Money Train

These are not the best of times for Tom DeLay. Accused of illegally funneling corporate contributions to Texas state candidates, the Houston representative has been forced to resign his position as majority leader and faces continued ethical and legal fallout from his association with disgraced lobbyist Jack Abramoff. But, back in the summer of 2000, Tom DeLay was on top of the world.At the Republican convention in Philadelphia that August, no one outdid DeLay, who was the party whip at the time, and his chief deputy, Missouri Representative Roy Blunt. Outside the convention hall, DeLay and Blunt stationed five lavishly outfitted antique rail cars, where congressmen could eat and drink, as well as reserve limousines and drivers if they wanted to tour the city--all thanks to DeLay's political action committee, Americans for a Republican Majority (armpac), and Blunt's Rely on Your Beliefs PAC (RoyB). And that wasn't all: DeLay and Blunt dished up breakfast for House Republicans each morning, provided a hospitality tent where parties were held, and hosted an outing at the Aronimink Golf Club and an evening at the Electric Factory, where Blues Traveler played. These festivities didn't come cheaply. DeLay reportedly raised almost $1 million to fund the events. And corporations, eager to score points with the powerful Republican leaders, donated their goods and services, too. For instance, according to the Houston Chronicle, those antique rail cars were an "in-kind contribution to armpac" from Union Pacific. A month before the convention, a new law had gone into effect requiring that organizations like DeLay's and Blunt's file regular reports with the Internal Revenue Service (IRS) listing their contributions and expenditures. But, if you wanted to know exactly how much DeLay and Blunt blew on the 2000 convention, you would have to look elsewhere. That's because the documents their PACs filed for the months just before and after the convention list hardly any contributions or expenditures at all--certainly nothing that would explain the level of spending that took place in Philadelphia. A legal or ethical oversight, perhaps, but, if so, it seems not to be the only one that took place in that heady year, when DeLay came into his own as the most powerful Republican in Congress. The story of the missing convention expenses (and a related tale of the curious path taken by $150,000 that DeLay's PAC gave to Blunt that spring) reveal a lot about the symbiosis between DeLay and Blunt--and the way the two men turned greed and political power into cash. The collaboration between the congressmen began in 1999, when DeLay made Blunt his top deputy. The two worked together rounding up votes, but DeLay also introduced Blunt to the political machine he was building--one that, as I've written before, linked his congressional office to the country's wealthiest businesses and donors through a network of lobbies and PACs run by his own aides and former staff (see "Tammany Fall," June 20). At the center of this machine was the newly established Alexander Strategy Group (ASG), a lobbying shop founded in 1998 with DeLay's blessing by his former chief of staff, Ed Buckham. ASG's payroll included DeLay's chief political aide, James W. Ellis, as well as DeLay's wife, Christine. ASG's lobbying business started slowly, and it initially seemed to rely as much on political management as on lobbying for its income. Its partners and staff ran armpac and several obscure but well-funded organizations, including the U.S. Family Network (usfn) and Americans for Economic Growth. Because these groups did not explicitly support candidates, they were able to raise unlimited amounts of soft money without disclosing their donors or their expenditures. Some of these organizations, the Federal Election Commission (FEC) later ruled, were involved in laundering soft money. But they were also used to subsidize ASG. The usfn, for instance, which raised over $1 million, bought a Washington, D.C., townhouse for armpac and ASG and paid out huge sums for fund-raising and consulting. One of the obscure organizations ASG managed was a "nonfederal" branch of armpac, so called because it didn't contribute to candidates for federal office and thus did not have to file any paperwork with the FEC. It was this branch of armpac that raised money for the convention. According to his staff, Blunt worked with DeLay and Ellis on the nonfederal armpac. Blunt also launched a nonfederal branch of RoyB in July 1999, run by Ellis and ASG. In its first few months, Blunt's nonfederal RoyB appeared to operate independently of DeLay's nonfederal armpac, but, in 2000, they became intertwined. According to Missouri law, organizations that give to state candidates have to file a report with the Missouri Ethics Commission at least once per quarter. Blunt and Ellis didn't do this initially, but, in July 2000, they finally complied, although with less than full candor. According to these reports-- obtained from political watchdogs PoliticalMoneyLine.com and FiredUpAmerica.com, a website operated by veteran Missouri politico Roy Temple--the nonfederal RoyB claimed receipts of $249,837 for 2000. Of this total, $150,000 consisted of two transfers in the spring from DeLay's nonfederal PAC to RoyB's nonfederal PAC. PACs sometimes transfer funds to one another, but they do so most often in order to spread the credit around for political contributions. (A gives to B to give to C, who is then grateful to B.) RoyB made its own share of political contributions in 2000--almost all of them to Missouri Republican organizations that could pass the money on to Blunt's son Matt, who was running for secretary of state. But RoyB didn't spend all its money in this way. In fact, over the course of the year, it recorded expenditures of just over $150,000 to ASG and other DeLay operations. That amount looks suspiciously similar to the $150,000 RoyB took in from DeLay's armpac during this same period. In 2000, RoyB ran up a $145,000 bill with ASG for what it described as either "consulting" or "strategy and fundraising," and it paid out another $5,281 to ASG's usfn and Ellis for rent and utilities. In addition, right after the first $50,000 arrived from armpac, RoyB donated $10,000 to DeLay's Foundation for Kids, a Texas-based charity that DeLay uses for p.r. and to justify golfing events. Could ASG have been worth $145,000 in "strategy and fundraising" to RoyB's PAC? Well, RoyB actually raised only $99,837 in 2000. Spending $145,000 to raise less than $100,000 doesn't make a lot of sense. And Blunt did not need strategic advice from Ellis and other Washingtonians to know how to spend his money in Missouri. In other words, the $145,000, along with the $10,000, looks like a subsidy to ASG and to DeLay himself that the Houston representative was trying to hide by transferring the money from one nonfederal PAC to another. Why would DeLay and Ellis want to hide the money? One possible reason is that their other political committees were beginning to come under scrutiny. In early May, the Democratic Congressional Campaign Committee would bring suit against the usfn and two other DeLay committees for racketeering. And, at this point, RoyB was still flouting Missouri's own disclosure rules. By sending the money to RoyB, DeLay and Ellis hoped, perhaps, to avoid having the transaction and the subsidy to ASG discovered. Attempts to get to the bottom of this mysterious $150,000 armpac contribution have only raised more questions about DeLay and Blunt's conduct. DeLay's office was unwilling to respond to questions about armpac, but Burson Taylor, Blunt's director of communications, tells The New Republic that both the nonfederal armpac and the nonfederal RoyB were engaged in raising funds for the convention. She claims that the $150,000 simply represented one convention account reimbursing another. Says Taylor, "It was a joint operation. Which is why it is so misleading to talk about a transfer.... Armpac and RoyB jointly raised the money.... If you and your friend were going to have an event, and he buys the chips and drinks and pays a certain amount, and then you gave him $18.75, was that a transfer of funds?" Taylor's explanation suggests that the $150,000 was actually used at the convention, but, if it was, it should show up as expenditures on RoyB's filings with the Missouri Ethics Commission and the IRS. But, remember, there's almost nothing on RoyB's reports that looks like it was directed to the convention. In fact, there is only one item that is clearly related to the festivities in Philadelphia: a payment of $5,782.50 to UPS to "reimburse airfare to nat'l conv." Failing to disclose any additional expenditures over $100 would be a violation of Missouri and also of federal law. According to the new campaign law, the RoyB and armpac nonfederal PACs would have had to begin filing IRS forms after July 1. DeLay's forms, which he began filing that summer, also show few expenses-- either in the form of direct expenditures or in-kind contributions--that are obviously traceable to the convention. DeLay's IRS report covering July 1 to September 30 lists only $88,188 for expenditures, of which $36,000 went to ASG and $25,856 to other consultants and fund-raisers. Even if DeLay had not received any cash contributions after July 1, in-kind contributions and expenditures at the convention should still have shown up on the forms. Contrast DeLay's report with the one filed by Dick Armey's Majority Leader's Fund. At the convention, Armey, like DeLay, dodged reporters' queries about his lavish spending. But Armey reported the details to the IRS. His PAC listed $545,870 in expenditures for this period, including many specific expenditures at Philadelphia hotels, arenas, and concert venues, as well as in-kind contributions and expenditures from companies like Coors. If Blunt and DeLay received similar contributions and made similar expenditures but failed to list them, then they would seem to owe the IRS, as well the American public, an explanation as to why not. When I asked Taylor where the expenditures might be listed, she acknowledged the problem. "I will have to try to figure that out and get back to you," she said. But, a week later, she has yet to get back to me. When I tried to find out what ASG had done for its $145,000, officers there didn't respond, and Blunt's staff would not talk on the record. One senior Blunt staffer, however, offered an explanation on background: "That was the first year of the RoyB fund. There was no staff, no office space, no pencils, nothing that belonged, so the RoyB fund, in its inception, contracted with ASG to provide everything from fund-raising, to congressional race analysis, to pens, pencils, and scotch tape. A lot of those expenditures don't show up on reports. They were phone lines and computers; they were helping to establish computer networks." This explanation, however, falls apart at every turn. The nonfederal RoyB was established in July 1999, not January 2000. It did pay for office space, telephones, computers, and office supplies, but these expenses are listed separately and specifically on the RoyB forms. It also paid for an accountant. RoyB could not have legally paid ASG for advising on congressional rather than nonfederal races--Congress is outside its purview. And, if RoyB paid ASG for "pens and pencils," in addition to "strategy and fundraising," but did not report these specific expenditures, it failed to adhere to Missouri's campaign laws, which require political committees to specify what they spend money on in no uncertain terms. What ASG did for the $145,000 they got from Blunt's PAC, and where the convention expenditures were listed, remains a mystery. DeLay and Blunt are not, of course, the first politicians to bend campaign laws to their advantage. But, in their recklessness and ostentation--in their eagerness to flaunt the power that money can confer on politicians--they easily exceeded their immediate predecessors. DeLay is now being called to account for what he did in Austin in 2002. But DeLay and Blunt still need to explain what happened in Philadelphia two years before.