With Roger Sollenberger, Political Reporter

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The Big Dig this week… The Hidden Message in the New George Santos Indictment

On Tuesday, Justice Department prosecutors brought new charges against Rep. George Santos (R-NY), bringing the total counts from 13 to 23 and introducing the first alleged financial crimes involving his campaign.

But while the superseding indictment lays out a number of brazen fraudulent schemes, prosecutors made clear that they have not disclosed the full breadth of their knowledge of Santos’ alleged political crime spree.

The talented Mr. Santos

Brendan Fischer, a campaign finance law expert and deputy executive director at Documented, told The Daily Beast that the new indictment still does not tell the full story.

“The charges reveal that George Santos engaged in a ridiculous criminal scheme to artificially inflate his fundraising numbers with fake donors and fake loans, and used a donor’s credit card to line his pockets and those of his campaign,” Fischer explained.

“But there’s still a lot that we don’t know, and there are many indications that DOJ has way more evidence up its sleeve,” he said.

Beggar or borrower

There is one particularly glaring omission in the new federal complaint: the source of the hundreds of thousands of dollars in shady personal loans that Santos claims to have made to his own campaign—which legal experts have for months singled out as likely the biggest and most urgent potential financial crime at play.

The Daily Beast, however, can reveal a key part of that mystery. According to a person with knowledge of events, the $630,000 in campaign loans currently on the books was transferred electronically to the campaign from an account under the name of Santos’ own private company, the Devolder Organization. Legal experts tell The Daily Beast that this means Santos appears to have violated the law against corporate contributions.

Santos faked one $500,000 loan entirely, prosecutors said. But The Daily Beast previously reported that the money was, eventually, real—hitting the campaign’s account months later in a series of alleged loans totalling $630,000, backfilling the $500,000 vacuum in the campaign’s record books and keeping it solvent throughout the last weeks of the contest. That money, according to the source, came from the Devolder Organization.

Joe Murray, Santos’ attorney, did not respond to The Daily Beast’s comment request.

Sham-wow

Experts said that the loans raise serious legal and ethical questions about the origins and intentions behind that money—such as whether Santos was hiding the names of unsavory financial backers or trying to find a way around fundraising limits on individual campaign donors.

Saurav Ghosh, director of federal reform at the Campaign Legal Center, called the arrangement a “sham all the way through.”

“As we sort of knew all along, the cash behind his candidacy was basically money from others washed through a paper-thin ‘business’ set up right as he was running for Congress,” Ghosh told The Daily Beast.

Timing is everything

The indictment charges Santos for making a fake $500,000 loan to his campaign in March 2022, in order to qualify for benefits from a National Republican Congressional Committee candidate aide program. According to prosecutors, the loan was not backed with real money, and Santos only had $8,000 to his name. Still, the loan appeared in reports that the campaign filed with the Federal Election Commission, earning Santos a charge for filing a false statement to the government.

“Devolder Santos did not provide the Committee with a check for the purported $500,000 loan, nor did he wire transfer such funds at that time,” the indictment says, noting that Santos “had less than $8,000 in his personal and business bank accounts.”

The key phrase, however, is “at that time.”

Hours before the grand jury handed down the indictment, The Daily Beast reported that while the $500,000 was fake in March, those funds did make their way to the campaign. These facts are in line with the claim that Santos did not “wire transfer such funds at that time.”

Pay yourself first

Previously, including in conversations with The Daily Beast, Santos has acknowledged that the loans originated from Devolder Organization funds. However, his version of the story implied that the money merely came out of the paychecks he received in the typical course of business, like any other self-funding candidate who owns a business and uses some of the income to fund their campaign.

For instance, in December, Santos told a New York radio and podcast host John Catsimatidis that the loans came from “the money I paid myself through the Devolder Organization.”

Even if this were true, Santos would still have trouble explaining such an acute and astronomical injection of personal cash right around the election. But, as with so many of Santos’ claims, this one now appears totally false.

Instead, according to the source, the funds were transferred to the campaign directly from the Devolder Organization’s account. Santos, whose name did not appear anywhere on the payments, the source told The Daily Beast, did not pay himself first.

In a separate press statement accompanying the indictment, prosecutors repeatedly and deliberately refer to multiple fake loans.The DOJ statement does not clarify which of Santos’ reported loans were fake, and does not say whether any of them eventually came through. (Santos made his first large loan about six weeks after he created the Devolder Organization—$80,000 on June 30, 2021.)

Santos, Inc.

“If the Devolder Organization is incorporated, then it’s prohibited from providing money to Santos’ campaign,” Ghosh explained. “Corporations cannot make contributions to campaigns and any transfer of money—be that a loan or an advance—is considered a contribution.”

Prosecutors describe the Devolder Organization not as a sole proprietorship, but a limited liability company with Santos as “sole beneficial owner.” (Here are its Florida business records.) Still, Ghosh observed that “even in the event that the company was some sort of unincorporated entity, it’s important to note that even in that case we’re still looking at a contribution in the name of another.”

Fischer, of Documented, told The Daily Beast that Santos cannot use business clients to skirt the rules.

“If Santos financed the loans from ‘clients’ who sought to secretly support his Congressional run, then those donors would have made illegal, undisclosed contributions to his campaign,” Fischer said. Even if Santos provided legitimate services, he added, those clients still would have broken the law if they gave the candidate’s commission a special boost above market value.

“But assuming that Santos had some customers who paid his business for legitimate purposes, a candidate cannot treat their corporate bank account as a personal piggy bank,” Fischer said.

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From Roger’s Notebook...

The invisible man. Rep. Jim Jordan (R-OH) received a donation from a Jan. 6 defendant, and he might not even know it.

The donation came on Oct. 27, 2020, from Washington state resident John Lolos. Prosecutors charged Lolos almost immediately—three days after the riot—for unlawfully accessing the Capitol and “violent entry and disorderly conduct.” One year after making the donation, he was sentenced to two weeks in prison. Lolos also was jailed days after the riot because he refused to stop chanting “Trump 2020!” on his flight home. (He blamed that on an undercover police officer who “displayed traits stereotypical of a homosexual.”)

Jordan—who is chair of the House Judiciary Committee and repeatedly pushed stolen election claims leading up to the attack, voted to disqualify lawfully appointed electors, and vowed to investigate the treatment of Jan. 6 defendants in prison—doesn’t appear to have returned the donation, according to FEC records. But it’s most likely that he doesn’t know about it yet.

Because the donation was $100, it was below the $200 threshold that would require the Jordan campaign to itemize the donor’s name in FEC filings. It wouldn’t even be public record, except for the fact that Lolos made the contribution through the online GOP platform WinRed, and WinRed automatically itemizes every donation.

This doesn’t mean that the Jordan campaign itself wouldn’t have a record of the donation, but in order to be aware of it, his campaign would have had to cross-check its full donor file with names of Jan. 6 defendants. However, they can do that now. Campaigns must maintain a list of all donors, even those who haven’t given more than $200, so the Lolos contribution should still appear in the campaign’s internal records. (The day he made the Jordan donation, Lolos, not a regular donor, gave the same amount to two other GOP candidates—Kim Klacik and Rep. Madison Cawthorn; all three candidates were participating in a controversial fundraising program.)

Asked for comment, Jordan campaign spokesperson Kevin Eichinger said, “This is a non-story. The donation was from October 2020.”

Jordan has been in the mix to be the next House speaker. The current leader in the GOP vote count, Rep. Steve Scalise (R-LA), who is also an election denier, doesn’t yet have the floor votes to win, in part because die-hard Colorado conservative Rep. Ken Buck won’t support anyone who refuses to say the election was not stolen.

At Lolos’ sentencing, D.C. District Judge Amit Mehta emphasized the fact that the defendant appeared unrepentant.

“In a sense, Mr. Lolos, you are a pawn in a game played by people who should have known better. But it still sounds like you believe what happened that day was not that big of a deal,” Mehta said. “And that’s just wrong.” 

Superduperseding. It wasn’t just George Santos who got hit with extra charges this week. On Thursday, federal prosecutors unveiled a stunning superseding indictment against Sen. Bob Menendez (D-NJ), alleging that he acted as an unregistered foreign agent for the Egyptian government while chairing the Senate Foreign Relations Committee.

Menendez, who stepped down as chair following his initial indictment last month, was previously accused of an array of crimes related directly to his official duties, including bribery, but the first indictment stopped just short of charging him with working for a foreign government. The Daily Beast’s resident Menendez expert Will Bredderman reported that the new charges feature “eye-bugging allegations that even the often-boggling original indictment did not.” 

At one point, the indictment says, Menendez, while in direct contact with an Egyptian intelligence operative, researched an American victim of a botched Egyptian airstrike in an effort to resolve a diplomatic crisis in Cairo’s favor.

Flight risk. A Donald Trump-aligned super PAC admitted this week that it had somehow failed to account for more than $150,000 in private flights from megadonors in 2022.

The super PAC—the absurdly titled “Make America Great Again, Again!, Inc”—admitted the alleged oversight in a response to FEC analysts who had flagged an unexplained increase in expenses on a recently amended April 2022 report. In the reply, MAGAA! claimed it discovered the discrepancies during an audit “as part of its internal compliance policies.”

“The Committee reviewed communications and schedules of past and present Committee employees and contractors, identified and corresponded with donors to obtain their information, and calculated the value of all missed in-kind contributions,” the response said, repeatedly claiming that the review was voluntarily, “not triggered by any media or Commission inquiry.”

Last month, Pay Dirt reported that the same thing happened to Trump’s leadership PAC, Save America. One of those new in-kind flight contributions was a $210,000 corporate contribution from a business tied to casino magnate Phil Ruffin. While super PACs can accept corporate contributions, however, leadership PACs cannot.

Brendan Fischer, campaign finance law expert at Documented, called these oversights “a pretty big deal.”

“Private air travel potentially offers a donor a chance to have one-on-one time with a candidate or top campaign officials,” Fischer observed, noting that Trump once pardoned the father of a donor who allowed the campaign to use his plane. “The public has a right to know about those luxe trips. It is a big omission to not have reported them initially.”

Big dent. Former Trump campaign aide Jessica Denson scored a long-fought and sweeping victory over her ex-boss on Thursday, when a federal judge voided the 2016 campaign’s nondisclosure agreement as overly restrictive, according to a court order.

In addition to awarding Denson her settlement (amount undisclosed), the ruling frees every member of the 2016 campaign from the agreement, allowing 422 former employees to speak about their experiences without fear of violating their contract. (The order notes that during negotiations the Trump campaign voluntarily released those employees.)

The legal muzzle the campaign placed on its employees was so sweeping that it was “invalid and unenforceable,” the judge ruled. The order permanently enjoined the 2016 campaign along with “its successor(s) in interest”—such as the 2020 or current campaigns—from enforcing or attempting to enforce similar agreements.

Denson, who accused the Trump campaign of sexual discrimination, previously won a lawsuit focused on her personal NDA, then expanded the effort to include the full campaign.

Hidden treasure. The New Mexico State Ethics Commission has fined the state’s treasurer, Democrat Laura Montoya, for campaign finance violations during her 2022 campaign.

On Oct. 6, a state judge found that Montoya broke state regulations against straw donations by knowingly misattributing a $10,000 donation from a developer, reporting that the money instead came from a PAC. The ethics commission fined Montoya $1,000 for the violation.

“Straw donor contributions, like those uncovered in this administrative case, undermine transparency in our elections,” the commission’s executive director Jeremy Farris said in a press release, according to the New Mexico Political Report. “If wealthy individuals want to give thousands of dollars to candidates for office, that’s their right; but they can’t do it in secret.”

More From The Beast’s Politics Desk

As mentioned above, House Republicans have picked their next speaker—Steve Scalise. But Sam Brodey reports that now it’s time for the hard part, because Scalise still needs to win a full floor vote, requiring near-unanimous support from a fractured GOP conference.

Donald Trump has been whining about not getting a jury trial for his $250 million New York corporate fraud case. But Jose Pagliery came up with the definitive report showing that Trump’s own lawyers are responsible.

Kentucky GOP attorney general and gubernatorial candidate Daniel Cameron raised eyebrows when he backed a $42 million corporate grant to help develop a controversial psychedelic addiction treatment. When I looked into it, I discovered a nest of political, corporate, and megadonor ties—read the crazy story here.

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