New York Rep.
Alexandria Ocasio-Cortez and
Saikat Chakrabarti, the progressive
firebrand's multimillionaire chief of staff, apparently violated
campaign finance law by funneling nearly $1 million in contributions
from political action committees Chakrabarti established to private
companies that he also controlled, according to an
explosive complaint filed Monday with the Federal Election Commission (FEC) and obtained by Fox News.
Amid the allegations, a former FEC commissioner late Monday
suggested in an interview with
The Daily Caller News Foundation that
Ocasio-Cortez and her team could be facing major fines and potentially
even jail time if they were knowingly and willfully violating the law by
hiding their control of the Justice Democrats political action
committee (PAC). Such an arrangement could have allowed Ocasio-Cortez's
campaign to receive donations in excess of the normal limit, by pooling
contributions to both the PAC and the campaign itself.
The FEC
complaint asserts
that Chakrabarti established two PACs, the Brand New Congress PAC and
Justice Democrats PAC, and then systematically transfered more than
$885,000 in contributions received by those PACs to the Brand New
Campaign LLC and the Brand New Congress LLC -- companies that,
unlike PACs, are exempt from reporting all of their significant
expenditures. The PACs claimed the payments were for "strategic
consulting."
Although large financial transfers from PACs to LLCs
are not necessarily improper, the complaint argues that the goal of the
"extensive" scheme was seemingly to illegally dodge detailed legal
reporting requirements of the Federal Election Campaign Act of 1971,
which are designed to track campaign expenditures.
"It appears
'strategic consulting' was a mischaracterization of a wide range of
activities that should have been reported individually," the complaint
states.
FILE - In this Wednesday June 27, 2018, file photo, Alexandria
Ocasio-Cortez, left, the winner of New York's Democratic Congressional
primary, greets supporters following her victory, along with Saikat
Chakrabarti, founder of Justice Democrats and senior adviser for her
campaign. (AP Photo/Mark Lennihan, File)
The complaint was drafted by the conservative,
Virginia-based National Legal and Policy Center (NLPC). Ocasio-Cortez
and Chakrabarti, according to the NLPC's complaint, appeared to have
"orchestrated an extensive off-the-books operation to make hundreds of
thousands of dollars of expenditures in support of multiple candidates
for federal office."
The funds, the NLPC writes, were likely spent
on campaign events for Ocasio-Cortez and other far-left Democratic
candidates favored by Chakrabarti, who made his fortune in Silicon
Valley and previously worked on Bernie Sanders' 2016 presidential
campaign. But no precise accounting for the expenses is available,
and the complaint asks the FEC to conduct an investigation into the
matter immediately.
"These are not minor or technical violations," Tom Anderson, director of NLPC’s Government Integrity Project, said in a statement.
"We are talking about real money here. In all my years of studying FEC
reports, I’ve never seen a more ambitious operation to circumvent
reporting requirements. Representative Ocasio-Cortez has been quite
vocal in condemning so-called dark money, but her own campaign went to
great lengths to avoid the sunlight of disclosure.”
Added
Anderson: “They believe their cause is so great that they don’t have to
play by the rules. They believe that they are above campaign finance
law."
Brand New Congress LLC does not appear to be registered as
an LLC in any state, according to the complaint, but is a registered 527
tax-exempt organization. Fox News confirmed that Brand New Campaign LLC
is a registered Delaware corporation, but Brand New Congress LLC is
not.
Ocasio-Cortez's office did not return a request for comment.
In announcing the complaint the NLPC pointed to a 2016 interview on MSNBC,
in which the 33-year-old Chakrabarti told anchor Rachel Maddow that he
wanted to employ a "single, unified presidential-style campaign" model
to "galvanize" voters nationally to elect progressives to Congress,
while helping candidates avoid the stress of fundraising and managing
their own campaigns.
Other
legal experts also sounded the alarm on Monday, saying Chakrabarti's
unusual arrangement raised serious unanswered questions.
Former FEC Associate General Counsel for Policy Adav Noti, who currently directs the Campaign Legal Center,
told Fox News that it was a "total mystery" to him why Chakrabarti had
established an LLC seemingly to take money from the PAC, rather than
simply create a "normal venture," like a consulting business, to provide
services for candidates on the books.
"Certainly, it's not
permissible to use an LLC or any other kind of intermediary to conceal
the recipient or purpose of a PAC's spending," Noti said. "The law
requires the PAC to report who it disperses money to. You can't try to
evade that by routing it through an LLC or corporation or anyone else."
Rep. Alexandria Ocasio-Cortez, D-N.Y., listens to questioning of
Michael Cohen, President Donald Trump's former personal lawyer, at the
House Oversight and Reform Committee, on Capitol Hill in Washington,
Wednesday, Feb. 27, 2019. (AP Photo/J. Scott Applewhite)
Noti added: "What's so weird about this situation is
that the PAC that dispersed so much of its money to one entity that was
so clearly affiliated with the PAC. Usually, that's a sign that
it's what's come to be known as a 'scam PAC' -- one that's operated for
the finanical benefit of its operators, rather than one designed to
engage in political activity."
At the same time, Noti said,
Chakrabarti had provided "long descriptions of why they structured it
the way they did -- which is not something a scam PAC would do," because
it only draws attention to the unusual setup. And Noti cautioned that
there is a tendency for some groups to try to gain attention by
invoking Ocasio-Cortez.
"But on the other hand," Noti added,
Ocasio-Cortez's "explanations don't make a lot of sense on their face. I
read their explanation multiple times, and I still don't understand. If
you want to start a business to provide services to campaigns -- many
of those are organized as LLC's, and you sell your services."
"I read their explanation multiple times, and I still don't understand."
— Former FEC Associate General Counsel Adav Noti
Instead,
Chaktrabarti "started a PAC, which has legal obligations to report all
of is incoming and outgoing money, and then used the PAC to disperse its
funds to the LLC," Noti said.
Added former FEC chairman Bradley A. Smith, in an interview with The Washington Examiner:
"It's a really weird situation. I see almost no way that you can do
that without it being at least a reporting violation, quite likely a
violation of the contribution limits. You might say from a campaign
finance angle that the LLC was essentially operating as an unregistered
committee."
Last week, Anderson also raised concerns
over Ocasio-Cortez's decision to announce, with much fanfare, that she
would offer a minimum salary of $52,000 to her staffers, and a maximum
salary of $80,000 -- far below the typical six-figure highs hit by
chiefs of staff and other high-level congressional workers.
Government
watchdogs pointed out that federal law requires congressional workers
making more than $126,000 a year -- which would ordinarily include
Chakrabarti -- to file detailed forms outlining all of their outside
income, including investments and gifts.
“Purposefully underpaying
staffers in order to avoid transparency is an old trick some of the
most corrupt members of Congress have used time and again,” Anderson
said.
Speaking to the New York Post, Ocasio-Cortez spokesman
Corbin Trent dismissed the FEC complaint, saying the campaign had
consulted an elections lawyer and that all money was properly accounted
for.
“It was payment for services. ... We believe that complaint
is politically motivated, basically intended to create a political
story,” Trent told the Post.
Noti told Fox News that Trent's
explanation could be plausible -- and if so, it might help
Ocasio-Cortez's team avoid civil fraud lawsuits.
Rep. Alexandria Ocasio-Cortez (D-NY) speaks during a march
organised by the Women's March Alliance in the Manhattan borough of New
York City, U.S., January 19, 2019. REUTERS/Caitlin Ochs - RC1647E36CA0
"One possibility -- a strong possibility, based
on the description they put out, is they just got really bad legal
advice that somehow said they had to to do this," Noti said.
"But regardless, when they decided to use the PAC form, which they did,
they subjected themselves to all the legal requirements that come with
that."
Election laws are complicated, Noti added, and there have
been some erroneous recent reports related to Ocasio-Cortez's campaign.
For example, FEC filings reviewed by Fox News show that Ocasio-Cortez’s
congressional campaign paid the Justice Democrats PAC more than $35,000
from 2017 to 2018 for "web services," “strategic consulting,” and
"campaign services."
While some outlets have incorrectly reported
that federal rules generally prohibit PACs from providing more than
$5,000 in services to campaigns, Noti told Fox News that the payments
were likely proper so long as they were for the fair market value of the
services rendered.
In terms of possible penalties, Noti said that
Ocasio-Cortez's campaign could be facing FEC fines if it followed bad
legal advice and made reporting errors. But civil or even criminal fraud
statutes, as opposed to campaign finance laws, would potentially kick
in if it were determined that Chakrabarti had intentionally tried to
hide the money to use for illicit expenses.
Meanwhile, former FEC commissioner Brad Smith told the Daily Caller News Foundation's investigative unit that,
because Ocasio-Cortez may have held legal control of the Justice
Democrats PAC while the PAC was supporting her campaign, the two
committees were likely acting as affiliated committees -- and therefore
share an individual contribution limit of $2,700 that might have been
improperly and repeatedly exceeded.
The Daily Caller News Foundation's review of archived copies of the Justice Democrats PAC's website and relevant campaign documents indicated
that Ocasio-Cortez and Chakrabarti "obtained majority control of
Justice Democrats PAC in December 2017" -- and yet allegedly failed to
disclose afterwards to the FEC the fact that the PAC was supporting her
candidacy.
“If this were determined to be knowing and willful,
they could be facing jail time," Smith said. "Even if it’s not knowing
and willful, it would be a clear civil violation of the act, which would
require disgorgement of the contributions and civil penalties. I think
they’ve got some real issues here.”
Added former Republican FEC
commissioner Hans von Spakovsky: “If the facts as alleged are true, and a
candidate had control over a PAC that was working to get that candidate
elected, then that candidate is potentially in very big trouble and may
have engaged in multiple violations of federal campaign finance law,
including receiving excessive contributions."
Monday's FEC complaint comes on the heels of a separate complaint
by the Washington, D.C.-based Coolidge Reagan Foundation, which alleged
last week that the Brand New Congress PAC may have illegally funneled
thousands of dollars to Ocasio-Cortez's live-in boyfriend, Riley
Roberts.
It was first reported late last month that the Brand New
Congress PAC paid Roberts during the early days of the Ocasio-Cortez
campaign. According to FEC records, the PAC made two payments to Roberts
– one in August 2017 and one in September 2017 – both for $3,000.
The
FEC complaint specifically cites the use of "intermediaries" to make
the payments, "the vague and amorphous nature of the services Riley
ostensibly provided," the relatively small amount of money raised by the
campaign at that stage and "the romantic relationship between
Ocasio-Cortez and Riley" in asserting the transactions might violate
campaign finance law.
The Coolidge Reagan Foundation -- a
501(c)(3) -- is requesting that the FEC look into the payments for
potential violations on relevant campaign finance laws that state that
campaign contributions “shall not be converted by any person to personal
use” and that “an authorized committee must report the name and address
of each person who has received any disbursement not disclosed.”
Fox News' Perry Chiaramonte contributed to this report.