Dear Speaker Pelosi, Majority Leader Reid, Minority Leader Boehner, Minority Leader McConnell:

As you have probably read this week, Congress’s approval ratings are at a ten-year low. According to a new Los Angeles Times/Bloomberg poll, only 27 percent of Americans approve of the way Congress is doing its job.

Scandal after scandal has injured the esteemed reputations of the House and the Senate. While we applaud efforts by both parties in passing ethics reform legislation, more is needed to remove the taint on Washington so that we can begin to restore American’s faith in their elected leaders.

One key step would be to reform what lawmakers must report on Financial Disclosure Reports (FDR) that are being released today. Under current federal rules, someone who donates more than $200 dollars to a candidate for federal office is disclosed, but someone who invests or partners in a business with a lawmaker does not have to be disclosed. The Financial Disclosure Report required by the Ethics in Government Act has sizable loopholes, which have been used in recent years by Congressmen who have engaged in questionable, if not illegal, conduct. Even worse, these ineffective rules are not enforced. Almost every congressional case of corruption can be linked to loopholes in these disclosures.

Transparency has long been recognized as a strong deterrent to corruption. Transparency has been a key element in promoting honesty in everything from securities regulation to campaign finances. In recent years, scandals in corporate finance have led to more transparency through the passage of Sarbanes –Oxley, and union corruption has led to more transparency in the annual LM reports filed with the Department of Labor.

Congressional scandals and the resulting lack of public confidence in the integrity of Congress can be best remedied by better public disclosure.

Here are six ways you can fix financial disclosure forms:

1. Fix Disclosure of Personal Residences: The value of personal residences, information relating to transactions involving personal residences and even the existence of such residences are not required to be disclosed under current rules unless there is rental or other income derived from the ownership. Sales information and good faith estimates of property values should be disclosed with appropriate measures in place to maintain lawmaker security.

As part of a criminal conspiracy, Rep. Randy “Duke” Cunningham (R-CA) sold his personal residence in California for about $750,000 over the market price to Mitchell Wade, a government contractor who benefited from Cunningham directing tens of millions of dollars-worth of contracts to Mr. Wade’s company, MZM. They were able to conceal this bribe because they knew that information about the sale of his personal residence was exempt from disclosure on Rep. Cunningham’s Financial Disclosure Report. The details of the transaction were discovered by a reporter and eventually led to guilty pleas by both Rep. Cunningham and Mr. Wade.

2. Better Disclosure of Business Partners and Joint Investors: While current rules call for disclosure of assets of the lawmaker, there is no requirement that co-ownership of closely held investments be disclosed. There have been numerous examples in which special interests have curried improper favors with elected officials by including the official in a purported investment. In these cases, the officeholder typically receives an extraordinary return on investment with little or no risk.

Rep. Alan Mollohan (D-WI) was recently discovered to have had millions of dollars in financial partnerships with three individuals associated with groups that collectively received more than $100 million in federal funds through Mollohan’s assistance. While there were numerous omissions and misrepresentations of Mollohan’s assets in his FDR, he was never required to disclose the names of his business partners. Sen. Ted Stevens (R-AK) and Rep. Dennis Hastert (R-IL) – along with many other lawmakers – have had financial partners and co-investors who never were required to be disclosed.

3. Spouse’s Employment: Current rules require the disclosure of the employer of the spouse of a Member of Congress but there is no requirement that income of a spouse be disclosed, even in the broad ranges which are applicable to other disclosed financial information. There are numerous examples – both historic and recent – in which special interests sought to improperly influence elected officials through the employment of the official’s spouse.

4. Reform or Eliminate the Use of Broad Ranges: We understand the importance of privacy, but the use of broad value ranges render disclosure forms almost meaningless. From a practical standpoint, it is difficult if not impossible to see the return on investment that lawmakers receive. Narrowing the ranges would not put an excessive burden on the lawmakers because current rules allow for “good faith” estimates on value of investments.

5. Require disclosure of information from IRS FORM 1040 (Adjusted Gross Income and possible investment income)

A requirement that certain important information from a lawmaker’s annual IRS Form 1040 be included in the Financial Disclosure Report would act as a further disincentive to provide misleading information. While Presidential candidates and some candidates for other federal office have released tax return information there is no requirement that it be done. Nor is it necessary. However, a requirement that Adjusted Gross Income and certain investment income information be disclosed would provide an additional measure of transparency. It would also deter lawmakers who may have an incentive to hide questionable financial dealings from the public.

6. Require Random Auditing of Financial Disclosure Reports

Presently, there is very little oversight of the accuracy of Financial Disclosure Reports filed by Members of Congress. At best, the limited staff of the House & Senate ethics committees should conduct cursory reviews. The prospect of the risk of a random audit by a financial professional may very well prove to be a deterrent to a Member of Congress seeking to file a misleading Financial Disclosure Report.

Supreme Court Justice Louis D. Brandeis once said “Sunshine is the best disinfectant.” That sentiment is as true today as when he first made the statement. We urge you to promote more effective public disclosure through reforming the Public Disclosure Report requirements in the Ethics in Government Act.

Sincerely,

Ryan Alexander
President
Taxpayers for Common Sense

Ken Boehm
Chairman
National Legal and Policy Center