Ex-Rep. Grimm Said to Wipe Out $400,000 in Campaign Debt

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By Kenneth P. Doyle

An agreement reached by former Rep. Michael Grimm’s (R-N.Y.) campaign committee to wipe out nearly $400,000 in debts to a major law firm was questioned by legal experts interviewed by Bloomberg Government.

The move, reported in a new Federal Election Commission filing, eliminated Grimm’s longstanding campaign debt around the same time that the controversial former congressman, who recently was released from prison after serving a sentence for tax evasion, announced he would run again for his old seat in the U.S. House. Grimm is challenging Rep. Dan Donovan (R-N.Y.) in a Republican primary.

The newly filed FEC report said Grimm’s campaign paid $25,000 last month to the Washington office of the law firm Squire Patton Boggs. The rest of the campaign’s debt to the firm--totaling nearly $422,000--“has been adjusted by mutual agreement,” the report said.

Grimm, who served in Congress from 2011 to 2015, accumulated large legal bills during a lengthy campaign finance investigation. He was represented by attorney William McGinley, who is now the White House Cabinet secretary under President Donald Trump. When he represented Grimm, McGinley worked for the law firm Patton Boggs, which later merged with another firm, Squire Sanders, to become Squire Patton Boggs.

No FEC Approval

Legal experts questioned Grimm’s filing claiming that most of his campaign debts to the law firm have been erased. Elimination of campaign debts usually must be approved by the FEC in a debt-settlement agreement, or else the forgiven debts could be considered illegal campaign contributions. Debt-settlement agreements usually are filed with the FEC when a candidate has retired from politics and has little prospect of running or raising campaign money again.

“It’s possible for a campaign vendor to forgive debts owed by a federal candidate, but that can generally only be done after the candidate has filed a debt settlement plan with the FEC and it has been approved by the Commission,” election lawyer Brett Kappel of the firm Akerman LLP told Bloomberg Government.

FEC officials declined to comment specifically on Grimm’s recent campaign filing but noted that all filings are reviewed by the agency’s Reports Analysis Division to determine if they pass legal muster.

An FEC guidance document for candidates says only a terminating campaign committee may settle debts for less than the full amount owed to the creditor. In addition, debts can’t be settled if a new campaign committee has been formed for the same candidate and has enough cash to pay debts owed by the previous campaign committee.

Debts Erased as New Committee Forms

Spokespersons for the Grimm campaign and Squire Patton Boggs couldn’t be reached immediately by Bloomberg Government for comment.

The most recent filing by Grimm’s original campaign committee, Michael Grimm for Congress, was submitted to the FEC on Oct. 14 and showed over $27,000 in cash on hand and no debts. Less than two weeks earlier, a new Grimm campaign committee called Friends of Michael Grimm filed a statement of organization with the FEC.

The new committee’s filing came the day after Grimm held a rally in his former congressional district in Staten Island announcing that he was running for Congress again. The new campaign committee hasn’t yet reported whether it has raised or spent any money.

An announcement for Grimm’s Oct. 1 kickoff campaign rally blamed his recent legal troubles and imprisonment on persecution by the Obama administration. “Tragically, our Congressman upset the powers that be, and he was driven from office in a politicized abuse of the justice system rivaled only by the current fishing expedition targeting our President, Donald Trump,” the announcement said.

FEC: Grimm Broke Campaign Finance Law

Grimm was sentenced in 2015 to eight months in prison for scamming the government of taxes in his operation of a Manhattan health food restaurant. He pleaded guilty to one count of helping prepare a false tax return.

The guilty plea followed a lengthy investigation of Grimm involving multiple legal issues, including campaign finance violations. The Staten Island Republican gained national notoriety after threatening in a televised incident to throw a reporter off a Capitol balcony when the reporter questioned Grimm about the investigation.

After Grimm was imprisoned on the tax conviction, the FEC released documents in a civil enforcement matter finding reason to believe that Grimm “knowingly and willfully” solicited illegal foreign campaign contributions. According to the FEC documents, Grimm’s solicitation of foreign campaign funds centered on contributions from members of Mosdot Shuva Israel, a religious organization that included Israeli citizens led by Rabbi Yoshiyahu Yosef Pinto. The contributions were first highlighted in a 2012 article in the New York Times.

FEC documents said the agency’s investigation of Grimm showed he “solicited and received contributions from individuals whom Grimm knew to be foreign nationals, and that those contributions, in some cases, were made in the names of others.” The commission’s vote to find that Grimm violated the law came within days of the expiration of a five-year statute of limitations for the violations in the matter—designated Matter Under Review (MUR) 6528. The FEC said it wouldn’t seek a penalty because of the statute of limitations on the violation.

Grimm’s attorney in the campaign finance probe, McGinley, later moved to the firm Jones Day, which represented Trump’s 2016 presidential campaign. Patton Boggs merged with the firm Squire Sanders in 2014 to become Squire Patton Boggs, the firm the Grimm campaign says has now agreed to erase nearly all its debts.

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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