Federal investigators are looking into personal loans and contributions U.S. Rep. Robert Pittenger made to his 2012 congressional campaign, two sources have told the Observer, providing more detail about an investigation that became public last month.
The FBI and IRS are investigating whether Pittenger improperly transferred the money from his former real estate company, Pittenger Land Investments, according to the two sources who shared details about the federal investigation on the condition they not be identified.
While he was running for Congress in 2012, the Charlotte Republican gave his campaign more than $2.3 million in personal loans and contributions – including a couple hundred thousand dollars the week before a bitter primary runoff.
Campaign finance experts say that if the personal loans are tied back to his family business, he could be accused of making illegal corporate contributions or misrepresenting contributions.
Pittenger, who is traveling overseas, could not be reached for comment. His campaign director, J. William VanOrsdel, and Pittenger’s wife, Suzanne, who now runs Pittenger Land Investments, issued the same statement to the Observer:
“Congressman Pittenger has acted with integrity in all respects and has consulted with multiple attorneys concerning the funding of his political campaign,” the statement said. “As the Congressman has indicated before, he has provided all information requested by the United States Attorney’s Office and will continue to provide any further information requested by this office.”
Pittenger acknowledged last month that the company he founded in 1985 was being investigated by the FBI. But he has denied wrongdoing and has said such inquiries are part of the normal course of business in his industry.
He has previously said he didn’t know the specifics of the investigation but emphasized that it didn’t involve his duties as a member of Congress or his congressional staff.
Pittenger Land Investments gathers investors to buy raw tracts of land with the eventual goal of selling the properties to developers for a profit. The Observer has reported in recent weeks that some investors have been unhappy with the performance of the company, which has been led by Suzanne Pittenger since Robert Pittenger’s election to Congress.
Investigators ask about money
The two sources who spoke with the Observer said that federal investigators have asked PLI investors questions about how they thought their money would be used and what expectations they had. It’s unclear how many investors have been approached.
“One of the direct questions was, ‘Did you make contributions thinking that it’d be used for political purposes?’” said one source.
It’s common practice for candidates to make loans to their campaigns. There are no limits on how much a candidate can give to his or her campaign. But it must be personal funds. Any other contributions, including those from family or family businesses, are subject to strict guidelines.
“The money has to be his money,” said Larry Noble, senior counsel at the Campaign Legal Center, a Washington, D.C.-based campaign watchdog. “If he took the money out of a corporation and then funneled it into the campaign, then he would have several legal problems.”
In 2012, Pittenger contributed $1,680,735 to his campaign and loaned his campaign $644,000.
One large loan to himself for $250,000 on March 1, 2012, was made less than a week before his predecessor in the 9th Congressional District seat, former Rep. Sue Myrick, publicly endorsed his main opponent, former Mecklenburg County Sheriff Jim Pendergraph. Pittenger gave himself an additional $200,000 on July 7, 2012, a week before the Republican primary runoff against Pendergraph.
Pittenger’s 2012 personal contributions came under scrutiny once before. In 2013, the Federal Election Commission fined Pittenger’s campaign $31,000 for failing to report a 2012 personal contribution soon enough. Pittenger made a $309,000 contribution in April but didn’t report it until July. The FEC said he should have reported it in April.
Charles Greer, a Charlotte accountant who served as Pittenger’s campaign treasurer at the time, declined to comment, citing accounting industry ethics. A new campaign treasurer, Caleb Crosby, came on board in the spring of 2013. He did not return a call seeking comment.
Greer, co-founder of Charlotte-based GreerWalker, has also served as an accountant for Pittenger Land Investments, according to a company brochure. But the company appears to now be using another firm, Atlanta-based Frazier & Deeter. Suzanne Pittenger did not respond to a question about the company’s accountants.
In federal investigations, the FBI typically works with prosecutors in the U.S. attorney’s office, which can bring evidence and witnesses before a grand jury. The Observer reported last month that a Pittenger matter came before a federal grand jury empaneled in March.
UNC law school professor Richard Myers, a former federal prosecutor, said prosecutors don’t want to waste a grand jury’s time but noted an investigation can sound more ominous than it is.
“Just somebody saying there is a grand jury investigation into ‘x’ sounds terrible,” Myers said. “Well, that grand jury may reveal that ‘x’ did nothing wrong.”
The Pittenger investigation comes on the heels of another controversy involving personal loans to campaigns by U.S. Rep. Frank Guinta. This spring, the Federal Election Commission found that the New Hampshire Republican illegally accepted more than $300,000 in campaign donations from his parents in 2009 and 2010. A number of his GOP colleagues have called for Guinta’s resignation.
Investors raise concerns
Based on his 2013 financial disclosure report, Pittenger is the 55th wealthiest member of Congress, with a net worth of $6.86 million, according to the Roll Call newspaper. That was down from $27.68 million in 2012, when he ranked 13th.
Most of Pittenger’s wealth stems from the real estate business he founded after moving to Charlotte from Texas three decades ago.
Pittenger Land Investments identifies land in potential growth areas, and then solicits investors to buy the properties, which are held by limited liability companies. The goal is to later sell the tracts at a profit to developers, making money for investors and PLI.
Congressional rules prohibit its members from engaging in professions that involve managing others’ assets, including law and real estate, because of likely conflicts of interest. So after being elected to Congress, Pittenger transferred the business to his wife, Suzanne, who is now CEO.
Pittenger says he received a letter from the House Ethics Committee that allowed the transfer, but he has declined to release the letter because, he says, the letter contains personal information. A bipartisan Washington watchdog group has called on Pittenger to release the letter.
Pittenger’s 2012 financial disclosure report shows that he received a salary and bonus of $3.7 million from the company that year. He also had a defined benefit plan, terminated in 2012, valued at between $100,001 and $1 million.
Even before news of the FBI investigation, some of PLI’s investors had become unhappy with the slow pace of land sales at the company since the recession and a lack of transparency about the company’s operations.
Last month, PLI asked investors to approve a deal that would have shifted management of the company’s properties to a Florida-based company. But investors complained about the terms and complexity of the deal, and PLI canceled the transaction.
The Observer also reported last month that some investors were surprised to learn that PLI bought land at one price and then sold it to investors for a higher price. Robert Pittenger has said that is a standard industry practice and was fully disclosed.
Last week, a lawyer and a CPA in Greensboro representing trusts that invested with PLI raised questions about the accounting and record-keeping at the company. They said they are seeking more information from the company but suggested PLI may not be the “proper choice to serve as the administrative manager for” the LLCs that hold the company’s properties.
Suzanne Pittenger has said “all relevant information will be provided to any investor requesting it, and PLI’s approach is to be as open and transparent as possible with regard to any questions that any members have.”
Rothacker and Gordon report for The Charlotte (N.C.) Observer.
Jim Morrill of The Charlotte Observer contributed to this article.