Call it the fly-by-night super PAC.
Patriots for Trump was a political action group established in September to raise money in Donald Trump’s name and spend it, presumably, to help the Republican presidential candidate get elected. But Trump himself foreswore any connection with the group, and in late October, Trump’s lawyers insisted the group stop using Trump’s name to raise money and refund any donations it had collected.
Patriots for Trump complied with part of that demand: On Nov. 5, it shut down its web site and stopped soliciting donations online. Yet in less than two months, the group raised roughly $300,000—and possibly more—from donors who will end up with nothing to show for their contributions. None of them will get their money back, either: The group’s treasurer, Scott Mackenzie, told Yahoo Finance all the money raised by Patriots for Trump has been spent.
Super PACs are drawing howls of criticism—from Trump himself, who calls them “scams”—and from many others, including Democratic presidential contenders Bernie Sanders and Hillary Clinton. The main complaint is that super PACs, which have no limits on contributions, funnel vast sums from rich donors to favored campaigns, tilting democracy too far toward wealthy interests.
Yet there’s another dodgy element to the proliferation of money in politics, enabled by the 2010 Citizens United Supreme Court ruling and other recent court cases: an outbreak of fundraising groups that mislead donors about their intentions and mostly exist to enrich those running the PAC. Earlier this year, for instance, James Bond actor Daniel Craig gave $50,000 to a super PAC called Americans Socially United that he mistakenly thought was officially connected with Bernie Sanders’ campaign. It wasn't, and once Sanders learned of the group, he disavowed it, while his attorneys called it “illegal.” Yet the group is still operating, with a welcome message on its web site that reads, “Bet on Bernie!”
Getting into trouble
Of the several different types of poltiical fundraising committees, super PACs may have the loosest rules. Since they're technically supposed to be separate from any candidate's campaign, they're not allowed to cover traditional expenses such as the candidate's travel costs or salaries for campaign staff. They're also not supposed to use a candidate's name as part of their own, so in that regard, Patriots for Trump was breaking the rules.
But super PACs can raise unlimited amounts of money and spend it more or less as they want to. Legitimate super PACs, such as the Right to Rise group that backs Jeb Bush or Priorities USA, which backs Hillary Clinton, typically spend the majorioty of the funds they raise on ads or get-out-the-vote efforts. But there are no rules stipulating how much of the money raised must be spent on bona fide political activities. "People set up committees and collect money and you see 90% of it go toward administrative expenses or salaries,” says Larry Noble of the nonprofit Campaign Legal Center, which lobbies for tougher campaign-finance laws. "They'll say, 'we have to put up a lot of money to raise money, or pay ourselves a fair amount of money.'" The government could prosecute scam PACs for fraud, yet the Federal Election Commission, which enforces campaign-finance laws, is known as one of the least-aggressive agencies in Washington, rarely getting tough on violators.
Mackenzie is a controversial conservative operative who says fundraising groups often recruit him as treasurer because "I make sure the accounting is correct and the filings with the FEC are done on a timely basis." Yet critics say several other PACs he's been involved with have raised money in the name of candidates who ultimately received little support from the PAC in return. In some cases, the PACs spent as little as 2% of all money raised on campaign activities. Most of the money raised by those PACS went toward administrative expenses such as salaries, follow-on fundraising and consulting fees—sometimes paid to firms in which Mackenzie himself had an interest.
The Federal Election Commission has fielded at least eight complaints against Mackenzie since 2006, finding no fault in three of them. In four other cases, the FEC cited Mackenzie for minor violations such as "inadvertant" errors on expense-reporting forms. In the final case, it found he had “knowingly and willfully violated” campaign-finance laws. Even that violation, however, involved a relatively minor infraction: The tardy reporting of a single $1,385.75 expense. The FEC levied no fine or penalty against Mackenzie.
A 2014 lawsuit filed against a Mackenzie super PAC was more costly. Ken Cuccinelli, who lost the Virginia governor's race in 2013, sued a super PAC called Conservative Strikeforce, whose treasurer was Mackenzie. Cuccinelli claimed the PAC used his name to raise $2.2 million but only ended up spending $10,000 of that (less than 5%) on campaign activities. Conservative Strikeforce setttled the suit by agreeing to pay $85,000 to Cuccinelli's campaign. Mackenzie told Yahoo Finance a Cuccinelli advisor asked him to help raise money, even though the Cuccinelli campaign later called Conservative Strikeforce a "malicious scam PAC operation."
Dubious business model
The business model for Patriots for Trump seemed to be similar to that of other Mackenzie PACs. Filings with the FEC show the group spent close to $300,000 in October on mail and phone outreach to voters, efforts that can be used to bring in additional donations. It presumably spent more paying Mackenzie a salary, though the PAC hasn’t had to report that yet. Mackenzie says donated funds covered all those expenses, and his intent was to provide “groundwork” for Trump in the early-voting states of Iowa and New Hampshire by contacting possible Trump voters and urging them to show up on voting day, which will be next February in both states. “I wanted to be involved in Mr. Trump’s campaign,” Mackenzie said in a phone interview. “After getting the letter from his attorney, I thought it best to shut it down.”
In addition to the Mackenzie PAC, Trump’s lawyers sent cease-and-desist letters to 6 other super PACs claiming some affiliation with Trump. In general, they asked the groups to stop using Trump's name to raise money. Three of those groups, including Patriots for Trump, no longer have a web site, or never did. Four others still seem to be hanging on, despite the Trump warnings. One, called Make America Great Again, has a website but nowhere to donate. Another group, called Committee to Restore America’s Greatness, seems to be a work in progress, with a home page that says “opening soon” and a box to enter your email address in order to “find out when we open.”
Two other super PACs warned by Trump’s lawyers—Americans for Greatness and Let’s Trump Politics—remain active and do accept donations, which Yahoo Finance was able to confirm by contributing $5 to each using a credit card. Let’s Trump Politics sent a follow-up email saying the group “is in no way directly affiliated with Mr. Trump and any donations will not, by definition, be used to support Mr. Trump's candidacy in 2016.” It also offered a refund. However, the group does seem to be violating campign-finance laws by using Trump's name as part of its own.
There was no follow-up at all from another group Yahoo Finance contributed to, called Americans for Greatness, which lists Robert Cohen of Honolulu as its treasurer. Cohen did not respond to a request for comment sent to the email address listed on the PAC’s official paperwork (which doesn’t include a phone number). Super PACs can generally avoid legal problems by posting fine-print disclosures saying they're not affiliated with any candidate, which both Let's Trump Politics and Americans for Greatness now do on their websites.
Still, the very nature of super PACs may encourage the type of shady behavior Trump and many reformers decry, since by law they’re not allowed to coordinate with official campaigns, even when they genuinely support a given candidate. “You cannot be involved with a candidate,” Mackenzie points out, which means it's normal for a super PAC to raise money that the candidate it's supporting knows nothing about. If the candidates themselves are supposed to be kept in the dark, it's hard to imagine how voters are supposed to know who's asking them for money.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.