Financial Disclosure Reports Show 25% Error Rate
Members of Congress are required to disclose their personal finances by the beginning of next week, but if past efforts are any indicator, about a quarter of lawmakers will probably file inaccurate disclosure forms.
Members of Congress and certain senior-level staffers are required by federal law to file the annual report — due Monday — in order to provide a public window into lawmakers’ income, investments and liabilities. But the initial information provided by Members is frequently wrong. A Roll Call analysis of filings with the Clerk of the House shows that three out of 10 House Members filed amendments to prior disclosures last year. In the Senate, more than 12 percent of all filings last year were amending prior incorrect submissions, according to data gathered by CQ MoneyLine.
Lying on disclosure forms is a crime, but there is essentially no penalty for simply getting them wrong.
Requirements to report details about real estate holdings, self-directed investment accounts and capital gains from the sale of property or stocks frequently trip up lawmakers.
Though the House Ethics Committee revised and expanded its instruction manual this year to address these issues, many Members submit forms with omissions, typos or mathematical errors that can swing their apparent net worth by millions of dollars.
For example, Rep. Brian Bilbray has corrected the disclosure he filed last year four times and is working on another amendment. The issue is a family tax consulting business, which has a reported value swinging from as little as $15,000 to as much as $50 million, depending on the version of the form.
In his initial disclosure, the California Republican reported that his wife earned $52,000 from a tax business valued at $25 million to $50 million. In his first amendment — filed to include previously omitted capital gains from the sale of a property in Montana after Roll Call contacted him — Bilbray reduced the valuation of the tax business to $15,001 to $50,000. In subsequent filings in June and July of last year, the value of Bilbray Tax Service vacillates between the two figures. A representative from Bilbray’s office said a new amendment is in the mail that will correctly note the value of the business as $15,001 to $50,000.
Attorneys who assist lawmakers with their annual filings say it’s easy to run afoul. Cleta Mitchell, a member of Foley & Lardner’s political law practice, said lawmakers frequently use tax preparers and accountants to assist them with financial disclosures, though the process is quite different than completing a tax return.
“It’s counterintuitive for people who are in the financial world, and it’s complicated,” Mitchell said.
Sen. Richard Blumenthal, who topped Roll Call’s list of the richest freshmen in Congress with a net worth of at least $64 million, has amended his financial disclosure forms three times since he first filed last April. In the first corrected filing, submitted in June, he added 14 additional footnotes describing his vast array of real estate holdings and investment accounts. In August, the Connecticut Democrat added details about real estate assets worth $15,001 to $50,000. In October, Blumenthal submitted three more footnotes that listed details about three investment funds that together could be worth as much as $800,000.
Mitchell said voluntary amendments are inevitable given the complexity of the process and should not be viewed as a sign of wrongdoing.
“When people find additional information, it should be encouraged, not discouraged,” said Mitchell, who was not speaking about any lawmaker specifically. “I don’t think amendments should be frowned upon.”
Members of the House Ethics Committee, which publishes the rule book governing financial disclosure, have themselves been confused by the disclosure forms. Texas GOP Reps. Mike Conaway and Michael McCaul amended their initial filings last year, as did Rep. John Yarmuth (D-Ky.), who joined the committee this year.
Ethics ranking member Linda Sánchez (D-Calif.) failed to disclose royalties from a book she wrote with sister Rep. Loretta Sanchez (D-Calif.) for more than two years and did not report the necessary details about mortgages and lines of home equity credit for properties she rented out, flaws first reported by Politico. A spokesman for Sánchez said she amended her financial disclosures and has submitted drafts to the committee, though they have not yet been posted online.
“The Congresswoman prepared her amendments to her FDs immediately after recognizing the omissions and small errors,” Communications Director Adam Hudson said. “Congresswoman Sanchez sought additional guidance related to publishing agreements, because the Committee had made changes to the reporting requirements for two of the years that will also impact the FD she will file this year.”
Some lawmakers discovered problems with prior forms as they were readying disclosures due this year.
Rep. Fred Upton said he noticed in late April that he had erroneously omitted five life insurance policies from his prior-year disclosures. Collectively, the five policies are worth at least $181,000 and will be included on this year’s disclosure form.
“As I began to prepare to file for my 2010 Financial Disclosure Report, I reviewed the top 10 Financial Disclosure Mistakes flier that was included and noted I [had] mistakenly not included the life insurance policies that my wife and I hold,” the Michigan Republican said in a letter of explanation to the Clerk of the House.