House Ethics Committee confirms probe into Rep. Palazzo's campaign spending. What's next?

U.S. Rep. Steven Palazzo, who is accused of misspending tens of thousands in campaign cash, is being scrutinized by the House Ethics Committee. (Photo by Tom Williams/CQ Roll Call via AP Images)

WASHINGTON — The House Ethics Committee has confirmed it’s probing U.S. Rep. Steven Palazzo’s campaign spending, and Palazzo has hired former U.S. Rep. Gregg Harper — a longtime Ethics Committee member — as his lawyer in the probe.

The panel released a statement late Thursday noting that Ethics Chairman Ted Deutsch of Florida and ranking Republican member Kenny Marchant of Texas have decided to “extend the matter regarding Representative Steven Palazzo.”

It is both a dry procedural statement of fact, but also an extremely consequential admission. Although the statement says it “does not itself indicate that any violation has occurred, or reflect any judgment on behalf of the Committee,” it is the first time the panel has publicly acknowledged it is probing Palazzo.

Palazzo’s spokeswoman denied wrongdoing on the part of her boss, and said the congressman has hired Harper. Harper told Mississippi Today on Friday he believes the matter will be “completely dismissed.”

Palazzo is accused of sending more than $60,000 in monthly rental payments of $3,000 from the campaign to a property company called Greene Acres MS that Palazzo owns in Perkinston and more than $146,000 to his ex-wife’s accounting firm, which Palazzo used to run before heading to Congress.

But Harper said he believes the allegations have misconstrued Palazzo’s financial arrangements.

“There were allegations that money had been paid to Palazzo or to his wholly owned LLC that was for a farm in Perkinson. That was not true. It was for a campaign office in D’Iberville,” Harper said. “So we’ll be able to clear that up and show that it was a legitimate campaign office, that this was within the rules, and was appropriate, and there is nothing unethical about paying two accounting firms to do work.”

Mississippi Today has also previously reported on other questionable spending, including thousands for “gifts,” including liquor and wine and purchases from a tactical clothing outfitter, a boot store and university campus stores, as well as money spent on sporting events, golf expenses and trailers. Roll Call has also reported on suspicious purchases that appear to be related to home maintenance and car upkeep. Harper said he expects to clear all of these issues up with the Ethics Committee, as well.

Palazzo’s staff has previously denied the allegations that led to the investigation, calling them “politically motivated,” and has argued that the spending was proper.

Though a campaign spokesman has previously said all these expenses are above board, he told Mississippi Today the campaign did err when it bought a fold-up wall bed and continuing accounting education for Palazzo, and has since refunded those purchases.

Timeline for updates

The Ethics Committee statement issued Thursday means the clock is ticking until the committee has to let the public know more. It starts a procedural timeline under which an investigation must start or be dismissed, and sets a timetable for a decision that will either commence a full investigation into Palazzo, hand the investigation to the Department of Justice, dismiss the matter, or allow a full report about the investigation surrounding Palazzo to be made public.

“I expect everything to be dealt with by the committee and hopefully wrapped up sometime during the 117th Congress,” Harper said.

But to figure out exactly when those things could happen takes some understanding of Congressional rules — and a little bit of math.

As the committee noted in its statement, it received a referral regarding the Palazzo case on Sept. 2 from the Office of Congressional Ethics, an independent watchdog that investigates allegations of wrongdoing and makes recommendations to the Ethics Committee. The OCE’s inquiry was likely spurred by a complaint in March from the Campaign Legal Center, an election reform group, alleging that Palazzo had been spending campaign money like a “personal slush fund.” This complaint was prompted by one or more of Palazzo’s opponents in this year’s GOP primary, including one who hired an investigator to look into it.

Normally the ethics announcement would have come much sooner, but it was delayed because the Ethics Committee’s internal rules essentially stop all committee proceedings 60 days before an election, because the panel is wary of weighing in on anything that could become politicized and affect the outcome of a race.

The committee simply extended its review, starting a new 45-day clock to complete its work. This happens in nearly every ethics case. The committee has a maximum of 90 days, or two 45 day periods, to decide what route to take in the case.

In normal circumstances, the Ethics Committee would now have 45 days to decide what to do next. Then it would have to reveal to the public either that it is empaneling an investigative subcommittee to litigate the allegations on its own or that the Justice Department is taking over the investigation. If neither of those happens or the Ethics Committee dismisses the case, then the Office of Congressional Ethics would release the full report of its investigation into Palazzo.

If the Ethics Committee decides to empanel an investigative subcommittee, the OCE report would have to be released after a year, unless the subcommittee finishes its work up sooner. If the Department of Justice gets involved, generally the OCE would hold off releasing any report until it gets the OK to do so from federal prosecutors.

Predicting when, exactly, the public will know more about Palazzo’s situation is a bit of an inexact science. The 45-day clock will tick until the end of this Congress, which is on January 3, 2021. But the clock won’t start again right away in the next Congress. Instead, the count doesn’t officially start again until after all the new Ethics Committee members are seated and appointed and the panel has its first meeting — a process that could take an indeterminate amount of time.

It generally takes at least a month or two to ramp things up in a new Congress, but it could take even longer this coming year because several members of the Ethics Committee, including both its top Democratic and Republican members, will have to be replaced. Marchant is retiring, while Deutsch is term-limited as chairman.

The best estimate about when the public may know more about Palazzo’s situation is that it will probably happen sometime within the first quarter of 2021. More specifically, it will need to happen 28 days after the first Ethics Committee meeting of the 117th Congress — a meeting that could be private, and might not even be announced publicly.

The last time an ethics case like this bled over from one Congress to the next was in the case of ex-Rep. Duncan Hunter, a California Republican who will report to prison next month for an 11-month term after pleading guilty to stealing campaign funds for personal use “for items as inconsequential as fast food, movie tickets and sneakers; as trivial as video games, Lego sets and Playdoh; as mundane as groceries, dog food, and utilities; and as self-indulgent as luxury hotels, overseas vacations and plane tickets for their family pet rabbits, Eggburt and Cadbury,” according to the Justice Department.

In that case, the OCE referred their investigation to the Ethics Committee in late 2016 but it wasn’t until March 2017 that the committee announced that the Justice Department was taking over. Even then, it wasn’t until almost three years later that Hunter pleaded guilty.

Mississippi Today reporter Geoff Pender contributed to this report.