Hagedorn hires lawyer-to-the-GOP-stars, previewing possible ethics case

Misspending of taxpayer money has already cost chief of staff his job

Rep. Jim Hagedorn represents Minnesota's First District after a narrow victory in 2018.

WASHINGTON — Rep. Jim Hagedorn has retained a prominent ethics lawyer to represent him, following revelations his office mismanaged taxpayer money, including paying a company owned by a member of his own staff.

Hagedorn has enlisted Elliot Berke, who has represented everyone from then-House Republican Conference Chairwoman Cathy McMorris Rodgers to disgraced Republican Reps. Duncan Hunter of California and Aaron Schock of Illinois in their respective ethics, legal and campaign finance cases arising from allegations they violated spending rules.

On July 30, Berke delivered a letter signed by Hagedorn to the House Administration Committee, which oversees taxpayer money allotted to congressional offices. The letter noted that the congressman had hired Berke to perform an independent review of spending in his office, according to two sources with direct knowledge of the matter.

Hagedorn acknowledged the review in a statement last week after a story came out reporting that he had fired his chief of staff.

The personnel move is the clearest sign yet that Hagedorn is prepared for an inquiry by the House Ethics Committee — or worse, said ex-Rep. Donna Edwards, a former Democratic member of the ethics panel.

“By making that hire, to me that suggests that there is an ongoing ethics investigation or that he anticipates one is going to be opened up,” the former Maryland legislator said.

Elliot Berke is a well known Washington ethics lawyer.

An ethics inquiry would hardly come as a surprise, according to half a dozen ethics experts contacted for this report. House ethics rules prohibit a congressman from doing business with a member of his staff. In a recent case, the Ethics Committee found that it may actually be illegal for staff to own companies that do business with the federal government.

In fact, Hagedorn’s new lawyer Berke represented the member of Congress in that recent comparable case. In December, the Ethics Committee found that an employee in McMorris Rodgers’ office was self-dealing, directing business to his own consulting firm in the mid-2010s.

Though there were ultimately few consequences for the misspending, the Ethics Committee noted in its report that the employee “acted contrary to the spirit and letter of the rules and laws intended to prevent conflicts of interest” and cautioned Congress to “avoid even the appearance of a conflict of interest when entering into relationships with contractors on behalf of the House.”

The report pointed to two specific federal statutes that “generally prohibit House employees from privately representing others before the federal government.”

Edwards, who left the committee before the McMorris Rodgers case began, said the Ethics Committee’s report about the McMorris Rodgers case and the language of the statutes open up the possibility of not just an ethics review, but a potential legal issue.

“It raises a presumption that this is worthy of investigation and suggests that there may have been a violation of the law, in addition to whatever ethics violations there might be under the rules governing the House,” she said.

Still, the Ethics Committee report in the McMorris Rodgers’ case noted that the Department of Justice may need to clarify the statutes. The Department allows an exemption for employees to represent themselves in dealings before the government, but “it is not clear that such an exemption would extend to the representation of a distinct legal entity owned by that employee, including an LLC,” according to the report.

Hagedorn’s office spent more than $100,000 of taxpayer money with an LLC owned by a member of his own staff, and another roughly $340,000 with an LLC that does not disclose its owners.

According to a statement from Hagedorn’s office, he was not aware of the spending, but began a review when he first found out about it some two months ago. That would have been right around the time the Congressional budget watching website Legistorm first highlighted that Hagedorn had spent about 40% of his annual budget in three months.

Last week, the Daily Caller revealed that Hagedorn had fired his chief of staff, Peter Su, for “irregular spending,” a revelation that came about a week after the Minnesota Reformer inquired with the office about the spending. 

John Sample, the employee whose LLC was paid for printing services, remains employed by the office, according to a source familiar with Hagedorn’s personnel. Hagedorn’s spokesman and interim chief of staff did not respond to a request for comment.

Ethics rules are clear, however, that although an employee could be punished for misspending funds, members of Congress are ultimately responsible for spending decisions made by their staff.

Although Hagedorn has yet to specify what was irregular about the spending, he said in a KTTC interview Monday that the issue was not the sheer amount of money spent on mailings in the first quarter of 2020 — about as much as an average congressional office spent on all personnel and expenses during that time frame. That spending was planned all along, Hagedorn said, but he declined to elaborate on what led him to fire Su.

“We have a portion of our budget that goes towards mailings. There was a finite number of dollars that was spent on that. We were always going to do that,” Hagedorn told the news outlet during President Donald Trump’s Monday rally in Mankato, Minn.

The public will probably not know whether Hagedorn is under investigation until after the November election, because the Ethics Committee generally doesn’t comment on cases in the months before an election, so as not to sway the race. And if Hagedorn loses the election, it’s unlikely the Ethics Committee would pursue the case, because the panel only has jurisdiction over current members of Congress and staff.

“The House ethics regime is built on the theory that members face their constituents every two years,” said Donald Sherman, deputy director of the watchdog group Citizens for Responsibility and Ethics in Washington. “I see this working out one of two ways: Either the member is reelected and the committee’s investigation continues, or the member is not reelected and the committee’s investigation goes away.”

A spokesman for the Ethics Committee declined to comment. A spokesman for the Office of Congressional Ethics, which often investigates cases and refers them to the Ethics Committee, declined to confirm or deny that an investigation is underway. 

Since Su, the chief of staff, was already fired, the Ethics Committee already lost jurisdiction to punish him. They can still subpoena him, but it’s unlikely he’d face any more punishment unless he is found to have committed a crime and the case is referred to the Department of Justice. That’s what happened in the McMorris Rodgers case; the investigation dragged on for nearly a decade and the employee who was found to have misspent money had long since left Congress, so he evaded censure.

Hagedorn could certainly face electoral consequences, though. The issue has already made waves in his district, with local press peppering him with questions.

And Hagedorn’s opponent is turning the scandal into election fodder in what is sure to be a close race for the 1st District congressional seat. 

DFL candidate Dan Feehan said in a Monday tweet that the revelations are “disgraceful,” that Hagedorn was “asleep at the wheel,” and that he’s “concerned criminal activity occurred.”