WASHINGTON — A federal investigation into a long-ago land deal by Sen. Bernie Sanders' wife is threatening to take some of the luster off the senator's populist appeal, attaching the phrase "bank fraud" to the biography of a politician practically sainted on the left for his stands against "millionaires and billionaires."
Sanders, a Vermont independent, is still riding high on popularity from his presidential campaign, delivering rousing speeches to cheering progressives in Ohio, Pennsylvania and West Virginia.
But he has been shadowed by talk of a deepening investigation into his wife's role in a 2010 land deal for a Vermont college that ultimately contributed to her ouster as its president. His wife, Jane Sanders, has hired a lawyer to represent her as federal authorities look into a $10 million sale of about 33 acres of lakefront property by the Roman Catholic Diocese of Burlington to Burlington College. Jane Sanders was hoping to relocate and expand the institution.
The couple and many of their supporters maintain that the investigation is politically motivated and that it was set in motion by the Vermont state chairman for Donald Trump's presidential campaign, Brady Toensing, who filed a complaint with the local U.S. attorney's office in January 2016 on behalf of the diocese's parishioners.
But the facts in the case do not fit well with Bernie Sanders' populist image. The charges revolve around a $6.5 million bank loan, that was obtained with a promise that college donors would quickly pay back at least $2.6 million of the debt. They did not, Jane Sanders was ousted, and the college went belly up.
Sanders fans and Democratic strategists agree that the investigation, no matter its outcome, could be used by operatives in both parties to undermine the senator.
"Just the fact that this is hanging over them could be used," said Nina Turner, president of Our Revolution, a liberal organization formed by several people close to Sanders. "I would hope that voters would dig deeper, but sometimes people don't. And they hear the word 'FBI' and it sends a shiver up and down people's spines."
Sanders remains one of the most popular political figures in the country. Even Democrats who might want to push him aside understand that tarnishing the integrity of one of their biggest draws could make it harder for liberals to win elections in 2018 and 2020.
Not everyone is so enamored with Sanders' continuing power. Stu Loeser, who owns a media strategy firm and was a longtime spokesman for Mayor Michael Bloomberg of New York, said Sanders had missed his "once in a lifetime chance" to be president.
A federal law enforcement official, who declined to be identified because the matter was still under investigation, confirmed to the New York Times that authorities have been looking into the land deal.
To finance the land purchase, the college borrowed from a bank and obtained additional financing from the diocese, according to David V. Dunn, a Burlington College trustee at the time. The college needed to demonstrate that it had the financial resources to pay the bank loan, which it did with Jane Sanders' assurances that it would receive $2.6 million in donations and increase its enrollment, Dunn said.
"Neither of those were true," he said in an interview Monday.
Some of the pledges turned out to be overstated, and enrollment did not increase. Sanders was forced to resign in 2011. Financially strained, the college closed last year.
In his letter of complaint to the federal prosecutor, Toensing, who was then vice chairman of the Vermont Republican Party, said he was requesting "an investigation into what appears to be federal loan fraud involving the sale of the Roman Catholic Diocese of Burlington headquarters."
"This apparent fraud resulted in as much as $2 million in losses to the Diocese and an unknown amount of loss to People's United Bank, a federally financed financial institution," the letter said.