| ► Houston Chronicle - 05/21/10 - Watchdog claims fraud by lawmakers |
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Houston Chronicle - 05/21/10 - Watchdog claims fraud by lawmakers Legislators deny reimbursement for lodging from state while billing own campaigns is unethical, taxable
By GARY SCHARRER
AUSTIN BUREAU Aug. 21, 2010
AUSTIN — Most Houston and San Antonio state legislators pay for lodging and related-living expenses in Austin out of their campaign accounts and then pocket the $168 per diem from taxpayers, a practice one ethics watchdog called "de facto fraud."
Legislators say their conduct is ethical and legal. But the handling of per diems totaling at least $23,520 each in legislative session years could put them in a gray area with the IRS.
Dave Palmer, a self-styled ethics watchdog from California, filed complaints this week with the Travis County district attorney and the Texas Ethics Commission against the lawmakers.
"When outside sources pay 100 percent of a legislator's lodging expenses, he or she has no lawful right to pocket State reimbursements paid to defray those costs, right?" Palmer asked in his complaint to the Travis County district attorney. "It would be difficult to imagine that this conduct does not constitute de facto fraud."
His complaint covers 34 of 46 legislators from Houston and San Antonio. Palmer said his complaint soon will be expanded to include about two dozen Dallas and Fort Worth-area legislators.
Prosecutors did not return calls regarding Palmer's complaint, which did not cite alleged violations of specific criminal statutes.
The use of money from political supporters to cover Austin living expenses raises questions about potential tax implications, however.
"You can't have the same expenses reimbursed from two sources and not declare one source as income. That's pretty clear. That's how the law works," said John Robinson, a federal tax expert and accounting professor in the McCombs School of Business at the University of Texas at Austin. "At the least, this is questionable."
Ellis defends use
Internal Revenue Service officials declined to say how per diem pay should be handled when living expenses are paid from campaign funds.
Campaign records and Palmer's research indicate Sen. Rodney Ellis, D-Houston, has used more than $200,000 in campaign funds to cover Austin living expenses during the past decade.
This year, Ellis reported monthly "Austin housing expenses" ranging between $2,223 and $2,895.
"I follow the Election Code in how I pay for Austin lodging and other expenses," Ellis said. "While the per diem does not cover the total cost of doing state business, it's hard for me to advocate increasing the amount, especially with our current budget situation. I consider covering the balance of the cost with personal or campaign funds a legitimate expense tied to public service."
Rep. Barbara Woolley, R-Houston, has spent $187,000 from campaign funds to cover her Austin rent during the past seven years, according to campaign records and Palmer's research. Woolley uses her campaign account for $2,200-a-month rent payments in Austin, according to her campaign finance reports.
'Doesn't cover' expenses
The eight-term legislator did not respond to questions.
Campaign records and Palmer's research indicate Sen. Leticia Van de Putte, D-San Antonio, has used nearly $129,000 in campaign funds to cover Austin living expenses in the past seven years. This year, Van de Putte reports monthly "Austin apartment rent" of $1,650 paid from her campaign account.
"The Election Code specifically authorizes legislators to pay for Austin lodging and some other expenses from legislators' campaign accounts, so that is what my campaign does," Van de Putte said. "Per diem doesn't cover the extent of the many expenses associated with being in Austin while working on legislative business. It is not, therefore, taxable income, nor do I report it as such."
Van de Putte and other lawmakers say they do not favor raising the per diem but have to use campaign money or personal funds to finance living costs exceeding their per diem - which amounts to more than $4,000 a month during legislative
sessions.
There are no state rules on the proper use of pier diem pay, and lawmakers are allowed to use political funds to pay for business-related expenses, according to the Texas Ethics Commission.
Lillian Mills, a federal tax expert and professor in the McCombs School of Business at the University of Texas at Austin, said per diem pay generally is not taxable.
"But you can't then use the same amount of expense to avoid paying tax on some other reimbursement like a draw out of that campaign fund," she said. "There may be a free lunch, but there are no second tax helpings."
Texas lawmakers do not have to provide invoices or documentation for their expenses or file for the per diem checks when they are in session.
The payments are made automatically, according to leaders in the House and Senate business offices.
When not in session, legislators get up to $2,016 per month, or a maximum of 12 days, in per diem pay to cover expenses. They do not have to be itemized.
The maximum monthly per diem for a committee chair is 16 days, or $2,688 when the Legislature is not in session.
Not billing campaigns
The salary for a Texas legislator is $600 per month.
Houston-area legislators who have not used campaign money to pay for Austin living expenses, according to Palmer's research, are Republican Sens. Glenn Hegar and Joan Huffman; Democratic Sen. John Whitmire; Republican Reps. John Davis, Rob Eissler and John Zerwas; and Democratic Reps. Scott Hochberg, Carol Alvarado and Ellen Cohen.
Palmer, 66, is a disabled Army veteran who has spent much of the past 18 years examining financial records of public officials in California, Texas, Ohio, New Jersey, New York, Louisiana and several other states.
Palmer, who has been described as "an equal opportunity exposer," said he's not guided by ideology or partisan politics.
"I don't care who they are," the Folsom, Calif., resident said. "The thing I hate the most is hypocrisy. It just angers the hell out of me."
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