FEC to NRCC: “I told you so!”

Posted on March 25th, 2008 Andrew G. Mandelbaum No comments  Print This Post

On February 1, the National Republican Congressional Committee revealed “irregularities” in its accounting practices. Wachovia Bank, which had made a $9 million loan to the NRCC in 2006, was notified and the FBI called in to investigate. Over the past four years, it was discovered, the NRCC treasurer Christopher J. Ward had funneled as much as $1 million of the NRCC’s funds to other political committees and, perhaps, campaign accounts; “dozens” of which he oversaw as treasurer. How was this permitted to happen?

According to the Federal Elections Commission’s rules, summarized in this Post article, “Campaign committees are not required by law to perform an internal audit each year… But most corporations and large campaign committees do perform regular reviews to ensure their numbers match the reports they file with the FEC.” Reporting inaccurate numbers to the FEC is, indeed, a violation of FEC rules and so punishable by fine.

Recognizing that under these rules organizations with sound accounting practices could be penalized due to the illegal actions of an individual staff member, the FEC issued a “Statement of Policy” in May 2007 entitled: “Safe Harbor for Misreporting Due to Embezzlement.” This document proposes a set of guidelines that, if followed, could absolve organizations of liability for inaccurate reporting. The guidelines are mostly commonsensical in nature, suggesting for example that bank accounts be opened in the organization’s name and that no single individual both “[receive] incoming checks and [monitor] all other incoming receipts.”

Bresnahan and O’Conner write at Politico that Rob Kelner, a lawyer hired by the NRCC to oversee its internal investigation, “admitted that the NRCC — which had not done a legitimate financial audit since 2001 — lacked some of the basic internal financial controls laid out by the FEC. Instead, he said, Ward was solely responsible for tracking much of the money that flowed through the committee.” Under Representatives Tom Davis and Thomas Reynolds, the NRCC relaxed other regulations, including a requirement that the executive committee sign off on expenditures exceeding $10,000.

The decision to reduce regulatory oversight was undoubtedly driven by the desire to increase electoral competiveness. With financial controls resting in the hands of a single individual, money could be rapidly disbursed to needy campaigns. Of course, this advantage comes with disadvantages that Christopher J. Ward, buoyed by his penchant for creative art (i.e. forging audit documents), was able to exploit.

New NRCC Chairman Tom Cole, claiming “we were the victims here,” hopes that the FEC will be swayed by the NRCC’s efforts to come clean and refrain from slapping the NRCC with a harsh fine. I beg to differ, not because I’m not a Republican, but because regulation – enforcement of the rules of the game – is what makes the U.S. political system function as well as it does (or as poorly, if you want to be negative about it). The NRCC tried to gain an electoral advantage – against the FEC’s recommendations – and got burned by one of their own good ole’ boys, resulting in the NRCC’s violation of FEC rules. “I told you so” should be the refrain of the FEC.

On a final note, Cleta Mitchell, a campaign finance lawyer for a number of Republican campaign committees, remarked of the people at the NRCC: “They’re not businesspeople… They won’t spend a dime on management.” Does Ms. Mitchell know that she’s working for the party of “small government?”