RNC fails to report $7M in debt to FEC

The Republican National Committee failed to report more than $7 million in debt to the Federal Election Commission in recent months - a move that made its bottom line appear healthier than it is heading into the midterm elections and that also raises the prospect of a hefty fine.

In a memo to RNC budget committee members, RNC Treasurer Randy Pullen on Tuesday accused Chairman Michael S. Steele and his chief of staff, Michael Leavitt, of trying to conceal the information from him by ordering staff not to communicate with the treasurer - a charge RNC officials deny.

Mr. Pullen told the members that he had discovered $3.3 million in debt from April and $3.8 million from May, which he said had led him to file erroneous reports with the FEC. He amended the FEC filings Tuesday.

Campaign-finance analysts said that simply misreporting fundraising numbers to the FEC can lead to millions of dollars in fines and that criminal charges can be levied if the actions are suspected to be intentional.

“This is significant because the civil penalties could mean big fines that take a significant bite out of the RNC’s finances close to the November congressional elections, when state parties need the RNC’s financial help for their ’victory’ programs,” said former FEC Commissioner Hans A. von Spakovsky.

RNC Communications Director Doug Heye said that it was “standard practice” for party committees to file amended reports on their financial activities to comply with extensive FEC disclosure requirements.

“We have always followed the guidelines of our legal counsel and treasurer and have put in place additional oversight to ensure that all invoices are handled in a proper, open and transparent manner,” Mr. Heye said in an e-mail statement.

The Washington Times also has learned that former Federal Election Commission Chairman Michael E. Toner has been retained as outside counsel to the RNC, a move Mr. von Spakovsky called unusual and significant.

“The RNC normally uses its own inside counsel to deal with the FEC,” said Mr. von Spakovsky, a Heritage Foundation legal scholar. “But if I had a really serious problem with the FEC, Michael Toner is one of the first guys I would turn to help me out.”

Considered one of the hottest campaign-finance legal talents the GOP has in town, Mr. Toner joins an RNC legal team headed by RNC General Counsel Reince Priebus, who is also the Wisconsin GOP chairman, and augmented by former FEC Chairman Thomas J. Josefiak, also a former RNC chief counsel.

Mr. Heye did not immediately comment on the amount of debt Mr. Pullen discovered for his amended filings.

But Mr. Heye did deny specifically that Mr. Leavitt had barred staff from answering Mr. Pullen’s questions.

“No, the staff has always been free to engage with the treasurer or any other member of the national committee,” he said.

Mr. Heye added that Mr. Steele has been the moving force behind the internal policies review.

“That review has been conducted by Tom Josefiak and Michael Toner, both former FEC commissioners held in high esteem and whose expertise is unquestioned, and their recommendations are being implemented,” Mr. Heye said.

The communications director added that the RNC’s ethics committee had recommended a similar independent review, which is being performed by the accounting firm Clifton Gunderson.

In the memo, Mr. Pullen reiterated his concern that “fundraising has been falling well short of budgeted numbers,” and that he began reviewing the committee’s finances when he noticed increases in cash on hand each month despite the drop-off.

“The explanation for this was the RNC was doing a great job of controlling expenses. This on the surface seemed reasonable; however, I reviewed April and May check registers in May and noted what seemed to be an increasing number of invoices with dates from prior months,” he wrote.

Mr. Pullen said that Mr. Leavitt, acting on orders from Mr. Steele, tried to limit his access to the unreported past-due bills that the RNC owes for goods and services by barring staff members from providing him any information unless approved by the chairman.

According to Mr. Pullen, he complained and Mr. Steele then allowed the information to flow.

Mr. Pullen said Mr. Leavitt also told him that past-due bills were not to be officially included in the RNC’s financial statements and specifically could not be reported as RNC debt until Mr. Leavitt was able to personally assess each bill in order to judge whether it was legitimate and past due.

But at a meeting of top RNC officials, Mr. Josefiak, a campaign-finance lawyer, was shown some of the invoices and told Mr. Leavitt that they needed to be reported immediately if they had not been formally challenged.

One RNC official said Mr. Leavitt had been keeping the invoices locked in his office.

The RNC came under fire for some of its spending in late March when the RNC reimbursed a staffer for almost $2,000 in entertainment expenses involving donors at a West Hollywood sex-themed club. The staffer was fired.

Mr. Pullen said he was then surprised to discover $3.3 million more in unreported debt for the report he had filed in May, along with $3.8 million in unacknowledged debt for the report he had filed on June 20.

The report for June, which was filed Tuesday, shows outstanding debts of more than $2 million.

“One of the purposes of the campaign-finance laws is let donors to political committees know a committee’s indebtedness as a way of judging the party’s leaders,” said Paul S. Ryan, an attorney for the nonpartisan Campaign Legal Center in Washington. “That way, donors can decide whether a change in leadership is needed or that the leadership is doing a good job and so is worthy of contributions.”

A faction of committee members has been critical of Mr. Steele’s fundraising operation.

Before Mr. Steele took over as chairman in January 2009, RNC fundraising typically far exceeded donations to the Democratic National Committee.

Back on May 31, 2006, for example, the RNC had $43.1 million in cash on hand compared with the DNC’s $10.3 million. Part of the RNC’s edge over the DNC stemmed from Republicans holding the presidency, though they were about to lose control of Congress that year.

Mr. Pullen’s amended financial reports to the FEC show that the RNC engaged in deficit spending of $2.2 million in April and $3.7 million in May, spending more on raising money and on operating costs than it gathered in donations.