July 31, 2014
Creating PACs and Then Spending Their Money
Posted on Mar 17, 2013
By Kim Barker, Pro Publica
This report was first published on ProPublica.
In August 2008, as the right wing of the Republican Party grew increasingly disenchanted with the party’s direction, the men from Russo, Marsh and Associates sensed opportunity: They created a political action committee, Our Country Deserves Better, and in time launched the Tea Party Express.
Russo, Marsh—an established California outfit of Republican consultants—was just getting started. The firm formed a second political committee, this one with a pro-military agenda. And eventually, seizing on the President’s unpopularity in certain circles, they opened a third, the Campaign to Defeat Barack Obama.
Throughout the 2012 election cycle, the committees were relentless. In email after email, they pleaded for small donations to run ads supporting candidates who would defeat President Obama’s “socialist” agenda. And it worked: They collected more than $14 million in donations—from all over the country, and from donors who gave as little as $10 to elect Ted Cruz as a Republican senator from Texas or to put Mitt Romney in the White House.
Yet an examination of the PACs’ expenditures shows they spent a small percentage of the money they raised on work directly aimed at getting candidates elected—paid ads, say, or contributions to other political committees. Mainly, they paid consultants. And the biggest chunk of that consultant money went to Russo, Marsh and Associates, and people connected to the firm.
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Some of that money went for travel, or for ads funneled through the consultants. But most was for consulting, fundraising fees and administrative help.
It’s rare for the people who form PACs to pay and treat themselves quite so generously. In addition to paying Russo, Marsh an assortment of fees, the PACs spent money so its principals could travel well: from almost $1,300 for meals at a fondue restaurant in Ohio on Oct. 18, to more than $50,000 for consultants and staff to occasionally stay at a golf resort on Lake Michigan last fall.
Meanwhile, the people who gave money had no idea that such amounts would go to consultants, not to the nuts and bolts efforts to get preferred candidates elected and their opponents defeated.
“How does Joe Average know this?” asked Linda Knox, 73, who with her husband gave $585 to the Campaign to Defeat Barack Obama, mainly in $10 and $15 increments, after learning of the PAC’s spending habits. “Of course I want the money to go to elect people who share my values, not to consultants.”
No one from Russo, Marsh and Associates returned calls asking for comment. The two largest PACs didn’t respond to emails and calls. Danny Gonzalez, a spokesman at the pro-military PAC, said: “I was not aware of what the particular numbers are.” He said he would prepare a more detailed response.
Shawn Callahan, who’s worked for Russo, Marsh and now does consulting for the PACs, said Our Country Deserves Better did much more than just contribute to campaigns “in a traditional sense.” He said the PAC focused on coordinating unpaid grassroots activists, and spent much of its money on political organizing. He said the Tea Party Express held more than 400 rallies over the past three years, adding that the group had been credited with making the difference in dozens of House races.
“What looks like overhead is not overhead, but the costs of performing the mission of rallying citizens to get involved in conservative politics,” he wrote in an email. At a later point, he added: “As a political activist and donor myself, I hope that donors are proud of all that we have accomplished together. I know I am.”
While many watchdog organizations track how political committees raise money, few look at how the money is ultimately disbursed. PACs can spend their money as they want—on legal fees, on big meals, on trips to Dubai. But while PACs often devote some money to fundraising, most spend the bulk of contributions on efforts clearly aimed at electing specific candidates.
This last election, more than 3,000 PACs like the Russo, Marsh ones — independent committees supporting more than one candidate and not officially run by a lobbying group — spent almost half a billion dollars. Two-thirds of those committees spent most of their money directly supporting candidates.
PACs like these are allowed to donate money to a candidate or candidate committee — up to $5,000 per election. They can also donate up to $15,000 to a national political party committee and $5,000 to local parties or other political committees every year. But PACs also often spend money on what are known as independent expenditures, such as TV ads and phone calls supporting or opposing candidates. This spending can be unlimited, but it must be done independent of the candidates, meaning that the candidates often aren’t even aware it’s happening—especially with PACs that don’t spend much on ads.
Longtime conservative activist Sal Russo, who helped found the consulting firm that became Russo, Marsh and Associates in Sacramento, Calif., in 1976, has a long history with mainstream Republicans. He got his big break as an aide to Ronald Reagan, when he was California’s governor. Russo developed longtime ties with several conservative politicians, including Utah Sen. Orrin Hatch. He worked on the campaigns of former presidential candidate Jack Kemp and former New York Gov. George Pataki.
Questions about the role of Russo, Marsh and Associates with political committees are not entirely new. The New York Times and Talking Points Memo detailed how one of the committees, Our Country Deserves Better, had paid out a substantial amount of money to the Russo, Marsh firm in 2009 and 2010. Sal Russo told The New York Times his firm did nothing wrong.
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