[House Report 112-588]
[From the U.S. Government Publishing Office]


112th Congress 
 2d Session             HOUSE OF REPRESENTATIVES                 Report
                                                                112-588
_______________________________________________________________________

                                                 Union Calendar No. 145

 
                      IN THE MATTER OF ALLEGATIONS

                       RELATING TO REPRESENTATIVE

                           VERNON G. BUCHANAN

                               __________

                              R E P O R T

                                 of the

                          COMMITTEE ON ETHICS




   July 10, 2012.--Referred to the House Calendar and ordered to be 
                                printed
                          COMMITTEE ON ETHICS

JO BONNER, Alabama,                  LINDA T. SANCHEZ, California,
  Chairman                             Ranking Member
MICHAEL T. McCAUL, Texas             JOHN A. YARMUTH, Kentucky
K. MICHAEL CONAWAY, Texas            DONNA F. EDWARDS, Maryland
CHARLES W. DENT, Pennsylvania        PEDRO R. PIERLUISI, Puerto Rico
GREGG HARPER, Mississippi            JOE COURTNEY, Connecticut

                              REPORT STAFF

               Dan Schwager, Chief Counsel/Staff Director
             Deborah Sue Mayer, Director of Investigations
              Kelle A. Strickland, Counsel to the Chairman
            Daniel J. Taylor, Counsel to the Ranking Member
                      Christopher R. Tate, Counsel
                       Frank Davies, Investigator
                Brittany M. Bohren, Investigative Clerk
                          LETTER OF SUBMITTAL

                              ----------                              

                     U.S. House of Representatives,
                                       Committee on Ethics,
                                     Washington, DC, July 10, 2012.
Hon. Karen L. Haas,
Clerk, U.S. House of Representatives,
Washington, DC.
    Dear Ms. Haas: Pursuant to clauses 3(a)(2) and 3(b) of Rule 
XI of the Rules of the House of Representatives, we herewith 
transmit the attached Report, ``In the Matter of Allegations 
Relating to Representative Vernon G. Buchanan.''
            Sincerely,
                                                 Jo Bonner,
                                                          Chairman.
                                          Linda T. Sanchez,
                                                    Ranking Member.
                            C O N T E N T S

                              ----------                              
                                                                   Page
 I. INTRODUCTION......................................................1
II. HOUSE RULES, LAWS, REGULATIONS, AND OTHER STANDARDS OF CONDUCT....2
III.BACKGROUND........................................................3

IV. ANALYSIS..........................................................5
 V. CONCLUSION........................................................6
VI. STATEMENT UNDER RULE XIII, CLAUSE 3(c) OF THE RULES OF THE HOUSE OF 
    REPRESENTATIVES...................................................7
                                                 Union Calendar No. 145
112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-588

======================================================================




   IN THE MATTER OF ALLEGATIONS RELATING TO REPRESENTATIVE VERNON G. 
                                BUCHANAN

                                _______
                                

   July 10, 2012.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

               Mr. Bonner, from the Committee on Ethics, 
                        submitted the following

                              R E P O R T

                            I. INTRODUCTION

    On November 8, 2011, the Office of Congressional Ethics 
(OCE) forwarded to the Committee on Ethics (Committee) a Report 
and Findings related to Representative Vernon G. Buchanan's 
alleged failure to properly list on his Financial Disclosure 
Statements for 2007 through 2010, certain positions with a 
number of entities, as well as certain income from those 
positions. Representative Buchanan amended his 2007 through 
2010 Financial Disclosure Statements while OCE conducted its 
investigation.
    OCE found ``substantial reason to believe that 
Representative Buchanan failed to disclose reportable positions 
and unearned income'' on his Financial Disclosure Statements, 
and recommended further review in order for the Committee ``to 
apply its Policy Regarding Amendments to Financial Disclosure 
Statements and determine whether the amendments were filed with 
a presumption of good faith.''
    The Committee published OCE's Report and Findings on 
February 6, 2012.\1\ The Committee conducted its own review of 
those allegations pursuant to Committee Rule 18(a).
---------------------------------------------------------------------------
    \1\Because the Committee has already published OCE's Report and 
Findings, it has not done so again with its own Report. OCE's Report 
and Findings are available on the Committee's Web site, http://
www.ethics.house.gov.
---------------------------------------------------------------------------
    This Report, adopted by the Committee on June 29, 2012, 
resolves the allegations forwarded by OCE on November 8, 2011. 
The Committee has unanimously determined that the evidence 
presently before the Committee supports a determination that 
Representative Buchanan did not report, in complete and 
accurate detail, all of the positions or ownership interests he 
held with several entities on his Financial Disclosure 
Statements for 2007, 2008, 2009, and 2010, and that he did not 
accurately report certain income received from those same 
entities in the same years.
    However, the Committee also unanimously determined that 
these errors and omissions are not substantively different from 
the hundreds or thousands of errors and omissions corrected by 
amendment at the requirement of the Committee every year. Such 
errors and omissions occur frequently but rarely result in 
Committee action other than requests for amendments which will 
be publicly filed, and, in certain cases, late fees when the 
amendments are not timely filed after notification. Therefore, 
due only to the structure of House and Committee Rules 
requiring publication of material referred by OCE for further 
review, this Report is warranted to explain the Committee's 
actions and findings in this matter, and to provide greater 
context to the OCE's Report and Findings.
    On September 15, 2011, after being notified by OCE of their 
inquiry, Representative Buchanan amended his annual Financial 
Disclosure Statements for calendar years 2007, 2008, 2009, and 
2010, to reflect his positions with or ownership interests in 
certain entities, and income earned from these entities. As is 
done in many instances of incomplete or inaccurate Financial 
Disclosure Statements, Representative Buchanan has now remedied 
these errors and omissions by his subsequent amendments. 
Therefore, no further action by the Committee is warranted in 
this OCE matter.\2\ The Committee notes that Representative 
Buchanan's amendments, like all amendments, are available for 
public review with the Clerk of the House and online.
---------------------------------------------------------------------------
    \2\This Report addresses only the matter referred to the Committee 
on November 8, 2011, regarding financial disclosure errors and 
omissions. It does not address any other matter referred by OCE 
regarding Representative Buchanan.
---------------------------------------------------------------------------

   II. HOUSE RULES, LAWS, REGULATIONS, AND OTHER STANDARDS OF CONDUCT

    House Rule XXVI, clause 2 provides that Title I of the 
Ethics in Government Act (EIGA) of 1978 ``shall be considered 
Rules of the House as they pertain to Members, Delegates, the 
Resident Commissioner, officers, and employees of the House.'' 
The EIGA, codified at 5 U.S.C. app. 4 101 et. seq., provides 
that Members, officers, and certain staff of the House are 
required to file an annual Financial Disclosure Statement. The 
EIGA also requires candidates for federal office to file a 
Financial Disclosure Statement while they are a candidate. The 
EIGA, at Section 102(a), describes the information that must be 
included in the Financial Disclosure Statement. Section 
102(a)(6)(A) requires a filer to include: ``The identity of all 
positions held on or before the date of filing during the 
current calendar year (and, for the first report filed by an 
individual, during the two-year period preceding such calendar 
year) as an officer, director, trustee, partner, proprietor, 
representative, employee, or consultant of any corporation, 
company, firm, partnership, or other business enterprise, any 
nonprofit organization, any labor organization, or any 
educational or other institution other than the United 
States.''

                            III. BACKGROUND

    On November 8, 2011, OCE referred a matter involving 
Representative Buchanan to the Committee. In its referral, OCE 
recommended the Committee further review allegations that 
Representative Buchanan had failed to disclose reportable 
positions and unearned income on his Financial Disclosure 
Statements for the past four years.
    The Committee reviewed the allegations forwarded by OCE in 
its referral. Committee staff reviewed Representative 
Buchanan's original Financial Disclosure Statements and the 
amendments he filed for public disclosure with the Clerk of the 
House in September 2011, after he was notified of OCE's 
inquiry.
    OCE's Report and Findings describe a number of alleged 
errors in Representative Buchanan's Financial Disclosure 
Statements from 2007 to 2010. In summary, OCE alleges that 
Representative Buchanan failed to report positions with six 
companies: Boca Creek Development Company, LLC; Bowling Green 
Dealership, LLC; Country Club Shores LLC and its companion 
entity Country Club Shores II, LLC; Regent Court Association, 
Inc.; and Vernon G. and Sandra J.C. Buchanan Family Foundation, 
Inc. OCE also alleged that Representative Buchanan failed to 
disclose up to $14,315 in interest income imputable to these 
six entities over the four-year time period it investigated. 
The total amount of interest income was the subject of some 
dispute between OCE and Representative Buchanan. For example, 
OCE noted that according to his federal income tax returns, 
Representative Buchanan had received interest income from 
Bowling Green Dealership, LLC of $2,373 in 2007 and $2,992 in 
2008, but that he had listed the amount of interest income on 
his original Financial Disclosure Statements for those years as 
``zero.'' In his amended Financial Disclosure Statements for 
those years, Representative Buchanan stated that he had 
received ``zero'' interest income from Bowling Green Dealership 
during those years, but noted that ``Bowling Green, LLC 
produced interest income during the period, but when applied 
against net loss, the net total was still a loss.'' OCE, in a 
footnote to its Report and Findings, alleged that this 
methodology for calculating income was at odds with the 
Committee's instructions for completing Financial Disclosure 
Statements, in which the Committee states the general rule that 
income and assets must be reported on a gross basis, as opposed 
to a net basis.
    Representative Buchanan, in an interview with OCE, stated 
that the omission of these positions and income was 
inadvertent. He explained that he relies on his staff and 
several accountants to prepare his Financial Disclosure 
Statements and that, while he reviews the draft ``a little 
bit,'' he relies on others to ``handle all of the details.'' On 
September 15, 2011, after having been notified of OCE's 
inquiry, Representative Buchanan filed amended Financial 
Disclosure Statements for the years in question. The amendments 
added the disclosure of all reportable positions discovered by 
OCE, as well as additional positions not initially disclosed 
and not identified by OCE.
    In his response to the Committee's request for information, 
Representative Buchanan described his process for reviewing and 
amending his Financial Disclosure Statements. Once he learned 
of OCE's investigation, Representative Buchanan instructed his 
accountant to investigate. The accountant, Ms. Toni Poor, 
obtained all relevant records from the Florida Department of 
State, Division of Corporations regarding any and all entities 
in which Representative Buchanan was listed as an officer or 
manager. These files were cross-referenced against 
Representative Buchanan's own files. With respect to errors and 
omissions in reporting unearned income, Ms. Poor reviewed 
historical tax returns for the entities OCE identified, and 
compared them with the ranges submitted on Representative 
Buchanan's Financial Disclosure Statements.
    With respect to the controversy about his methodology for 
reporting income, Representative Buchanan responded that he 
reported the income based on the Committee's instructions for 
reporting a partner's share of business income as reported on 
his IRS Schedule K-1. That guidance instructs that such income 
should be calculated as the sum of the income reflected on 
specific lines of the IRS Schedule K-1 issued to partners. When 
Representative Buchanan performed that calculation with respect 
to Bowling Green Dealership, LLC, the result was a 
``significant loss for both 2007 and 2008.'' Representative 
Buchanan reported that he had contacted Committee staff in 
September 2011 while preparing the revisions to his Financial 
Disclosure Statement and received confirmation of his 
interpretation of the policy.
    Representative Buchanan also noted that many of the 
additional changes resulted from recharacterization of 
positions from officer to ``managing member'' with the Division 
of Corporations; other changes resulted from inadvertent 
omission of previously sold or inactive businesses which had 
not been formally dissolved; and, in a few cases, the 
reportable positions had simply been omitted through oversight. 
Staff has reviewed these additional revisions and determined 
that the explanation is consistent with the nature of those 
revisions--most of the revisions simply change the title of a 
position previously disclosed (e.g., from ``Partner'' to 
``Managing Member'' or from ``President'' to ``President, 
Partner, Director'') or provide additional information about 
the nature of the entity (e.g., to describe whether it is owned 
by a parent company also controlled by Representative Buchanan, 
or whether it is to be dissolved in the near future).
    On December 14, 2011, Representative Buchanan, through 
counsel, sent a letter to the Committee responding to OCE's 
Report and Findings. In that letter, Representative Buchanan 
explained that the unreported income, totaling just under 
$15,000 over four Financial Disclosure Statements, amounts to 
somewhere between 0.0000434% and 0.00000962% of the total 
assets he disclosed on those statements. Representative 
Buchanan stated that such a small error relative to the size of 
his Financial Disclosure Statements demonstrates that he 
attempted to comply with the EIGA requirements. Representative 
Buchanan also explained that the unreported positions were 
inadvertently omitted and not positions from which 
Representative Buchanan drew a large profit or in which he had 
been intimately involved. Finally, Representative Buchanan 
stated that the process he follows to complete and submit his 
Financial Disclosure Statements, which involves a number of 
financial professionals and significant communication with 
Committee staff prior to filing, demonstrates his good faith 
efforts to comply with EIGA.

                              IV. ANALYSIS

    It is clear from a review of Representative Buchanan's 
Financial Disclosure Statements and amendments that when he 
filed his annual Financial Disclosure Statements for 2007, 
2008, 2009, and 2010, he did not report all of the positions he 
held with several entities in complete and accurate detail. He 
also failed to accurately report all income earned from those 
entities. On September 15, 2011, shortly after being notified 
by OCE that they were reviewing his Financial Disclosure 
Statements, Representative Buchanan submitted letters to the 
Clerk of the House to amend his original filings in order to 
properly report the positions he held and income he earned.
    Members and other filers are, of course, required by law, 
and expected, to make full, complete, and accurate disclosures 
on their Financial Disclosure Statements. When the Committee, 
an outside group, the press, or some other entity discovers 
errors and omissions (as OCE did in this case), the 
inaccuracies may or may not be substantial or serious. Some 
examples of substantial or significant errors 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, failing to disclose significant 
positions or transactions representing direct and obvious 
conflicts of interest, or a series of numerous errors and 
omissions over many years which reflect a substantial portion 
of all reportable items.
    However, less substantial errors and omissions on Financial 
Disclosure Statements are not uncommon. In fact, between 30% 
and 50% of all Financial Disclosure Statements reviewed by the 
Committee each year contain errors or require a corrected 
statement. For over 95% of these inaccurate Financial 
Disclosure Statements, the filer appears to be unaware of the 
errors until they are notified by the Committee. Some filers 
also appear to become aware of errors after being notified by 
members of the media or outside groups who review the 
statements and other public records. Generally, unless there is 
some evidence that errors or omissions are knowing or willful, 
or appear to be significantly related to other potential 
violations, the Committee notifies the filer of the error and 
requires that he or she submit an amendment, which is then 
publicly filed. Once the amendment is properly submitted, the 
Committee takes no further action. Accordingly, errors and 
omissions in Financial Disclosure Statements are an ordinary 
part of the process for many filers, and in the normal course 
of review and amendment of Financial Disclosure Statements, the 
fact of errors and omissions are typically not the subject of 
an investigation or Report by the Committee, but rather are 
disclosed publicly by the filing of the amendment itself.
    In this matter, Representative Buchanan was notified by OCE 
that his Financial Disclosure Statements were either inaccurate 
or were missing information that should have been reported. 
Very shortly after receiving this notification, Representative 
Buchanan submitted information to the Clerk of the House to 
publicly amend his Financial Disclosure Statements with 
corrected information. Representative Buchanan has consistently 
stated that if his Financial Disclosure Statements require 
further review or amendment to correct inadvertent errors or 
omissions, he will conduct such review or submit such 
amendment.
    There has been no evidence or allegation presented to the 
Committee that Representative Buchanan's failure to file 
correct and complete information was either knowing or willful. 
Accordingly, Representative Buchanan, by filing Financial 
Disclosure Statements containing inadvertent errors and 
omissions, found himself in a posture not uncommon among filers 
of Financial Disclosure Statements, and while many others in 
that position are able to exit it in a manner which is not the 
subject of a public investigation by the Committee, House and 
Committee Rules forced the Committee to publish OCE's Report 
and Findings in this matter and accordingly publicize 
Representative Buchanan's errors and omissions.\3\ 
Nevertheless, because there is no evidence that these errors 
were knowing or willful, the Committee has determined that a 
full and complete amendment correcting these errors is the 
appropriate resolution of the matter, as it is in most other 
instances requiring an amendment.
---------------------------------------------------------------------------
    \3\To be clear, as noted above, while the Committee's notices and 
consultations regarding amendments are generally not public, all 
amendments themselves are made public by the Clerk of the House.
---------------------------------------------------------------------------
    To be clear, however, Representative Buchanan, as well as 
other Members and employees of the House, should understand 
that accurate and complete reporting on Financial Disclosure 
Statements should be every filer's goal and is necessary to be 
in compliance with House Rules and federal law. All filers are 
encouraged to promptly file amendments whenever they learn of 
errors or omissions. Failure to do so may constitute a knowing 
or willful violation. Subjecting the routine amendment process, 
in every instance, to public investigation may serve to 
discourage voluntary disclosure of errors and omissions, 
undermining the goal of accurate and complete public 
disclosure.
    Additionally, while filers are certainly welcome to seek 
professional assistance in preparing their Financial Disclosure 
Statements, they are reminded that each filer is responsible 
for compliance with EIGA requirements. As always, Committee 
staff is willing to assist all filers as they prepare their 
Financial Disclosure Statements.

                             V. CONCLUSION

    Representative Buchanan's annual Financial Disclosure 
Statements filed as a Member for 2007, 2008, 2009, and 2010, 
contained certain errors and omissions. The amendments he 
submitted for those four years reflected a number of errors or 
omissions, some of which were identified by OCE and some of 
which Representative Buchanan himself discovered. The 
Committee's practice in such cases is to notify a Member or 
employee of errors on their Financial Disclosure Statements and 
require them to publicly amend their Statements. In this case, 
Representative Buchanan has already amended his Financial 
Disclosure Statements to provide corrected information with 
regard to all errors brought to his attention. Therefore, the 
Committee concludes that no further action is necessary and 
considers the matter closed.

VI. STATEMENT UNDER RULE XIII, CLAUSE 3(c) OF THE RULES OF THE HOUSE OF 
                            REPRESENTATIVES

    The Committee made no special oversight findings in this 
Report. No budget statement is submitted. No funding is 
authorized by any measure in this Report.

                                  
