Super PAC leaders score perks from political donations

Introduction

The People’s Majority super PAC advertises itself with lofty goals.

“We are the only super PAC dedicated to the research, development and enhancement of motivating conservatives to the polls,” it proclaims on its website. “No dinners, no pictures with VIPs, no shirts or yard signs here. People’s Majority uses every penny of your contribution to identify and motivate low-turnout voters on Election Day.”

Well, not every penny. The super PAC, which registered with the Federal Election Commission with the express purpose of advocating for and against political candidates, spent nearly ten grand on meals alone last year, including eye-popping bills at restaurants including Sorellina in Boston, Manny’s Steakhouse in Minneapolis, Henri in Chicago and Michael’s on the Hill in Vermont.

And even though it is an “independent expenditure-only committee” — the formal name for a super PAC — it didn’t spend a cent on independent expenditures, the activities that help elect or defeat candidates, such as political advertisements and targeted get-out-the-vote efforts.

People’s Majority isn’t alone.

Fewer than one in seven of the roughly 300 super PACs and “hybrid” PACs that spent money in 2013 put funds toward calling for the election or defeat of a federal candidate, according to the Center for Public Integrity’s analysis of recent FEC filings.

Given that 2013 was not a regular election year, it’s not surprising that super PACs weren’t out buying ads. But critics say the groups could have used 2013 to stockpile cash ahead of midterm elections this November. Instead, they collectively burned through more than half of the $143 million they raised last year. Nearly two-thirds of super PACs and hybrid PACs spent more than they saved.

Many of these committees operated as piggy banks for golf expenses and steakhouse soirees or vehicles for filling the bank accounts of consulting firms and super PAC executives. Others have grown so big and sophisticated that they operate more like political party committees than independent outfits.

Among the Center for Public Integrity’s findings about super PAC spending in 2013:

• Less than a sixth of the $109 million spent by super PACs and hybrid PACs — which make independent expenditures but also have separate accounts for making candidate contributions — went to independent efforts to support or oppose federal candidates.
• Almost half of the groups’ itemized reported expenses* — $36 million — went toward overhead costs such as salaries, payments to consultants and marketing. This doesn’t include spending on fundraising, events, research, data, list acquisitions, polling, voter outreach and mailings.
• Political entrepreneurs cashed in, despite 2013 being a non-election year. At least five super PACs and hybrid PACs made payments to firms employing their leaders. What’s more, the top 10 groups paid by super PACs and hybrid PACs for services together collected more than $22 million.

Leaders of several of the super PACs say their committees’ spending is justified: Fundraising or advocacy work is often done by people whose salaries and consulting fees are considered overhead expenses, and travel is required to help accomplish their goals.

But some of the super PACs’ donors expressed surprise their money wasn’t necessarily paying for efforts to elect the kinds of candidates they support.

“I wouldn’t want to give money to anybody that’s not doing what they claim to,” Texas resident Abel Balboa said after hearing one of the hybrid PACs he donated to, the Tea Party Leadership Fund, paid nearly $200,000 to firms run by the group’s leaders. “I give on impulse out of my own heart, thinking I’m doing good.”

That’s no surprise to Rick Hasen, a law and political science professor at University of California, Irvine, who publishes the Election Law Blog.

“Super PACs are not just about influencing elections — they are a source of income for political consultants,” Hasen said.

Almost half of the itemized reported expenses for super PACs and hybrid PACs — $36 million — went toward overhead costs such as compensation and marketing. More than $4 million went for fundraising. Other major expenses included costs for advocacy, research and mailings. Click a bar to see a breakdown of each spending category.

Source: Center for Public Integrity analysis of Federal Election Commission data covering 2013 spending, excluding non-federal costs, transfers, refunds and in-kind expenses.

Overhead

Super PACs today play major roles in U.S. politics, but they’re a relatively new phenomenon.

The U.S. Supreme Court’s Citizens United v. FEC decision in 2010 allowed unions and corporations to spend as much as they want to advocate for or against those running for office, so long as they don’t coordinate their spending with candidates or their committees.

Later that year, a lower court ruled in SpeechNow.org v. FEC that independent political organizations could accept unlimited donations from individuals as well as corporations and unions, effectively giving birth to super PACs. Ever since, super PACs have spent hundreds of millions of dollars on elections.

People’s Majority in D.C. spent over a fifth of its more than $121,000 in overall expenses on food, drink and travel costs — more than 10 times what was normal in 2013 for the 301 super PACs and hybrid PACs examined.

Though it didn’t report compensation costs, two-thirds of its expenses went to consultants. The average super PAC spent about a quarter of its cash on both consultants and compensation during 2013.

Paul Hatch, a founder of the super PAC, said most of the consulting fees were for the group’s executive director who spent his time researching better ways to motivate voters to get to the polls and using technology to do that. Hatch said the executive director also had meetings with donors and “spent a lot of time with other people in the industry … vetting ways of using handheld devices, doing online advertising.” It raised more than $65,000, according to FEC records, and was left with less than $8,000 at the end of 2013.

American Bridge 21st Century, which supports Democrats and was one of the highest-spending super PACs last year, once slammed Sen. Marco Rubio, R-Fla., in an opposition research report, citing criticism about his “lavish” spending.

Yet it’s the super PAC’s own spending that may appear lavish. The super PAC — formed by conservative-turned-liberal pundit and writer David Brock — spent nearly $27,000 on food and drinks last year.

The super PAC’s meal costs, reported to the FEC, include hefty bills at such fine dining establishments as Obelisk in Washington, D.C., and Tocqueville in New York City.

A research-centered super PAC, American Bridge shelled out more than $6,800 on tickets to attend events, conferences and workshops around the country and more than $148,000 on travel costs such as airfare and lodging.

It spent $4 million on compensation, or 63 percent of its total expenses — four times more than the percentage for such costs for all groups examined. Its former president, Rodell Mollineau, who left the group recently, earned $196,000 in salary and mileage reimbursement costs.

It also gave $146,000 to Brock, its founder, and another $19,000 to Media Matters for America, Brock’s nonprofit that tracks, analyzes and corrects “conservative misinformation.” Media Matters paid Brock more than $270,000 in 2012, according to its most recent tax return.

American Bridge 21st Century also spent more than $1 million on fundraising but nothing to directly oppose or support candidates.

The super PAC, spokeswoman Gwen Rocco said, “plays a unique, innovative role” holding Republican candidates and leaders accountable.

“By employing research staff and a team of trackers based in states around the country, we record and catalog Republicans’ public statements, media appearances, voting records and more,” Rocco wrote in an email, adding that the super PAC employs more than 80 people, including half who are “trackers” that helped document more than 4,400 events during the current election cycle so far.

The super PAC’s expenses don’t bother Margaret Kavounas, a San Francisco retiree who donated $1,000 to the group last year after she said Brock personally asked her.

“You can’t just sit in Washington and know what’s going on,” she said.

At conservative super PAC American Crossroads, President Steven Law, who reportedly prides himself on his group’s low overhead, took home more than $94,000 in compensation and other reimbursements in 2013 from the super PAC. He also earned $538,000 in 2012 as president of the group’s affiliated social-welfare nonprofit, Crossroads Grassroots Policy Strategies, according to its most recent tax return.

American Crossroads, co-founded by Republican operative Karl Rove, is among the highest-spending super PACs. The percentage of its overall expenses for rent and event costs was more than six times that of all groups’ examined: It forked over more than $140,000 to rent offices and more than $130,000 for event costs, mainly catering and renting facilities.

The group also reported one of the single highest dining bills of any super PAC: a $6,346 tab at J&G Steakhouse in Washington, D.C.

“Our event, hospitality and catering expenses are related to fundraising activity,” Jordan Wiggins, a political assistant for the group, wrote in an email, adding that he expects “very low” administrative costs for the current election cycle. American Crossroads’ fundraising costs made up a smaller percentage of its expenses compared to other groups.

Restore our Republic PAC, a super PAC formed in March 2013, solicits donations on its website, saying, “When you make a donation to Restore our Republic, you can be sure your money will support principled conservatives that will not waver when they get to Washington.”

Donors’ money also supported a $5,402 bill at Chops Specialty Meats in Broussard, La., for food at an alligator hunt fundraiser. “It’s an expensive outing to put together,” said former U.S. Rep. Jeff Landry, the group’s leader who is now running for Louisiana attorney general, adding that about 150 people attended. “That bill covered three days of food and drinks [so] it’s really not that high.”

A comparatively small super PAC, 1911 United, didn’t spend money to advocate for or against candidates last year. After all, its stated mission is “to assist in the re-election efforts of … President Barack Obama.”

It did, however, buy more than $3,000 worth of toy airplanes, t-shirts, art supplies and American flags. Its travel- and transportation-related costs represented 40 percent of its more than $20,000 in overall expenses — more than 25 times the percentage spent on such costs by all groups examined.

The money went to 1911 United’s bus tour to Pennsylvania, Ohio, Illinois, Indiana, Mississippi and Louisiana to raise awareness about youth gun violence, said Sinclair Skinner, the group’s treasurer. One event featured plane rides for young people, most of whom had never set foot in an airport, said Skinner, a pilot. The super PAC gave away flags and toy planes at the event.

“We’ve always really focused on leveraging the mind and time of the people, not so much the money of the people,” Skinner said.

Jan PAC is a super PAC formed by Arizona Gov. Jan Brewer, a Republican, to oppose the Obama administration’s signature health care law and illegal immigration. Brewer drew scrutiny a few years ago for frequent travel, and it appears the trips have continued. Her super PAC spent almost $21,000, or more than 14 percent of its expenses, on travel — much higher than the 1.3 percent average for all groups. Brewer and another Jan PAC official didn’t respond to calls and emails.

One of the biggest super PAC spenders, Americans for Responsible Solutions PAC, was formed in 2013 by former congresswoman Gabby Giffords and her husband, Mark Kelly, a retired U.S. Navy captain, two years after her near-fatal shooting. The super PAC, which advocates for stronger gun control laws, gave its affiliated social-welfare nonprofit, also called Americans for Responsible Solutions, more than $186,000 for online advocacy work.

Americans for Responsible Solutions PAC also spent more than $200,000 on travel and transportation related costs — making up a higher percentage of its expenses than that of super PACs and hybrid PACs overall. The expenses include $8,962, $6,903 and $809 for hotels in London, Paris and Honolulu, respectively.

A super PAC spokesman said events were held for American citizens living abroad who care about reducing gun violence and “Giffords does not travel alone and in some cases requires assistance, which incurs additional costs.”

Self-dealing?

Some of the group’s leaders may not have treated themselves to fancy meals on the donors’ dime, but they arguably enriched themselves through payments to firms they have ties with.

For instance, the Tea Party Leadership Fund, which spent more than any other hybrid PAC last year, paid $40,500 for consulting and data licensing to Glengary Inc. — a marketing consulting firm owned by Todd Cefaratti, an organizer for the hybrid PAC.

Cefaratti previously ran a website, JoinTheTeaParty.us, which drew questions from tea party supporters in 2010 for not spending any of its donations for part of that year to directly support tea party candidates.

Dan Backer, the Tea Party Leadership Fund’s treasurer, also has a firm, DB Capitol Strategies, that was paid more than $150,000 by the hybrid PAC last year for legal costs.

Backer is also the registered agent of American Action News and the Coolidge-Reagan Foundation, according to Virginia business registration records. Those two entities, which are listed at the same address in FEC documents as DB Capitol Strategies, each received $20,000 for “media” and “charitable contributions,” respectively, from the Tea Party Leadership Fund.

Backer said both DB Capitol Strategies and Glengary have a lot of other clients.

“With the growing complexities of compliance and increased and often targeted scrutiny of administration officials, candidates for public office and organizations of all varieties … are in need of extensive legal services to provide oversight and compliance, as well as representation,” he wrote in an email about his firm.

Among its services to the hybrid PAC: requesting advisory opinions from the FEC and helping with legal advice and litigation. Backer said the Coolidge-Reagan Foundation works to challenge “unconstitutional restraints on free speech” — an important cause for him.

Glengary, which is one of “many different vendors” hired by the hybrid PAC, provided data management services, Backer said.

At least one Tea Party Leadership Fund donor was surprised to learn his money went toward such expenses.

“Obviously, that doesn’t sit well with anybody,” said Herman Ahrens, a retired Air Force colonel in Arkansas who donated $235 to the Tea Party Leadership Fund last year.

He recalled contributing because he saw an ad he liked about the group, and he generally supports the tea party movement challenging Republicans who are “afraid they’ll make somebody mad.”

Since super PACs could theoretically provide donors with economies of scale and lower administrative costs, many groups’ overhead expenses in 2013 seem high, said David Magleby, a political science professor at Brigham Young University who has researched campaign finance issues.

“If I was a donor, I think I’d say ‘I’d rather find another [group] or charity’ ” to give money to, Magleby said.

More than $76,000 of conservative American Principles Fund’s more than $356,000 in expenses last year went to Frank N. Tsamoutales LLC for management and strategy consulting. The lobbying firm recently promoted Sarah Huckabee Sanders, one of the three leaders listed on American Principles Fund’s website, to vice president.

Huckabee Sanders, the daughter of former Arkansas Gov. Mike Huckabee, is a paid executive director of the super PAC “compensated through the consulting firm she works for,” according to a statement from Frank Cannon, a board member of the group.

Restore America’s Voice PAC doled out more than $146,000 in payments to American Caging, which processes donations, run by its treasurer, Maureen Otis. The super PAC also paid its chairman, Ken Hoagland, a $94,000 salary on top of the $166,170 he was paid in 2012 from its affiliated social-welfare nonprofit, Restore America’s Voice Foundation, according to its most recent tax return.

Hoagland said his compensation from the super PAC has been “reduced to $84,000 as 2013 FEC reports will soon reflect,” adding that his work for the groups includes writing TV ads, appearing on public affairs shows and working with other advocacy groups and members of Congress.

Hoagland added that costs for income tax, retirement, office and travel come out of his compensation, which is on a consulting basis. The donation processing services were cheaper than others’ and included extra services such as data processing, he said.

Advancing Freedom Action Network, whose treasurer is Kevin DeWine, spent $40,000, or most of its roughly $58,000 in expenses, on fundraising to a firm called Main Street Solutions, LLC — whose incorporator and registered agent is DeWine, according to Ohio state business registration records. DeWine, a former state legislator and former chairman of the Ohio Republican Party, declined to comment.

Put Alaska First, a super PAC that aims to back “candidates that place Alaska’s interests ahead of partisanship,” sent nearly a quarter of its roughly $280,000 in total expenses to Lottsfeldt Strategies, owned by the super PAC’s senior advisor, Jim Lottsfeldt. Almost half of the payments were “pass-through” costs not retained by the firm, Lottsfeldt said.

“Put Alaska First had just started …. Like with a business, start-up costs versus revenues [early on] always look lopsided,” he wrote in an email, noting that fees to his firm this quarter add up to less than one percent of the half-million dollars the group raised.

Political entrepreneurs

More than half of the $59 million the 301 super PACs and hybrid PACS spent on costs not related directly related to promoting or attacking political candidates went to 50 groups.

The biggest beneficiary of non-political expenses was Rochester, N.Y.-based Paychex, which received more than $3 million from liberal super PACs mainly for payroll-related services.

Since most of the money collected was passed on to pay taxes or salaries, Paychex kept less than $20,000 for its payroll-related services, said Laura Saxby Lynch, a spokeswoman for the company.

The second-biggest recipient of non-political expenses was Akron, Ohio-based InfoCision. The telemarketing company drew fire in recent years for labor complaints and for reportedly keeping most of the money it raised for several major charities, including the American Cancer Society.

Infocision officials did not return calls and emails.

A couple of fundraisers, Strategic Fundraising and AB Data, hired by conservative and liberal groups, respectively, were the next largest recipients. They were paid more than $4 million combined. A spokesman for Strategic Fundraising said the group specializes in raising money from small donors.

As to the independent expenditures themselves, more than 140 people and groups benefited from the spending, with media buyers ranking among the top.

Three media buyers, Waterfront Strategies, SKDKnickerbocker, and Smart Media Group, collected a combined $8 million — almost half of the $17 million in independent expenditures examined. Media buyers keep only a fraction of the expenses reported: They typically receive a commission of less than 15 percent of the amount billed.

AB Data and Smart Media Group didn’t respond to calls and emails requesting comment.

“We work with clients to develop a compelling message and then deliver it to the right audience. We are very proud of the advertising work we did [including ads for candidates who] will help millions of families,” said SKDKnickerbocker spokesman Doug Thornell, adding that its commission rate is “significantly” less than 15 percent.

J. Toscano, a partner with GMMB, echoed the sentiment: “The last time an ad agency got 15 percent commission, Don and Betty Draper were still unhappily married.”

Toscano said the precise rates in contracts with clients are confidential and the commission pays for, among other things, negotiating prices with media outlets, placing and creating ads, and providing consulting services: “It’s how we pay employee salaries, health insurance, taxes, rent and keep the lights on.”

It’s also part of a thriving economy that donors support through their political contributions — whether they intended to or not.

Data reporter Ben Wieder contributed to this report.

*The expenses analyzed excluded non-federal costs, transfers, refunds and in-kind expenses. Two super PACs that act as “middle men” transferring donations from individuals to political committees were also omitted.