#PA13: The Margolies FEC Complaint – What We Know So Far

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bio-imageHere’s a synopsis of what has occurred so far with the alleged Margolies FEC violations:

This past Saturday, I sent an email to a staffer at the Margolies congressional campaign, inquiring about their campaign finances. It didn’t seem like she could possibly be keeping up with her spending rate, given the amount of money that was being fundraised. These are the questions I asked:

(1) What was your primary-eligible cash on hand as of March 30th?
(2) Did you classify any of your expenditures to-date as being for the general?
(3) How much did it cost to plan and execute the Clinton event?
(4) When did you pay for the Clinton event (food, beverages, facilities, staff, etc.)?
(5) It looks like Joe Trippi, DA Jones, and Linda August were not paid during the month of March. Have they been let go, or did they choose to defer their payments?

Their senior advisor, Ken Smukler, responded six hours later, very defensively:

“We do not find Keystone Politics to be a credible news organization nor this reporter to be a credible journalist on this topic as she has actively solicited campaign contributions for another candidate in the 13th congressional race.  Our campaign finance report speaks for itself.”

Screen Shot 2014-04-27 at 12.50.31 AMScreen Shot 2014-04-27 at 12.50.31 AM - Version 2 Margolies’ campaign spent an average of over $2000 a day, and in some finance periods spent more than was coming in for that quarter, further limiting her financial resources. Their daily average burn rate accelerated over time, meaning this wasn’t just short term mistakes by those managing the campaign or the ebb and flow of normal congressional campaign expenses; it was a conscious choice.

Meanwhile, there’s reportedly not a ton of field activity going on from their campaign (knocking on doors, phone banks, etc.). I reported on the information I could calculate myself, three days ago.

At 11:30 AM on Thursday April 25th, Senator Daylin Leach, one of four candidates competing in the May primary for Pennsylvania’s 13th congressional district, held a press conference. He announced his submission of a complaint to the Federal Election Commission against Marjorie Margolies, another candidate in the race. According to Leach, Margolies spent money specifically earmarked for the general election. Under FEC guidelines, individual donors may contribute up to $2600 for a primary election, and then up to an additional $2600 for general election. For PACs, the limit is $5000 per election, and in each case while you can raise money for the general election before you are the nominee, you are not permitted to spend it yet.

Press attendees and those on the conference call were provided with the data Leach and his legal counsel use to back up these claims, and this data comes directly from Marjorie Margolies’ own finance reports. You can check it out for yourself, HERE.

MM Primary Spending Charts-page-001 - Version 2

The Data
According to the first chart, Margolies’ campaign first dipped into general election funds to pay bills on January 15th, and continued to remain in the red until the last day of Quarter 1. Had they not reached at least the zero mark by March 30th, Margolies’ competitors and the FEC would have immediately noticed the breach of campaign finance law, because their total cash on hand would have been more than the amount raised for the general election. If you look at the very last bar on the graph, Margolies barely makes ends meet before the deadline, and does so by raising over $30,000 the very last day, as well as having her highly compensated political consultants forego pay during the final month. Her consultants’ acceptance of working for no pay for the final month is one of many indications that they knew their accounting practices were unlawful as much as they were unsustainable.

MM Primary Spending Charts-page-001 - Version 3The second chart maps the relationship between Margolies’ total fundraising for the general election funds that are ineligible to be spent during the primary election, and the overall “cash on hand” (COH) that Margolies had throughout this time period. According to FEC law, the red line is always supposed to be above the blue line. Clearly, that’s not the case.

Heated Dialogue
On Thursday after Leach’s press conference, Ken Smukler, who is one of Margolies’ highly paid consultants, told Philadelphia Inquirer staff writer Jessica Parks that the campaign “has at all times complied with all federal campaign laws. Period.” He referred to Leach’s FEC complaint as an attempt “to save his desperate campaign.”  Margolies has remained silent since the complaint was filed, and it is important to note that Smukler’s consultant fees were largely covered by funds Leach alleges were not legally accessible to the campaign.

Aren Platt, senior advisor to the Leach campaign, told the Inquirer on Friday that “the math speaks for itself. If they’re saying that what we know to be true, based on their own finance report, is not true, then they need to prove it.”

Smukler fired back, saying “Daylin Leach has become the carnival barker of this congressional campaign. Last week trying to get folks into his tent to watch him bad-mouth President Clinton, this week throwing a bunch of names at Marjorie. But like many clowns, he’s more sad than funny.”

What the FEC regulations say
Standard campaign finance practices include strict accounting measures, either through two separate books for the respective primary and general election contributions, or to be completely safe about it, two separate bank accounts. Finance law also mandates that a candidate who loses their primary election must reimburse donors of their general election contributions. By spending funds before Margolies has won her primary, she has clearly violated FEC regulations, even if they were able to make ends meet by the time their finance reports were due.

A misreading of campaign finance law would lead one to believe that general election funds can be spent as long as they are put back before the campaign finance deadline. This is not the intent of the law, and reading the law in such a way invalidates the point of contribution limits and attributions to the primary and general elections completely.

One reporter during the press conference brought up a 2009 FEC complaint against Jennifer Horn for Congress, in which Horn was not found to be out of compliance. The math was blurred in this case, as a large amount of small contributions had no date attributed to them. In other words, from day to day, no accountant could pin point the exact moment that Horn’s finances dipped into general election funds. All the FEC could prove was that by the time campaign finance reports came in, they were in the clear. This does not mean the principle of the law is that one can do whatever they want, as long as on a filing deadline day their numbers look solid. It only means that in this particular case, the exact day could not be pinpointed.

In Margolies’ case, Leach legal advisor Adam Bonin calculated daily totals with all of her unitemized contributions attributed to the first day of the quarter, thus eliminating this accounting variability from the scenario. The unitemized donations counted toward the daily total contributions for the entirety of Quarter 1. Even so, Margolies’ finances dip more than $70,000 into general election expenses during the first quarter of this year.

I’ve also been asked over the past few days if all this data just indicates that the Margolies campaign “went into debt” and got back out of debt before the deadline. Campaign debts are indeed completely different from spending general election funds, and a loan from a bank or from the candidate herself would have been noted on campaign finance reports.

If the original legal defense Ken Smukler made to the Philadelphia Daily News is correct, then during the end of this campaign, when 48 hour deadlines come into effect, the Margolies can spend into their general election fund on Tuesday as long as they make up the difference before midnight Thursday. This is a clear perversion of the law, and it still doesn’t explain how they’d be able to pay back their general election contributors should they lose the primary, as required by law.

Legal and Political Realities
This complaint and the issues it addresses will not be resolved before election day, as the Federal Election Commission takes months to examine the many complaints they receive. In general, most of the violations the FEC examines are with reliance on complaints from either an affected person in the dispute (a candidate) or by a citizen. If the FEC finds that they agree with the complaint filed, only Margolies and her campaign treasurer Jennifer May would be held liable for the violation. The staffers who were paid through funds not eligible to be spent would not face any consequences, and in the meantime, Margolies gets to continue to run for Congress. The complaint will be handled internally, and if there is a punishment or judgment against Margolies or campaign treasurer May, it will likely be a fine that may only equal a small fraction of the total contributions spent illegally.

The job Margolies’ lawyer has now is to make sure that this story does not become part of the mainstream conversation among eligible voters. The perception by the news media overall up until this point has been to label Margolies as the front-runner, but with new legal woes and hardly any cash on hand, it is clear to most with political savvy that this is not the case.

While Leach, Boyle, and Arkoosh continue to execute their field operations (making contact with voters through phone calls and door knocks), Margolies has barely enough money to cover basic expenses. It’s not even very clear at this point how she was able to cover the expenses of the Clinton event, just ten days after the Quarter 1 finance report was submitted.

We’ll have to wait until the next campaign finance report to find out.

Colleen Kennedy is a contributor for Keystone Politics. You can follow her on Twitter here.

This entry was posted in Elections, Greater Philadelphia, Miscellany, National Politics, Open Government, US House.

One Response to #PA13: The Margolies FEC Complaint – What We Know So Far

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