Santorum Surge Brings Ethics Questions

ABC News

Rick Santorum's powerful finish in the Iowa caucus is bringing fresh attention to his tenure in Congress, including ethics questions that dogged him about a preferred mortgage he received from a bank run by campaign donors, and federal funds that went to a real estate developer who backed his charity.

One of the top donors to Santorum's charity was also the beneficiary of an $8 million Santorum-sponsored federal earmark, according to published reports. Melanie Sloan, a former federal prosecutor who filed an ethics complaint against Santorum in 2006 on behalf of a watchdog group, said her organization's website received a tidal wave of visitors in the past 24 hours, and in an interview she said she believes people will discover that the GOP presidential contender is "hardly the moral paragon he purports to be."

"There were several instances in which Santorum appeared to have taken campaign contributions in direct exchange for legislative assistance," said Sloan, whose organization, Citizens for Responsibility and Ethics in Washington (CREW), spent months investigating Santorum's activities while he was in office. "He violated Senate gift rules by accepting a mortgage from a bank in which he had no interest and which otherwise made loans only to its own investors."

Santorum has rarely responded to such attacks, but at one point he wrote a letter to a Philadelphia newspaper criticizing the ethics complaints as a series of "disingenuous innuendo and half-truths." The Senate Committee on Ethics never responded to CREW's complaint, and the two-term senator left Congress in 2007 after losing a reelection bid. A Santorum campaign spokesman has not yet responded to phone messages and email requests for comment.

For months, Santorum's record and background have escaped presidential-caliber scrutiny from rivals and reporters because he never appeared to have traction with voters in the early Republican contests. But as Santorum's GOP rivals have learned, the national spotlight can be searing. Questions about Newt Gingrich's consulting work for Fannie Mae surfaced in attack ads against him. Herman Cain bowed out of the race after reports of sexual harassment complaints dogged him for weeks. If the pattern holds true as the winnowed GOP field heads from Iowa down the rural roads of New Hampshire, Santorum will be the latest to undergo intensified scrutiny from rival campaigns and from the national media.

Perhaps the most jarring detail from his tenure in office is the unorthodox $500,000 mortgage that Santorum and his wife secured on the home in rural Virginia they had purchased for $643,361. According to a series of reports in the Philadelphia Daily News, the mortgage came from Philadelphia Trust Company, a fledgling private bank catering to "affluent investors and institutions" whose officers had contributed $24,000 to Santorum's political action committees and re-election campaign.

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In advertising, the lender said it only offered its preferred rates to well-heeled borrowers who also used their investment services. But Santorum's public disclosure forms showed he did not have the required minimum $250,000 in liquid assets and was not an investor with Philadelphia Trust. His ability to secure the five-year loan led Sloan to file a complaint under a Senate ethics rule that specifically prohibits members from accepting a loan on terms not available to members of the general public. At the time, a Santorum spokeswoman told the Daily News that the mortgage terms were set at "market rates," but did not provide further comment.

After leaving Congress in 2007, Santorum sold the house for $850,000.

Santorum Charity Backer Got Federal Earmark

The other issue that captivated Santorum critics involved a non-profit charity called Operation Good Neighbor. Santorum founded the organization to "illustrate compassionate conservatism" but did not take a formal role in its day-to-day operations. The charity was run by his campaign staffers. It operated out of the same building as his campaign headquarters. And its board included several top Washington, D.C. lobbyists who had clients with millions of dollars in business before the U.S. Senate, according to a 2006 report by WTAE, the ABC News affiliate in Pittsburgh.

The chairman of Operation Good Neighbor was Michael O'Neill, CEO of Preferred Real Estate. The company was involved in a waterfront development in Chester, Pa., that, with Santorum's help, benefitted from more than $8 million in federal grants, according to local reports.

O'Neill told ABC News that accusations suggesting the charity work and his development were connected were "crazy."

"My answer is absolutely not," said O'Neill, who is now out of the real estate business. "I was never told, 'If you do this, we'll help with that.' They were completely unrelated."

O'Neill said Santorum was a figurehead with the charity and that the senator derived no benefit from the work the charity performed -- doling out contributions to small groups around the state. "He was proud of the work of the charity," O'Neill said. "Rick helped bring exposure, but other than that, he didn't get anything out of it."

O'Neill also said the former senator should be proud of the waterfront development, which he says has helped deliver 2,000 jobs to downtown Chester, where there is now a soccer stadium, an office building, and a casino.

Santorum also defended the federal grants in a letter to the Philadelphia Daily News, saying his efforts to win federal money for O'Neill's waterfront development represented "a prime example of how, when used appropriately, earmarks can be beneficial."

"When Preferred Real Estate became interested in investing in the region, specifically in the revitalization of a blighted former generating plant, I was ecstatic -- this was exactly the type of project that could kick off a full-scale economic rebirth and help combat poverty," he wrote. "So, working with the city, I helped bring federal money to improve access to the riverfront, renovating roads like Route 291 and Highland Avenue, as well as to better the environment of the riverfront, making it a more attractive place for Pennsylvanians to work and live."

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O'Neill has not committed to supporting Santorum's presidential bid, saying he is waiting to see if Santorum can focus on more mainstream economic issues, rather than social issues.

"If he doesn't win it won't be because of his ethics," O'Neill told ABC News. "What's going to kill him is, this country wants someone down the middle."

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