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Feb. 13 (Bloomberg) -- During a decade in Congress, California Representative Grace Napolitano has pocketed more than $200,000 of political contributions by charging as much as 18 percent interest on money she loaned to her own campaign.
The suburban Los Angeles Democrat made the $150,000 loan in 1998, when she was first elected to the U.S. House of Representatives. Through Dec. 31, her campaign committee has used donations to pay Napolitano $221,780 of interest while reducing the principal by just $64,727, a review of her Federal Election Commission filings shows.
As recently as June 2008, Napolitano held a fundraiser asking supporters and political action committees for money to pay down the 1998 debt. Napolitano, her spokesman and her campaign?s lawyers didn?t respond to requests for comment.
?I find this practice quite reprehensible,? said Craig Holman, government affairs lobbyist for Public Citizen, a Washington advocacy group. Interest payments from Napolitano?s campaign treasury have ?proven exorbitantly profitable,? he said. ?Candidates are not supposed to personally benefit from these campaign funds.?
The Federal Election Commission in 1999 ruled the loan and its 18 percent rate were allowed by U.S. election laws, after a complaint by Napolitano?s 1998 Democratic primary opponent. The commission agreed with Napolitano?s explanation that the interest charges were justified because Napolitano had to pay penalties for taking the money from a retirement account.
Lengthy Loan
Former FEC Chairman Scott Thomas, a Democrat, said that while interest charges are legal he?s never seen another case ?where someone has basically continued to generate interest income off a campaign loan this long.? Most candidates only seek repayment of the initial loan amount, Thomas said.
?This is unbelievable -- it really is extraordinary,? said Michael Toner, a former Republican member of the FEC who was general counsel for George W. Bush?s 2000 presidential campaign. Toner said he ?cannot recall a situation? where a candidate collected interest in sums that ?actually exceeded the original loan balance.?
For Napolitano, a 72-year-old grandmother of 14, the campaign IOU has been a profitable asset, far outperforming stocks since the loan started accruing interest in May 1998. Over the same period, an investment in the Standard & Poor?s 500 stocks, with reinvested dividends, would have lost more than 7 percent, according to Bloomberg data.
In the first five months of 2008, Napolitano?s campaign paid her almost $68,000 of interest, according to FEC records. An additional $15,227 of principal was paid last May.
Biggest Asset
The debt is the biggest asset listed in Napolitano?s financial-disclosure filings, which don?t include personal residences. A former Ford Motor Co. secretary, Napolitano withdrew $150,000 for the loan from an employee-stock retirement plan. Ford shares, which traded for about $45 in May 1998, closed yesterday at $1.79.
Napolitano gave the money to her campaign in March 1998 and began charging 18 percent interest on May 3, 1998, after the deadline passed for moving the funds into another retirement account without early withdrawal penalties, according to FEC records.
Napolitano cut the interest charge to 10 percent in July 2006. As of Dec. 31, the campaign owed $85,273 of principal and $5,549 of unpaid interest, according to FEC filings.
When the FEC investigated her opponent?s 1998 complaint about the loan, Napolitano?s lawyer, Diane Fishburn, said the 18 percent interest rate was ?not out of line with the rates on other unsecured loan transactions.? The FEC concluded that the interest rate, while ?high,? was allowable.
FEC Ruling
?It does not appear that the 18 percent interest rate for the $150,000 loan amounts to a conversion of campaign funds to the candidate?s personal use or that the $150,000 loan was made on commercially unreasonable terms,? the commission ruled.
Napolitano didn?t charge interest on an additional $70,000 of loans to her 1998 campaign. FEC records show that the campaign repaid at least $59,000 of the interest-free loans by August 1999. The interest-free loans aren?t listed on campaign filings after early 2000.
Last year, when Napolitano faced only token opposition for a sixth term, her campaign sought $500 from individuals and $1,500 from political action committees at a June 25 Washington fundraiser. The money was to go at least in part for ?1998 primary debt retirement,? according to her campaign Web site.
Napolitano is chairman of the House Natural Resources Committee?s water and power subcommittee and a member of the Transportation and Infrastructure Committee.
Political Contributions
From May 15 to Aug. 4, 2008, Napolitano?s FEC filing says she collected money from five political action committees that designated the funds for the 1998 primary. Contributors included PACs associated with Edison International, the owner of California?s largest electric utility; Parsons Corp., an engineering and construction company in Pasadena, California; and the American Road & Transportation Builders Association. Other donors included Fannie Mae and the National Community Pharmacists Association.
Edison spokeswoman Lauren Bartlett said in an e-mail that its PAC donates to debt retirement ?in rare cases.?
Lisa Camooso Miller, vice president of public affairs at the community pharmacists? group, said the association gave $1,500 to Napolitano for debt repayment and wrote a separate $1,000 check to be allocated at the lawmaker?s discretion. An FEC filing by Napolitano?s campaign earmarks the full $2,500 to the 1998 debt.
Dave Bauer, a spokesman for the road builders, said the group gave to the debt-reduction effort because ?we feel like supporting debt retirement is supporting the member of Congress.?
Fannie Mae spokesman Chuck Greener had no immediate comment. The mortgage-finance company closed its PAC after the federal government?s September takeover. Erin Kuhlman, corporate relations vice president for Parsons, declined comment.
Through year?s end, Napolitano had reported no payments for loan interest or principal since the June 25 fundraiser.
Napolitano won almost 82 percent of the vote in last year?s general election, where she was opposed by a third-party candidate who spent no money on the campaign.
A biography on Napolitano?s congressional Web site says she has five children, 14 grandchildren and a great-grandson. Napolitano was mayor of Norwalk, California, and a state assembly representative before her election to Congress.
Nice way to indirectly take bribes. Loan money then ensure it is never paid off, and you can continuously siphon interest to your own pockets from campaign donors. When is the change coming to Washington??
Feb. 13 (Bloomberg) -- During a decade in Congress, California Representative Grace Napolitano has pocketed more than $200,000 of political contributions by charging as much as 18 percent interest on money she loaned to her own campaign.
The suburban Los Angeles Democrat made the $150,000 loan in 1998, when she was first elected to the U.S. House of Representatives. Through Dec. 31, her campaign committee has used donations to pay Napolitano $221,780 of interest while reducing the principal by just $64,727, a review of her Federal Election Commission filings shows.
As recently as June 2008, Napolitano held a fundraiser asking supporters and political action committees for money to pay down the 1998 debt. Napolitano, her spokesman and her campaign?s lawyers didn?t respond to requests for comment.
?I find this practice quite reprehensible,? said Craig Holman, government affairs lobbyist for Public Citizen, a Washington advocacy group. Interest payments from Napolitano?s campaign treasury have ?proven exorbitantly profitable,? he said. ?Candidates are not supposed to personally benefit from these campaign funds.?
The Federal Election Commission in 1999 ruled the loan and its 18 percent rate were allowed by U.S. election laws, after a complaint by Napolitano?s 1998 Democratic primary opponent. The commission agreed with Napolitano?s explanation that the interest charges were justified because Napolitano had to pay penalties for taking the money from a retirement account.
Lengthy Loan
Former FEC Chairman Scott Thomas, a Democrat, said that while interest charges are legal he?s never seen another case ?where someone has basically continued to generate interest income off a campaign loan this long.? Most candidates only seek repayment of the initial loan amount, Thomas said.
?This is unbelievable -- it really is extraordinary,? said Michael Toner, a former Republican member of the FEC who was general counsel for George W. Bush?s 2000 presidential campaign. Toner said he ?cannot recall a situation? where a candidate collected interest in sums that ?actually exceeded the original loan balance.?
For Napolitano, a 72-year-old grandmother of 14, the campaign IOU has been a profitable asset, far outperforming stocks since the loan started accruing interest in May 1998. Over the same period, an investment in the Standard & Poor?s 500 stocks, with reinvested dividends, would have lost more than 7 percent, according to Bloomberg data.
In the first five months of 2008, Napolitano?s campaign paid her almost $68,000 of interest, according to FEC records. An additional $15,227 of principal was paid last May.
Biggest Asset
The debt is the biggest asset listed in Napolitano?s financial-disclosure filings, which don?t include personal residences. A former Ford Motor Co. secretary, Napolitano withdrew $150,000 for the loan from an employee-stock retirement plan. Ford shares, which traded for about $45 in May 1998, closed yesterday at $1.79.
Napolitano gave the money to her campaign in March 1998 and began charging 18 percent interest on May 3, 1998, after the deadline passed for moving the funds into another retirement account without early withdrawal penalties, according to FEC records.
Napolitano cut the interest charge to 10 percent in July 2006. As of Dec. 31, the campaign owed $85,273 of principal and $5,549 of unpaid interest, according to FEC filings.
When the FEC investigated her opponent?s 1998 complaint about the loan, Napolitano?s lawyer, Diane Fishburn, said the 18 percent interest rate was ?not out of line with the rates on other unsecured loan transactions.? The FEC concluded that the interest rate, while ?high,? was allowable.
FEC Ruling
?It does not appear that the 18 percent interest rate for the $150,000 loan amounts to a conversion of campaign funds to the candidate?s personal use or that the $150,000 loan was made on commercially unreasonable terms,? the commission ruled.
Napolitano didn?t charge interest on an additional $70,000 of loans to her 1998 campaign. FEC records show that the campaign repaid at least $59,000 of the interest-free loans by August 1999. The interest-free loans aren?t listed on campaign filings after early 2000.
Last year, when Napolitano faced only token opposition for a sixth term, her campaign sought $500 from individuals and $1,500 from political action committees at a June 25 Washington fundraiser. The money was to go at least in part for ?1998 primary debt retirement,? according to her campaign Web site.
Napolitano is chairman of the House Natural Resources Committee?s water and power subcommittee and a member of the Transportation and Infrastructure Committee.
Political Contributions
From May 15 to Aug. 4, 2008, Napolitano?s FEC filing says she collected money from five political action committees that designated the funds for the 1998 primary. Contributors included PACs associated with Edison International, the owner of California?s largest electric utility; Parsons Corp., an engineering and construction company in Pasadena, California; and the American Road & Transportation Builders Association. Other donors included Fannie Mae and the National Community Pharmacists Association.
Edison spokeswoman Lauren Bartlett said in an e-mail that its PAC donates to debt retirement ?in rare cases.?
Lisa Camooso Miller, vice president of public affairs at the community pharmacists? group, said the association gave $1,500 to Napolitano for debt repayment and wrote a separate $1,000 check to be allocated at the lawmaker?s discretion. An FEC filing by Napolitano?s campaign earmarks the full $2,500 to the 1998 debt.
Dave Bauer, a spokesman for the road builders, said the group gave to the debt-reduction effort because ?we feel like supporting debt retirement is supporting the member of Congress.?
Fannie Mae spokesman Chuck Greener had no immediate comment. The mortgage-finance company closed its PAC after the federal government?s September takeover. Erin Kuhlman, corporate relations vice president for Parsons, declined comment.
Through year?s end, Napolitano had reported no payments for loan interest or principal since the June 25 fundraiser.
Napolitano won almost 82 percent of the vote in last year?s general election, where she was opposed by a third-party candidate who spent no money on the campaign.
A biography on Napolitano?s congressional Web site says she has five children, 14 grandchildren and a great-grandson. Napolitano was mayor of Norwalk, California, and a state assembly representative before her election to Congress.
Nice way to indirectly take bribes. Loan money then ensure it is never paid off, and you can continuously siphon interest to your own pockets from campaign donors. When is the change coming to Washington??
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