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Aren’t False Financial Disclosure Forms Illegal?

Q: I work for a Member of the House, and one of my responsibilities is to help her gather information for her annual financial disclosure statement. I have been doing this for years, and we have always been as careful as possible to ensure that the statements are free of errors. She has insisted on this approach. Then, last week, I saw that the House Ethics Committee dismissed charges that a Member had filed false financial disclosure statements. Apparently, the committee explained that errors on statements are common. Is it really legal to file false financial disclosure statements?

A: Is it legal to file a false financial disclosure statement? In a word, no. If this were not a family-friendly publication, I might have included a word before “no” for emphasis. But, this does not mean all types of errors on financial disclosure statements warrant sanctions. Given your role in helping your Member with the statements, I suspect you have a keen interest in this distinction.

Federal law requires all Members to file annual financial disclosure statements containing information about income, gifts, assets, liabilities and outside positions held. The requirement originates with the Ethics in Government Act and, according to the House Ethics Manual, provides a means of monitoring and deterring potential conflicts of interest.

Last week the House Ethics Committee released a report regarding its investigation of alleged false financial disclosure statements by Rep. Vern Buchanan (R-Fla.). In November 2011, the Office of Congressional Ethics referred the matter to the Ethics Committee, finding that there was “substantial reason to believe” that Buchanan failed to disclose reportable positions and income on his disclosure statements. The OCE stated that it was referring the matter for the committee to determine whether Buchanan’s subsequent amendments to his statements to remedy the omissions “were filed with a presumption of good faith.”

In last week’s report, the Ethics Committee stated that Buchanan’s actions did not warrant sanctions. The committee acknowledged in its report that the evidence showed that Buchanan’s statements for the years 2007-2010 contained errors. Specifically, the report stated that in those years Buchanan “did not accurately report certain income” and “did not report, in complete and accurate detail, all of the positions or ownership interests he held with several entities.”

However, the report concluded that the errors were “not substantively different from the hundreds or thousands of errors and omissions” that the committee requires filers to correct every year. The report says that errors are “an ordinary part of the process for many filers,” estimating that 30 percent to 50 percent of the statements the committee reviews each year contain errors. When a filer makes an error, the report says, the committee’s general practice is to notify the filer of the error and require an amendment, unless there is evidence that errors are knowing or willful, or appear to be significantly related to other potential violations. “Once the amendment is properly submitted, the committee takes no further action.”

This does not mean that errors can never lead to serious consequences. When filing a statement, a filer must certify that the statements it contains are “true, complete and correct to the best of my knowledge and belief.” Above this certification, there is a reminder that false statements can result in serious penalties and sanctions. Notably, Title 18, U.S. Code, Section 1001 makes it a crime to knowingly and willfully make a materially false, fictitious or fraudulent statement in any Congressional matter.

So, how can you tell the difference between ordinary errors and the kind that can lead to serious trouble? Although there is no clear answer, the Ethics Committee report on the Buchanan matter does provide some clues.

Examples of “substantial or egregious errors,” the report says, “may include the failure to report significant amounts or whole categories of earned income, particularly when such income is also withheld from reporting on taxes.” They also may include “failing to disclose significant positions or transaction representing direct and obvious conflicts of interest, or a series of numerous errors and omissions over many years which reflect a substantial portion of reportable items.”

Buchanan’s errors concerned positions with six companies that he said he inadvertently failed to include in his statements. The errors also concerned unreported income, which, Buchanan said, totaled less than $15,000 over four years, which was less than 0.0001 percent of the assets disclosed in his statements.

The committee noted that there was no evidence that Buchanan’s errors were knowing or willful and that, when Buchanan was alerted to the errors, he promptly filed amendments to correct them. By filing statements containing inadvertent errors that he later corrected, the committee said, Buchanan was in a “posture not uncommon among filers.”

The safest course remains for your Member to aim for complete accuracy. Even in Buchanan’s case, where the committee concluded that his errors and amendments did not warrant sanctions, those errors still exposed Buchanan to the time and expense of responding to investigations by both the OCE and the Ethics Committee. The more careful filers are about the accuracy of their statements, the lower their risk of similar investigations.

C. Simon Davidson is a partner with the law firm McGuireWoods. Click here to submit questions. Readers should not treat his column as legal advice. Questions do not create an attorney-client relationship.

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