Dark money comes to light

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.

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.

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. 

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.

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. 

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. 

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. 

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. 

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." 

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." 

"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."