Palazzo’s campaign spending under investigation. ‘What we saw was outrageous,’ rival says

U.S. Rep. Steven Palazzo has been cooperating since June with an ethics investigation into his campaign spending, his campaign spokesman says.

The investigation by the Office of Congressional Ethics centers on two issues set out in a March 26 letter to the OCE from the Campaign Legal Center, a nonpartisan organization that specializes in election law:

▪ $60,000 in campaign payments to a Palazzo-owned LLC for rental of office space

▪ $127,933 in payments to Palazzo & Co. LLC, an accounting firm he transferred to his wife after taking office in 2011. The couple divorced in 2016 but payments continued.

“Elected officials betray the public’s trust when they convert campaign contributions to personal slush funds,” the letter to the OCE said.

Federal election law and House rules prohibit converting campaign funds to personal use. The OCE could either refer its findings to the House Committee on Ethics for action or dismiss the complaint as unfounded.

While Palazzo says he will be cleared, at least one Mississippi politician said he would consider running for the 4th Congressional District seat if Palazzo was forced to vacate the office.

“As a former law enforcement officer, I understand how important it is to not comment on specific details of ongoing investigations,” said Dane Maxwell, public service commissioner for Mississippi’s Southern District. “However, I have been approached by a number of people regarding this, so I am aware of the apparent situation.

“The people of South Mississippi voted for me to serve as public service commissioner, and that is my focus. I don’t have any interest in running against Congressman Palazzo.

“Having said that, if the seat came open, and the people of South Mississippi asked me to run, I would greatly consider and pray about it.”

Complaint politically motivated, Palazzo campaign says

Palazzo’s campaign spokesman says the congressman’s political opponents in the March Republican primary instigated the “baseless allegations.” Palazzo won the primary against three opponents and was re-elected Nov. 3 without opposition.

One of those opponents, Biloxi councilman Robert L. Deming III, said he discovered questionable spending while studying Palazzo’s campaign reports to see what it would take financially to run for the office.

Deming said he hired a private investigator who looked into Palazzo’s campaign spending and turned over the information to an attorney who specializes in Federal Election Commission regulations.

The attorney wrote a brief about the questionable spending, which Deming sent to the Campaign Legal Center and Mike Hurst, U.S. Attorney for the Southern District of Mississippi.

“We gave it to as many people as we could,” Deming said Wednesday, “because what we saw was so outrageous.”

“I felt obligated to do it because I think as a citizen of our great state and nation, I feel we are all compelled to speak out when we see something that is wrong.”

Questions on campaign office spending

Of the numerous allegations the report detailed, the CLC focused on the Palazzo campaign’s office rental and accounting firm payments to request the Office of Congressional Ethics investigation.

Palazzo’s campaign spent $60,000 to rent office space from Greene Acres of MS LLC, a company he owns and the name of his farm in rural Stone County. Rental payments were $3,000 a month from May 2018 to August 2019, the CLC letter said.

Campaigns can lease office space from the candidate for legitimate campaign use but must pay fair-market value for rent. The CLC contends the rent was above fair-market value, and Palazzo never used the rural farm as a campaign office.

The CLC said the payments were “unusually high for campaign office rent in Mississippi” and exceeded fair market value, adding up to more than three other Mississippi House members spent, combined, to rent campaign offices.

Palazzo spokesman Justin Brasell said the office rent was paid to Greene Acres because it is a management company for Palazzo properties, not just the farm.

Brasell said the campaign office was actually in a wooded area on the Tchoutacabouffa River, known as “the river house,” that sits just northwest of The Promenade Shopping Center in D’Iberville. He also said research indicated the rental payments were at fair market value.

Palazzo no longer owns the river house property or the farm, he said.

Questions about accounting services

Since 2011, Palazzo has used campaign contributions to pay $127,933 to Palazzo & Co. LLC, an accounting firm owned by his wife before and after their divorce. But he paid another $76,954 to a different firm, Breazeale, Saunders & O’Neil, in 2018 and 2019 “for apparently the same services,” the complaint says.

From 2017 forward, the Palazzo campaign’s accounting expenses totaled almost as much as the three other Mississippi House members accounting-related costs combined, the CLC said: $68,678 for Palazzo, compared to $71,848 for the other three campaigns.

The CLC said the investigation needed to determine whether any of the accounting funds went for Palazzo’s personal use.

But Brasell said accounting services were not duplicated. Breazeale, Saunders & O’Neal handled Palazzo’s FEC compliance and reporting, while Palazzo & Co. managed daily campaign finances, including bill payments, banking and financial and data management.

He said Breazeale, Saunders & O’Neal now handles all the Palazzo campaign’s accounting because his “point of contact” at Palazzo & Co. has left the firm and moved to Texas. The last payment to his ex-wife’s firm was in August 2019, Brasell said.

“Palazzo for Congress is fully cooperating to answer questions from the Office of Congressional Ethics (OCE) and looks forward to resolving this matter as soon as possible,” Brasell said.

He called the CLC a “George Soros-supported” group, referring to the billionaire who spends on liberal causes. But the CLC stresses its nonpartisan focus.

“During the presidential campaign, CLC filed complaints against multiple Democrats, including Bill de Blasio and Pete Buttigieg,” CLC communications manager Tracy King said in an email.

“And more specifically, as it relates to the personal use of campaign funds, CLC cited multiple Democrats in the report we released in July 2018, which exposed the bipartisan nature of the problem.

“The organization is committed to democracy, not to any political party or electoral result, and has always and will continue to file legal actions against actors who violate our laws and norms, no matter political party.”

Palazzo expects the investigation to be completed in December or January.

Previous allegations against Palazzo

This isn’t the first time Palazzo’s actions have come into question since he first took office.

In a 2011 Roll Call column, “Heard on the Hill,” allegations surfaced against Palazzo and his then-wife, alleging they had used Washington staffers to help move them into a new apartment and to serve as de facto babysitters, helping care for the children and chauffeuring them around.

Palazzo said at the time the family paid the staffers for their time.

House ethics rules prevent congressional members from using staff for their personal benefit.

In another incident in 2011, two of Palazzo’s staffers held a wild party in Annapolis, where police were called and one of the staffers pretended to be the congressman when he spoke to an angry neighbor. Palazzo was not at the party and fired the two staffers.

This story was originally published November 13, 2020 at 5:50 AM.