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PAY DIRT

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GOP Senate Hopeful Cooks Books, Skirts Donation Limits

Every day this week has brought major new developments in the controversy over EPA administrator Scott Pruitt’s living arrangements and his handling of agency staffing decisions. Let’s recap some of the big ones.

Montana Senate candidate Matt Rosendale had a problem. A pair of high dollar donors,Tom Rastin and his wife, Karen Wright, kept giving Rosendale more than the $5,400 each individual can legally donate to a campaign per election cycle. And each time, twice to be exact, Rosendale’s team was forced to refund the excess donations.

But with some creative accounting, it appears the the Rosendale campaign figured out a way around the limits - not only for Rastin and Wright, but for other max-out contributors to the campaign. It’s a pretty ambitious end-run around campaign finance laws made possible only by Rosendale’s extensive personal wealth.

Rosendale, Montana’s state auditor, ran for a House seat in 2014, and lent his campaign $1.3 million for the unsuccessful effort. He’s now using the same campaign committee to mount his Senate bid, and when this cycle’s campaign began, the committee still owed Rosendale about $237,000.

In April, the Rosendale campaign began raising money explicitly for the purpose of retiring that debt. Repayment of debts incurred during previous election cycles don’t count towards the $5,400 per-donor limit for the current cycle, the rationale being that they’re effectively donations to a previous campaign and won’t be used to support ongoing political efforts.

Nine donors stepped up in April and May to help retire the campaign’s debt to Rosendale, including Rastin, Wright, Home Depot founder Bernie Marcus and his wife Wilma, veteran political consultant Roy Pfautch, and Texas oil tycoons Wayne and Gayle Laufer. Eight of the nine donors had already maxed out to the Rosendale campaign. The debt retirement contributions would’ve put all nine of them over the per-election limit for individual contributors had they gone towards the Rosendale campaign’s 2018 coffers.

All of those contributions would’ve been generally unremarkable, if perhaps conspicuously generous—these high-dollar Republican donors were, after all, helping to settle years-old debts owed to the candidate himself.

But then the Rosendale campaign pulled an audacious accounting maneuver. On May 14, it used the money from those nine donors to repay $32,831 of the debt the campaign committee still owed to Rosendale. The very next day, Rosendale re-lent the exact same sum to the campaign. In effect, donations to Rosendale’s 2014 campaign were routed through the candidate’s personal bank account and transferred to his 2018 campaign. After the transaction took place, the campaign still owed Rosendale the same amount of money, but he had effectively removed the cash supplied by those nine donors from his campaign’s 2014 balance sheets and placed it on those of his ongoing senate effort, allowing those donors to nearly double the sums they can provide to the latter.

Brendan Fischer, the director of FEC reform programs at the Campaign Legal Center, called the scheme “pretty wacky,” but said it’s likely above board. “Unless the donors were in on the plan, I’m not sure it is illegal,” Fischer told PAY DIRT. “If the donors were told they were helping pay down Rosendale’s 2014 loan to his campaign, I don’t think there is anything stopping Rosendale from turning around and putting his repaid loan back into his 2018 campaign.

The fungible debt retirement tactic appears to have been incorporated into the Rosendale campaign’s fundraising strategy. In a campaign memo provided to potential donors in June and obtained by PAY DIRT, the campaign asks for donations not just to its 2018 account, but also for the purposes of retiring its 2014 debts. “In addition to making contributions to Rosendale’s 2018 primary and general elections,” the memo advises, “contributors that did not max out ($2,600) to the 2014 primary may contribute to debt retirement.” There is nothing in the memo indicating to donors that their debt repayment contributions might effectively end up in the campaign’s 2018 coffers, but the donation form makes sure to note that the “GRAND TOTAL” maximum contribution is $8,000, not $5,400

The Rosendale campaign still owed the candidate $176,863 as of its latest FEC filing. If the campaign decides to employ the same creative accounting in the future, that’s a lot of money that the campaign can accept above normal individual contribution limits.

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Pruitt’s Parting Gift to His Former Lobbyist Landlords

Acting Environmental Protection Agency administrator Andrew Wheeler’s first day on the job served as a potent reminder of the mess—ethical as well as environmental—he’ll be tasked with cleaning up in the wake of Scott Pruitt’s resignation.

On Monday, the Department of Justice announced that it had reached a $100 million settlement agreement with industrial equipment manufacturer Stanley Black & Decker over contamination of a superfund site in Rhode Island. It was a hefty price tag, but the settlement did not include any punitive damages, and only required that two of the company’s subsidiaries pay for the costs of the cleanup—$42 million for costs already incurred, and another $58 million for anticipated future costs.

The $100 million price tag is a bit towards the lower end of the $68 million to $140 million the company told shareholders last year that it expected to have to pay to clean up the site.

Stanley Black & Decker and its years-long legal fight with the EPA became a flashpoint of Pruitt’s tenure at the agency after it was revealed that the former administrator had rented a room in a condo owned by a wife of one of the company’s lobbyists. That lobbyist, J. Steven Hart, has since resigned from the firm where he worked for decades, Williams & Jensen.

The settlement on Monday represented the conclusion of one last piece of business between two men tied together by scandal, and each ousted from their powerful perches for their respective roles in that controversy.

It’s a chapter in the agency’s history that Wheeler, who faces a significant number of his own ethical challenges, is no doubt eager to leave behind.

How Ron Paul Operatives Made Bank Off the Alt-Right

The “pipeline” from libertarianism to the alt-right has received some attention amid Donald Trump political ascent. And it just so happens that the most prominent alt right-linked candidates of the 2018 election cycle can trace some of their most active campaign supporters and consultants to a small crew of aides to Ron Paul’s 2012 presidential campaign, some of whom have set up a network of PACs and political vendors that have boosted 2018’s most controversial Republicans—and earned hundreds of thousands of dollars for their small cadre of proprietors.

By 2018, they’d had their hands in campaigns for Paul Nehlen, the virulent racist and anti-Semite challenging Speaker Paul Ryan; Roy Moore, the disgraced former Alabama supreme court judge whose Senate campaign was derailed by allegations of pedophilia; and Corey Stewart, who is vying to replace Virginia Sen. Tim Kaine on a platform that fully embraces neo-Confederate imagery.

The saga began in Maine, where a group of Ron Paul campaign staffers endeavored to set up a political apparatus operating independently of either the campaign or the state GOP. Leading the effort was Eric Brakey, then the Maine state director for Paul’s campaign. In June 2012, he set up a political group in the state called Defense of Liberty PAC, (DOLPAC) which enlisted the services of Reilly O’Neal, a regional director for the Paul campaign, and his consulting company, Tidewater Strategies. The PAC would eventually spend a total of about $80,000, with just over $12,000 going to candidates in the state, and the rest spent on consultants, staff salary, and overhead expenses.

Those spending habits drew the ire of Patrick Eisenhart, a Maine delegate for Ron Paul at the 2012 Republican convention. He filed an ethics complaint with state authorities alleging the use of PAC funds for the personal enrichment of its principals and consultants. The Maine Ethics Commission declined to bring any action against DOLPAC. The language in their decision foreshadowed difficulties in combating so-called “scam PACs” in the years since: “Mr. Eisenhart does raise important issues regarding whether a PAC has some fiduciary responsibilities to its contributors,” the commision wrote. “However, under current campaign finance law, there is no such standard.”

After the Paul presidential campaign fizzled out, O’Neal’s consulting business really picked up steam. Over the next two election cycles, Tidewater and two of his other firms, Mustard Seed Media and the Capital Square Funding Group, pulled down about $940,000 from federal political clients.

Among those clients was a super PAC called the Principled Leadership Project (PLP), and it would once again tap the Paul campaign alumni network. In early 2017, PLP jumped into a special election for a House seat in Georgia with an attack ad so vicious that it was condemned by both the Republican and Democratic candidates in the race. Defending the ad was the group’s new spokesman, Noel Fritsch, a Ron Paul 2012 supporter who consulted for Nehlen’s 2016 campaign. That was before the racism and anti-Semitism were front and center, but Fritsch would go on to work for Nehlen’s 2018 campaign as well.

PLP has raised more than $270,000 this cycle, the vast majority of which has been paid to the group’s consultants. They include Tidewater, Capital Square, and another of O’Neal’s consulting firms, email vendor Rightside Lists. They also include an obscure firm called DSGB Strategies, which was created in late 2016 by Brian Gentry, a little-known political consultant with views typical of a subset of libertarians, such as his intense antipathy towards “tyrant” Abraham Lincoln, his role in fomenting the “War for Southern Independence,” and “dishonest Abe’s enormous contribution” to “the modern socialist, welfare/warfare state.” Gentry is also an alum of the 2012 Ron Paul campaign, and in early 2018, DSGB signed a new client: the Maine Senate campaign of Eric Brakey.

DSBG is incorporated in Georgia, but in FEC forms, it’s listed a different address: a Washington D.C. house owned by Fritsch, who insists he has nothing to do with the firm. But work by Fritsch, O’Neal, and Gentry has overlapped considerably since last year, and some of the groups with which they’re involved appear to do little but pay the three consultants’ companies. O’Neal and Fritsch have drawn the ire of conservative activists in North Carolina for their involvement with the group North Carolina Gun Rights, which has raised about $46,000 this cycle and paid about $34,000 to O’Neal’s and Gentry’s firms. The group’s only donation to another political entity this cycle was a $750 contribution to the North State Leadership Council. That group has raised just $11,600—including a $5,000 donation from PLP—and paid $8,600 of it to two of O’Neal’s firms. Another tarheel state-centric group, Pro-Life North Carolina PAC, has raised about $29,000 this cycle, and paid $22,000 to Tidewater, Capital Square, and Mustard Seed.

The sums that this cadre draws from its network of super PACs pales in comparison to its biggest cash cow to date: the Moore Senate campaign. O’Neal, Fritsch, Gentry, and their consulting firms pulled down a whopping $1.1 million from Moore’s failed campaign.

From the summer of 2017 through the end of the year, they also did significant work for Nehlen’s campaign—Fritsch as a paid staffer, and O’Neal as a consultant. That work would come to dog Fritsch in particular as he and O’Neal began working for Stewart in December. Stewart, who was raised in Minnesota but has nonetheless embraced the Confederate Flag as a campaign symbol, has recently been grilled on the explicitly racist and anti-Semitic campaign messaging of his top consultants’ last client.

They’ve also taken on a new venture in the news space: shortly after Moore’s defeat, O’Neal’s Mustard Seed Media bought the site Big League Politics, a fringey pro-Trump outlet whose editor has called conspiracy theorist Alex Jones “my Walter Cronkite.”

Brakey, meanwhile, prevailed in the Maine Republican Senate primary last month, earning the right to challenge Sen. Angus King in November. He may get the chance to pursue the goals he invoked in founding DOLPAC six years ago.

“My plan remains to be (as always),” he wrote at the time, “Step 1 - Have the Liberty Movement take over the Maine Republican Party. Step 2 - Have the Liberty Movement take over the State of Maine. Step 3 - Have the LIberty Movement take over Nation. Step 4 - Enjoy our Liberty.”

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