[House Report 116-451]
[From the U.S. Government Publishing Office]
House Calendar No. 83
_______________________________________________________________________
116th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 116-451
_______________________________________________________________________
IN THE MATTER OF ALLEGATIONS
RELATING TO REPRESENTATIVE
LORI TRAHAN
__________
R E P O R T
OF THE
COMMITTEE ON ETHICS
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
July 16, 2020.--Referred to the House Calendar and ordered
to be printed
U.S. GOVERNMENT PUBLISHING OFFICE
99-006 WASHINGTON : 2020
COMMITTEE ON ETHICS
THEODORE E. DEUTCH, Florida, KENNY MARCHANT, Texas,
Chairman Ranking Member
GRACE MENG, New York GEORGE HOLDING, North Carolina
SUSAN WILD, Pennsylvania JACKIE WALORSKI, Indiana
DEAN PHILLIPS, Minnesota MICHAEL GUEST, Mississippi
ANTHONY BROWN, Maryland
REPORT STAFF
Thomas A. Rust, Chief Counsel/Staff Director
Brittney L. Pescatore, Director of Investigations
David Arrojo, Counsel to the Chairman
Kathryn Lefeber Donahue, Senior Counsel
C. Ezekiel Ross, Counsel
Danielle Appleman, Investigator
Caroline Taylor, Investigative Clerk
LETTER OF TRANSMITTAL
----------
U.S. House of Representatives,
Committee on Ethics,
Washington, DC, July 16, 2020.
Hon. Cheryl Johnson,
Clerk, House of Representatives,
Washington, DC.
Dear Ms. Johnson: 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 Lori Trahan.''
Sincerely,
Theodore E. Deutch,
Chairman.
Kenny Marchant,
Ranking Member.
C O N T E N T S........................................................
Page
I. INTRODUCTION.....................................................1
II. PROCEDURAL BACKGROUND............................................2
III. HOUSE RULES, LAWS, REGULATIONS, AND OTHER STANDARDS OF CONDUCT...2
A. EXCESSIVE CONTRIBUTIONS................................. 2
B. DISCLOSURES............................................. 3
1. House Financial Disclosure Statements............... 3
2. FEC Reports......................................... 4
C. CODES OF CONDUCT........................................ 4
IV. BACKGROUND.......................................................4
A. LOANS FROM PERSONAL FUNDS............................... 6
1. March 31, 2018 Loan................................. 6
2. June 30, 2018 Loan.................................. 7
3. August 22, 2018 Loan................................ 8
B. LOAN FROM REVOLVING LINE OF CREDIT...................... 9
C. CONTRIBUTIONS FROM THE TRAHANS.......................... 10
D. FINANCIAL DISCLOSURE STATEMENTS......................... 11
V. FINDINGS........................................................12
A. EXCESSIVE CONTRIBUTIONS................................. 12
1. Loans from Personal Funds........................... 12
2. Loan from Revolving Line of Credit.................. 15
B. DISCLOSURES............................................. 16
1. Financial Disclosure Statements..................... 16
2. FEC Reports......................................... 17
VI. CONCLUSION......................................................20
VI. STATEMENT UNDER HOUSE RULE XIII, CLAUSE 3(C)....................21
APPENDIX A: REPORT AND FINDINGS OF THE OFFICE OF CONGRESSIONAL
ETHICS (REVIEW NO. 19-5449).................................... 22
APPENDIX B: REPRESENTATIVE TRAHAN'S SUBMISSION TO THE COMMITTEE.. 69
APPENDIX C: REPRESENTATIVE TRAHAN'S RESPONSES TO QUESTIONS....... 87
APPENDIX D: EXHIBITS TO THE COMMITTEE'S REPORT................... 93
116th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 116-451
======================================================================
IN THE MATTER OF ALLEGATIONS RELATING TO REPRESENTATIVE LORI TRAHAN
_______
July 16, 2020.--Ordered to be printed
_______
Mr. Deutch, from the Committee on Ethics,
submitted the following
R E P O R T
In accordance with House Rule XI, clauses 3(a)(2) and 3(b),
the Committee on Ethics (Committee) hereby submits the
following Report to the House of Representatives:
I. INTRODUCTION
On September 18, 2019, the Board of the Office of
Congressional Ethics (OCE) forwarded to the Committee a Report
and Findings (OCE's Referral) regarding Representative Lori
Trahan. OCE recommended the Committee review allegations that
(1) personal loans Representative Trahan made to her principal
campaign committee, Lori Trahan for Congress (Campaign), were
excessive contributions from her husband because they were
sourced from her husband's personal funds; and (2)
Representative Trahan omitted required information related to
the personal loans from her congressional candidate Financial
Disclosure Statements and from the Campaign's reports to the
Federal Election Commission (FEC).
The Committee reviewed the allegations referred by OCE
pursuant to Committee Rule 18(a). Following its review, the
Committee found that the funds used to source Representative
Trahan's personal loans to the Campaign were marital property
to which Representative Trahan had a legal right of access and
control. Accordingly, the loans were sourced from
Representative Trahan's personal funds, not excessive
contributions from her husband. For this reason, the Committee
did not find that Representative Trahan acted in violation of
House Rules, laws, regulations, or other standards of conduct
with respect to campaign contribution limits.
As to the alleged disclosure omissions and errors on her
Financial Disclosure Statements and the Campaign's FEC reports,
the Committee found no evidence that they were knowing and
willful. Specifically, the Committee considered allegations
that Representative Trahan may not have properly reported a
line of credit that she used to make an additional loan to her
campaign. Because there was not a clear legal standard
articulated by the FEC in their public guidance, the Committee
determined the FEC was best qualified to determine whether
Representative Trahan's campaign properly complied with the
relevant reporting requirements and directs Representative
Trahan to have the Campaign contact the FEC to ensure accurate
disclosure.
For these reasons, the Committee did not find that
Representative Trahan acted in violation of House Rules, laws,
regulations or other standards of conduct. Accordingly, the
Committee unanimously voted to dismiss this matter, adopt this
Report and take no further action. Upon publication of this
report the Committee considers the matter closed.
II. PROCEDURAL BACKGROUND
OCE commenced a preliminary review of this matter on May
11, 2019. On June 10, 2019, OCE initiated a second-phase
review. OCE voted on September 13, 2019 to refer this matter to
the Committee. On September 18, 2019, the Committee received
OCE's Referral recommending further review of allegations that
Representative Trahan's Campaign accepted personal loans and
contributions that exceeded campaign contribution limits and
that Representative Trahan failed to disclose required
information on her Financial Disclosure Statements and the
Campaign reports to the FEC.
Following OCE's recommendation that the Committee further
review the matter, the Committee began an investigation
pursuant to Rule 18(a). The Committee reviewed all of the
materials provided to it by OCE. The Committee requested and
received additional information from Representative Trahan,
including statements subject to the penalty of perjury and the
False Statements Act. In total, the Committee reviewed more
than 12,800 pages of materials.
On July 15, 2020, the Committee unanimously voted to adopt
this Report and take no further action with respect to
Representative Trahan.
III. HOUSE RULES, LAWS, REGULATIONS, AND OTHER STANDARDS OF CONDUCT
A. EXCESSIVE CONTRIBUTIONS
The Federal Election Campaign Act (FECA) prohibits any
person from making, and a candidate and the candidate's
authorized campaign committee from accepting, contributions
exceeding the contribution limits set by the FEC in an election
cycle.\1\ In the 2018 election cycle, the limit was $2,700.\2\
A contribution is any ``gift, subscription, loan, advance, or
deposit of money or anything of value made by any person for
the purpose of influencing any election for Federal
office.''\3\ Contributions from spouses are subject to the
contribution limitations.\4\ Contributions from candidates are
not, so long as they are made from a candidate's personal
funds.\5\
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\1\52 U.S.C. Sec. Sec. 30116(a)(1)(A); 30116(f).
\2\82 Fed. Reg. 10904, 10906 (Feb. 16, 2017) (adjusting the
contribution limit for the 2018 election cycle to $2,700 for each
election the candidate participates in).
\3\52 U.S.C. Sec. 30101(8)(A); 11 C.F.R. Sec. 100.52(a). The term
``anything of value'' includes all in-kind contributions. 11 C.F.R.
Sec. 100.52(d)(1).
\4\Buckley v. Valeo, 424 U.S. 1, 51, n. 59 (1976) (``Although the
risk of improper influence is somewhat diminished in the case of large
contributions from immediate family members, we cannot say that the
danger is sufficiently reduced to bar Congress from subjecting family
members to the same limitations as nonfamily contributions.''); see
also FEC Campaign Guide, Congressional Candidates and Committees (June
2014) (hereinafter FEC Campaign Guide) at 28 (``Contributions from
members of the candidate's family are subject to the same limits that
apply to any other individual. For example, a candidate's parent or
spouse may not contribute more than $2,700, per election to the
candidate.'').
\5\11 C.F.R. Sec. 110.10.
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FECA and the implementing regulations promulgated by the
FEC define what constitutes a candidate's personal funds.\6\
Personal funds include (1) any asset that the candidate had
legal right of access to or control over under applicable State
law at the time the individual became a candidate, and with
respect to which the candidate had ``legal and rightful title''
or an ``equitable interest''; (2) the candidate's income
received during the current election cycle; and (3) a portion
of assets that are jointly owned by the candidate and the
candidate's spouse either ``equal to the candidate's share of
the asset under the instrument of conveyance or ownership,'' or
if nothing is specified, one-half the value of the jointly
owned asset.\7\
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\6\52 U.S.C. Sec. 30101(26);11 C.F.R. Sec. 100.33(a), (b).
\7\Id.
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A candidate may also use funds from a loan drawn on a home
equity line of credit in excess of the contribution limits to
fund that candidate's campaign if the loan is (1) obtained in
accordance with applicable laws and under commercially
reasonable terms, and (2) is made by an entity that provides
lines of credit in the normal course of business.\8\ Under FEC
regulations, if a candidate's spouse is the endorser or co-
signer for a home equity line of credit, the spouse is not
deemed to have made a contribution to the campaign if the value
of the candidate's share of the property used as collateral
equals or exceeds the amount of the loan that is used for the
candidate's campaign.\9\
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\8\11 C.F.R. Sec. 100.83. Home equity lines of credit are excluded
from the definition of contribution. Id. Sec. 100.71.
\9\Id. 100.83(b)(1).
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B. DISCLOSURES
1. House Financial Disclosure Statements
The Ethics in Government Act (EIGA) provides that
candidates for the House must file a public Financial
Disclosure Statement with the Clerk of the House.\10\ Once
elected, Members are required under EIGA and House Rules to
file annual Financial Disclosure Statements.\11\ Financial
disclosures summarize financial information concerning the
filer, their spouse and dependent children.\12\ If a filer
knowingly and willfully falsifies or fails to file or to report
any required information, the Committee may take appropriate
action.\13\ The EIGA also authorizes the Attorney General to
seek a civil penalty.\14\ Federal criminal law may be
implicated.\15\
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\10\5 U.S.C. app. Sec. Sec. 101(c), 103(h)(1)(A)(i)(I). An
individual becomes a ``candidate'' for purposes of EIGA when the
individual meets the definition of ``candidate'' as codified in 52
U.S.C. Sec. 30101 (``if such individual has received contributions
aggregating in excess of $5,000 or has made expenditures aggregating in
excess of $5,000'').
\11\5 U.S.C. app. Sec. 101(f); House Rule XXVI, cl.2 (EIGA Title I
``shall be considered Rules of the House as they pertain to Members,
Delegates, the Resident Commissioner, officers, and employees of the
House.'').
\12\5 U.S.C. app. Sec. 102(e)(1); House Ethics Manual (2008) at 247
(hereinafter Ethics Manual).
\13\5 U.S.C. app. Sec. 104(c); Ethics Manual at 265.
\14\5 U.S.C. app. Sec. 104(a); Ethics Manual at 265.
\15\18 U.S.C. Sec. 1001; Ethics Manual at 265.
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2. FEC Reports
FECA requires a campaign committee to disclose all receipts
in an election cycle, including any contributions or loans, on
the campaign committee's reports to the FEC.\16\ The amounts
and nature of any outstanding debts and obligations, including
loans, must also be disclosed.\17\ When a candidate obtains a
home equity line of credit to loan funds to the campaign
committee, the candidate must also disclose the following on
FEC Form 3, Schedule C-1: (1) the date, amount and interest
rate of the loan; (2) the name and address of the lending
institution; and (3) the types and value of collateral or other
sources of repayment that secured the line of credit, if
any.\18\
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\16\52 U.S.C. Sec. 30104(b)(2); 11 C.F.R. 104.3(a)(3). For
contributions that exceed $200 in an election cycle, the campaign must
disclose the name of the person who made the contribution, and the date
and amount of the contribution. 52 U.S.C. Sec. 30104(b)(3). In-kind
contributions from a candidate's personal funds that exceed $200 in an
election cycle must be disclosed as both a contribution and
expenditure, and the ultimate payee or vendor must also be disclosed.
Reporting Ultimate Payees of Political Committee Disbursements, 78 Fed.
Reg. 40625, 40627 (July 8, 2013). See also FEC Campaign Guide at 95-96.
\17\52 U.S.C. Sec. 30104(b)(8); 11 C.F.R. Sec. 104.3(d). See also
FEC Campaign Guide at 91, 108-109 (providing guidance on reporting
loans from a candidate's personal funds).
\18\11 C.F.R. 104.3(d)(4)(i)-(iii). See also FEC Campaign Guide at
110-111 (providing guidance on reporting a candidate's loan derived
from a line of credit).
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A contribution is considered to be received by the campaign
committee on the day the contributor relinquishes control, or
delivers it to the committee.\19\ A campaign committee's
treasurer must make all deposits of receipts within ten days of
receipt.\20\ A knowing and willful violation of FECA's
reporting provisions also involves criminal penalties.\21\
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\19\11 C.F.R. Sec. 110.1(b)(6).
\20\11 C.F.R. Sec. 103.3. See also FEC Campaign Guide at 23
(``While all contributions must be deposited within 10 days, the date
of deposit is not used for reporting . . .'').
\21\52 U.S.C. Sec. 30109(d)(1); FEC v. John A. Dramesi for Congress
Comm., 640 F. Supp. 985, 987 (D.N.J. 1986) (holding that to establish a
knowing and willful violation, there must be knowledge that one is
violating the law).
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C. CODES OF CONDUCT
Violations of FECA and the laws governing House Financial
Disclosure Statements may also implicate House Rule XXIII,
clauses 1 and 2, which state, ``[a] Member . . . of the House
shall behave at all times in a manner that shall reflect
creditably on the House,'' and ``shall adhere to the spirit and
the letter of the Rules of the House.'' FECA violations are
also inconsistent with paragraph 2 of the Code of Ethics for
Government Service, which provides that government officials
should uphold the laws and regulations of the United States
``and never be a party to their evasion.''\22\
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\22\See Ethics Manual at 20.
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IV. BACKGROUND
On September 21, 2017, Representative Trahan became a
candidate for the House to represent the Third Congressional
District of Massachusetts.\23\ Representative Trahan was
successful in her candidacy and was sworn in as Member of the
House on January 3, 2019.
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\23\Lori Trahan, Statement of Candidacy (Sept. 21, 2017).
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Representative Trahan has been married to David Trahan
since November 17, 2007. Prior to their marriage,
Representative Trahan and Mr. Trahan executed a prenuptial
agreement to ``define their respective rights in the property
of the other during marriage.''\24\ Massachusetts permits
couples like the Trahans to enter into prenuptial agreements
prior to marriage to define their rights and obligations during
their marriage.\25\ The Trahans' prenuptial agreement defines
``marital property'' and ``separate property.''\26\ Per the
agreement, marital property is defined as follows:
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\24\Exhibit 1. On Nov. 16, 2019, Representative Trahan provided the
Committee, through counsel, the antenuptial agreement.
\25\Mass. Gen. Laws ch. 209, Sec. 25(2019), (``At any time before
marriage, the parties may make a written contract providing that, after
the marriage is solemnized, the whole or any designated part of the
real or personal property or any right of action, of which either party
may be seized or possessed at the time of the marriage, shall remain or
become the property of the husband or wife, according to the terms of
the contract.''); Osborne v. Osborne, 429 N.E. 2d 810, 816 (1981)
(``[A]n antenuptial contract settling the alimony or property rights of
the parties upon divorce is not per se against public policy and may be
specifically enforced.''); DeMatteo v. DeMatteo, 762 N.E. 2d 797, 809
(2002) (``It is only where the contesting party is essentially stripped
of substantially all marital interests that a judge may determine that
an antenuptial agreement is not `fair and reasonable' and therefore not
valid.'').
\26\There is no evidence in the record to suggest that
Representative Trahan's antenuptial agreement did not meet the ``fair
and reasonable'' standard under Massachusetts case law at the time of
execution and would be deemed invalid.
During the course of the marriage the Parties shall
make equal periodic contributions to a fund for the
maintenance of their household and the care and support
of the children of the marriage, if any. All property
purchased with the proceeds of this fund shall be
deemed marital property. All wages, salary, and income
of each party earned or received during marriage,
together with all property purchased with such wages,
salary and income, shall also be marital property. Each
party shall have equal rights in regard to the
management of and disposition of all marital
property.\27\
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\27\Exhibit 1 para.11.
The prenuptial agreement also provides that any real
property purchased in joint title by the Trahans reflects the
intent of the parties to have a joint interest in that
property.\28\
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\28\Id. para.10.
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The prenuptial agreement states that each party gave the
other a full and complete disclosure of the assets, income, and
other property of the party or the party's estate.\29\ A list
of those assets, income and property are included in the
prenuptial agreement as Exhibits A (Mr. Trahan) and B
(Representative Trahan), which are incorporated in the
agreement by reference.\30\ The prenuptial agreement defined
separate property as the assets, income and property of the
Trahans specifically listed in Exhibits A and B, along with all
income and increases in value arising from that separate
property during marriage.\31\ Separate property also includes
any property acquired by gift or inheritance by either spouse
and any bonuses received by either spouse.\32\
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\29\Id.para. 6.
\30\Id.para. 6, Exhibits A and B.
\31\Id.para. 8, Exhibit A.
\32\Id.para. 8.
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On July 30, 2008, Representative Trahan and Mr. Trahan
established a joint checking account at Enterprise Bank.\33\
The Trahans also jointly own a home in Westford,
Massachusetts.\34\
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\33\Exhibit 2; see also Representative Trahan's Financial
Disclosure Statement for Jan. 1, 2018-May 15, 2019 (filed May 15, 2019)
(hereinafter New Member FD) at 1.
\34\New Member FD at 5 (disclosing the Westford, Massachusetts
residential property has a joint mortgage of between $50,001 and
$100,000). Representative Trahan's counsel confirmed that
Representative Trahan owns one-half interest in the home.
Representative Trahan's submission to the Committee (Appendix B) at 7.
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A. LOANS FROM PERSONAL FUNDS
During her candidacy, Representative Trahan loaned funds to
the Campaign. In each instance, the Campaign reported those
loans as from her personal funds on the Campaign's FEC Reports.
Representative Trahan made the loans to the Campaign by check
from the Trahans' joint checking account. The joint checking
account received funds to cover the loans from Mr. Trahan's
business accounts, either directly or through Mr. Trahan's
personal account.\35\ The specific loans are described in
further detail below.
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\35\In Representative Trahan's submission to the Committee in
response to OCE's Referral, she explained through counsel, ``Rather
than taking steady salaries, both [Representative Trahan and Mr.
Trahan] regularly transferred funds from their respective business
accounts into their joint checking account to pay for household
expenses. That practice continued after Representative Trahan became a
candidate in 2017. In addition, both spouses also had individual
checking accounts that were used interchangeably to pay for joint
expenses like credit card and tuition payments, as well as health and
child care costs.'' Appendix B at 4.
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11. March 31, 2018 Loan
On March 31, 2018, Representative Trahan wrote a $50,000
check to the Campaign from the joint checking account she holds
with Mr. Trahan.\36\ The memo on the check states,
``donation.''\37\ Representative Trahan, through her counsel,
explained that she intended the check to be a loan to the
Campaign, but at the time she wrote it, she did not know how to
properly characterize a loan on the memo line of the check.\38\
On that date, the joint checking account did not have
sufficient funds to cover the check.\39\
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\36\OCE's Referral, Exhibit 1.
\37\OCE's Referral, Exhibit 1. Although the memo on the check
stated ``donation,'' the Campaign reported the check as a loan from
Representative Trahan.
\38\Appendix C at 2.
\39\OCE's Referral, Exhibit 2.
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On April 2, 2018, Mass Eagle Development, LLC (Eagle
Development) deposited $100,000 into Mr. Trahan's personal
checking account.\40\ Eagle Development is a residential
property development founded in 2010.\41\ Mr. Trahan has a 33
percent ownership interest in the company.\42\ Mr. Trahan
deposited checks in varying amounts from Eagle Development in
his personal checking account prior to, during and after
Representative Trahan's candidacy for the House.\43\
Representative Trahan reported the funds Mr. Trahan received
from Eagle Development as S Corporation income on her Financial
Disclosure Statements.\44\ Eagle Development is not listed as
separate property in the Trahans' prenuptial agreement.\45\
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\40\Exhibit 3.
\41\Eagle Development, Certificate of Organization, Commonwealth of
Mass. (Oct. 28, 2010) (hereinafter Eagle Development Certificate).
\42\New Member FD at 1; Eagle Development Certificate.
\43\Exhibit 4.
\44\New Member FD at 1.
\45\See Exhibit 1, Exhibit A (Eagle Development is not listed among
the enumerated ``separate property'' assets in the agreement).
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On April 7, 2018, Mr. Trahan wrote himself a check for
$50,000 from his personal checking account.\46\On April 9,
2018, Mr. Trahan deposited the check in the couple's joint
checking account.\47\Mr. Trahan's $50,000 deposit in the joint
checking account provided sufficient funds to cover
Representative Trahan's March 31, 2018, $50,000 check to the
Campaign.\48\On April 9, 2018, the Campaign deposited the
$50,000, nine days after it received the check.\49\
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\46\OCE's Referral, Exhibit 3. When Mr. Trahan wrote himself the
$50,000 check on Apr. 7, 2018, his personal checking account had a
balance of over $250,000. Exhibit 5.
\47\OCE's Referral, Exhibit 3; see also Exhibit 6.
\48\Exhibit 6.
\49\OCE's Referral, Exhibit 1. The check has a date stamp of both
Apr. 9, 2018 and Apr. 10, 2018 from Lowell Five Cent Savings Bank where
the Campaign cashed the check. The check did not clear until Apr. 11,
2018.
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The Campaign reported the $50,000 as a loan from
Representative Trahan, received on March 31, 2018, on the last
day of the FEC reporting period for the first quarter of
2018.\50\ The loan was reported as from Representative Trahan's
personal funds.\51\
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\50\Lori Trahan for Congress, Amended Apr. 2018 Quarterly Report of
Receipts and Disbursements, at 145-146 (May 14, 2018).
\51\Id.
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2. June 30, 2018 Loan
On June 30, 2018, Representative Trahan wrote another check
for $50,000 from the joint checking account to the
Campaign.\52\ The memo on this check states, ``loan.''\53\
Again, the joint checking account did not have sufficient funds
to cover her $50,000 check on the date she wrote it.\54\
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\52\OCE's Referral, Exhibit 4.
\53\Id.
\54\OCE's Referral, Exhibit 5.
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On July 9, 2018, Mr. Trahan wrote a check to himself for
$55,000 from DCT Development, Inc. (DCT Development).\55\ DCT
Development is a general contracting corporation Mr. Trahan
formed in 1992.\56\ Mr. Trahan owns 100 percent of the
company.\57\ DCT Development is not listed in the Trahans'
prenuptial agreement, despite being owned by Mr. Trahan at the
time of the agreement.\58\ Representative Trahan informed the
Committee that DCT Development was not disclosed in the
prenuptial agreement because it did not normally have
substantial assets besides cash, but instead served as a
Subchapter S corporation through which he could receive income
in connection with various construction projects.\59\ According
to Representative Trahan, she and Mr. Trahan intended DCT
Development and income he received from it to be marital
property under the agreement, and Mr. Trahan treated the income
as such.\60\
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\55\OCE's Referral, Exhibit 6.
\56\New Bud Builders Inc., Articles of Organization, Commonwealth
of Mass. (Mar. 2, 1992); DCT Development, Articles of Amendment,
Commonwealth of Mass. (Nov. 15, 2000) (changing the name from New Bud
Builders, Inc. to DCT Development, Inc.).
\57\New Member FD at 1; DCT Development, Annual Report,
Commonwealth of Mass. (Feb. 24, 2019).
\58\See Exhibit 1, Exhibit A (DCT Development is not listed in
Exhibit A, the assets, income, and property disclosed by Mr. Trahan
that are ``separate property'' in the agreement).
\59\Appendix C at 1.
\60\Id. Representative Trahan informed the Committee that two other
assets owned by Mr. Trahan prior to the prenuptial agreement, Granite
Rock Management and Granite Rock Construction, were also not listed in
Exhibit A because, like DCT Development, they did not normally have
substantial assets besides cash. Mr. Trahan also treated those assets
and income he received from them as marital property. Id.
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Representative Trahan stated that she and Mr. Trahan
considered the $55,000 check from DCT Development on July 9,
2018 to be income Mr. Trahan earned from DCT Development.\61\
He treated it as income for tax purposes.\62\ Representative
Trahan specifically told the Committee the disbursement was not
returned capital.\63\ On the date of the disbursement, DCT
Development had a cash balance of $112,861.37, which
represented DCT Development's value at that time.\64\ Because
Representative Trahan and Mr. Trahan treated the disbursement
as Mr. Trahan's income, they also treated it as marital
property under the agreement.\65\
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\61\Id. at 1-2.
\62\Id.
\63\Id.
\64\Id. at 2.
\65\Id.
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Mr. Trahan frequently deposited checks from DCT Development
into his personal account and sometimes into the Trahans' joint
checking account in varying amounts, prior to, during and after
Representative Trahan's candidacy for the House.\66\ In this
instance, on July 9, 2018 when Mr. Trahan wrote the $55,000
check to himself from DCT Development, Mr. Trahan deposited the
check into the couple's joint checking account.\67\ Mr.
Trahan's $55,000 deposit in the joint checking account provided
sufficient funds to cover Representative Trahan's June 30,
2018, $50,000 check to the Campaign. On July 10, 2018, the
Campaign deposited Representative Trahan's check for $50,000,
ten days after receipt.\68\
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\66\Exhibit 4.
\67\OCE's Referral, Exhibit 6.
\68\OCE's Referral, Exhibit 4.
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Representative Trahan's Campaign reported the $50,000 as a
loan from Representative Trahan received on June 30, 2018, the
last day of the FEC reporting period for the second quarter of
2018.\69\ Like the previous loan, the Campaign reported it as
from Representative Trahan's personal funds.\70\
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\69\Lori Trahan for Congress, July 2018 Quarterly Report of
Receipts and Disbursements, at 282-283 (July 15, 2018).
\70\Id.
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3. August 22, 2018 Loan
On August 21, 2018, Mr. Trahan initiated a transfer of
funds from his personal checking account to the Trahans' joint
checking account for $200,000.\71\ Mr. Trahan had deposited
$180,900 from Middlesex Land Holdings, LLC (Middlesex) and
$110,000 from Poplar Hill Development LLC (Poplar Hill) in his
personal checking account on July 31, 2018, which provided
sufficient funds to cover the $200,000 transfer to the Trahans'
joint checking account on August 21, 2018.\72\
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\71\OCE's Referral, Exhibit 8.
\72\Exhibit 7; Exhibit 8; Exhibit 9.
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Created in 2015, Middlesex is a company that holds vacant
land for future development.\73\ Mr. Trahan and a business
partner own the company.\74\ Mr. Trahan made deposits in
varying amounts from Middlesex from December 2017 to January
2019 in his personal checking account, totaling $316,848.\75\
Representative Trahan reported the funds Mr. Trahan received
from Middlesex as partnership income on her Financial
Disclosure Statements.\76\ Middlesex is not listed in the
Trahans' prenuptial agreement as separate property.\77\
---------------------------------------------------------------------------
\73\Middlesex, Certificate of Organization, Commonwealth of Mass.
(Feb. 26, 2015) (hereinafter Middlesex Certificate).
\74\Middlesex Certificate; New Member FD at 2.
\75\Exhibit 4.
\76\New Member FD at 2.
\77\See Exhibit 1, Exhibit A (providing Middlesex is not listed
among the enumerated ``separate property'' assets in the agreement).
---------------------------------------------------------------------------
Poplar Hill is a residential home building company created
in 2014.\78\ Like Middlesex, Mr. Trahan and a business partner
own the company.\79\ Mr. Trahan made deposits in varying
amounts from Poplar Hill from March 2018 to July 2018 in his
personal checking account, totaling $295,000.\80\ On her
Financial Disclosure Statements, Representative Trahan reported
the funds Mr. Trahan received from Poplar Hill as partnership
income.\81\ Poplar Hill is not listed in the Trahans'
prenuptial agreement as separate property.\82\
---------------------------------------------------------------------------
\78\Poplar Hill, Certificate of Organization, Commonwealth of Mass.
(Mar. 3, 2014) (hereinafter Poplar Hill Certificate).
\79\Poplar Hill Certificate; New Member FD at 2 (Mr. Trahan owns a
50 percent interest in Poplar Hill).
\80\Exhibit 4.
\81\New Member FD at 2.
\82\See Exhibit 1, Exhibit A (Poplar Hill is not listed among the
enumerated ``separate property'' assets in the agreement).
---------------------------------------------------------------------------
Prior to Mr. Trahan's $200,000 transfer, the Trahans' joint
checking account had a balance of $2,769.54.\83\ On August 22,
2018, Representative Trahan wrote a check from the joint
checking account to her Campaign for $200,000.\84\ The memo on
the check states, ``loan.''\85\ The same day, the Campaign
deposited her $200,000 check.\86\ The Campaign reported the
$200,000 as a loan from Representative Trahan, received on
August 23, 2018 from her personal funds.\87\ Representative
Trahan forgave $50,000 of this loan on September 24, 2018.\88\
---------------------------------------------------------------------------
\83\OCE's Referral, Exhibit 7.
\84\OCE's Referral, Exhibit 9.
\85\Id.
\86\Id.
\87\Lori Trahan for Congress, Second Amended Oct. 2018 Quarterly
Report of Receipts and Disbursements, at 158 (Dec. 15, 2018).
\88\Id. at 144, 158.
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B. LOAN FROM REVOLVING LINE OF CREDIT
On October 15, 2010, the Trahans entered into a Revolving
Credit Agreement and Note (Credit Agreement) with Washington
Savings Bank which allowed them to borrow up to $200,000
secured by their jointly owned home in Westford,
Massachusetts.\89\ The Credit Agreement provides for an
adjustable interest rate.\90\
---------------------------------------------------------------------------
\89\OCE's Referral, Exhibit 10; New Member FD at 5.
\90\OCE's Referral, Exhibit 10.
---------------------------------------------------------------------------
On September 4, 2018, Representative Trahan wrote a check
from the Trahans' revolving credit account for $71,000 to her
Campaign.\91\ The memo on the check states, ``loan.''\92\ On
October 2, 2018, the Campaign cashed Representative Trahan's
$71,000 check.\93\ The bank records for the revolving credit
account did not reflect a withdrawal of funds to cover the
$71,000 check until October 3, 2018, when the Trahans withdrew
$76,400 from the revolving credit account.\94\ As discussed
further below, Representative Trahan also wrote a check to the
Campaign for the remaining $5,400 withdrawn from the line of
credit, for the Campaign's recount fund.\95\
---------------------------------------------------------------------------
\91\OCE's Referral, Exhibit 11.
\92\Id.
\93\Id. 10.
\94\OCE's Referral, Exhibit 12.
\95\OCE's Referral, Exhibit 13.
The Campaign initially reported the $71,000 check as
a loan from Representative Trahan's personal funds
received on September 4, 2018, but did not complete a
Schedule C-1 to disclose that the loan originated with
the revolving credit account.\96\ In its second
amendment to its FEC report on December 15, 2018, the
Campaign completed the Schedule C-1.\97\ It disclosed
that the loan was incurred or established on September
4, 2018 and was due on October 20, 2030.\98\ It also
disclosed Washington Savings Bank as the lending
institution, a 5.25 percent interest rate, and
collateral of real property valued at $950,000.\99\
---------------------------------------------------------------------------
\96\Lori Trahan for Congress, Oct. 2018 Quarterly Report of
Receipts and Disbursements, at 155 (Oct. 15, 2018).
\97\Lori Trahan for Congress, Second Amended Oct. 2018 Quarterly
Report of Receipts and Disbursements, at 160 (Dec. 15, 2018).
\98\Id.
\99\Id.
The Campaign repaid the $71,000 loan to Representative
Trahan on November 20, 2018.\100\ Representative Trahan
deposited the check into the couple's joint checking account on
December 3, 2018.\101\
---------------------------------------------------------------------------
\100\Lori Trahan for Congress, 2018 Amended Post General Report of
Receipts and Disbursements, at 279, 289 (Dec. 15, 2018).
\101\Exhibit 10. OCE's Referral notes that Mr. Trahan repaid the
$76,400 withdrawn from the Trahans' revolving line of credit plus
interest to Washington Savings Bank from his personal bank account on
Oct. 11, 2018. OCE's Referral 42. The Committee is not aware of any
regulations prohibiting Mr. Trahan's repayment from his personal
account. Further, the Campaign was not required to report any
repayments by Representative Trahan to the lending institution. FEC
Campaign Guide at 110-111.
---------------------------------------------------------------------------
C. CONTRIBUTIONS FROM THE TRAHANS
Representative Trahan and Mr. Trahan made several
contributions to the Campaign during the 2018 election cycle.
Mr. Trahan made a $2,700 contribution on September 29, 2017,
designated for the primary election.\102\ The following day, on
September 30, 2017, he made a contribution for $2,700
designated for the general election.\103\ Both of his
contributions were made by check from his personal checking
account.\104\
---------------------------------------------------------------------------
\102\LoriTrahan for Congress, Oct. 2017 Quarterly Report of
Receipts and Disbursements, at 32 (Oct. 15, 2017). See also Exhibit 11.
\103\Id. at 27. See also Exhibit 12.
\104\Exhibit 11; Exhibit 12; Exhibit 13.
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Representative Trahan and Mr. Trahan also wrote a $5,400
check on October 2, 2018 to the Campaign.\105\ The memo on the
check states, ``Dave $2700/Lori $2700.''\106\ The Campaign
reported the check as a $2,700 contribution from each of them
for the election recount.\107\ The Trahans made the
contribution from the couple's revolving credit account
utilizing the remaining funds from the October 3, 2018
withdrawal that also funded Representative Trahan's $71,000
loan to the Campaign.\108\
---------------------------------------------------------------------------
\105\OCE's Referral, Exhibit 13.
\106\ Id.
\107\Lori Trahan for Congress, Second Amended 2018 Pre-General
Report of Receipts and Disbursements, at 123-124 (Dec. 15, 2018).
\108\OCE's Referral, Exhibit 12-13.
---------------------------------------------------------------------------
In addition to the monetary contributions, Representative
Trahan made numerous in-kind contributions to her Campaign
throughout the election cycle for items like advertising,
ground transportation, lodging, supplies and airfare, among
other things.\109\ The in-kind contributions were reported by
the Campaign on its FEC Reports.\110\
---------------------------------------------------------------------------
\109\See e.g., Lori Trahan for Congress, Second Amended Oct. 2018
Quarterly Report of Receipts and Disbursements, at 98-100, 143-144
(Dec. 15, 2018).
\110\Id. The Campaign reported the in-kind contributions as both
receipts and disbursements on Schedules A and B of FEC form. The
Campaign did not include information about the ultimate payees, such as
the vendor that Representative Trahan paid, in a memo entry.
---------------------------------------------------------------------------
D. FINANCIAL DISCLOSURE STATEMENTS
Representative Trahan filed Financial Disclosure Statements
with the Clerk of the House as a candidate on March 26, 2018
and May 21, 2018 and as a Member on May 15, 2019.\111\
Representative Trahan filed four amendments to each of her
candidate financial disclosures on June 4, 2018, November 16,
2018, February 19, 2019 and March 21, 2019.\112\ While the
amendments were made by Representative Trahan on her own
initiative, public reporting suggests that least some of the
amendments may have been prompted by questions from the
media.\113\ The amendments included:
---------------------------------------------------------------------------
\111\Representative Trahan's Financial Disclosure Statement for
Jan. 1, 2016-Dec. 31, 2017 (filed Mar. 26, 2018) (hereinafter 2017 FD);
Representative Trahan's Financial Disclosure Statement for Jan. 1,
2017-May 15, 2018 (filed May 21, 2018) (hereinafter 2018 FD); New
Member FD. If an individual qualifies as a candidate during a non-
election year, they must file a Financial Disclosure Statement within
30 days of becoming a candidate or May 15 of that year, whichever is
later. Candidates must then file a second statement on May 15 of the
following year. See 5 U.S.C. app. 101(c). Representative Trahan's 2017
FD was due on Oct. 23, 2017. She requested and received an extension
from the Committee. Representative Trahan's 2018 FD was due on May 15,
2018. She filed it on May 21, 2018, within the 30-day grace period
afforded to all filers.
\112\Representative Trahan's Amended Financial Disclosure Statement
for Jan. 1, 2016-Dec. 31, 2017 (filed June 4, 2018) (hereinafter First
Amended 2017 FD); Representative Trahan's Amended Financial Disclosure
Statement for Jan. 1, 2016-Dec. 31, 2017 (filed Nov. 16, 2017)
(hereinafter Second Amended 2017 FD); Representative Trahan's Amended
Financial Disclosure Statement for Jan. 1, 2016-Dec. 31, 2017 (filed
Feb. 19, 2019) (hereinafter Third Amended 2017 FD); Representative
Trahan's Amended Financial Disclosure Statement for Jan. 1, 2016-Dec.
31, 2017 (filed Mar. 21, 2019) (hereinafter Fourth Amended 2017 FD);
Representative Trahan's Amended Financial Disclosure Statement for Jan.
1, 2017-May 15, 2018 (filed June 4, 2018) (hereinafter First Amended
2018 FD); Representative Trahan's Amended Financial Disclosure
Statement for Jan. 1, 2017-May 15, 2018 (filed Nov. 16, 2018)
(hereinafter Second Amended 2018 FD); Representative Trahan's Amended
Financial Disclosure Statement for Jan. 1, 2017-May 15, 2018 (filed
Feb. 19, 2019) (hereinafter Third Amended 2018 FD); Representative
Trahan's Amended Financial Disclosure Statement for Jan. 1, 2017-May
15, 2018 (filed Mar. 21, 2019) (hereinafter Fourth Amended 2018 FD).
\113\See Andrea Estes, Questions raised about source of late funds
that helped carry Rep. Lori Trahan to victory, Boston Globe (Mar. 3,
2019), https://www.bostonglobe.com/metro/2019/03/03/questions-raised-
about-source-late-funds-that-helped-carry-rep-lori-trahan-victory/
oGjvhDF9tbmV9FWt5zgQfJ/story.html (``After the November election, when
the Globe began asking questions, [Representative Trahan] amended her
financial reports four times . . .'') (hereinafter Boston Globe
Article).
---------------------------------------------------------------------------
Adding Representative Trahan's ownership of
and unearned income from Concire LLC to Schedule A:
Assets and ``Unearned'' Income;\114\
---------------------------------------------------------------------------
\114\First Amended 2017 FD at 1; First Amended 2018 FD at 1.
---------------------------------------------------------------------------
Adding Representative Trahan's joint bank
account she holds with Mr. Trahan at Enterprise Bank to
Schedule A: Assets and ``Unearned'' Income;\115\
---------------------------------------------------------------------------
\115\Second Amended 2017 FD at 1; Second Amended 2018 FD at 1.
---------------------------------------------------------------------------
Adding Representative Trahan's ownership
interest in Stella Connect to Schedule A: Assets and
``Unearned'' Income;\116\
---------------------------------------------------------------------------
\116\Third Amended 2017 FD at 3; Third Amended 2018 FD at 3.
---------------------------------------------------------------------------
Updating Representative Trahan's earned
income from Concire LLC on Schedule C: Earned
Income;\117\ and
---------------------------------------------------------------------------
\117\Second Amended 2017 FD at 4; Second Amended 2018 FD at 3.
---------------------------------------------------------------------------
Adding ``confidential'' clients to Schedule
J: Compensation in Excess of $5,000 Paid by One
Source.\118\
---------------------------------------------------------------------------
\118\Fourth Amended 2017 FD at 5; Fourth Amended 2018 FD at 5.
---------------------------------------------------------------------------
V. FINDINGS
A. EXCESSIVE CONTRIBUTIONS
1. Loans from Personal Funds
Contributions, including loans, made from a candidate's
personal funds are not subject to the contribution limits in
FECA.\119\ A candidate's ``personal funds'' are any asset that,
under applicable State law, the candidate had legal right of
access to or control over, and with respect to which the
candidate had ``legal and rightful title'' or an ``equitable
interest,'' at the time the individual became a candidate.\120\
Personal funds also include a portion of assets that are
jointly owned by the candidate and the candidate's spouse
either ``equal to the candidate's share of the asset under the
instrument of conveyance or ownership,'' or if nothing is
specified, one-half the value of the jointly owned asset.\121\
Unlike a candidate, a candidate's spouse is subject to FECA's
contribution limits, which in the 2018 election cycle were
$2,700 per election.\122\
---------------------------------------------------------------------------
\119\11 C.F.R. Sec. 110.10.
\120\52 U.S.C. Sec. 30101(26); 11 C.F.R. Sec. 100.33(a), (b).
\121\Id.
\122\See FEC Campaign Guide at 28.
---------------------------------------------------------------------------
The Committee considered whether three loans Representative
Trahan made to the Campaign, totaling $300,000, were excessive
contributions from Mr. Trahan. In doing so, the Committee
reviewed the Trahans' prenuptial agreement and the transactions
through which Mr. Trahan deposited funds into the Trahans'
joint checking account which were then used for Representative
Trahan's loans to the Campaign. The prenuptial agreement went
into effect on November 17, 2007 in accordance with
Massachusetts law, long before Representative Trahan became a
candidate for the House.\123\ The prenuptial agreement defines
marital property as ``all wages, salary and income'' of
Representative Trahan and Mr. Trahan during their
marriage.\124\ It provides the Trahans' with ``equal rights in
regard to the management of and disposition of all marital
property.''\125\ The agreement carves out certain specific
assets disclosed in Exhibit A (and resulting income) that are
designated as ``separate property,'' and therefore not
considered marital property.\126\ Mr. Trahan's assets listed in
the agreement as separate property (Exhibit A) are not owned by
Representative Trahan.
---------------------------------------------------------------------------
\123\Exhibit 1 at 1.
\124\Id.para. 11.
\125\Id.
\126\Id.para. 8.
---------------------------------------------------------------------------
As described in detail above, the funds Mr. Trahan
transferred to the Trahans' joint checking account originated
from businesses Mr. Trahan owns and that provide Mr. Trahan
with a salary, investment income or both. None of the
businesses are included in the list of assets in Exhibit A that
were deemed separate property in the prenuptial agreement.
Three of the businesses--Eagle Development, Poplar Hill and
Middlesex--were created after the Trahans entered into the
prenuptial agreement and thus, were not and could not have been
disclosed on Exhibit A. As a result, the funds from these
businesses that were the source for Representative Trahan's
loans were not separate property, but instead considered to be
the Trahans' joint marital property under the agreement.
Unlike the other businesses, DCT Development did exist
prior to the Trahans' prenuptial agreement. Paragraph six of
the prenuptial agreement states that Representative Trahan and
Mr. Trahan had given each other a ``full and complete
disclosure of the assets, income, and other property'' which
were listed in the exhibits to the prenuptial agreement.\127\
However, Mr. Trahan's disclosures on Exhibit A did not include
DCT Development.\128\ This omission is notable because it
appears to be inconsistent with the disclosure requirements in
paragraph six of the agreement.
---------------------------------------------------------------------------
\127\Id.para. 6.
\128\Id., Exhibit A.
---------------------------------------------------------------------------
Representative Trahan was able to address the omission of
DCT Development from the agreement. She informed the Committee
that Mr. Trahan did not include DCT Development because ``it
did not normally have substantial assets besides cash, but
instead served as a Subchapter S corporation through which he
could receive income in connection with various construction
projects.''\129\ Representative Trahan also said that two other
businesses owned by Mr. Trahan at the time they entered into
the agreement--Granite Rock Management and Granite Rock
Construction (collectively Granite Rock Businesses)--were
similarly excluded from the agreement for the same reason.\130\
According to Representative Trahan, she and Mr. Trahan intended
DCT Development, Granite Rock Businesses and the income he
received from those entities to be marital property under the
agreement.\131\ Representative Trahan did not provide the
Committee with any documentary evidence to support her
explanation. While the Committee questions whether the omission
of DCT Development and Granite Rock Businesses was in
accordance with accounting principles at the time the Trahans
entered into the agreement, it did not find evidence to
contradict Representative Trahan's explanation that the Trahans
intended DCT Development and Granite Rock Businesses to be
marital property under the agreement, and therefore all
resulting income to be marital property. As such, DCT
Development and any income from it was joint marital property
under the agreement.
---------------------------------------------------------------------------
\129\Appendix C at 1.
\130\Id.
\131\Id.
---------------------------------------------------------------------------
As to the $55,000 disbursement on July 9, 2018 from DCT
Development to Mr. Trahan at issue here, Representative Trahan
specifically asserted that she and Mr. Trahan considered it
income earned or received by Mr. Trahan during their marriage,
and thus marital property under the agreement.\132\ Likewise,
it was treated as income for tax purposes.\133\ Representative
Trahan also told the Committee the disbursement was not
returned capital from DCT Development.\134\ On the date of the
disbursement, DCT Development had a cash balance of
$112,861.37, which represented DCT Development's value at that
time.\135\ Her assertions are in accordance with her previous
representations to the Committee in her Financial Disclosure
Statements and in her submission in response to OCE's Referral,
that funds Mr. Trahan received from DCT Development were his
salary or income.\136\ Based on Representative Trahan's
assertions to the Committee, the $55,000 disbursement was
marital property.
---------------------------------------------------------------------------
\132\Id. at 2.
\133\Id.
\134\Id.
\135\Id.
\136\New Member FD at 1-2; Appendix B at 4.
---------------------------------------------------------------------------
As discussed above, Mr. Trahan deposited his salary and
income from Eagle Development, Poplar Hill and Middlesex
exclusively in his personal checking account and his income
from DCT Development into his personal account and the couple's
joint account--all of which was marital property under the
prenuptial agreement.\137\ Paragraph eleven of the prenuptial
agreement, which discusses the couple's marital property, does
not specify any particular bank account where the Trahans would
deposit their ``wages, salary, and income'' that constitute
martial property, but it does contemplate the couple making
periodic contributions to a fund for the maintenance of their
household.\138\ Representative Trahan explained to the
Committee the couple's practices with their incomes from their
businesses:
---------------------------------------------------------------------------
\137\Exhibit 4.
\138\Exhibit 1para. 11.
Rather than taking steady salaries, both
[Representative Trahan and Mr. Trahan] regularly
transferred funds from their respective business
accounts into their joint checking account to pay for
household expenses. That practice continued after
Representative Trahan became a candidate in 2017. In
addition, both spouses also had individual checking
accounts that were used interchangeably to pay for
joint expenses like credit card and tuition payments,
as well as health and child care costs. While Mr.
Trahan has historically had a larger income and has
thus historically contributed more to the joint
checking account and paid for more expenses than
Representative Trahan has done, that practice, too,
both preceded and post-dated Representative Trahan's
candidacy.\139\
---------------------------------------------------------------------------
\139\Appendix B at 4.
It appears that, in accordance with the agreement, the
Trahans' incomes that were martial property were held in their
personal and joint checking accounts, which were used
interchangeably by the couple. The prenuptial agreement allows
Representative Trahan to manage and dispose of all marital
property, regardless of the bank account it was held in.\140\
In this instance, Representative Trahan exercised her right to
manage and dispose of her marital property by loaning the funds
from the couple's joint account to the Campaign. Moreover,
Massachusetts Law allows either party to a joint account to
withdraw, assign or transfer ``any part or all of the deposits
and interest'' in a joint account.\141\ As such, Representative
Trahan was able to execute her transaction under the relevant
Massachusetts law.
---------------------------------------------------------------------------
\140\The FEC has been inconsistent on whether it deems funds from a
candidate's joint checking account shared with a spouse as ``personal
funds'' of the candidate. See e.g., FEC Matter Under Review (MUR) Jim
Huffman for Senate, et al. (MUR6417) (finding reason to believe the
spouse's funds from a trust account transferred to a joint account and
subsequently loaned to the candidate's campaign were excessive
contributions from the candidate's spouse); Terri Lynn Land for Senate,
et al. (MUR 6860) (deadlocking on finding a reason to believe spouse's
income transferred to a joint checking account and subsequently loaned
to the candidate's campaign were excessive contributions from the
candidate's spouse). Because of the Trahans' antenuptial agreement, the
Committee need not make a determination regarding funds in the Trahans'
joint checking account.
\141\Mass. Gen.Laws ch. 167D Sec. 3(a)(2015) (``Any bank or
federally-chartered bank may receive deposits in the name of 2 or more
persons as joint tenants, payable to 2 or more persons or the survivor
or survivors of them, and any part or all of the deposits and interest
represented by joint accounts may be withdrawn, assigned or transferred
in whole or in part by any of the individual parties. Payments to any
of the parties to a joint account while all of them are living shall
discharge the liability of the bank or federally chartered bank to all
persons and, in the event of the death of any of them, the bank or
federally chartered bank shall be liable only to the survivor or
survivors and the payment to any of the survivors shall discharge the
liability of the bank or federally chartered bank to all persons.'').
---------------------------------------------------------------------------
Because Massachusetts law allows for prenuptial agreements
like the Trahans', and the prenuptial agreement provided
Representative Trahan, long before she was a candidate, equal
rights to manage and dispose of Mr. Trahan's salary and income,
the Committee found Mr. Trahan's salary and income satisfied
the definition of a candidate's personal funds under FECA. As
such, the loans Representative Trahan made using Mr. Trahan's
salary and income were her personal funds and not excessive
contributions from Mr. Trahan. As a candidate, Representative
Trahan was allowed to use her personal funds, irrespective of
contribution limits, for the Campaign.\142\ Therefore, the
Committee found the three loans Representative Trahan made to
the Campaign from funds transferred to her joint checking
account by her husband, totaling $300,000, did not violate any
House Rules, laws, regulations or other standards of
conduct.\143\
---------------------------------------------------------------------------
\142\11 C.F.R. 110.10.
\143\OCE's Referral states that Representative Trahan and Mr.
Trahan did not cooperate with OCE's review and OCE does not cite to the
Trahans' prenuptial agreement. OCE was not provided with a copy of that
agreement and therefore could not analyze its impact on the
allegations.
---------------------------------------------------------------------------
2. Loan from Revolving Line of Credit
A candidate may use funds from a home equity line of credit
to make loans to the candidate's own campaign as long as the
loan was obtained in accordance with all laws and under
commercially reasonable terms.\144\ Under FEC regulations, if a
candidate's spouse is an endorser or co-signer for a home
equity line of credit, the spouse is not deemed to have made a
contribution to the campaign if the value of the candidate's
share of the property used as collateral equals or exceeds the
amount of the loan that is used for the candidate's
campaign.\145\ A candidate's share of a jointly owned asset is
either the share of the asset under an instrument of ownership
or, if no share is indicated, the value of one-half the
property.\146\
---------------------------------------------------------------------------
\144\11 C.F.R. 100.83. Home equity lines of credit are excluded
from the definition of contribution. 11 C.F.R. 100.71.
\145\11 C.F.R. 100.83(b)(1). See also FEC Advisory Opinion (AO)
Hochberg (AO1991-10) (finding the candidate's equity in a home owned
with spouse is calculated as one half the tax valuation of the home
minus outstanding mortgage).
\146\11 C.F.R. 100.33(c).
---------------------------------------------------------------------------
The Committee considered whether the $71,000 loan from the
revolving line of credit established under the Credit Agreement
with Washington Savings Bank resulted in an excessive
contribution from Mr. Trahan to the Campaign.\147\ As discussed
above, Representative Trahan and Mr. Trahan executed the Credit
Agreement with Washington Savings Bank on October 15, 2010,
many years before Representative Trahan's candidacy.\148\ The
Credit Agreement allowed the Trahans to borrow up to $200,000
secured by their home in Westford, Massachusetts.\149\
---------------------------------------------------------------------------
\147\Sec. While not at issue in this matter, the Committee found
the Credit Agreement was obtained in accordance with all laws and under
commercially reasonable terms, as required under 11 C.F.R. Sec. 100.83.
\148\OCE's Referral, Exhibit 10.
\149\Id.; New Member FD at 5.
---------------------------------------------------------------------------
In 2018, the Trahans' Westford home was valued at
$1,242,800.\150\ On her New Member Financial Disclosure
Statement, Representative Trahan disclosed the couple has a
mortgage on their Westford home valued at between $50,001 and
$100,000.\151\ Subtracted from the value of the home, the
Trahans' equity in their home in 2018 was between $1,142,800
and $1,192,799. Representative Trahan owns a one-half interest
in the Westford home.\152\ Representative Trahan's share of
their home is one half the value of the equity, totaling
between $571,400 and $596,399.50 in 2018.
---------------------------------------------------------------------------
\150\Town of Westford, Massachusetts,Property Assessment for 9
Weetamoo Way, http://westford.patriotproperties.com/
Summary.asp?AccountNumber=10321 (follow ``previous assessment''
hyperlink) (last visited July 10, 2020); Appendix B at 7.
\151\New Member FD at 5.
\152\Appendix B at 7. Exhibit 1para. 10 (providing that any real
property purchased in joint title by the Trahans reflects the intent of
the parties to have a joint interest in that property).
---------------------------------------------------------------------------
While Mr. Trahan was jointly liable for the funds borrowed
under the Credit Agreement, Representative Trahan's $71,000
loan to her Campaign funded by the revolving line of credit was
well below her share in the collateral (between $571,400 and
$596,399.50). In fact, the $71,000 loan is less than half the
$200,000 available to the couple through the line of credit.
Because Representative Trahan's share of the property used as
collateral equaled or exceeded the amount of the loan, Mr.
Trahan did not make a contribution to the Campaign as the co-
signer of the Credit Agreement. Therefore, the Committee found
the $71,000 loan did not result in an excessive contribution
from Mr. Trahan to the Campaign. As such, Representative
Trahan's loan to the Campaign from her home equity line of
credit did not violate any House Rules, laws, regulations or
other standards of conduct.
B. DISCLOSURES
1. Financial Disclosure Statements
Candidates for the House and Members are required to file
Financial Disclosure Statements with the Clerk of the House
under the EIGA and House Rules.\153\ If a filer knowingly and
willfully falsifies or fails to file or to report any required
information, the Committee may take action or the filer may be
subject to civil and criminal penalties.\154\ Absent evidence
that errors or omissions on financial disclosures are knowing
and willful, the Committee's general practice is to notify the
filer of the error and require that the filer submit an
amendment.\155\ Once the amendment is properly submitted, the
Committee typically takes no further action.\156\ A filer may
also amend a Financial Disclosure Statement on the filer's own
initiative. Such amendments are normally given a presumption of
good faith by the Committee if submitted before the end of the
year in which the report was originally filed.\157\
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\153\5 U.S.C. app. Sec. Sec. 101(c), (f), 103(h)(1)(A)(i)(I); House
Rule XXVI, cl.2.
\154\5 U.S.C. app. Sec. 104(a)(1), (2) and (c); see also Ethics
Manual at 265.
\155\Comm. on Ethics Instruction Guide: Financial Disclosure
Statements and Periodic Transaction Reports at 8; see also Comm. on
Ethics, In the Matter of Allegations Relating to Representative Vernon
G. Buchanan, H. Rept. 112-588, 112th Cong. 2d Sess. 5 (2012)
(hereinafter Buchanan).
\156\Id.
\157\Ethics Manual at 264.
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Representative Trahan filed Financial Disclosure Statements
as a candidate and as new Member. As discussed above,
Representative Trahan voluntarily amended her candidate
Financial Disclosure Statements on four occasions to include
previously omitted and additional information about her
ownership, unearned income, earned income and client payments
from Concire LLC, her joint bank account at Enterprise Bank
with Mr. Trahan and her ownership interest in Stella
Connect.\158\ Each of those amendments was made within a year
of the Statement's original filing.
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\158\First Amended 2017 FD; First Amended 2018 FD; Second Amended
2017 FD; Second Amended 2018 FD; Third Amended 2017 FD; Third Amended
2018 FD.
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Representative Trahan's amendments to her Financial
Disclosure Statements are not uncommon. In fact, between 20
percent and 30 percent of all Financial Disclosure Statements
reviewed by the Committee each year contain errors or require a
corrected statement. It is also not uncommon for filers to
become aware of errors in their Financial Disclosure Statements
by members of the media or outside groups who review the
statements and other public records.\159\ The Committee found
no evidence that Representative Trahan's omissions on her
Financial Disclosure Statements were knowing or willful. To the
contrary, her amendments show her good faith effort to comply
with the disclosure requirements. The Committee has previously
encouraged filers to promptly file amendments whenever they
learn of errors or omissions to avoid a knowing and willful
violation, which is what Representative Trahan did.\160\
Because Representative Trahan has already amended her Financial
Disclosure Statements to provide corrected information, the
Committee concluded that no further action is necessary.
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\159\Buchanan at 5.
\160\See Id. at 5, 6.
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2. FEC Reports
Campaigns must disclose all receipts, including any
contributions, in-kind contributions, or loans, on reports to
the FEC.\161\ For reporting purposes, a receipt is recorded by
a campaign when it is actually received by the campaign.\162\ A
campaign has ten days after receiving funds to deposit
them.\163\ Loans are also reported as an outstanding debt.\164\
Certain loans, like a home equity line of credit, require
additional reporting on Schedule C-1, including disclosing (1)
the date, amount and interest rate of the loan; (2) the name
and address of the lending institution; and (3) the types and
value of collateral.\165\ If a campaign intentionally
misreports information to the FEC, it may be subject to
criminal penalties.\166\
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\161\52 U.S.C. Sec. 30104(b)(2), 11 C.F.R. Sec. 104.3(a)(3). For
contributions that exceed $200 in an election cycle, the campaign
committee must disclose the name of the person who made the
contribution, the date and amount of the contribution. 52 U.S.C.
Sec. 30104(b)(3). In-kind contributions from a candidate's personal
funds that exceed $200 in an election cycle must also be disclosed. FEC
Campaign Guide at 95-96.
\162\11 C.F.R. Sec. 110.1(b)(6).
\163\Id. Sec. 103.3. See also FEC Campaign Guide at 23 (``While all
contributions must be deposited within 10 days, the date of deposit is
not used for reporting . . .'').
\164\ 52 U.S.C. Sec. 30104(b)(8), 11 C.F.R. 104.3(d). See also FEC
Campaign Guide at 91, 108-109 (reporting guidance for loans from a
candidate's personal funds).
\165\11 C.F.R. Sec. 104.3(d)(4)(i)-(iii). See also FEC Campaign
Guide at 110-111 (reporting guidance for a candidate's loan derived
from a line of credit).
\166\52 U.S.C. 30109(d)(1).
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i.) Personal Loans
The Campaign reported to the FEC each of the personal loans
Representative Trahan made to her Campaign by check on March
31, 2018, June 30, 2018,and August 22, 2018. As discussed
above, the Committee found those loans were made with her
personal funds and thus, the Committee did not find the
Campaign misreported the source of the funds.\167\ The
Committee also examined whether the Campaign misreported the
date it received the March 31, 2018 and June 30, 2018 loans. As
to the March 31, 2018 loan, the Campaign reported it received
the loan on the date of the check, but did not cash the check
until April 9, 2018, nine days later. For the June 30, 2018
loan, the Campaign also reported it was received on the date of
the check, but did not cash the check until July 10, 2018, ten
days later. As discussed above, the date Representative Trahan
wrote each of the checks coincided with the last day of the FEC
reporting period for that quarter. The date the Campaign
deposited each of the checks corresponded with the date Mr.
Trahan transferred funds to the couple's joint checking account
to provide sufficient funds for the loan checks. Both checks
were cashed within 10 days of receipt, as is required under FEC
regulations.\168\ Thus, it does not appear the Campaign's
reporting of the loans violated any House Rules, laws,
regulations or other standards of conduct.
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\167\The FEC sent the Campaign a Request for Additional Information
(RFAI) following the Campaign's submission of its Apr. 2018 Quarterly
Report of Receipts and Disbursements where the Campaign first disclosed
Representative Trahan's Mar. 31, 2018 loan. The RFAI requested
additional information about the source of the funds for the loan and
referenced the FEC's definition of ``personal funds.'' Letter from FEC
Analyst Chris Jones to Martha Howe, Treasurer, Lori Trahan for Congress
Committee (May 7, 2018). Following receipt of the RFAI, on May 15, 2018
the Campaign amended its Apr. 2018 Quarterly Report to include
additional notations that Representative Trahan's loan was from
personal funds. Lori Trahan for Congress, Amended Apr. 2018 Quarterly
Report of Receipts and Disbursements, at 145-146 (May 14, 2018).
\168\11 C.F.R. Sec. 103.3. See also FEC Campaign Guide at 23
(``While all contributions must be deposited within 10 days, the date
of deposit is not used for reporting . . .'').
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The Committee notes, however, the dates of receipt and
deposit raise questions about whether Representative Trahan
intentionally reported the loans in advance of making the
transfers in order to increase her cash-on-hand numbers at the
close of the relevant quarterly reporting periods. Even though
such conduct may be permissible under FEC regulations, the
Committee cautions Representative Trahan that, as a Member of
the House, she is expected to act in a manner that reflects
creditably upon the House and should ensure accuracy and
transparency in her campaign activities.\169\
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\169\While Representative Trahan was not a Member of the House at
the time the loans were made and reported, the Committee has long held
it has jurisdiction over misconduct relating to a successful campaign
for the House. Comm. on Ethics, In the Matter of Allegations Relating
to Representative Ruben Kihuen, H. Rept. 115-1041, 115th Cong. 2d Sess.
5 (2018); Comm. on Standards of Official Conduct, In the Matter of
Representative Jay Kim, H. Rept. 105-797, 105th Cong. 2d Sess. 6
(1998).
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ii.) Loan from Revolving Line of Credit
The Campaign first reported the $71,000 loan from
Representative Trahan's revolving line of credit on its October
2018 Quarterly Report, filed on October 15, 2018. At that time,
it disclosed the loan was made on September 4, 2018, from
Representative Trahan's personal funds, but did not disclose
that it was a line of credit. Further, the Campaign did not
file a Schedule C-1 to disclose additional requisite
information about the date ``incurred or established,'' the due
date, the source, and collateral for the revolving line of
credit. On December 15, 2018, the Campaign amended its October
2018 Quarterly Report, including filing Schedule C-1 for the
$71,000 loan which disclosed additional information about the
line of credit.\170\
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\170\The Campaign did not receive an RFAI from the FEC related to
the $71,000 loan, which would have required a response from the
Campaign on the public record. The Campaign's amendment may have been
prompted by media inquiries. See also Boston Globe Article.
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The Committee encourages Members' campaigns to voluntarily
amend FEC Reports to comply with FEC reporting regulations.
Voluntarily amending FEC Reports, like voluntarily amending
Financial Disclosure Reports, shows a good faith effort to
comply with disclosure requirements. However, it is not clear
that the line of credit was property reported on the amended
filing. For example, in its December 15, 2018 amended Report on
Schedule C-1, the Campaign reported the line of credit was
``incurred or established'' on September 4, 2018, the date
Representative Trahan wrote the check from the line of credit
account to the Campaign. But, the line of credit was originally
established on October 15, 2010. Further, the Trahans did not
withdraw funds from the line of credit to cover Representative
Trahan's check to the Campaign until October 3, 2018. It is not
clear from available FEC guidance which date should have been
disclosed as the date ``incurred or established.''\171\
Additionally, the Campaign reported the valuation of the
collateral as $950,000, even though it appears that the total
value of Representative Trahan's home at the time of the draw
for the Campaign was more than that amount (between $1,142,800
and $1,192,799), and her share would have been less that amount
(between $571,400 and $596,399.50). FEC guidance also does not
address valuation of a home used as collateral for a line of
credit, which was initially established prior to
candidacy.\172\
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\171\Instructions for Schedule C-1, Loans and Lines of Credit from
Lending Institutions (FEC Form 3) at 17 (May 2016) (no discussion of
lines of credit established prior to candidacy); FEC Campaign Guide at
111 (no discussion of lines of credit established prior to candidacy);
cf. Cunningham (AO 1994-26) (advising a candidate that lines of credit
not obtained for campaign purposes need not be disclosed until the
first draw for campaign purposes; after a draw for the campaign,
candidate must disclose the source of the line of credit and
information, including date of the granting of the line and first
campaign draw and ``explain that this line was taken out well in
advance of the campaign (as is evidenced by the date of the granting of
the line) and was not granted or altered in anticipation of its use for
or during any political campaign'').
\172\Id.
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The Committee has a long history of undertaking
investigations and, when appropriate, imposing sanctions or
directing remedial measures where a Member or candidate in a
successful election to the House is found by the Committee to
have violated a clear standard of campaign finance laws or
regulations. The Committee notes, however, that publicly
available FEC guidance regarding reporting home equity lines of
credit under these circumstances where a candidate and spouse
establish a line of credit prior to candidacy is limited.\173\
Given the lack of a clear legal standard on the relevant
reporting requirements and the Campaign's efforts to amend its
disclosures, there is no evidence that any omissions or errors
were knowing and willful. To the extent that the Campaign did
not properly report information, the FEC (not the Committee) is
best suited to make that determination. As such, the Committee
directs Representative Trahan and the Campaign to contact the
FEC to ensure they have properly disclosed the details of the
revolving line of credit.\174\
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\173\See e.g., Instructions for Schedule C-1, Loans and Lines of
Credit from Lending Institutions (FEC Form 3) at 17 (May 2016) (no
discussion of lines of credit established prior to candidacy); FEC
Campaign Guide at 111 (no discussion of lines of credit established
prior to candidacy); cf. AO 1994-26 (advising a candidate that lines of
credit not obtained for campaign purposes need not be disclosed until
the first draw for campaign purposes; after a draw for the campaign,
candidate must disclose the source of the line of credit and
information, including date of the granting of the line and first
campaign draw and ``explain that this line was taken out well in
advance of the campaign (as is evidenced by the date of the granting of
the line) and was not granted or altered in anticipation of its use for
or during any political campaign'').
\174\Similarly, the Committee directs the Campaign to consult the
FEC regarding its disclosure of Representative Trahan's in-kind
contributions. The Campaign appears to have appropriately reported the
in-kind contributions as both receipts and disbursements, as is
required to avoid inflating cash on hand. However, based on the FEC's
Interpretive Rule on Reporting Ultimate Payees of Political Committee
Disbursements, unreimbursed disbursements by a candidate for that
candidate's own campaign also require an additional memo entry
itemizing the ultimate payee if the aggregate amount to that vendor
exceeds $200 for the election cycle. Reporting Ultimate Payees of
Political Committee Disbursements, 78 Fed. Reg. 40625, 40627 (July 8,
2013). See also FEC Campaign Guide at 95-96.
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VI. CONCLUSION
Representative Trahan's prenuptial agreement with her
husband established clear delineations as to the couple's
income and assets and rights to their income and assets during
their marriage. Based on the prenuptial agreement, the
Committee found that Representative Trahan's loans to the
Campaign were from her personal funds, not excessive
contributions from her husband, and therefore did not violate
House Rules, laws, regulations or other standards of conduct.
The Committee also found no evidence that Representative
Trahan's omissions of required information or errors on her
Financial Disclosure Statements and FEC reports were knowing
and willful, and accordingly, did not merit further action. In
fact, Representative Trahan's amendments to her disclosures on
her own initiative show her good faith effort to comply with
the relevant disclosure requirements.
To the extent that there may have been errors in reporting
information to the FEC, the Committee found that the FEC was
best qualified to make that determination and directs
Representative Trahan and the Campaign to contact the FEC to
ensure accurate disclosure.
The Committee notes that the disclosure requirements in
FECA were created to provide voters with information about
where political campaign money comes from and how it is spent
so they may adequately evaluate those who seek federal
office.\175\ Similarly, the public disclosure of assets,
financial interests, and investments required under EIGA and
House Rule XXVI are intended to provide the information
necessary to allow Members' constituencies to judge their
official conduct in light of possible financial conflicts of
interest.\176\ Members should strive to ensure accuracy and
transparency in their campaigns and Financial Disclosure
Statements in furtherance of these objectives.
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\175\Buckley v. Valeo, 424 U.S. 66-67 (citing H.R. Rept. No. 92-
564, p. 4 (1971)).
\176\Ethics Manual at 251.
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VI. STATEMENT UNDER HOUSE RULE XIII, CLAUSE 3(C)
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.
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