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  1. Florida Politics

Congressional investigators cite numerous potential ethics violations by Rep. Alan Grayson

In this Oct. 14, 2015, file photo, Rep. Alan Grayson, D-Fla., speaks in Tallahassee,. A congressional review panel says there is "substantial reason to believe" Grayson acted improperly in a number of business activities and in managing his congressional office. (AP Photo/Steve Cannon, File)
Published Apr. 6, 2016

Congressional investigators have found a litany of potential violations of federal law and congressional rules in the business and political dealings of U.S. Rep. Alan Grayson, a leading Democratic candidate for Florida's open U.S. Senate seat.

The Office of Congressional Ethics recommended the U.S. House Ethics Committee continue investigating Grayson's management of a hedge fund and other business interests that may have improperly overlapped with his congressional duties. The Ethics Committee will further pursue the matter, which does not indicate violations necessarily occurred but ensures that a cloud will hang over Grayson as he campaigns to succeed Sen. Marco Rubio.

"I didn't do anything wrong," Grayson declared Tuesday, calling it a "politically inspired witch hunt" and predicting nothing further will happen before the election. Once he leaves the House, the committee no longer has jurisdiction anyway.

The Office of Congressional Ethics is an independent body that serves as a grand jury of sorts, reviewing allegations of misconduct and deciding what should be referred to the House Ethics Committee for further review or action. The committee, often criticized as being too lax, usually takes no action but can recommend discipline ranging from a reprimand to expulsion.

Among the office's findings made public Tuesday in a more than 900-page report:

• Grayson had a previously undisclosed buyout agreement with his old law firm allowing the Orlando congressman to collect contingency fees for multiple pending cases involving the federal government. The Office of Congressional Ethics report found there is "substantial reason to believe" Grayson violated federal law with that arrangement and recommended the Ethics Committee subpoena a principal of Grayson's old firm who, after consulting with the congressman, refused to cooperate with investigators.

• Grayson ran a hedge fund that improperly used the congressman's name, gave him a fiduciary responsibility to undisclosed investors and at least once appears to have paid him management fees. House rules bar members from using their name on or being compensated for any legal or financial service for which the member has a fiduciary responsibility to look out the interests of clients.

• Investigators found numerous "significant" omissions from Grayson's financial disclosure forms, including investments related to the Grayson hedge fund, the buyout agreement at his old law firm and a family trust.

• Grayson, while serving in Congress, invested in limited partnerships in the energy sector that did business with the federal government, including selling fuel to the Defense Department.

• A staffer in Grayson's congressional office who also worked for his hedge fund used official time and resources to work for the fund, a violation of federal law.

• Grayson, the report said, "participated in multiple press interviews focused on his campaign for the U.S. Senate from his congressional office" and improperly mixed political and official work and resources in violation of federal law.

The Office of Congressional Ethics recommended that the Ethics Committee issue subpoenas to require Grayson's ex-wife to provide financial records. She also refused to cooperate with the investigators.

"In many cases, the alleged violations were interrelated and connected to Representative Grayson's leadership of, and financial interest in, the law firms he directed and the hedge fund he manages," the report said.

Grayson and his lawyer said that in declining to refer the matter to a subcommittee for further investigation, the Ethics Committee signalled disciplinary action against Grayson is unlikely. They said that what the report seized on as likely violations of the law or congressional rules were either petty errors blown out of proportion or no violations at all.

"If the allegations were serious and the evidence supporting the allegations were serious, an investigative committee would be created," Grayson's Washington lawyer, Brett G. Kappel, said in a conference call with reporters Tuesday.

A multimillionare trial lawyer and investor, Grayson has been engulfed in controversy over his business dealings since the Tampa Bay Times last year revealed that he had set up several hedge funds, some of which were based in the Cayman Islands, a renowned tax haven. Two ethics complaints were filed against him, one from a supporter of Grayson's rival for the Democratic U.S. Senate nomination, U.S. Rep. Patrick Murphy of Jupiter.

Senate Democratic leader Harry Reid earlier this year said Grayson's actions had disgraced Congress and called on him to drop out of the Senate race.

"The Washington political establishment has decided who their favored candidate is, and it's not me," Grayson said Tuesday. "These Murphy-instigated fishing expeditions are just like the Benghazi Committee witch hunt, another taxpayer-funded political inquisition which Patrick Murphy voted with Republicans to set loose. Patrick Murphy and his D.C. establishment allies are using this new political witch hunt to try to distract our Florida voters."

In a conference call with reporters, Grayson accused the Office of Congressional Ethics of "disturbing and illegal collusion" with Murphy staff members, called Murphy "more crooked than a three dollar bill" and attacked the New York Times for coverage of his intermingling of congressional and hedge fund activities.

He has closed the Caymans-based funds and removed his name from those funds even as he insisted he did nothing wrong whatsoever. The question over whether Grayson improperly used government resources for political purposes stems partly from a July 2015 interview he did with Huffington Post Live, the morning Grayson announced his Senate campaign.

Emails that investigators obtained from Grayson's staff indicated they realized it was wrong.

"Should not have happened," a House staffer wrote. "Admit it, take the hit now and don't fight it for 15 months."

That's not Grayson's style. He said Tuesday that the interview, via Skype, was done on a campaign computer and "my own WiFi service." Grayson said political questions are routinely posed to lawmakers by reporters, which is true.

"Everybody does it. . . . We have no control over the questions that you may ask when we're sitting in our offices."

Grayson's lawyer, Kappel, wrote a blistering, point-by-point rebuttal to the report.

"The referral itself verges on the demented, in all of its Captain Ahab attempts to spear the white whale by coming up with something — anything — with which to try to argue that some unethical conduct has occurred," he wrote. "Acting upon detailed legal advice at every turn, Rep. Grayson has gone all out, at great expense, to adhere to all of the rules. Not only were the rules never broken; they were never even bent."

Times Washington bureau chief Alex Leary contributed to this report. Contact Adam C. Smith at asmith@tampabay.com. Follow @AdamSmithTimes.

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