PW investigates: Lax reporting laws allow campaigns to hide how millions are spent

By: - July 1, 2021 4:17 pm
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Election watchdogs call on regulators to better track and police campaign consultant expenditures

In the final two months of the 2020 General Election, the campaign of Cal Cunningham, the Democratic candidate for a U.S. Senate seat in North Carolina, shelled out $25 million to the consulting firm Screen Strategies Media, apparently for advertising.

Sen. Thom Tillis, the Republican incumbent and Cunningham’s opponent, also spent large amounts on a single vendor, the Maryland-based firm Onmessage: more than $5 million in three payments from Oct. 13-26.

What Screen Strategies Media and Onmessage did next with those sums is not publicly known. Nor is it required to be. Current election laws allow political campaigns to funnel their money through consulting firms, thus shrouding the identities of the ultimate recipients — also known as “subvendors” — of the funds.

Now watchdog groups are trying to close the loophole. The Campaign Legal Center, based in Washington, D.C., and Duke University’s Center on Science & Technology Policy filed a petition this Tuesday with the Federal Election Commission, asking it to amend the agency’s rules by including subvendors in disclosure filing requirements.

“We’re more concerned with those cases in which people follow the law — it’s just that the law is not very good,” Scott Babwah Brennan, senior policy associate at the Center on Science & Technology Policy, said, “Even if you follow through what the law requires you to do, it still doesn’t get the sort of transparency that we would like to see.”

The candidate committees of Cunningham and Tillis spent 72% and 63% of their total expenses on Screen Strategies and OnMessage, respectively, with little detailed accounting.

The candidate committees of Cunningham and Tillis spent 72% and 63% of their total expenses on Screen Strategies and OnMessage, respectively, with little detailed accounting, according to OpenSecrets, a news site of the campaign finance watchdog group Center for Responsive Politics.

Screen Strategies and OnMessage did not return Policy Watch’s emails seeking comments on the specifics of these expenditures.

Bob Hall, former executive director of Democracy NC, said he is considering filing a similar rulemaking petition to the North Carolina State Board of Elections to require subvendor disclosures in statewide elections.

“Campaigns are getting more expensive and more of the money is being funneled through consultants,” Hall said. “It becomes even more urgent to get better disclosure, because we’re essentially losing the information about what campaigns are spending their money on.”

The State Board of Elections generally doesn’t require disclosure of subvendors and subcontracts, though it requires an understandable description, the agency wrote to Policy Watch via email.

Hall said campaign disclosures have become more transparent in recent years but some filings still lack details. Hall pointed out that in 2020, State Sen. Joyce Krawiec, a Forsyth County Republican and chairwoman of the Senate Health Committee, reported several expenditures over $100,000 for expenses whose purposes were only given as “wire” and “advertising.”

Community organizations such as Citizens Supporting Raleigh also reported tens of thousands of dollars for “consulting fees.”

Stronger disclosure rules could have significant implications in federal and state races, where secrecy over subvendors can hide dubious transactions. In one recent case, a subvendor, McCrae Dowless, is now under criminal investigation.

In 2018, the campaign of Mark Harris, a Republican running in the 9th congressional district, paid the consulting firm Red Dome Group close to $550,000. Where any of that money went was not disclosed until a Board of Elections investigation found Red Dome paid subvendor and political operative McCrae Dowless more than $130,000. This was based on Dowless’s fee of $4 to $5 for each absentee ballot request form he turned in, plus a monthly fee of $1,625, Policy Watch reported previously.

The state board found that Dowless in turn used Red Dome money to pay individuals $150 per 50 absentee ballot request forms turned in and $125 per 50 absentee ballots collected. Dowless also paid people to falsify witness certifications In Bladen and Robeson counties, where more than 1,000 ballots had been doctored.

In 2018, the campaign of Mark Harris, a Republican running in the 9th congressional district, paid the consulting firm Red Dome Group close to $550,000.

None of the expenses from Red Dome Group to Dowless, nor any of his expenditures to individuals collecting ballots were publicly disclosed. The Harris campaign’s financial disclosures to the FEC  were limited to the Red Dome Group.

Andy Yates, a Red Dome Group consultant, testified at an state board evidentiary hearing that he didn’t track the money he paid Dowless, as Policy Watch previously reported. Yates testified that he never asked for receipts from Dowless or verified the absentee ballot request forms that Dowless had submitted.

Hall, the former executive director of Democracy NC, said if the FEC would have required disclosure from subcontractors, as the recent petition is requesting, the Harris campaign would have been mandated to disclose Red Dome Group’s primary subcontractors, including Dowless.

After its investigation, the state elections board annulled the results of the 2018 race, which had given Harris an advantage over Democrat Dan McCready. The board ordered a second election, in which then-state Senator Dan Bishop defeated McCready; Harris did not run again.

The board referred Dowless’s criminal investigation to the Wake County District Attorney, Raleigh’s News & Observer reported. That probe is ongoing.

In a separate case, Dowless pleaded guilty in federal court last week for receiving $14,000 in Social Security disability benefits while concealing he was working for and getting paid by candidates, including Harris through Red Dome Group, according to the report.

Trump campaign allegedly used shell company to hide fund disbursement, pay family members

The FEC allows campaigns to report lump sums to subcontractors without detailing individual expenses. Yet the commission prohibits campaigns from using these firms as mere conduits for the money.

The FEC has penalized campaigns under those circumstances or when the subcontractors did not have an “arm’s-length” relationship with the campaign committee, the petition states.

However, the current legal loophole makes it “very difficult to identify violations of the reporting requirements,” said Brendan Fischer, the federal reform director at the Campaign Legal Center.

In a complaint to the FEC, the Campaign Legal Center alleged former President Donald Trump’s campaign violated the rule by allegedly routing $769 million through American Made Media Consultants, a shell company that served as a conduit for “laundering the funds” and “concealing the campaign’s transactions.”

Trump’s son-in-law Jared Kushner approved the formation of the company; Trump’s daughter-in-law Lara Trump sat on the board.

The Campaign Legal Center cited reports by Business Insider and The New York Times claiming the company paid Trump’s family members.

“It took a ton of work on our part and a ton of work on the part of multiple reporters to untangle the relationship between … the Trump campaign and American Made, and that’s not, that’s just not possible for many cases,” Fischer said.

The FEC is still investigating the complaint.

Digital loophole a black hole

It’s still unclear where the American Made Media money went. While the FCC requires campaign committees and contractors to disclose spending on radio and TV ads (and the stations themselves must keep documentation), there are no such rules for digital media.

It’s sometimes possible to piece together information from voluntary disclosures by tech conglomerates, including Facebook and Google.

But none of American Made’s ads for the Trump campaign  appeared on Facebook, Google, Reddit, or Snapchat ad archives, according to a report co-authored by Duke’s Scott Babwah Brennen. If the million-dollar media company did not purchase ads on these mainstream platforms, he wonders where and if the money was spent.

“Our recent report estimated that 94% of advertising money in the last month of the 2020 election passed through communication consultancies” Brennan said in a press release, “making this less of a loophole and more of a black hole in the middle of our election oversight system.”

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Yanqi Xu

Yanqi Xu, Courts, Law and Democracy Reporter, came to Policy Watch in December of 2020 from the Investigative Reporting Workshop in D.C., where she combined data and reporting to cover public accountability issues. Yanqi graduated with a master’s degree in journalism from the University of Missouri in 2019. Her multimedia work appeared in PolitiFact and the Columbia Missourian, and was featured on the local NPR and NBC affiliates. Originally from China, Yanqi started her career producing newscasts to tell people what’s going on around the world.