Report: AingeGate: Is the UTGOP laundering money for Tanner Ainge?
Copyright: Utah Standard News / By Ed Wallace & the Utah Yaks/ January 24, 2018

Remember Tanner Ainge? The guy that came out of nowhere and ran for Congress as a Republican in the special election to replace Jason Chaffetz? According to his Federal Election Commission (FEC) filing, Ainge’s campaign ended with Debts/Loans owed by the “Ainge for Congress” campaign of $65,332, the same amount of Ainge’s loans to his campaign that were not paid back. No other debts were listed. (See FEC summary at end of article)

Yet, in a report aired on KUTV news on Friday, January 19, Brian Mullahy stated that the Utah Republican Party (UTGOP) has an outstanding debt for printing of around $35,000 for Ainge’s campaign. The actual total is $45,551.61. The favor of the party in using their postage permit is not technically a debt or an expense of the Ainge campaign that needs to be reported.

However, UTGOP Chair Rob Anderson told one party member that the party is running a debt for Ainge and that Ainge reached out to him. Anderson is quoted as saying: “He [Ainge] reached out to the party and said, ‘Look, I’m having problems. I don’t have a lot of donors but, I have a few that are willing to pay a lot, and I’m aware that you can help me out here.’ So, this was after the whole election thing and this isn’t public. There’s only a handful of people who know that Ainge is running money through the party to help service his debt. I would do that for just about anybody just to help them out in a situation where they’ve lost a race. And he’s got a hard road to hoe. He’s created a lot of enemies.”

Anderson went on: “Now, here’s the deal with that. Mia sent out fliers. They put the mailings through the Utah GOP and put paid for by the Utah GOP. That’s the kind of pass-through money that we agree to. Dave Hansen’s agreed to pay that off. That’s Mia’s responsibility. And I’ll tell you, Arena has called and said ‘Your name is on there. You’re liable to it.’ So, that’s the only reason we carry it on the books is we have to report that to the FEC. And then Tanner Ainge contacted us after his candidacy. And the reason we put him on there is for individual donations, we can accept up to 10,000 federal money per person and 20,000 per couple. And he had a couple of donors that we’re looking into–they said 2,700 is the individual limit to a campaign. And so we told him that we’d put that on the books and he could raise additional money from a couple of sources to pay that off. And I think he’s raised some money. We haven’t received that yet. But that is Tanner’s responsibility, so it’s not ours.”

The member then asked Anderson “Did you just put it on your books because they ran it through your kind of postal account or something?”

Anderson: “Yes. Yes. Yes. That’s the only reason we have it.”

Member: “And that happened before you were chairman, right?”

Anderson: “And that happened before I was chair. That was last fall. And Tanner Ainge, I accepted just because I wanted to help him pay off his debt.”

In a recorded meeting of the Executive Committee (EC) meeting on September 9, 2017, Anderson explained how he [UTGOP] took over Ainge’s debt. The following is a transcript of Anderson’s comments:

3:14 – “There will be some pass-through money with the Tanner Ainge campaign. He has incurred a bunch of debt, and his donors, he’s got donors, that want to continue to contribute to pay off that debt, but they can only do twenty-seven hundred dollars per individual but they can do ten thousand to the party, so I’ve offered to clear up his debt and get him back on the street again and clean up his accounts. I’ve offered the party to allow the donations up to ten thousand dollars and so we’ll see some of that come through shortly, and we’ve been paying some of his bills in that way.”

Question: “But, that’s just pass-through, it’s not costing the party anything?”

Anderson: “We’ll have some pass through in those cases and we’ll try to help out Tanner… I guess there’s no reason to vote on it, or anything like that.” There was then some discussion about FEC regulations concerning state and federal money:

Attendee: “Taking a $10,000 state contribution and paying a federal debt… I think there has to more to it than that.”

Anderson: “We were on the ropes before Thursday night because we can only take a certain portion of that state money and throw it over to federal, and we were above that [limit]. The way we do the budget now is, the way the money runs in the office: We get the money in… Abe’s generally not there… Peter will take it, Peter’s the central control for that, and he’ll take it over to Mike McCully, our accountant, Mike will put that in the appropriate account, and manages all that. Mike’s pretty smart on all that stuff… he’s used by other states….. He controls all of that… he’s going to keep us out of a bind. Everytime we approach those, he calls me and goes ‘look, we need this, we need that’, and I go, ‘I understand Mike, we’ll make that happen’.”

At that same meeting, Thomas Wright, a former chair and RNC member recommended ‎against any such move for FEC/legal reasons. Because there was not a quorum at the meeting, no votes were taken. Members left the meeting believing the idea was dead.

One of the attendees stated “If Anderson did what he stated in the meeting he was doing, he did it without authorization of the party and knew he was acting inappropriately. No authorization has been given to Anderson since to take such action by the EC or SCC or officers as a whole to ‘run Ainge’s debt through the Party books’.”

Anderson now says that isn’t what happened but instead violated postal non-profit regulations, which the party has now been told by the USPS not to do in the future. When the GOP signed an agreement with the post office for the non-profit discount, they agreed that they would not offer the discount to anyone as part of that agreement.

In the January 19 KUTV interview, Ainge claimed the money owed to the party was for mailers that were funneled through the Party, but that contradicts the 9/9 Executive Committee transcript.

A source with knowledge of campaign financing speculated “Mailing for Ainge suggests the agreement had to have been discussed during his campaign, which violates neutrality rules.  If it wasn’t discussed until after Ainge’s campaign, it’s not for mailers, it’s just a huge debt that the party agreed to take on. The party essentially financed one candidate’s campaign (and still is) even if the debt didn’t transfer until recently. I think the GOP may have agreed to funnel Ainge family money to the Ainge campaign via the loophole of party committee donations.”

An executive level official within the FEC, when informed of the draft of this story, stated: “Calling this a loophole makes it sound tricky, but not illegal. IT IS 100% ILLEGAL. There is no legal loophole that would allow for this to be done… it is an attempt to circumvent the law and hide it from the FEC. That one point [loophole] might make some think that there is a problem with the rules and laws. There is not. Getting this report into the FEC’s hands will probably instigate a FEC civil AND Department of Justice criminal investigations.”

 

Other than a detailed aged account payables report, Anderson has refused to give the party’s audit committee the party’s financial information since last fall. The following information has been requested:

1 – Comparative financial balance sheets for the last five (5) years.

2 – Current detailed aged accounts payable.

3 – Detailed year to date list of revenues and pledges.

4 – Current year’s budget.

5 – All legal documents and financial documents pertaining to the SB54 lawsuit.

6 – FEC reports submitted for the last seven (7) years.

7 – Lease documents for the Utah Republican Party offices.

In response to the audit committee’s request, Anderson had his own interpretation about the request and role of the committee, “It is not the purview of the Audit Committee to oversee the financial dealings of the Party. Please advise once a qualified CPA firm has been appointed.”

Anderson’s behavior concerning the Ainge issue has already scared off one major donor who had recently offered a $50k commitment to the party.

One longtime Republican stated:  “They [UTGOP] bent over backward for Hatch, but I have never seen them take on the debt of a candidate who never became the party’s nominee.”

On November 10, 2017, Lori Farnsworth, Ainge’s mother-in-law made a $10,000 contribution to the UTGOP which shows on the FEC UTGOP filing. She had already maxed out her contribution limit to Ainge’s campaign on 6/27/2017. There are no specifics in the UTGOP FEC filings where that money went. Prior to that, Farnsworth had lived most of her life in Arizona and never contributed to the UTGOP. Before the primary, contributions to the campaign by the Farnsworth family totaled $7,700.

A super PAC, ‘Conservative Utah’, was officially formed and filed with the FEC on July 14. Apparently, their only purpose was to fund Ainge’s campaign with money mostly contributed by Ainge’s family. By the end of July, $290,000 was raised, including $250,000 from his mother, Michelle Toolson Ainge. Another family member, James Toolson, also donated $10,000.  Michelle Toolson Ainge also contributed the maximum of $2,700 to Ainge’s campaign while the rest of the Ainge family contributed $5,900. The Toolson family also contributed $5,800 to the campaign. All of these contributions are legal. The “Conservative Utah PAC” had disbursements of $137,550.76. They ended with cash on hand of $152,449.24.

There was also significant monies changing hands between Ainge’s campaign and the UTGOP.

In addition, there were significant transfers from the UTGOP state account to the Federal account totaling $99,408.

On 9/22 there was a contribution to the local account from the federal account as well as an expense from the local account for a transfer to the federal account. $16,852 was transferred from the federal account to the local account and $25,000 from the local account to the federal account on the same day. Scott Keller donated $50,000 locally on 9/15 and the party put $50,000 into the federal account on 9/19. Two of these transfers, 11/7/2017 and 12/6/2017, for $5,000 each equal the amount of Lori Farnsworth’s $10,000 contribution to the UTGOP filing 11/10/2017

Ainge’s FEC 2017 year-end filing still show the same debt of $65,331. And, the UTGOP continues to house the debt of $45,555.61 owed to Majority Strategies for Ainge’s printing. Essentially, the UTGOP is liable for the bills for the Ainge flyers that defamed the ultimate UTGOP Congressman John Curtis.

UTGOP payables also include $122,134.40 owed to Arena Communications for the Mia Love campaign, and $4,028 owed to the law firm of Caplin & Drysdale for legal fees, the same firm that also represents Count My Vote. In addition, Caplin and Drysdale represented Romney in his presidential campaign.

So, who is Majority Strategies (MS)? They present themselves primarily as a “consulting strategy and management’ company that mostly does work for Republican candidates. Another service they offer is printing, but you have to dig to find that out.

According to their website  “Majority Strategies is the premier influence marketing services firm with over two decades of experience across elections, advocacy and brand.” They are a foreign company based in Florida (State of Origin) with a registered agent (Michael McCarlie ) with an address in Salt Lake City. Their Utah license expired on 3/28/2017 (Failure to file renewal), about two months prior to Ainge filing to run. They were paid $77,253 for printing by Ainge for Congress between 8/4 to 9/30/2017. Michael McCarlie  was also paid $2,735 by Ainge’s campaign for printing. MS also did work for Romney’s campaign.

If Ainge didn’t report the Majorities Strategies debt at the end of his campaign, that means either he was under reporting, or he already had a deal with Anderson before his campaign ended, violating neutrality rules.

The question is… Is this legal (using the loophole of giving 10k to the party to pay off a campaign debt)? Our understanding of the way FEC rules work is that any one person can’t violate the contribution limits. If someone wanted to exploit a loophole and give addition money to a candidate, beyond the $2,700 x 2, through another entity like the UTGOP, then probably, in the spirit of the rule, that is not allowed. So theoretically, if one tries to do that, then there’s this legal fiction where they’re pretending that the money they give to the state party is not intended for Ainge… it’s just money to the state party, and the party just happens to choose to give it to Ainge.

Assuming that is a rule, then who has violated the rule? Is it the donor, who intended for the money to go to Ainge, and knows that the state party will agree to give it to Ainge? Does the donor violate the rule for going above the limit? Is it the Ainge campaign… are they the ones that violated the rule because they accepted a contribution from a donor that went above a limit? Is it the state party that violated a rule because they agreed to accept the donation knowing that they were just going to give it to Ainge?

And, where in all this is UTGOP Chair Rob Anderson culpable? He probably isn’t culpable in accepting a donation. He may not be culpable in giving a donation to Ainge. Maybe, where he’s culpable, is that his stated intent was to accept the donation for the purpose of giving it to Ainge when he knew that the donor had already maxed out to Ainge. Are the FEC rules written in such a way that that’s a violation of the rules?

The party has seemingly assumed the expenses of the Ainge campaign. Is that the loophole that allows them to get donations to pay that debt? In other words, you send your donors our way and we’ll pay off your debt. But, shouldn’t Ainge’s FEC filings show an in-kind contribution from the party that the party took a vendor bill off his hands that he hadn’t paid yet. These questions will be answered when the FEC completes their investigation.

In the recorded September 9, 2017 Executive Committee (EC) meeting, Anderson stated that “I don’t know that any campaign used us in the CD3 race, so there was no income, there was no pass-through money.” The following is a transcript of Anderson’s comments:

At  the 2:04 mark: “Campaigns, when they come in and they use us to get the bulk mail rate, so the money is on our books, but it really doesn’t come to us, it’s a pass-through, so the income and the outcome is about the same. So, what happened in the CD3 race is that….explained to us that anybody can get that bulk mail rate, they’ve got to use a post office that is capable to sort the mail in that method and give it to the post office in that bulk mail form. So, they didn’t, I don’t know that any campaign used us in the CD3 race, so there was no income, there was no pass-through money.”

But, In a bizarre twist to this story, and in direct contradiction to his earlier statement, time-stamped about 14 minutes before Brian Mullahy’s report, UTGOP Chair Rob Anderson posted on Facebook, and at 6:45 p.m he emailed State Central Committee members claiming that Ainge was the only candidate that had used “the discounted bulk rate with the UTGOP indicia.”

The mail permit use was a service offered to all campaigns. That raises the question of why the UTGOP would put itself at financial risk, and offer their bulk mailing rate to any candidate who self-identifies as a Republican, or even one who goes through the party’s caucus nominating process, when the same discount rate is available at any post office in the country who can handle bulk mailing. There are at least 79 USPS locations in Utah that do that regularly.

Anderson’s statement that “This is a service available to all Republican candidates, but requires the candidate, not the Party, to remit payment for the US Postal bulk-mail cost.” is misleading because one of Ainge’s challengers was required to “pay for it at the time we used it.” However, on a Utah GOP accounts payable statement on December 20, 2017, Ainge’s debt was still sitting on Party books. This shows preferential treatment to Ainge over other candidates in the same race, violating Party neutrality standards.

Now, the party is needlessly on the hook for around $167,692.01 of campaign debt that should have never been on the UTGOP books in the first place. That amounts to an interest free loan, with no collateral, relying strictly on the honor of a politician to pay it back, with no clause to do so, or penalty if they don’t. Is there a lending institution in the country that would do that? The SCC may be looking to get a better grip on what the party is doing in the future.

Mia Love’s campaign manager, Dave Hansen, stated in the KUTV story that “Technically, the money [$122,140.40] is owed by the party,” adding the campaign routed the mail through the state GOP, because the party pays a lower bulk rate. “It’s the responsibility of the campaign to pay it off.”

KUTV2 News asked if the campaign [Love’s], which had more than $300,000 as of late September, could take some of that money and pay off the debt. “We can take some of it,” Hansen replied. “But there are certain limits from the Federal Election Commission as to how much can be transferred over.”

An official at the USPS who is assigned to handle Political Campaign mailings stated: “No, one thing is bulk mailing rate and quite another is the Non-Profit rate. The GOP has a non-profit status but they have misused their status. The USPS National Political Strategist and myself met with BJ Griffin and we explained this to him among many other issues we addressed. I will give them the benefit of the doubt because this has been done for years and the non-profit status has been misused by other GOP chairs. We [the USPS] do not see any malice on their part. The USPS will be conducting training for all candidates some time in March. It is very likely that I will be the USPS Rep. in charge of the training.”

Dave Bateman, in his GOP bailout, refuses to pay those two debts. Nor should he. In the case of the  Ainge and Love campaigns, and Rob Anderson, their actions go way past civil concerns and could likely spill into the definition of criminal activity. This is a story that transcends a single episode like the debt matter. It’s a story about the corruption of Utah’s political process (and its leaders) that should by all means be the epitome of incorruptibility.

Ainge filled out his paperwork and announced his candidacy on May 22, 2017. Up to that time, his only experience in politics was as a volunteer for Mitt Romney’s presidential bid in 2008. The same people that ran Ainge’s campaign also ran Romney’s. Within one day of Ainge’s announcement, the national media had latched onto the story and catapulted the unknown Ainge, with no political experience, but with a famous father, into the national spotlight.

Ainge started Prelude Partners in Irvine, California, in 2016 and was still a registered voter in Orange County, where he lived from 2013 until 2016, when he announced and began to gather the 7,000 signatures from registered Republicans in the CD3 district that were required to get onto the primary ballot. He turned the signatures in on June 5, 2017, and registered to vote in Utah one day later on June 6.

Ainge was the spoiler in the Republican Primary election in 2017. The election resulted with the winner, John Curtis, getting only 43.28% of the votes cast. The Republicans are now saddled with a candidate that 56.72% of the Republican voters voted against.

In ADVISORY OPINION 1979-9 from Joan D. Aikens, the Chairman for the Federal Election Commission to The Texas Democratic Party on May 3, 1979, the following is written:

“Regarding candidates who lost in the primary, your committee, which is a multicandidate political committee as defined in 441a(a)(4), may make total contributions not exceeding $5,000 to each candidate with respect to their primary election for Federal office. 2 U.S.C. 441a(a)(2)(A). Payment of a candidate’s debts directly to the creditor would be a contribution subject to 441a(a) limits. See 11 CFR 110.1(g)(2). Such payments would also have to be combined with any pre-primary contributions by your committee to the same candidate, since only one $5,000 limit is available for primary election contributions.

The $5,000 contribution limit on individuals contributing to your committee is a limit by calendar year. Section 441a(a)(1)(C) clearly states that no person shall make contributions to any other political committee (one that is not an authorized candidate committee or a political committee established by a national political party) in any calendar year which, in the aggregate, exceed $5,000.”

Sources:

Federal Election Commission

Disclosures.utah.gov

Ainge’s run for Congress drawing national media’s attention

Tanner Ainge wasn’t registered to vote in Utah when he filed to run for Congress

Brand new super PAC spending big to support Tanner Ainge

This was from the transcript of the 11-4-17 meeting.

Mr. McCauley reported, “My responsibility is to tell you a little bit about the financial condition of the Utah Republican Party. I am a CPA by profession, and my entire practice is focused on campaign finance and finance-relate matters. I was at one time the treasurer of the Utah Republican Party. I served in that capacity from 1999 to 2000-and-something. First chair I served with was George Cannon, and the last I served with was Thomas Wright. So, I’m pretty familiar with the accounting and finances of the Party. We have done some things over the last couple of years that have made some change to what we’re doing that have affected the Party in some negative ways. And the goal right now is to try and turn that around, with accurate control. We’re going to talk about first of all a couple of things I want you to be completely aware of. First of all, I’ve provided [inaudible] services to multiple parties throughout the country, obviously certain states. And one of the things I want you to be completely aware of, some of the information we’re about to present to you is unheard of in my experience. Providing financial disclosure to the openness that we’re about to disclose to you is not something I typically see. So, you need to be aware of that. This is, when Rob talks about, when Rob talks about full disclosure, I think that should be noted. It should be really noted. The attempt here is to prevent the financial picture from a particular period of time. Do we have the first slide…? No such. We were hoping that it would be slightly different than we have. We have my first report, which is about the financial position, which is July 1st. And, of course, financial reports are always given for a fiscal period of time. Our fiscal year-end is June 30th, and our fiscal period begins July 1st, and it’s recorded of course as a specified period of days. So, October 31st is the closing period of time. At that point in time, October 31st, there was $25,000 in the checking accounts. You may have a lot of questions about why we have so many checking accounts at the state party level, (which you should be aware of that. We have things that come into the state party, money that comes into the state party that are governed in by federal law. And money that comes into the state party that’s governed by state law. So, we have a checking account for each one of those to [inaudible] obligation. There are certain types of contributions that come into a party that by definition are federal only. And that means that if it’s an individual person, [inaudible] giving us $10,000, corporations can’t participate in that. We can accept corporate contributions too. In the state of Utah, unlike in many other states, we can accept corporate contribution, but then it has to be recorded in the state account. Both the federal accounts and the state accounts are reported. All that information is disclosed on a regular basis. With the state of Utah, and one election year happens to be on your year, you can look on the Lieutenant Governor’s site, you can see some the activity that’s going on there. We’re actually providing perspective on the accounting side of things, taking care of that twice week [inaudible] that information putting it there. You may not necessarily be able to see it [inaudible] actually opens that up for the reporting period, at that point of time it is available. The FEC information, on the other hand, the federal is reported every month. The expenditure associated with that account is reported on the federal website [inaudible] every single month, the activity went on a federal account. There are by definition at least three on the entire Republican Party’s federal account. There’s also another account that we use. It’s called a levelling account. And I want to kind of explain that. Unfortunately, not every single dollar that comes into the party could be spent for specific kinds of activity. There are certain kinds of things that are administrative [inaudible]. $25,000 in the checking accounts. We have about $591,000 in payables. I want you to be aware of that. That $591,000, there’s a couple of things that we should be aware of. (There are– of that 591,000, 122,000– approximately 160,000 is pass through money. That’s money that comes from federal programs such as [inaudible] RNCA or the RNC or the RNCC, some of those organizations affecting specific races that happen here in the states. So those are not obligations of the party. That leaves $423,000 that the party has outstanding in payable loans. Of that $423,000, 200 and– about 360 of that looks like pertains to the lawsuit. And so that’s the number that pertains to that. That leaves about $80,000 that are operational, current operation activity and previous stuff that we’re getting our hand around. One of those things we’re finding out about some of the debt that has existed for some of the [inaudible] organizations, again we’re starting to find out some of that stuff because that stuff wasn’t available previously. And we’re getting that, even since our budget committee on Wednesday, we’re finding out some of that information even since then. We’ve been served [inaudible] suits and we’re trying to– we’re working through that as much as we possibly can. Just to give you an idea, at this particular point in the time, the party, for the period ended October 31, July 1st until October 31st, the party has raised $161,000. And has spent about 180 of that, so were in a net deficit right now of about $15,000 and that stems from the fact that we have these continuing payables that we’re trying to just take care of. The question always comes up about the burn rate of the party. Right now the burn rate is about the lowest I’ve ever seen it. It’s $9,600 a month, is our estimated amount. $9,600 covers the rent, the salaries and the related fees that we have associated with copy machines, etc., etc. Again, that’s about as low as I’ve ever seen it and it’s very low compared with other states. An interesting question about payroll, could we do this in a cheaper way or something like that? I have yet to find an opportunity—I’ve seen multiple states consider moving to volunteers, and the fact is that some of the stuff we do here with volunteer work, we just couldn’t pull off with volunteer help. (We spent about $23,000 worth of payroll in this period of time. We were able to go back to 2013, which was a similar period of time, a non-election year, rent [inaudible] cheaper [inaudible] so you should note that we do an awful lot for very little, but that tends to be the Utah Republican Party way. All in all, I think that we’ve got our work cut out for us, but we also have some good things happening. I think that’s [inaudible]. Does anybody have any questions about this?”

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