Conservative group files FEC complaint against Alexandria Ocasio-Cortez
Conservative group files FEC complaint against Alexandria Ocasio-Cortez and her chief of staff.
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 separately 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.
The complaint notes that Ocasio-Cortez was a board member of Justice Democrats when money was being disbursed to Brand New Congress LLC.
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.
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"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."
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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. But Chakrabarti defended the set-up on Twitter, saying, "We were doing something totally new, which meant a new set-up. So, we were transparent about it from the start."
A separate explanation posted by Justice Democrats last year cast the arrangement as above-board. "The ONLY way to do work for multiple candidates legally at this scale is to create an LLC and act as a vendor," the group said.
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.
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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 disburses 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 disbursed 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 financial 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 set-up. 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, Brand New Congress' "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."
Instead, Chakrabarti "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 Brand New Congress and its related entities and organizers avoid civil fraud lawsuits.
Rep. Alexandria Ocasio-Cortez (D-NY) speaks during a march organized 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 Brand New Congress could be facing 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.
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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 afterward 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.”
Note: A previous version of this article incorrectly stated that Adav Noti was referring specifically to Ocasio-Cortez, rather than Brand New Congress more generally -- including when discussing Brand New Congress' defense of its LLC arrangement, and when discussing possible civil penalties that may result from Brand New Congress' arrangement.
Fox News' Perry Chiaramonte contributed to this report.
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