Can Selling Something Be an Ethics Violation? | A Question of Ethics
Q. I read that Rep. Aaron Schock, R-Ill., may face an ethics investigation for selling his house for too high a price. As a longtime House staffer, this worried me. I’ve sold several big-ticket items over the years — cars, a boat, houses, and while I’ve always tried to make sure that the selling price is not too low, it never occurred to me to ensure that the price is not too high. Can it really be an ethics violation to get too good of a deal on something I sell?
A. Good question. In theory, it is conceivable that selling something could give rise to an ethics violation. House gift rules prohibit members and staffers from accepting anything of value — including money — unless an exception applies. One of the exceptions allows receipt of something for which the recipient pays market value. Conversely, the House Ethics Manual says an improper gift may exist when a member or staffer is sold property at less than market value, “or receives more than market value in selling property.” In practice it would be hard to imagine the House Ethics Committee would deem it an ethics violation for a member or staffer to negotiate a good deal in an arms-length transaction. Absent evidence the deal resulted from some sort of conspiracy between the seller and buyer, it seems unlikely the Ethics Committee would be concerned.
Earlier this month, an advocacy group sent a letter to the Office of Congressional Ethics requesting an investigation into whether Schock improperly sold his house at a price above market value. The OCE is the organization that screens ethics complaints by the public against members and staffers to determine whether further review is warranted by the House Ethics Committee.
According to the letter sent by Citizens for Responsibility and Ethics in Washington, in October 2012 Schock sold his home in Dunlap, Illinois for $925,000. While CREW alleges this price was “far in excess” of fair market value, CREW’s letter does not include a professional independent appraisal of the value of Schock’s home at the time of the sale. Rather, CREW cites circumstantial evidence about whether the market value of Schock’s home was as high as $925,000 at the time of the sale. For example, CREW cites valuations by websites such as Zillow, as well as prices for sales of “comparable homes” in the neighborhood of Schock’s house, which CREW says were hundreds of thousands of dollars less.
If this were the extent of the evidence, it seems unlikely to capture the Ethics Committee’s interest. While CREW cites circumstantial evidence intended to show Schock received more than market value for his home, other circumstantial evidence seems to swing the other way. For example, the same Zillow site that CREW cites shows that Schock’s house was put on the market in April 2008 at a price of $1,085,000, and stayed on the market until February 2009, when the listing was removed. Zillow states it was also put on the market later that year for $995,000, before being removed again the following year.
The Ethics Committee is, of course, not comprised of experts in property valuations. Nor does it have expertise in valuing cars, boats, collectibles or other items members and staffers often buy and sell. It cannot possibly have the time and resources to second-guess the many sales members and staffers make on a daily basis, absent evidence of foul play.
Here, CREW contends, such evidence may exist. CREW’s letter notes that the home purchaser contributed to Schock’s campaign in 2008 and also to Schock’s joint fundraising committee in 2014. In addition, the corporate political action committee of the company for whom the purchaser was formerly employed has been a regular contributor to Schock’s campaigns. Schock has responded that he never spoke to the buyer about the sale, and said a real estate agent handled the entire transaction.
Are these circumstances enough to suggest foul play? Ultimately that will be for the OCE to decide. The rules require the OCE to review any matter brought before its attention by considering all of the allegations, relevant documents and sometimes conducting witness interviews. If that review concludes there is substantial reason to believe the allegations, it will refer the matter to the Ethics Committee for further consideration.
Whatever the result of that investigation, you need not worry too much about your own sales. Perhaps if you receive an eye-popping offer, you should confirm that everything is above board. But, so long as you are engaging in normal, arms-length transactions, negotiate away.
C. Simon Davidson is an attorney with the law firm McGuireWoods. Submit questions to email@example.com. Questions do not create an attorney-client relationship. Readers should not treat his column as legal advice.
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