.S. officials involved in the decision backed her up on that point. Ethics committee members ultimately agreed.
The banks were in trouble because of their investments in mortgage giants Fannie Mae and Freddie Mac, which were taken over by the government.
Waters had been under investigation since 2009, starting with the independent Office of Congressional Ethics. The case later shifted to the Ethics Committee, where it has caused much dissension.
The two committee lawyers who originally worked on the case were suspended by the panel's former Democratic chairman, who accused them of meeting with committee Republicans while excluding Democrats.