George Santos case highlights cracks in financial disclosure system

WASHINGTON — The upset victory by Rep. George Santos last year exposed cracks in the congressional financial disclosure system after he failed to submit one year’s statement, filed another late and allegedly falsified key parts of his reports in his House campaigns — without detection.

Everyone running for Congress by law must file an annual financial disclosure statement for the public to review, but a Newsday analysis found more than a third of New Yorkers running for U.S. House seats last year did not file and that late and flawed reports are common.

The widespread view in Congress and the House and Senate ethics committees is that almost all nonfilers are challengers with little chance of winning, while almost all competitive candidates and members of the House and Senate file their disclosures.

But some ethics attorneys are reassessing the shrugs at nonfilers now that Santos (R-Nassau/Queens) faces an ethics committee investigation that could lead to his ouster from office and a 13-count federal indictment with charges that could land him in prison.

“Until recently, there's been no need to prioritize this because the harm of someone not filing who loses didn't seem to be a concern,” said Kedric Payne, vice president and general counsel of the nonprofit Campaign Legal Center that works for ethical and fair elections.

“But when you see what happened with Santos,” he said,” then you start to say: ‘Oh, no, no, no, it is highly important that candidates file their financial disclosure early so that there is a way to provide information to the public before they vote.’ ”

Latest filings

On June 14, the House Clerk's Office and the Senate Ethics Committee posted on their websites the 2023 statements or requests for more time to file submitted by candidates and members of Congress — including the 26 representatives and both Democratic senators from New York.

The post-Watergate Ethics in Government Act that Congress passed in 1978 mandated that those running for Congress file annual disclosure reports of their income, assets, liabilities, positions in organizations and agreements with outside entities. 

The point of the financial disclosures, according to the law that created them, is to inform the public about the financial interests of candidates, legislators and federal officials to increase confidence in the integrity of government and to deter potential conflicts of interest.

Long Island’s Republican congressmen Andrew Garbarino of Bayport, Nick LaLota of Amityville and Santos were among the 15 New York members who have filed for extensions, most of them until Aug. 13. Another 10 New Yorkers submitted their full disclosure reports.

Sen. Chuck Schumer’s filing said he had $1,000 to $15,000 in his bank account and $115,000 to $300,000 in joint bank accounts with his wife, Iris Weinshall, the New York Public Library’s chief operating officer. Weinshall had $768,000 to $2.2 million in her various accounts.

Sen. Kirsten Gillibrand reported having $1.2 million to $5.5 million in money market, savings and checking accounts at two banks and a credit union.

And a dozen candidates already gearing up to run in New York’s June 27, 2024 primary filed statements or sought extensions in the past few weeks, including three candidates for Santos’ seat and two who are running in Long Island’s Fourth Congressional District.

The only member of New York’s congressional delegation who didn't file by the May 15 deadline was the congressman representing that district: Rep. Anthony D’Esposito (R-Island Park).

Missing financial disclosure filings

It is not common for a member of Congress to fail to submit a disclosure, but many candidates do not file, according to a Newsday analysis of the financial statements of New Yorkers running in the 2018, 2020 and 2022 primaries and those on the ballot for every 2022 U.S. Senate race in the nation.

D’Esposito filed his 2023 statement on June 20, after Newsday had contacted his office five days earlier about it. His spokesman, Matt Capp, issued a statement saying the delay in filing “has been handled.” In 2022, D’Esposito submitted his filing three months late.

Last year, after a court ruling requiring the redrawing of congressional district boundaries pushed the New York congressional primaries from June to August, about 40% of those running for party nominations did not file. Eight of them ran in the general election, and lost.

In the COVID pandemic year of 2020, 45% of those running in the primary did not file — a jump from the pre-pandemic election in 2018, when just under 20% of candidates failed to file.

And in the 34 U.S. Senate races across the country in the 2022 general election, about a third of those running did not files disclosures — including Republican Joe Pinion, who won 43% of the vote in his race against Schumer.

Pinion, named the New York State GOP’s media surrogate earlier this month, said Thursday he had filed a statement the same day Newsday asked him about it.

“We had a responsibility to make sure that was done in a timely manner. We didn’t get it done,” Pinion said of the statement due May 15, 2022. “In lieu of what has happened here with George Santos, I think there’s increased scrutiny and rightly so on these filings.”

Many New York candidates who did not submit disclosure reports ran campaigns with little money — last year 15 did not raise any money at all, exempting them from filing — as they tried to compete in races dominated by the wealthy and well-connected.

Not all nonfilers were broke. Fifteen other 2022 candidates raised between $100,000 and $750,000 each, far above the $5,000 threshold for filing, but still did not submit disclosure reports.

Retired NYPD Det. Michael Rakebrandt of Holbrook, for example, said he raised about $17,000 to challenge Garbarino in the Second District Republican primary last year. Rakebrandt lost. But he acknowledged he did not file a financial statement and would sort it out.

When told that a third of the candidates did not file, Rakebrandt replied in a LinkedIn message: “That’s not right, people should be able to see those. It is important to have transparency with that especially when you look at the issues with members insider trading.”

Yet it is unlikely the ethics committees or prosecutors will investigate or sanction D’Esposito, Rakebrandt or other nonfilers, experts said.

Stanley Brand, an attorney who specializes in ethics and campaign finance law, said the ethics committees take up very few cases involving incumbents, and may not have jurisdiction or the resources to police the vast majority of failed candidates.

The U.S. Department of Justice also has authority to pursue election-related cases and has done so over time in a handful of cases, Brand said, citing Santos as one of them.

“But given the number of fringe or minor party candidates,” Brand said, “the DOJ just doesn’t have the resources to make enforcement a priority.”

Flawed filings

Meredith McGehee, an expert on campaign finance and ethics with more than 35 years of experience in Washington, spoke with outrage about the Senate and House ethics committees’ failure to crack down on nonfilers' late reports and erroneous statements.

“The failure to file by candidates should concern American voters because transparency provides a key tool to uncover conflicts of interest or the appearance of conflicts by those who seek public power,” McGehee said.

“It's pretty rare to find a member of Congress who treats it really seriously. And the ethics committees have been so weak in their enforcement,” she said.

“It’s not seen as if it’s a real serious matter if you’re late or if you’re in error,” McGehee said. “Usually if there's an error, someone comes out and says, ‘Fix it.’ And if it's late, they'll say, ‘Get it in.’ ”

Anyone who searched for LaLota’s 2022 disclosure likely had a tough time finding it because he entered his first name in the space for his last name, and the clerk posted it under the name “LaLota Nick.” He has not amended it, but the clerk now posts it under the last name of LaLota.

LaLota’s office did not respond to questions about the error.

Some members seek an extension to file disclosure reports after their state’s primary.

In April 2022, two days before a judge set Aug. 23 as New York’s 2022 primary date, Garbarino had requested an extension until Aug. 13 to file his report — long after the originally scheduled June 28 primary. Garbarino’s office did not respond for an explanation.

The House Ethics Committee's annual reports show its staff expends a lot of effort to coach and help members comply with the rules for their investments and finances as well as how to fill out their disclosure statements.

The ethics committees say they do not sanction members who file late or make mistakes as long as they are acting in good faith and amend their filings as recommended. The committees can fine late filers $200 but usually do not make those fines public.

Under the Ethics in Government Act, the U.S. attorney general can seek a civil penalty of $50,000 and also file criminal charges against anyone who knowingly and willfully falsifies, fails to file or conceals required information.

But few allegations involving financial disclosure statements prompt prosecutions, a review of reports filed by the independent Office of Congressional Ethics shows.

In 2019, for example, the office alleged loans that Rep. Lori Trahan (D-Mass.) made to her campaign were excessive contributions from her husband out of his own personal funds and that she failed to include them on her financial disclosure form.

In 2020, the House Ethics Committee determined the loans were marital property and that Trahan did not knowingly and willfully exclude them from her disclosures.

Craig Holman, the lobbyist on ethics, lobbying and campaign finance for Public Citizen, a nonprofit consumer advocacy organization, faulted the committees for not doing a better job of vetting the statements, as shown by their review of Santos’ filings.

“In 2020, when he filed, he declared he had a total income of about $55,000, and in 2022, when he filed, he declared an income of $750,000 plus up to $5 million in dividends from a company that he owned,” Holman said.

“If the IRS were to take a look at someone's filing tax filings like that, going from a pauper to a millionaire in a matter of two years, that would have raised red flags,” Holman said.

Santos, who ran for Congress in 2020 and 2022, did not respond to Newsday’s list of questions for this story.

Newsday sent questions about nonfilers, missing, late and erroneous filings and the effect of Santos’ ethics probe and indictment to Tom Rust, staff director and chief counsel to the House Ethics Committee. "No comment," Rust said in an email.

Newsday also reached out to the office of Garbarino, a member of the House Ethics Committee. He did not respond.

McGehee said a solution might be to make financial disclosure statements more accessible than they are now to better meet the goal of the Ethics in Government Act to inform the public.

The House Clerk’s Office and Senate Ethics Committee post individual PDFs of each filer’s statements, amendments and stock transaction reports. Users must download them one at a time to review — making it difficult to make comparisons with past statements or other filers.

Senate filings are posted at https://efdsearch.senate.gov/search/home/ and House filings at https://disclosures-clerk.house.gov/PublicDisclosure/FinancialDisclosure.

“They've made it more impossible by not standardizing a searchable, sortable, downloadable database,” McGehee said.

The task of building a data file that allows easier analysis is so difficult that OpenSecrets, the nonprofit nonpartisan political money tracker, last did it for the June 5, 2018, primaries in several states. The group found a third of those running did not file disclosures.

The ethics committees should use a database format similar to those used by the Federal Election Commission for campaign contributions and the House Clerk’s Office for lobbyists, said Alex Baumgart, an OpenSecrets researcher.

Candidates would file electronic disclosures into a downloadable database that would display summary information such as when the candidate filed the data, the due date for the filing and the date of the primary, he said.

“It’s essentially a candidate tracker,” Baumgart said.

Legal filings

When Santos filed his 2022 House financial disclosure statement, he may have either overlooked or dismissed a checkbox before the line for his signature certifying the statements he made on the report “are true, complete and correct.”

Brand, the ethics attorney, said the statements actually have legal status.

“When I drafted the original forms for the Ethics in Government Act when I worked in the House’s counsel office, I put a thing on the bottom that said these statements are subject to the federal false statement statute,” he said.

“The Department of Justice would have taken that position anyway. But I wanted to give everybody notice — ‘Hey, don't be cavalier with these things. They could carry significant legal liability.' ”

Count 13 of the federal indictment of Santos alleged he made false statements in his 2022 financial disclosures about his salary and dividends from the Devolder Organization LLC, the company he founded, and the amounts he reported in his bank accounts.

If convicted on this count alone, Santos could face a fine of up to $50,000 and up to five years in prison.