The ‘Pathetic’ Decision to Le galize Candidate ‘Slush Funds’

With Roger Sollenberger, Political Reporter

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The Big Dig this week… The ‘Pathetic’ Decision to Legalize Candidate ‘Slush Funds’

In a ruling that critics are calling “pathetic,” “troubling,” and “unfortunate,” with “limitless potential for corruption,” the country’s election regulators have for the first time explicitly authorized personal slush funds for politicians.

The ruling was slipped into a comparatively innocuous Federal Election Commission decision published last week, involving rent payments from former Republican congressman Lou Barletta’s leadership PAC (LOU PAC) to his wife.

That particular arrangement appears quite likely within the law, according to legal experts. But in dismissing the complaint, a majority of four commissioners also took the opportunity to make a far more sweeping statement, officially articulating for the first time that leadership PACs—long derided as personal slush funds—are entirely exempt from the ban on personal use.

“Pathetic”

“[T]he prohibition against personal use applies only to the ‘use of funds in a campaign account of a present or former candidate,’” the analysis said, adding that “absent a change in Commission regulations, the personal use prohibition is inapplicable to LOU PAC because it is not an authorized candidate committee.”

Craig Holman, head of government affairs at watchdog Public Citizen, said that the commissioners were “dancing around the law.”

“It’s a pathetic decision by the FEC,” Holman told The Daily Beast. “Leadership PACs have always been seen as slush funds, but they’ve been justified as a way politicians can raise money for other lawmakers and candidates. Now the FEC has opened a whole new can of worms and formally recognized that leadership PACs can be used for personal purposes. Any lobbyist or special interest can give money to a lawmaker to line their own pockets. That’s not what these PACs were originally designed to do, and it’s another reason they should be banned.”

I’m going to Disney World

Leadership PACs are a unique type of fundraising committee. While they’re not officially “authorized” committees, they are directly sponsored by candidates and officeholders. The original idea was to give politicians a way to support allies without exceeding contribution limits.

But many candidates have also tapped their LPACs to bankroll what appear to be personal expenses, treating themselves to luxury vacations, fine meals, even trips to Disney theme parks.

Nest egg

Campaign finance expert Paul S. Ryan said that while LPACs have been a “sore spot” for years, the FEC decision creates new incentives for corruption.

“This allows someone to use money raised while they were a member of Congress to pay expenses after retirement. That creates a huge incentive to raise money while in office for later personal use,” Ryan said, noting that many officeholders retire into lobbyist jobs, where they maintain close contact with elected officials.

“This ruling represents an unfortunate and troubling deregulation, which only increases the threat of corruption,” he said.

Skip to my Lou

Here’s how it all went down.

Federal law lays down a hard ban on candidates using campaign funds for their personal use. Barletta was accused of using his campaign and leadership PAC to violate that prohibition.

After losing his 2018 re-election bid, Barletta converted his campaign committee into a PAC, which inherited his leftover donor cash. The new PAC then took the money originally raised into the campaign and transferred it to his leadership PAC. The LPAC then paid monthly rent expenses to Barletta’s wife, for a property that the couple owned jointly.

The FEC ruled that the Barlettas didn’t violate regulations because they appeared to be paying fair market value for that rent. But the decision didn’t stop there. It took an extra step, saying that leadership PACs are exempt from rules against personal use.

Back door man

But Barletta’s case had an additional wrinkle—he had first transferred campaign funds to his leadership PAC. That extra step, the FEC said, put the previously regulated funds beyond the reach of the law. Transparency advocates say this opened a channel for politicians to spend campaign money with impunity, both in and out of office.

Jordan Libowitz, communications director for Citizens for Responsibility and Ethics in Washington, called it an “end around.”

“This gives candidates and officeholders a pathway to benefit personally from money raised into their campaigns. You go out, hold a fundraiser, move that money to a leadership PAC and then do what you want with it,” he told The Daily Beast.

Dems in disarray

The other two Democrats expressed similar dissent in a joint statement last week. One of them, Commissioner Ellen Weintraub, explained her view to The Daily Beast.

“The statute says that the personal use restrictions apply to contributions ‘accepted by a candidate, and any other donation received by an individual as support for activities of the individual as a holder of Federal office,’” Weintraub said, quoting from the U.S. Code. “If money comes into a principal campaign committee, then that’s a contribution accepted by a candidate. I don’t think the money loses that characteristic when it’s transferred to a leadership PAC.”

(The ruling cited what appears to be possibly conflicting language in the Federal Election Commission Act, which defines “personal use” as “any use of funds in a campaign account of a present or former candidate.”)

Democratic commissioner Dara Lindenbaum—a former private-sector attorney whom President Joe Biden appointed to the FEC in August—tipped the scales to the GOP. She told The Daily Beast she was “surprised” to have learned that the issue was “remotely controversial.”

“I try not to comment on particular matters. That said, I don’t believe this is a significant decision because it is well established that the personal use restrictions do not extend to PACs,” Lindenbaum said. “I was surprised to learn that this was a remotely controversial issue as the FEC has years of unanimous legislative recommendations asking Congress to amend the personal use restrictions to include leadership PACs.”

Congress is now the only option, according to Brett Kappel, a campaign finance attorney at Harmon Curran, who told The Daily Beast that any effort to get the FEC to issue a rulemaking “now appears dead.”

“The only way this loophole will be closed will be by Congress enacting legislation,” he said.

Read the full story here.

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From Roger’s Notebook...

Ready for Ron? It looks like a super PAC trying to get Florida Gov. Ron DeSantis on the 2024 presidential ballot has made a promise to its donors that it can’t keep. The super PAC—“Never Back Down, Inc”—put out a fundraising solicitation which tells supporters that the group will forward their donations to a future DeSantis campaign, and if he doesn’t run, to the campaign of the nominee he publicly endorses by March 6, 2024.

But because it’s a super PAC, Never Back Down can’t transfer contributions to any candidate. According to a 2019 FEC advisory opinion, if the group had instead registered as a “hybrid PAC”—a super PAC with an additional contribution account—then it could have held donations in that account for a nominee fund. We might see the PAC make that change soon.

Books a million. Former President Donald Trump is planning to sell a new book containing 150 private letters he’s received over the years, Axios reported Thursday. The book, called “Letters to Trump,” will reportedly feature a 2000 letter from Oprah Winfrey in which she tells the real estate mogul, “Too bad we’re not running for office. What a team!”

Like Trump’s previous coffee table picture book, “Letters to Trump” will come from Winning Team Publishing, the firm created by Trump adviser Sergio Gor and adult son Don Trump Jr. The starting price is $99, with autographed copies setting you back $399.

DeSantis also has a book out, called “The Courage to Be Free.” Last month, DeSantis headlined an Alabama Republican Party event. According to FEC records, the Alabama GOP purchased about $23,000 worth of books that month for an “event expense.” One of those vendors, Premiere Collectibles, hosted a “Live Signing” for DeSantis, where he autographed copies of his books on live video—immediately raising their value.

Sunshine State. Over the weekend, the FEC told the Florida Republican Party that it appeared to have impermissibly accepted around $560,000 last August from an unregistered entity—the State of Florida. That payment would likely be okay if the money went into the party’s non-federal account, which it apparently didn’t. The Florida GOP’s filings also don’t make clear why they received that specific payment from the state government.

However, it appears from FEC records that Florida has been making increasingly large six-figure payments to both Florida political parties for more than a decade. Last year, Florida transferred more than $356,000 to state Democrats, which the party reported as being for “filing fees,” and the year before that another payment was described as “federal filing fees”—a sign that these might be reimbursements from the state.

However, there appear to be no matching upfront expenses to the state from either party’s federal account that would explain those reimbursements, and the GOP does not ever appear to have reported what those payments are for. A quick Daily Beast search of filings suggests this pattern does not extend to other large states, like California, New York, and Texas.

Wohly owned. Serial fraudsters Jacob Wohl and Jack Burkman were told by a New York court on Wednesday that they had to pay summary judgment to plaintiffs who, along with state Attorney General Letitia James, sued them for violating their civil rights with an allegedly racist robocall scheme in 2020. The amount is yet to be determined.

The pair were sued for placing robocalls that intimidated Black voters, which James alleged was a violation of the Ku Klux Klan Act. Wohl took “great insult” to that in a statement to The Daily Beast.

“As a Jewish Republican, I take great insult from the claim that I am somehow a Ku Klux Klansman,” Wohl said. “This transparent scheme to suppress the important work of Predator DC will not slow us down,” he added. (There’s no basis for his claim that the lawsuit, filed in early 2021, was engineered to sabotage the duo’s “To Catch a Predator”-style video sting series, which they launched months later.)

Wohl and Burkman are on probation after pleading guilty last year to fraud charges in Ohio related to the same scheme, and were later ordered to dedicate 500 hours of community service to voter registration. They’ve been sued in several states.

Schlapped. The longtime Republican campaign operative who in January accused Matt Schlapp of sexually assaulting him during Herschel Walker’s campaign has publicly come forward. North Carolina Republican Carlton Huffman first stepped out in a Washington Post article on Wednesday, after a judge ordered that he could not pursue his $9.4 million lawsuit against the Schlapps under anonymity.

The Daily Beast first broke this story in early January, corroborating Huffman’s account of the evening through contemporaneous text messages, videos, and the Walker campaign. The campaign believed Huffman, offering legal and therapeutic options the day he reported the incident. Schlapp’s attorneys have denied the allegation.

The Schlapps have seen blowback after the story broke. In January, Media Matters researchers revealed that Fox News appears to have blacklisted the Schlapps, who are regular contributors to the network. Schlapp also runs the CPAC gatherings, and this year’s big event was sparsely attended, with leaders like DeSantis and former Vice President Mike Pence declining to join.

Doxxed. The congressional Chief Administrative Officer sent out an alarming notice on Wednesday, informing members that the FBI had discovered that the “account information and [personal identifiable information] of hundreds of Member and House staff were stolen” in a data breach.

The breach targeted DC Health Link, potentially exposing thousands of enrollees, the notice said. The CAO said that while the office didn’t yet know the full scope, it did not appear that Congress was specifically targeted.

Outfoxed. Last week, two progressive groups filed FEC complaints targeting “confidential information” about allegedly unreleased Biden ads that Fox News chair Rupert Murdoch shared with Trump aide Jared Kushner during the 2020 campaign, as revealed in a court filing. But as The Daily Beast reported this week, the allegations in those complaints appeared weaker once the underlying exhibits were unsealed.

Additionally, the FEC just shot down three similar complaints against Bloomberg News that had cited its coverage of Mike Bloomberg’s brief 2020 presidential bid.

At the time, Bloomberg News said that while the campaign was on, the outlet wouldn’t do any in-depth investigative reporting about Bloomberg (or his Democratic rivals). The FEC’s general counsel also found that four Bloomberg opinion pieces could be construed to constitute independent expenditures on his behalf, because they “expressly advocated the election or defeat of a federal candidate” and because “Bloomberg News was owned by a candidate.” But the OGC recommended against taking action, saying that the articles “appear to represent only a small fraction” of Bloomberg opinion pieces.

More From The Beast’s Politics Desk

Marianne Williamson is once again seeking the Democratic nomination for president, and Republicans are having a lot of fun with it. Read Ursula Perano on the GOP’s latest troll here.

The Trump Organization says it ended a tumultuous 2022 without telling anyone outside the company how business is doing—a claim that, if believed, could indicate looming financial trouble amid a legal tsunami. Jose Pagliery explains it all to you here.

The Norfolk Southern crash has brought renewed focus on how the rail industry has evaded regulations. That story has been playing out for decades, according to my review of decades of lobbying and campaign finance filings.

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