Santorum's mortgage raises interest

SEN. RICK SANTORUM and his wife received a $500,000, five-year mortgage for their Leesburg, Va., home from a small, private Philadelphia bank run by a major campaign donor - even though its stated policy is to make loans only to its "affluent" investors, which the senator is not.

Good-government experts said the mortgage from The Philadelphia Trust Co. raises serious questions about Santorum's conduct at a time when he is the Senate GOP's point man on ethics reform. They said it would be a violation of the Senate's ethics rules if Santorum received something a regular citizen could not get.

A campaign spokeswoman for Santorum, who is seeking re-election, said the couple's mortgage interest rate was "market-driven," but she refused to offer specifics, as did officials from Philadelphia Trust.

• A political-action committee chaired by Santorum, America's Foundation, spends less money on direct aid to GOP candidates - its stated purpose - and more on expenditures than similar PACs. And its expenditure reports are littered with scores of unorthodox expenses for a political committee, with charges at coffee and ice cream shops and fast-food joints as well as supermarkets and a home-hardware store.

For example, America's Foundation made 66 charges at Starbucks Coffee, almost all in the senator's hometown of Leesburg, Va., and 94 charges at another D.C.-area vendor, HMSHost Corp. Virginia Davis, the campaign spokeswoman, defended all the charges as campaign-related, saying the senator prefers to meet political aides in coffee shops rather than on Senate property.

• A little-publicized charity founded by Santorum in 2001, the Operation Good Neighbor Foundation, is not registered in Pennsylvania, even though the majority of its fundraising and spending takes place here.

What's more, three years of public tax returns show the charity spent just 35.9 percent of the nearly $1 million it raised during that time on charity grants, well below the 75 percent threshold recommended by experts. The group's Web site says it has distributed a total of $474,000 to groups, many faith-based, that fight social ills and urban poverty.

It appears that Santorum's unconventional mortgage deal could pose the biggest problem for the senator, who consistently has trailed his likely November rival, Democratic state treasurer Bob Casey Jr., by double digits in the polls. Unlike longtime Washington pol Santorum, Casey does not maintain a so-called "leadership PAC."

Melanie Sloan, a former federal prosecutor who heads Citizens for Responsibility and Ethics in Washington, or CREW, said that "anytime he gets something that a regular person couldn't get, that's an improper gift" - regardless of any fees or the interest rate.

Officials with Philadelphia Trust have been generous supporters of Santorum's campaign since the private bank opened its doors in late 1998. Federal records show the company's executives, directors and their spouses have donated $24,000 either to the senator's campaign or to the America's Foundation PAC. Of that total, $13,000 came from the man who signed the mortgage papers - Philadelphia Trust CEO Michael Crofton - and his wife.

Crofton also has been chairman of the board of advisers for Operation Good Neighbor, and records show the bank has donated at least $10,000 to the senator's charity.

Philadelphia Trust advertises itself as an independent private bank for "affluent investors" - who have liquid assets of at least $250,000 - and for institutions. On its Web site, it states that its "[b]anking services are available only to investment advisory clients whose portfolios we manage, oversee or administer."

A call to the bank confirmed that its mortgages are only for investors and not for the general public.

According to a review of the annual financial-disclosure forms that Santorum files, he has never held an investment portfolio with Philadelphia Trust. And in 2002, the year he obtained the mortgage, the value range he gave for his small number of investments could not have exceeded $140,000.

The Pennsylvania senator bought the Virginia home, 43 miles from Capitol Hill, a year earlier for $643,361, and - according to Loudoun County property records - had received a $405,000 mortgage from a traditional lender. The 2002 refinancing with Philadelphia Trust exceeded the initial loan by $95,000.

The chairman of Philadelphia Trust - George Marlin, a one-time Conservative Party candidate for mayor of New York - said discussing any customer's transaction would violate bank privacy laws. Crofton did not return phone calls.

A bank director, Karen Iacovelli, also would not answer questions in detail, but when pressed on whether the bank does loan business with non-investment customers, she said, "Yes and no - it's a judgment call."

There is no evidence that Santorum - who sits on the Senate Banking Committee - took any official actions on behalf of Philadelphia Trust. The senator's campaign said no special treatment was involved.

"Sen. Santorum and his wife, who is an attorney and a nurse, applied for the mortgage using the standard application process that Americans must go through when applying for a mortgage and received a market-driven rate for their second home in the Washington, D.C., area to house them and their six children when the Senate is in session," said Davis, the campaign spokeswoman. She would not answer follow-up questions.

This is not the first time that Santorum's Virginia residency has posed political problems. In late 2004, the senator came under fire when it was revealed that the school district in Penn Hills, Pa., had paid roughly $67,000 to cyberschool the Santorums' six kids, even though the children are residing in the Leesburg home full-time. Santorum owns a much smaller home in Penn Hills and keeps his voting residence there; the home has most recently been occupied by Karen Santorum's niece.

Santorum also made a surprising admission to The New York Times Magazine last year, telling the magazine that "[w]e live paycheck to paycheck, absolutely." He said that his parents - retired Veterans Administration employees - send him money every now and then.

The senator - as well as his political aides - are able to travel the country for fundraisers and other events by billing the cost to America's Foundation, a "leadership PAC."

Federal election regulators have allowed members of Congress to establish these political-action committees to support other candidates and political-party activities, as long as the committee doesn't directly aid the campaign of the politician who created it.

But Santorum's leadership PAC is noteworthy in several ways. America's Foundation has spent just 18.1 percent of the whopping $5,363,735 it has raised since the start of 2001 on direct aid to state and local candidates, less than all five other leadership PACs that were compared, and considerably less than several of them.

The other leadership PACs examined belonged to Senate GOP leaders Bill Frist of Tennessee and Mitch McConnell of Kentucky, Democratic leaders Harry Reid of Nevada and Dick Durban of Illinois, and House GOP leader Roy Blunt of Missouri.

It's routine for a PAC like Santorum's to pay operating expenses, such as staffers and fundraising, renting halls for events, related travel, and sometimes for rent and maintaining an office. But the probe found Santorum's federal records on PAC spending also contain scores of credit-card charges that experts found highly unconventional.

In addition to the 160 charges at the two coffee vendors, Starbucks and HMSHost, America's Foundation charged numerous meals at fast-food restaurants - eight at Arby's and four at Burger King, for example - as well as pizza and Chinese restaurants in northern Virginia.

The PAC also reported spending on a slew of American retailers. The list includes conventional office-supply stores but also some that are unusual for campaigns, including charges at Overstock.com, Wal-Mart, Kmart, Target, Circuit City, Barnes & Noble - even a $273.48 charge at a Restoration Hardware in Ardmore listed as "repairs."Five charges were made at Giant Food markets in Leesburg and another Virginia location.

The review of other leadership PACs showed that such charges are unusual, and one good-government expert - CREW's Sloan - said some of them carry at least the appearance of being for personal use, which would violate Senate ethics rules.

"Let them explain why an ice cream cone at Ben & Jerry's is a campaign expense," Sloan said, referring to a $4.48 charge logged in August 2002.

Campaign spokeswoman Davis insisted that every charge was campaign-related, citing "routine expenses such as office supplies including furniture, travel for staff, meals, and grocery items for various functions such as fundraisers and planning meetings."

Davis would not directly respond to a follow-up request for information about the Operation Good Neighbor Foundation, a charity founded by Santorum in 2001.

A look at the charity's tax returns for 2001, 2002, and 2003 found that of the nearly $1 million received in donations, 56.5 percent went toward expenses including salaries, travel and conferences, and only 35.9 percent went to charitable grants. Experts said charities should aim to spend a mininum of 75 percent, if not more, on program grants.

What's more, Pennsylvania Department of State officials said Operation Good Neighbor would be required to register with them if it solicited more than $25,000 here, and records on donors from 2002 show that it raised at least $94,000 from Pennsylvania sources.

But officials said they could not find a record of any registration. Under law, the state could impose civil penalties, although more typically the agency sends "cease and desist" letters that prevent additional fundraising.

The charity's 2002 donor list included the $10,000 from Philadelphia Trust Co., as well as $10,000 from the Keystone Sanitary Landfill, owned by Scranton businessman Louis DeNaples; and $5,000 from the Delaware River Port Authority.

Gary Ruskin of the Congressional Accountability Project, a good-government group, questioned ties between the charity and Santorum's campaign structure, including $50,000 in salary to its executive director, Rob Bickhart, who is also the senator's campaign-finance manager, a former staffer for Santorum and Sen. Arlen Specter, and a former public-affairs official with SEPTA.

"It looks like another pocket to fill," said Ruskin, adding that "Sen. Santorum is obviously a man with many pockets."

This article stems from an investigative piece that Daily News staff writer Will Bunch wrote on a freelance assignment for American Prospect, a national political magazine with a liberal bent. The entire 6,000-word story is slated to be available today at the magazine’s Web site, Prospect.org, and the magazine will be on newsstands later this month. You can also discuss the piece at Bunch’s blog, Attytood.com.

"I think we should pay them much more, if they made more $$$ they would have less incentive to take illegal money. "

I've always thought we should pay members on Congress something like $100,000 a month and then deduct $5000 every time they cast a vote.

Maybe the wife doen't work and doesn't bring in any income. I can't get past the six-children-and-cyber-schooling thing. I raised three and sent them to school, and I was still busy every minute of the day. Who's supervising the schooling? A live-in teacher?

I know for a fact many of those folks are living paycheck to paycheck.

Listening to the moms at my kids school and listening to them brag about all the things they have .. doesn't take much to realize their $$$ signs don't match up what they are brining in each month

The guy qualifies for a personal line of credit at most banks if he makes $150 g a year. Not to mention your other observations, which are correct.

This is just typical RAT mudslinging. An invasion of privacy in my opinion. Santorum ahould turn this around and throw it right back at them.

"It's very short term. Maybe he thinks he might be moving out of the area soon?"

Don't know this for a fact but would guess there is a balloon payment due at end of term. House was worth 643K in 2001. Must be easily over a million by now. Re-finance to make balloon payment or sell and pocket at least $500,000. Nice investment Rick. :-)

It's probably a 5 year balloon, amortized over 30 with low payments. Which means he'll have to refinance or sell at the end of 5 years unless he's got half a million bucks laying around. Assuming his credit is OK, refinancing wouldn't be a big deal at that point. Even if he's not that wealthy, his Senatorial salary should cover the payments as long as he doesn't have other major debts.

Of course, if he loses in November...then who knows...

I've always thought we should pay members on Congress something like $100,000 a month and then deduct $5000 every time they cast a vote.

A better idea is to pay them nothing, and give them $5000 every time they repeal a law. Passing a new law would cost them $10k.

...so what the heck is this only worth 140k stuff?

They were referring to liquid assets, and the bank policy of catering to affluent customers with at least $250k in liquid assets.

I don't think it is illegal for a bank to loan money to whoever they want to.

If they made a loan to Senator Rick Santorum that they would not have made to Private Citizen Rick Santorum in the expectation of quid pro quo, it most certainly is illegal. The case hinges on those two questions of fact, and frankly they both smell suspicious.

There is no evidence that Santorum - who sits on the Senate Banking Committee - took any official actions on behalf of Philadelphia Trust.

So... what's the problem, then?

More disturbing, though, are the random charges through the PAC

The charges aren't disturbing to me at all, but then again I run my own business. I often meet people at coffee shops for meetings, or pick up office supplies--the other thing I do is create promotions for my clients and it sometimes involves buying unconventional items from retail stores just to show how something would look as part of a direct mail package, or web promo. Then we source the product wholesale if they like it. I even have to buy clothing, furniture and other household accessories for commercials and photo shoots. If the client is on a budget, I'll have them buy the stuff. Sometimes they return it, or they can use it in their offices.

A 500k 5 year mortgage on a property means that property alone is worth likely far far more than 500k... so what the heck is this only worth 140k stuff?

I think the 140k is from a certain category when Congressmen file their financial statements -- sounds like Santorum's investments were in a range from $XX-$140k. I'm guessing this is only stocks, bonds, etc, and doesn't include real estate, at least not residences, which is where it seems most of their assets are tied up, and also may not include retirement savings in certain categories?

"...so what the heck is this only worth 140k stuff? "

According to the article, the private bank only deals with people who invest a minimum of $250k in "liquid assets" in that bank, but this in the PG. Hard to tell what the real story is.

This is a family making at least 200k a year cash.. with a house in PA and a house in the hot VA market... I am sorry but unless the family has drug or gambling addiction problems I'm not buying that they only have 140k in liquid assets. His wife and his 401k/IRAs/etc alone probably have more than that in them.

The problem with folks "estimating" other folks net worth, is that most times the estimators don't have a real clue of what a person holds.

This is one Conservative who would not cry if you lost.

You might be singing a different tune when the GOP decides conservatives can no longer win statewide races in PA.

That is a blatant hit piece. And guess what? It is having the desired effect even here! WHAT THE HECK! So many here, "It doesn't look good..."

Yep and yep.

For a small business, the charges aren't strange. But for a PAC?

You're talking about $4.44 at a service station. $5.26 at a convenience store. Multiple charges at a supermarket. Charges that reflect the purchasing habits of a family, not a political action committee.

If they made a loan to Senator Rick Santorum that they would not have made to Private Citizen Rick Santorum in the expectation of quid pro quo, it most certainly is illegal. The case hinges on those two questions of fact, and frankly they both smell suspicious.

They smell suspicious why? Because the author wanted you to think so.

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