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February 24, 2012

Rick Santorum’s Post Senate Activities Deserve Scrutiny

By crewstaff

Rick SantorumRick Santorum has a long history of ethical problems. His lapses while a senator landed him in CREW’s 2006 Most Corrupt Members of Congress report, and CREW filed an ethics complaint against him. CREW recently took a close look at the public record on Mr. Santorum’s activities since he left the Senate after the 2006 election, and came away with a number of questions.

Registration of Excelsior, LLC

Last week, Mr. Santorum released his tax returns for 2007 through 2010. His largest source of income for all of those years, totaling more than $2 million, was an entity called Excelsior, LLC, a limited liability company he set up in Virginia to handle his consulting and public speaking business. As required by state law, Mr. Santorum registered Excelsior, LLC with the Virginia State Corporation Commission in March 2007. The registration was active in 2007 and 2008, but was automatically canceled at the end of 2008, apparently because Mr. Santorum failed to pay the $50 annual fee on time (he did pay the fee and a penalty in early 2009 after the registration was cancelled). You can read the relevant documents here.  Nevertheless, based on his tax returns for 2009 and 2010, Mr. Santorum continued to conduct business as Excelsior, LLC. Unauthorized transacting of business as a limited liability company is a Class 1 misdemeanor in Virginia, which carries a penalty of up to one year in jail and a fine of up to $2,500. Mr. Santorum may have a valid explanation, but it is not apparent from the public record.

Compensation from Universal Health Services

Another question relates to Mr. Santorum’s compensation as a director of Universal Health Services, Inc. (UHS), a hospital chain based in Pennsylvania, in the months before Mr. Santorum announced his candidacy for president. Mr. Santorum joined the UHS board in 2007, and served until June 14, 2011, when he resigned to run. According to SEC filings, UHS paid him $50,412 in director fees and stock options in 2007, $77,958 in fees and options in 2008, $45,000 in fees in 2009 (no options were awarded), and $168,069 in fees and options in 2010.

UHS has not made public its 2011 director’s compensation yet, but it appears Mr. Santorum was paid more in the six months before he left to run for president than he was in the previous two years combined. On the personal financial disclosure form he filed in September 2011, Mr. Santorum declared UHS paid him $395,414 in director fees and stock options from January 2010 through June 2011. Subtracting the $168,069 UHS said it paid him in 2010, Mr. Santorum apparently was paid $227,345 for six months work for UHS. There is no evident explanation for the significantly higher compensation. Notably, however, UHS and its employees are major contributors to Mr. Santorum. In fact, the company’s employees and political action committee make up the second largest source of contributions to Mr. Santorum’s presidential campaign, giving him $20,000.

Great Falls home purchase and mortgage

Mr. Santorum’s purchase of a home on five acres in Great Falls, Virginia in 2007, and his current mortgage on the home, also are somewhat peculiar. Mr. Santorum and his wife moved from Leesburg, Virginia into a house in on Creamcup Lane in Great Falls around August 2007, but initially did not buy it in their own name. According to a news report based on the deed and mortgage documents, the property was purchased for $2 million by an entity called Creamcup Trust that was formed by Mr. Santorum and James Sack, the secretary and general counsel of a major home developer and mortgage finance company. Two years later, the trust transferred ownership to the Santorums. Fairfax County records say the amount paid was “$0” and note there was “no consideration” - meaning nothing was paid - in the sale. Trusts are sometimes used to transfer property, but it is unclear why the Santorums chose this vehicle.

The Santorums and Creamcup Trust also took out a series of mortgages on the property, apparently refinancing several times. According to the news story, the Santorums took out the current $1 million 30 year mortgage in mid-2010 from ING Bank in Minnesota at 4 percent interest. In the months before Fairfax County recorded the mortgage in July 2010, the average rates in Virginia for 30 year “jumbo” refinance mortgages ranged from 5.19 percent to 5.74 percent. While there may be legitimate reasons why the Santorums received a lower rate, Mr. Santorum has a history of questionable mortgage transactions. CREW filed an ethics complaint against the-Sen. Santorum in 2006 for violating Senate gift rules after he accepted a $500,000 mortgage on his Leesburg house from an exclusive Pennsylvania bank that provided mortgages only to its own affluent clients. Mr. Santorum did not maintain accounts at the bank, but its directors did donate to his campaign.

Departure from Mpower Media, LLC

Mr. Santorum’s position as co-chairman and president of a company called Mpower Media, LLC also is curious. Mpower set out to manufacture a DVR-like device and service that would filter offensive content from television and the Internet to protect children. An archived copy of Mpower’s website says the company was formed by Steve McEveety and Ken Ferguson, who secured an initial investment of $15 million from financier David Segel. Mr. Santorum’s apparent departure from Mpower near the end of 2009 is somewhat mysterious. In November, Mpower issued a press release and circulated emails in which Mr. Santorum, named as the company’s president, promoted the product. Yet as of December 21, 2009, Mr. Santorum was no longer listed on Mpower’s website, and he did not list the position on his personal financial disclosure, which covers all of 2010.

Given Mr. Santorum’s record of ethical lapses, these issues certainly merit further scrutiny. We look forward to hearing Mr. Santorum’s explanations.

 

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