It’s nice work if you can get it—“it,” in this case, being other folks’ hard-earned cash.
The world of political fundraising has a big problem. Consider an excellent investigation by ProPublica and Politico published Friday about a political-action committee called the Conservative Majority Fund, which, the authors write:
has raised nearly $10 million since mid-2012 and continues to solicit funds to this day, primarily from thousands of steadfast contributors to conservative causes, many of them senior citizens. But it has made just $48,400 in political contributions to candidates and committees. Public records indicate its main beneficiaries are the operative Kelley Rogers, who has a history of disputes over allegedly unethical fundraising, and one of the largest conservative fundraising companies, InfoCision Management Corp., which charged millions of dollars in fundraising fees.
Such groups, often labeled “scam PACs,” are not new, and though they seemed to gain a toehold on the right first, liberal counterparts have been catching up in the Trump era. The basic setup is something like this: A group raises money it claims will go to some political cause, but ends up spending no money, or effectively no money, on that goal, instead directing the funds to other ends—often to its founders or staff in the form of salaries, payment for services rendered, travel, and the like. The Conservative Majority Fund is just an especially extreme example.
Broadly speaking, U.S. campaign-finance laws have been written to prevent nefarious influence by donors over politicians. To that end, the government limits (for now, at least) how much an individual can give to a candidate. It prevents “straw donations,” in which an individual routes donations through other people, since that would give a single individual undue influence. It prevents donations from foreigners to U.S. political campaigns. It requires that campaigns and some other bodies disclose who has given to them. The unifying principle is the presumption that the public needs to worry about who might influence a politician. Scam PACs bypass that principle. Here, it’s not the donors who are taking advantage—it’s the donors who are being taken advantage of, by operators who have spotted a shadow in the law in which they can operate.
Politics is a lucrative business, and campaign operatives routinely take office seekers for rides. Sometimes that is because they are unscrupulous, and sometimes that is simply because the operative makes errors or because the candidate just can’t cut it. (After all, most candidates lose.) “The consultant is selling something to the candidate,” the political scientist Adam Sheingate told Molly Ball in The Atlantic in 2016. “The confidence game is that the candidate is always a little afraid. They’re always a little scared they can lose, and that’s what the consultant exploits.”
It’s hard to feel much pity for candidates who light their campaign cash on fire. But the kind of people who give to scam PACs are more sympathetic. CMF, for example, relied heavily on telemarketing, which is both an extremely expensive method of raising funds—it requires live people to call would-be donors—and one that, like direct mail, is particularly effective at targeting older and often less sophisticated, more vulnerable people.
About $9 million of what CMF raised went to an Akron, Ohio–based telemarketing firm called InfoCision, according to ProPublica. Devoted readers will not be surprised to see the firm’s name here. As I reported in a pair of pieces on Ben Carson’s 2016 presidential run, the Carson campaign was raising astonishing amounts of money—but it was also spending eye-popping amounts. FEC reports showed that much of the money was being plowed back into direct mail and telemarketing fundraising. A lot of it went to a direct-mail firm run by Carson’s chief fundraiser, and big chunks also went to InfoCision and Eleventy, another company based in Akron.
In summary, Carson was raising cash from possibly unsophisticated donors and then spending it to raise more cash from unsophisticated donors. Carson didn’t end up with much to show for it—he was polling fourth, in single digits, when he dropped out in March 2016, though he did end up with a Cabinet position for which, by his own account, he was not qualified. But the vendors made a neat buck. InfoCision had previously been a major payee for a dubious PAC run by Newt Gingrich, which, as of mid-2015, had raised $1.25 million and spent $1.38 million, but gave just $2,500 to candidates.
Still, those numbers look like a model of efficiency compared with CMF’s ratios. The modus operandi—call people up, solicit money for a specific cause, and then spend next to no money on that—sounds a great deal like a standard variety of scam, Carolyn Carter, the deputy director of the National Consumer Law Center, confirmed to me. (Carter noted that the state and federal laws that govern what tax-exempt organizations can do are complicated, but in general, deceptive practices are barred.)
The catch here is who regulates the behavior. If you call people up, ask them for money, and claim most of the donation will go to a charity but don’t actually do that, you’re liable to get in trouble with the government. In fact, that has happened to InfoCision: In 2012, the Ohio attorney general reached a settlement with InfoCision in which the company paid a fine and agreed to abide by state laws. The company also settled a class-action lawsuit based on the same practices in 2014. (Those are not its only scrapes with the law. In 2018, the Federal Trade Commission fined InfoCision $250,000 for claiming that it was not asking for money in phone calls in which it asked for money. InfoCision also settled a class-action lawsuit in which employees said they’d been underpaid.)
But the FTC, state attorneys general, and other bodies that might regulate this kind of behavior in other spheres are constrained in their ability to intervene, because this is all happening under election law—which seems to be an ingenious loophole for bad behavior. As ProPublica notes, the FTC doesn’t have jurisdiction over political fundraising. That’s the province of the Federal Election Commission.
The FEC, however, is notoriously toothless, effectively created to deadlock. But even setting aside that problem, two Democratic commissioners acknowledged in 2016 that “the power of the Commission to directly and comprehensively protect political contributors is limited.” In 2018, the FEC asked Congress to amend the Federal Election Campaign Act to allow the commission to regulate fraud.
The Daily Beast also reported in 2018 that the Justice Department had brought charges against a scam PAC in Arizona, and a defendant pleaded guilty in November 2018. “This is the first-ever federal prosecution of fraudulent scam PACs, but it won’t be the last,” U.S. Attorney for Manhattan Geoffrey Berman said at the time.
One hopes Berman is correct. For the time being, scam PACs seem to have found a clever way to get away with behavior that might be illegal in other areas simply by doing it in the election sphere. It’s hard to besmirch any pursuit as routinely maligned as politics, but they have found a way.