Is pro-Bush super PAC obscuring spending?

Introduction

Super PACs are supposed to be both transparent and independent from the politicians they are supporting.

But it’s not clear that Right to Rise USA, the super PAC formed by Republican Jeb Bush prior to his presidential bid, is either.

The super PAC’s biggest single vendor this year through June is a mysterious limited liability company, LKJ, LLC, whose owners are hidden behind the state of Delaware’s opaque registration laws. The company doesn’t appear to have a website or a physical office.

It’s only known address: a Washington, D.C., post office box — one it shares with a company run by Heather Larrison, the national finance director for Bush’s official presidential campaign.

The company’s Delaware origin makes it impossible to determine whether a chief Bush lieutenant is embedded in — and profiting from — the cash-flush tangle of entities created to boost his bid.

The arrangement is also a prime example, in the post-Citizens United era of politics, of how the borders separating presidential campaigns and super PACs can be simultaneously porous and difficult to penetrate.

Right to Rise USA, the Bush campaign and Larrison all refused to answer, or did not respond to, questions from the Center for Public Integrity.

Paying LLCs is legal, but opacity “clearly violates the purpose of the [regulations], which is to have true transparency,” said Trevor Potter, the former general counsel to Republican Sen. John McCain’s presidential campaign and former chairman of the Federal Election Commission who is the founder of the Campaign Legal Center, a nonpartisan watchdog group.

Potter said use of LLCs in this way also becomes a greater issue “in the modern world of super PACs supporting single candidates, because you have an obvious coordination question and you don’t have the information you would need to address it.”

Under the law, super PACs can support candidates, but can’t coordinate their expenditures with them.

The secrecy could also add to the mounting questions donors have about whether money is being spent efficiently to boost Bush, who has languished in the polls, despite touting his muscular organization and superior fundraising.

Trend in secrecy?

Many businesses are LLCs, but in some cases, LLCs paid by campaigns appeared to have been set up for purposes that include obscuring the vendors’ identities or creating legal separation between a campaign and super PAC.

“Some LLC contributions raised questions in prior cycles, and now we’re seeing more LLC disclosures on the expenditure side,” said Kenneth Gross, head of the political law practice at Skadden, Arps, Slate, Meagher & Flom.

For instance, during the 2012 election, the campaign of 2012 Republican presidential nominee Mitt Romney spent tens of millions of dollars through LLCs that were essentially set up to serve as general contractors, accepting payment from the campaign and, in turn, paying other vendors.

This effectively concealed the identities of some vendors, as well as exactly how much they were paid, making it impossible to tell who reaped the benefits of the campaign’s largesse.

In another case, a polling company, Public Opinion Strategies, worked for Romney’s campaign. But at the same time, other members of the same company reportedly worked through an LLC so they could legally perform polls for Restore Our Future, the super PAC that spent more than $142 million backing Romney’s candidacy.

That was necessary because super PACs and campaign committees are prohibited from working together in some key respects, though the legal definition of coordination is narrow, painfully technical and frequently misunderstood. Enforcement is rare.

Super PACs sprang up as an indirect result of the U.S. Supreme Court’s 2010 decision in Citizens United v. FEC, which allowed corporations, unions and other special interests to raise and spend unlimited amounts of money to directly advocate for and against political candidates.

A decision in a lower court case, SpeechNow.org v. FEC, cited Citizens United as a precedent in ruling contribution limits are unconstitutional when applied to groups that make independent expenditures. That led to the creation of super PACs — independent groups that can raise and spend unlimited amounts, but can’t coordinate their spending with candidates.

If a candidate and a super PAC were free to work together, it would amount to a gutting of contribution limits put in place to avoid corruption.

Campaigns and super PACs are legally permitted to share vendors, though in many cases firewalls and other measures are required to be in place.

Neil Newhouse, a co-founder and partner at Public Opinion Strategies who was Romney’s lead pollster, is reportedly working for Right to Rise USA. One of the LLCs on Right to Rise’s expenditure reports, R2R Research LLC, uses the address of property he owns, according to Virginia property records.

It’s impossible to tell whether R2R Research LLC was created to allow for an arrangement similar to that used by the Romney campaign and super PAC in 2012, or for other reasons. Newhouse did not respond to an email requesting comment.

The Campaign Legal Center, Potter’s group, has in the past unsuccessfully urged the FEC to require political committees to itemize payments of more than $200 made to “sub-vendors,” so the ultimate recipient of money is clear, but the FEC has not done so.

Pushing the limits

Until Bush officially declared himself a candidate, which he did on June 15, Right to Rise USA played host to Bush’s campaign-in-waiting, paying a series of staffers and vendors who ultimately took roles with the official campaign, including the firm of Bush’s campaign manager, Danny Diaz.

The Larrison Group was also among those receiving payments from Right to Rise USA during that period, taking in roughly $145,000 for purposes including rent and finance consulting. In addition, at least one other individual who received payments from Right to Rise USA appears to be a Larrison Group employee.

The super PAC’s payments to the Larrison Group — described as being made for purposes including finance consulting, travel, rent, furniture, and equipment purchase — overlapped in time with the payments to LKJ, LLC, which were described as finance consulting.

Right to Rise USA paid LKJ, LLC roughly $620,000 during the first half of the year, more than 11 percent of the super PAC’s total expenditures, with the most recent payment listed as being made on June 2, less than two weeks before Bush officially announced his bid.

The super PAC doesn’t have to file reports disclosing its expenditures beyond June 30 until next year.

LKJ, LLC also received roughly $95,000 in payments from Bush’s leadership PAC, which is called Right to Rise PAC, Inc. The connection between the Larrison Group and LKJ, LLC isn’t readily apparent.

LKJ, LLC’s Delaware incorporation paperwork, filed in February, gives no information about its ownership.

But Right to Rise USA listed the LLC’s address as a post office box in Washington — the same post office box number used by the Larrison Group. The two companies were listed on the campaign finance records as using different ZIP codes.

But a Center for Public Integrity investigation confirmed both ZIP codes direct mail to the same post office box, housed at a post office in the city’s upscale Georgetown neighborhood.

Several campaign finance lawyers said they typically advise against candidate committees and super PACs backing those candidates sharing vendors unless the situation is unavoidable, for the sake of appearances, if nothing else. Still, they all stressed that the practice is legal when appropriate measures, such as firewalls, are in place.

There are other connections between the Bush campaign and Right to Rise USA.

Independent expenditure reports filed by Right to Rise USA show it paid Redwave Communications, an Iowa-based company owned by David Kochel, a senior strategist for the Bush campaign, as recently as August.

Redwave Communications did not respond to a request for comment. The Bush campaign did not respond to a request for an on the record comment for this story, but has repeatedly said the campaign “complies with all federal campaign finance laws and regulations and requires the same of its consultants.”

Ties that bind?

In addition, another LLC formed this year, Digital Core Campaign LLC, has taken in payments from the Bush campaign, the Right to Rise super PAC and the Right to Rise leadership PAC that together total nearly $696,000.

Digital Core Campaign LLC’s registered agent and manager is Andrew Barkett, a former Facebook engineer and chief technology officer to the Republican National Committee.

Barkett said he alone owns the company, which he said he set up in order to market his services to political clients. He confirmed that so far, his only federal political clients have been the Bush campaign, the Right to Rise super PAC and the Right to Rise leadership PAC, but he said the company is bidding on other work.

In addition, he said that Digital Core Campaign LLC is now working only for the Right to Rise super PAC, not the campaign or leadership PAC, though he did not rule out doing additional work for the campaign or leadership PAC in the future.

The company has 11 employees, some of whom are contractors, he said. He added it has put in place required internal procedures such as audits, firewalls and systems to make sure nothing is improperly shared between customers.

“We are certainly not an entity tasked with sharing all data between” entities backing Bush, he said. “We don’t do that.”

In another example of shared vendors, three fundraisers who over the summer parted ways with the Bush operation had raised money for both the super PAC and the campaign committee, the campaign confirmed to Bloomberg in September, saying there was FEC precedent for fundraising consultants to have multiple clients.

At the time, Bloomberg reported that Right to Rise USA spokesman Paul Lindsay had declined to say whether anyone else was consulting for both the super PAC and the campaign.

The Campaign Legal Center is among the watchdog groups that have questioned whether fundraisers can work for both a campaign and a super PAC supporting the candidate.

In a 2014 complaint with the FEC, the group argued the practice is prohibited by campaign finance law prohibiting candidates and their agents from soliciting contributions above the amount individuals can give to a campaign committee.

The matter is still pending before the frequently deadlocked commission, which Potter said has left a gap by failing to squarely address the question.

“This is another example of why this FEC gridlock is gutting the laws,” Potter said. “If they’re not going to resolve these issues, nobody knows what is permitted or not, and thus the practice becomes to go ahead and use common vendors and then to try and hide it through obfuscation.”