A Project of The Annenberg Public Policy Center

Cruz Loans Not ‘Transparent’

Sen. Ted Cruz said “all of the information” about large bank loans he received to help finance his 2012 Senate campaign “has been public and transparent for many years.” But the loans were not transparent:

  • Cruz did not disclose that he had obtained loans from Goldman Sachs and Citibank that combined were worth between $350,002 and $750,000 until July 9, 2012. That was after his May 29, 2012, primary election, and after he had already loaned his campaign nearly $1 million.
  • Cruz took out another Goldman Sachs loan for between $100,001 and $250,000 for his 2012 campaign, but that wasn’t reported on his financial disclosure report until May 15, 2013 — by which time he was already a U.S. senator.
  • In both reports, Cruz did not report the loans were for his campaign. That was not required by the ethics law, because those forms are simply intended to disclose personal finances (assets, liabilities, etc). But he should have reported using the loans for his campaign in separate campaign reports with the Federal Election Commission. He did not.

Cruz called his failure to report the source of his loans to the FEC “an inadvertent filing error.” It may have been an inadvertent error. We don’t know. But the record is clear that Cruz has not been “transparent” about his loans, as he claimed.

It was first reported by the New York Times on Jan. 13 that Cruz borrowed money from Goldman Sachs and Citibank for his 2012 campaign but did not disclose the loans on campaign finance reports filed with the FEC. Instead, Cruz reported to the FEC that he was making personal loans from his own funds.

So, at the time, Texas voters had no way of knowing how Cruz was financing his campaign. That could have been important information to some voters because at the time, Cruz was running as a tea party candidate in a hotly contested primary against the Republican establishment favorite, Lt. Gov. David Dewhurst.

As political columnist Timothy Carney of the Washington Examiner wrote during the Texas Senate primary, the tea party was inflamed by the bank bailout of 2008 and Dewhurst’s campaign donors included “bailout beneficiaries like the Mortgage Bankers Association and the National Association of Realtors.” Cruz told Carney in a phone interview: “Everyone who makes their living from continuing the government spending gravy train is supporting Dewhurst.”

In an interview on the day the Times published its story, Cruz downplayed the news report by referring to personal financial disclosure reports he has filed annually with the secretary of the Senate. Those reports are required to be filed by all Senate candidates and senators, and are intend to disclose personal finances — such as income, paid honorarium, stocks and other assets, and loans and other liabilities.

Cruz, Jan. 13: It is an inadvertent filing question. The facts of the underlying matter have been disclosed for many, many years. It is not complicated. Our finances are not complicated. We put in the entirety of our savings. We did so through a combination of savings accounts and selling assets and taking a margin loan against other assets and that – those facts are clear and transparent and a technical and inadvertent filing error doesn’t change that at all.

But his personal financial reports were neither clear nor transparent. They do not disclose the purpose of the loans, and the 2012 PFD report in particular wasn’t filed in a timely manner (as we will describe in more detail later).

During the Jan. 14 GOP presidential debate, Cruz minimized the difference between the personal financial disclosure statements filed with the secretary of the Senate and the campaign finance reports filed with the FEC, calling it “a paperwork error in disclosing it on one piece of paper instead of the other.”

“The entire New York Times attack is that I disclosed that loan on one filing with the United States Senate that was a public filing. But it was not on a second filing with the FEC,” Cruz said.

Cruz ignores that there are significant differences and purposes for the two reports.

The personal financial disclosure reports are filed once a year, while FEC campaign finance reports are filed multiple times — including quarterly, and pre- and post-election. Candidates are even required by the FEC to disclose loans and contributions received within 48 hours in the final days of an election. It was on those 48-hour reports that Cruz largely notified the FEC that he had loaned his campaign about $1.4 million — without disclosing that he borrowed that money from Goldman Sachs and Citibank.

The purpose of the FEC reports is to allow voters to know the source of a campaign’s funding. “The law says if you get a loan for the purpose of funding a campaign, you have to show the original source of the loan, the terms of the loan and you even have to provide a copy of the loan document to the Federal Election Commission,” Kenneth A. Gross, a campaign finance expert who was a former associate general counsel of the Federal Election Commission, told the Times.

We’ve put together a timeline that shows what Texas voters knew and when they knew it about Cruz’s loans. What it shows is that Cruz made significant loans to his campaign in the days leading up to the May 29, 2012, primary, totaling nearly $1 million, but Cruz did not report taking out loans from Goldman Sachs and Citibank until July 9, 2012 — nearly two weeks after the primary. Even then, as we said, there was no way for voters to know the purpose of the loans from the personal financial reports.

Jan. 31, 2012 – Cruz files a year-end report for 2011 that shows loans “made or guaranteed by the candidate” during 2011 totaled only $70,000.

May 12, 2012 – Cruz files a pre-primary report, which covered campaign activity from April 1 to May 9, 2012. The report showed no loans for this period. The total amount that Cruz had loaned to his campaign with less than three weeks before the election was still $70,000.

May 18, 2012 – Cruz loans his campaign $400,000, according to a 48-hour notice.

May 22, 2012 – Cruz loans his campaign $500,000, according to a 48-hour notice. That brings the total he loaned his campaign so far during the primary to $970,000.

May 29, 2012 – Primary day. Neither candidate gets 50 percent of the vote, so the race is headed for a runoff election scheduled for July 31.

July 9, 2012 – Cruz files a personal financial disclosure report to the secretary of the Senate, as required of all Senate candidates. The report, which the Senate office stamped as received on July 12, 2012, shows Cruz took out two personal loans in 2012: a loan ranging from $100,001 to $250,000 from Goldman Sachs, and a line of credit from Citibank ranging from $250,001 to $500,000. These Senate reports provide only ranges — unlike the detailed information that is required by the FEC.

Let’s stop here to make an important point: Despite saying the loans were “transparent,” Cruz did not publicly disclose he had received loans from Goldman Sachs and Citibank before his primary election — even though the law requires candidates to file “within 30 days after becoming a candidate for nomination or election to the office of Member of the United States Senate, or by May 15 of that calendar year, whichever is later, but at least 30 days before the election.”

We can’t say for sure if the Cruz campaign violated the law, which results in a penalty of just $200. He may have received an extension. However, we could find no record of an extension on the Senate website that archives all personal financial disclosure records dating to Jan. 1, 2012.

We asked Cruz’s campaign if Cruz requested a filing extension in 2012, but we have yet to hear back. We also asked the Senate Ethics Committee if it has any record of Cruz filing for an extension, but we have yet to hear back from it, either. We will update this story if we get any more information.

Now back to the 2012 Senate campaign, which as we said went into a runoff election.

As he did during the primary, Cruz made large loans to his campaign during the runoff election, especially in the final days:

July 15, 2012 – Cruz files a July quarterly report that showed $960,000 in loans “made or guaranteed by the candidate” for the primary and runoff elections from May 10, 2012, to June 30, 2012. The total he loaned to his campaign at that point was now $1,030,000.

July 23, 2012 – Cruz loans his campaign $250,000, which was reported in a 48-hour report dated July 24, 2012.

July 25, 2012 – Cruz loans his campaign $150,000, which was reported in a 48-hour report dated July 26, 2012.

July 31, 2012 – Cruz wins the runoff election.

Oct. 15, 2012 – The October quarterly report shows Cruz loaned his campaign a total of $1,430,000 for the primary and runoff elections. (As an aside, it also shows that he repaid himself to that point a total of $385,000.)

May 15, 2013 — Cruz filed his annual personal financial disclosure report to the Senate on time. The report, which covers his finances for 2012, shows the range of the Goldman loan doubled in 2012 to $250,001-$500,000. We don’t know the exact value of the loans, or exactly when this loan was taken out. (Those are other outstanding questions that we have made to the campaign.)

The 2012 and 2013 Senate forms combined show that Cruz could have taken out loans for as much as $1 million for his 2012 campaign. But Cruz didn’t fully disclose the loans until nearly a year after his primary election.

Yes, there was a short period of time from July 12, 2012, when the Senate received Cruz’s personal finances report, to July 31, 2012, when Cruz won his runoff election — that Texas primary voters knew that Cruz had taken loans worth between $350,002 to $750,000 from Goldman Sachs and Citibank. But they didn’t know the purpose of the loans, and they didn’t learn the full amount of the loans until after Cruz was elected.

So not “all of the information” about Cruz’s loans has been made “transparent,” contrary to what Cruz said. We’ll leave it for you to decide if his failure to report was an “inadvertent filing error.”