Politico has a new article up about the Hillary Victory Fund – Clinton Fundraisng Leaves Little for State Parties.. What they report is accurate, but it’s also incomplete and doesn’t, IMO, properly stress major aspects of the HVF that the public should be aware of.
There are several money trails into and out of the HVF which may have led to much of the confusion or inability to grasp the totality of what’s going on with the it. Some of it is perfectly legal, some questionable, and some illegal. The HVF, state parties, and DNC have some easy and ready-made explanation when questioned, but are the right questions being asked?
A lot of attention has been given to the HVF cash transfers to state Democratic parties that in turn transfer the fund to the DNC. All perfectly legal as long as the funds are flowing exactly as reported. Has any reporter confirmed that they are? Not enough attention has been paid to HVF expenses, fundraising operations, and the HVF store. I’m going to focus on the last two in this diary (and it may be a bit dry) because money from HVF to HFA is less complicated and therefore, easier to understand what part is okay and one part is questionable. it also lays a necessary foundation for understanding the other large amounts moving through the HVF (which I’ll cover in Part 2).
And most of the $23.3 million spent directly by the victory fund has gone towards expenses that appear to have directly benefited Clinton’s campaign, including $2.8 million for “salary and overhead” and $8.6 million for web advertising that mostly looks indistinguishable from Clinton campaign ads and that has helped Clinton build a network of small donors who will be critical in a general election expected to cost each side well in excess of $1 billion.
There’s an assumption built into the above statement that tends to be repeated by folks for Hillary. It’s this: [HVF] has helped Clinton build a network of small donors who will be critical in a general election expected to cost each side well in excess of $1 billion.
That assumption raises obvious questions. When was it established that HVF would be a vehicle for increasing the number of small donors? For some time HVF has been touted as a means for wealthy donors to assist Hillary, the DNC, and state parties. When did it begin touting itself as a vehicle for increasing Hillary’s small donor base?
Why is Hillary For America (HFA) incapable of building a network of small donors? What does HVF do better than HFA in attractiing small donors? How is that possible considering HFA and HVF are co-located and using the same staff and outside vendors?
A definition is in order at this point:
Small donors and/or small donations mean any amount from an individual donor that in the aggregate doesn’t exceed $2,700 for Hillary’s primary campaign.
Scroll through the HVF FEC reports and it’s immediately apparent that most of the donations are small. (Not $27 small; so maybe smallish would be more descriptive.) Other than donations in excess of $2,700, it looks no different from reports filed by HFA or Bernie’s campaign. However, that’s deceptive for a few reasons
.
Consider a campaign t-shirt. At Bernie’s and HFA, it’s not a purchase but a donation and the dollar amount contributes to that person’s $2,700 donation limit. The campaign covers the cost (campaign expenses) of the t-shirt, sales taxes, and shipping. Thus, the net amount a campaign generates from purchase donations is much less than that of straight donations. The required campaign record-keeping makes no distinction between a t-shirt donation and a non-purchase donation.
What if a campaign could get someone to underwrite and operate the campaign “store” and turn over the gross receipts to the campaign? Cool deal, huh? Legal? Doubtful. But that’s exactly what the HVF has been doing.
HVF didn’t get up and running until somewhat late in September. Those first few days or weeks it raised $3.2 million but only $199,255 was raised from small donations (including merchandise sales) that could be transferred to HFA. Direct marketing costs for that period were $604,089. In the last quarter of 2015, HVF raised $3.24 million for HFA and incurred direct marketing costs of $1.85 million.
In the first quarter 2016 HVF raised $9.45 million in small donations all of which was transferred to HFA. HVF incurred the following expenses in the period:
$5.0 million – direct marketing
$1.1 million – employee expenses (charged by HFA)
$0.6 million – merchandise costs
$0.4 milliion – payment processing costs
$0.6 million – other
So, a minimum of $7 million to raise that $9.45 million, but HFA got that $9.45 million with zero campaign spending costs.
Let’s take a closer look at that $0.6 million other from above because it reveals how the funds flow. Here’s the relevant part of the HVF disclosure on tickets to the March Radio City Music Hall “I’M WithHer” concert.
Proceeds from this concert will benefit Hillary Victory Fund. The full amount paid by each individual, except for applicable delivery charges, is considered a contribution to Hillary Victory Fund and is subject to the prohibitions and limitations of federal law. The first $2,700/$5,000 from an individual/multicandidate committee (“PAC”) will be allocated to Hillary for America, designated for the primary election. …
The concert was a success with a sold out audience [venue capacity 6,015]:
The concert benefited the Hillary Victory Fund. There were 11 sponsors of this fundraiser who gave more than $100,000. The campaign is expected to raise millions of dollars and organizers said most attendees were first-time campaign donors. Tickets ranged from $125 to $2,700.
HVF (more accurately the sponsors) ate the cost for the concert. The identifiable and reported direct costs were:
$75,000 – MSG Venue – paid 2/22/16
$243,927 – MSG – Event Production
$326,765 – MSG – Return Revenue Fees
If the average ticket price ended up being $200, gross receipts would have been $1.2 milliion. That would be $1.2 million in hard money for HFA. It was a no risk concert for the Hillary campaign, because even if it bombed, it wouldn’t eat into the campaign’s hard money bank account. (Also note that “in-kind” or discount contributions for candidate campaign committees, such as performing at a campaign benefit concert, are quite restrictive. For example if Katy Perry’s normal fee is $100,000, that’s near what she’d have to charge to appear as the talent as a HFA fundraiser. Similar restrictions don’t apply for the HVF.)
On the last calendar of each month, the HVF has been making a bulk cash transfer of all small donations to HFA. However, the “memo” on each of the donations included in the transfer is properly recorded in the HFA system and reported to the FEC. In HFA’s reporting, a direct donation to the campaign is indistinguishable from a donation routed through HVF.
As many of the smaller donations to HVF are from individuals that earlier in the election (pre-Sept. 2015) had made small donations to HFA, the claim that HVF was creating a new donor base isn’t supported. However, it is possible that the HVF has taken over the small donor solicitation and receipt operation from HFA as HVF became fully operational; so, Hillary’s people would point to any donors that came on board late in 2015 and 2016 as evidence that it is a new donor base. That’s hogwash, but it will sell with HRC’s supporters.
What should be apparent at this point is that:
- There is no physical or employee separation between HFA and HVC, and this is highly questionable because it’s impossible that coordination between the two hasn’t been happening.
- Campaign fundraising is a campaign function and all costs associated with fundraising are campaign expenses. Thus, HFA’s campaign spending in the first quarter is understated by approximately $7 million.
- HVF’s receipts are overstated by $9.45 million in the first quarter and expenses overstated by that $7 million. (This really is double counting the small donor receipts.)
- As wtih several 2016 candidates, the amount of money that Hillary can raise from wealthy donors is massive. But most of what they are willing and able to give to Hillary exceeds their donation limit of $2,700 (hard money) for the primary and campaigns can only spend hard money. Using that $7 million in soft money to pay for campaign expenses meets the spirit of money laundering. Does it meet a legal definition of money laundering?
If any enforcement agency were looking into this, the Hillary could do another “oops” and make the appropriate accounting and cash adjustments. HFA does have the cash to cover those expenses. Won’t matter to anyone at this point that her campaign spending has been understated and cash balances overstated; it has served its purpose to appear financially stronger than the Sanders’ campaign. Sort of like her resume.
Update Politico – April Fundraising
Clinton’s campaign took in a total of $36 million in April, of which $9.5 million went to the Hillary Victory Fund, a joint fundraising operation between the campaign, the Democratic National Committee, and state parties. Of that total, $26.4 million of the $36 million went to the Clinton campaign itself, which enters May with $30 million on hand.
By comparison, Sanders’ team on Sunday reported raising $25.8 million in April, a steep drop from its $44 million total in March.
I call BS on the HRC report. HFA cannot donate $9.5 million to HVF. It’s quite the opposite of how the funds may flow. So, what’s going on? Are they trying to correct the prior misuse of soft money for hard money expenses (as detailed above)? Or are they playing more games to make HFA look good? An in and out from HVF to HFA and vice versa as has been done with from HVF to state Dem Parties and then on to the DNC?