Gallegly Gives Up Role as His Campaign’s Landlord : Politics: The Simi Valley congressman has also stopped leasing furniture to his office. He says he is tired of being questioned about the practices.

Rep. Elton Gallegly (R-Simi Valley) is no longer his campaign headquarters’ landlord and furniture leaser, longstanding practices that once led to a warning from federal election officials.

Emphasizing that he had done nothing wrong or illegal, Gallegly last week moved his campaign headquarters out of a building of which he was co-owner, saying he was weary of dealing with inquiries from The Times and others about the arrangements.

Gallegly had paid himself and the co-owners of the Simi Valley office building about $45,000 in rent in the five years since he first went to Congress.

The second-floor office in the Erringer Professional Building--which Gallegly owns with his wife, Janice, and another couple--previously had been used by Gallegly’s real estate company.

Gallegly also began leasing various pieces of furniture and office equipment to his campaign in early 1986 that he had purchased for his real estate operation. By mid-1991, he had run up a campaign debt of $12,266 for these items.

Both practices are permitted under federal law if they are fully reported and the rent and lease costs are equivalent to “reasonable commercial rates,” said Fred Eiland, a spokesman for the Federal Election Commission. If the costs are below market rates, the difference would be considered an in-kind campaign contribution and would have to be so reported.

Gallegly meticulously reported the figures. The monthly office rent total was $750; the equipment rental about $120 a month. Gallegly said both amounts were based on fair market rates. A local real estate agent agreed with him.

Gallegly, a three-term lawmaker, said he decided to change the practices after The Times sought detailed accountings of the costs in recent months.

“It’s the constant questions and the perception and so on,” Gallegly said. “You just get tired of the same people asking the same questions. It just eliminates any question in anybody’s mind about anything.”

In October, 1988, Gallegly asked the FEC whether it was permissible for his campaign committee to continue to accrue the office rental cost as a debt to him and his partners rather than paying it off regularly.

The campaign committee had accumulated $12,000 in rental debts during the 1987-88 election cycle to Elton and Janice Gallegly and Michael and Marcie Schweitzer, friends of the Galleglys who also have a 50% stake in the Erringer Building.

Prompted by Gallegly’s inquiry, the FEC opened an investigation that culminated in a decision not to take action. The commission voted 5 to 1 in February, 1991, to reject the recommendations of FEC General Counsel Lawrence M. Noble to initiate enforcement proceedings against Gallegly, the co-owners of the Erringer Building and Gallegly campaign treasurer D. Frank Norton Jr.

In an interview, Gallegly said that the FEC had told him that “it’s our interpretation that if you carry it any longer than this it’s going to be a contribution.”

However, in a Feb. 21, 1991, letter on file at the FEC, Noble informed Gallegly that “the non-payment of rent for the committee headquarters appears to be in violation” of federal election law. He added that “you should take immediate steps to ensure that this activity does not occur in the future.”

The commission determined that the unpaid rent was, in effect, an in-kind contribution from Janice Gallegly and the Schweitzers. Federal law limits individual contributions to $1,000 for a primary and general election, or a total of $2,000. In this case, the commission said, Janice Gallegly and the Schweitzers had each, in effect, contributed $3,100.

Candidates, such as Gallegly, can contribute unlimited amounts to their own campaigns.

Noble wrote: “The rent on office space and furniture results in excessive in-kind contributions because it appeared that the committee had sufficient funds to pay off the debt owed to Erringer, there is no evidence indicating that Erringer made any commercially reasonable attempts to collect the debt owed by the committee, and, in light of the relationships between the parties involved, the rental arrangement between Erringer and the committee does not appear to have been an arms-length transaction.”

Gallegly, who generally carries a hefty balance in his campaign fund, paid off $13,875 that his campaign owed for office rent on June 27, 1990--two weeks after the FEC notified him that the commission staff intended to recommend to the commissioners that the unpaid rent constituted a violation. His campaign has continued to pay the rent regularly since then.

Gallegly maintains that he was the victim of either misguidance by the FEC staff or a change in the commission’s position on the question of carrying the rent payment as a loan.

In 1988, he said, he was initially told by an FEC staffer that it was proper to carry the rent payments as debt and not to take any action on the matter. But, according to an FEC account of the conversation, the commission’s staff director had “confirmed the debt was being appropriately reported, but expressed concern over the length of time the debt had been outstanding,” FEC records show.

Gallegly said he carried the debt “to keep ourselves in as strong a cash position in the campaign as we could, not knowing who or what we would be running against.”

On Feb. 1, Gallegly moved his campaign office out of the building he co-owns and into a new Simi Valley location about three miles from his old headquarters. He said he gained slightly more space--704 square feet as compared to 685--but gave up window exposure and a large illuminated “Gallegly for Congress” sign. He will now pay $800 monthly, a $50 increase.

His most recent campaign report showed the committee had $354,197 on hand.

The rent paid by Gallegly’s campaign committee at the Erringer Building was slightly less than that paid by other tenants, according to figures supplied by the lawmaker on the condition that they not be published. Gallegly said none of the six offices in the two-story building had been vacant more than two weeks in the past 12 years.

During the FEC’s inquiry, Noble determined that the rent “was a fair market value,” according to FEC records. “Thus, no in-kind contributions in the form of rent discounts apparently occurred.” His later warning concerned only the length of time the debt was carried.

The Gallegly committee did not have a lease but rather was in the office on a month-to-month basis, he said. Unlike other tenants who had rent increases built into their leases, Gallegly’s rent had not been raised for his campaign office during his five years in Congress.

The decision to donate the furniture and equipment was reflected in Gallegly’s campaign finance report for the second half of 1991, which became available this week. He valued the items at $8,000 and turned them over to the committee as an in-kind contribution.

Gallegly said the equipment included 12 walnut desks, two Leatherette sofas, four filing cabinets, three IBM typewriters, a Sharp copy machine, a telephone system and other miscellaneous equipment and furniture. He described the furniture as “almost in new condition” when he was first elected in 1986.

“When we originally started the campaign office, we didn’t know if we were going to keep it open year-round,” Gallegly said. “So why go out and buy a bunch of new stuff not knowing how long we were going to keep a campaign office?”

Once he was elected to represent the 21st District, Gallegly said he decided to keep a campaign office open throughout his two-year term to forestall any concerns that he was using his taxpayer-funded offices for campaign work. At that point, he decided to retain the furniture and equipment that he had purchased several years earlier.

“The campaign treasurer said you’ve got to show the value of this stuff and establish what it would cost to lease it,” Gallegly recalled. “It certainly wasn’t a priority with me. I never even thought about it.”

Political consultants and other campaign veterans said that it is generally considered more cost-efficient for an elected official to buy office furniture and equipment than to rent it.

Gallegly’s campaign still owes him $21,866, according to a Jan. 31 campaign finance report.

In 1986, when he was a candidate, he owned the Erringer Building himself and loaned the campaign $800 a month, or a total of $9,600, for rent, which it has not paid off, according to Gallegly’s campaign report. The campaign also showed a debt to Gallegly of $12,266 for rental of equipment and furniture.