Self-Dealing Omitted: Rep. Grace Napolitano Pays Herself $200,000 In Interest On '98 Loan
The Democrats campaigned to take over the reins of the majority in Congress by promising to "drain the swamp" of a "culture of corruption" by the Republican Party. Examples of Democratic corruption or self-dealing go largely unnoticed. For two weeks now, the national media has ignored a Los Angeles Times report that Rep. Grace Napolitano has paid herself more than $150,000 in interest on $150,000 she loaned herself in her initial 1998 House campaign. (The Whittier Daily News later amended that figure upward to $205,922.) With the exception of the Hannity show on Fox News, no one else in the national media has noticed. Andrew Zajac reported on February 14:
Rep. Grace F. Napolitano (D-Norwalk) has collected tens of thousands of dollars in personal income by charging double-digit interest on money she lent her campaign 11 years ago and soliciting donations from Washington lobbyists at "debt retirement" fundraisers.
Napolitano, 72, has taken advantage of a 1998 Federal Election Commission ruling that authorized her to lend $150,000 to her campaign at 18% interest, accepting her argument that the money was from a retirement fund subject to an early withdrawal penalty equivalent to that rate. She lowered the interest on the loan to 10% in mid-2006.
FEC rulings have given candidates the latitude to charge a "commercially reasonable rate" of interest for personal loans to campaign committees, said commission spokeswoman Judith Ingram.
Lawmakers aren't allowed to convert campaign funds to personal use, but laws governing the subject are arcane, Ingram said. "You have to look carefully at the regulations and see when and if that's taken place," she said.
Napolitano spokesman Christopher Honey declined to comment on the loan and said that Napolitano would not speak to a reporter about it.
Napolitano's campaign finance forms indicate that she has collected more than $158,000 in interest on the loan since 2001 and has reduced the principal by about $65,000.
The loan was first reported Friday by Bloomberg News, which said the congresswoman had paid herself $221,780 in interest since 1998. Napolitano held at least one fundraiser each in 2007 and 2008 to collect money for the loan, according to campaign records.
Both were hosted by 21st Century Group Inc., a Capitol Hill lobbying firm whose clients include several transportation interests.
Napolitano is a member of the House Transportation and Infrastructure Committee and is chairwoman of the water and power subcommittee of the Natural Resources Committee....
A former office worker at Ford Motor Co., Napolitano made the loan to her campaign during her first run for Congress, withdrawing it from a stock retirement account she held with the automaker.
The accrued interest payments have since become the largest asset she lists on her annual financial disclosure statement.
The 1998 FEC ruling, made in response to a complaint by her primary opponent, James Casso, stated the rate was high but permissible because of the circumstances outlined by Napolitano.
Napolitano's case is unusual if only because she used her relatively modest income to justify the high interest rate, said Kent Cooper, a retired chief of public disclosure at the FEC.
In Congress, "most of the time you're dealing with extremely wealthy people," Cooper said. He said that lobbyists tend to contribute to fundraisers for debt retirement because "they know it's really helping the member."
Napolitano's most recent filing, on Jan. 31, indicated a due date on the loan of Dec. 31, 2008, but still listed a balance of $85,272.
On February 16, Sean Hannity reported briefly on the matter:
Now one Democratic congresswoman does not need the government's economic stimulus package. California representative Grace Napolitano has found a way to beat these tough economic times on her own. Now according to Bloomberg News since 1998 Congresswoman Napolitano has made over $220,000 from interest payments on a loan that she made to her own congressional campaign.
Although the original loan was only $150,000, well, Napolitano's been able to accumulate nearly $250,000 by charging as much as 18 percent interest on the loan, and it's still not paid off. Now Napolitano has argued that the excessive interest rate is justified because she had to pay penalties for using stock from her Ford Motor Company retirement fund for the original loan.
Now we now know that Napolitano is making out like a bandit. Now the stock that she sold to make the loan was worth $40 a share in 1998 and is now worth less than $2 a share. Ouch.