Profits on Sales Go Unreported

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Clarification Appended

Dozens of financial disclosure forms filed by Members of Congress last year were apparently inaccurate, failing to report hundreds of thousands of dollars in income from stock sales and other transactions, but the Members believed their forms were correct because the House ethics committee approved them.

Roll Call has identified about a dozen Members of Congress who have acknowledged that they incorrectly reported their proceeds from sales of stock and at least two dozen other filings that appear to be incorrect, but the forms do not provide enough data to prove they are wrong. In many cases, the errors appear to have been repeated over several years.

In most cases, the Congressional offices contacted by Roll Call offered the same response: We didn’t know it was an error because the ethics committee approved it. In every case Roll Call identified, the Member of Congress provided enough information to indicate that a sale of stock or other property occurred, so there is no reason to believe that Members intentionally were trying to hide income.

The ethics committee staff members, on behalf of Chairwoman Stephanie Tubbs Jones (D-Ohio) and ranking member Doc Hastings (R-Wash.), declined to comment for this story.

Under House rules, each Member of Congress files a personal financial disclosure form every year listing income, assets, liabilities and transactions. The Committee on Standards of Official Conduct provides instructions for filling out these forms that stipulate that capital gains from stock sales must be listed as income and that the sale must also be listed on the “transactions” section of the form.

For example, Rep. Pete Hoekstra (R-Mich.) reported on his 2006 financial disclosure form that he had purchased stock in Interoil Company in a transaction valued from $1,001 to $15,000. He also reported that seven months later, he sold Interoil stock in a transaction valued in the same range. Historical stock tables indicate that the value of Interoil stock jumped almost $10 per share during that time period, and Hoekstra’s purchase and sale appear to have netted a profit somewhere from $675 to $9,875. That profit should be, but is not, listed on Hoekstra’s income tables. Hoekstra’s office did not return calls seeking an explanation for the omission.

Like all Members of Congress, Hoekstra’s disclosure form was reviewed by the ethics committee, but the committee doesn’t really fact-check financial disclosure forms, according to sources familiar with the process.

The committee’s rulebook explains that “the Committee shall designate staff counsel who shall review Financial Disclosure Statements, and, based upon the information contained therein, indicate ... whether the Statement appears substantially accurate and complete and the filer appears to be in compliance with applicable laws and rules.”

A guidance document for reviewers of financial disclosure forms produced by the Office of Government Ethics explains that disclosure rules “require that reviewers accept reports at face value.” If an asset is listed in the “transaction” section but not listed on the “income” section, “reviewers may assume that it produced no reportable income during the period prior to its sale or capital gains upon its sale,” the guidance advises.

Those guidelines do not require a reviewer to double-check a disclosure form to make sure that the information as reported is correct. But it does suggest that if “a large number of assets is sold without any income being reported, the reviewer should inquire further to ensure understanding of the instructions.”

Under these guidelines, a reviewer could have contacted Rep. John Tanner (D-Tenn.), who reported on his 2006 financial disclosure form that he had sold more than two dozen stocks on March 20, 2006, with each transaction ranging from $1,000 to $15,000. Tanner’s income table has no entry for any of these stocks, implying that he made no more than $200 on any of the sales. Tanner’s prior year disclosure reports offer no indication that he held many of these stocks, so it is impossible to know when he bought them or how much money he earned in sales that day.

Tanner spokesman Randy Ford, in an e-mail reply to Roll Call’s inquiry, said “We have checked and still have no indication that anything was filed inaccurately. If the committee thinks something is improper, Congressman Tanner will be happy to amend his paperwork as needed.”

Among the Members who were prompted to file amendments after having been contacted by Roll Call were Reps. Charlie Wilson (D-Ohio), Nita Lowey (D-N.Y), Jim Saxton (R-N.J.), David Dreier (R-Calif) and Jay Inslee (D-Wash.).

Other forms appear to be inaccurate, but the Members’ offices were unable to confirm the details of the transactions. Among the Members whose filings appear to be incomplete: Reps. Raúl Grijalva (D-Ariz.) and Jeff Flake (R-Ariz.).