Monday, May 9, 2011
CONGRESSIONAL DEADBEATS & JUNK LAWSUITS!
By JOHN BRESNAHAN & JONATHAN ALLEN
The campaign committees of Jeff Denham, Tim Griffin and Laura Richardson are all in debt.
It’s no secret that Rep. Laura Richardson’s personal finances have been a big problem for the California Democrat. But what’s less known — despite regular, publicly available reports — is that her campaign committee is deep in debt, to the tune of $454,098.
About half of Richardson’s debt, $217,500, is owed to California political consultant John Shallman. Richardson, who had to defend herself against ethics charges related to a defaulted home mortgage, is also in hock for nearly $100,000 to Perkins Coie, a firm that handles legal and campaign finance issues for many Democrats. The ethics case was dismissed in July.
And Mike Fraioli, a longtime Democratic fundraiser, is owed an additional $74,000-plus by Richardson’s campaign, according to her latest filing with the Federal Election Commission. Richardson for Congress had only $36,128 in the bank as of March 31.
Richardson may be the poster candidate for the unofficial “Deadbeat Caucus.” That group is made up of election winners and losers alike — although mainly losers — who carry over campaign debts for months or years, sometimes even dying before paying their bills. There are more than a dozen House freshmen in this group — and 22 House lawmakers overall — who owe a total of $1.7 million to various vendors.
Richardson’s office declined to comment for this story.
According to an analysis of FEC reports filed by House members, most indebted campaigns owe money directly to the candidate themselves, some of whom forked over millions of dollars of their own money to underwrite the cost of their races. Often, such debts aren’t likely to be recovered.
Most House members, flush with contributions from influence-seekers after their latest victory, can pay off those debts quickly, if they choose to do so.
But in some cases, campaign vendors, including fundraisers, direct mail, media buy companies and law firms are left holding long-term IOUs from losing or retired politicians with no real recourse for getting their money back.
If these vendors enter into “debt settlement talks” with a candidate or an incumbent, they often receive a fraction of what they are actually owed. FEC rules require campaign vendors and campaign committees to make “all reasonable efforts” to resolve unpaid bills, including the use of “late-fee charges, referral to a debt collection agency or litigation,” and they can’t treat a political candidate differently “than a nonpolitical debtor in similar circumstances.” If they fail to meet those FEC standards, the services or materials provided by the vendor to the campaign committees may be classified as illegal contributions.
Political pros are often unwilling to take legal action to get these debts paid, fearing that such a move will damage their reputation among future clients. The world they move in is a relatively small one of campaign professionals in Washington and across the country, meaning any legal case becomes highly visible.
Yet while relatively rare, it does happen. For instance, Berger Hirschberg Strategies, a prominent D.C. fundraising firm, filed a lawsuit in January against Rep. Corrine Brown (D-Fla.), her campaign committee and Ronnie Simmons, her chief of staff, for breach of contract over $45,000 in unpaid bills. The case is still pending in D.C. court.
Election losers, in particular, may not have the ability to raise money from special interest groups once there’s no chance that they’ll be making laws.
“It’s the losers who get you,” one veteran political consultant told POLITICO. “It’s a little tricky. At the end of the day, you have to figure out who you trust and who you don’t.”
Some consultants and vendors calculate the “deadbeat factor” into their bottom line, according to several campaign pros.
But most are loath to discuss the topic, and finding someone who’s willing to go on the record about a deadbeat politician can be nearly impossible.
“Some people do weigh ‘I’m trying to get people to hire me and now I’m going to be in the papers,’” the veteran consultant said about the dilemma facing those who are owed a lot of money.
“In my early days in the business, I learned a hard lesson,” said another prominent Democratic fundraiser. “I learned that you can’t allow anyone to owe you too much money. You can get into trouble like that.”
As part of POLITICO’s analysis of member campaign debt, it was found that:
More than half — 13 out of 22 — of the House members who owe money are freshmen, including a handful from the historic GOP freshman class of the 112th Congress. Most of these sitting lawmakers should be able to pay off their debts quickly because donors will seek them out now that they are in office.
GOP Reps. Tim Griffin of Arkansas and Justin Amash of Michigan are each about $177,000 in arrears, campaign reports show. Rep. David Rivera (R-Fla.), who has already found himself in the ethics spotlight over his failure to report tens of thousands of dollars in loans from a company owned by his mother, owes $131,474. Freshman GOP Reps. Jeff Denham of California, Paul Gosar of Arizona, Jon Runyan of New Jersey and Bill Flores of Texas have campaign debts of $75,000 to $85,000. Veteran Rep. Trent Franks (R-Ariz.) has $112,621 in unpaid bills, and California Democratic Rep. Maxine Waters’s campaign owes $73,581.
Others lawmakers with debts of more than $10,000 include Reps. Cedric Richmond (D-La.), Nan Hayworth (R-N.Y.), Yvette Clarke (D-N.Y.), Richard Hanna (R-N.Y.), David Schweikert (R-Ariz.), David Cicilline (D-R.I.), Mike McCaul (R-Texas) and Corrine Brown (D-Fla.) as well as Del. Donna Christensen (D-V.I.).
At the end of March, each lawmaker had more money in outstanding debt than in a campaign account.
In some cases, a candidate will die before his or her campaign debts are paid off. That’s what happened with Jenny Oropeza, who still owed more than $70,000 at the time of her death last October.
Margaret Workman, a Democratic House candidate in West Virginia in 2002, owes $3,500 to a Chicago-based opposition-research firm. Workman is now the chief justice of the West Virginia Supreme Court of Appeals.
The most interesting set to watch may be the Democrats who lost in the past cycle. Bereft of their influence, it will be harder for them to raise money from donors to retire debts to vendors.
For instance, the campaign committee for former Rep. Alan Mollohan (D-W.Va.) — a one-time ranking member of the House Ethics Committee who later had his own ethics troubles — never declared until after the November election that the committee owed an additional $63,000 to campaign vendors.
The committee told the FEC in a Jan. 3 letter that it “was unaware that outstanding debt (besides loans) had to be reported.” While the Alan Mollohan for Congress committee paid off about $30,000 of that total, according to FEC records, it is unclear whether the remainder will ever be covered.
But congressional campaign vendors still don’t have it as bad as those political pros who find themselves on the wrong side of a presidential race. Presidential campaigns often take years to pay off their debts, as has been the case with Democrats Hillary Clinton and John Edwards. Republican Rudy Giuliani owes more than $200,000 to the telecommunications company Verizon from his presidential campaign and thousands more to his own security firm.
The most famous of unpaid presidential campaign bills was that of former Sen. John Glenn (D-Ohio). Glenn ran unsuccessfully for president in 1984, but his committee wasn’t closed until January 2006. At the time, Friends of John Glenn still owed nearly $2.7 million.
Posted by Eileen at 1:16 PM