by Andrew Walden
Is Colleen Hanabusa lining her pockets with contributors’ cash? According to OpenSecrets.com, over $123,000 has been diverted from her campaign to Hanabusa’s own accounts since 2011.
In August, 2011, eight months after being elected to Congress, Hanabusa suddenly decided that five years of principal and interest paid to herself allegedly to repay bank loans to her campaign were really just interest-only payments. With a few keystrokes, “Colleen for Congress” went from owing Hanabusa $67,555.84 to $97,145.59 and she suddenly owed additional amounts of "accrued interest" now totaling $25,266.01.
Increasing one’s debt load may seem counter-intuitive as money making schemes go, but when Hanabusa became a Congressional incumbent, special interest money began flowing her way. Re-designating five years of payments allows even more contributions to be vacuumed out of the campaign committee.
The re-write of her loan documents raises issues far beyond the campaign loan’s high interest rates which earlier this year drew the attention of Citizens for Responsibility and Ethics in Washington (CREW). In a March 22 news release CREW explained how Hanabusa fits into the non-profit watchdog group’s ‘Family Affair’ report findings:
“With the interest rates Rep. Hanabusa is charging for loaning her own campaign money, she could be confused for a loan shark,” said CREW Executive Director Melanie Sloan. “Most Americans open a savings account when they want to earn a little interest on their money. Instead, Rep. Hanabusa is making a killing by investing in her own campaign.” Campaign records show Rep. Hanabusa made two loans to her campaign committee, totaling $125,000, in 2006. Since then, she has charged more than 9% interest on these loans, resulting in over $30,000 in interest payments. At the end of the 2010 election cycle, less than $3,000 of the principal on these loans had been repaid. Additionally, campaign records show that Rep. Hanabusa’s campaign committee reimbursed her husband, John Souza, almost $9,000 for food and other expenses during the 2010 cycle.
Was Hanabusa violating the law by charging her campaign interest? Attorney Paul Ryan of The Campaign Legal Center March 22 told reporters that bank documents showing the interest rate would be critical to determining whether Hanabusa was violating the law:
"The main provision of federal law that would be at play here is the ban on converting campaign funds to personal use. Just as it would be illegal for candidates to use campaign funds to pay their personal mortgage, this evokes similar concerns."
In March Richard Rapoza, Hanabusa’s Chief of Staff and Campaign Communications Director told media:
(Hanabusa) has not profited at all from those interest payments. Those loans were fully documented to the FEC as required by law. The interest rates to the campaign on those funds reflect the rates charged by the bank, and interest payments were made directly to the bank.
In response, CREW Executive Director Melanie Sloan told Hawai`i Free Press:
CREW’s information on the interest payments paid to Rep. Hanabusa is drawn from Federal Election Commission filings made by her own campaign committee. If what Rep. Hanabusa is saying is correct, then her campaign has incorrectly reported the loan on an ongoing basis.
Her 2006 filings show two loans from Central Pacific Bank that were due in 2007. Those filings do not show that Rep. Hanabusa was responsible for the loan, a required step that would have made it clear the loan was a pass-through loan. In addition, outstanding bank loans must be reported by campaign committees on an ongoing basis on Schedule C-1 until the loan is paid off. The most recent Schedule C-1 filed by Colleen for Congress was filed with her 2006 reports.”
Asked in late May about the documents Ryan said would be critical, Rapoza tells Hawai`i Free Press, “We did provide the documentation to them subsequently." But the “subsequent documentation” Rapoza emailed this reporter is the very same 2006 FEC form C1 at the heart of CREW’s March “Family Affair” report.
CREW’s Sloan continues:
“Despite the fact that the campaign told the FEC both loans were due in 2007, both loans continued to accrue interest for years afterwards, and Rep. Hanabusa’s campaign continued to make interest payments to Rep. Hanabusa, which suggests she was the final recipient of the payments.”
Rapoza claims: “it was advanced on her professional line of credit. She had a line of credit for her law office. She drew on that and that determined the interest rate.” Rapoza also points to an October, 2006 “Colleen for Congress” form C-1 (pg56) which outlines an additional $25,000 loan at a fixed rate of 9.47% due and payable in 2007.
Contrary to Rapoza’s claims, the loan balances outstanding on Hanabusa’s “Colleen for Congress” most recent FEC filings clearly state “Loan Source Ms. Colleen Hanabusa PERSONAL FUNDS” and make no reference to any bank loan.
And according to Hawaii Department of Commerce and Consumer Affairs online Business Registration System, Hanabusa no longer has a law firm. “Colleen Hanabusa, A Limited Liability Law Company” was terminated February 28, 2011.
Asked if the terms of the 2006 line of credit were extended year-by-year to the current day, Rapoza says:
They were extended until the loans were paid in full. They were drawn on Rep. Hanabusa's line of credit, as opposed to being fixed-term loans like a mortgage or car loan.
But the 2006 Schedule C-1 filed by Colleen for Congress shows that the interest rate charged by Central Pacific Bank was adjustable based on the 91-day Treasury bill rate plus 4.5%. In 2006 and 2007, 91 day Treasury Bills were paying 4% to 5% interest, justifying a 9% rate on Hanabusa’s line of credit, but in 2008 and continuing to the current day, the interest rate on 91-day T-Bills has plummeted to nearly zero.
Based on Rapoza’s statement, Hanabusa’s interest rate should have been 5% or less for the last four years.
Form C-1 is the only form which required a statement from Central Pacific Bank signing off on a description of the terms and rate of Hanabusa’s lines of credit. Failing to file those reports on an ongoing basis makes it possible to misrepresent the terms of the loans and the nature of the loan payments.
Hanabusa has not filed her forms C-1 as required for bank loans since 2006, and the 2006 Forms C-1 were apparently sent only in response to a FEC letter demanding them. Even when revising five years of FEC reports, Hanabusa’s campaign committees did not file Schedule C-1 beyond 2006.
Did inconvenient questions precede Hanabusa’s rewrite? Just one month before the restatements began, a June 1, 2011 letter from Hanabusa to the Clerk of the House responds to “… questions raised from my 2010 Financial Disclosure Form.” Hanabusa tells the Clerk, “Schedule V personal line of credit, reported on both my 2009 and 2010 Financial Disclosure forms, was first incurred in September, 2006.”
The FEC Candidate Guidebook (pages 35-36) requires loan repayments go into a segregated bank account set up at the lending institution or another bank but Open Secrets.org reports that the top two vendors for the Hanabusa for Hawaii Campaign 2012 are:
· Colleen For Congress paid $134,150
· Hanabusa, Colleen paid $123,422
Roll Call March 22 wrote: “Members Use Positions for Profit — Rep. Colleen Hanabusa (D-Hawaii) collected more than $31,000 in interest on a $125,000 loan….” But the restatements and these latest payments go far beyond CREW’s allegations of high interest “loan sharking” and self-dealing.
Related: Hanabusa: I am not a Loan Shark