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Investigators: ‘Substantial Evidence’ Rep. Steven Palazzo Broke Laws With Funds, Favors

Rep. Steven Palazzo
Rep. Steven Palazzo, R-Miss., seen here in 2019, is under investigation for his handling of campaign finances and on allegations that he misused his office for "personal" or campaign-related purposes. AP Photo by J. Scott Applewhite

A non-partisan congressional ethics board says it found “substantial evidence” that U.S. House Rep. Steven Palazzo, a Mississippi Republican who represents the state’s 4th Congressional District, may have repeatedly violated federal law, including by misusing campaign funds and using his office for campaign purposes and to do favors for a family member.

The report cites “a concerning pattern of campaign expenditures on a large riverfront home which Rep. Palazzo owned and rented to Palazzo for Congress as an ostensible campaign headquarters.” 

“Rep. Palazzo’s campaign committee, Palazzo for Congress, reported campaign disbursements that may not be legitimate and verifiable campaign expenditures attributable to bona fide campaign or political purposes,” the Office of Congressional Ethics for the United States House of Representatives said in the report that Congress made public yesterday.

The report also alleges that the south Mississippi congressman “may have improperly spent a portion of his Members’ Representational Allowance (MRA) on personal or campaign expenses,” referring to the budget available to each member of Congress that they can use for official expenses, such as paying for staff, travel, office or mail expenses.

“If Rep. Palazzo spent MRA funds on personal or campaign expenses, then Rep. Palazzo may have violated House rules, standards of conduct, and federal law,” the OCE report says.

The report cites additional “substantial evidence” that “Rep. Palazzo may have performed official actions to assist his brother, Kyle Palazzo.”

“If Rep. Palazzo performed special favors for his brother, then Rep. Palazzo may have violated House rules, standards of conduct and federal law.” 

Palazzo Calls Allegations ‘False’

OCE unsealed the report late Monday. The board began investigating Palazzo in June 2020, it says, and unanimously approved the report by a 6-0 vote on Aug. 28, 2020. OCE  then transmitted it to the bipartisan Committee on Ethics of the U.S. House of Representatives on Sept. 2 with recommendations.

“The Board recommends that the Committee further review the above allegation concerning Rep. Palazzo because there is substantial reason to believe that Rep. Palazzo converted funds to personal use to pay expenses that were not legitimate and verifiable campaign expenditures attributable to bona fide campaign or political purposes,” the report says.

It offered the same assessments of the allegations of misusing MRA funds and granting his brother special favors.

The Mississippi Free Press called Congressman Palazzo’s office this morning, but a staffer said his communications director was not available to talk. After this reporter emailed his communications director, Colleen Kennedy, asking for a call back, she responded instead with a statement about the OCE report instead.

In the statement, Palazzo said he would cooperate with the congressional committee that is now reviewing the allegations.

“Congressman Palazzo welcomes the opportunity to work through this process with the House Committee on Ethics and will fully cooperate with the Committee to show that he has complied with all relevant rules and standards,” says the statement, which also describes the allegations as “false.”

The Mississippi Free Press was not able to ask the congressman or his staff any questions.

Campaign Spent Over $80,000 on D’Iberville Home

OCE’s report says the board “sought to interview” the congressman and multiple staff members from his PAC and campaign committee, including their treasurer, but “all declined.” 

One staffer told OCE investigators that a former staff claimed Palazzo required official staff members “to sign a non-disclosure agreement as a condition of employment,” the report says.

The report cites federal campaign-finance law, which states that a “contribution or donation (to a member of Congress) shall not be converted by any person to personal use” as well as U.S. House rules that say members “may not expend funds from a campaign account…that are not attributable to bona fide campaign or political purposes.”

“Following media attention and the initiation of this review, Rep. Palazzo recently reimbursed the campaign committee for thousands of dollars in personal use of campaign funds across multiple categories of personal expenses,” the report says.

Carl Boyanton challenged Palazzo in the 2020 GOP primary. Photo courtesy Carl for Congress

Carl Boyanton, a conservative challenger, publicly accused Palazzo of misusing campaign funds in February 2020. The Campaign Legal Center, a watchdog group, called for an investigation into Palazzo’s campaign spending in March 2020

In Palazzo’s statement today, he said the investigation was “a direct result of false allegations made by a primary opponent and the Campaign Legal Center claiming the Congressman’s campaign paid him for rent of a farm in Perkinston, Mississippi.”

“Simple investigation shows that the payments were actually made for a property in D’Iberville, Mississippi, owned by the Congressman, appropriately and legally used for a campaign office and rented at fair market value,” he added.

The statement obfuscates the allegations in the OCE report, though, which briefly mentions his 2013 purchase of the Perkinston property, but only “as context” to explain his later purchase of the D’Iberville property—the central focus of the real estate-focused part of the inquiry.

Palazzo made a series of reimbursements between the time of the initial accusations in early 2020 and the launch of the OCE probe in June 2020, but the report cites a number of “issues” that he “has not addressed.” That includes more than $80,000 in campaign payments made on rent or improvements to the D’Iberville home between February 2018 and August 2019 before he sold it in September 2019.

Report Recommends Subpoenas

In the report’s “Conclusion” section, the OCE Board recommended that Congress issue subpoenas to a number of people and entities, including ones it said refused to fully participate in its investigation such as Rep. Palazzo, Green Acres, Palazzo for Congress, the Patriot Political Action Committee, Paul Breazeale and Kyle Palazzo.

In a statement on March 1 as it released the report on Palazzo’s business dealings, the House Ethics Committee said its Democratic chairman, Rep. Theodore E. Deutch of Florida, and the Republican ranking member, Rep. Jackie Walorski of Indiana, had “jointly decided on December 17, 2020, to extend the committee’s review of the matter” and would work “to gather additional information to complete its review.”

“The Committee notes that the mere fact of conducting further review of a referral, and any mandatory disclosure of such further review, does not itself indicate that any violation has occurred, or reflect any judgment on behalf of the Committee,” the March 1 statement said.

“In order to comply with Committee Rule 7 regarding confidentiality, out of fairness to all respondents, and to assure the integrity of its work, the Committee will refrain from making further public statements on this matter pending completion of its initial review.”

Neither Palazzo’s campaign nor his leadership committee responded to requests for comment for this story.

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