Memories of Easley campaign finances hazy

After the hearing roared out of the gate Monday – revelations included nearly $90,000 in flights aboard a private plane that were never paid for, repairs to Easley's home that were paid for with campaign funds and donations given to the state Democratic Party with the intent to benefit Easley's campaign – Tuesday's testimony focused on the fine points of campaign finance.

For the second straight day, Easley didn't attend the hearing, but elections board Chairman Larry Leake said he expects to call Easley as a witness Wednesday morning. Easley is the first sitting or former governor in North Carolina to face a campaign finance inquiry.

The elections board could take no action or issue a fine or reprimand in the case. The board's findings also could be turned over to the Wake County District Attorney's Office for possible criminal prosecution.

On Tuesday, Davis Horne, a Raleigh lawyer who served as Easley's campaign treasurer from 1993 to 2006, was grilled by elections board members and other attorneys for more than two hours, and Michael Hayden, a professional fundraiser hired by the Easley campaign for the 2004 election, spent more than an hour on the witness stand.

Neither man took responsibility for monitoring the flow of campaign cash to ensure that all contributions and expenses were legal.

"I think it was everyone's responsibility" to keep track of in-kind contributions, Horne said. "I'm not the designated compliance officer."

Later, Horne was asked about why he never questioned the lack of invoices for flights Easley took while on the campaign trail on planes owned by McQueen Campbell, a Raleigh real estate broker and longtime Easley supporter. "We reported all flights that we were aware of," Horne said. "I did not see my responsibility as treasurer to monitor the everyday activities of the campaign."

Hayden said there was little formal structure to the campaign's financial dealings, saying neither Horne nor campaign manager Jay Reiff kept close tabs on his fundraising activities.

"I didn't track all the donors to see who gave more than $4,000," he said.

State law limits contributions from individuals to a single candidate to $4,000 per election cycle. Corporate donations are banned.

"I was not the compliance director," Hayden said about efforts to ensure donations were properly reported. "I don't think anybody had that specific title."

Both men also discussed a memo Reiff issued in 2003 detailing a plan to use money from the Democratic Party to finance Easley's campaign since individual donations to political parties aren't capped and parties can give as much as they want to candidates.

"We can pay all of our expenses this way," Reiff wrote.

Officials haven't publicly named Reiff as the subject of a subpoena in the hearing.

State law prohibits donating to a political party for the sole purpose of benefiting a specific candidate, but political observers contend the lack of limit on contributions to parties invites abuse.

"This is a loophole that's been exploited by both parties for more than a decade," said Joe Sinsheimer, a Democratic political consultant and campaign watchdog. "It allows the very wealthy and politically connected to basically make unlimited contributions in our state and corrupt the political process."

Horne said he couldn't remember any discussion of Reiff's plan by campaign staffers, but he was certain that former Democratic Party executive director Scott Falmlen repeatedly said he and other Democratic officials would decide how to spend any money donated to the party.

Hayden said he doesn't recall talking to Wilmington businessman Lanny Wilson about giving money to the Democratic Party, adding that he would never suggest people try to evade campaign donation limits by funneling money through a political party.

He said his job with the campaign was "to effectively and persistently raise money within the law."

Jim Cooney, the attorney representing the Democratic Party, belittled Reiff's theory that party money could finance Easley's gubernatorial campaign, which spent an average of about $9 million in an election.

Using a chart to track fundraising, Cooney explained that the amount of money Easley raised for the Democratic Party was double what the party sent back to his campaign. Cooney also noted that the amount the party gave to the campaign amounted to about 3 percent of the campaign's expenses.

Leake said the elections board is trying to verify Cooney's numbers.

Andrew Whalen, the executive director of the state Democratic Party, said the party doesn't earmark donations for candidates.

"The Democratic Party always maintained control of the funds that were in its possession. If how those funds would be used were misrepresented, that's on those individual fundraisers," Whalen said.

In other testimony Tuesday, developer Gary Allen said he didn't give two $50,000 donations to the Democratic Party in 2003-04 with the intent of benefiting the Easley campaign. He also gave the maximum $4,000 contribution to Easley's campaign during the period.

Elections board members repeatedly tried to link the donations to meetings between Allen and Easley and an effort by Allen and Wilson to get an environmental permit for a boat dock at a coastal development they owned. Allen said he couldn't recall the timing of the donations, the meetings and the permitting effort, but he denied any link between them.

"To me, none of that was tied together," he said.

An FBI agent has been sitting in on the elections board hearing to gather information that could be used in a federal investigation. Easley's campaign finances are part of a grand jury probe into his dealings with friends and contributors while in office.