Review of the Bush-Cheney 2000 Recount Fund and 527 Disclosure Law
As of July 26, 2002
The Bush-Cheney 2000, Inc-Recount Fund, created shortly after the November 2000 election to pay for the campaign?s legal and political activities in Florida and other contested areas, evaded a soft money campaign finance disclosure law for 18 months. The recount fund?s trustees did not file required disclosure forms until 3:25 p.m. on July 15, 2002 ? meeting the deadline for an Internal Revenue Service (IRS) "amnesty" program to avoid millions of dollars in potential fines by less than nine hours.
The recount fund was required by law to file a statement of organization (known as an 8871 form) and make at least four and perhaps as many as six periodic filings detailing contributions and expenditures (8872 forms) under a "527 group disclosure" law passed in July 2000 (PL 106-230). 527 groups, named after the section of the Internal Revenue Code that governs them, can raise unlimited amounts of soft money and primarily exist to influence elections.
As of July 25, 2002, a statement of organization was available on the IRS disclosure website but no 8872 forms were online, as it can take the agency a month or more to post reports. IRS spokesman Tim Harms told Public Citizen that if the recount fund disclosed all its forms by July 15, as the Bush-Cheney group claims, they would be "in compliance" and would not be subject to fines. As of July 25, Harms could neither confirm nor deny that the Bush-Cheney recount fund had submitted all the necessary disclosure reports before the amnesty deadline.
IRS Law Requires Recount Fund to File Disclosure Reports
- Republican National Committee (RNC) official Jim Dyke confirmed to Public Citizen on July 24, 2002 that the Bush-Cheney recount fund is a 527 group and has filed its 8871 and 8872 forms with the IRS. "They are a 527 ? just like the Democrats [Gore-Lieberman Recount Committee] were a 527," Dyke told Public Citizen.
- According to press reports, the Bush-Cheney recount fund was created around November 10, 2000. The IRS requires groups to submit a statement of organization (form 8871) within 24 hours of a group?s formation, but the recount fund failed to file a statement of organization until July 15, 2002 at 3:25 p.m. ? 18 months later.
- The recount fund also failed to file at least four different periodic disclosure reports, and perhaps as many as six, detailing contributions and expenditures. The 2000 and 2001 reports and due dates are: post-election 2000 due 30 days after the general election; year-end 2000 due January 31, 2001; mid-year 2001 due July 31, 2001; and year-end 2001 due January 31, 2002. Two additional reports may have been required if the recount fund continued operations in 2002; they are the first quarterly 2002 report due April 15, 2002 and the second quarterly 2002 report due July 15, 2002.
- The Gore-Lieberman Recount Committee filed a statement of organization with the IRS on November 11, 2000. Subsequently, it filed six disclosure reports with the IRS during the last year-and-a-half, which detail $3.7 million in contributions and $3.2 million in expenditures.
Amnesty Program Saves Recount Fund Large Potential Fines
- The IRS announced the amnesty and compliance program on May 2, 2002. In a news release describing the program the IRS said that failure to file by July 15 could result in "the assessment of taxes, penalties and interest."
- Financial penalties for 527 groups that do not comply with the disclosure law can equal 35 percent of a group?s total contributions and expenditures. According to IRS guidance documents (Instructions for Form 8872), "A penalty will be imposed if the organization is required to file Form 8872 and it fails to file the form by the due date or files the form but fails to report all the information required ? The penalty is 35 percent of the total amount of contributions and expenditures to which a failure relates."
- On the Bush campaign website, the fund disclosed $9.9 million in contributions and according to press reports it spent all but $270,000 on recount activities and gave the remaining money to the RNC. Because the Bush-Cheney recount fund failed to meet the reporting deadlines, it could have been fined 35 percent of the $9.9 million in contributions, which is $3.46 million. Fines could also have been levied on the expenditures ? another $3.46 million ? bringing the total possible penalties to $6.92 million.
Flaunting Law, Recount Fund Does not Provide Disclosure Reports
- As of July 26, 2002, no Bush-Cheney recount fund 8872 forms detailing contributions and expenditures were available online. But the 527-disclosure law requires groups to make all disclosure forms available for public inspection during normal business hours "at the organization?s principle office and at each of its regional or district offices having at least three paid employees."
- The fund?s principle office is in Austin, Texas. Four attempts to contact David Herndon, the fund?s contact person, by phone on July 24 and 25 and two attempts to contact him in person on July 25, to obtain copies of the 8872 reports were unsuccessful. Herndon?s secretary Lisa Couvillon said Herndon was not available and that we should leave a voice mail message. Later, on July 26, Couvillon told Public Citizen that Herndon was on his way to Europe and that we should contact attorney Ben Ginsberg in Washington for further information. Couvillon also told Public Citizen that the office, which is located at 515 Congress Avenue Suite 2300, did not have the forms. When informed by Public Citizen on July 24, 2002 that the recount fund was required by law [26 USC 6104(d)] to have the forms and make them available for public inspection, Couvillon said she would look into the matter.
- RNC official Dyke said the reports could be retrieved by contacting the fund?s custodian, Michael Koroluk, but because his only available contact information is a Washington, D.C. post office box (with an incorrect zip code on the disclosure form), the documents could only be received in writing and not for immediate public inspection ? delaying the request by as much as a month. (The law provides groups with 30 days to respond to written requests for disclosure reports.) Dyke further said that the RNC has nothing to do with the Bush-Cheney recount fund, but he said the fund would respond to a written request within a month.
- The IRS can levy fines on groups that do not comply with requirements to make forms accessible. "Responsible persons of a tax-exempt organization who fail to provide the documents as required may be subject to a penalty of $20 per day for as long as the failure continues," states IRS guidance documents. "There is a maximum penalty of $10,000 for each failure to provide a copy of an annual information return."
Incomplete Voluntary Disclosure Is No Substitute
- While the recount fund did voluntarily make a list of its contributors available online, the information is incomplete and possibly misleading. For instance, the recount fund failed to provide required information such as expenditures, the employer and occupation of contributors who gave more than $200, the full address of contributors, summary data on total contributions and expenditures and organization information about the fund?s address, connected committees and directors. Also, the IRS could not review the fund?s activities as part of its enforcement and compliance mission because the agency had no record of the group?s existence prior to July 15, 2002.
Recount Fund Skirts Self-Imposed Limits Along with Soft Money Law
- 527 groups are not bound by contribution limits and can accept contributions directly from corporations and unions, but the Bush-Cheney recount fund set a self-imposed limit of $5,000 per person and also said it would not accept PAC or corporate contributions. Nonetheless, a database of contributions provided by the Bush-Cheney campaign show 10 donors who gave more than $5,000 and two contributors who gave $10,000. Also, the American Coal Co. PAC gave $5,000, Ohio Valley Coal Co. PAC contributed $5,000 and the Independent Oil Producers PAC gave $750.
The Recount Fund?s Staff
The recount fund?s form 8871 statement of organization lists the following directors and staff:
- Michael Koroluk, custodian of records, who is listed at a post office box in Washington, D.C. We have no other information about him.
- David Herndon, the fund?s treasurer and contact person, is of counsel to the law firm Graves, Dougherty, Hearon & Moody in Austin, Texas. Herndon contributed $15,500 to Bush?s gubernatorial campaigns, according to Texans for Public Justice.
- Alan "Bud" Shivers, Jr., a director of the fund, is president of Texans for Quality Health Care and has been called a "Pioneer" by George W. Bush ? a title given to those who raised at least $100,000 for Bush?s presidential campaign.
- C. Patrick Oles is a director of the fund.
- Tim Beall is the fund?s assistant treasurer.