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Rep. Tom Davis Dodges Campaign Finance Disclosure Law

April 25, 2002

Rep. Tom Davis Dodges Campaign Finance Disclosure Law

Evasion Spotlights Compliance Problems with “527” System; IRS Urged to Assess Strong Penalty Against Top House Republican Fundraiser

WASHINGTON, D.C. ? A political committee created by Rep. Thomas M. Davis III (R-Va.) has unlawfully evaded federal campaign finance disclosure rules for 18 months, Public Citizen has found. The committee is quite productive; in 2001 alone, it raised $638,000.

The “Congressman Tom Davis Virginia Victory Fund” was established in 1997 to help steer donations to state and local elections, according to records kept in Richmond, Virginia?s state capitol. But following enactment of the 527 Organization Disclosure law on July 1, 2000, Davis?s political committee was supposed to file disclosure reports with the Internal Revenue Service (IRS). In fact, Davis personally voted for this legislation. But his political committee has yet to file a financial disclosure report with the IRS even though the first such reports were due 18 months ago.

“It was an innocent oversight and we are looking to correct it,” David Marin, Davis?s press secretary, told Public Citizen. “The Congressman is certainly aware what is going on with his account ? he wants them to get into compliance as soon as possible.”

Public Citizen first notified the political committee?s custodian of records on March 19, 2002 of the failure-to-disclose problem. More than a month later, the problem has not been rectified.

“It was my fault,” said Mary Jane Sargent, custodian of the account, when first asked on March 19, 2002, why the political committee had not registered with the IRS. “I thought it was not supposed to be registered ? It may have been that I didn?t pay attention to it when they gave me all this junk to read.”

When contacted a month later on April 22, 2002, Sargent said she was “in the process of filing the reports now to get into compliance.” (After prodding by Public Citizen, Davis?s political committee electronically submitted a “statement of organization” to the IRS on the night of April 22, 2002. But it still had not disclosed any financial records as of the afternoon of April 24, 2002. In all, the organization should have submitted seven different disclosure reports by that date.)

Sargent maintains that Davis? political committee intended to obey the laws regarding disclosure, noting that although Davis? political committee did not file with the IRS, it did file with the Virginia Board of Elections. However, failure to disclose to the IRS permitted Davis to hide from the media and watchdog groups the identity of donors who may have interests before Congress. This is because the IRS is the only national clearinghouse for this information; otherwise, the public would not necessarily know the committees exist — nor could the IRS follow its charge to regulate these groups. Further, the IRS files are online while Virginia?s files are not.

“Claiming ignorance and innocence 18 months late is no excuse in this case,” said Joan Claybrook, president of Public Citizen. “When there is a law requiring disclosure it is not satisfactory to say ?we are trying.? It is not something complicated to do.”

The evasion appears particularly troubling because Davis is chairman of the National Republican Campaign Committee (NRCC), the fundraising operation for House Republicans. “It is disturbing to see any member of Congress evading disclosure, especially one with his position,” said Claybrook. “It?s not like you have a rookie here in campaign finance making these mistakes.”

Although the political committee is called the “Congressman Tom Davis Virginia Victory Fund,” the organization?s expenditures show no money going to Davis?s congressional campaign. Instead, the political committee has played a role in Virginia politics during recent elections, with most of the money collected by Davis going to state and local candidates and consultants.

In 2001, the political committee contributed $222,895 (36 percent of expenditures) to state and local candidates and paid consultants $187,746 (30 percent of expenditures), according to records filed with the Virginia Board of Elections.

In 2001, Davis?s political committee collected $637,996. Corporate donors (not PACs, individuals or unions) accounted for most of that ($413,550 or 65 percent of the total).

The top contributors last year were Thompson, Cobb, Bazilio & Associates, a Washington D.C. accounting firm ($50,000); Milton Peterson, a Northern Virginia land developer ($20,000); Virginia Auto and Truck Dealers PAC ($20,000); ManTech International ($15,000); Sallie Mae ($15,000); and Telcom Ventures LLC ($15,000).

These large contributions highlight one of the reasons why federal officeholders like Davis create such 527 political organizations: 527 groups are allowed to receive unlimited soft money contributions, which Davis?s own re-election campaign committee cannot.

State records reveal that while Sargent was the custodian of the account, Davis personally authorized 45 percent of the political committee?s expenditures in 2001. Failure to disclose these records during these years could result in financial penalties amounting to 35 percent of all expenditures and contributions raised during this time. In other words, if the IRS were to proceed with a compliance case, it could charge the political committee at least $483,023 in penalties.

“Goodnight ? I don?t have that much money,” exclaimed Sargent when hearing how much the political committee could be fined for its non-disclosure.

“The IRS needs to send a signal that this brazen defiance of the law will not be tolerated,” said Frank Clemente, director of Public Citizen?s Congress Watch. “In accordance with the regulations, the IRS should fine the Congressman Tom Davis Virginia Victory Fund for its egregious failure to disclose. Shadowy 527 groups represent a large and growing loophole that many political actors will use to influence elections. Disclosure is imperative to discourage deceit.”

The IRS division that oversees non-profit organizations apparently never caught Davis? missing disclosure reports, partly because it is still creating a compliance and enforcement program for 527 groups ? nearly two years after the IRS was charged with the task. Without a compliance program in place, it is possible that the IRS will not levy any penalties against the Congressman Tom Davis Virginia Victory Fund.

Public Citizen found more than 60 members of Congress who have similar 527 political committees that have been filing with the IRS in regular, timely and lawful fashion.

That?s not to say, however, that all members of Congress have been following the law. As Public Citizen first reported on Feb. 26, 2002, the 527 committee of House Speaker Dennis Hastert (R-Ill.) ? called the Keep Our Majority Political Action Committee, or KOMPAC ? failed to file a prescribed disclosure report for the crucial “pre-election” period of October 1-October 18, 2000. KOMPAC also failed to file a required report for the period of Oct. 19-Nov. 7, 2000.

After Public Citizen brought the problem to the attention of Lisa Lisker, KOMPAC?s official custodian of records, the 527 group filed the required disclosure reports with the IRS on March 27, 2002 ? more than 16 months late. Hastert?s KOMPAC disclosed that during the five-week period which it had omitted from reports, it collected $139,960 and spent $865,864, with most of the expenditures in the form of campaign contributions to Illinois candidates.

In a similar case, the Congressional Black Caucus (CBC) was required to begin filing 527 disclosure reports in October 2000. The CBC did not file any report until May 4, 2001, and this report arrived with serious flaws. This first filing, the “post-election” report due Dec. 7, 2000, listed $1,092,658 in contributions ? but these were actually expenditures. The group listed only $6,000 in contributions, again mislabeled, that account for less than one percent of the CBC?s actual receipts during the period covered by the report.

Public Citizen has released two studies that detail the nature of so-called “527” groups (named after a section of the Internal Revenue Code they are governed by), the flaws in the IRS disclosure system and the failure of the IRS to enforce the law. The are Congressional Leaders? Soft Money Accounts Show Need for Campaign Finance Reform Bills and Deja Vu Soft Money.

On April 20, Rep. Davis helped win a Harvard University rock ?n roll trivia contest by naming the Blues Magoos as the band behind the 1966 song “(We Ain?t Got) Nothin? Yet.” Today, Public Citizen asks: Which Republican representative?s soft money political committee has violated federal law by disclosing “nothing yet?”