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How Political In-Action Committees Spend Your Money

October 26th 2010

Economy - Money Money Money

Jay Peters is a psychology instructor at a Durham, North Carolina, community college who has donated tens of thousands of dollars to conservative, Republican, and Libertarian causes over the past two decades. One repeated recipient of his generosity has been a political action committee (or PAC) founded and chaired by former presidential candidate Alan Keyes: Black America’s PAC (BAMPAC, for short). Peters made three contributions to the Washington-based group, expecting that his donations would be used to help elect conservatives to federal office.

BAMPAC had other ideas. Out of more than $2 million spent since the beginning of 2007, just $13,500 of money controlled by BAMPAC has gone to federal candidate contributions, with another $9,325 for state and local candidate donations. Combined, that amounts to a mere 1.14 percent of overall spending. Over the same period, the PAC’s president received almost $200,000 in salary payments—about 10 percent of the group’s spending. And almost all of the rest went to fundraising expenses and other overhead.

Peters won’t be donating to BAMPAC again, and says he is cutting back on PAC contributions in general because of “abuses” like these. Peters laments that few entities monitor how PACs spend their donors’ money. While he and his wife rely on groups like Charity Navigator to help them donate to charitable organizations that spend efficiently, there is no similar standard for political committees.

In fact, there are few rules and no accepted norms for PAC spending, and an analysis of more than 5,200 PACs shows a wildly disparate—and in some cases troubling—range of spending and budgeting policies among them. As Paul S. Ryan, program director and legal counsel at the nonpartisan Campaign Legal Center, noted, donating to PACs is a “contributor beware” proposition.

A Watergate-Era Legacy

With the 2010 elections fast approaching and organizations scrambling to influence the outcome, one of the most important groups of players are the PACs. The first PAC was formed in the 1940s by the Congress of Industrial Organizations (now part of the AFL-CIO) to help re-elect President Franklin Roosevelt. The campaign finance laws of the 1970s established a legislative framework for PACs, and ever since, interest groups have formed these committees, allowing donors to pool their contributions to advocate for candidates who share their viewpoints.

PACs are tax-exempt under Section 527 of the U.S. tax code, though contributions to them are not tax-deductible. Campaign law places virtually no restrictions on how PACs spend money, but their tax-exempt status with the IRS requires that their function be “influencing or attempting to influence the selection, nomination, election, or appointment of any individual” to public office.

The number of registered PACs has grown from 608 in 1974 to more than 4,600 at the start of 2009, according to FEC records. In 2007 and 2008, PACs combined to distribute more than $412 million to federal candidates.

An examination of FEC data through June 2010 reveals some interesting facts. Of the 4,200-plus PACs which reported spending money in the 2008 and 2010 campaign cycles, more than 3,700 of them made at least one contribution to a political candidate. More than 2,600—a majority—spent most of their funds over that time on candidate contributions. And in excess of 1,600 of those devoted at least 90 percent to such donations.

While many political committees use their funds to donate to federal candidates, to support other PACs and party committees, and on independent expenditures intended to influence federal elections, others spend their money on less-obviously political purposes.

The IRS can, theoretically, revoke a group’s tax-exempt status, but rarely does so in regard to political action committees. The FEC is responsible for ensuring that PACs abide by campaign fundraising rules and fully disclose their activities but has no oversight of how those PACs spend their money.

Although there are many legitimate things that these PACs can do with their money other than funding candidates—their popularly understood role—a handful are using their money for surprising purposes, often at odds with their fundraising promises to potential donors.

Scott Thomas, a former Federal Election Commission chairman, warns that some people use PACs for the benefit of themselves and others. “If you set up a political action committee and cajole people into giving money, you pretty much have carte blanche to find ways to get some of that money into your pockets or the pockets of associates.” And, he adds, “There are as many creative ways to go about this as there are creative people.”

Mary Boyle, vice president for communications for the pro-campaign finance reform group Common Cause, adds that the spending habits of many PACs are legal, but “pushing the envelope.” And she notes the old Washington adage, “the scandal isn’t what’s illegal; it’s what’s legal.”

Among the examples that illustrate their points are the following:

Black America’s PAC

Black America’s PAC was created in 1994 by former United Nations Economic and Social Council ambassador and frequent presidential and senatorial candidate Alan Keyes. BAMPAC now claims to be “among the top 25 PACs in the country.” While the PAC activities from January 2007 through June 2010 do rank it among the top 200 highest spending PACs, its political giving ranks among the bottom echelon of comparable committees.

BAMPAC has spent almost $1.4 million since January 2007 on direct mail and lettershop expenses. This went to cover fundraising solicitations and other communications to previous and prospective donors. BAMPAC President and CEO Alvin Williams is also “principal” of NADIK Consulting, LLC, a business development and government relations firm. A former Republican National Committee and George H. W. Bush transition staffer, Williams has taken more than $460,000 in salary from the PAC since January 2003—far more than the PAC’s total federal contributions to candidates in that period.

In an e-mail, Williams explained that BAMPAC’s low contributions and high overhead were a result of “the current historic recession” and said his group has been “struggling to stay afloat” since 2007. Indeed, the most recent events listed on BAMPAC’s website lists are a September 2005 dinner and a 2002 candidate meet-and-greet reception.

“Although we continue to raise resources primarily through direct mail, the overwhelming majority of the dollars raised are plowed back into the direct mail operations,” Williams admitted. But, he argued, “When we send out direct mail solicitations, we are communicating much more than asking the donor to contribute.” The mailings also include updates on current issues and polling of donors, he said.

Williams also said that since October 2009, he has “discontinued taking a salary from BAMPAC” until the PAC can “properly rebound.” But the PAC’s own filings indicate that he has continued to receive a reduced monthly salary. When asked to explain this apparent contradiction, he said that the filings must be in error and that any payments he received this year were a “stipend” rather than a regular salary. However, no amended filings have yet been submitted to the FEC.

Committee for a Democratic Future

Democrat Rosa DeLauro, 67, has represented a New Haven, Connecticut-area congressional district since 1991, and when in Washington, D.C., she and her husband, pollster Stanley Greenberg, share a Capitol Hill row house. Located just a few blocks from the House chambers, it is ideally suited for entertaining her Democratic colleagues—something she and her leadership PAC do several times a month.

Less than a mile away sits Schneider’s of Capitol Hill, a liquor shop boasting eight full-time wine consultants and a variety of spirits originating in locales from Anguilla to Wales.

Using money from her Committee for a Democratic Future leadership PAC, DeLauro spent about $200,000 on catering and wine from 2007 to 2010, almost exclusively at Schneider’s and Federal City Caterers, which lies two miles up Massachusetts Ave.

Formed in November 2001, the Congresswoman’s leadership PAC aimed to “assist marginal House incumbents” and “support promising House challengers to help elect a Democratic majority,” her then-chief of staff told the Hartford Courant in 2005. And some of the PAC’s spending has gone to that effort—though less than ten percent of disbursements ($27,500 out of $302,736), since the start of 2007. Another $900 went to pay an FEC administrative fine for failure to file a required disclosure report.

But about two-thirds of the PAC’s spending in that time has gone to pay for food and drink for what DeLauro spokeswoman Kaelan Richards termed informal “policy dinners” for the Congresswoman, academics, policy experts, and all interested members of the House Democratic Caucus. Solicited donors are not specifically told of these dinners, Richards acknowledged, adding that DeLauro “believes these forums enable members to be more informed policy makers—and ultimately, better at their jobs.”

One donor offered a full-throated defense of the PAC’s funding of these dinners. Former Congressman Toby Moffett, now a Democratic consultant and one of several party insiders who have written checks for the PAC, has contributed at least $1,000 to the Committee for a Democratic Future over the years. He says the policy dinners are “one of the best things that happens in Washington,” and described them as “a little bastion of enlightenment and intellectual discourse.”

“If I’m gonna give money, I’d rather have it go to this than to some inane TV commercial,” Moffett said.

More Conservatives PAC

While DeLauro uses her committee to fund dinners for politicians, her Republican colleague Patrick McHenry found an even odder use for his leadership PAC: donations to help pay a former aide’s legal bills.

Patrick McHenry, 34, was elected to Congress in the western North Carolina 10th District in 2004. Two years later, he formed More Conservatives PAC (or McPAC), asking those “concerned about the direction of our country” to open their checkbooks in order to “elect More Conservatives to Congress.”

Though donors anted up, the PAC did little to elect more conservatives. Out of more than $250,000 in disbursements from January 2007 to the PAC’s February 2009 termination, just $58,000 (under 23 percent) went to candidate contributions. The PAC’s efforts did little to increase the number of conservatives in public office as it made just one contribution to a political candidate not already in Congress. And among those incumbents receiving the PAC’s support, several were among the most centrist Republicans in the House, according to National Journal’s rankings.

Much of the remainder of the PAC’s funds went to management and consulting fees, including more than $16,000 to the public affairs firm headed by the PAC’s treasurer, Pamela Sederholm.

Another $20,000 was donated to the legal defense of a former campaign staffer accused of voting while not a resident of the district. In his 2008 re-election primary, McHenry’s challenger decried the payment as “subsidizing voter fraud.” Jeff Patch, communications director for the non-profit Center for Competitive Politics, a group that generally opposes campaign finance restrictions, observed that McHenry’s expenditure “seems outside the scope of what a leadership PAC should be spending money on.”

At the start of the current Congress, McHenry terminated McPAC and assumed the chairmanship of House Conservatives Fund (HCF). Though HCF’s website claims its sole aim is “electing true conservatives,” since McHenry took the reins, it has retained Sederholm ($12,884 so far this cycle) and spent less than 12 percent of its $1.1 million-plus spending for candidate contributions. Neither McHenry nor Sederholm responded to a request for comment.

Ohio’s Future PAC

After a dozen years in the U.S. House, a year as President George W. Bush’s U.S. trade representative, and a stint as head of Bush’s Office of Management and Budget, Republican Rob Portman, 54, is currently his party’s nominee for an open Ohio U.S. Senate seat. In addition to his campaign account, he can rely on Ohio’s Future PAC, his own leadership committee, to cover many of his costs.

The PAC’s website says its mission is “to develop creative solutions to Ohio’s economic challenges and support public policies that help make our state more competitive.” It enlists potential backers with a sales pitch that their donations “are helping recruit and support leaders who are focused on creating a better business environment in Ohio to expand jobs and opportunities.”

It has boosted at least one sector: private aviation. Out of about $364,000 in spending, Ohio’s Future PAC has used more than $28,000 on travel costs since the start of 2007, including more than $15,000 on private airplane rentals, fueling, piloting, and landing fees. These payments went to companies including Anchor Equipment Leasing LLC of Covington, Ky., and One Charlie Victor LLC and Aviation Specialists of Cincinnati. The aviation companies declined to disclose the itineraries or passengers manifests for these flights, information not apparent from the PAC’s FEC filings.

As Portman blasted Washington on his campaign website for record spending while “Ohio families are living under tight budgets, fighting to make ends meet,” his PAC used thousands of dollars on overhead, $2,434 to host a kickoff “welcome event” at a private Cincinnati club, and $455 for “PAC apparel.”

The PAC did, however, contribute about $140,000 to federal and non-federal campaign committees, about 39 percent of its disbursements.

Portman’s office did not respond to requests for comment. He did tell the Columbus Dispatch in 2008 that the PAC “helps me to keep my options open” for future campaigns, but that his sole focus that year was helping to elect McCain and other Republicans.

Americans Against Illegal Immigration PAC

In May 2005, Senators John McCain (R-Ariz.) and Edward Kennedy (D-Mass.) joined forces to introduce an immigration reform plan that included a path to citizenship for those in the U.S. illegally. Two months later, a group of activists opposed to that prospect registered a political action committee called Americans Against Illegal Immigration PAC (AAII).

Over the PAC’s four and a half years in operation, it raised and spent more than $1.7 million. Of that, $1.2 million went to outside vendors hired for fundraising. Just $2,792 went to independent expenditures, supporting two unsuccessful Republican House candidates. The group’s other television, web, and print ads totaled less than $20,000.

AAII PAC was in constant trouble with the FEC, paying fines of $10,000, $5,950, and $1,125 for failure to completely disclose its financial records in a timely manner. One fine payment from the PAC read “Penalty payment UNDER PROTEST” in the check’s “for” line.

Former Ronald Reagan campaign staffer Allen Brandstater headed AAII PAC. He says “direct mail, particularly for a new organization, is extremely expensive. If we had alternatives which were more financially efficient, we would have used them.” He adds that many expenses listed as fundraising were “enfolded in political activity and education.”

The PAC closed in January of this year, following dwindling donations and what Brandstater described as the “erasure of illegal immigration as a national issue.” He characterized the group’s efforts as a “measured success” and referred questions about efficacy to the group’s donors. However, many of the listed contributors appeared to have been elderly, and several are now dead. Others were unable to recall their support of the organization.

Three months after the PAC’s termination, its former treasurer Scott B. Mackenzie, a professional FEC compliance consultant for conservative causes, registered a new political action committee with the the FEC: Americans Against Illegal Immigration II PAC. When reached by telephone, Mackenzie said he was “not the guy to talk to” and hung up. That PAC has not reported raising or spending any money.

Lyndon LaRouche PAC

Lyndon LaRouche, 88, holds the rare distinction of being an eight-time unsuccessful presidential candidate. The Lyndon LaRouche PAC seeks to advance his political agenda, advocating for expanded nuclear power, colonization of Mars, and the impeachment of President Barack Obama. The committee has spent a stunning $13 million since the start of 2007, but just $3,855 (0.03%) of it went to political donations. Almost six million dollars went to LaRouche Youth LLC, a for-profit led by people affiliated with the PAC, for grassroots lobbying and advocacy. No expenditure details are disclosed. Nearly $500,000 of the PAC’s spending went to “petty cash,” also un-itemized. The PAC also paid $7,000 in fines in 2006 to the FEC for failure to file required disclosure reports.

Treasurer Barbara Boyd said that the PAC pays LaRouche Youth LLC to create web content and do field organizing, public advocacy, and canvassing for the PAC. She categorized the large petty cash expenditures as “under the FEC guidelines for such, to reimburse expenses incurred in direct political organizing activities throughout the country,” and said it goes mainly for automobile gas and maintenance, parking, and tolls.

Still, while it may be within FEC guidelines, the PAC’s methods essentially let it avoid disclosure of much of its spending.

It’s an issue, says Meredith McGehee, policy director at the Campaign Legal Center. “Any of these actions that lessen transparency and don’t give the public and the press an opportunity to see what’s really going on is concerning.”

Democratic Advancement PAC

In 2000, Tom Cramer, who describes himself as having been “an educator and an administrator, a rehabilitation director, and a small business owner for 15 years,” started Democratic Advancement PAC (DAPAC). The Bellevue, Washington-based group boasts of a “proven track record of electing Progressive Democrats” and says it works to recruit, train, guide, and help fund progressive candidates for the House and Senate. But not a penny of its more than $538,000 spent since 2007 went directly to electing candidates, progressive or otherwise.

David Spring, a PAC spokesman, said that the PAC’s aid to its endorsed candidates is not through contributions, but rather by providing “advice and logistical support.”

At the same time, nearly 40 percent of DAPAC’s spending since the start of 2007 went to Cramer and members of his family. Spring said the PAC was “hit hard by the Great Recession with a substantial fall off in donations” and that, “to save the organization, many of the tasks of running DAPAC were taken over by family members who were willing to work for minimum wage or less.”

One donor, philanthropist Madge Goldman of Bryn Mawr, Pa., says she has supported Cramer’s efforts for several years because she can trust him. She finds the PAC transparent in noting that its contributions will go to candidate training rather than direct contributions and supports the PAC because “that’s what [Cramer] can do best.”

But others were less enthusiastic. Eric Davidson, a California Institute of Technology professor of cell biology who gave more than $1,100, said he stopped donating to DAPAC in 2008 because he “did not receive sufficient information from them on what they were doing.” Chicago author Peter Ascoli, another $1,000 donor, said he supported DAPAC because of its politics, but always had the “distinct impression” that the money was going directly to candidates. “The fact that almost half the funds raised went to support the Cramer family [is] very disturbing,” he said, adding that in light of this information he “would definitely be little inclined to make another contribution to DAPAC.”

Cramer also unsuccessfully sought the Democratic nomination for Washington’s 8th congressional district earlier this year. His campaign committee spent a total of $83,276: $70,322 of that went to salary for his wife Barbara, over about a year and a half.

Fannie Lou Hamer PAC

Many political action committees endorse candidates and then give those candidates contributions. The Detroit-based Fannie Lou Hamer Federal PAC, named for a legendary civil rights activist, does the opposite. FLHPAC, which also operates a non-federal PAC for state and local efforts, asks Detroit-area candidates for a $2,500 “endorsement confirmation,” which it spends on flyers, ads, and leafleting. Zero dollars go from the PAC to endorsed candidates and much of the remainder goes to administrative overhead. Some federal funds go to the state PAC, which gave over $5,000 to the church of FLHPAC founder Rev. Wendell Anthony.

One surprising contributor: veteran New York Democratic Congressman Charles Rangel, who gave $1,000 from his campaign committee and $2,000 from his leadership PAC back in 2004. A spokesman for Rangel did not respond to a request for an explanation.

Some have criticized the pay-for-endorsement system—popular in Detroit, though other groups do not appear to operate federal PACs—and the lack of disclaimer on the endorsement lists noting that candidates have paid a fee for their distribution. The practice is widespread enough that two Michigan state legislators introduced legislation in 2009 to prohibit groups from accepting money for endorsements. The bill has been stuck in committee since, and a spokeswoman for one of the senators said that she doesn’t expect it to move before the session expires in December. Although the legislation could be reintroduced in January, both sponsors are departing from the state Senate due to term limits.

Fannie Lou Hamer PAC did not respond to multiple requests for comments, but PAC field director Yvette McElroy told The Detroit News in 2009 “We are very good at what we do.” The PAC boasts of an 85 percent success rate for endorsed candidates.

The PAC has been cited repeatedly for failure to file disclosure reports on time and paid two $500 fines to the FEC for failure to properly disclosure activities.

McGehee of the Campaign Legal Center finds the lack of disclosure on the paid-endorsement lists “particularly troublesome.” “It’s not one of the list of good-government practices to copy,” she said.

And the PAC apparently ignored the one federal law that might have alerted voters to the arrangement. While federal campaign finance rules require that “public communications” expressly advocating for candidates note whether that candidate authorized and/or paid for the messaging, a review of Fannie Lou Hamer PAC’s most recent slate advertising reveals that it did not do so. Its list of recommended candidates for the August 3 primary, including federal incumbent Reps. Carolyn Cheeks Kilpatrick and John Conyers, ran as an ad in the July 28-August 3 edition of the Michigan Chronicle.

The ad did not, as required, identify whether those candidates authorized the flyer. The Campaign Legal Center’s Paul Ryan said that this appears to be a violation of federal election law: “If a candidate arranges and pays to have his or her name [on the advertised slate], in my view that should be considered authorization.” Either way, he added, the ad should have said it was or was not authorized by those federal candidates.

Donor Beware

Campaign finance reform advocates like McGehee of the Campaign Legal Center see the potential to use PAC money for purposes other than as advertised to donors as “one of the sicknesses of the current campaign finance system.” When donors contribute to a PAC, she says, they “lose all control of what happens to it.”

This is a sentiment shared by even their traditional rivals, groups like the Center for Competitive Politics, which generally oppose campaign finance restrictions. Jeff Patch agrees with the “donor beware” sentiment. “It’s the responsibility of donors,” he said, “to conduct due diligence on these matters before sending a check—even more so with sophisticated leadership PACs than other committees.”

After all, as former FEC Chairman Thomas noted, “It’s a pretty wild, wild world out there.”

Josh Israel and Aaron Mehta are staff writers at the Center for Public Integrity. Gabriel Debenedetti is an intern. Reporting Fellow Laurel Adams contributed to this report. 


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