An incoming member of Congress is embroiled in the high-profile bankruptcy of a professional hockey player.
Rep.-elect Rod Blum (R-Iowa) had to take the player to court to try and recover some of a $2 million loan he provided.
{mosads}Jack Johnson, a defender for the Columbus Blue Jackets, filed for bankruptcy in October, after his parents borrowed millions of dollars in his name at high interest rates.
As his financial woes mounted, Johnson was sued by several parties due to missed loan payments.
Blum, the Iowa businessman who will be joining Congress as a Republican member in January, is among them.
Court documents indicate that Blum could be out as much as $1 million from his dealings with Johnson, whose financial woes were detailed in the Columbus Dispatch Thursday.
Mismanagement led to Johnson going from signing a $30.5 million contract in 2011 to bankruptcy proceedings three years later.
The article explains how Johnson’s name was signed to a number of loans after signing the contract, including one with Blum, who owns a software development company in Dubuque.
Court documents from the Franklin County Civil Court in Ohio indicate that Blum agreed to enter into a loan with Johnson in 2011, lending him $2 million with an initial 8 percent interest rate.
It is not clear if Blum has made a habit out of providing private loans to others, or how he came in contact with Johnson. A spokesman for Blum’s campaign confirmed the rough details of the loan, but declined to comment further.
“Obviously this is a difficult time for Jack Johnson, Jr., and out of respect for his privacy Mr. Blum will not be discussing his private financial situation as the legal process takes its course,” the spokesman said.
According to court documents, the loan was intended to finance multimillion-dollar life insurance and disability policies for Johnson, as well as financial investments with Chad Breen of Dubuque, Iowa, which is in Blum’s district.
The proceeds from Blum’s loan were sent directly to Breen, and could only be used to make investments through him.
The website for Breen Financial Services states that Breen is a registered player financial adviser with the National Football League’s Players Association, but makes no mention of work with professional hockey players or other athletes. A Twitter bio describes him as a “financial adviser for professional athletes, entertainers and other high net worth individuals.”
Breen did not respond to a message left on his voicemail.
Blum was a political novice when he jumped into the race to replace Rep. Bruce Braley (D), who mounted an unsuccessful Senate race against Republican Joni Ernst.
But it appears that Blum, is on the losing end of his loan to Johnson, which began at an 8 percent interest rate but jumped to 12 percent after Johnson missed payments.
Court documents indicate Johnson’s wages through the Blue Jackets had to be garnished to help pay off his loan to Blum. Twenty-five percent of Johnson’s paycheck was set aside to pay the loan, and his wages were garnished from September 2013 to October 2014, when Johnson filed for bankruptcy.
An affidavit filed at the end of September indicated that Johnson owed Blum $1.44 million when court proceedings began, and Blum had recouped roughly $494,000. With interest and court costs, Johnson still owed at the time $1.1 million. In bankruptcy filings, Johnson claimed under $50,000 assets with at least $10 million in debts.
The House code of ethics does not specifically bar members from using their personal funds to finance loans to others. However, generally speaking, members are barred from receiving or giving loans with terms that have terms more advantageous than could be normally expected, thanks to their standing as a member of Congress.
The Dispatch story noted that Johnson received another 12 percent loan from Steve Miller, who owned a California mortgage company. The $1.56 million loan was used to finance a Manhattan Beach home for Johnson’s parents, and quickly went into default after Johnson missed the initial payment.
Johnson went on to sue Miller and others, calling the loan “egregious, unethical and wrongful,” according to the Dispatch.