Reprinted with permission from ProPublica.

A senior official in charge of a federal loan guarantee program resigned after ProPublica reported his prior role in obtaining a guarantee under the same program as part of a deal that failed.

The official, Gavin Clarkson, stepped down Monday as deputy assistant secretary for policy and economic development in the Interior Department’s Bureau of Indian Affairs. He was appointed in June and his position did not require Senate confirmation.

At the Bureau of Indian Affairs, Clarkson supervised a program that provides loan guarantees to Indian businesses. As ProPublica reported, in his previous role as a businessman and academic, he had arranged financing and a $20 million guarantee, under the same program, for a loan that helped an Indian tribe buy a Wall Street brokerage.

The loan did not appear to meet the department’s guidelines for a guarantee but one was approved anyway. The brokerage ultimately went bankrupt and the loan was defaulted on. The department is still fighting that liability in court. (Even though the loan went sour, Clarkson and his company were paid $327,500, according to a filing in a related lawsuit.)

The transaction was criticized by the Interior Department’s internal watchdog in two separate reports this year. In a report this March, the inspector general found that the loan guarantee Clarkson arranged “departed from” guidelines and raised several red flags that made it “particularly risky.” The IG didn’t find any criminal violations, and a related grand jury investigation did not return any indictments.

In a second report, which was released yesterday, the IG said the loan program lacked “adequate controls.”

Clarkson faced pressure to resign because he hadn’t disclosed his role in the scandal, according to a department official.

A department spokeswoman declined to comment, and Clarkson didn’t answer requests for comment.

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