10/01/2012 07:01 pm ET Updated Oct 02, 2012

Brad Sherman Charged Too Much Interest On Campaign Loans, Opponent Howard Berman Charges

NEW YORK -- An election battle between two California Democrats is heating up once again with new accusations from the campaign of Rep. Howard Berman that his opponent, Rep. Brad Sherman, has personally profited off his election campaigns to the tune of almost $500,000.

The details of the allegation are complicated, but they essentially boil down to a claim that Sherman charged unnecessary interest on personal loans he made to his own campaign. Such loans themselves are far from irregular, but the Berman camp claims charging interest is. By charging interest, they say, Sherman allowed donors in later campaigns to essentially make campaign contributions into personal donations.

Sherman supporters, meanwhile, maintain that the amount of money he supposedly "pocketed" off of interest was less than what he would have at a bank.

On a call with reporters, Brandon Hall, a senior advisor to the Berman campaign, said that Sherman "has intertwined his personal financial situation with his ability to raise money" as a candidate.

The question this raised for voters, he added, was "is it appropriate for a member of Congress to view their campaign account as an investment vehicle?"

John Schwada, Sherman's press secretary, called the accusations "grossly misleading."

Sherman's campaign said in a statement that their candidate, a certified public accountant before he became a member of Congress, "always charged interest that was at least 2% less than the rate he would have received had he simply left the money in the bank."

"The practice is completely legal and has never been criticized by an independent group," the statement continued.

Sherman has not charged himself any interest on loans made in this campaign. And many of the loans in question were first made more than 20 years ago.

Paul S. Ryan, senior counsel at the Campaign Legal Center, said collecting interest on personal loans to campaigns was "certainly not unheard of."

"And it’s perfectly legal," he added, "so long as interest is paid at a 'commercially reasonable rate.'"

And the Federal Elections Commission has defined what is "reasonable" generously. Grace Napolitano, another Democratic representative from California, gave herself a loan at an 18 percent rate. The FEC said that was "high" but permissible. Campaign finance reformers scowled.

"We don't think it's a good idea," said Lisa Gilbert, deputy director of Public Citizen's Congress Watch, about charging interest on campaign loans. But, she added, it's "not that unusual."

Berman and Sherman are locked in a fierce internecine battle over who will represent California's 30th district in Congress. Because of redistricting and a new election system where voters in the general election pick between the two winners of the primary, the two Los Angeles-area Democrats -- both of whom generally have similar political positions -- have been forced to fight against each other.

Instead of arguing over policy issues, then, the candidates have sought to distinguish themselves on questions of ethics and likeability. The Sherman campaign, for its part, has claimed that Berman has taken far too many trips abroad (176).

“The Berman-Sherman race has turned into a very expensive, very unpleasant contest," Eric C. Bauman, chairman of the Los Angeles County Democratic Party, told The New York Times last week.

Sherman, the target of the new accusations, was up 45-32 percent against Berman in an independent SurveyUSA poll taken from Sept. 18 to 19.



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