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Fact Check: Democrats hit McCrory with ethics claims

Posted May 21, 2012 4:14 p.m. EDT
Updated May 22, 2012 8:46 a.m. EDT

— Pat McCrory has long campaigned on a pledge to clean up a "culture of corruption" in Raleigh, so a new ad bank-rolled by a national Democratic group questioning the Republican candidate for governor's own ethics has touched a nerve.

Lawyers and operatives for McCrory have been pressuring stations to remove the ad, which is attributed to North Carolina Citizens for Progress, because they say it unfairly tars their candidate. As well, they say the Democratic Governor's Association, who provided funding for the ad, is hiding behind a front company, North Carolina Citizens for Progress.

Lawyers and others associated with Citizens for Progress push back that McCrory is trying to alter his own record and insist that all their funding has been properly disclosed.

We had our own questions about the ad and those who created it. What we found is that while the individual components of the ad are true, how they are put together creates a misleading impression for viewers. 

What is North Carolina Citizens for Progress?

Cleta Mitchell, a lawyer for McCrory's campaign who works for Foley & Lardner in Washington, D.C., wrote to television stations asking them to stop airing the North Carolina Citizens for Progress ad. In the letter, Mitchell writes, "The Ad falsely claims to be sponsored by an entity called 'North Carolina Citizens for Progress' when, in fact, the true sponsor is the Democratic Governors Association."

So what is North Carolina Citizens for Progress?

It is a 527 group, so named for the part of the federal tax code under which it is organized. Such independent expenditure groups are free from the kind of fundraising and spending limits placed on candidates and certain political action committees organized under North Carolina laws. 

This is not the first time a 527 has been active in North Carolina. For example, the Republican-aligned Real Jobs NC was a 527 active in helping to elect GOP lawmakers in 2010. 

A form filed with the IRS in October lists a three-member board for Citizens for Progress that includes Sarah A. Boney, the owner of a Triangle-area pharmaceutical marketing firm and the board's president. Michael L. Weisel, a lawyer active in Democratic politics in North Carolina, is listed as the secretary and treasurer, although he says he is not a board member.

A second form filed with the IRS shows the group has gotten in-kind contributions from both the Democratic Governor's Association and the "NEA Advocacy Fund," an arm of the National Education Association, a national teacher's group. 

Weisel confirmed that the DGA had given a contribution that largely bank-rolled the specific ad in question. However, he said other groups and individuals have and would be contributing to North Carolina Citizens for Progress. A spokesman for the DGA confirmed their group was a contributor to the 527 group but said North Carolina Citizens for Progress had produced and bought the air time for the ad.  

"We are very grateful for the DGA's support, but make no mistake, the decisions about the ads and its airing are being made by the local group," Weisel said. 

While the DGA could have used its own advocacy arm to pay for the ads, as the Republican Governors Association did with recent attack on Democratic candidate Walter Dalton, Weisel said having a local group produce the spots ensured the ads would speak to issues relevant to voters in the state.

"We won't have people from Washington, D.C., parachuting in and blowing up the landscape," he said. 

Still, McCrory's campaign has insisted that North Carolina Citizens for Progress is merely a front group in letters to stations as well as a complaint to the FCC.

"Obviously, a viewer who sees an ad paid for by my client’s partisan opponent will be viewed differently than an ad sponsored by an ostensibly neutral citizens’ organization. It is unacceptable for these stations to be allowed to continue to knowingly and willfully violate the clear provisions of federal law," Mitchell wrote to the FCC on Monday.

It would be fair to note that both Weisel and Boney described their organization as being "progressive," a term generally used to describe politics practiced by the more liberal wing of the Democratic Party. And it was not hard to find public records that indicate who North Carolina Citizen for Progress's funders might be. 

One final note: (Updated)* Progress North Carolina Action, a liberal advocacy group, is publicizing the ad and talking it up to reporters. However, Gerrick Brenner, Progress NC Actions' director, says it has contributed no money to airing the ad.

"We don't have that kind of money," Brenner said. 

Still, the connection and similarity in names caused confusion among reporters when the ad first started to air, and some attributed it to Brenner's group initially. To make matters more hazy, Progress North Carolina Action is a 501(c)4. He also heads Progress NC, a 501(c)3 that speaks on matters of policy, but he emphasizes his work on this ad is for the (c)4 group and not the (c)3. Still, the policies and positions of the two groups would be hard to distinguish, except (c)3 groups are not allowed to take positions in political campaigns. 

What does the ad say? 

The ad script reads:

"Pat McCrory's questionable ethics. Case No. 1: Tree.com – a company that paid Pat McCrory over $140,000 to sit on its board while he was mayor of Charlotte. Its mortgage companies, charged with deceiving customers, paid millions to settle. And Pat McCrory? He used his position as mayor to lobby state government for millions in tax breaks for the company. Is Pat McCrory the guy to clean up Raleigh? You've got to be kidding." 

This ad is designed to to turn one of McCrory's key strategies – attacking Dalton as responsible for ethical lapses by officials in Gov. Bev Perdue's administration – against the former Charlotte mayor. The implication is that McCrory has ethical issues of his own. 

It also ties McCrory to a mortgage lender, a category of companies much demonized in the wake of the recent recession, which in large measure can be traced to problems with mortgage-backed securities. 

While it may be politically smart, are its claims accurate? 

Did McCrory really earn $140,000 from Tree.com while mayor? If he did, is there anything wrong with that? 

In a Schedule 14a proxy filing with the Securities and Exchange Commission, Tree.com reported paying McCrory $78,333 in cash and $62,500 in stock during 2009.  That total compensation would be more than $140,000. 

A spokeswoman for Tree.com confirmed that McCrory's service as a board member started on Jan. 26, 2009. McCrory left the mayor's office in December 2009. 

In its letter to stations, McCrory's campaign points out that his terms as a board member and mayor overlap by less than a year. Brian Nick, a spokesman for the McCrory campaign, said that the amount of the compensation was not in dispute.

McCrory still serves on the Tree.com board, and SEC reports indicate his total compensation is more than $100,000 each year.

The bigger question might be whether there is anything unethical about McCrory's serving on the board at all.

In North Carolina, being mayor is a part-time job, even if one is serving as mayor of the state's biggest city. The annual salary for Charlotte's mayor is $22,000 with a $10,000 expense allowance and a $4,800 auto allowance. 

"Having private employment is not only done frequently, but is necessary," said Charles Meeker, a former Raleigh mayor who works as a lawyer. Virtually ever mayor, unless they have retired, has some private employment, Meeker said. 

Meeker did not speak to the specific relationship between McCrory and Tree.com. 

For most of his tenure, it was well known that McCrory was a Duke Energy employee. He quit in January 2008 as he ran for governor against the Democrat and eventual winner, Perdue. 

The ad suggests that McCrory used his position as mayor "to lobby" for Tree.com. Wouldn't that be an ethical issue? 

If it were true, yes it would be. 

This claim is based on a 2006 letter from McCrory to then-Secretary of Commerce Jim Fain asking for help keeping Lending Tree headquartered in Charlotte. The company was being courted by South Carolina, and Charlotte could not match that state's incentive package alone. 

The first thing to note here is that this letter came three years before McCrory was named a Tree.com board member. And the ad uses the term "lobbying" in its generic, plain English sense, not the legal definition sketched out in North Carolina's statutes.

It's also important to note that Lending Tree changed ownership in 2008, so the company that McCrory wrote a letter for in 2006 was a much different entity than the one that put him on the board of directors in 2009.

So it would be inaccurate to say that at the time of the 2006 letter McCrory was employed by Lending Tree or Tree.com. Mayors across the state regularly ask for help recruiting and keeping companies as part of their duties. 

Brenner, of Progress NC, argues this ad merely illustrates a slice of McCrory's connection to Tree.com. Executives for the company have been donors to his campaigns for mayor and governor. And now that McCrory works for the Moore & Van Allen Law Firm, Tree.com is a client of that firm. 

Brenner and other Democratic groups have been pressing McCrory to disclose what kind of work he is doing at Moore & Van Allen, trying to infer that McCrory was somehow hiding relationships with clients who might benefit were he to become governor. 

However, McCrory has filed all the required ethics and financial disclosures, and nobody has suggested that donations from Tree.com executives to McCrory's campaign were improper. While it's clear that McCrory and Tree.com have had a long relationship, neither Progress NC nor North Carolina Citizens for Progress has produced any documentation that the relationship was improper. 

"If this wasn't politics, it would be completely unacceptable," Nick said. "This is an ad that specifically says that Pat (McCrory) took action in 2006 because he wanted to profit from that action some years later ... They're saying this is a quid pro quo, when in reality he took action on behalf of the people of Charlotte and the Charlotte region."

Is McCrory responsible for Tree.com's legal problems? 

In the ad itself and backup material presented in response to questions, both Brenner and Weisel provided a document that details legal settlements involving Tree.com.

McCrory doesn't dispute that Tree.com was involved in those cases. Rather, they point out several of them were initiated before McCrory became a board member. As well, it would be short-sighted to pin the blame in any one case on a single non-employee board member.

In a phone conversation, Weisel acknowledged this claim was more about linking McCrory to a company whose businesses practices were being challenged. 

It's fair to note, however, that no such challenge has been brought in North Carolina. Brenner suggests that the topic is still fair game because McCrory would, as governor, appoint officials who regulate banking in this state.

Are stations pulling the ad?

This is unclear.

McCrory's campaign claimed that at least one small cable system had declined to run the ad. The campaign issued a news release Monday afternoon saying Triad-area station WXII, an NBC affiliate, had pulled the ad. 

WXII General Manager Henry "Hank" Price said the station does not "ever comment on anything having to do with business decisions." 

Weisel said he did not know of any station that had actually pulled the ad in response to the McCrory campaign letter, but that was before the McCrory release about WXII.

On behalf of the McCrory campaign, Nick said they were pressing the issue because letting this ad go would set a bad precedent for his candidate. It's obvious from the ad itself that its creators plan to air more like it.

"By not taking the most serious action we could take, we'd be saying, 'It's OK, you can say whatever you want,'" Nick said. "We refuse to accept that."  

So is the ad truthful or not? 

As with many political ads, its authors can claim cover from documents ranging from SEC filings to news releases issued over the years. Each specific piece of information is truthful in its own right. 

The question is less about the specific facts cited – whether McCrory received a certain amount of compensation – than the overall implication. The ad implies a quid pro quo where its creators cannot prove one exists. Further, mayors in North Carolina regularly have private sector employment, and the suggestion that this was somehow unusual in McCrory's case in unfair. 

That said, it is no worse (or better) than the ad the Republican Governor's Association aired against McCrory's main opponent, Dalton, and is likely to be joined by others this year that twist fact to fit a particular political point of view.