CREW Responds to Rep. Pearce and Asks New Questions

In preparing this year's annual report on congressional corruption, CREW erred in failing to uncover an October 11, 2007 letter from the House Ethics Committee to Rep. Stevan Pearce (R-NM) concerning his failure to include a transaction on his personal financial disclosure forms.

In 2003, Rep. Pearce sold the assets of his company, Lea Fishing Tools, to Key Energy in exchange for stock. Rep. Pearce then reinvested the cash and stock proceeds of the sale into other rental equipment and investments and the company changed its name to Trinity Industries. On his financial disclosure form, Rep. Pearce did not disclose the sale to Key Energy.

In its 2007 report, CREW had claimed that Rep. Pearce violated the Ethics in Government Act by failing to disclose the transaction. We repeated this allegation in this year's report, but shortly after CREW's allegations appeared in September 2007, Rep. Pearce sent a letter to the House Ethics Committee requesting guidance as to whether or not the transaction should have been disclosed. Rep. Pearce has not released his letter, but on October 11, 2007, unbeknownst to us, Rep. Pearce received a letter, which he has released, from the House Ethics Committee stating that based on the information Rep. Pearce presented, no disclosure was necessary [read letter from Ethics Committee here].

The House Ethics Committee interpreted the Ethics in Government Act and the disclosure form instructions [see instructions here] as stating that transactions involving the assets of a business actively engaged in a trade or business need not be disclosed. As a result, because Lea Fishing Tools had been actively engaged in the trade or business of leasing oil field equipment, the Ethics Committee found that transactions involving the sale of its assets did not have to be disclosed.

Although CREW should have discovered and included this letter in its report (and has now appended the letter to the report), we stand by our original interpretation of the Ethics in Government Act. According to the Act, filers must report each purchase, sale, or exchange of real property or securities by themselves, their spouse, or dependent child when the value exceeds $1,000 in a calendar year [see statute here]. Contrary to the position taken by the House Ethics Committee in its letter, there is no exception in the Act for transactions involving the assets of a business actively engaged in a trade or business. The only exception to the reporting requirement is that a transaction solely by and between the reporting individual, his spouse, or dependent children need not be reported.

Melanie Sloan, CREW's executive director, said "First, the notoriously accommodating House Ethics Committee has misinterpreted the basic reporting statute to create an exception that does not appear anywhere in the law. But more significantly, why was Rep. Pearce so intent on hiding this transaction? Why not err on the side of transparency and report the sale?"