Democrats question loan in '97 Rossi didn't report

OLYMPIA — For several years while he served in the state Senate, Republican gubernatorial candidate Dino Rossi didn't tell state regulators about a $50,000 loan from a real-estate investor — a misstep that Democrats are using now to question Rossi's integrity in the final days of a heated election.

Rossi acknowledged the error when it was brought to his attention by The Associated Press, which learned of the error from state Democrats.

But Rossi also characterized his failure to disclose the loan as a minor, unintentional oversight.

His campaign correctly pointed out that much larger real-estate transactions were disclosed on his personal financial-disclosure form, which government officials and candidates are required to file with state regulators.

Rossi spokeswoman Jill Strait suggested that a decade-old bookkeeping problem being raised by his political opponents so close to the election was evidence of desperation.

"I mean, an 11-year-old oversight is the best they can come up with a week before the election? Really?" Strait said Friday.

Rossi and Democratic Gov. Christine Gregoire are locked in a rematch of their extremely close 2004 race.

Public documents show that Rossi borrowed the money in question in October 1997, when he was a state senator, from Michael Mastro, a real-estate developer. A Seattle property that Rossi owned at the time served as collateral.

The $50,000 was used as part of the down payment when Rossi and other investors, including two lobbyists, purchased a Mastro-owned Federal Way apartment building that year. Documents show Mastro loaned the investors $2 million to buy the apartment from him, with a sale price of $2.5 million.

Mastro was an early donor to Rossi's 2004 and 2008 campaigns for governor.

Gregoire defeated Rossi in 2004 by just 133 votes, and polls show the two running another tight race.

State Democratic Party Chairman Dwight Pelz called the overall apartment purchase "shady," and implied that Rossi's failure to disclose the loan was part of an overall reluctance by Rossi to reveal the details of his private finances.

"Rossi still refuses to come clean with Washingtonians regarding his tax returns and the full details of his questionable finances," Pelz said in a statement.

Strait, Rossi's spokeswoman, noted that in 1996, then-attorney general Gregoire was fined by the state Public Disclosure Commission for failing to report income from a law firm and using state facilities for politics, among other offenses. The commission found the violations were minor or unintentional.

Debts are part of the financial information that state legislators must disclose in regular filings to the PDC.

Rossi's 1998 financial disclosure, which covers the period in which he obtained the loan, does not note his $50,000 debt to Mastro.

Subsequent financial reports submitted before Rossi settled the loan in 2001 also do not reference the $50,000 debt.

Incorrectly filling out a financial-disclosure form can result in a relatively light punishment, if the matter is taken all the way to a formal agency hearing, which is rare.

In the case of Rossi, it's unlikely that action could be taken now, because mistakes are not punishable after five years. Documents show Rossi and Mastro declared the $50,000 the loan settled in 2001, after the Rossi company sold the Federal Way apartments.