A. September 23, 1987, Resolution of Preliminary Inquiry B. September 23, 1987, Notification to Representative Stallings........... 1. Relevant extracts of Representative Stallings' F.E.C. reports.. 2. Representative Stallings' September 29, 1987, letter to the Committee. 3. Representative Stallings' October 5, 1987, letter to the Committee ................... OCTOBER 20, 1987.-Referred to the House Calendar and ordered to be printed Mr. Dixon, from the Committee on Standards of Official Conduct, submitted the following REPORT 1. INTRODUCTION The Committee on Standards of Official Conduct (the "Committee") is authorized under the Rules of the House of Representatives (House Rule X, clause 4(e)(2)(B)), to investigate, in accordance with the Committee's Rules of Procedure, any alleged violation by a Member, officer, or employee of the House, of the Code of Official Conduct (House Rule XLIII). In addition, alleged violations of any law, rule, regulation, or other standard applicable to the conduct of such Member, officer, or employee, in the performance of his or her duties, or the discharge of his or her responsibilities are within the Committee's jurisdiction. On September 11 and September 14, 1987, news articles reported that Representative Stallings' campaign organization lent $1,000 on March 9, 1987, to the congressman's administrative assistant for personal expenses, and lent $4,800 on April 17, 1987, to the congressman to enable his purchase of a car. According to the news articles, the loan to the administrative assistant was "to help the congressional aide through a personal short-term financial crisis." Regarding the loan to Congressman Stallings, news reports indicated that the transaction was undertaken to enable the congressman's purchase of a "car that will be kept in Idaho and used for campaign and personal purposes." In the light of the news reports, the Committee obtained information corroborating that questionable financial transactions may have occurred in March and April, 1987, in connection with loans made from the congressman's campaign committee. Thus, as an exercise of authority and pursuant to the Committee's Rules of Proce 78-016 2 dure, the Committee determined that a Preliminary Inquiry should be undertaken with the view towards ascertaining all relevant facts and reaching an appropriate disposition of the matter. To this end, a Resolution of Preliminary Inquiry (Exhibit A) was adopted on September 23, 1987, and Representative Stallings was notified of that Committee action (Exhibit B). This report contains the results of the Committee's investigation undertaken pursuant to the Resolution. II. HIGHLIGHTS The Preliminary Inquiry established that, on two occasions, loans were made from Representative Stallings campaign organizationone loan to the congressman and one loan to the congressman's administrative assistant-under circumstances that were in violation of House Rule XLIII, clause 6. Representative Stallings did not contest the Committee's findings and, in fact, confirmed the information obtained by the Committee during the Preliminary Inquiry. In order to expedite the matter, and in light of his acknowledgement that the subject transactions ran afoul of House Rule XLIII, clause 6, Congressman Stallings waived his rights under the Committee's Rules of Procedure with respect to the issuance of a Statement of Alleged Violation and disciplinary hearing. In this connection, Representative Stallings admitted that error had been made in undertaking the two transactions and indicated that there was no intent on his part to hide the loans (since they had been fully disclosed on his F.E.C. reports). Rather, Representative Stallings said that the transactions were undertaken due to his failure to inquire about restrictions on use of campaign funds imposed by House Rule XLIII, clause 6, based upon his mistaken assumption that the loans were governed only by the Federal Election Campaign Act (FECA). The Committee believes that, under the circumstances here involved, a recommendation to the House of sanction would be inappropriate. Instead, the Committee concludes that Representative Stallings should receive a letter from the Committee reproving him for his violations. Accordingly, such correspondence will be sent to Representative Stallings and made publicly available along with this report. III. RESULTS OF INVESTIGATION The Preliminary Inquiry focused on two transactions that involved Congressman Richard Stallings' campaign organization. In the first transaction, the campaign organization loaned $1,000 on March 9, 1987, to Mr. Gary Catron, Representative Stallings' Administrative Assistant. Documents filed with the F.E.C. (App. 1) disclosed that this loan, which was initiated on March 9, was to be repaid on September 30, 1987, with 7 percent interest. By letter dated September 29, 1987, Congressman Stallings notified the Committee that this loan had been fully repaid. (App. 2) Furthermore, by letter of October 5, 1987, Representative Stallings, in response to a Committee inquiry (Exh. C), informed the Committee that the loan was to ease Mr. Catron's "short-term need for funds for personal purposes" and, therefore, was not undertak 3 en for the sole and exclusive benefit of the Stallings campaign organization. (App. 3) The Preliminary Inquiry also established, and Representative Stallings confirmed, that a loan to him was made on April 17, 1987, in the amount of $4,800 at 7 percent interest. (App. 3) In his October 5, 1987, letter to the Committee, the congressman indicated that this loan was to enable his acquisition of an automobile which cost $5,621.50, the use of which was for both personal and campaign purposes in the congressman's district in Idaho. Again, Representative Stallings stated that this loan was not undertaken for the sole and exclusive benefit of the campaign, a conclusion readily apparent given the mixed use of the automobile. Finally, in his October 5, 1987, letter, Representative Stallings stated that he participated in the process giving rise to the two loans. IV. LEGAL ANALYSIS Clause 6 of the Code of Official Conduct, House Rule XLIII, states: A Member of the House of Representatives shall keep his campaign funds separate from his personal funds. He shall convert no campaign funds to personal use in excess of reimbursement for legitimate and verifiable prior campaign expenditures and he shall expend no funds from his campaign account_not_attributable to bona fide campaign purposes. (Emphasis added.) In this Committee's report entitled, "Investigation of Financial Transactions of Representative James Weaver with his Campaign Organization", the Committee construed the scope and application of clause 6: Any use of campaign funds which personally benefit the Member rather than to exclusively and solely benefit the campaign is not a "bona fide campaign purpose." Moreover, a bona fide campaign purpose is not established merely because the use of campaign money might result in a campaign benefit as an incident to benefits personally realized by the recipient of such funds * Any other in. terpretation and application of the third prohibition of Rule XLIII, clause 6, would open the door to a potentially wide range of abuse and could result in situations where campaign monies were expended for the personal enjoyment, entertainment, or economic well-being of an individual without any clear nexus that the funds so expended achieved any political benefit to the disbursor (campaign organization) of the funds * The test of the propriety of any such campaign expenditure is, in the words of Rule XLIII, clause 6, whether the expenditure is 'attributable to a bona fide campaign purpose' and not whether the campaign has made money from that expenditure. In the case of a campaign organization lending money to its own candidate, the committee would expect such bona fide loan transactions to be attended by facts supporting the need 4 for a loan to the candidate as opposed to a direct expenditure. H. Rep. 99-933, pp. 13-14. [Emphasis added.] In the light of the above-quoted portions of the Weaver report, it is clear that the subject two loans were made in violation of the cited Rule; that is, they were not undertaken to "solely and exclusively" benefit the Stallings campaign organization. In his October 5, 1987, letter, Representative Stallings acknowleged the subject violations. V. CONCLUSIONS A. The loan to Mr. Catron for $1,000 undertaken on March 9, 1987, was to ease that individual's short-term financial difficulties and was, therefore, not for the sole and exclusive benefit of the Stallings campaign organization. Accordingly, this loan transaction was in violation of House Rule XLIII, clause 6. B. The loan to Congressman Stallings for $4,800 undertaken on April 17, 1987, was to enable the congressman's acquisition of an automobile to be used for campaign and personal purposes. Accordingly, since this transaction was not for the sole and exclusive benefit of the Stallings campaign organization, it, too, was a transaction which violated House Rule XLIII, clause 6. VI. RECOMMENDATION In reaching its decision on the appropriate disposition of this case, the Committee was guided by several important considerations-the nature of the violation and factors in mitigation. This approach is well-established. In the Manual of Offenses and Procedures, Korean Influence Investigation, (the "Manual") June 1977, the Committee offered, in part, a detailed explanation of the process and considerations underlying sanction recommendations. The Manual states, in part: House rule XLIII does not specify the sanction to be imposed upon a finding that a Member failed to adhere to the Code of Official Conduct. The committee should evaluate the particular circumstances of each violation to determine whether any sanction is warranted and, if so, the severity of the sanction that is appropriate under circumstances. Manual, p. 31. In applying the above-quoted approach to specific fact situations, the Manual goes on to state: In sum, the Committee should adopt the substantive |