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Dark money comes to light

Posted March 7, 2014

House Speaker Thom Tillis appears in an ad for N.C. House Legisaltive Partners

— Call it a ray of light, albeit a seemingly accidental one, into the world of dark money and policy making.

It was the spring of 2013, and lawmakers were busy drafting more than 1,700 bills, including a handful that had big implications for companies that manage homeowners associations and condominiums. At the same time, a group called Alliance for Better Communities, which is bankrolled by property management companies, gave four donations totaling $51,000 to a nonprofit closely tied to Republican state House leaders. 

Those donations to N.C. House Legislative Partners were legal. The group, which exists to tell "the story from the perspective of the men and women that make the decisions and cast the votes," is not required to report who gives it money or how that money is spent under either federal or state law. Good-government groups often call this type of fundraising "dark money," differentiating it from donations that must be disclosed on regular basis. 

The transactions would not have been disclosed at all, except that the property managers' group was a federal political action committee that had reported – well after the end of the legislative session – how it spent its money.  

As it turns out, the money from the property management companies provided more than half of the funds used to air an N.C. House Legislative Partners ad in the Greensboro and Charlotte television markets last spring that featuring House Speaker Thom Tillis, according to disclosure documents filed by other groups, tracking information from ad placement firms, other disclosure documents and interviews with those who have knowledge the groups. Money How money flows into elections

"As conference leader, I didn't know they had given the money, so it certainly didn't change the way I voted or the way I coached my members to vote," said Rep. Ruth Samuelson, R-Mecklenburg, who is responsible for many of the activities involved in getting GOP members re-elected.

Samuelson, who was featured a year ago in a three-minute video on the main page of the N.C. House Legislative Partners' website, says that sitting members of the General Assembly have limited involvement in and knowledge of the group's fundraising activities. 

But good-government watchdogs say it strains credulity to believe $51,000 came to a Republican House leadership group during the legislative session and lawmakers did not get word of it. 

"I'm sure every legislator would say, 'This didn't affect my vote at all because I didn't know about it.' But somebody knew about it; $51,000 is a lot of money," said Jane Pinsky, director of the North Carolina Coalition for Lobbying and Government Reform.

Who are the partners? 

In some respects, the fact that those whose industries are affected by state laws give in big chunks to state lawmakers' campaigns is an old and oft-told story. Campaign finance reports for lawmakers ranging from the Senate president pro tem down to rank-and-file members are filled in large measure with donations from those in regulated industries, ranging from doctors to beer wholesalers. 

Alliance for Better Communities Giving

Although $51,000 is more than many North Carolinians earn in a year, it would not make or break legislative campaigns in which top leaders raise millions of dollars for their parties. However, the donations from the property managers, made through their Alliance for Better Communities PAC, are noteworthy for three reasons.

First, they were bankrolled by corporate donations when, under North Carolina law, corporate donations to individual candidates are not allowed at any time.

Second, they came at a time when state law either prohibits or discourages those with interests pending before the legislature from making donations. State law says that those who have hired lobbyists, as is the case with Alliance for Better Communities, are prohibited from giving to lawmakers when the General Assembly is in session. 

Pinsky says such contributions make average voters wonder what those giving the money are getting in return.

"Any contribution like that is a bad idea because it undermines faith people have in our system," she said.

Finally, and perhaps most significantly, they help clarify an evolving campaign finance ecosystem in which money increasingly is given and spent in ways that shield it from public view. 

In this case, Republicans created N.C. House Legislative Partners in early January 2013, quietly filing the paperwork less than 30 days before the work of a new legislative session would begin in earnest. At the time, Republican leaders said they were "frustrated" by what they saw as an at-best incomplete portrayal of their work in Raleigh.

"We wanted something to get our story beyond Raleigh," Jordan Shaw, who was then a spokesman for House Republicans, said at the time.

Shaw is now the campaign manager for Tillis' U.S. Senate campaign. He referred questions to Samuelson.

Partners is organized as a 501(c)4 group and is technically a "social welfare" organization under IRS guidelines. The putatively nonpartisan group is supposed to spend less than half its time on political activities. 

In March 2013, N.C. House Legislative Partners announced it would air a pair of commercials featuring Tillis touting lawmakers' work. Two different sources with access to proprietary media tracking information said the total cost of the ad buys was slightly less than $100,000, all of it spent on cable or satellite television ad slots.

Roger Knight, a lawyer who works for the partners group, said the actual cost of the ads was closer to $90,000.

Roughly three-quarters of the spending targeted the Charlotte market, with the rest spent in the Greensboro area. 

The ads prompted speculation that the group would – at least initially – serve as a nascent campaign organization for Tillis, who would not officially announce his intentions to run for federal office until late May. When Tillis did get into the race, the nonprofit radically remade its website, all but wiping Tillis from its front page and replacing him with Samuelson, along with videos taped by three other senior Republican leaders. 

Curiously, one version of its front page now features pictures of both Republican and Democratic leaders. 

"It's an attempt to make them seem like an unbiased source of information," said Rep. Grier Martin, D-Wake, the Democratic Conference Co-chairman.

Martin said the group is clearly promoting policies favored by one group – Republicans – not the entire legislature. "They've never asked me to appear in a video," he chuckled. 

In exchange for a relatively nonpartisan patina, federal laws exempt social welfare groups like N.C. House Legislative Partners from saying who gives them money or how they spend it. However, a different kind of nonprofit group – the kind created by a group of North Carolina-based property management companies – does reveal such details. 

An alliance with its eye on Raleigh

Three property management executives filed the paperwork to create the Alliance for Better Communities in July 2012. Paul Mengert is president of Association Management Group in Greensboro. John Stone is president of Community Association Management in Pinehurst. Chris Gilleland is president of William Douglas Management in Charlotte. 

A database maintained by the State Board of Elections shows that Mengert individually has been a donor to mainly Democratic causes over the past decade, including donations to former Gov. Bev Perdue and current U.S. Sen. Kay Hagan. Gilleland has mainly given to Republican causes, including Tillis' individual campaign account. Stone has made few, if any, donations, the data show. 

But their new association, referred to as a 527 group in federal tax parlance, gathered contributions both from their own companies and others in the property maintenance business, including businesses like pool managers, plumbing companies and exterminators. 

Disclosure reports showed that some of the money was spent on events in the Raleigh and Charlotte areas. On Oct. 10, 2012, the group reported giving $25,000 to Real Jobs NC, political action committee organized in part by retail magnate-turned-state budget director Art Pope. Real Jobs spent heavily on mail and broadcast ads in support of Republican legislative candidates. 

In 2013, Alliance for Better Communities paid $25,400 to former Raleigh mayor and former state Republican Party chairman Tom Fetzer to lobby on the group's behalf. Fetzer declined to speak for the group, referring questions instead to Stone.

Neither Stone, Mengert nor Gilleland returned calls and emails seeking comment. 

A lobbying registration form filed by Fetzer showed he was hired to persuade lawmakers related to "landlord/tenant" issues, as well as "licenses" and "permits." The General Assembly's bill tracking system shows no fewer than seven bills with a direct impact on homeowners associations and similar groups were filed during the 2013 session. 

One bill, House Bill 331, streamlined the process for homeowners associations that want to foreclose on liens placed on properties when owners failed to pay their association fees, sailed through the General Assembly. Backers of the bill argue it is a consensus update that could result in better protections. It passed by wide margins, with only one House member voting against final passage.

Other bills that would have required homeowners association board members to get continuing education or subjected property management companies to regulation by the state Real Estate Commission never found their way out of committee. Typically, whether a bill is heard by or voted on by a committee is something determined by committee chairman, although that list is typically vetted by top legislative leaders.  Thom Tillis in TV ad New TV ad features NC House speaker

To be clear – none of those actions can be tied to a specific donation. Some of those bills were sponsored only by Democrats, which nearly always guarantees failure in a legislature controlled by Republicans.

But while none of this proves a quid pro quo, it is clear that, at the same time legislation was moving in ways that favored property managers, Alliance for Better Communities was giving heavily to N.C. House Legislative Partners. 

"The fact of the matter is we're talking about folks seeking to influence the legislature giving a whole lot of money," said Ben Ray, a spokesman for the state Democratic Party. "The payoff was that Tillis was able to run ads boosting his name identification, and this organization (N.C. House Legislative Partners) concealed all of it." 

Building a firewall 

It is a testament to the Byzantine nature of modern campaign finance laws that a group built for the benefit of House Republicans must, at the same time, shield those lawmakers from knowing about its basic operations.

Knight, the group's lawyer, says this is the case with N.C. House Legislative Partners for two reasons. One, he said, is to avoid influence on the legislative process. The other is to avoid running afoul of state and federal election laws that govern independent expenditures by nonprofit groups on ads that could be viewed as arguing for a political cause or purpose. 

"Elected officials do not raise money for NCHLP, make no specific solicitations and have no access to donor lists, other than what exists in public records," Knight said in an email to WRAL News.

In this particular case, Samuelson said she did not know that Alliance for Better Communities existed or that it had given the N.C. House Legislative Partners.

"I can't even tell you who is on the board of legislative partners," Samuelson said, describing herself as "disconnected." 

The N.C. House Legislative Partners website lists a four-member board – including John Stone, one of the board members of Alliance for Better Communities. The chairman is former state Rep. Danny McComas, a Republican who is now chairman of the State Ports Authority.

"Our mission is to educate the public," McComas said, although he was unable to give details of the group's financial dealings, referring most questions to Knight.

But others say the group is actually doing an end run around laws that are meant to disclose who is trying to influence those doing the public's business.

"We have a framework of law that is trying to promote disclosure and minimize the influence of lobbyists while the legislature is in session," said Bob Hall, director of Democracy North Carolina, a group with ties to progressive causes that has also been instrumental in starting investigations into former Democratic leaders such as Gov. Mike Easley and House Speaker Jim Black. 

"They are avoiding disclosure," Hall said of N.C. House Legislative Partners. "It's sad, and it's an indication that pay-to-play culture is not withering away. It's actually finding new ways to be involved right in the middle of the legislative process." 

48 Comments

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  • BIlzac Mar 10, 2014

    Some people only care about corruption and politicians being "owned" when said politicians are from the other party.

    Those people are a good chunk of our problem.

    Some people just accept corruption as inevitable, say everybody's doing it, and have decided we can't expect better.

    They are another big chunk of our problem.

    Of course there is the group who, for some unfathomable reason, refuse to even participate in the process.

    They are also a good chunk of our problem.

    Every day there seems to be a smaller and smaller group of people who truly hold all our political leaders to the same standard of reasonable conduct. There was a time when this was a big group, and therefore capable of pushing for change. Now this group is so small as to be safely ignored by both sides, in favor of pandering to the extremists.

    You see those extremists all over these forums.

    We have the government and political "leaders" the extremists have demanded.

  • glarg Mar 10, 2014

    View quoted thread


    First off I have to note that you seem to be conceding that there was no actual corruption being demonstrated in this story.

    Secondly, what are you Democrats afraid of? Someone runs an ad saying "Kay Hagan isnt listening to North Carolinians. Call Kay Hagen and tell her what you think of Obamacare" . So what! How little do you guys think of the intellect of your fellow citizens that softball "call Kay Hagen" ads are going to awaken an army of zombies to vote her out. If your argument only works with no counter argument it wasnt a very good position to start with.

    It might be instructive to read Citizens United. The government isnt allowed to decide which speech criticizing it is approved and which isnt. Thats the whole point of the First Amendment- if the incumbent powers liked your speech there would be no need to protect it.

    Obama raised nearly a billion for 2008 and raised 1.1 BILLION in 2012. What is he scared of?

  • goldenosprey Mar 10, 2014

    So glarg, you distrust the media, a disparate group of corporations competing with one another on a limited set of platforms having influence on elections, yet you are hunky-dory with large corporations in general owning and operating government and buying elections. Curious. How do you square this from a philosophical standpoint?

  • glarg Mar 10, 2014

    View quoted thread


    Can you tell us what you think the corruption is? I doubt anyone could.

    How is this even scary 'dark money' if it was reported on a federal form?

  • Teresa Engel Mar 10, 2014
    user avatar

    View quoted thread


    I seriously doubt that Soros owns any more members of Congress than the Koch brothers. I bet we could ask Renee "I need my paycheck" Ellmers how much money they put in her war chest. But, it would be a moot point since she wouldn't tell us the truth if her life depended on it. She would likely say something to the effect, "I didn't know anything about them."

  • mike275132 Mar 8, 2014

    "CHATHAM ADAM MAR 7, 6:10 P.M.
    Art Pope and the Koch brothers out in Nebraska (or wherever they're from) currently own NC's government lock, stock and barrel."

    Agreed , just like Hungarian Billionaire George Soros and Obama's Organizing for Communes own the Democrat Regime.

  • Bill Sorenson Mar 8, 2014
    user avatar

    Nothing but a hit piece on a threat to Kay Hagen. I am not suggesting Tillis isn't gaming the system but they ALL game the system. Just as soon as you do an expose on the Democratic fundraising schemes and incredible amount of money from out of state that they receive, I will care. Until then, try to stay neutral. Or if you are going to do a hit piece, pick a target from both sides of the aisle. Remember Jim Black? I do.

  • Charlie Watkins Mar 8, 2014
    user avatar

    The media will have to do a whole lot better than this to retain Kay's seat in the Senate. It will be a test of their resourcefulness to see if the media can tarnish Tillis into defeat.

  • shareisa Mar 8, 2014

    I am sick to death of all the corruption in government. We need term limits! Now Duke Energy is going to charge us for their cleanup too?! When will Americans rise up? We are asleep at the wheel while these politicians get away with murder and our money too. Speaking of homeowner's associations, why are NC citizens allowing all of this ugly high-density, clear-cutting, housing and commercial development that is removing all wildlife habitat and trees?! We are too busy paying attention to what color the houses are in Beige Land!! Get a grip and save our trees and stop this before it is too late!

  • Chatham Adam Mar 7, 2014

    Art Pope and the Koch brothers out in Nebraska (or wherever they're from) currently own NC's government lock, stock and barrel. This $51K in so-called dark money is chump change.

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