Scam PACs Line Pockets by Misleading Donors

Some rake in donations for illegitimate political campaigns for figures like Laura Ingraham and Congressman Allen West. Others latch onto specific issues like veterans’ rights or regions like the Virgin Islands.

Some use mail campaigns to convince older, retired donors to send them money. Others use social media and aggressive call campaigns.

They’re hard to track and harder to regulate because “scam PACs” — committees that claim to be raising money for political campaigns but spend little to none of the proceeds on political activity — are what experts call a “know-it-if-you-see-it situation.”

“A scam PAC would be a political committee that raises funds with the purpose of supporting candidates or a particular cause, but then instead of spending the money raised to support candidates or causes, the political operatives running the PAC pay themselves,” Brendan Fischer of Campaign Legal Center said.

The Center for Responsive Politics identified PACs that have spent at least $100,000 so far in the 2018 cycle, at least half of which went to “fundraising” as identified by CRP. (We assign expenditures to categories based on information disclosed in FEC filings, as described here).

Spending on fundraising is not necessarily shady; some groups put most of their money into fundraising early in the cycle, then make contributions or independent expenditures later in the cycle. However, our research identified a number of groups that have a pattern of wasting their donors’ money.

These PACs will often spend large chunks of their money on fundraising campaigns, allocating the rest to salaries, administrative costs and overhead. In order to pocket the money they generate, those PACs will often pay inflated service fees to firms they’re affiliated with.

Take Sheriff David Clarke for US Senate. The draft committee used inflammatory fundraising emails that raised $2 million to entice the former Milwaukee sheriff to run for a Wisconsin Senate seat against Democratic incumbent Tammy Baldwin.

The only problem? Clarke never expressed interest in challenging Baldwin and dismissed the committee as a “scam.” The PAC was started by Jack Daly, a lawyer who lives more than 1,000 miles away in North Carolina, and whose PAC spent $55,000 on bobbleheads last year. Daly has since changed the name to Bold Conservatives PAC.

These PACs are inherently hard to root out because their spending and campaign practices often don’t adhere to any set formula. Their spending has caught the attention of the Federal Election Commission (FEC), but commissioners, known for infighting and icy political rivalries, have done little to address it.

In 2016, commissioners’ attempts to reign in scam PACs were foiled by an appellate court decision and what former Democratic commissioner Ann Ravel described as “little willingness on the part of the commission” to impose any regulations.

“At its heart, it’s something the FEC should do because the FEC is entrusted with the integrity of the electoral process, in particular campaign contributions and expenditures,” Ravel said. “This is a really non-political issue — or should be. It has no party attached to it. It’s just plain fraud.”

A number of the PACs are easy to spot and appear to do little to mask the networks of spending they’ve built. Perhaps one of the most prominent cluster of scam PACs center around one figure: Scott B. Mackenzie.

Mackenzie has served as the treasurer of 49 political groups since 1996 and in the 2016 election cycle was treasurer for 22.

PACs With Scott Mackenzie as Treasurer, 2018 Cycle

Committee Name	Raised	Spent	Money to Candidates
Tea Party Majority Fund	$1,053,224	$984,324	$0
Virgin Islands GOP	$935,758	$984,451	$0
Conservative Majority Fund	$723,259	$761,336	$0
Conservative Strikeforce	$258,376	$268,693	$0
Tea Party Victory Fund	$4,000	$4,000	$0
Founded On Truth	$238	$238	$0
Black Republican PAC	$30	$154	$0
Careless PAC	$28	$1,730	$0
Save New York PAC	$0	$0	$0
Man In The Arena	$0	$0	$0
Hispanics For A Conservative America	$0	$0	$0
Stand America PAC	$0	$0	$0
Veterans Victory Fund	$0	$0	$0

Those political groups — including Virgin Islands GOP, Conservative Strikeforce, Tea Party Majority Fund and Conservative Majority Fund — pull in money from donors through aggressive mail campaigns with apocalyptic messaging and spend just a fraction of that money on candidates or legitimate political campaigning.

Tracking what firms are getting paid by the PACs, said Brendan Fischer with Campaign Legal Center, “can give you a sense of how the money being raised and spent is potentially benefiting the individuals running the operations.”

“It can be hard to tell on the face of an FEC report that a lot of money is going to a lot of consultants running the scam PAC,” Fischer said. “You have to look a little more closely.”

Despite running into trouble with the FBI in May 2017, Mackenzie’s committees continue to rake in money from small donors and spend it on vague “administrative” and “fundraising” costs.

This cycle, eight of Mackenzie’s PACs have spent more than $3 million combined, but only a fraction of that money has benefited political candidates. (Some of these PACs have made political contributions in previous cycles, however).

Mackenzie is not the only one to build a network of questionable PACs.

Eldon L. Alexander, Mary Parker Lewis and Maureen E. Otis — former staffers of the conservative presidential candidate Alan Keyes — assembled a group of political committees that have, like Mackenzie’s network, raised and pumped money into each other’s companies.

Alexander, a treasurer of six PACs since 2010, and his former colleagues have PACs and businesses that share addresses ranging from a PO Box in Herndon, Virginia, to a business in Stafford, Texas.

The businesses include Alexander Endeavors, Politechs Inc., American Caging Inc., Richard Norman Company, Constantine Financial Services, the Law Offices of Maureen E. Otis, and more.

Some of these companies also see money coming in from other questionable PACs.

Lewis’s company Politechs Inc. received $29,000 from Bold Conservatives PAC, the PAC formerly known as Sheriff David Clarke for US Senate.

Another, Richard Norman Co., associated with Otis, was paid $10,500 in the 2016 cycle and $25,122 in the 2014 cycle by Conservative Strikeforce, one of Mackenzie’s PACs.

Riding Coattails

Other PACs latch on to specific issues.

Retired Army Maj. Brian A. Hampton, treasurer of Put Vets First! PAC, has used veteran’s issues to draw in money from donors.

An investigation by the Center for Public Integrity revealed that before the PAC, Hampton used telemarketer campaigns to multiply funds for his charities, Circle of Friends for American Veterans and the Center for American Homeless Veterans. He pocketed most of the funds and left scraps for veterans, CPI reported.

His PAC this cycle has followed a similar trend. So far, he’s raised and spent $3 million, and only $3,000 has gone toward federal candidates. He’s directly pocketed $110,808 of that money by paying himself with PAC funds.

Another treasurer meanwhile has made similar moves as Daly.

In February 2017, Fox News talk show host Laura Ingraham decried PACs for asking her supporters to donate to a fictitious Virginia Senate run.

Ignore any and all fundraising appeals claiming to represent me or a potential Virginia senate run. They are SCAMS and fraudulent.

— Laura Ingraham (@IngrahamAngle) February 10, 2017

One group, Conservative Freedom Fighters, has raised $55,483 and spent $35,946 since the beginning of the 2016 cycle. Little more than $2,500 of that has gone to federal candidates. Roughly the same amount went to PAC treasurer Alexander Hornaday’s law firm.

Hornaday has used PAC solicitations to ride the financial coattails of big political names.

For instance, in 2012, former Florida Representative Allen West’s campaign alleged that a number of PACs used his name to solicit donations for their own profiting.

West’s campaign manager, Tim Edson, filed a complaint to the FEC about one PAC in particular, Republican Majority Campaign, asking them to shut down the “fraudulent and unauthorized use of Congressman West’s name.”

“The Republican Majority Campaign is a scam,” Edson wrote. “With respect to the solicitations at issue in this complaint, RMC seeks to profit from the name and reputation of Allen West.”

The FEC dismissed the complaint and, like other attempts to address the rise of scam PACs, the idea of actual enforcement fizzled out.

Former commissioner Ravel recalled the complaint and said that the FEC was told they “could do nothing about that.” She didn’t clarify if she was told that by commissioners or someone else.

“We were told at the time this is something for local law enforcement,” she said, “but I believe that the actual power does reside in the FEC and that they could take stronger action. At least there should be congressional interest in this to specify that the FEC has that ability.”

The Gray Area

But regulations are tough. It’s unclear even to commissioners what regulatory power the FEC holds and while many organizations can be clearly labeled as frauds, others do spend small amounts of money on political campaigns and legitimate political activity.

“The most obvious scam PACs are the ones putting tons of money into fundraising, not doing anything that appears tangible to advance a cause or support candidate,” Fischer said. “But then there could be some activities where there might be an argument that this is actually legitimate.”

Take the New Democratic Coalition, for instance, a PAC run by treasurer Helen Milby.

Spending by New Democratic Coalition, 2016 Cycle

Expenses	Total Spent
Contributions to federal candidates	$1,373,856
Fundraising consulting	$556,318
Fundraising events	$430,748
Contributions to committees	$425,500
Administrative travel & lodging	$91,691
Unclassifiable event expenses	$41,514
Contributions to national parties	$30,000
Accountants, compliance & legal services	$29,264
Contributions to joint fundraising committees	$18,250
Fundraising fees	$7,389
Administrative event expenses & food	$4,771
Rent, utilities & office expenses	$3,984
Administrative data & technology	$3,634
Unclassifiable printing & shipping	$3,427
Miscellaneous administrative	$1,081
Unclassifiable	$583
Miscellaneous fundraising	$483
Unclassifiable supplies & equipment	$434

This cycle, it has donated $367,000 to political candidates, but it also paid out $272,351 to Milby’s own company, Helen Milby and Co. Over the past 10 years, the PAC has donated nearly $3.9 million to political candidates but has paid $2.2 million directly to her own company.

Or take 21st Century Democrats: up through the 2008 cycle, the PAC would contribute thousands, sometimes hundreds of thousands, of dollars to federal candidates. But in 2010, those donations dropped off and since then, the PAC hasn’t given a cent to a political candidate.

It continues to raise and spend millions every year. In cycles since then, FEC records show most of their money went to things like “fundraising,” “salaries” and “administrative” costs.

Regulations

But that doesn’t mean the benefactors of these committees skate by scot-free.

In 2013, Conservative Strikeforce — the same Mackenzie PAC that drew criticism by West’s campaign — was required to give former Virginia Attorney General Ken Cuccinelli $85,000 in the settlement of a lawsuit. Cuccinelli’s campaign said the PAC used his name to solicit donations, but only donated a small portion of the money it raised.

The FEC has commented on scam PACs in the past and while commissioners have attempted to take action, very few steps have been taken.

A 2016 appellate court decision allowed PACs to use a candidate’s name on First Amendment grounds and limited the extent to which the FEC can regulate unaffiliated PACs using candidates’ names.

In response to the case, Ravel and current FEC Democratic Vice Chair Ellen Weintraub released a joint memorandum noting that the commission was “not altogether powerless” and can still require disclaimers noting such PACs are unaffiliated with the candidates they purport to be backing.

“Donors, especially small donors, give to political committees to express their political views; most people giving to a political committee do not aim to enrich the creators of the PAC,” they wrote.

At the next FEC meeting, commissioners unanimously agreed to Weintraub’s proposal that the commission form a working group to mitigate the negative effects of such PACs.

But just months out from the 2018 midterm elections, leaders of the FEC have not confirmed whether any steps have been taken on that front.

“Authorized political committees, for their part, are outraged that Scam PACs are using their candidates’ or organizations’ names to siphon off funds intended to aid their efforts,” the 2016 memorandum read.

Weintraub agreed to an interview about scam PACs but did not respond to multiple follow-up calls and emails. So did Republican FEC Chair Caroline Hunter, whose office said she would be interested in talking about the topic but did not respond to subsequent emails and calls.

OpenSecrets reached out to PAC treasurers Scott Mackenzie, Eldon Alexander, Maureen Otis and Mary Parker Lewis but received no response.