NESSEL AND BENSON PLOD DOWN THE ‘DARK MONEY’ PATH
Secretary of State Jocelyn BENSON recently asked a legislative panel to give her department subpoena power to investigate campaign finance or lobbying law violations as a way to help bring Michigan from “worst to first” in government transparency and ethics requirements.
As part of a sweeping proposal that also includes stricter civil and criminal penalties, Benson proposed including high-level staff in the state’s lobbying law so any gifts they receive from lobbyists are subject to the same disclosure requirements as elected officials.
Speaking to the state House Ethics and Oversight Committee, Benson said expanding disclosure requirements would also mean candidates and voters would have to be educated and equipped with the resources to comply.
Benson said the enforcing body of disclosure requirements needs the ability to subpoena information about complaints to determine if a violation has occurred, collection authority for civil penalties such as fines, and criminal penalties for egregious intentional violations. Candidates need to be fully informed about those consequences by requiring them to read and sign a statement that acknowledges that they’re aware of criminal sanctions or culpability if there is a violation.
Meanwhile, in a recent media interview, Attorney General Dana Nessel said she expects to have some resolution on four major public integrity cases by the end of the year, including two involving nonprofit organizations tied to ex-House Speaker Lee Chatfield, and ex-Senate Majority Leader Mike Shirkey.
The Secretary of State (SOS) made criminal referrals in 2022 and 2023 of at least three cases to the Attorney General (AG). So far, there has been no response from Nessel to these criminal referrals by Benson’s office since this is part of an ongoing investigation.
Why not? What’s going on here? For answers, The Ballenger Report turns to Bob LaBrant, a retired attorney and one of Michigan’s experts in analyzing campaign finance and election law issues.
TBR: If you think Nessel is the person who should be doing everything that Benson is talking about in her press release, why did Benson ask the Legislature for this new power? What could SHE do that Nessel isn’t better equipped to do?
LaBrant: I suspect past Secretaries of State like Richard Austin, Candice Miller, Terri Lynn Land, and Ruth Johnson all would have liked their Department to have had subpoena power. Subpoena power enhances SOS fact finding in investigating complaints. If criminal conduct is uncovered, I’m sure the case would still be referred to the AG. Remember, the SoS already has subpoena power in some areas of her department’s jurisdiction. For instance, for auto repair shops.
TBR: Is Benson impatient with Nessel’s failure to act on the three referrals she made to the A.G. in 2022-23?
LaBrant: I don’t sense Benson’s request for subpoena power was the start of a turf war with Nessel. I don’t think Benson is particularly upset with Nessel’s pace of dealing with her referrals.
TBR: Has Nessel already waited too long to act, in your opinion?
LaBrant: No, but she is slow. In each of those cases, the Bureau of Elections (BOE) — under the jurisdiction of the SoS — made a determination under the Michigan Campaign Finance Act (MCFA) that there may be reason to believe the MCFA was violated. Except for Chatfield, all of those cases involved using a 501 C 4 organization to funnel money to a ballot question committee (BQC). 501 C 4 organizations are tax-exempt. However, they are required to file an annual return with the Internal Revenue Service on IRS Form 990 disclosing, among other things, their contributors of $5,000 or more. The annual IRS Form 990 is available for public inspection at the 501 C 4’s office. However, the names and addresses of those contributors are redacted.
TBR: Is this where ‘dark money’ comes in?
LaBrant: The dark money scheme works like this: Corporations, labor unions, individuals, and associations contribute to a 501 C 4; their contribution to the 501 C 4 goes undisclosed publicly. The 501 C 4, in turn, makes contributions to the BQC in the 501 C 4’s name. This scheme was concocted to hide the true identity of the ballot question funders.
All three referrals occurred when the 501 C 4 refused to sign a conciliation agreement and pay a fine equal to the amount they allegedly laundered through the 501 C 4.
BQC 501 C 4 Amount laundered to BQC.
Unlock Michigan Michigan Citizens for Fiscal Responsibility $ 1,810,000
Unlock Michigan Michigan! My Michigan! $ 550,000
Fair and Equal Bi-partisan Solutions $ 782,000
TBR: Among these, should there be a particular focus?
LaBrant: My focus has been on the Shirkey investigation since I was the complainant in that matter. It has been more than 12 months since Secretary of State Jocelyn Benson on June 3, 2022, made a criminal referral of Michigan Citizens for Fiscal Responsibility (MCFR) and Michigan! My Michigan! (MMM) to the Attorney General.
Those two nonprofits wrote a total of 17 checks in 2020 to Unlock Michigan, a ballot question committee (BQC) that launched a petition drive in June 2020 to try to repeal the 1945 Gubernatorial Emergency Powers Act, a law that was used by Governor Whitmer at the beginning of the Covid-19 pandemic. Their petition drive was successful. Those two dark money nonprofits accounted for approximately 85% of all the money raised by Unlock Michigan in 2020.
A criminal referral allows a legal observer to quickly focus on a possible criminal conspiracy charge, a five-year felony. Conspiracy is where two or more persons enter into an agreement to do an illegal act and then act on that agreement.
The first step in pursuing a criminal conspiracy charge would be for the AG’s office to seek from an Ingham County court an investigative subpoena to obtain from the two nonprofits an unredacted copy of their 2020 IRS Form 990 that they filed with the IRS or, in the alternative, access by the AG to MCFR’s and MMM’s 2020 bank deposits.
The redacted 990 form currently on file for inspection to the public shows that MCFR had 44 contributors in 2020 who gave in amounts ranging from $5,000 to $180,000. The names of those contributors, available for public inspection, are redacted. A subpoena for an unredacted 2020 IRS Form 990, or, in the alternative, access to MCFR’s 2020 bank deposits would provide a person’s name that can be matched to those listed amounts. This would likely lead to a subpoena of persons in that organization (like lobbyist agents) seeking to learn who solicited them and who in their organization authorized a contribution to MCFR.
The same also applies to the 2020 redacted IRS Form 990 form for MMM that shows that MMM had 34 contributors in 2020 who gave in amounts ranging in size from $5,000 to $300,000. Yes, $300,000!
Those lobbyist agents, placed under oath under penalty of perjury, could be asked about any group or individual meetings they attended with public officials, party officials, or others where options were discussed for contributing directly to Unlock Michigan or, in the alternative, to a 501 C 4 to help meet the petition drive’s expenses.
What we have already in the public record is that Michigan Energy First, a 501 C 4, funded handsomely by Detroit Edison (DTE), reported on their own 2020 IRS Form 990 that they gave a grant of $100,000 to MCFR.
TBR: Is that significant?
LaBrant: It means one down, 77 mystery contributors to go. Attorney General Nessel can provide answers to the question: “Who were the other 43 contributors to MCFR, as well as the 34 contributors to MMM, especially the $300,00 contributor?” The criminal referral gives the Attorney General a strong legal framework to go to court to seek an investigative subpoena. Hopefully, Nessel embraced that power and has pursued a subpoena, but we do not know if that happened because of the secrecy involved in an ongoing investigation.
TBR: Does Benson have any role here?
LaBrant: As I said, the Secretary of State does not have subpoena power itself in resolving campaign finance complaints. That’s why last month Benson urged the House Ethics and Oversight Committee to give her department subpoena power to investigate campaign finance and lobby law complaints.
As of now, we know only that Attorney General Nessel has promised some resolution in these cases by year’s end. What constitutes “some resolution” is unknown. Nessel can act now and make Michigan Energy First (MEF) an offer it cannot refuse. Settle now, or wait to be indicted? It’s their choice. The AG could require, as a condition of settlement, that MEF pay the State of Michigan $100,000 covering its part in the Unlock Michigan deception. In the long run, MEF would then save much of that in reduced defense lawyer fees. Or the AG could grant MEF immunity to testify against MCFR and make the other mystery 77 contributors the same offer. Using that strategy, the State of Michigan can recoup $2.36 million for fines they did not collect directly from MCFR and MMM back in 2022.
TBR: Has Nessel already waited too long to act, in your humble opinion?
LaBrant: No. I think Nessel may have slow walked these referrals to allow the Legislature time to amend the Campaign Finance Act. I think if the AG already had an unredacted 2020 IRS form 990 and could match a name to an amount she could be out offering plea agreements. But because of the secrecy surrounding an ongoing investigation, I’m not yet confident a subpoena of MCFR and MMM records has even been sought. MCFR and MMM could have settled this matter back on June 3, 2022, by signing a conciliation agreement. Had they done so, they would have obtained a complete bar to further civil or criminal action. They gambled that the AG’s office would do nothing. We will see by year’s end if that was or was not a good bet.
TBR: WHY is Nessel slow-walking this, in your opinion?
LaBrant: I believe she wants the cover of an amended Campaign Finance Act so she can build an airtight case. Prosecutors want sure things. They don’t want to go to court and lose. There is no question that the MCFA should be strengthened. However, legislative reforms should not be used as an excuse to avoid criminal prosecution. The AG can go a long way in cleaning up Michigan’s dark money scandals even without waiting for the Legislature to act.