Wednesday, March 21, 2012

Friends of Weiner may get hit with FEC audit or enforcement action

[4/8 Update at bottom: Weiner campaign collected $337,078 for congressional reelection race he bowed out of, but after scandal only refunded $15,000 to 4 contributors; $5,000 went to June donors; still "an active candidate" for 2013 NYC mayoral race, disgraced ex-congressman has until June to decide what to do with reported $4.8 million war chest]

2011 was not a banner year for Anthony Weiner. He started out a Congressman who wanted to become NYC mayor, and ended it out of office in disgrace.

This year might not be so great, either, if the Federal Election Commission disagrees that contributions for an election that was never to be can instead be earmarked for "winding down" costs. Post-resignation expenditures include $50,000 in disbursements to a top fundraiser and $40,000 to a security investigation firm "sent on a fool’s errand" to clear Weiner of online infidelities he eventually confessed to, after first blaming on hackers.

On January 31, 2012, the FEC sent a letter to the treasurer of Friends of Weiner, which demanded a response by March 6, related to the former Democratic Congressman's October quarterly report.

Back in 2007 the New York Observer, reported that "the treasurer for Mr. Weiner’s campaign is Nelson Braff, the co-founder and executive vice president at Perrin, Holden & Davenport Capital Corp., in Manhattan, who, according to the biography on the company’s Web site, is also an amateur comedian."

An American Comedy Institute catalog adds:
A consummate public speaker, Nelson's hobby for years was stand-up comedy, and he performed at such high profile comedy clubs as Don't Tell Mama, The Improv and Caroline's. He and his longtime friend Jody Eisenman formed PHD Capital, a Wall Street brokerage and investment-banking firm, in 1995.

Since the FEC letter warned of a potential audit, Mr. Braff should - it goes without saying - take the matter seriously. However, his response seems to ignore some of the FEC analyst's concerns, appears rather terse, and may not be viewed as "adequate."
Dear Treasurer:

This letter is prompted by the Commission's preliminary review of the report(s) referenced above. This notice requests information essential to full public disclosure of your federal election campaign finances. Failure to adequately respond by the response date noted above could result in an audit or enforcement action.

Additional information is needed for the following 1 item(s):

- While it is permissible for a person to make a contribution for the general election prior to the primary election, the recipient committee must employ an acceptable accounting method to distinguish between primary and general election contributions. (11 CFR § 102.9(e)) This general election amount must be maintained in the committee's account.

Since the candidate is not seeking office and will not participate in the 2012 general election, any contribution received for the general election must be returned to the donors, in accordance with 11 CFR § 110.1(b)(3). The use of general election contributions to pay primary debts and obligations is prohibited under the Act as such use could result in individuals making contributions with respect to the primary election in excess of the $2,500 per election limit. Any subsequent report(s) filed with the Commission must disclose the refund of any general election contributions. Refunds must be done within 60 days after the candidate's announcement not to seek re-election.

If you have not already done so, please inform the Commission of your corrective action immediately in writing and provide a photocopy of your check for any refund. Refunds are reported on Line 20(a), (b) or (c), as applicable, of the Detailed Summary Page and on a supporting Schedule B of the report covering the period in which they are made. (11 CFR § 104.8(d)(4))

Although the Commission may take further legal action, your prompt action to refund these contributions will be taken into consideration.

Please note, you will not receive an additional notice from the Commission on this matter. Adequate responses must be received by the Commission on or before the due date noted above to be taken into consideration in determining whether audit action will be initiated. Failure to comply with the provisions of the Act may also result in an enforcement action against the committee. Any response submitted by your committee will be placed on the public record and will be considered by the Commission prior to taking enforcement action. Requests for extensions of time in which to respond will not be considered.

Electronic filers must file amendments (to include statements, designations and reports) in an electronic format and must submit an amended report in its entirety, rather than just those portions of the report that are being amended.

If you should have any questions regarding this matter or wish to verify the adequacy of your response, please contact me on our toll-free number [redacted] (at the prompt press 5 to reach the Reports Analysis Division) or my local number [redacted].

Jill Sugarman
Sr. Campaign Finance & Reviewing Analyst
476 Reports Analysis Division

The February 23, 2012 Friends of Weiner response to the FEC query was quite brief, and it may potentially get the campaign in deeper water, unless further information was provided before March 6.
This submission is in response to the Commission's request for additional information dated January 31, 2012, concerning the committee's October Quarterly Report (7/1/2011 - 9/30/2011).

The Committee used the funds that were in the committee's account to pay, as allowed in section 113.2 of the Commission's regulations, the ordinary and necessary expenses incurred in connection with the Congressman's duties as holder of federal office including costs associated with the winding down of the Congressional office. None of the funds contributed for the general election were used to promote his election to any office. The Committee refunded contributions to every contributor who requested a refund. The regulations expressly provide without any limitation that funds in a campaign account may be used for the purpose described above.

Friends of Weiner appears to completely ignore the analyst's complaint that "the recipient committee must employ an acceptable accounting method to distinguish between primary and general election contributions." The campaign also seems to be arguing - without explicitly stating it - that they are only compelled to return donations if contributors requested such.

According to CFR 113.2 - Permissible non-campaign use of funds include "[t]he costs of winding down the office of a former Federal officeholder for a period of 6 months after he or she leaves office."

Since Weiner's resignation took "effect at midnight, Tuesday, June 21, 2011," that would mean - according to that particular FEC rule cited by Friends of Weiner - the period would have commenced on December 21, 2011.

However, the most recent filing shows that multiple disbursements occurred after that date, including an $8,000 payment to campaign finance director Dolev Azaria [See previous article for more on Weiner's former next-door neighbor who has gotten paid over $50,000 since June: Weiner paid 'fund-raising whiz' $8K a month after he resigned] for administrative services, $2500 to Risa Heller for communication consultations, $1194 to TD Card Services for credit card payment, $1372.63 to the Baker Hostetler LLC for legal services and $5859.53 to SL Green Realty Corp. for rent all on December 30.

As the NY Daily News reported in February, in an article attributed to Alison Gendar called "Disgraced ex-Congressman Anthony Weiner used campaign money to hire private investigators to chase down his lie about his now-notorious crotch-shot tweet","Weiner paid T&M Protective Services of Manhattan $13,290 for 'legal services' in the fourth quarter of 2011."

That disbursement also occurred on December 30, which was nine days after the regulation cited by Friends of Weiner to explain why general election funds were being used to pay "winding down" costs.

However, the NY Daily News failed to note that the October quarterly filing shows Weiner paid T&M an additional $29,832.00 on September 1, 2011. According to Open Secrets, the Weiner campaign paid $43,122, in total, to T&M Protective Services in 2011.

According to the report filed on January 31, 2012, $25,311.02 still remained on hand at the close of 2011, so Azaria, Heller, and perhaps T & M might have gotten similar payouts at the end of January and even February.

Last October, Russell Berman reported for The Hill, "The handful of members of Congress who have resigned amid scandal in recent years have maintained active campaign accounts, federal records show, and they have spent tens of thousands of dollars in political contributions on legal fees, travel, public relations consultants and, in at least one case, the salary of a family member."
Weiner stepped down after admitting he had repeatedly lied about sending lewd photos and messages to women on social networking websites. His campaign reported refunding $15,000 in contributions during the third quarter, and ended the filing period with nearly $92,000 cash on hand.

“Most of the expenditures, including the travel to Washington, are associated with the winding down of Anthony’s campaign,” said Risa Heller, a Weiner spokeswoman whose firm is being paid by the campaign. “I remain on the payroll to field the regular calls, like this one, that continue to come in related to his service in Congress.”


The spending of political contributions on legal fees and even consultants after a lawmaker has resigned in scandal might be “unpalatable to the public,” but it is generally legal, said Lisa Gilbert, deputy director of Congress Watch at the watchdog group Public Citizen. “The only bright line that exists is that it [the money must be] connected to the time in office,” she said.

Only time will tell if the FEC decide to make an example out of Friends of Weiner. If an audit or other enforcement action is taken, then the FEC and media might look more closely at the nearly $100,000 spent just on Weiner's former "fund raising whiz" and the security firm hired to probe Weinergate.

"Please note, you will not receive an additional notice from the Commission on this matter," Sr. Campaign Finance & Reviewing Analyst for the FEC Jill Sugarman warned Friends of Weiner. "Adequate responses must be received by the Commission on or before the due date noted above to be taken into consideration in determining whether audit action will be initiated. Failure to comply with the provisions of the Act may also result in an enforcement action against the committee."

Weiner campaign collected $337,078 in contributions, but only refunded $16,000

According to the year-end filing for Friends of Weiner (pdf link), the reelection committee collected $337,078 but only refunded $15,000 to four donors after the Democratic congressman resigned. Two of the donors that received refunds appear to have made contributions after the scandal broke, but before and after he admitted sending tweets.

The October Quarterly filing shows that $2,000 was refunded to Titan Capital Group's Russell Abrams on 7/26, $5,000 to Soltana Cracker's Brian Gold on 7/26, $3,000 to Taconic Investment Partners' Paul E. Pariser on 7/13, and $5,000 to real estate developer Donald Zucker on 7/26. The July Quarterly filing shows $1,000 was refunded to Titan Research & Development's Aaron Malinsky on May 1, which was close to four weeks before the infamous underwear tweet was sent.

According to the FEC filing, Pariser's contributions were made on June 7, 2011, which was the day after Weiner finally admitted sending the underwear tweet. Abrams' contribution was recorded as occurring on June 2. Zucker's came before the scandal.

Alison Gendar reported for The New York Daily News on October 20, 2011:
“Given the way things went, and the fact that I had just made the contribution a week or two before the scandal broke, I asked for a refund,” said Brian Gold, president of Sultana Distribution Services, a Bronx-based candy distribution center.
Gold added, "Once the scandal broke and it was clear his mayoral aspirations were over, it just seemed to make sense to ask for a refund. It’s very unfortunate that his indiscretions went down that road."

Actually, Gold's contribution was recorded as occurring on 4/12/11, which was about a month and a half before "the scandal broke."

Weiner's resignation took effect on June 21, so all refunds were made within the required 60 days period.

Gendar also reported,

Weiner also has $4.85 million war chest from his aborted New York City mayoral run, according the New York City Campaign Finance Board.

He has not closed that account or provided any refunds, according to board documents. His next city campaign update is due in January, 2012.
However, there doesn't seem to be any updates in 2012, since the last recorded expenditure from Weiner's mayoral war chest, was on July 25, according to the NYC Campaign Finance Board.

Last August the Queens Campaigner reported,
Weiner’s war chest now contains about $4.8 million, according to records from the city Campaign Finance Board raised from 2007-09, which the disgraced congressman was widely expected to use for a 2013 run. And according to the board, he has not officially dropped out of the race.

“As far as the paperwork on file with our agency is concerned, he is still an active candidate for 2013,” said Eric Friedman, spokesman for the board.

Weiner has several options for how to spend the money, but he is forbidden from putting it toward personal use.

He could donate the money to charity, give it back to his contributors or use it to make donations to political campaigns.
Joe Anuta added, "Weiner is required to alert the board by June 2013, the next election year, whether he will drop out of the race. Other than that, Weiner does not need to make any decisions."

Weiner hasn't collected any donations for the 2013 NYC mayoral race since 2009, and as Anuta reported, "[a]lthough the money is currently in a race for a city office, it would be possible for Weiner to transfer it for either a state or federal race," even if it is years or decades from now.