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What Happened to the Other Half Million?

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I’ve got just a few questions about the report that prosecutors have found $500,000 that former NRCC treasurer Christopher Ward embezzled (h/t dakine).

The former treasurer of a key Republican campaign committee embezzled more than $500,000 over a five-year period, using it to fund mortgage payments and a six-figure remodeling of his Bethesda home, according to court documents filed yesterday.

The papers were filed by federal prosecutors in an attempt to force the former treasurer, Christopher J. Ward, to forfeit his home to the government.

The government alleges that Ward, who had worked for National Republican Congressional Committee (NRCC) since the 1990s, made numerous unauthorized diversions of funds from its accounts and joint accounts set up with Senate Republicans. He often shifted money into his personal account just as payments for his mortgage or home remodeling were due, according to the court filing.

First, seeing as how the NRCC admits it has a million dollars less on hand than it thought it did, where did the other half million go? 

Well, if you look closely, these court papers pertain to money embezzled from the Presidential Dinner funds, not from the NRCC.

So I’m curious.  

Is it just that the embezzlement Ward did from the Presidential Funds is easier to find? Or is something different going on with the NRCC than they’ve been telling us?

“They’re Not Businesspeople … They Won’t Spend a Dime on Management”

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So says Republican campaign finance lawyer Cleta Mitchell of the NRCC. It’s her excuse for why the NRCC didn’t take very basic measures to ensure that Christopher Ward didn’t steal from the campaign committees he worked with.

Whatever the excuse, the NRCC is now complaining, again, that they’re victims and therefore it’s very mean that the FEC will fine them for overstating their cash on hand because they had a corrupt treasurer.

The FEC remains paralyzed for the moment, the result of a lingering confirmation fight between the White House and Senate Democrats. But after acknowledging that there was a $740,000 difference between the fundraising numbers the committee reported and its actual cash on hand — a partial result of the alleged embezzlement by Christopher J. Ward — NRCC Chairman Tom Cole (R-Okla.) and a top outside lawyer are already angling for lenient treatment from the commission.

“Our working relationship with the FEC has been good,” Cole said last week. “We were the victims here.”

But the Politico article lays out all the things the NRCC did not do to prevent Ward from embezzling the money.

But a series of FEC guidelines issued last spring suggest the NRCC’s after-the-fact cooperation might not be enough. Under those guidelines, NRCC officials also must demonstrate that they did what they could to prevent the acts of malfeasance they allege.

The FEC established these “safe harbor” policy guidelines in April 2007 amid a spate of embezzlement cases. Commissioners wanted to help these victims of internal malfeasance avoid paying additional fines — provided that the victims took reasonable steps to protect themselves in the first place.

The safe harbor recommendations call for campaign committees to establish certain basic internal auditing controls to prevent misappropriations by an employee. These include: two signatures on any check in excess of $1,000, a sign-off by two people on all wire transfers and separate individuals handling the intake of and accounting for campaign funds.

The guidelines also call on committees to act quickly in disclosing their internal fundraising information to the correct federal authorities.

The NRCC, of course, deliberately unified all its accounts into one (incidentally, so did the DCCC, also apparently in response to BCRA). And the NRCC also gave Ward the ability to sign off on any checks–including those over $10,000.

Read more →

Enron Accounting at the NRCC

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While I was buried in the White House’s amazing email fraud yesterday, the Politico posted an article further developing the NRCC accounting story. The Politico describes three roots to the accounting fraud. The NRCC no longer required executive committee approval for certain expenditures, it consolidated all its accounts, and it permitted people to work outside the NRCC.

Under Virginia Rep. Tom Davis and New York Rep. Thomas Reynolds, who chaired the committee from 1999 until the end of 2006, the NRCC waived rules requiring the executive committee — made up of elected leaders and rank-and-file Republican lawmakers — to sign off on expenditures exceeding $10,000, merged the various department budgets into a single account and rolled back a prohibition on committee staff earning an income from outside companies.

These changes gave committee staffers more freedom to spend money quickly and react to a shifting political landscape during heated campaign battles, and House Republicans were able to claim larger majorities after the 2000, 2002 and 2004 elections.

The article goes on to provide a few details that–along with an admittedly amateur review of the FEC filings involved I did–sheds further light on what’s going on.

In another decision that has become controversial, the NRCC began, during Davis’ chairmanship, to allow its staffers to earn outside income. Taking advantage of that change, Ward founded Political Compliance Services in 2001 with Susan Arceneaux, helping dozens of lawmakers and congressional candidates comply with Federal Election Commission laws. The two severed their ties earlier this year, a lawyer for Arceneaux said.

Ward wasn’t alone in seeking outside income. Don McGahn, the NRCC’s longtime counsel, was retained by numerous Republican campaigns and leadership PACs, helping those organizations comply with FEC disclosure requirements.

What appears to have happened after the changes is that Christoper Ward assumed the job of treasurer for the RNCC as well as a bunch of leadership PACs (and helped other start new ones). Read more →