Sen Santorums home mortgage foundation outlays raise questions

Author: WILL BUNCH bunchw

@phillynews.com 215-854-2957

Article Text:

SEN. RICK SANTORUM and his wife received a $500,000, five-year mortgage for their Leesburg, Va., home from a
small, private Philadelphia bank run by a major campaign donor - even though its stated policy is to make loans only
to its "affluent" investors, which the senator is not.

Good-government experts said the mortgage from The Philadelphia Trust Co. raises serious questions about
Santorum's conduct at a time when he is the Senate GOP's point man on ethics reform. They said it would be a
violation of the Senate's ethics rules if Santorum received something a regular citizen could not get.

A campaign spokeswoman for Santorum, who is seeking re-election, said the couple's mortgage interest rate was
"market-driven," but she refused to offer specifics, as did officials from Philadelphia Trust.

A probe into Santorum's personal and political finances also found:

* A political-action committee chaired by Santorum, America's Foundation, spends less money on direct aid to GOP
candidates - its stated purpose - and more on expenditures than similar PACs. And its expenditure reports are littered
with scores of unorthodox expenses for a political committee, with charges at coffee and ice cream shops and fast-
food joints as well as supermarkets and a home-hardware store.

For example, America's Foundation made 66 charges at Starbucks Coffee, almost all in the senator's hometown of
Leesburg, Va., and 94 charges at another D.C.-area vendor, HMSHost Corp. Virginia Davis, the campaign
spokeswoman, defended all the charges as campaign-related, saying the senator prefers to meet political aides in
coffee shops rather than on Senate property.

* A little-publicized charity founded by Santorum in 2001, the Operation Good Neighbor Foundation, is not
registered in Pennsylvania, even though the majority of its fundraising and spending takes place here.

What's more, three years of public tax returns show the charity spent just 35.9 percent of the nearly $1 million it
raised during that time on charity grants, well below the 75 percent threshold recommended by experts. The group's
Web site says it has distributed a total of $474,000 to groups, many faith-based, that fight social ills and urban
poverty.

The mortgage

It appears that Santorum's unconventional mortgage deal could pose the biggest problem for the senator, who
consistently has trailed his likely November rival, Democratic state treasurer Bob Casey Jr., by double digits in the
polls. Unlike longtime Washington pol Santorum, Casey does not maintain a so-called "leadership PAC."

Melanie Sloan, a former federal prosecutor who heads Citizens for Responsibility and Ethics in Washington, or
CREW, said that "anytime he gets something that a regular person couldn't get, that's an improper gift" - regardless
of any fees or the interest rate.

Officials with Philadelphia Trust have been generous supporters of Santorum's campaign since the private bank
opened its doors in late 1998. Federal records show the company's executives, directors and their spouses have
donated $24,000 either to the senator's campaign or to the America's Foundation PAC. Of that total, $13,000 came
from the man who signed the mortgage papers - Philadelphia Trust CEO Michael Crofton - and his wife.

Crofton also has been chairman of the board of advisers for Operation Good Neighbor, and records show the bank
has donated at least $10,000 to the senator's charity.

Philadelphia Trust advertises itself as an independent private bank for "affluent investors" - who have liquid assets of
at least $250,000 - and for institutions. On its Web site, it states that its "[b]anking services are available only to
investment advisory clients whose portfolios we manage, oversee or administer."

A call to the bank confirmed that its mortgages are only for investors and not for the general public.
According to a review of the annual financial-disclosure forms that Santorum files, he has never held an investment
portfolio with Philadelphia Trust. And in 2002, the year he obtained the mortgage, the value range he gave for his
small number of investments could not have exceeded $140,000.

The Pennsylvania senator bought the Virginia home, 43 miles from Capitol Hill, a year earlier for $643,361, and -
according to Loudoun County property records - had received a $405,000 mortgage from a traditional lender. The
2002 refinancing with Philadelphia Trust exceeded the initial loan by $95,000.

The chairman of Philadelphia Trust - George Marlin, a one-time Conservative Party candidate for mayor of New York
- said discussing any customer's transaction would violate bank privacy laws. Crofton did not return phone calls.

A bank director, Karen Iacovelli, also would not answer questions in detail, but when pressed on whether the bank
does loan business with non-investment customers, she said, "Yes and no - it's a judgment call."

There is no evidence that Santorum - who sits on the Senate Banking Committee - took any official actions on behalf
of Philadelphia Trust. The senator's campaign said no special treatment was involved.

"Sen. Santorum and his wife, who is an attorney and a nurse, applied for the mortgage using the standard
application process that Americans must go through when applying for a mortgage and received a market-driven rate
for their second home in the Washington, D.C., area to house them and their six children when the Senate is in
session," said Davis, the campaign spokeswoman. She would not answer follow-up questions.

This is not the first time that Santorum's Virginia residency has posed political problems. In late 2004, the senator
came under fire when it was revealed that the school district in Penn Hills, Pa., had paid roughly $67,000 to
cyberschool the Santorums' six kids, even though the children are residing in the Leesburg home full-time. Santorum
owns a much smaller home in Penn Hills and keeps his voting residence there; the home has most recently been
occupied by Karen Santorum's niece.

Santorum also made a surprising admission to The New York Times Magazine last year, telling the magazine that
"[w]e live paycheck to paycheck, absolutely." He said that his parents - retired Veterans Administration employees -
send him money every now and then.

The PAC

The senator - as well as his political aides - are able to travel the country for fundraisers and other events by billing
the cost to America's Foundation, a "leadership PAC."

Federal election regulators have allowed members of Congress to establish these political-action committees to
support other candidates and political-party activities, as long as the committee doesn't directly aid the campaign of
the politician who created it.

But Santorum's leadership PAC is noteworthy in several ways. America's Foundation has spent just 18.1 percent of
the whopping $5,363,735 it has raised since the start of 2001 on direct aid to state and local candidates, less than all
five other leadership PACs that were compared, and considerably less than several of them.

The other leadership PACs examined belonged to Senate GOP leaders Bill Frist of Tennessee and Mitch McConnell
of Kentucky, Democratic leaders Harry Reid of Nevada and Dick Durban of Illinois, and House GOP leader Roy Blunt
of Missouri.

It's routine for a PAC like Santorum's to pay operating expenses, such as staffers and fundraising, renting halls for
events, related travel, and sometimes for rent and maintaining an office. But the probe found Santorum's federal
records on PAC spending also contain scores of credit-card charges that experts found highly unconventional.

In addition to the 160 charges at the two coffee vendors, Starbucks and HMSHost, America's Foundation charged
numerous meals at fast-food restaurants - eight at Arby's and four at Burger King, for example - as well as pizza and
Chinese restaurants in northern Virginia.

The PAC also reported spending on a slew of American retailers. The list includes conventional office-supply stores
but also some that are unusual for campaigns, including charges at Overstock.com, Wal-Mart, Kmart, Target, Circuit
City, Barnes & Noble - even a $273.48 charge at a Restoration Hardware in Ardmore listed as "repairs."Five charges
were made at Giant Food markets in Leesburg and another Virginia location.
The review of other leadership PACs showed that such charges are unusual, and one good-government expert -
CREW's Sloan - said some of them carry at least the appearance of being for personal use, which would violate
Senate ethics rules.

"Let them explain why an ice cream cone at Ben & Jerry's is a campaign expense," Sloan said, referring to a $4.48
charge logged in August 2002.

Campaign spokeswoman Davis insisted that every charge was campaign-related, citing "routine expenses such as
office supplies including furniture, travel for staff, meals, and grocery items for various functions such as fundraisers
and planning meetings."

The charity

Davis would not directly respond to a follow-up request for information about the Operation Good Neighbor
Foundation, a charity founded by Santorum in 2001.

A look at the charity's tax returns for 2001, 2002, and 2003 found that of the nearly $1 million received in donations,
56.5 percent went toward expenses including salaries, travel and conferences, and only 35.9 percent went to
charitable grants. Experts said charities should aim to spend a mininum of 75 percent, if not more, on program grants.

What's more, Pennsylvania Department of State officials said Operation Good Neighbor would be required to
register with them if it solicited more than $25,000 here, and records on donors from 2002 show that it raised at least
$94,000 from Pennsylvania sources.

But officials said they could not find a record of any registration. Under law, the state could impose civil penalties,
although more typically the agency sends "cease and desist" letters that prevent additional fundraising.

The charity's 2002 donor list included the $10,000 from Philadelphia Trust Co., as well as $10,000 from the Keystone
Sanitary Landfill, owned by Scranton businessman Louis DeNaples; and $5,000 from the Delaware River Port
Authority.

Gary Ruskin of the Congressional Accountability Project, a good-government group, questioned ties between the
charity and Santorum's campaign structure, including $50,000 in salary to its executive director, Rob Bickhart, who is
also the senator's campaign-finance manager, a former staffer for Santorum and Sen. Arlen Specter, and a former
public-affairs official with SEPTA.

"It looks like another pocket to fill," said Ruskin, adding that "Sen. Santorum is obviously a man with many pockets."
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