Campaign Legal Center & Democracy 21 File Complaint Against Tennessee Congressional Candidate, American Conservative Union, And Others Who Coordinated On Elaborate Scheme To Evade Campaign Finance Law

Violations include illegal coordination, straw donor schemes, excessive contributions, and failure to report contributions

On June 21, 2017, the Campaign Legal Center (CLC) and Democracy 21 (D21) filed a complaint with the Federal Election Commission (FEC), and will file with the Department of Justice (DOJ), against former congressional candidate Brian Kelsey and others, including the American Conservative Union (ACU), for their part in a scheme to circumvent contribution limits and disclosure laws by illegally funneling funds from Kelsey’s state account through intermediaries to secretly support Kelsey’s run for U.S. Congress in 2016.

“In order to disguise the illegal transfer of prohibited state money into his federal race, it appears that Kelsey concocted a scheme to pass the money through a dark money daisy chain and straw donor reimbursement plot,” said Brendan Fischer, director, federal and FEC reform at the nonpartisan Campaign Legal Center. “Kelsey appears to have stacked legal violation on top of legal violation, and we anticipate that the FEC and DOJ will take this very seriously.”

“The FEC needs to investigate whether the unusual pattern of money transfers laid out in the complaint was in fact an effort to funnel non-federal funds into a federal campaign,” said Democracy 21 Counsel Donald Simon. “The timing and amounts of the transfers is more than enough to raise suspicions that warrant further scrutiny by the FEC.”

Kelsey, a Tennessee state senator, unsuccessfully ran for Congress in the Republican primary for Tennessee’s 8th Congressional District in 2016. Because Tennessee allows state candidates to accept donations in amounts and from sources prohibited by federal law, federal candidates cannot transfer or spend state campaign funds in their federal race.

But on July 11, 2016 in the midst of the primary, Kelsey’s state campaign committee transferred $106,341 to Standard Club PAC (a Tennessee state PAC), which constituted almost all of the PAC’s fundraising for 2016, and then:

On July 15, the Standard Club PAC transferred $30,000 to the 501c4 ACU;

On July 20, ACU reported making a $30,000 independent expenditure in support of Kelsey.

Additionally:

On July 15 and 20, the Standard Club PAC transferred a total of $37,000 to Citizens 4 Ethics in Government (which was almost all of C4EG’s fundraising for 2016);

On July 21, Citizens 4 Ethics in Government transferred $36,000 to ACU (which was almost all of C4EG’s spending for 2016);

On July 22, ACU reported making a $19,480 independent expenditure in support of Kelsey, and on July 26, reported a $30,520 independent expenditure in support of Kelsey.

ACU never reported the source of the contributions to the FEC.

These schemes appear to have violated the Federal Election Campaign Act (FECA) ban on federal candidates transferring state “soft money” funds that exceed federal limits and the “straw donor” prohibition on making contributions in the name of another. Since executing such a plan would appear to require an exceptional degree of communication between Kelsey and ACU, ACU’s expenditures were likely illegally coordinated with Kelsey.

Evidence also suggests Kelsey used funds from his state campaign and PAC to reimburse state legislators who contributed to his congressional campaign, providing further evidence that Kelsey treated his state campaign accounts as slush funds to illegally support his federal candidacy, in violation of FECA’s straw donor ban.

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