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Is There Any Merit to the C Street Ethics Complaints?

Q: I am hoping that you can clear up some confusion I am having about the recent ethics complaints alleging that some Members paid below-market rates for rooms rented in a Capitol Hill house. I have read conflicting accounts. Some have said that the complaints are bogus. Other reports suggest that there could be some merit to the complaints. Who is right?

[IMGCAP(1)]A: It is not always possible to assess the validity of an ethics complaint on its face. The officials who review and make recommendations regarding ethics complaints often conduct extensive investigations before reaching a conclusion regarding the validity of a complaint. With that in mind, let’s turn to your question.

On April 1, a watchdog group filed complaints against four Senators and five Representatives. The complaints, filed by Citizens for Responsibility and Ethics in Washington, allege that the Members accepted lodging at below-market rates in violation of the House and Senate gift rules. In accordance with House and Senate rules, the complaint against the Senators was filed with the Senate Ethics Committee, and the complaint against the Representatives was filed with the Office of Congressional Ethics, which screens complaints filed by the public before review by the House ethics committee.

The complaints are based on news articles regarding the C Street House, a residence near the Capitol that the complaints say is owned by a company called C Street Center Inc. The complaints say that the house is 5,732 square feet, with 12 furnished bedrooms, nine bathrooms and five living rooms. The complaints allege that Members pay $950 per month to stay at the house and that they also receive housekeeping services provided by eight college-age volunteers and a “house mother.” According to the complaints, $950 is a below-market rate and therefore qualifies as an improper gift, in violation of the House and Senate gift rules.

The complaints argue that there are only two exceptions that would permit accepting the “gift” of lodging. One allows Members to accept gifts based on personal friendship. The other allows Members to accept “personal hospitality.” In either case, however, the complaints say, the exceptions apply only when the donor is a person — not a corporation or similar entity, such as C Street Center.

These are the only exceptions that the complaints address. Depending on the facts, however, it is possible that other exceptions might apply. For example, one exception permits Members to accept opportunities and benefits that are available to the public or a group that is not defined on the basis of being a Member of Congress. If the C Street House monthly rate were available to residents who were not Members, this exception might apply.

But all this talk of exceptions bypasses a threshold issue that is not clear from the complaints: whether the Members have received a gift in the first place. In support of the claim that the Members have received a gift, the complaints say that $950 is a below-market rate for the rooms and cite much higher monthly rates at nearby hotels and corporate housing suites. For example, they say, a month at the Capitol Hill Liaison Hotel would cost $6,000, and a month at Marriott ExecuStay would cost $4,000 to $5,000. They also cite the rates for furnished efficiencies and one bedroom apartments in the Capitol Hill area, stating that rents are upward of $1,700.

I am no expert in real estate, but I wondered whether these were apt comparisons. So I contacted a real estate agent who specializes in D.C. rentals. He says that the comparisons drawn in the complaints are apples to oranges. The big distinction in his mind is that, unlike the examples in the ethics complaints, the C Street House sounds like a “rooming house,” meaning that residents share common space with one another, including bathrooms. The most analogous rentals to this type of living arrangement, he said, would be furnished “rooms and shares.” Unfortunately, he said, it is difficult to assess the market value of rooms and shares because their landlords typically do not use formal real estate listings but rather seek tenants via word-of-mouth or by posting ads on forums such as Craigslist. The absence of formal listings means there is not an extensive record of recent rentals for comparison.

So, I did my own Craigslist search for listed “rooms and shares” on Capitol Hill. I discovered that most furnished rooms and shares on Capitol Hill are listed for $600 to $1,000 per month, though none appeared to include housekeeping services.

The agent and I also discussed the total rental revenue that the owner of a 5,700-square-foot Capitol Hill house might expect. The agent said that it would be highly dependent on the condition of the house and that the small rental market for such large homes again makes it difficult to assess. If the C Street House were to operate at full occupancy of its 12 bedrooms, and all of the residents paid $950 per month, the monthly rental revenue for the house would be $11,400. At 75 percent occupancy, the revenue would be $8,550. In either case, the agent said, the owners of a 5,700-square-foot Capitol Hill house would likely be very pleased with monthly revenue that large.

Ultimately, then, the complaints against the Members may turn on the issue of whether they received a “gift.” If the agent I spoke to is right, it appears that they did not. In any event, the ethics complaints are now in the hands of the Senate Ethics Committee and the Office of Congressional Ethics. Perhaps they will be contacting real estate experts as well.

C. Simon Davidson is a partner with the law firm McGuireWoods. Click here to submit questions. Readers should not treat his column as legal advice. Questions do not create any attorney-client relationship.

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