In summary
Former U.S. Rep. Loretta Sanchez loaned state Assemblywoman Sharon Quirk-Silva $430,000 to buy a house in Orange County—an arrangement that some legal experts labeled unusual, but that both politicians said was not improper and resulted from their friendship.
To buy a house, an Orange County legislator received a $430,000 personal loan from a former Orange County congresswoman—an arrangement that some legal experts labeled unusual, but that both politicians said was not improper.
Democratic Assemblywoman Sharon Quirk-Silva borrowed the sum from former U.S. Rep. Loretta Sanchez, an unsuccessful 2016 U.S. Senate candidate, in the fall of 2017, according to financial disclosure and property documents reviewed by CALmatters and confirmed by Quirk-Silva and Sanchez.
The loan was used to purchase a Fullerton house for nearly $600,000, which Quirk-Silva and her husband eventually moved into. After selling their previous home and arranging traditional bank financing, the documents indicate, Quirk-Silva and her husband repaid Sanchez—with interest, Quirk-Silva said. The existence of the loan appears on the assemblywoman’s state-required financial disclosure documents.
While California law bans state and local elected officials from borrowing money from each other, nothing appears to prohibit the arrangement Quirk-Silva struck with Sanchez, who did not hold elected office at the time. In late 2018, Sanchez would announce her candidacy for a seat on the Orange County Board of Supervisors, going on to lose earlier this month.
“It gives a feeling: Was there a sense of indebtedness and gratitude?” said Jessica Levinson, a Loyola Law School professor who specializes in campaign and elections law. “Do they feel like business partners, and do you lose some of your independence?”
But Quirk-Silva, a member of the Assembly housing committee, compared the arrangement to parents helping their adult children with a home purchase, an increasingly common phenomenon in California’s expensive and competitive single-family home market.
“We were very, very grateful that we had somebody that helped us just like a relative,” said Quirk-Silva.
“Just like many parents help their children put down payments. That’s perfectly acceptable, it happens all the time where people who know each other, who have a relationship do help each other.”
Added Sanchez, who spent 20 years in Congress: “She’s a friend, that’s how I treat her. Not as a public official.”
Neither the Republican nor Democratic co-chairs on the Assembly ethics committee responded to requests for comment on the loan.
A Mortgage in a Weekend
In November 2017, a year after she had defeated an incumbent Republican to regain her seat in the state Legislature, Quirk-Silva said she spotted a “Coming Soon” sign on a property just a few doors down from her Fullerton home.
Quirk-Silva said she and her husband, who serves on the Fullerton city council, liked the 3-bed, 2-bath property for its big backyard and fixer-upper potential.
But they didn’t want to wait to line up a traditional mortgage, and they couldn’t sell their home in time to free up the necessary cash.
So Quirk-Silva said she asked advice from her longtime friend and ally Sanchez, who had left her U.S. House seat earlier that year after losing a U.S. Senate race to Kamala Harris. It was a Saturday, and the realtor told Quirk-Silva the house would hit the market within 48 hours.
“I said I’m trying to figure out how to do this because (our) house isn’t up for sale, and she said ‘I can loan you the money,’ ” said Quirk-Silva. Sanchez confirmed she offered the loan without prompting.
Quirk-Silva says Sanchez and her husband worked out the terms of the loan that weekend. On the following Monday, Quirk-Silva made the ultimately winning bid of nearly $600,000 on the house, on a tree-lined street blocks away from a local community college.
“We’re not rich or anything”
Asked how she was able to lend nearly half a million dollars so quickly, Sanchez said, “I’m a private citizen and lots of people have that kind of money sitting around.” She added that she had made personal loans to other friends besides Quirk-Silva.
Sanchez and her husband, Jack Einwechter, a military veteran and former federal lobbyist for defense contractors, are part-owners of the digital political communications company Datamaticia. Einwechter also runs a small law practice out of Orange County, for which Sanchez is a consultant.
According to financial disclosures Sanchez filed when she left Congress, she then had a maximum of $265,000 in reportable liquid assets, not including any real estate she owned.
“We’re not rich or anything,” Einwechter said recently when asked about the Quirk-Silva loan. “We’ve sold some houses recently, and were liquid for a while.”
California’s Political Reform Act, the law governing financial interactions between legislators and special interests, does not prohibit public officials from taking out personal loans.
But it does have a rule against gifts that exceed $470. In the past, California’s Fair Political Practices Commission (FPPC) has investigated cases where the terms of a loan appeared more generous than what was available to the general public and thus should have been legally considered a gift.
Quirk-Silva said her husband and Sanchez finalized loan terms that weekend : 4 percent interest, with a 6-month payback period. Property documents confirmed by Quirk-Silva indicate the loan was repaid by August of the following year. Quirk-Silva says they needed the additional time to finish renovating the new home.
“That’s a good rate” for the borrower, but not unusual, said Kristina Reed, a Sacramento-area lawyer familiar with private real estate transactions similar to the deal. She typically sees interest rates of 5 to 7 percent.
A spokesman for the state’s FPPC declined to comment on Quirk-Silva’s loan, citing a longstanding policy of not commenting on possible violations. The commission also doesn’t track how many legislators might have disclosed similar loans in the past.
A CALmatters’ analysis of lawmakers’ financial disclosures found that last year, only one other state legislator reported borrowing a personal loan: Jeff Stone, a Republican representing portions of Riverside County.
Stone said he only borrows from family, which in last year’s disclosures he said were his aunt, uncle and daughter. The loans were for his home-flipping business, he said.
Stone says he avoids borrowing from politically connected individuals, explaining, “I would be concerned about the optics of that.”
A Personal, Political and Financial Friendship
Quirk-Silva met Sanchez in the early 2000s when Sanchez was in Congress and Quirk-Silva was dipping her toe in local Orange County politics. Latina Democrats of the same generation in a traditionally Republican part of the state, they struck up a friendship.
“We just got along well,” said Quirk-Silva, noting that the two often took long walks together and even shared office space during the 2012 campaign. In 2016, she endorsed Sanchez over Harris for U.S. Senate.
While Quirk-Silva was paying back the $430,000 home loan to Sanchez, her 2018 re-election campaign also paid $17,500 for services provided by Datamatica, a digital communications firm owned by Sanchez and her husband, according to campaign finance records.
After Sanchez announced she would be running for a vacant Orange County Supervisor seat in November of 2018, Quirk-Silva offered to organize a group of elected officials to canvass for her, said Sanchez’s campaign manager Phil Janowicz, who added that the canvassing never materialized.
Questions about Disclosures
As a candidate for Orange County supervisor, Sanchez was legally required to file financial disclosure forms covering income sources from the previous 12 months. State law requires not only that borrowers disclose personal loans, but that lenders running for office report any income from personal loans as well.
But income from the loan to Quirk-Silva is absent from Sanchez’s campaign filings.
Sanchez said she talked with election watchdogs at the FPPC before filling out her financial disclosure forms and said she believed she filled out everything properly.
“You don’t have to disclose income that doesn’t have anything to do with (business) coming before the county, or something in your district,” said Sanchez. “This loan had nothing to do with any of that.”
A spokesman for the FPPC, while not commenting on the Sanchez loan specifically, said any income from any source within a candidate’s potential political jurisdiction should be reported.
For her part, Quirk-Silva says she never worries that Sanchez—who has expressed interest in running for supervisor again–will ask for a political favor because of the loan.
“Loretta will never do that, and she never has,” said Quirk-Silva.
CALmatters general assignment reporter Elizabeth Castillo contributed to this story.