Crapo throws himself at mercy of FEC

After losing $250,000, the Idaho senator seeks to soften the penalty by reporting the violation.

dpopkey@idahostatesman.comMay 17, 2013 

  • Woman got 8 years in campaign scheme

    In rare cases, absconding with campaign funds results in criminal action. In a recent California case, prosecutors likened Kinde Durkee to the Bernie Madoff of campaign treasurers.

    Durkee admitted to defrauding clients of more than $7 million, though a restitution order requires her to repay $10.5 million to 77 victims. Sen. Dianne Feinstein, D-Calif., said she lost about $4.5 million. Other victims included other members of Congress, California state legislators and the Los Angeles County Democratic Party.

    Convicted of mail fraud, Durkee was sentenced to more than eight years in prison in November.

    She spent the money on mortgages, paying her employees, caring for her parents and season tickets to the Los Angeles Dodgers.

Sen. Mike Crapo is hoping to make the best of a bad situation by taking advantage of a 2007 policy that encourages campaigns to voluntarily report violations of the Federal Election Campaign Act.

Last week, the Idaho Republican filed a "sua sponte" letter with the Federal Election Commission saying that a failed investment cost his campaign a quarter-million dollars. Also called "self-reported voluntary submissions," the process is designed to streamline investigations.

The carrot for Crapo is the FEC's practice of negotiating civil penalties that are generally between 25 percent and 75 percent lower than in cases brought by other means. Generally, penalties do not exceed $7,500.

"We'll agree to whatever they propose that needs to be done," Crapo spokesman Lindsay Nothern said Thursday.

Crapo, who has $3.4 million in his campaign treasury, faces re-election in 2016.

He has released three supporting documents submitted to the FEC, but not the letter detailing possible violations.

"It is a confidential filing between the campaign and the FEC Office of General Counsel," Nothern said after consulting with Crapo's legal counsel.

In March, Crapo's campaign paid the Chicago law firm of McDermott Will and Emery $29,243 to handle the case. Nothern said another $7,000 has since been paid and additional expenses are expected.

According to the FEC, self-reporting should include an admission of each violation; a complete recitation of the facts and relevant documents explaining how violations were discovered; a description of any actions taken in response; and a list of other agencies investigating the violation.

Nothern said Crapo decided to go public after the FBI and U.S. attorney decided against criminal action regarding a defunct Nevada-based real estate company that received $250,000 from the campaign. U.S. Attorney Wendy Olson said Thursday that her office decided against any charges in the matter early this year. Olson said her policy is not to disclose why the government declines a prosecution.

Jake Ball, Crapo's campaign manager from June 2006 to December 2010, gave the $250,000 to a longtime friend on Sept. 22, 2008, as the U.S. financial crisis was worsening, according to Ball's March 14 affidavit attached to Crapo's FEC filing.

Crapo "gave me latitude to seek such a higher return, but I do not recall any other discussions with Senator Crapo describing the investment strategy," Ball said in the affidavit.

Ball's friend, Gavin McCaleb, promised to pay the campaign 8 percent annual interest on or before Sept. 22, 2009, according to a promisory note Crapo attached to his FEC filing. McCaleb invested the $250,000 in Pyramid Global Resources, which, McCaleb said in a Feb. 20 affidavit, was to have returned a profit in less than two months.

"The agreement was a fraud," McCaleb said. "Pyramid did not repay any of the funds as promised and the escrow company refuses to cover the loss."

Nothern said Crapo didn't learn of the loss until late 2010, as Ball was leaving the campaign to work for newly elected Congressman Raul Labrador, R-Idaho. Ball resigned as Labrador's district director May 9, the same day Crapo filed with the FEC. Ball said he was leaving to pursue a Web-based bookselling business.

Crapo could have kept the self-reporting quiet until the FEC acted.

"Everything in the enforcement process is confidential until the case is resolved," FEC Press Officer Judith Ingram said Thursday.

But Nothern said Crapo decided to disclose the loss after exhausting his remedies to retrieve the money. The "final word" from federal authorities and Crapo's legal team came "within the last six months," Nothern said.

"The investigation's over," Nothern said. "We can publicly say what happened, at least to some extent. We're trying to be open here.

"We weren't callous, that's far from the case. We spent considerable money on attorneys to try and recover it."

Crapo has since tightened his accounting, ending a practice that allowed Ball alone to make the investment.

Said Nothern: "At least three sets of eyes see this stuff."

Dan Popkey: 377-6438, Twitter: @IDS_politics

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