Rick Renzi Deal Helped Pay for 2002 Campaign

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We’ve already got two separate items linked on the reported investigations of Rep. Rick Renzi, R-Ariz. One concerns his involvement in a land swap deal that made a $3 million profit for James Sandlin, a a real estate investor who’d bought half of a business owned by Renzi for $200,000 in 2001 (Sandlin would later buy the rest for somewhere between $1,000,001 and $5 million). The second story notes an inquiry into Renzi’s influence on behalf of a government contractor, Mantech International, of which his father is an executive vice president.

The Sandlin inquiry is particularly interesting; Justin Rood has much more on it at TPM Muckraker (with the story advanced further here). What I find interesting is the extent to which the Sandlin-Renzi relationship helped the latter in his first campaign for Congress in 2002. The Federal Election Commission audited Renzi’s 2002 campaign committee, Rick Renzi for Congress, and found that the candidate had loaned more than $760,000 to his own coffers–by far the single greatest source of funds. Among the money that Renzi said that he loaned to his 2002 effort was the $200,000 raised by selling half of Renzi Investments Inc. (later renamed Fountain Realty & Development, Inc.) to Sandlin. In its investigation of the matter, the FEC focused on the narrow, somewhat snooze-inducing issue of who owned the $200,000 (and other money) that Renzi transferred to his campaign: Was this personal money, or were these contributions from Renzi Investments Inc., a Subchapter S Corpoartion (and thus barred, under federal election law, from contributing to a campaign). From the FEC Audit Report:

Although [Rick Renzi for Congress] representatives indicated that the sale of 50% of the Candidate’s interest in Fountain Realty & Development, Inc. was a source of funds for some of the loans, the documentation available at that time did not support that representation. …Bank records for the Candidate, Renzi & Co. Inc. and Fountain Realty & Development, Inc. were provided only for December 2001, and did not establish how and when the proceeds of the sale were received by the Candidate. Other documents detailed the sale of the interest to two individuals; however, no information concerning how the purchase price was determined was provided.

At the exit conference, the Audit staff presented this matter to RRFC representatives. They maintained that the funds in question were generated through the sale of various business asstes. They argued that these busines entities were owned soley or in majority by the Candidate; therefore, profits from the sale of these business assets, were funds of the Candidate.

It would be interesting to see how the purchase price was determined (there may well be documents the FEC didn’t see), especially since, as the audit report suggests, Renzi’s campaign maintained it was raising funds by the sale of business assets. It’s also worth noting what the FEC found as they investigated these transactions:

During this process, [Rick Renzi for Congress] representatives revised their characterization of the source of the Candidate’s funds for many of these transactions. Many of the transactions previously described as “distributions” from the subchapter S corporations or “proceeds” from the sale of business assets are now characterized as loan repayments to the Candidate. This evolving characterization of the source of the funds necessitated the Audit staff’s request for additional documentation.

And people doubt that evolution is an ongoing process…