Money & Politics Report provides comprehensive behind-the-scenes coverage of campaign finance, lobbying, and government ethics issues at the federal, state, and local levels.
The Federal Election Commission has approved recommendations from staff auditors who found Sen. Ted Cruz (R-Texas) hasn’t provided required public details about more than $1 million in bank loans that helped finance his original 2012 Senate campaign.
FEC commissioners voted unanimously before a public meeting of the commission May 25 to approve a memo with the auditors’ findings. The “tally vote” was announced in an agenda document distributed at the beginning of the FEC meeting.
The action came before a meeting in which commissioners approved long-pending audit findings regarding the Colorado Republican Party and a draft advisory opinion (AO 2017-02) approving a web-based bank deposit program for federal political committees called War Chest LLC.
FEC Chairman Steven Walther said the commission has an obligation to tell the public more about what the FEC “can and can’t do” regarding allegations that foreign money was allowed to influence U.S. elections last year. Walther indicated his comments were prompted from frustration that the FEC hasn’t moved faster to resolve more than a dozen pending enforcement cases involving foreign money allegations.
News reports first raised questions about Cruz’s loans more than a year ago during the presidential campaign, when the Texas senator was running for the Republican presidential nomination. Those questions have never been fully resolved, FEC auditors said.
A spokeswoman in Cruz’s Senate office, Catherine Frazier, told Bloomberg BNA May 24 that the Cruz campaign expected the matter to be resolved after the FEC commissioners voted.
“Once the FEC Commissioners approve the audit report at Thursday’s meeting and the process concludes, we will be able to accurately amend our reports to be consistent with the FEC’s recommendations,” Frazier said in an email.
Frazier didn’t provide any further comment after the FEC vote.
The May 25 vote wasn’t a final action on the matter. The FEC commissioners will have to vote again later on a final audit report. After that, Cruz could face enforcement action, such as an FEC fine, for failing to follow disclosure rules. Such enforcement action, however, would be separate from the audit process.
Cruz acknowledged last year in a letter to the FEC that he used loans from Goldman Sachs Group Inc. and Citibank, a subsidiary of Citigroup Inc., to help finance his 2012 campaign for the Senate. The letter didn’t provide details about the loans, including whether they were secured by assets held jointly by Cruz and his wife, Heidi, who had worked for Goldman Sachs.
The auditors’ memo recommended that the FEC find Cruz’s Senate campaign “failed to properly disclose” that $1,064,000 in funds it reported as candidate loans originated from commercial lenders.
In addition to the findings on the Cruz campaign’s failure to report bank loans, the FEC auditors’ memo also found that Cruz didn’t convert some candidate loans to his 2012 Senate campaign committee into campaign contributions in the time period required by the law and FEC regulations. After a conference with FEC auditors in 2015, Cruz’s campaign committee agreed to convert the $545,000 it had reported as a candidate loan balance into a contribution from the candidate.
Most of the discussion at the May 25 FEC meeting focused on the audit of the Colorado Republican Committee, a state party which FEC auditors found violated rules for reporting payments for mailings and other items.
The commissioners split along party lines regarding one key finding—that the party had an “unreported back account” that collected nearly $88,000 used to help defray travel costs for the 2012 Republican National Convention.
The FEC’s three Republican commissioners voted to find the bank account didn’t belong to the Colorado GOP committee and thus there was no reporting violation. The two FEC commissioners holding Democratic seats voted for staff findings that available evidence indicated the account did belong to the state party and should have been reported. The finding wasn’t approved by the commissioners, but they did vote to note the partisan split over the issue in a final audit report.
The commissioners were able to agree on the advisory opinion for War Chest LLC, requested by attorneys Charles Spies and James Tyrrell of the firm Clark Hill PLC. The request said the new deposit mechanism would help ensure that political committees with large assets would be able to distribute their money among a number of banks, where it could be federally insured.
In comments during the FEC meeting, Tyrrell said such a mechanism is needed especially for major campaigns and super political action committees, some of which collect and hold many millions of dollars in contributions.
Walther’s comments kicking off the FEC meeting suggested the FEC needs to do more to come to grips with the issue of foreign money in U.S. elections. Though he didn’t specifically mention the Trump presidential campaign, the 2016 presidential race and its aftermath have been dominated by allegations of Russian influence.
Trump has denied there was any collusion between his campaign and Russia and has at times played down any Russian impact on the election, but several probes of the matter continue.
Foreign spending to influence U.S. campaigns has long been illegal and the FEC has handled enforcement matters in this area in the past. But it remains to be seen what role, if any, the FEC may have in sorting out the Russian-influence allegations that roiled the 2016 campaign and have led to a recently announced special counsel investigation headed by former FBI Director Robert Mueller.
Walther said in his FEC meeting remarks that the agency faced 15 pending cases of alleged illegal foreign campaign money at the beginning of this year. He didn’t provide any details about the cases or say if they are progressing toward resolution.
FEC enforcement matters are handled in strict secrecy until they’re resolved. The FEC hasn’t announced any new, major cases involving foreign money this year.
To contact the reporter on this story: Kenneth P. Doyle in Washington at email@example.com
To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com
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