Candidates boost campaign coffers via credit

AJC Exclusive: The political equivalent of puffer fish swelling up to scare off predators

For two candidates for governor this year, one answer has been to take out large lines of credit from friendly banks — then not draw on them.

Republicans John Oxendine and Nathan Deal both have taken out hefty $250,000 lines of credit to add to cash on hand totals for their campaigns. With the credit secured in December, Oxendine was able report this month that he had $2.2 million in cash on hand, as opposed to the less impressive $1.95 million. Deal, the first to take out a line of credit in the governor’s race, reported $940,000 on hand this filing period. But when he filed his report last summer, he was able to report he had more than $1 million on hand — a crucial threshold with donors.

It’s the political equivalent of puffer fish swelling up to scare off predators and lure mates.

The borrowing comes at a crucial time in the crowded governor’s race, a fund-raising period where donors are sizing up who actually has a chance to win.

In December, Oxendine, the state’s insurance commissioner, put his Gwinnett County house valued at $278,000 up as collateral to take out a quarter-of-a-million-dollar line of credit from Brand Bank, a private Gwinnett bank that has donated to his previous campaigns and until recently owned an insurance agency still housed in its branches.

The line of credit was to Oxendine personally, but he then immediately gave it to his campaign.

Thanks to the line of credit, Oxendine was able to add an extra $250,000 to his bottom line and solidify his position as the Republican who has raised the most money for his gubernatorial bid. Nathan Deal, a congressman from nearby Hall County, had his campaign take out a $250,000 line of credit last summer from the Chattahoochee Bank of Georgia, a fledgling bank in his Gainesville district. Deal is friendly with the bank’s executives and attended its grand opening in 2007.

Deal’s collateral for his $250,000 line of credit? It was $250,000 in cash taken from existing campaign funds and put in a CD at the bank. In other words, he set up a line of credit using the exact same amount of cash he borrowed.

When he submitted his campaign finance report, the $250,000 he raised looked like $500,000 on hand, and Deal is taken more seriously by potential donors and opponents.

The lines of credit, considered loans under state ethics law, are the largest taken out in this election season so far. Oxendine hasn’t used a penny of it. Deal, who took out the line of credit months ago, has only borrowed small amounts from the account, according to his staff. But in financial reports, both campaigns can point to extra cash.

Tom Perdue, one of the state’s leading Republican campaign strategists who is not involved in a gubernatorial campaign this year, said such lines of credit have been used before, often as a way to convince donors the candidate is serious and also to have extra cash to draw on at the end of a campaign for commercials.

“Sometimes a line of credit may be the only way to put a significant amount of money in a campaign because they don’t have a lot of money,” he said.

He said Oxendine’s way, of mortgaging property, was a more traditional way of doing it, but Deal’s idea seems to have been simply swapping money from one place to another and making it look as though he had more than he did. Both approaches boost the totals in a campaign’s report.

“That is a way to at least get in the news stories and add $250,000 to the bottom line,” Perdue said.

Recent campaign disclosures show that other gubernatorial candidates also have gotten loans. Democrat David Poythress’ campaign had received $235,000 in loans, listed as coming from Poythress. The campaign of Republican Austin Scott, a state representative, has received about $119,000 in loans, mostly from Scott.

None of these loans were lines of credit with a bank.

Oxendine’s line of credit is complicated by his role as the state’s insurance industry regulator. State ethics law prohibits campaigns of state officials from taking donations or loans from entities they regulate. The law is meant to prevent companies or individuals from exerting influence to get favored treatment. The bank where he secured the credit is closely affiliated with an insurance agency. Brand Banking Co. and Brand & Britt Insurance Agency are so closely linked that most of the insurance company’s offices are located inside the bank’s branches, according to both companies’ Web sites. And for six years, the bank owned half the insurance agency, until it sold its stake last June.

Since the banks sold its share of the insurance agency before offering him the line of credit, the Oxendine campaign and the companies did not violate any ethics law. Oxendine said the loan was a standard one and it had nothing to do with seeking or granting favors.

“I am following the ethics law 100 percent,” he said. “And I am following the ethics law intent.”

Oxendine said he went to Brand Bank because it is local. Oxendine said he called bank CEO Bartow Morgan, a longtime friend and a major donor to Republican candidates, about getting the loan, but then only dealt with bank staff after that.

Morgan, who has given $12,300 to Oxendine’s campaign for governor and who has given to him in the past, said he offered Oxendine a standard loan, as he would any customer.

Oxendine spokesman David Crim said his candidate took out the loan to show donors that he is so committed to the race that he even put his house up as collateral. Crim said the campaign didn’t know how much others were raising and Oxendine wanted to make sure he maintained a commanding lead in fund-raising.

Deal took out his line of credit from a bank whose board chairman, James Walters, president of various financial companies, has given Deal’s campaign $12,200. A company that Walters owns, Walters Acceptance Corp., also gave $12,200. According to campaign finance reports, Deal’s campaign also leases office space from Walters.

The bank headed by Walters now has provided a $250,000 line of credit — but at absolutely no risk, since Deal has opened up a $250,000 certificate of deposit at the bank.

Harris Blackwood, Deal’s spokesman, said the campaign has used the line of credit for a few minor expenses. Asked if the line of credit was a tactic to appear to have more money, Blackwood sighed.

“If that’s how it’s perceived, that’s how it’s perceived,” he said. “It is what it is.”

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