Rickrolled: How Minnesota Congressman Rick Nolan and the DFL Party appear to have broken federal law

January 21, 2014

 

Shelly Mategko
Zenith City Weekly

Financial reports filed with the Federal Election Commission (FEC) in 2012 by the Rick Nolan for Congress campaign and the Minnesota DFL Party appear to show a coordinated attempt to circumvent contribution limits set by federal law.


A state political party may donate to individual campaigns up to $5,000 per election—cash and in-kind combined. Yet the DFL reported expenditures of $25,382 on salaries alone for Nolan campaign staffers before the primary election and $44,226 before the general election.


When Nolan won the DFL endorsement for Minnesota’s Eighth Congressional District on May 4, 2012, he had five staffers on his payroll. From June through the August 14 primary, that payroll dwindled to just one person—campaign manager Mike Misterek.


The others were transferred to the payroll of the Minnesota DFL. In June, the Nolan campaign added a field organizer and she, too, was placed on the DFL’s dime.

 

All of the staffers retained their titles and positions within the Nolan campaign and the campaign continued to reimburse them for expenses and consulting fees.


After the primary, Team Nolan added four more staff, two of whom were paid by the campaign and two by the DFL, with the campaign reimbursing their expenses.


Political parties are allowed to pay for campaign staff, but must report it as an in-kind contribution to the campaign, subject to the $5,000 limit. Instead, the DFL reported these expenditures as “Federal Election Activity” (FEA), which is exempt from contribution limits.


FEA activities include things like voter registration and get-out-the-vote efforts. Those paid with FEA money must be party employees, working on behalf of the party and not on behalf of one specific candidate. Among Nolan’s staffers paid in this manner were his campaign chair, field director, personal staff assistant, field organizer, political director, and finance assistant.


State DFL spokeswoman Ellen Perrault said she would have the appropriate person call back for comment, but no one called back before press. Eighth District DFL Chair Don Bye said he is “not in a position to comment.” Nolan spokesman Steve Johnson did not return calls. Campaign manager Mike Misterek could not be reached.


“Using FEA to pay for workers in traditional campaign staff roles sounds like a legal problem,” says Paul Ryan, senior counsel with the Campaign Legal Center in Washington DC, which represents the public in campaign finance matters. “If they continued to do work for the campaign, it should be reported as in-kind contributions to the campaign.


“The question gets down to who is giving the work assignments. If the campaign is giving their work assignments, then they are campaign employees. If they are performing day-to-day work for the candidate, then it is an in-kind contribution to the campaign and is subject to contribution limits.”


Regarding expense reimbursements, “campaigns generally don’t pick up the tab for party employees. It would be hard to justify spending limited campaign resources on expenses for employees who don’t work for them.”


Ryan noted a $5,000 “win bonus” (a reward to staffers for election success) paid in December 2012 to Nolan’s campaign chair, Jim Swiderski. However, at the time of the election, Swiderski was working for the DFL—at least on paper. “Why would a campaign pay a win bonus to someone who didn’t work for the campaign?”


Two FEC compliance specialists spoke to the Zenith on condition of anonymity because they are not authorized to speak to the press. Both agreed these expenditures “definitely sound like in-kind contributions...If they are working on behalf of a specific candidate, it would be considered an in-kind contribution to the campaign and subject to contribution limits.”


Then there’s the matter of independent expenditures, which are defined by the FEC as “an expenditure for a communication that expressly advocates the election or defeat of a clearly identified candidate and is not coordinated with a candidate, candidate’s committee, party committee or their agents.”


Those making independent expenditures are prohibited from “coordinated communications”—talking to the candidate’s team about the expenditure. This is important for transparency and because, if the expenditure is not independent, then it would be a campaign contribution.


In 2012, the Minnesota DFL reported $452,374 in independent expenditures on behalf of Rick Nolan, mostly for television, radio, and Internet advertising, all of which is perfectly legal, provided the DFL Party and the Nolan campaign were not communicating about it.


But it’s hard to believe they weren’t, given the deeply intertwined relationships between them. Not only were Nolan staffers on the DFL payroll, but he paid two of them for consulting services during the summer of 2012, while they were listed as DFL employees.


At the same time, he was paying consulting fees to Strategic Field Concepts, a company co-owned by Mike Misterek and state DFL Executive Director Corey Day, and to Don Bye, who was also paid consulting fees by the DFL. The DFL’s comptroller and FEC compliance officer was reimbursed for placing pro-Nolan ads.


Kathy Kiely of the Sunlight Foundation, a non-profit that focuses on transparency in political money, says this highlights the “ridiculously flawed law” that defines coordinated communications. SuperPACs, for example, make huge independent expenditures, yet they’re often run by people who once worked for the candidate in a prior election and now work for an organization advocating on behalf of the same candidate.


“But this takes it one step further,” says Kiely. “How can you not be coordinating these expenditures when the party is paying your staff? It defies credulity that the party can be making truly independent expenditures when they are paying the salaries of those working on the campaign. How is it even possible for those working on both to not be talking to each other?”


But Paul Ryan urges caution. “The key to independent expenditures lies with who within the party was responsible...It is possible for an organization making independent expenditures to meet federal law while employing campaign employees and employing common consultants or vendors.”


The FEC advises, but does not require, that campaigns and parties establish a firewall to prevent coordinated communications. “It may hinge on whether the DFL had a firewall in place. If there is no firewall or if they got sloppy, they may indeed have serious legal problems.”


Jim Niland, director of the DFL’s coordinated campaign, says the party’s attorney Charles Nauen sends out a firewall memo each election cycle, but Niland couldn’t remember the details of the memo in 2012.


He isn’t sure how involved state DFL Chair Ken Martin gets with independent expenditures, but says Martin certainly must be aware of them. “In order for any ad to have a ‘Paid for by the Minnesota DFL Party’ disclaimer, Ken must first see the ad and approve the content.”


While it’s up to the FEC to determine if any laws were broken, it’s not hard to understand why these activities might have been tempting. The 2010 defeat of DFL Representative Jim Oberstar by Republican Chip Cravaack stunned Minnesota Democrats, steeling their resolve to take back a seat that had been reliably DFL for 64 years.


In January 2012, the Democratic National Campaign Committee targeted Minnesota’s Eighth as a “Red-to-Blue” district, meaning the national party was prepared to spend millions to put a Democrat back in that seat, hoping to regain control of the US House.


In May, Nolan won the DFL endorsement by 76 percent. But there were two flies in the ointment—former Duluth City Councilor Jeff Anderson and former St. Cloud State Senator Tarryl Clark, who both opted to challenge Nolan, forcing the national party and its millions to wait on the sidelines until after the primary.


This gave Cravaack a headstart and placed tremendous pressure on the DFL. Everything was riding on Rick Nolan to recapture the bluest of blue districts.


He needed money badly. Before he could take on Cravaack, he first had to get past the fundraising behemoth that was Tarryl Clark, who had already been running ads since May.


According to FEC reports filed through July 25, 2012, Clark had raised over $1.1 million with almost $100,000 cash-in-hand. Nolan had raised only $357,655 with $87,898 cash-in-hand. An amended report filed in 2013 indicates Nolan’s actual cash-in-hand was really only half that amount. By shifting staff payroll expenses to the DFL, the Nolan campaign could funnel its resources into fundraising, media, and voter contact. The only question is whether in doing so, they ran afoul of federal law.


FEC reports filed in 2012 do not indicate that the DFL Party made similar arrangements with any other federal campaigns to split the tab for employees in traditional campaign roles, or that the party made independent expenditures on behalf of any other races in Minnesota.


“I have not heard of using FEA to make in-kind contributions in this fashion,” says former FEC associate general counsel Kenneth Gross. “The only way to find out is for someone to look under the hood.”

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