Mortgage non-disclosure is trouble for Richardson

Rep. Laura Richardson (D-Calif.) could face fines for leaving a heavily indebted mortgage off her financial disclosure statement, according to campaign finance experts.

A review of Richardson’s 2007 financial disclosure shows that she failed to report her Sacramento home mortgage as a liability even though she owed $40,000 more than she paid for the home, which was purchased in January of that year. By the end of 2007, Richardson had accumulated $575,000 in total debt after failing to make payments on her original $535,000 mortgage, according to Sacramento County records.

{mosads}Financial disclosure laws require members of Congress to report home mortgages as liabilities if indebtedness exceeds the purchase prices of the item.

“On a plain reading of the law, it’s not clear why this mortgage would not be included on her financial disclosure statement, given the situation,” said Meredith McGehee, the Campaign Legal Center’s policy director.

Lawrence Noble, former general counsel for the Federal Election Commission (FEC) and a campaign finance, ethics and lobbying expert, agreed.

“That is what the rule says,” Noble said. “The reality is that at the end of the year, if she was indebted for more than what she paid for the house, then she was required to report it.”

The home went into foreclosure and was sold at auction last month. Richardson is disputing the sale.

Her office did not return repeated calls seeking comment for this story. It also has not responded to questions about how Richardson was able to loan her congressional campaign $77,500 while continuing to default on several properties.

Richardson, who is expected to cruise to a victory in Tuesday’s Democratic primary, has come under increasing scrutiny since news of the foreclosure and subsequent sale at auction of her Sacramento home. Additional reports indicated Richardson has a long history of mortgage defaults that also covers homes in San Pedro and Long Beach.

Richardson’s own financial statement, however, showed no indication that anything was amiss.

Under Schedule III of her 2007 Financial Disclosure Statement, filed on Feb. 22 of this year, the freshman lawmaker listed her liabilities as simply “N/A.”

Yet throughout 2007, as her Sacramento home was going from newly purchased to foreclosed on, Richardson also defaulted on her Long Beach home a third and again a fourth time, when she fell $15,101 behind on her payments.

In September of that year, Richardson also let her San Pedro home slip into default when she fell $12,410 behind on her payments.

In January 2008 Richardson defaulted on the San Pedro home a second time, and in April — with Richardson owing $367,436 on an original loan of $359,000 — Wells Fargo Bank issued a notice of trustee sale of the home. Records indicate that the home is still scheduled to be sold at a July 14 auction.

Richardson was able to rescind both of the default notices on her Long Beach home after catching up on her payments, which she did first in March and then again in October 2007.

Richardson’s fourth default notice, for $15,101, on her Long Beach home came in October 2007 — the same month she again caught up on her payments as well as repaid herself $8,000 from her campaign, her FEC records show.

Noble said that the entities that monitor financial disclosure statements — the House ethics committee and the Department of Justice — will likely issue a warning to Richardson to amend her reports.

“In terms of what they would ultimately do about it, I think the question would be: Was this an attempt to cover up anything, or was it a mistake?” Noble said.

McGehee called Richardson’s financial disclosure statement “puzzling.”

“Obviously this raises questions about disclosure and more information, I think, is needed to ensure that she has, indeed, abided by the statutory requirements,” McGehee said. “The purpose of the financial disclosure is, first and foremost, to reveal conflicts of interest or potential conflicts of interest … and to ensure that if questions come up about positions, votes, other actions they take as a federal official, that there is transparency.”

Although Richardson missed the vote on the housing bill that passed the House in early May, she has said she only did so in the wake of her father’s sudden death.

Richardson last fall voted to help pass the Mortgage Forgiveness Debt Relief Act, which prevents the federal government from charging income tax on debt forgiven as a consequence of foreclosure. And she has said publicly that she wants to capitalize on her experience to advocate for further reform of the nation’s housing policies.

Richardson told the Long Beach Report on May 24 that she thinks people “expect me to take what I’ve learned, what I see, not only for myself but what I see that they’re doing, and figure out how to fix it, and that’s what I intend upon doing.”

Over the weekend, two of Richardson’s opponents in Tuesday’s primary seized on the issue in a last-minute attempt to unseat the 46-year-old freshman, who came to Congress after a 2007 special-election victory.

Peter Mathews accused her of “a pattern of financial irresponsibility” and wondered “how she can be responsible for a federal budget when she can’t balance [her] own budget,” while Lee Davis said she was a “national embarrassment” who has lost credibility.

Susan Crabtree contributed to this article.