Some Real Morons Are Getting Very Rich As Political Consultants

Entitled The Campaign Casino-- Elections Have Become a Get-Rich-Quick Scheme, and the Press Is Missing the Story, Lee Aitken has penned a jaw-dropping report, just released by the Shorenstein Center on Media, Politics and Public Policy. Their point is that the media is missing-- perhaps purposely missing ("the U.S. press has been oddly complacent about that fact, continuing a tradition that puts the financial gains of political operatives--who are great sources and valued customers of the big media companies-- off limits")-- one of the most compelling stories behind how campaign finance laws are being used to enrich a whole class of political operatives, something DWT has been harping on for several years.

Aitken reminds us that $6 billion went through the hands of political operatives in the 2012 election cycle. Some of it stayed in those hands. I usually pick on the DCCC when giving examples of bad behavior but that isn't fair-- not when their corrupt practices are common all through the stinking Beltway, and on both sides of the aisle. When EMILY's List, for example, "suggests" that the candidates they raise money for hire The New Media, Inc., not everyone is aware that that firm's president, Tierney Hunt is the wife of EMILY's List Campaigns Director Jonathan Parker. The money EMILY's List demands cannot be spent on something useful-- like a field operation-- but must be wasted on a lame Beltway firm is going to personally enrich an EMILY's List executive. And I'm sure Jonathan and Tierney are lovely people and I certainly bear them no animus or mean to single them out. If they didn't do this they would be among a tiny minority of Beltway operative who don't-- even if EMILY's List has, in the last couple of years, turned into one of the most pernicious of all.

Aitken asks, "who pocketed all the cash?" He estimates that after $5 billion went to media-- of which a hefty percentage goes back to the consultants and operatives-- "which left another one billion at the disposal of the 'campaign industrial complex'-- that standing army of consultants, pollsters, mailers, data gurus and field organizers." He wonders who has become fabulously wealthy from all this campaign money sloshing around inside the Beltway. "Did it create new financial incentives that changed the way the game is played or altered the political discourse? Has it, as some argue, bankrolled the polarization of America?" (Give Steve Israel's latest ex-wife, Marlene Budd, a couple of drinks and ask her and, I guarantee you, you will never donate another nickel to the DCCC.) I can imagine Aitken sneering as he asserts, "The presumption seems to be that these men and women are motivated by ideology and personal loyalty, their payoff, if any, just a happy coincidence and a private matter… The Daily Beast’s John Avlon recently described how Sarah Palin’s SarahPAC had spent most of its money on consultants and only a small fraction on candidates. He called the PAC “a lifestyle play, propping up an expensive ideological entourage,” and was moved to quote the great labor intellectual Eric Hoffer: “Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket.”

But this attitude is woefully out of date now that what Bloomberg Businessweek called “a Cayman Islands–style web of nonprofit front groups and shell companies” is being used not only to shield donors but also to obscure the self-enrichment of the political class. When a consultant can earn millions of dollars in a single election cycle by moving nimbly between the campaigns, the independent spending groups and the vendors that get their business, it’s time to revive the Watergate-era mantra, “follow the money.”

…As they now stand, both the FEC and the IRS disclosure rules are weak, lopsided and poorly enforced. For donors, at least, they attempt to track contributions all the way back to the person who writes the check, even if the trail is sometimes lost in a thicket of so-called “dark money”-- that is, transfers among groups that need not identify their donors. On the spending side, however, reporting requirements stop far short of a personal bank account. Rather, they have allowed hundreds of millions of dollars to disappear into quickly set up shell corporations and vaguely named tax-exempt groups with no final accounting of services rendered or profits made.

One of the few legal prosecutions, so far, of a 2012 campaign violation exposed the enormous potential for both self-enrichment and sleights of hand in the current system. The California Fair Political Practices Commission traced $29 million raised to run ads about state ballot measures through a daisy chain of dark money, 501(c)(4) tax-exempt groups. The linchpin for this maneuver was the Center to Protect Patient Rights (CPPR), which a former Capitol Hill aide named Sean Noble [steered nearly $10 million in fees and expenses to his private consulting firms in 2011] operates out of a post office box in Arizona. The organization’s sole function appears to be accepting grants and making grants for a network of conservative nonprofits with ties to the Koch brothers.

In this case, the $29 million from California donors who wanted to remain anonymous was steered to the Virginia-based Americans for Job Security, which passed $24.5 million to CPPR. Noble then made two grants: $18 million to another 501(c)(4) he’d set up in Arizona, Americans for Responsible Leadership (ARL), which passed on $11 million to the Small Business Action Committee (SBAC) in California, and $7 million to Iowa-based American Future Fund, which gave $4 million to the California Future Fund.

California officials called this “money laundering” and eventually levied the state’s largest-ever campaign fine-- $ 1 million-- against CPPR and ARL. They also demanded that SBAC and California Future Fund pay $15 million to the state treasury, although the latter group has already closed up shop… The $1 million fine levied against CPPR and ARL was quickly paid by cashier’s check with no indication where the money came from.

…“Are political consultants immune from external scrutiny simply because their hearts are pure or their candidates hold the right positions on the issues?” Walter Shapiro asked in Salon in 2007, well before the Supreme Court let campaign spending completely off the leash. Similar logic was rejected for organizations such the United Way and the Red Cross after a series of self-enrichment scandals in the early 90s; traditional U.S. charities are now required to itemize salaries, perks and expenses. It’s possible that Noble’s companies gave good value for $10 million in 2011 and $24 million in 2012, but he’d be required to prove it if he’d been at one of those charities.

And if he worked directly for a campaign, there would be some accountability as well. In a candidate’s organization, “at least you have campaign managers and others who keep a handle on spending and fees,” said Mark McKinnon, who was a strategist for George W. Bush in 2000. In the new independent expenditure groups, “you basically have just a few people getting together to check the box on legal structure, and then they basically just divide up the money.” And, he added, “how you track the actual dollars will be very difficult if not impossible. That’s the ugly beauty of the scheme.”

…[In the bad old days] campaign advisors such as Dick Morris were getting rich from the traditional 15 percent commission on ad buys… [and] colleagues wondered whether Morris’s “strategic thinking” was being skewed by “financial self interest." … The unease about who might be getting rich did not rise as dramatically as the spending, however. Rather, it seems to have subsided into an attitude of acceptable inevitability. Because many of the fatter targets, such as Democratic pollster Mark Penn, also had a substantial corporate clientele, the growing wealth of campaign consultants was usually regarded as the by-product of a more professionalized political class. If these consultants had developed a mastery of polling, messaging and data analysis worth millions to business clients, it made sense that campaigns would pay a similar rate.

Traditionally, the consultants doing media buys kept a commission of 5 to 15 percent and returned some of it to the campaign staff who steered them the business. “So you’ll get a congressional campaign manager who on the surface you think is making $50,000–$60,000,” former Rick Perry campaign manager Rick Tyler told Reuters. “The fact is he could be making hundreds of thousands of dollars-- you have no idea because he’s being paid separate from what you’re seeing.” Neither the commissions nor the side deals need to be reported to the FEC. (After working for both Perry and Newt Gingrich in the last presidential race, Tyler became a senior vice president at Strategy Group for Media, the combative Ohio- based firm owned by Rex Elsass, where senior staff drive Bentleys and the boss has a private jet, according to a BuzzFeed profile.)… Tax filings show that Steve Law, the director of Crossroads GPS, earned $538,000 in 2012.

In a 2012 article on campaign ads, The New Yorker’s Jane Mayer reported that a top political consultant now makes about $4 million a year, which is more than most lobbyists. Current practice, according to her sources, is to pay seven percent of the ad buy to the media consultant, two percent to the pollster and one percent to the campaign manager. But it’s also become more common for top consultants to work for a flat fee.

This does not mean that a campaign’s spending reports to the FEC will show any seven-figure checks written to an individual, however. Annual salaries reported in those filings are higher than they were a decade ago but hardly outrageous for these all-consuming jobs-- in the $250,000– $300,000 range. But senior advisors do not usually appear on the payroll; rather, they own an limited liability corporation (LLC) that wraps individual compensation into some larger bill for creative or strategic services. (In 2008 most of Axelrod’s compensation would have come out of the nearly $4 million paid to AKPD Message & Media, the consulting firm he sold when he became White House senior advisor.)

…It’s increasingly common in both parties for political operatives to set up as vendors through so-called “integrated businesses” that provide basic services as well as strategic guidance to the campaign. Again, some of these are well established, and others pop up on demand. For example, Politico reported that shortly after GOP strategist Nick Ryan set up a super PAC for Rick Santorum, called the Red White and Blue PAC, Ryan incorporated a direct mail and telemarketing firm, Global Intermediate, that became one of the new PAC’s biggest vendors. (Ryan also played a role in the California money shuffle, as the go-to guy at American Future Fund, which has paid hefty fees to another of Ryan’s firms, the Concordia Group.)

“Any politician has a retinue of people that over time they build up,” said Meredith McGehee, policy director at the Campaign Legal Center and owner of McGehee Strategies. Becoming part of the inner circle is “a great business. You can make a good living growing all the different services to the candidate or to the super PAC.” In those situations, said Republican strategist Michael Murphy, who has advised many national candidates, the campaign must be a “savvy consumer,” and negotiate contracts that include full disclosure of the vendor’s costs and commissions. Otherwise it will see “dumb money rush out the door.”

This perfectly legal self-dealing was particularly noteworthy in the Romney campaign, where nine vendors with ties to staff received more than $160 million. Romney’s digital director, Zac Moffatt, for example, steered an eye-popping $95 million to Targeted Victory, a company he co- founded in 2009 with Michael Beach. Moffatt was officially on leave from the firm in 2012, collecting a $300,000 campaign salary. Senior advisor Myers said that, like American Rambler, Targeted Victory served as the general contractor for digital work, farming out tasks to numerous smaller shops.

As a private partnership, Targeted Victory has no duty to disclose how much it paid to other companies or how much was spent on online advertising, for which industry pros say 10 to 15 percent is the standard commission. Nor must it disclose the terms under which Moffatt resumed his partnership in the company, which had a banner year in 2012.

…One particular suite of offices in Alexandria, Virginia, epitomizes this tangled web of electioneering and self-dealing. In the prominent conservative blog Red State, Erick Erickson charged that the fifth floor of 66 Canal Center Plaza is “where the seeds of Mitt Romney’s ruin and the RNC’s Get Out the Vote (GOTV) effort collapsed-- bled to death by charlatan consultants making millions off the party, its donors and the grassroots.”

Suite 555 housed no fewer than 10 separate organizations, both profit and non-profit, working for the Romney campaign, the Romney super PAC, the Republican National Committee, American Crossroads and assorted smaller entities. The tangle of personnel connections and money transfers among these groups is so complex that The New York Times attempted to represent it in a graphic. The ringmaster was Carl Forti, a legendary operative who was political director of Romney’s 2008 campaign and then became a strategic advisor to his 2012 super PAC, Restore Our Future, while also serving as political director of Karl Rove’s Crossroads GPS and running a consulting firm, the Black Rock Group, in partnership with Michael Dubke.

As complex as it appears to be, the Times’ graphic oversimplified the actual situation on the fifth floor. It overlooked at least one tenant that figured prominently in the California money shuffle, Americans for Job Security. AJS, the 501(c)(6) founded by veteran GOP consultant Dave Carney, sent $24.5 million from California donors to Sean Noble’s CPPR after taking its $1.5 million cut. (According to the depositions, a 15 percent commission on the California money was split between the fundraisers and the groups that transferred the cash.)

Forti’s partner Michael Dubke is a former president of AJS, which is now officially headed by Stephen DeMaura, while Dubke and Carney have moved on to run Crossroads Media LLC. But, according to a recent report by the Center for Public Integrity, “Historically, Carney has tapped others to run the group [AJS] on a full-time basis while he works in the background, drumming up business.” That report describes how, in the 2010 election cycle, DeMaura and Carney, with Carney doing the talking, approached several candidates with the same proposition that later snagged the California fundraisers: Steer your big donors to us and we can spend the money to support your cause without revealing their identities. AJS subsequently paid $20,000 to settle a dark money complaint lodged with state authorities in Alaska, without admitting any wrongdoing, and was also named in an FEC complaint about dark money in a Colorado senate race.