[House Report 117-591]
[From the U.S. Government Publishing Office]
Calendar No. 156
117th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 117-591
_______________________________________________________________________
IN THE MATTER OF ALLEGATIONS
RELATING TO REPRESENTATIVE
MADISON CAWTHORN
__________
R E P O R T
of the
COMMITTEE ON ETHICS
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December 6, 2022.--Referred to the House Calendar and ordered to be
printed
_________
U.S. GOVERNMENT PUBLISHING OFFICE
39-006 WASHINGTON : 2022
COMMITTEE ON ETHICS
SUSAN WILD, Pennsylvania, MICHAEL GUEST, Mississippi,
Acting Chairwoman Acting Ranking Member
DEAN PHILLIPS, Minnesota DAVE JOYCE, Ohio
VERONICA ESCOBAR, Texas JOHN H. RUTHERFORD, Florida
MONDAIRE JONES, New York KELLY ARMSTRONG, North Dakota
REPORT STAFF
Thomas A. Rust, Chief Counsel/Staff Director
Brittney Pescatore, Director of Investigations
David Arrojo, Counsel to the Acting Chairman
Kelle Strickland, Counsel to the Acting Ranking Member
Sydney R. Bellwoar, Counsel
Janet M. Foster, Senior Counsel
Caroline Taylor, Investigator
Peyton Wilmer, Investigative Clerk
LETTER OF TRANSMITTAL
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House of Representatives,
Committee on Ethics,
Washington, DC, December 6, 2022.
Hon. Cheryl L. 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 Madison Cawthorn.''
Sincerely,
Susan Wild,
Acting Chairwoman.
Michael Guest,
Acting Ranking Member.
C O N T E N T S
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Page
I. INTRODUCTION...................................................... 1
II. PROCEDURAL BACKGROUND............................................. 3
III.FINDINGS AND CONCLUSIONS.......................................... 4
IV. STATEMENT UNDER HOUSE RULE XIII, CLAUSE 3(c)...................... 6
APPENDIX A: REPORT OF THE INVESTIGATIVE SUBCOMMITTEE............. 7
Calendar No. 156
117th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 117-591
======================================================================
IN THE MATTER OF ALLEGATIONS RELATING TO REPRESENTATIVE MADISON
CAWTHORN
_______
December 26, 2022.--Referred to the House Calendar and ordered to be
printed
_______
Ms. Wild, 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 December 1, 2022, the Committee considered the Report of
the Investigative Subcommittee (ISC) in this matter, which the
ISC unanimously adopted on November 16, 2022. The ISC was
impaneled to investigate allegations that Representative
Madison Cawthorn may have improperly promoted a cryptocurrency
in which he may have had an undisclosed financial interest and
engaged in an improper relationship with an individual employed
on his congressional staff. This Report memorializes the
Committee's conclusions based on the ISC's Report.
The Committee accepted the ISC's findings and
recommendations, which were reached following a seven-month
investigation.\1\ The ISC did not find evidence that
Representative Cawthorn engaged in an improper relationship
with a member of his congressional staff and recommended no
further action with respect to that allegation. The ISC found
substantial evidence that Representative Cawthorn promoted a
cryptocurrency in which he had a financial interest in
violation of rules protecting against conflicts of interest,
and that he failed to file timely reports to the House
disclosing his transactions relating to the cryptocurrency.
However, the ISC did not find that Representative Cawthorn
knowingly or willfully failed to file timely disclosures;
nonetheless, the ISC found he is required by statute to pay the
applicable late filing fees for his untimely disclosures. The
ISC also found that Representative Cawthorn's purchase of the
cryptocurrency was on more generous terms than were available
to the general public, resulting in an improper gift. The ISC
unanimously recommended that Representative Cawthorn be
required to repay the value of the improper gift and pay all
applicable fees for his late filing of disclosures for his
cryptocurrency transactions.
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\1\The Committee thanks the Members of the ISC for their efforts
and attention to this matter.
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While much of the promotional activity was shared on social
media by individuals other than Representative Cawthorn, the
ISC recognized that he was ``not a passive participant.''\2\
The ISC found Representative Cawthorn made direct and
unambiguous comments about purchasing or supporting a
cryptocurrency in which he had invested, that he did so in
contexts that he reasonably should have known would be used for
public promotion, and that he also used his own social media
account to share and comment on promotional posts.\3\ The ISC
did not reach a consensus on whether Representative Cawthorn
intended to personally profit from his promotional activities.
However, the ISC found that he should have been sensitive to
the appearance of impropriety that his actions might create.
The ISC Report explains that, as a Member of the House,
Representative Cawthorn has a duty to protect the integrity of
that institution, and his participation in promotional efforts
for the cryptocurrency he owned was inconsistent with that
duty.\4\
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\2\ISC Report at 1.
\3\Id.
\4\Id. at 2.
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As the ISC Report notes, Members are widely recognizable
public servants, and their participation in commercial
endorsements or promotions may create the perception that they
are making use of their official position for commercial gain.
While cryptocurrency promotion, particularly of a ``meme
coin,'' may be a novel issue before the Committee, whether a
Member may promote an asset in which that Member has a
financial interest is not a novel question. The Committee's
established guidance provides that Members should not be
actively involved in promoting or endorsing any goods or
services in which the Member or the Member's family has a
financial interest.\5\ This guidance applies to digital assets.
The Committee joins the ISC in its hope that this matter will
serve to educate all Members about the laws and rules designed
to protect the integrity of the House against conflicts of
interest, including as they apply to digital assets.
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\5\Comm. on Ethics, Guidance on Personal Endorsement or Promotion
by Members of the House of Representatives (Aug. 24, 2018), https://
ethics.house.gov/financial-disclosure/financial-disclosure-pink-sheets/
guidance-personal-endorsement-or-promotion.
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The ISC could not come to a consensus as to whether to
recommend the Committee reprove Representative Cawthorn in this
matter. However, the ISC intended that its Report serve as an
admonishment of Representative Cawthorn's conduct.
Accordingly, the Committee hereby unanimously adopts the
ISC's Report, which shall serve as an admonishment of
Representative Cawthorn, and directs Representative Cawthorn to
repay $14,237.49 to an appropriate charitable organization not
later than December 31, 2022, remit late fees of $1,000 to the
U.S. Department of the Treasury within fourteen days of the
release of this Report, and submit a periodic transaction
report (PTR) disclosing his January 17, 2022 Let's Go Brandon
Coin (LGB Coin) transaction within fourteen days of the release
of this Report.\6\
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\6\Although the ISC recommended Representative Cawthorn be directed
to pay $800 in late filing fees, after the ISC Report was adopted, he
advised Committee staff that he incorrectly copied down the amount of
LGB Coin he sold on January 17, 2022, which he initially valued at $302
and thus did not disclose in a PTR because it was below the $1,000
reporting threshold. However, as noted in the ISC Report, the actual
amount of LGB Coin sold on that date was valued well over $1,000 and
should have been disclosed. Therefore, the Committee determined
Representative Cawthorn must also submit a PTR disclosing the January
17 transaction, along with an additional $200 in late fees.
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Based on the totality of his conduct, including his
repeated and knowing promotion of a cryptocurrency in which he
held a financial interest, the Committee also determined that
Representative Cawthorn acted in a manner that did not reflect
creditably upon the House, in violation of clause 1 of the
House Code of Official Conduct.
The ISC's Report is transmitted as an appendix to this
Report.\7\
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\7\See Appendix A.
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II. PROCEDURAL BACKGROUND
On May 23, 2022, the Committee announced that it had
impaneled an ISC to investigate allegations that Representative
Cawthorn may have improperly promoted a cryptocurrency in which
he may have had an undisclosed financial interest and engaged
in an improper relationship with an individual employed on his
congressional staff. The ISC conducted a thorough
investigation, in which it interviewed seven witnesses,
including Representative Cawthorn, and reviewed documents
received from four individuals in response to requests for
information from the ISC. These allegations had been the
subject of public reporting, as well as a class action lawsuit
filed in federal court relating to an alleged ``pump and dump''
scheme for the cryptocurrency LGB Coin.
The ISC met six times in the 117th Congress. The ISC sent
four requests for information. Committee staff received and
reviewed documents and information produced in response to the
ISC's requests. The ISC also conducted seven interviews,
including an interview of Representative Cawthorn.
Representative Cawthorn and his current staffers fully
cooperated with the ISC's investigation. One individual
affiliated with LGB Coin, Witness 1, provided only limited
cooperation.\8\
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\8\ISC Report at 2.
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On November 16, 2022, the ISC unanimously voted to adopt
its Report and transmit it to the Committee.\9\ The ISC could
not come to a consensus as to whether to recommend the
Committee reprove Representative Cawthorn. However, the ISC
intended that its Report serve as an admonishment of
Representative Cawthorn's conduct. The Committee considered the
ISC's Report and on December 1, 2022, unanimously voted to
release the ISC's findings and issue this Report.
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\9\Id. at 3.
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III. FINDINGS AND CONCLUSIONS
A. ALLEGATIONS THAT REPRESENTATIVE CAWTHORN MAY HAVE ENGAGED IN AN
IMPROPER RELATIONSHIP WITH AN INDIVIDUAL EMPLOYED ON HIS CONGRESSIONAL
STAFF
In the spring of 2022, there was public discussion in news
articles and on social media relating to Representative
Cawthorn's personal relationship with a member of his
congressional staff, following the release of photographs and
videos depicting the two of them engaging in explicit and
sexually suggestive comments and conduct. Both denied having
any romantic or sexual relationship. All witnesses interviewed
by the ISC also stated there was no improper relationship
between the two, and that the close relationship between
Representative Cawthorn and this individual did not create an
unfair work environment. Furthermore, the ISC established that
any depictions of sexually-themed or otherwise inappropriate
comments or conduct took place prior to Representative
Cawthorn's service in the House and beyond the ISC's
jurisdiction.
The ISC reviewed Representative Cawthorn's conduct and
found no evidence of an improper relationship between
Representative Cawthorn and a member of his congressional
staff. The ISC also found no evidence of an unprofessional
office environment, and found that Representative Cawthorn did
not violate House Rules or laws relating to nepotism, as the
staffer was not a first cousin. The Committee accepts the ISC's
findings and recommendation with respect to this allegation.
B. ALLEGATIONS RELATING TO REPRESENTATIVE CAWTHORN'S FINANCIAL INTEREST
IN LGB COIN
Representative Cawthorn received 180 billion LGB Coin on
December 21, 2021, for which he provided a $150,000 check to
Witness 1, based on an over two-week-old valuation of LGB Coin.
The transaction occurred just before LGB Coin announced that it
would sponsor NASCAR driver Brandon Brown in the 2022 season.
The sponsorship was made public on December 30, 2021; however,
NASCAR withdrew its approval on January 4, 2022. Representative
Cawthorn sold nearly all of his LGB Coin in three batches on
December 31, 2021, January 4, 2022, and January 17, 2022.\10\
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\10\Representative Cawthorn still owns 15,378,707,329 LGB Coin,
which he believed was valued at approximately $357.52 as of November
19, 2022. However, as noted in the ISC Report, the value of his
remaining LGB Coin was substantially less at the time the Report was
adopted, and it is unclear how Representative Cawthorn reached his
estimation of the value.
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Representative Cawthorn did not disclose either his
purchase or sales of his LGB Coin until after the Committee
established the ISC. Additionally, Representative Cawthorn was
seen in multiple photographs and videos in which he appeared to
support or specifically encouraged individuals to purchase LGB
Coin, including after the value of the LGB Coin that he held
plummeted.
The ISC found that Representative Cawthorn improperly
promoted a cryptocurrency in which he had a financial interest,
in violation of conflicts of interest rules set forth in House
rule XXIII, clause 3 and paragraph 5 of the Code of Ethics for
Government Service. However, the ISC did not reach a consensus
on whether Representative Cawthorn intended to personally
profit from his promotional activities. The ISC found he also
violated the Ethics in Government Act by failing to timely
disclose his financial investment in LGB Coin pursuant to House
disclosure requirements; however, the ISC did not find his
failure to be knowing or willful. The ISC found Representative
Cawthorn was misinformed regarding the requirements related to
cryptocurrency disclosures, which are relatively new.\11\
Finally, the ISC found Representative Cawthorn received an
improper gift under House rule XXV, clause 5, when he purchased
LGB Coin on terms more favorable than those available to the
general public. The ISC recommended that Representative
Cawthorn be directed to pay the applicable late filing fees for
his late disclosure, and to repay $14,237.49, reflecting the
approximate value of the gift he received, to an appropriate
charitable organization.
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\11\ISC Report at 21-22 (noting that Representative Cawthorn
reasonably relied on the advice of his accountant, who erroneously
informed him cryptocurrency transactions did not need to be disclosed
on Periodic Transaction Reports).
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The ISC also considered allegations that Representative
Cawthorn may have been involved in fraudulent activities
relating to the cryptocurrency, including allegations of
insider trading and/or a scheme to artificially inflate the
value of LGB Coin. While the ISC questioned Representative
Cawthorn's explanations for his trading activities, the ISC did
not find sufficient evidence of fraudulent activity.
The ISC could not come to a consensus as to whether to
recommend the Committee reprove Representative Cawthorn, but
intended for its Report to serve as an admonishment of
Representative Cawthorn's conduct.
The Committee accepts the ISC's findings relating to
Representative Cawthorn's LGB Coin activity. The Committee,
accordingly, voted unanimously to adopt the Report of the ISC
and includes that Report as part of the Committee's Report to
the House of Representatives on this matter. Representative
Cawthorn is directed to pay $14,237.49 to an appropriate
charitable organization by December 31, 2022, to pay $1,000 in
late filing fees to the U.S. Department of the Treasury within
14 days of the release of this Report, and to file a PTR
disclosing his January 17, 2022 LGB Coin transaction within
fourteen days of the release of this Report.
The Committee also determined that Representative
Cawthorn's conduct with respect to LGB Coin did not reflect
creditably upon the House, in violation of clause 1 of the Code
of Conduct. Clause 1 is a purposely subjective standard
designed to ``have a deterrent effect against improper
conduct,'' and provide ``the ability to deal with any given act
or accumulation of acts which, in the judgment of the
Committee, are severe enough to reflect discredit on the
Congress.''\12\ The provision serves ``as a safeguard for the
House as a whole.''\13\
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\12\House Ethics Manual at 13 (2008) (citing 114 Cong. Rec. 8778
(Apr. 3, 1968)).
\13\House Comm. on Standards of Official Conduct, Inquiry into the
Operation of the Bank of the Sergeant-At-Arms of the House of
Representatives, H. Rept. 102-452, 102d Cong. 2d Sess. 22 (March 10,
1992) (citing H. Rept. 90-1176, 90th Cong. 2d Sess. 17 (1968)).
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Following the publication of this Report, repayment of the
value of the improper gift, payment of all applicable late fees
for untimely filings of House disclosures, and filing a
disclosure regarding his January 17, 2022 LGB Coin transaction,
the Committee will consider this matter closed.
IV. 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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