By Chuck Strouse
By Scott Fishman
By Terrence McCoy
By Ryan Yousefi
By Ciara LaVelle, Kat Bein, Carolina Del Busto, and Liz Tracy
By Pepe Billete
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By Kyle Swenson
It's hard to imagine how the congressman could have remained oblivious to the FEC audit long after its conclusion. And wouldn't his brother and district director tell him they'd been subpoenaed midway through the audit? "On July 27, 1999, when no records were forthcoming and LDC [Diaz-Balart campaign] representatives ceased communicating with the audit staff, the commission approved subpoenas to Ana Carbonell; Rafael J. Diaz-Balart, LDC custodian of records; and banks known to have been utilized by LDC," the audit recounts.
In December 1999, the narrative continues, the FEC tried to contact Diaz-Balart himself via letter. There was no reply, whereupon "... several attempts were made by the audit staff to contact the congressman's office to inquire about the lack of any response to the letter. On January 6  the audit staff was able to speak with Stephen D. Vermillion, the congressman's chief of staff. He indicated that the letter had been received and that the matter had been referred to Ms. Carbonell. Further Ms. Carbonell advised him that she had discussed the matter with the congressman."
That conversation elicited no helpful information from either Diaz-Balart or his staff, so the FEC issued an interim audit report on January 10. It recommended the campaign correct the numerous bookkeeping and reporting errors discovered by auditors, refund illegal contributions, and explain in writing why the campaign had consistently overstated its cash-on-hand balance by about $114,000. Auditors had been stymied from the beginning by this discrepancy, which existed from the beginning of the audit period and was never clarified, even after scrutiny of subpoenaed bank records.
In the final audit report released in April 2000, the FEC noted that the Diaz-Balart office had responded to the interim audit with amended financial reports. Analysts had not, however, been able to verify all the "corrected" figures cited in the amendments, because the documents submitted as backup were incomplete. Further the campaign still couldn't fully account for the $114,000 discrepancy. "LDC did not provide needed documentation (such as canceled checks and appropriate bank statements).... At best LDC's response only explains about $20,000 of the $114,000 cash balance overstatement," auditors complained.
And there was the strange refund check snafu: In February 2000, in response to findings in the interim audit report, Diaz-Balart's office told the FEC it had refunded almost $30,000 in illegal contributions and provided copies of the fronts of 45 non-negotiated checks. That didn't impress auditors, who noted two months later they still had not received "copies (front and back) of negotiated refund checks."
And in fact none of the checks was ever negotiated. According to the Daily Business Review, Diaz-Balart staffers conveniently discovered all 45 checks, all uncashed, in the campaign office after the November 2000 elections. Thus the money, like any other legal contributions, had been available to pay for expenses leading up to the election. Treasurer Riesco, who had just been hired, told the Daily Business Review the checks had been returned by the post office because they hadn't been addressed properly. In November new refund checks were written and mailed, and this time donors received and cashed them. Among the Diaz-Balart supporters who had contributed more than the $1000 per election max allowable by law was Dexter Lehtinen, husband of U.S. Rep. Ileana Ros-Lehtinen, South Florida's other Republican Cuban-American member of Congress. Many individuals and their relatives routinely make large contributions to multiple candidates and political action committees, and it's often understandable that they might lose track of the total amounts spent on each election. But the FEC also made the Diaz-Balart campaign return more than $10,000 donated by 23 corporations, an amount most knowledgeable observers consider unusually high. Corporations aren't allowed to contribute to political candidates, although they can form PACs to do that. In this case a number of individuals made contributions both in their names and in their companies' names; several offenders were members of Miami's prominent Milton family, who are builders and developers. How could the Diaz-Balart campaign not spot so many illegal checks from corporate donors?
Perhaps more troublesome, though, were the tens of thousands of dollars in both receipts and expenditures not reported to the FEC. As recently as this past January, Riesco informed the commission of $40,300 in contributions received during 1997-98 that were never revealed to the FEC auditors. (This alone exceeds the amount of the July 18 FEC fine.)
The auditors did find $35,720 in unreported interest income during that period. These earnings came from certificates of deposit at Hamilton Bank, NationsBank, and Bank of America. None of the CDs had been disclosed until discovered by auditors. Commission analysts told Diaz-Balart's staff to correct the public record by filing the appropriate forms listing the interest earnings. This was done, though the amounts and terms of the CDs weren't included.
Aside from the fact that the campaign failed to report thousands of dollars of interest income -- not only during the audit period but in succeeding years until the omissions were corrected in 1999 -- there's no indication Diaz-Balart paid the required federal income taxes on more than $75,000 interest accrued on CDs from 1996 through 2000. Contributions to political campaigns aren't taxed, according to an Internal Revenue Service spokeswoman, but earnings such as interest income are taxable if more than $100. Riesco did not return calls to his office seeking clarification of questions about Diaz-Balart's finance reports.