Taylor Campaign Loan

Many of you may have seen an article appeared in the AJC last evening that gave some detail about the $1 million dollar loan Taylor gave his campaign in December of 2005. Frankly, when I first read this, I thought that this story was a bit of a yawn, only important to those who pay day to day attention to politics. (After all, how many Georgians know or care about the fine points of campaign finance reporting or would be surprised about a hometown bank making a big time loan to a hometown boy (and shareholder) seeking the Governor's office?)

But Crawford does raise a couple of points that were not included in the AJC version of the story. For example, he points out that the bank made this large loan (only secured by a zero face value life insurance policy) at the end of a three quarter period when the bank showed a loss, that the bank's former chief credit officer and current interim president was himself a $1000 donor to the Taylor campaign, and that Georgia campaign finance ethics rules require that if money is listed as a loan to the campaign and not as a gift, that the loan must have been made in compliance with standard bank credit practices. In other words, it's not a loan if the person or entity does not reasonably expect to be repaid. The question is whether or not based on Taylor's reported networth and the way in which the loan was secured, it is reasonable for the bank to expect repayment. Taylor's folks have indicated that they expect to repay the loan. The bank indicates they expect repayment. Here's the Crawford piece. The detail makes it worth a read.

Political Notes -- Taylor knows where to go for funds by Tom Crawford on 5/22/2006

When Lt. Gov. Mark Taylor needed a cash infusion for his gubernatorial campaign, he knew exactly where to turn: his friendly hometown bank in Albany.
Late last December, at a time when Secretary of State Cathy Cox was having more success at raising campaign contributions and was threatening to pass Taylor in the money race, the lieutenant governor obtained a loan of more than $1 million from Albany Bank & Trust.
Taylor then put $1 million of that money into his campaign, but did not reveal in his disclosure report that the money had originated with Albany Bank & Trust. Instead, his report for the July-December period merely states that on Dec. 30 Taylor's campaign received a $1 million loan from the candidate.
The origin of the money wasn't revealed until the week of May 1, when Taylor filed the personal disclosure report with the State Ethics Commission that is required by Georgia's new ethics law. Taylor's report revealed that he had borrowed $1,005,982 from Albany Bank & Trust on a note that is due Dec. 30, 2006.
The only security for the bank loan, according to Taylor's disclosure report, is a life insurance policy with a face amount of $1.25 million but with a cash surrender value of zero.
Taylor's disclosure report also showed that he owns stock worth $15,065 in Community Capital Bancshares, Inc., the holding company that owns Albany Bank & Trust.
Some key officials of Community Capital Bancshares and Albany Bank & Trust are also major campaign contributors to Taylor.
Charles M. Jones III is the CEO of Community Capital Bancshares. During the 2002 race for lieutenant governor, Taylor reported $10,000 in contributions from Jones (two donations of $5,000 apiece on June 12, 2002). Taylor earlier reported a $5,000 contribution from Jones on May 7, 2001. Jones also contributed $5,000 to Taylor on June 30, 2004.
Taylor also reported a $1,000 contribution from Paul Joiner, who formerly was chief credit officer of Albany Bank & Trust and is now the interim president of Community Capital Bancshares.
Joiner declined to answer questions about why his bank would loan more than $1 million to a borrower when the only reported collateral was a life insurance policy with a zero cash surrender value.
I really can't discuss it that's a matter of privacy, Joiner said in a brief telephone interview. I really can't tell you a thing about it. He referred all questions to the Taylor campaign.
Taylor campaign spokesman Rick Dent confirmed that the bank loan was the source of the $1 million that Taylor gave to his campaign last December.
Dent described the financial transaction as a standard bank loan and added, "Like most banks, assets and an individual's credit history provide the basis for any loan qualification."
Albany Bank & Trust made the large loan to Taylor during a difficult period for the bank's holding company. On March 20, Community Capital Bancshares announced a loss of $172,000 in net income for the three-month period ending Dec. 31, 2005, the same quarter in which the loan was made to Taylor.
"Though we incurred a loss from a large charge-off on a loan relationship in the fourth quarter, our company has addressed its problems and repositioned itself on a solid foundation from which to grow our banking franchise, Jones said in a news release issued by the company.
On the same day that it disclosed its quarterly loss, Community Capital Bancshares also announced that Robert E. Bob Lee, president and director of the company, had resigned to pursue other interests. Lee's interim replacement was Paul Joiner, a Taylor contributor.
Bank loans to political candidates that are later paid back out of campaign contributions are not unusual in Georgia elections.
While campaign contributions from an individual to a candidate are limited to a maximum of $16,000 in an election cycle, that limitation does not apply to a bank loan made to a candidate if such loan is made in the normal course of business with the expectation on the part of all parties that such loan shall be repaid and the loan is based on the credit worthiness of the candidate and the candidate is personally liable for the repayment of the loan, according to the state ethics law.
On the personal disclosure report he filed earlier this month with the Ethics Commission, Taylor lists the bank loan as both an asset he will presumably be repaid by his campaign committee and a liability, since he must pay off the note to the bank by Dec. 30.
Taylor claims a net worth of $976,276 on his personal disclosure report. If, for some reason, his campaign were not able to pay him back the $1 million he lent to the campaign, Taylor theoretically would have a negative net worth.
People who invest in property or stock gain and lose income over time, Dent said in response to questions about Taylor's personal financial situation. Changes from year to year on the tax returns reflect the sale and/or purchase of assets. The loan is both an asset and a liability and therefore not something that really affects his overall net worth as calculated by the state ethics commission at all.
Taylor has earned most of his money from his position as vice president of his father's trucking business and from his real estate interests, according to media reviews of his personal tax returns. Taylor's taxable income has fluctuated from $495,261 in 2003 to $928,433 in 2004 and then to $199,406 in 2005.
Taylor transferred the bank loan funds into his campaign treasury at a time when Cox was raising significantly more money than Taylor from outside contributors.
In January 2005, Taylor had more than $1.7 million in his campaign bank account while Cox had just registered to begin raising money for the governor's race.
When the disclosure reports for the June-July 2005 period had been filed, Cox had raised $2.12 million compared to only $1.46 million for Taylor. That fundraising disparity continued during the July-December period of 2005 when Cox raised another $1.95 million from outside contributors to just $1.08 million from outside sources by Taylor.
By lending that extra $1 million to his campaign just before the end of the year, Taylor was able to report he had raised slightly more money overall than Cox during that July-December period.
A provision in the new ethics act that took effect on Jan. 9 will make it more difficult for future candidates to recoup loans that they make to their campaigns. From now on, a candidate who incurs loans for a campaign cannot be paid back out of campaign contributions to the extent that such loans exceed $250,000.

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