October 1, 2012
Berman blasts Sherman for taking over $425,000 in interest on loans to campaigns
The reelection campaign for Rep. Howard Berman (D) is launching a multi-media attack on Rep. Brad Sherman (D) highlighting Sherman’s having collected at least $425,000 in interest – and perhaps as much as $461,000 – on personal loans made to his various campaign committees over the course of his decades-long career.
Sherman, who is running against Berman for reelection in the 30th district in the West San Fernando Valley, first charged interest on loans to his campaign committees in 1989. The practice is legal but not widely used; some election law observers decry it as unethical.
Sherman has not collected interest on loans made to his campaign committees since 2005, but over the 17 preceding years, he made loans to three different campaign committees and collected interest on those loans. Sherman regularly left those loans on the books for long stretches of time, even when his comittee had sufficient funds to pay them back. He also collected interest on interest that had accrued even after the principal amount of the loan had been repaid.
The Berman campaign has acknowledged that Sherman did not charge exorbitant rates of interest on the loans; the Sherman campaign said that interest was paid at a rate two percent less than the returns being offered at an ordinary bank.
But the Berman campaign said that the practice amounted to Sherman “intertwining” his campaign and personal accounts, and could not find another member of Congress who had collected as much interest as Sherman had.
“Is it appropriate for a member of Congress to use their campaign accounts – which is there for the purposes of getting elected and reelected – is it appropriate to also use that campaign account as an investment vehicle?” Brandon Hall, Berman’s campaign manager, said in a conference call with reporters on Monday.
With just over five weeks until Election Day, the Berman campaign, which has acknowledged Sherman is leading in this closely watched race, is upping its negative messaging, putting the charges at the center of a new media push with ads on TV, the Internet and direct-mail solicitations.
Though they stop short of calling Sherman’s actions unethical, Hall said that the message is designed to raise questions about Sherman in the minds of voters.
The Sherman campaign dismissed the Berman campaign’s accusations in a statement, calling them “false at worst and highly misleading at best.”
“He loans it to his campaign because he’s committed to being a public servant,” said John Schwada, the Sherman campaign’s press secretary.
In defending Sherman’s actions, his campaign released a statement on Monday saying the practice of collecting interest on personal loans to campaigns is “completely legal and has never been criticized by an independent group.”
Furthermore, the statement said Sherman made the loans early in his career, when he was facing “self-funded multi-millionaire Republican candidates while running in a highly competitive seat,” at a rate of interest “that was at least 2% less than the rate he would have received had he simply left the money in the bank.”
This is hardly the first time that campaign finance has been the subject of attacks and counterattacks in this big-budget battle between incumbents.
Early on, Sherman focused on the existence of a number of pro-Berman Super PACs, groups that can accept unlimited donations to make independent expenditures on behalf of a particular candidate.
In August, the Berman campaign, on an anti-Sherman Web site, called Sherman “The Payday Lenders’ Man in Washington,” in part for his having benefitted from a 2009 fundraiser at the home of a lobbyist representing payday lenders.
And on Monday, the Sherman campaign’s statement reiterated a number of attacks on Berman, including the accusation that Berman paid his brother, political consultant Michael Berman, $741,500 to run campaigns between 1992 to 2010, years when Berman did not face a serious election challenge.
That accusation stemmed from a report issued by the independent watchdog group, Citizens for Responsibility and Ethics in Washington (CREW).
In the same report, however, CREW called for increased scrutiny of the practice of collecting interest on loans to campaign committees. “High interest payments suggest candidates may be using loans as vehicles for self-enrichment,” the report stated.
According to the Berman campaign, CREW began reporting interest payments made to members of Congress in 2005, the same year that Sherman last collected interest from loans made to his campaign committees.
Having abandoned the practice of collecting interest on the money he loaned his campaign committee, Sherman was not among the 14 sitting house members mentioned in CREW’s 2012 report. CREW declined to comment for this story.
Even as the Berman campaign unveiled its latest attack, one plank was being challenged. When it was launched, the new Web site publicizing what the Berman campaign calls “The Brad Sherman Scam” prominently featured a quote from Craig Holman, a lobbyist at Public Citizen, a Washington advocacy group.
“I find this practice quite reprehensible,” the quote from Holman read.
That remark, from 2009, came from a Bloomberg story about Rep. Grace Napolitano’s collecting more than $200,000 in interest on loans she made to her campaign committes. Though Napolitano collected less than half of what Sherman did in interest, the loans she made were reportedly made at very high rates of interest, up to 18 percent in some cases.
Public Citizen asked the Berman campaign to remove the Holman quote from the Web site.
“We don’t know the facts,” Lisa Gilbert, acting director of Public Citizen’s CongressWatch, said. “This question is taken from a different situation with a different member of Congress.”
By the end of the day on Monday, the Holman quote appeared to have been removed. Still, the Berman campaign's Hall stood by its initial use.
"Craig Holman and Public Citizen are commenting on the exact practice that Brad Sherman engaged in to profit $460,000 by using his campaign as a personal investment vehicle," Hall said in a statement emailed to the Journal.