Rep. Steven Palazzo makes his way to a bipartisan Homeland Security Appropriations Conference Committee in the Capitol on Wednesday, January 30, 2019. (Photo By Tom Williams/CQ Roll Call via AP Images)

The Office of Congressional Ethics is investigating U.S. Rep. Steven Palazzo’s campaign spending, after a watchdog group in March filed a complaint questioning whether he was using campaign contributions as a “personal slush fund.”

The Campaign Legal Center in late March requested OCE investigate whether Palazzo used campaign funds to pay himself and his erstwhile spouse nearly $200,000.

A Palazzo campaign spokesman on Friday said that Palazzo’s campaign has supplied documents and “cooperated fully” with OCE inquiries, and that the campaign’s spending has been aboveboard. He said Palazzo expects to be cleared of any wrongdoing and the allegations are politically motivated. The Sun Herald first reported confirmation of the investigation on Friday.

Federal law and U.S. House rules prohibit conversion of campaign money to personal use. Violations of the Federal Election Campaign Act can carry felony criminal penalties. The OCE investigates such complaints and can recommend they be dismissed, handed off to the House Ethics Committee for further review or discipline of the representative, or refer them to the Department of Justice for criminal investigation.

The CLC’s complaint said Palazzo’s campaign committee paid a total of $60,000, in monthly payments of $3,000, for rent at a property called Greene Acres MS that Palazzo owns in Perkinston.

The complaint said, “there was no bona fide campaign purpose for renting Representative Palazzo’s farm for more than a year.” It said the campaign’s official address was in Gulfport and that Greene Acres “would be an unusual choice” for a campaign office, given that it is “in an extraordinarily rural part of Mississippi.”

While campaigns can and often do rent space owned by a candidate, it must be at fair market value and used for legitimate campaign purposes. The CLC complaint said the $3,000 a month rent was unusually high, and there is a “lack of any publicly available information about the campaign using the farm as an office.”

The complaint also questioned Palazzo’s campaign paying nearly $128,000 to his now former wife’s accounting firm, while it paid another accounting firm “for apparently the same services,” and that his spending on accounting services is far more than other similar campaigns.

Palazzo transferred ownership of his accounting firm to his wife when he joined Congress in 2011 because of House rules limiting outside income, the CLC complaint said. Palazzo and his wife divorced in 2016, but she still owns the firm.

Palazzo campaign spokesman Justin Brasell on Friday said, “Congressman Palazzo’s primary opponents teamed up with a George Soros-funded organization in Washington, D.C., and generated this complaint that’s full of false allegations.”

Brasell said Palazzo’s campaign rented a house from Greene Acres that was used as a campaign office for Palazzo’s reelection campaign and “people worked there.”

Brasell said that the Palazzo firm handled all the campaign’s day-to-day accounting — paying bills, keeping a ledger, etc. — while the other firm handled FEC compliance and reporting.

Kedric Payne, general counsel and director of ethics for the Campaign Legal Center, said: “The big picture is that this diminishes the public’s trust when a congressman uses campaign money for a personal slush fund. It is encouraging to see there is an investigation into this.”

Payne said “the fact the investigation is still going on shows there seems to be a violation.”

“The way the OCE works, there is an initial stage where a member can simply explain things and disprove a complaint,” Payne said. “If that does not occur, then there is a longer stage. OCE can refer any criminal violation to the Department of Justice.

“Yes, I think there is a high likelihood this has found personal use, due to how long the investigation is going, and that would mean criminal conduct has occurred.”

The nonprofit, nonpartisan Campaign Legal Center was founded by Republican Trevor Potter, a President George H.W. Bush appointee to the Federal Elections Commission. It has received donations from the Open Society Institute founded by billionaire liberal political activist George Soros, among dozens of other foundations and groups. The CLC has a history of filing complaints against candidates or PACs of both parties.

The Sun Herald reported Friday that one of Palazzo’s opponents in the March GOP primary spotted questionable campaign spending, hired a private investigator to look into it, and turned over findings to the Campaign Legal Center and the U.S. Attorney’s Office. The newspaper also reported that Southern District Public Service Commissioner Dane Maxwell said he is “aware of the apparent situation” and would consider running for the seat if Palazzo had to leave office.

Brasell said Palazzo has not had any inquiries from the DOJ, Attorney General’s Office or other law enforcement about the campaign finance issues.

At least three members of Congress have resigned and/or been prosecuted over alleged personal use of campaign money.

In 2013, former Rep. Jesse Jackson Jr. of Illinois pleaded guilty to spending campaign money on a Rolex watch, fur coats, mounted elk heads and other items and was sentenced to 30 months in prison.

In 2014, Rep. Rob Andrews of New Jersey resigned from Congress amid years of allegations that he spent campaign money on personal trips and used his daughter’s graduation party to raise campaign money.

In March, former Rep. Duncan Hunter of California was sentenced to 11 months in federal prison for corruption charges from misuse of hundreds of thousands of dollars in campaign funds.

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