Months after the Federal Election Commission notified several GOP state parties of major gaps in their 2020 fundraising and spending reports, the committees are correcting their numbers—but they still can’t explain why the discrepancies occurred.
The issue has raised new questions about possible abuse of a longstanding campaign finance loophole that allows wealthy megadonors to cut massive checks. Last year a number of Republican state parties failed to disclose transfers in the hundreds of thousands, sometimes millions, of dollars, which violates reporting requirements.
“There are layers of problems here, but the basic question is whether the state parties complied with federal disclosure requirements,” Paul Ryan, vice president of policy and litigation at election reform advocacy group Common Cause, told The Daily Beast.
It appears systemic. The FEC has so far sent notices to 10 of those 46 state parties that failed to report high-dollar same-day transfers from joint fundraising committees and to the RNC. So far, all but one have responded.
But their explanations have been incomplete or nonexistent. For example, the Rhode Island Republican Party seemed only to acknowledge the error occurred but did not address how or why. “The $251,771.78 for the Post General report was missed on the original 30 Day Post General report that was filed so an amended report was filed to include that.” The party later filed another amendment disclosing more than $455,500 in transfers from Trump Victory, but did not offer an explanation in that letter either.
The problem stems from joint fundraising agreements—teams of political committees that join together to increase their party’s fundraising power and reach. The arrangements are legal, but it appears the GOP has used them to secretly pass millions of dollars from Trump Victory to the RNC through apparently oblivious state committees.
And the corrected filings also show that some committees hadn’t told the FEC they joined Trump Victory, even though Trump Victory had included them. Their explanations have been unclear.
Hawaii didn’t announce its role in Trump Victory until this February. Four days later, the committee revealed nearly $1.7 million in transfers, claiming it missed the transactions “due to a misunderstanding regarding the reporting requirements.”
Last month, the Arkansas GOP disclosed a whopping $3.5 million in transfers with Trump Victory, a group it has never officially joined, according to FEC records. “The transfers were inadvertently not disclosed on the original reports due to clerical errors,” the state party explained.
The Oklahoma GOP passed hundreds of thousands of dollars from Trump Victory on to the RNC last year, but has still never officially joined the agreement. Last month, the treasurer wrote—twice—that he has been suffering from “serious health problems.”
However, while the state parties may have been unaware of the arrangement, the RNC wasn’t. The RNC reports include the transfers.
The FEC wanted to know how that was possible. In response to a question about the Colorado GOP’s unreported transfers, the RNC shifted all blame to the state, writing, “We have confirmed that we received funds from [the] Colorado Republican Committee. No further action is required.”
This doesn’t mean the FEC was baffled. In fact, the same month it asked the RNC to explain itself, the Wyoming GOP paid the FEC a major fine for the same types of omissions in 2016.
But now there’s a new dimension: A small D.C.-area bank may also be in the crosshairs.
In January 2020, Trump Victory told the feds it would use Chain Bridge Bank, a popular institution among Republican committees. The RNC also held an account there, but some state committees didn’t. Others recently told the FEC they had one, but initially failed to report it.
Two parties—Arkansas and Oklahoma—still haven’t reported an account with Chain Bridge. The Hawaii GOP only added the bank in February.
If the committees had established the accounts on their own, it’s unclear how they could have forgotten doing so. None of them have explained this to the FEC, and none responded to The Daily Beast’s inquiries. Chain Bridge would not comment publicly on its clients.
Joint fundraising arrangements are complicated, but carry major financial benefits. Here’s how it works.
Joint fundraising committees open a back door, allowing national parties to raise more money from megadonors than the law otherwise permits. Because Trump Victory has 48 members, one person can cut a single check equal to the combined contribution limits of all four dozen committees. Trump Victory then distributes that money to the other committees.
For example, two donors gave Trump Victory $817,800 in 2020: Pharma exec Richard Roberts, and Nicole Luckey, wife of billionaire tech pioneer Palmer Luckey, in September and October, respectively.
The arrangement has a second benefit. While a donor can only give $10,000 to a state party, state committees can transfer unlimited sums to the national party—the RNC. This means the RNC can effectively claw back all Trump Victory contributions from the states, including from donors who already gave the RNC the maximum amount.
The strategy traces back to 2016, when then-candidate Hillary Clinton became the first to take advantage of the 2014 Supreme Court decision that opened the joint fundraising floodgates. That helped the Democratic National Committee build a machine that pulled in $80 million for the DNC—about three times more than Trump’s own machine that year.
“These joint fundraising practices amount to little more than legalized money laundering, and allow wealthy donors to sidestep contribution limits and write six-figure checks for the benefit of presidential candidates and the national parties,” Brendan Fischer, director of federal reform at the Campaign Legal Center, a non-partisan watchdog group, told The Daily Beast.
“It’s bad policy, but it’s legally permissible,” said Ryan, who co-authored a 2013 Supreme Court amicus brief arguing that joint fundraising would unfairly empower wealthy donors.
Again, this is all usually legal. But last year many of those transfers appear to have gone unnoticed by a number of experienced state committee treasurers.
The FEC has previously issued fines for similar infringements. Given the amount of money involved, the penalties could be steep.
“A ‘knowing and willful’ violation of federal campaign finance law is punishable by a fine of up to 200 percent of any contribution or expenditure involved in such violation,” Ryan said.
There’s another twist: the bank accounts. Those omissions raise new questions about whether the party treasurers—who must sign off on those accounts—knew their committees had opened an account at Chain Bridge. That could expose them legally, Ryan said.
“Campaign finance law would be undermined if a state committee was using an account and not disclosing it, which treasurers must do under penalty of perjury.” Ryan said. “It would be even more severe if the RNC was setting up an account and not telling the state party about it.”
The FEC thinks the problems may be related.
In 2019, the agency slapped the Wyoming GOP with a major fine for its unreported 2016 transfers. The report cited allegations of suspicious banking activity, pointing to concerns that funds were transferred directly from Trump Victory to the RNC, “rendering all FEC reports concerning those transfers fraudulent.”
The General Counsel recommended a sweeping investigation. The Republican-appointed commissioners, however, voted it down.
The reason for the apparent shortcuts is hard to discern.
“I can’t think of many reasons why they would set this up,” said Ryan. “They may find it easier, or could be trying to save bank fees. But it could also be a way to increase the RNC’s haul. Suppose you had a state party that wouldn’t participate, but the RNC wanted to involve another state so it could pull in more money. This would allow them to do so.”
The Wyoming case may offer a hint that supports his hunch.
On Monday, WyoFile reported that the Wyoming GOP’s treasurer has accused the state party chair and RNC of striking a deal behind his back in 2016, calling it an “obvious ‘end run’ to by-pass individual state laws.”