REPORT: Rep. Issa's Ongoing Ethics Problem

May 20, 2011 12:44 pm ET

This week, it was revealed that DEI Holdings Inc., the car-alarm company founded by Rep. Darrell Issa (R-CA) and on whose board he sits, had for years underpaid tariffs on parts imported from China. This is only the latest ethical scandal to taint Issa since he became the chairman of the House Oversight Committee.

Issa Firm Underpaid Tariffs For Years

Issa Sits On Board Of Company That Just Paid $2.5 Million In Back Tariffs. From The San Diego Union-Tribune:

The Vista car-alarm company once owned by Congressman Darrell Issa was paying about half the required tariffs on certain parts it imported from China for years and paid an estimated $2.5 million in back duties earlier this year to rectify the situation.

Issa no longer owns DEI Holdings Inc., although he is still on the board of the company, which is being sold to Boston-based Charlesbank Capital Partners for $285 million in cash. [San Diego Union-Tribune, 5/18/11]

"Issa Said He Was Aware Of The Misclassifications And Participated In Efforts To Resolve Them." From The San Diego Union-Tribune:

In a prepared response to questions from The Watchdog, Issa said he was aware of the misclassifications and participated in efforts to resolve them.

"Once these issues came to the attention of the board of directors, we called for an independent review by expert counsel," he wrote. "My understanding is the company has made appropriate tariff adjustments and disclosures both to Customs and our independent auditors." [San Diego Union-Tribune, 5/18/11]

DEI Did Not Repay Back Duties Until After Whistleblower Filed Complaint. From The San Diego Union-Tribune: "Former DEI executive Mike Wilhelm noted that the disclosure was made a year after the fact, and only after he filed a whistle-blower complaint with Customs on March 14 of this year. 'They weren't going to do it unless I forced them to,' said Wilhelm, a DEI vice president who resigned over the issue in March after 10 years with the company. "Frankly, I became ashamed to work there.'" [San Diego Union-Tribune, 5/18/11, emphasis added]

Whistleblower: DEI "Hired A Consultant" Who Told Them Not To Pay Back Import Duties. From Wilhelm's complaint to U.S. Customs and Border Protection: "Company rejected the advice to legal counsel to file required notice and pay back import duties of ~ $3m (difference between 1.3% and 2.5%) because they hired a consultant who told them that unless there was a whistle blower, they could get away without paying." [Wilhelm complaint to CBP, 3/14/11, via San Diego Union-Tribune]

Expert: "This Company Has Not Been Meeting That Reasonable Care Standard." From The San Diego Union-Tribune:

Minnesota trade consultant John Goodrich said importers played a cat-and-mouse game with regulators to minimize their tariffs until 1993, when Congress passed the Customs Modernization Act. That law placed new responsibilities on companies bringing goods into the United States.

"Importers are now held to a hyper due-diligence level known as reasonable care," Goodrich said.

"This company has not been meeting that reasonable care standard," Goodrich said after reviewing the whistle-blower complaint and the company's financial disclosure statements divulging the problem.

He noted that every duty form states the importer "will immediately furnish to the appropriate CBP officer any information showing a different statement of facts" than those reported on the shipping records.

Goodrich said, "It is difficult to justify that waiting six to eight months to make corrections and to disclose constitutes 'immediately.'" [San Diego Union-Tribune, 5/18/11, emphasis added]

Issa Has Repeatedly Used Committee Resources To Promote Major Campaign Contributors

Washington Post: Watchdogs Criticized Practice Of Calling Donors To Testify. The Washington Post reported on the practice of committee chairs calling donors to testify, "watchdogs say it raises the question of whether expert panels are assembled based on their donations." [Washington Post, 3/16/11]

Issa Called Tom Nassif, President And CEO Of Western Growers Association, To Testify On Regulation. [Oversight.House.gov, 2/10/11]

  • Nassif Has Donated $13,800 To Issa's Campaigns. From The Washington Post: "Nassif had given $4,800 to [Issa's] 2010 campaign and a total of $13,800 over the past two decades." [Washington Post, 3/16/11]
  • Western Growers Association's PAC Has Donated $7,000 To Issa's Campaigns. [OpenSecrets.org, accessed 5/20/11]
  • Issa Did Not Mention Donations In Purporting To Give "Full Disclosure" Of His Ties To Nassif. During the February 10 hearing, Issa said:

ISSA: Before I introduce or ask Mr. Nassif to speak, I think full disclosure — Ambassador Nassif is the deacon in my church. He was the ambassador to Morocco and he is, in fact, a personal friend. So I hope that won't diminish the 70 percent of fresh fruit and vegetables that he represents and the thousands of growers. [Oversight Committee hearing, 2/10/11, via Political Correction]

  • Issa Spokesman Defended Nassif's Participation In Hearing. From The Washington Post:

Issa spokesman Frederick Hill noted that agriculture is one of the largest industries in California and, therefore, Nassif was an important part of the hearing on "Regulatory Impediments to Job Creation."

"Mr. Issa certainly thought that [Nassif's] testimony was both important and relevant to the hearing taking place," Hill said. Nassif did not respond to a message seeking comment. [Washington Post, 3/16/11]

  • Issa Subsequently Called Nassif To Testify For A Second Oversight Hearing. [House.Oversight.gov, 4/19/11]

Issa Called Buschur, Owner Of Buschur Electric, To Testify On Regulation. [Oversight.House.gov, 2/10/11]

  • Buschur Donated $20,450 To Republican Candidates For Ohio Federal And State Office In 2010. [Political Correction, 5/12/11]
  • Oversight Committee Producing Three-Part Web Video Series On Buschur's Business. [House.Oversight.gov, 5/9/11]

Issa Called Executive From Google To Testify On Overregulation Of Tech Industry. [Oversight.House.gov, 4/18/11]

  • Google's PAC Donated $6,000 To Issa's 2010 Campaign. [OpenSecrets.org, accessed 5/20/11]

Issa Called Executive Microsoft To Testify On Overregulation Of Tech Industry. [Oversight.House.gov, 4/18/11]

  • Microsoft's PAC Gave Issa $9,000 In 2010, $36,000 For His Career. [OpenSecrets.org, accessed 5/20/11]

Issa Called CEO From California Independent Petroleum Association For Fracking Regulation Hearing. [House.Oversight.gov, 5/6/11]

  • CIPA's PAC Donated $2,500 To Issa's 2010 Campaign. [OpenSecrets.org, accessed 5/20/11]

Issa Bought Building That Benefited From His Earmarks

Issa Bought Office Building After Seeking Funds To Widen Street It Was On. From The San Diego Union-Tribune:

Rep. Darrell Issa gained federal funding for a road-improvement project in his home district, then bought an office building on the street scheduled to be widened.

The Vista Republican, who chairs the House committee in charge of government oversight, purchased the Vista Medical Plaza office complex on West Vista Way in October 2008.

In the three years before he made that investment, his office requested a total of $17 million for widening and other improvements along the same street. Ultimately, $815,000 was approved.

Aides to Issa said the planned improvements had nothing to do with his decision to purchase the 10,000-square-foot office park. [San Diego Union-Tribune, 4/2/11]

"The Situation Troubles Some Government Watchdogs." From The San Diego Union-Tribune:

The situation troubles some government watchdogs.

"We think the standard that members of Congress and members of the administration should hold themselves to is to avoid even the appearance of a conflict of interest," said Joe Newman of the Project on Government Oversight. "If Rep. Issa is personally benefiting from earmarks he sponsored, then it certainly raises questions that should be addressed."

[...]

Melanie Sloan, who runs the nonpartisan Citizens for Responsibility and Ethics in Washington, said there is no telling whether Issa requested the money knowing he might invest in the neighborhood.

"When members (of Congress) get earmarks around property they buy, there will always be questions as to whether the legislative process has been used to advance the members' interests," she said. [San Diego Union-Tribune, 4/2/11]

Issa Skirted House Ethics Rules With Trade Show Trips

Issa Attended Consumer Electronics Show On Personal Business. From Roll Call:

Issa has returned every year to the electronics show, and for several years he traveled as other Members and staff did: by accepting the trip from the trade association as part of his official duties and reporting the trip to the Ethics Committee as a gift.

But after Congress tightened the rules on Congressional travel, Issa began going to the trade show on personal business, as a director of DEI. He told the Hill newspaper in a 2010 video interview that new House ethics rules made it harder for Members of Congress to attend the event. "I'm here on my own dime," Issa said. "If you are here as a 'guest of the show,' you can only be on the ground for less than 24 hours."

But Issa wasn't really there on his own dime. According to his 2010 financial disclosure form, his travel to the 2009 show, food and lodging were paid for by Directed Holdings Inc. The form indicates that Issa "Attended Board Meeting." [Roll Call, 3/4/11]

But Brought Staff There On Official Business. From Roll Call:

In 2010 and 2011, two of Issa's staff members filed "gift/travel" forms with the Ethics Committee saying their travel was paid for by the association, along with a flock of other House staff and Members. But Issa did not file travel forms, and spokesman Frederick Hill said it was because he traveled as a board member of DEI on personal business.

For this year's show, Issa was accompanied for part of the trip by his then-spokesman Kurt Bardella, whose $447 travel tab was paid for by the Oversight Committee, according to committee records. The committee report indicates that Bardella was at the show "for official committee business." [Roll Call, 3/4/11]

By Traveling "In His Personal Capacity," Issa Avoided Congressional Ethics Rules. According to Roll Call, by travelling "in his personal capacity," Issa "is not bound by the disclosure requirements that cover official Congressional travel, nor the limits on how many days he can spend on the ground at the sponsor's expense." [Roll Call, 3/4/11]

Issa Website Linked His Congressional, Corporate Work

Watchdogs Criticized Issa Website For Blending Corporate, Congressional Branding. From Roll Call:

Issa maintains dei.com, which has served as a portal to two of his family companies and his Congressional campaign website. The site had a disclaimer at the bottom saying it was paid for by Issa's campaign, but after Roll Call inquired about the site Tuesday, that language was removed and the link to the campaign site appeared to have been removed.

The header on the site reads "ISSA - US Congressman," but it was originally the corporate address for the car alarm company Issa ran before he came to Congress, Directed Electronics Inc.

For watchdogs, the concern is whether Issa has clearly separated his campaign and corporate entities. In general, candidates cannot use their corporate resources to support their campaigns.

"When you go on a site and it says, 'Here are my corporate accounts and here is my Congressional account,' there should be a Chinese wall there," said Meredith McGehee, policy director at the Campaign Legal Center. Dei.com made it appear "that the corporate entities and the campaign entity are just subsidiaries of each other."

McGehee also pointed out that the link to the campaign website said "US Congressman Darrell Issa's Site," which could lead a visitor to believe it was the official Congressional website rather than the campaign site. Late Tuesday, the campaign site link was removed. [Roll Call, 3/1/11]

Issa Staffers Have "Close Connections" To Industries That Could Benefit From His Investigations

Watchdog Institute: Several Issa Committee Staffers Worked As Lobbyists Or For Trade Associations. From the Watchdog Institute:

Issa's staff already has released findings sympathetic to industries bent on softening or eliminating certain government regulations. A preliminary report this month, for example, focused largely on Environmental Protection Agency standards and relied heavily on input from industry associations. Other standards the committee is targeting include new regulations on workplace safety and the financial services industry.

And some on Issa's staff know this territory from the inside.

Several have ties to billionaire brothers David and Charles Koch, who have made much of their fortune in oil and chemical businesses and have established a reputation as staunch small-government conservatives. Their influence through campaign contributions, lobbying and nonprofit groups — such as Americans for Prosperity, an activist organization with connections to the Tea Party movement — has become more pronounced since the shift in power in the House last November.

A Republican staff counsel for the oversight committee is the son of a lobbyist pushing for regulatory changes on behalf of big corporations. At least four other staffers once lobbied Congress for companies and industry associations. Another counsel worked for the Alliance of Automobile Manufacturers, which Issa recently asked for input on government regulations. [Watchdog Institute, 2/28/11]

Issa Fired Staffer For Leaking Journalists' Emails To Reporter

Issa Fired Spokesman Bardella After Internal Investigation Triggered By Politico Report. From Politico:

Rep. Darrell Issa, the Republican chairman of the powerful Oversight and Government Reform Committee, has launched an inquiry into whether spokesman Kurt Bardella improperly shared e-mails from other reporters with a New York Times reporter writing a book on Washington's political culture, POLITICO has learned. 

Bardella has been cooperating extensively with the Times's Mark Leibovich on the book, and Issa told POLITICO Monday that he would "get to the bottom" of exactly what Bardella shared with Leibovich. 

On Tuesday morning, Issa fired Bardella as a result of his investigation.

[...]

POLITICO Editor-in-Chief John F. Harris raised concerns about the allegations in a letter Sunday to Issa.

"The practice of sharing reporter e-mails with another journalist on a clandestine basis would be egregiously unprofessional under any circumstances," Harris wrote. "As the editor-in-chief of POLITICO, my concern is heightened by information suggesting that POLITICO journalists may have had their reporting compromised by this activity." [Politico, 2/28/11]

Issa Claimed Committee Staff Was Unaware Of Bardella's Actions. From an Issa statement:

"In November 2010, Kurt did seek permission from his supervisors to participate in a book project with Mr. Leibovich.  His request was granted, but nothing that he described to his supervisors ever included the indication, intent, or possibility that he would be sharing reporter e-mail correspondence with Leibovich for his book.  Kurt's supervisors, including the committee's Director of Communications Frederick Hill have told me that they did not learn about what Kurt was doing with reporter correspondence until the committee was first contacted by Politico last Friday evening.  I have not found or heard anything, including Kurt's own account, which contradicts these explanations. [Issa statement, 3/1/11, via NationalJournal.com]

But Bardella Told A Reporter Others In The Office Knew He Would Copy Leibovich On Emails. The New Yorker's Ryan Lizza reported:

I'm somewhat mystified that Issa required an "investigation" to get to the bottom of this, because inside Issa's office there was no secret about Bardella's cooperation. When I was writing my profile of Issa, Bardella openly discussed his cooperation with Leibovich—and not just with me, but with his direct boss as well. For example, during a meeting with Bardella and Issa's chief of staff, Dale Neugebauer, the three of us had a light-hearted discussion about how extensively Bardella was working with Leibovich.

"So you know about this, right?" I asked Neugebauer.

"Oh yeah. Yeah, he knows," Bardella said.

"He [Bardella] just got to Washington and he's got a book about him coming out," I noted.

"I know, no kidding," Neugebauer said.

In a later conversation, Bardella told me, "I've shared a lot with [Leibovich]." He added, "I have provided him with a lot of content. I BCC him on certain projects that I'm working on." Bardella said he shared information that shows "this is how it happens" and "this is the conversation I'm having right now."

"Do the other folks in the office know?" I asked.

"Yeah," Bardella said, and he gave me an example of the type of stuff he shares: "Here's this inquiry I got from a reporter. Here's what I said to my staff about it, here's the story, here's the e-mail I just got from so-and-so, another reporter who's upset that I gave his story to [someone else]." [NewYorker.com, 3/1/11]

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