Bannon Indictment Shines Light on Commonly Abused Campaign Finance Loophole

Federal prosecutors charged former White House strategist Steve Bannon and three others with fraud Thursday for allegedly siphoning money from an online fundraising effort meant to build a wall on the southern border for President Donald Trump.

The indictment alleges Bannon, Brian Kolfage, Andrew Badolato and Timothy Shea routed crowdfunded money for the “We Build The Wall” campaign to their personal accounts using a number of nonprofits and shell companies.

The group raised $25 million on GoFundMe, but never disclosed how it was spending its money. Kolfage later launched an identically named 501(c)(4) tax-exempt nonprofit called “We Build the Wall” with a similar stated aim to fund a southern border wall and an ambitious $5 billion goal.

Kolfage wrote on the GoFundMe page that money would be redirected to the nonprofit and said its administrators would “not take a penny in salary or compensation.” However, prosecutors say Kolfage pocketed over $350,000 through a network of opaque shell companies and nonprofits meant to keep the payments confidential.

Prosecutors claim Bannon steered $1 million from WeBuildTheWall to an unnamed nonprofit he controls. That money was then used to pay Bannon’s personal expenses, prosecutors said.

According to investigations from Buzzfeed News and NBC News, Kolfage has used GoFundMe to scam donors in the past, allegedly taking money meant to go to a veteran mentorship program for himself.

Several well known Republicans with ties to Trump serve on the group’s advisory board, according to its website. They include Blackwater founder Erik Prince, an informal advisor to Trump’s campaign and the brother of Education Secretary Betsy DeVos; former Milwaukee County Sheriff David Clarke; and former Kansas Secretary of State Kris Kobach. Kobach reportedly used the We Build The Wall email list to raise money for his Senate campaign. He lost his Republican primary bid in July, despite national Democrats’ apparent efforts to elevate his campaign using “pop-up” super PACs.

Because We Build The Wall is organized as a 501(c)(4) nonprofit rather than a political committee, it is not legally required to disclose its donors or file regular campaign finance reports to the FEC. Under IRS rules governing such nonprofits, We Build the Wall would not be required to divulge details of its spending until after the 2020 presidential election due to its December 2018 incorporation date.

Even then, the group would only be required to disclose limited details of transactions with closely-tied entities or operatives and payments to its top contractors. Routing spending through shell companies and other nonprofits would further obscure what little financial information the group is required to disclose.

Incorporation records list WeBuildTheWall’s agent as Cogency Global, a firm that received payments from conservative political groups reported in FEC filings. The firm has a history of ties to other ‘dark money’ operations ranging from the limited-liability company behind a mystery $1 million donation to Trump’s inauguration. Cogency Global was recently listed as the agent on record for Kanye West’s presidential campaign and a dark money group launched by allies of Sen. Tom Cotton (R-Ark.).

WeBuildTheWall spent nearly $1 million on digital ads with around $600,000 targeted through Google ads while the rest was spread across the group’s Facebook page and a page affiliated with Kolfage. The “Brian Kolfage” Facebook page is listed as a nonprofit organization and primarily redirects users to WeBuildTheWall’s website. But its ads all include a disclaimer they are paid for by “Brian Kolfage Fans” or “Supporters Of Brian Kolfage For America.”

Online political advertising is another area of federal campaign finance disclosure brimming with loopholes leaving it largely unregulated by the FEC but technology companies and watchdogs have filled some of those gaps.

The nonprofit Bannon used to funnel $1 million is not named in the indictment but notes it is controlled by Bannon and has a stated mission of “promoting economic nationalism and american sovereignty.” A nonprofit Bannon founded in 2017 to “advance the ideals of Economic Nationalism and American Sovereignty,” Citizens of the American Republic, is listed in the indictment among entities federal prosecutors are forcing to forfeit funds.

Citizens of the American Republic reported taking in less than $200,000 to the IRS during its initial fiscal year but its most recent tax return obtained by OpenSecrets shows the group brought in more than $4.4 million in 2018. Since then, Citizens of the American Republic’s Facebook page has spent nearly $20,000 on digital ads, including ads promoting We Build The Wall and its event featuring Donald Trump, Jr., while $600 in Google ads were removed from the platform for violating its advertising policies.

Unlike We Build The Wall’s crowdfunding effort and nonprofit operation, political campaigns and groups registered with the FEC are required to promptly disclose their spending. Trump’s reelection effort, however, uses shell companies to conceal where exactly its money is going.

Last month, the Campaign Legal Center filed a complaint with the Federal Election Commission alleging the Trump campaign concealed $170 million in spending by routing the money through two firms that then funneled the money to undisclosed vendors. The complaint alleged the pass-through companies hid payments to Trump’s family members, among others. The group’s president and former Republican FEC commissioner Trevor Potter said the tactic “flies in the face of transparency requirements mandated by federal law, and it leaves voters and donors in the dark about where the campaign’s funds are actually going.”

The Trump campaign funneled massive sums of money to firms owned by former campaign manager Brad Parscale, who Trump demoted last month. Trump reportedly questioned whether Parscale was “getting rich” off of the campaign after watching an ad from the anti-Trump Lincoln Project super PAC. The Lincoln Project also pays sub-vendors through layers of shell companies that hide the specifics of its spending, leaving a number of undisclosed vendors who have done work for the super PAC.

The Campaign Legal Center filed another complaint against Democratic congressional candidate Antone Melton-Meaux for deploying similar tactics in his House race challenging Rep. Ilhan Omar (D-Minn.) by using shell companies to disguise the ultimate recipients of campaign money in order to pay a firm on the Democratic Party’s “blacklist.”

Political groups and campaigns leveraging this loophole can hide details about who may be profiting from their operations, which leaves information on how money flows kept behind closed doors.

Federal campaign finance law imposes few restrictions on groups disclosing payments to an opaque firm or shell company that steers money to the vendors actually doing the work. That tactic leaves the American public in the dark about how much operatives may be profiting from a group’s fundraising.

The FEC, the agency dedicated to enforcing campaign finance laws, currently does not have enough members to hold meetings or take action on complaints. Trump nominated a fourth member to restore the commission’s quorum but the confirmation has not been taken up by the Senate.