Interest on campaign loan pays

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.

Both fundraisers were hosted by 21st Century lobbyist Jocelyn Hong, who could not be reached for comment.

An invitation to an April 30, 2007, fundraiser promised a “Traditional, Home-Style Mexican Breakfast” and invited political action committee checks of $1,500 or personal donations of $500, payable to the “Napolitano for Congress ‘1998 Primary Debt Retirement.’ ”

Napolitano occupies a safe Democratic seat and has never garnered less than 68% of the vote in her six House campaigns.

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.

Her campaign committee previously listed a due date of Dec. 31, 2002, but in early 2004, she extended the payment deadline.

FEC spokeswoman Ingram said she did not know if the loan was considered past due according to FEC reporting requirements or if there was a sanction for an arrearage.

“The analogy we would draw is payments by a campaign to a vendor. Those agreements are outside the FEC. How the commissioners would react if someone filed a complaint in this case, I don’t know,” Ingram said.

Invitations to the Napolitano debt retirement events were faxed by the Democratic Congressional Campaign Committee, but the committee otherwise had no role in the events, according to spokeswoman Jen Crider.

“As far as looking over shoulders, that’s not the role of the DCCC,” Crider said.

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azajac@tribune.com