Money & Politics Report provides comprehensive behind-the-scenes coverage of campaign finance, lobbying, and government ethics issues at the federal, state, and local levels.
Sen. Ted Cruz (R-Texas) has refused demands by the Federal Election Commission to provide more public details about more than $1 million in bank loans that helped finance his original campaign for the Senate in 2012, according to a new memorandum from FEC staff auditors.
Questions about Cruz’s loans were raised in news reports during last year’s presidential campaign, when the Texas senator was running for the Republican presidential nomination. The questions have never been fully resolved, according to the FEC auditors.
An audit finding that Cruz violated campaign finance reporting rules is set to be considered at the FEC commissioners’ next open meeting May 25. Cruz’s office told Bloomberg BNA that the campaign disclosure reports would be amended after the FEC commissioners approve the audit findings.
Cruz acknowledged in a letter to the FEC in January 2016 that he used loans from Goldman Sachs Group Inc. and Citibank, a subsidiary of Citigroup Inc., to help finance his 2012 campaign for the Senate. The letter did not provide details about the loans, including whether they were secured by assets held jointly by Cruz and his wife, Heidi, who had worked for Goldman Sachs.
The loans weren’t reported, as required by FEC rules, in Cruz’s original Senate campaign finance reports, and those reports have never been amended, the FEC auditors’ memo said. Cruz’s Senate campaign committee “declined to make any additional comments regarding this matter” in response to questions from FEC auditors.
The auditors’ memo recommended that the FEC find Cruz’s Senate campaign “failed to properly disclose” that $1,064,000 in funds it reported as candidate loans originated from commercial lenders.
Although Cruz’s failure to report the loans wasn’t questioned in 2012, questions were raised in news stories last year, during the presidential campaign. His campaign said the failure to list the bank loans in the initial FEC reports was inadvertent and noted that the loans were disclosed on personal financial disclosure reports filed with the Senate Ethics Committee.
Cruz’s Senate campaign committee sent a January 2016 letter to the FEC “to supplement the public record” regarding its loans from the candidate. The three-sentence letter stated that the “underlying source of some of the loan amounts” was a Goldman Sachs margin loan and a Citibank line of credit, but it provided scant details.
The FEC auditors’ findings on the matter are set to be considered by the FEC commissioners at a meeting May 25. The FEC meeting agenda also includes long-pending audit findings regarding the Colorado Republican Party, a draft advisory opinion (AO 2017-02) regarding deposits by federal political committees, and possible new FEC rulemakings on political party committees.
In addition to the findings on the Cruz campaign’s failure to report bank loans, the FEC auditors’ memo also found that Cruz didn’t convert some candidate loans to his campaign committee into campaign contributions, as required by the law and FEC regulations.
Federal campaign finance law restricts the amount and timing of candidate loans that can be paid back with other contributions after an election is over. Cruz ignored this requirement, however, and his campaign continued to report $545,000 as a loan payable to the candidate for years after the 2012 Senate election was over, according to the FEC auditors’ memo. The campaign repaid $485,000 to Cruz within the requirements of the law, the memo said.
After a conference with FEC auditors in 2015, Cruz’s campaign committee agreed to convert the $545,000 it had reported as a candidate loan balance into a contribution from the candidate. The campaign committee said, however, that it “reserves the right to challenge the constitutionality” of restrictions on the amount of personal debt that may be repaid by a campaign to a candidate.
The FEC told Cruz’s campaign last year that rules on reporting of candidate loans to a campaign require clarification of “whether or not the candidate used personal funds or borrowed the money from a lending institution or some other source.”
The agency’s letter, signed by Bradley Matheson of the FEC’s Reports Analysis Division, requested that Cruz’s Senate campaign committee amend its previously filed disclosure reports to indicate the source of each loan and whether the loan to the campaign was derived from the candidate’s personal funds or obtained from a bank loan, brokerage account, credit card, home equity line of credit, or other line of credit.
The FEC letter, known as a request for additional information, or RFAI, gave the Cruz campaign a deadline of March 8, 2016, to respond and correct its reporting problems. Cruz’s campaign treasurer, Bradley Knippa, responded the the FEC in a letter on that date, but the letter indicated the campaign wouldn’t provide the requested information on the public record.
Knippa’s letter said that enforcement complaints had been filed with the FEC regarding the bank loans at issue. FEC enforcement matters generally are handled secretly until they are resolved, and Knippa said it was the campaign’s understanding that RFAI’s aren’t sent out by the FEC during the pendency of an enforcement matter.
“You can expect our cooperation to bring this matter to a quick and amicable resolution,” Knippa’s letter said. More than a year after the letter was sent, no resolution of an FEC enforcement matter involving Cruz’s campaign has yet been announced.
To contact the reporter on this story: Kenneth P. Doyle in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)